COLUMBIA SMALL CAP FUND INC, 485BPOS, 2000-02-22

COLUMBIA SMALL CAP FUND INC
485BPOS, 2000-02-22

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Reg. Nos. 333-5863/811-7671
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. 6 [ X ]
----

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940

Amendment No. 8 [ X ]
----

(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

J. Jerry Inskeep, Jr.
1301 SW Fifth Avenue, PO Box 1350, Portland, Oregon 97207
(Name and Address of Agent for Service)

Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement.

It is proposed that this filing will become effective (Check appropriate box)

X immediately upon filing pursuant to paragraph (b)
----
on __________ pursuant to paragraph (b)
----
60 days after filing pursuant to paragraph (a) (1)
----
on __________ pursuant to paragraph (a) (1)
----
75 days after filing pursuant to paragraph (a)(2)
----
on __________ pursuant to paragraph (a)(2) of Rule 485
----

If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
----
previously filed post-effective amendment.

<PAGE>

[LOGO]

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COLUMBIA FUNDS

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-------------------------------
PROSPECTUS
-------------------------------

FEBRUARY 22, 2000

COLUMBIA COMMON STOCK FUND
----------------------------------------------------------------------
COLUMBIA GROWTH FUND
----------------------------------------------------------------------
COLUMBIA INTERNATIONAL STOCK FUND
----------------------------------------------------------------------
COLUMBIA SPECIAL FUND
----------------------------------------------------------------------
COLUMBIA SMALL CAP FUND
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COLUMBIA REAL ESTATE EQUITY FUND
----------------------------------------------------------------------
COLUMBIA BALANCED FUND
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COLUMBIA U.S. GOVERNMENT SECURITIES FUND
----------------------------------------------------------------------
COLUMBIA FIXED INCOME SECURITIES FUND
----------------------------------------------------------------------
COLUMBIA NATIONAL MUNICIPAL BOND FUND
----------------------------------------------------------------------
COLUMBIA OREGON MUNICIPAL BOND FUND
----------------------------------------------------------------------
COLUMBIA HIGH YIELD FUND
----------------------------------------------------------------------
COLUMBIA DAILY INCOME COMPANY

<PAGE>

DEAR INVESTOR:

We are pleased to present the 2000 Columbia Funds prospectus. All you need to
know about investing with Columbia is available right here. We hope you'll find
that our streamlined design and straightforward content provide a meaningful,
user-friendly report. Whether you want to open a new account or add to an
existing account, we've placed all the information at your fingertips.

This year, we are pleased to report a name change for one of our Funds: Columbia
Oregon Municipal Bond Fund. Formerly called Columbia Municipal Bond Fund, the
Fund's new name reflects its concentration in Oregon municipal securities while
distinguishing it from Columbia National Municipal Bond Fund, which invests in
tax-exempt municipal securities issued throughout the country.

As always, Columbia is committed to pursuing consistent, long-term investment
returns while managing risk for our shareholders. The past year was a rewarding,
but volatile year in the financial markets. We think you'll be pleased with the
1999 performance of Columbia Funds as reported in this prospectus. We also
strive to keep our expenses low, enabling more of your investment dollars to
work for you. This year's prospectus reports a decline in expense ratios for
nine of our 13 funds.

To gain a better understanding of our investment philosophy, fund objectives,
and management fees and expenses, we encourage you to read the prospectus
carefully before investing. If you have any questions about our products or
services, please call us toll-free at 1-800-547-1707 or at (503) 222-3606 in
Portland. An Investor Services Representative will be happy to assist you.

Thank you for your interest in Columbia Funds.

Sincerely,

/s/ Thomas L. Thomsen /s/ John A. Kemp
Thomas L. Thomsen John A. Kemp
PRESIDENT AND CHIEF INVESTMENT OFFICER CHAIRMAN AND CHIEF EXECUTIVE OFFICER
COLUMBIA FUNDS MANAGEMENT COMPANY COLUMBIA FUNDS MANAGEMENT COMPANY

<PAGE>

- --------------------------------------------------------------------------------
TABLE OF CONTENTS
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February 22, 2000
PROSPECTUS

- --------------------------------------------------------------------------------
TABLE OF CONTENTS

<TABLE>
<S> <C> <C>
INTRODUCTION 1 A TEAM APPROACH TO INVESTING
2 RISK OF INVESTING IN MUTUAL FUNDS
- --------------------------------------------------------------------------------
INFORMATION 2 STOCK FUND INVESTING
ABOUT 3 BOND FUND INVESTING
COLUMBIA FUNDS 4 COLUMBIA COMMON STOCK FUND
6 COLUMBIA GROWTH FUND
8 COLUMBIA INTERNATIONAL STOCK FUND
10 COLUMBIA SPECIAL FUND
12 COLUMBIA SMALL CAP FUND
14 COLUMBIA REAL ESTATE EQUITY FUND
16 COLUMBIA BALANCED FUND
18 COLUMBIA U.S. GOVERNMENT SECURITIES FUND
20 COLUMBIA FIXED INCOME SECURITIES FUND
22 COLUMBIA NATIONAL MUNICIPAL BOND FUND
24 COLUMBIA OREGON MUNICIPAL BOND FUND
26 COLUMBIA HIGH YIELD FUND
28 COLUMBIA DAILY INCOME COMPANY

- --------------------------------------------------------------------------------
MANAGEMENT 30 COLUMBIA INVESTMENT TEAM
- --------------------------------------------------------------------------------
INVESTOR 33 PURCHASING SHARES
SERVICES 33 SELLING SHARES
34 IMPORTANT FUND POLICIES
38 INSTRUCTIONS FOR ACCOUNTS
40 DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
MORE ABOUT 43 PORTFOLIO SECURITIES
THE FUNDS 47 MORE ABOUT RISKS
</TABLE>

As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed on the adequacy of this
Prospectus. Any representation to the contrary is a criminal offense.

<PAGE>

THE COLUMBIA FAMILY
OF NO-LOAD FUNDS

COLUMBIA COMMON STOCK FUND
----------------------------------------
COLUMBIA GROWTH FUND
----------------------------------------
COLUMBIA INTERNATIONAL STOCK FUND
----------------------------------------
COLUMBIA SPECIAL FUND
----------------------------------------
COLUMBIA SMALL CAP FUND
----------------------------------------
COLUMBIA REAL ESTATE EQUITY FUND
----------------------------------------
COLUMBIA BALANCED FUND
----------------------------------------
COLUMBIA U.S. GOVERNMENT SECURITIES FUND
----------------------------------------
COLUMBIA FIXED INCOME SECURITIES FUND
----------------------------------------
COLUMBIA NATIONAL MUNICIPAL BOND FUND
----------------------------------------

COLUMBIA OREGON MUNICIPAL BOND FUND
----------------------------------------

COLUMBIA HIGH YIELD FUND
----------------------------------------
COLUMBIA DAILY INCOME COMPANY
----------------------------------------

<PAGE>

- --------------------------------------------------------------------------------
INTRODUCTION
- --------------------------------------------------------------------------------

INTRODUCTION
- ----------------------------------------

This Prospectus is designed to provide you with important information about
investing in Columbia Funds. The Funds are presented separately with
descriptions of the following:

[icon] GOAL AND STRATEGY
- ---------------------------------
[icon] INVESTMENT RISKS
- ---------------------------------

[icon] WHO SHOULD INVEST?

- ---------------------------------
[icon] HISTORICAL PERFORMANCE
- ---------------------------------
[icon] EXPENSES
- ---------------------------------
[icon] FINANCIAL HIGHLIGHTS
- ---------------------------------

[SIDENOTE:]
Individual analysts track specific market sectors or industries, identifying
securities within those areas that are expected to reward shareholders.

For additional information about the strategies and risks of the Funds, please
refer to "More About the Funds" in the back of this Prospectus.

A TEAM APPROACH TO INVESTING

Columbia takes a unique approach to investing, where all Funds are managed using
the expertise of the entire investment team. Through this team effort,
individual analysts and portfolio managers have responsibility for tracking
specific sectors or industries of the market, identifying securities within
those areas that are expected to reward shareholders. This investment strategy
is an integral part of security selection for all Funds.

As part of its active management, Columbia's investment team meets twice weekly
to review and discuss the dynamics of the overall investment and economic
environment. This evaluation leads to the development of broad investment
themes, which create a framework for industry and stock selection. Themes are
based on the review and discovery of changes in the environment that may not yet
be widely recognized or understood by the rest of the investment community. This
approach to investment management is often referred to as "top down, sector
rotation."

Once particular industries and market sectors are identified for emphasis,
securities within the targeted industry or sector are recommended based on
fundamental and technical analysis. This involves a bottom-up review of
individual companies, where the team looks at such factors as financial
condition, quality of management, industry dynamics, earnings growth,

1
<PAGE>

profit margins, sales trends, and price/earnings and price/book ratios. In the
small cap, mid-cap, high yield bond and real estate investment trust sectors,
such analysis is even more critical to uncovering companies whose products or
services are offering a competitive advantage.

For fixed income securities, a top down approach is also used to determine
sector emphasis between different types of instruments. As with the equity
investment team, Columbia's bond team is made up of various fixed income
specialists who have responsibility for analyzing and selecting particular
securities. Using sector rotation, the bond team works to appropriately shift
emphasis between levels of quality, maturity, coupon and types of debt
instruments based on their relative attractiveness. The bond team also uses a
proprietary horizon analysis model to gauge the performance of different bonds
under various interest rate scenarios.

RISK OF INVESTING IN MUTUAL FUNDS

Mutual funds are not bank deposits and are not insured or endorsed by any bank,
government agency or the FDIC. The value of your investment will likely
fluctuate. Because you could lose money by investing in these Funds, please be
sure to read all the risk disclosure carefully before investing. The description
of each Fund contains a discussion of principal investment risks, and a more
detailed discussion of risks is located at the back of this Prospectus under
"More About the Funds."

INFORMATION ABOUT COLUMBIA FUNDS
- ----------------------------------------

STOCK FUND INVESTING

Columbia's stock funds invest principally in the stocks of public companies.
Companies sell shares of stock to help finance their business. Returns on stocks
are earned through a combination of dividends paid on each share and any
increase or decrease in the market price of the shares. The smaller the market
capitalization of a company, generally the less likely it will pay dividends.
That's because companies with a small market capitalization tend to use excess
earnings to help fund growth. The investment strategy of a number of the equity
funds described in this Prospectus is shaped, in part, by the market
capitalization (the total value of a company's outstanding stock) of the
companies in which the Funds may invest. As of the date of this Prospectus,
large cap generally refers to companies with $9 billion or more in outstanding
stock, mid cap is considered to have approximately $2 to $9 billion, and small
cap is considered to have less than $2 billion.

Generally, stock fund returns fluctuate more than bond and money market fund
returns, but stocks historically have offered investors the most long-

2
<PAGE>

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INFORMATION ABOUT COLUMBIA FUNDS
- --------------------------------------------------------------------------------

term growth. Columbia's stock funds vary in their level of risk or
volatility, depending upon the types and average market capitalizations of
the stocks they hold. As a general rule, the smaller a company's market cap,
the more volatile its stock price is likely to be.

BOND FUND INVESTING

Bonds are often called fixed income investments because they earn a fixed rate
of interest. Bonds are issued by corporations as well as by local, state and
federal governments and their agencies to raise money. The issuer of a bond is
borrowing money from investors. A bond represents a promise to pay back this
money (referred to as principal or face amount) at a specified time (maturity
date), plus a specified amount of interest (coupon).

Investment return on a bond is earned through the payment of interest and any
price appreciation or depreciation if the bond is sold before maturity. Most
bonds pay interest every six months. Because bond funds consist of many bonds
that are bought and sold on an ongoing basis, a bond fund investment does not
have a maturity date and does not earn a fixed interest rate. In addition, the
share price of a bond fund fluctuates daily to reflect the current value of all
bonds in the fund. The maturities of all the bonds within a bond fund can be
combined to determine its average maturity. Generally, the longer the average
maturity of a bond fund portfolio, the more sensitive its net asset value to
changes in interest rates.

Another distinguishing characteristic of a bond fund is its average credit
quality. Generally, the lower the credit quality of bonds in a portfolio, the
more sensitive the fund's net asset value to the activities and financial
prospects of the issuing company, as well as to general economic and market
conditions.

While bonds have not generated as high an investment return as stocks over time,
their returns are generally less volatile.

3
<PAGE>

COLUMBIA COMMON STOCK FUND
- ----------------------------------------

[icon] GOAL AND STRATEGY
--------------------------------

The Fund seeks capital appreciation by investing, under normal market
conditions, at least 65% of its assets in stocks of large-cap,
well-established companies. Many of the stocks selected by the Fund have
a history of paying level or rising dividends, and are expected to
continue paying dividends in the future.

[icon] INVESTMENT RISKS
--------------------------------
This Fund has stock market risk, which means the stocks held by the Fund
may decline in value due to the activities and financial prospects of
individual companies or to general market and economic conditions. You
could lose money as a result of your investment.

[icon] WHO SHOULD INVEST?
--------------------------------
This Fund is most appropriate for:
- Long-term investors
- Investors seeking a large-cap fund to balance their bond or small- and
mid-cap stock portfolios
- Those willing to accept short-term price fluctuations

[icon] HISTORICAL PERFORMANCE
------------------------------------------------------------------------
The bar chart below illustrates how the Fund's total return has varied
from year to year, while the table compares Fund performance over time
to the S&P 500, an unmanaged index generally considered representative
of the U.S. stock market. This information may help provide an
indication of the Fund's risks and potential rewards. All figures assume
the reinvestment of dividends. Past performance cannot guarantee future
results.

[CHART]

BEST QUARTER: 4Q '98 at 23.30% WORST QUARTER: 3Q '98 at -11.46%

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS as of 12/31/99
- -------------------------------------------------------------------------------
Inception
1 Year 5 Years (10/1/91)
<S> <C> <C> <C>
Columbia Common Stock Fund 25.76% 25.75% 19.97%
- -------------------------------------------------------------------------------
S&P 500 Index 21.04% 28.56% 20.08%
- -------------------------------------------------------------------------------
</TABLE>

4
<PAGE>

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STOCK FUNDS
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[icon] EXPENSES
--------------------------------

As a Columbia shareholder, you pay no transaction fees such as sales
loads or redemption and exchange fees when you buy or sell shares. The
table below describes the annual expenses you may pay when you hold Fund
shares.

<TABLE>
<CAPTION>
- -------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- -------------------------------------------------------------------
(expenses that are paid out of Fund assets)
<S> <C>
MANAGEMENT FEES 0.60%
Distribution and/or Service (12b-1) Fees None
OTHER EXPENSES 0.17%
Total Annual Fund Operating Expenses 0.77%
</TABLE>

This is a hypothetical example intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds.
Although your actual cost may be higher or lower, you would pay the
following expenses on a $10,000 investment, assuming: 1) a 5% annual
return, 2) the Fund's operating expenses remain the same, 3) you redeem
all your shares at the end of the periods shown, and 4) all
distributions are reinvested.

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
- ---------------------------------------------------------------------
<S> <C> <C> <C>
$79 $246 $428 $954
</TABLE>

[icon] FINANCIAL HIGHLIGHTS
------------------------------------------------------------------------

This table will help you understand the Fund's financial performance for
the periods indicated. Certain information reflects financial results
for a single Fund share. Total return shows how much your Fund
investment increased or decreased during each period, assuming
reinvested dividends and distributions. PricewaterhouseCoopers LLP,
independent accountants, has audited this information. Their report,
along with the Fund's financial statements, is included in the Funds'
annual report, which is available upon request.

<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ................. $24.40 $22.02 $19.26 $18.59 $15.16
- ------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ........................... 0.03 0.09 0.29 0.25 0.26
Net realized and unrealized gains on investments. 6.25 5.68 4.58 3.61 4.38
- ------------------------------------------------------------------------------------------------------------------
Total from investment operations ................ 6.28 5.77 4.87 3.86 4.64
- ------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income ............ (0.03) (0.13) (0.27) (0.23) (0.26)
Distributions from capital gains ................ (1.75) (3.26) (1.84) (2.96) (0.95)
- ------------------------------------------------------------------------------------------------------------------
Total distributions ............................. (1.78) (3.39) (2.11) (3.19) (1.21)
- ------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR ....................... $28.90 $24.40 $22.02 $19.26 $18.59
- ------------------------------------------------------------------------------------------------------------------
TOTAL RETURN ....................................... 25.76% 26.28% 25.37% 20.71% 30.84%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in thousands) ............. $959,910 $797,147 $783,906 $536,760 $358,523
Ratio of expenses to average net assets ............ 0.77% 0.80% 0.77% 0.76% 0.80%
Ratio of net investment income to
average net assets .............................. 0.09% 0.56% 1.37% 1.32% 1.68%
Portfolio turnover rate ............................ 97% 141% 90% 111% 75%
</TABLE>

5
<PAGE>

COLUMBIA GROWTH FUND
- ----------------------------------------

[icon] GOAL AND STRATEGY
--------------------------------
The Fund seeks capital appreciation by investing, under normal market
conditions, in stocks of companies expected to experience long-term,
above average earnings growth. These companies tend to have attractive
valuations, strong competitive positions within their industry groups
and the ability to grow using internal resources. The Fund intends to
focus on growth stocks, which are those stocks that generally trade with
higher price/earnings ratios, reflecting investors' willingness to pay a
higher share price for potentially steady or higher earnings growth.

[icon] WHO SHOULD INVEST?
--------------------------------
This Fund is most appropriate for:
- Long-term investors
- Investors seeking a fund with a growth investment strategy
- Those willing to accept short-term price fluctuations

[icon] HISTORICAL PERFORMANCE
--------------------------------
The bar chart below illustrates how the Fund's total return has varied
from year to year, while the table compares Fund performance over time
to the S&P 500, an unmanaged index generally considered representative
of the U.S. stock market. This information may help provide an
indication of the Fund's risks and potential rewards. All figures assume
the reinvestment of dividends. Past performance cannot guarantee future
results.

[CHART]

BEST QUARTER: 4Q '98 at 25.59% WORST QUARTER: 3Q '98 at -14.61%

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS as of 12/31/99
- -------------------------------------------------------------------------------
1 Year 5 Years 10 Years
<S> <C> <C> <C>
Columbia Growth Fund 26.02% 27.22% 18.44%
- -------------------------------------------------------------------------------
S&P 500 Index 21.04% 28.56% 18.22%
- -------------------------------------------------------------------------------
</TABLE>

6
<PAGE>

- --------------------------------------------------------------------------------
STOCK FUNDS
- --------------------------------------------------------------------------------

[icon] EXPENSES
------------------------------------------------------------------------

<TABLE>
<CAPTION>
- -------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- -------------------------------------------------------------------
(expenses that are paid out of Fund assets)
<S> <C>
MANAGEMENT FEES 0.55%
Distribution and/or Service (12b-1) Fees None
OTHER EXPENSES 0.10%
Total Annual Fund Operating Expenses 0.65%
</TABLE>

[icon] FINANCIAL HIGHLIGHTS
------------------------------------------------------------------------

<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ................. $42.51 $34.34 $30.74 $29.84 $24.84
- ------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .................... (0.03) 0.03 0.19 0.19 0.31
Net realized and unrealized gains on investments. 11.09 10.39 7.90 6.04 7.86
- ------------------------------------------------------------------------------------------------------------------
Total from investment operations ................ 11.06 10.42 8.09 6.23 8.17
- ------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income ............ (0.00)* (0.08) (0.17) (0.17) (0.29)
Distributions from capital gains ................ (4.66) (2.17) (4.32) (5.16) (2.88)
- ------------------------------------------------------------------------------------------------------------------
Total distributions ............................. (4.66) (2.25) (4.49) (5.33) (3.17)
- ------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR ....................... $48.91 $42.51 $34.34 $30.74 $29.84
- ------------------------------------------------------------------------------------------------------------------
TOTAL RETURN ....................................... 26.02% 30.34% 26.32% 20.80% 32.98%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in thousands) ............. $2,160,739 $1,753,024 $1,324,918 $1,064,100 $848,731
Ratio of expenses to average net assets ............ 0.65% 0.68% 0.71% 0.71% 0.75%
Ratio of net investment income (loss) to
average net assets .............................. (0.07)% 0.21% 0.55% 0.63% 1.14%
Portfolio turnover rate ............................ 118% 105% 96% 75% 95%
</TABLE>

* Amount represents less than $0.01 per share.

7
<PAGE>

COLUMBIA INTERNATIONAL STOCK FUND
- ----------------------------------------

[icon] GOAL AND STRATEGY
--------------------------------

The Fund seeks long-term capital appreciation by investing, under normal
market conditions, at least 65% of its total assets in stocks issued by
companies from at least three countries outside the U.S. While the
Fund's investments are not limited as to market capitalization, the Fund
intends to invest primarily in companies considered to be large and
well-established, based on standards of the applicable country or
foreign market.

[icon] WHO SHOULD INVEST?
--------------------------------

This Fund is appropriate for:
- Long-term investors
- Those seeking stock market diversification outside the U.S.
- Those willing to accept substantial price fluctuations

[icon] INVESTMENT RISKS
--------------------------------

This Fund has stock market risk and foreign investment risk. You could
lose money as a result of your investment.

Stock market risk means the stocks held by the Fund may decline in value
due to the activities and financial prospects of individual companies or
to general market and economic conditions.

Foreign investment risk means the Fund's portfolio may decline in value
due to the risks associated with international investing, such as:

- Changes in currency exchange rates
- Foreign taxes that could reduce returns
- Potential political or economic instability of the
country of issuer, especially in emerging or developing countries
- Lack of uniform accounting, auditing, and financial reporting
standards, with less governmental regulation and oversight than U.S.
companies
- Less liquidity than U.S. securities
- Less public information compared to U.S. companies

[icon] HISTORICAL PERFORMANCE
------------------------------------------------------------------------
The bar chart below illustrates how the Fund's total return has varied
from year to year, while the table compares Fund performance over time
to the MSCI EAFE Index, an unmanaged index representing major stock
markets in Europe, Australasia and the Far East. This information may
help provide an indication of the Fund's risks and potential rewards.
All figures assume the reinvestment of dividends. Past performance
cannot guarantee future results.

[CHART]

BEST QUARTER: 4Q '99 at 34.96% WORST QUARTER: 3Q '98 at -17.69%

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS as of 12/31/99
- -------------------------------------------------------------------------------
Inception
1 Year 5 Years (10/1/92)
<S> <C> <C> <C>
Columbia International Stock Fund 57.93% 19.48% 17.20%
- -------------------------------------------------------------------------------
MSCI EAFE Index* 27.30% 13.16% 13.77%
- -------------------------------------------------------------------------------
</TABLE>

*Morgan Stanley Capital International Europe, Australasia, and Far East Index

8
<PAGE>

- --------------------------------------------------------------------------------
STOCK FUNDS
- --------------------------------------------------------------------------------

[icon] EXPENSES
------------------------------------------------------------------------

<TABLE>
<CAPTION>
- -------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- -------------------------------------------------------------------
(expenses that are paid out of Fund assets)
<S> <C>
MANAGEMENT FEES 1.00%
Distribution and/or Service (12b-1) Fees None
OTHER EXPENSES 0.48%
Total Annual Fund Operating Expenses 1.48%
</TABLE>

[icon] FINANCIAL HIGHLIGHTS
------------------------------------------------------------------------

<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ................. $15.45 $13.70 $13.86 $13.07 $12.43
- ------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .................... (0.05) (0.00)* 0.03 0.03 0.02
Net realized and unrealized gains on investments
and foreign currency transactions ............ 9.00 1.76 1.56 2.13 0.62
- ------------------------------------------------------------------------------------------------------------------
Total from investment operations ................ 8.95 1.76 1.59 2.16 0.64
- ------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income ............ - - - (0.23) -
Distributions from capital gains ................ (1.59) (0.01) (1.75) (1.14) -
- ------------------------------------------------------------------------------------------------------------------
Total distributions ............................. (1.59) (0.01) (1.75) (1.37) -
- ------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR ....................... $22.81 $15.45 $13.70 $13.86 $13.07
- ------------------------------------------------------------------------------------------------------------------
TOTAL RETURN ....................................... 57.93% 12.83% 11.47% 16.59% 5.15%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in thousands).............. $239,223 $134,193 $146,281 $125,510 $100,873
Ratio of expenses to average net assets ............ 1.48% 1.56% 1.62% 1.54% 1.54%
Ratio of net investment income (loss) to
average net assets .............................. (0.35)% (0.02)% 0.19% 0.22% 0.15%
Portfolio turnover rate ............................ 94% 74% 122% 129% 156%
</TABLE>

* Amount represents less than $0.01 per share.

9
<PAGE>

COLUMBIA SPECIAL FUND
- ----------------------------------------

[icon] GOAL AND STRATEGY
--------------------------------

The Fund seeks significant capital appreciation by investing in a
portfolio of stocks that is considered more volatile than the S&P 500.
The Fund intends to invest primarily in small- and mid-cap companies,
but also may invest in special situations such as initial public
offerings (IPOs); companies that may benefit from technological or
product developments or new management; and companies involved in tender
offers, leveraged buy-outs or mergers.

The small- and mid-cap stocks held by the Fund are subject to greater
risk than large-cap stocks because:

- Their issuers may have limited operating histories, fewer
financial resources, inexperienced management, and may depend on a
small number of products or services

- Small- and mid-cap stocks may have low trading volumes, making it
difficult to sell a security or resulting in erratic or abrupt price
movements

Special situations have risk because they often involve major
corporate changes and, thus, present a high degree of uncertainty as
to market effect.

[icon] WHO SHOULD INVEST?
--------------------------------
This Fund is appropriate for:
- Long-term, aggressive growth investors
- Those looking to diversify their large-cap stock portfolios with
small- and mid-cap stock investments
- Those willing to accept substantial price fluctuations

[icon] HISTORICAL PERFORMANCE
------------------------------------------------------------------------

The bar chart below illustrates how the Fund's total return has varied
from year to year, while the table compares Fund performance over time
to the S&P MidCap 400 Index, an unmanaged index generally considered
representative of the U.S. market for mid-cap stocks, and to the Russell
2000 Index, an unmanaged index generally considered representative of
the market for small domestic stocks. This information may help provide
an indication of the Fund's risks and potential rewards. All figures
assume the reinvestment of dividends. Past performance cannot guarantee
future results.

[CHART]

BEST QUARTER: 4Q '99 at 37.43% WORST QUARTER: 3Q '90 at -29.31%

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS as of 12/31/99
- -------------------------------------------------------------------------------
1 Year 5 Years 10 Years
<S> <C> <C> <C>
Columbia Special Fund 36.33% 21.28% 17.21%
- -------------------------------------------------------------------------------
S&P MidCap 400 Index 14.72% 23.05% 17.32%
- -------------------------------------------------------------------------------
Russell 2000 Index 21.26% 16.69% 13.40%
- -------------------------------------------------------------------------------
</TABLE>

10
<PAGE>

- --------------------------------------------------------------------------------
STOCK FUNDS
- --------------------------------------------------------------------------------

[icon] EXPENSES
------------------------------------------------------------------------

<TABLE>
<CAPTION>
- -------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- -------------------------------------------------------------------
(expenses that are paid out of Fund assets)
<S> <C>
MANAGEMENT FEES 0.91%
Distribution and/or Service (12b-1) Fees None
OTHER EXPENSES 0.18%
Total Annual Fund Operating Expenses 1.09%
</TABLE>

[icon] FINANCIAL HIGHLIGHTS
------------------------------------------------------------------------

<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ................. $23.62 $20.26 $19.85 $21.44 $18.69
- ------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) .................... (0.16) (0.03) 0.01 (0.06) 0.03
Net realized and unrealized gains on investments. 8.74 3.40 2.50 2.85 5.45
- ------------------------------------------------------------------------------------------------------------------
Total from investment operations ................ 8.58 3.37 2.51 2.79 5.48
- ------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income ............ - (0.01) - - (0.02)
Distributions from capital gains ................ (2.27) (0.00)* (2.10) (4.38) (2.71)
- ------------------------------------------------------------------------------------------------------------------
Total distributions ............................. (2.27) (0.01) (2.10) (4.38) (2.73)
- ------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR ....................... $29.93 $23.62 $20.26 $19.85 $21.44
- ------------------------------------------------------------------------------------------------------------------
TOTAL RETURN ....................................... 36.33% 16.64% 12.64% 13.07% 29.53%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in thousands) ............. $918,322 $969,359 $1,249,718 $1,585,284 $1,384,415
Ratio of expenses to average net assets ............ 1.09% 1.03% 0.98% 0.94% 0.98%
Ratio of net investment income (loss) to
average net assets .............................. (0.64)% (0.09)% 0.04% (0.29)% 0.16%
Portfolio turnover rate ............................ 135% 135% 166% 150% 183%
</TABLE>

* Amount represents less than $0.01 per share.

11
<PAGE>

COLUMBIA SMALL CAP FUND
- ----------------------------------------

[icon] GOAL AND STRATEGY
--------------------------------

The Fund seeks significant capital appreciation by investing, under
normal market conditions, at least 65% of its assets in stocks, or
securities convertible into stocks, of companies with a market
capitalization of less than 250% of the dollar-weighted median market
capitalization of the S&P Small Cap 600 Index. As of the date of this
prospectus, companies with a market capitalization of approximately $2
billion or less would be considered small cap under this definition.

[icon] INVESTMENT RISKS
--------------------------------

This Fund has stock market risk, which means the stocks held by the Fund
may decline in value due to the activities and financial prospects of
individual companies or to general market and economic conditions. You
could lose money as a result of your investment.

The small-cap stocks held by the Fund are subject to greater volatility
than large-cap stocks because:

- Small companies may have limited operating histories, fewer financial
resources, inexperienced management and may be dependent on a small
number of products or services

- Small-cap stocks may have low trading volumes, which may make it
difficult to sell a security or result in erratic or abrupt price
movements

[icon] WHO SHOULD INVEST?
--------------------------------
This Fund is appropriate for:
- Long-term, aggressive growth investors
- Those looking to diversify their mid- and large-cap stock portfolios
with small-cap stock investments
- Those willing to accept substantial price fluctuations

[icon] HISTORICAL PERFORMANCE
-----------------------------------------------------------------------

The bar chart below illustrates how the Fund's total return has varied
from year to year, while the table compares Fund performance over time
to the Russell 2000 Index, an unmanaged index generally considered
representative of the market for small domestic stocks. This information
may help provide an indication of the Fund's risks and potential
rewards. All figures assume the reinvestment of dividends. Past
performance cannot guarantee future results.

[CHART]
<TABLE>
<CAPTION>
1997 1998 1999
<S> <C> <C>
34.10% 4.69% 59.15%
</TABLE>

BEST QUARTER: 4Q '99 at 50.27% WORST QUARTER: 3Q '98 at -18.20%

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS as of 12/31/99
- -------------------------------------------------------------------------------
Inception
1 Year (10/1/96)
<S> <C> <C>
Columbia Small Cap Fund 59.15% 31.55%
- -------------------------------------------------------------------------------
Russell 2000 Index 21.26% 14.00%
- -------------------------------------------------------------------------------
</TABLE>

12
<PAGE>

- --------------------------------------------------------------------------------
STOCK FUNDS
- --------------------------------------------------------------------------------

[icon] EXPENSES
------------------------------------------------------------------------

<TABLE>
<CAPTION>
- -------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- -------------------------------------------------------------------
(expenses that are paid out of Fund assets)
<S> <C>
MANAGEMENT FEES 1.00%
Distribution and/or Service (12b-1) Fees None
OTHER EXPENSES 0.30%
Total Annual Fund Operating Expenses 1.30%
</TABLE>

[icon] FINANCIAL HIGHLIGHTS
------------------------------------------------------------------------

<TABLE>
<CAPTION>
1999 1998 1997 1996(1)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ............... $17.43 $16.65 $12.99 $12.00
- ----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss ............................. (0.14) (0.09) (0.08) (0.00)*
Net realized and unrealized gains on investments. 10.45 0.87 4.51 0.99
- ----------------------------------------------------------------------------------------------------------
Total from investment operations ................ 10.31 0.78 4.43 0.99
- ----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Distributions from capital gains ................ (0.48) (0.00)* (0.77) -
- ----------------------------------------------------------------------------------------------------------
Total distributions ............................. (0.48) (0.00) (0.77) -
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ..................... $27.26 $17.43 $16.65 $12.99
- ----------------------------------------------------------------------------------------------------------
TOTAL RETURN ....................................... 59.15% 4.69% 34.10% 7.62%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) .......... $290,374 $160,472 $96,431 $21,061
Ratio of expenses to average net assets ............ 1.30% 1.34% 1.46% 1.61%(3)
Ratio of net investment loss to average net assets . (0.84)% (0.68)% (0.81)% (0.00)%(3)
Portfolio turnover rate ............................ 188% 158% 172% 33%(3)
</TABLE>

* Amount represents less than $0.01 per share.
(1) From inception of operations on September 11, 1996.
(2) Not annualized.
(3) Annualized.

13
<PAGE>

COLUMBIA REAL ESTATE EQUITY FUND
- ----------------------------------------

[icon] GOAL AND STRATEGY
--------------------------------
The Fund seeks capital appreciation and above-average income by
investing, under normal market conditions, at least 65% of its assets in
the stocks of companies principally engaged in the real estate industry.
A company is "principally engaged" in the real estate industry if at
least 50% of its gross income or net profits are attributable to the
ownership, construction, management, or sale of residential, commercial
or industrial real estate. While it does not invest directly in real
estate, the Fund will invest at least 65% of its assets in real estate
investment trusts ("REITs"), which pool investors' money for investment
primarily in income-producing real estate or related loans or interests.

[icon] INVESTMENT RISKS
--------------------------------
This Fund has stock market risk and real estate risk. You could lose
money as a result of your investment. Stock market risk means the stocks
held by the Fund may decline in value due to the activities and
financial prospects of individual companies or to general market and
economic conditions.

Real estate risk means the Fund may be subject to the same types of
risks associated with direct ownership of real estate:

- Declines in property value due to general, local and regional economic
conditions
- Overbuilding and extended vacancies of properties
- Increased property taxes
- Casualty or condemnation losses
- Changes in zoning laws
- Environmental clean up costs

If the Fund's investments are concentrated in a particular geographic
region, real estate risk may be even more significant. See "More About
the Funds" at the back of this prospectus for additional information
about REIT investment risk.

[icon] WHO SHOULD INVEST?
--------------------------------
This Fund is appropriate for:
- Long-term investors
- Those looking for an income-oriented equity fund that invests in real
estate securities
- Those willing to accept short-term price fluctuations

[icon] HISTORICAL PERFORMANCE
--------------------------------

The bar chart below illustrates how the Fund's total return has varied
from year to year, while the table compares Fund performance over time
to the NAREIT Index, which is an unmanaged index that reflects
performance of all publicly-traded equity REITs. This information may
help provide an indication of the Fund's risks and potential rewards.
All figures assume the reinvestment of dividends. Past performance
cannot guarantee future results.

[CHART]

BEST QUARTER: 4Q '96 at 18.34% WORST QUARTER: 3Q '98 at -8.27%

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS as of 12/31/99
- -------------------------------------------------------------------------------
Inception
1 Year 5 Years (4/1/94)
<S> <C> <C> <C>
Columbia Real Estate Equity Fund -2.45% 11.51% 10.18%
- -------------------------------------------------------------------------------
NAREIT* Index -4.62% 8.09% 6.89%
- -------------------------------------------------------------------------------
</TABLE>

*National Association of Real Estate Investment Trusts

14
<PAGE>

- --------------------------------------------------------------------------------
STOCK FUNDS
- --------------------------------------------------------------------------------

[icon] EXPENSES
--------------------------------

<TABLE>
<CAPTION>
- -------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- -------------------------------------------------------------------
(expenses that are paid out of Fund assets)
<S> <C>
MANAGEMENT FEES 0.75%
Distribution and/or Service (12b-1) Fees None
OTHER EXPENSES 0.24%
Total Annual Fund Operating Expenses 0.99%
</TABLE>

[icon] FINANCIAL HIGHLIGHTS
------------------------------------------------------------------------

<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR.................. $15.76 $18.80 $16.16 $12.71 $11.72
- ------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............................ 0.82 0.75 0.79 0.77 0.78
Net realized and unrealized gains
(losses) on investments....................... (1.19) (3.04) 3.15 3.94 1.12
- ------------------------------------------------------------------------------------------------------------------
Total from investment operations................. (0.37) (2.29) 3.94 4.71 1.90
- ------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income............. (0.71) (0.66) (0.62) (0.52) (0.49)
Distributions from capital gains................. - - (0.51) (0.53) (0.14)
Returns of capital............................... (0.11) (0.09) (0.17) (0.21) (0.28)
- ------------------------------------------------------------------------------------------------------------------
Total distributions.............................. (0.82) (0.75) (1.30) (1.26) (0.91)
- ------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR........................ $14.57 $15.76 $18.80 $16.16 $12.71
- ------------------------------------------------------------------------------------------------------------------
TOTAL RETURN........................................ -2.45% -12.33% 24.74% 38.30% 16.86%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in thousands).............. $241,716 $164,172 $151,554 $68,073 $21,587
Ratio of expenses to average net assets............. 0.99% 1.01% 1.02% 1.06% 1.18%
Ratio of net investment income to average
net assets....................................... 5.66% 4.60% 4.87% 6.23% 6.71%
Portfolio turnover rate............................. 29% 6% 34% 46% 54%
</TABLE>

15
<PAGE>

COLUMBIA BALANCED FUND
- ----------------------------------------

[icon] GOAL AND STRATEGY
--------------------------------

The Fund seeks high total return by investing in common stocks and debt
securities. Normally, 35% to 65% of assets will be allocated to stocks
and 35% to 65% will be allocated to debt securities. The Fund invests
primarily in stocks of large-cap, well-established companies. The debt
securities will be primarily investment-grade (rated BBB or higher by
S&P or Baa or higher by Moody's), or their unrated equivalents,
including obligations of the U.S. Government, its agencies and
instrumentalities, corporate debt securities, asset-backed securities,
collateralized bonds, and loan and mortgage obligations.

[icon] INVESTMENT RISKS
--------------------------------

Because this Fund invests in stocks and bonds, it has stock market risk,
interest rate risk, credit risk and prepayment risk. You could lose
money as a result of your investment.

Stock market risk means the stocks held by the Fund may decline in value
due to the activities and financial prospects of individual companies or
to general market and economic conditions.

Interest rate risk refers to the possibility that bonds in the Fund may
go down in value when interest rates rise.

Credit risk refers to the possibility that the companies issuing bonds
held by the Fund may not be able to pay interest and principal when due.

Prepayment risk refers to the possibility that the mortgage securities
held by the Fund may be adversely affected by changes in prepayment
rates on the underlying mortgages.

[icon] WHO SHOULD INVEST?
--------------------------------
This Fund is appropriate for:
- Long-term investors seeking to balance the higher volatility of stocks
with the greater stability of income-generating bonds
- Investors seeking moderate growth over the long term

[icon] HISTORICAL PERFORMANCE
------------------------------------------------------------------------
The bar chart below illustrates how the Fund's total return has varied
from year to year, while the table compares Fund performance over time
to the S&P 500, an unmanaged index generally considered representative
of the U.S. stock market and the Lehman Aggregate, an unmanaged index
composed of investment-grade U.S. Treasury and agency securities,
corporate bonds, and mortgage-backed bonds. This information may help
provide an indication of the Fund's risks and potential rewards. All
figures assume the reinvestment of dividends. Past performance cannot
guarantee future results.

[CHART]

BEST QUARTER: 4Q '98 at 12.86% WORST QUARTER: 3Q '98 at -4.76%

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS as of 12/31/99
- -------------------------------------------------------------------------------
Inception
1 Year 5 Years (10/1/91)
<S> <C> <C> <C>
Columbia Balanced Fund 12.70% 17.57% 14.15%
- -------------------------------------------------------------------------------
S&P 500 Index 21.04% 28.56% 20.08%
- -------------------------------------------------------------------------------
Lehman Aggregate Bond Index -0.82% 7.73% 6.94%
- -------------------------------------------------------------------------------
</TABLE>

16
<PAGE>

- --------------------------------------------------------------------------------
BALANCED FUND
- --------------------------------------------------------------------------------

[icon] EXPENSES
------------------------------------------------------------------------

<TABLE>
<CAPTION>
- -------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- -------------------------------------------------------------------
(expenses that are paid out of Fund assets)
<S> <C>
MANAGEMENT FEES 0.50%
Distribution and/or Service (12b-1) Fees None
OTHER EXPENSES 0.16%
Total Annual Fund Operating Expenses 0.66%
</TABLE>

[icon] FINANCIAL HIGHLIGHTS
------------------------------------------------------------------------

<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ................. $23.17 $21.42 $20.32 $20.08 $17.28
- ------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ........................... 0.69 0.72 0.84 0.76 0.73
Net realized and unrealized gains on investments. 2.21 3.52 2.92 1.58 3.54
- ------------------------------------------------------------------------------------------------------------------
Total from investment operations ................ 2.90 4.24 3.76 2.34 4.27
- ------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income ............ (0.69) (0.73) (0.83) (0.76) (0.73)
Distributions from capital gains ................ (0.66) (1.76) (1.83) (1.34) (0.74)
- ------------------------------------------------------------------------------------------------------------------
Total distributions ............................. (1.35) (2.49) (2.66) (2.10) (1.47)
- ------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR ....................... $24.72 $23.17 $21.42 $20.32 $20.08
- ------------------------------------------------------------------------------------------------------------------
TOTAL RETURN ....................................... 12.70% 20.07% 18.74% 11.78% 25.08%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in thousands) ............. $1,040,940 $975,381 $792,378 $672,593 $486,767
Ratio of expenses to average net assets ............ 0.66% 0.67% 0.68% 0.66% 0.69%
Ratio of net investment income to average
net assets ...................................... 2.85% 3.22% 3.83% 3.82% 4.05%
Portfolio turnover rate ............................ 133% 128% 149% 133% 108%
</TABLE>

17
<PAGE>

COLUMBIA U.S. GOVERNMENT SECURITIES FUND
- ----------------------------------------

[icon] GOAL AND STRATEGY
--------------------------------
The Fund seeks preservation of capital and a high level of income by
investing at least 80% of its assets in direct obligations of the U.S.
Government with a maximum maturity of three years. Securities will be
selected based on an assessment of interest rate trends. Generally,
securities purchased will be of a shorter maturity when interest rates
are expected to rise and of longer maturity when interest rates are
expected to decline.

[icon] INVESTMENT RISKS
--------------------------------
This Fund has interest rate risk, which refers to the possibility that
your investment may go down in value when interest rates rise. While
direct obligations of the U.S. Government are guaranteed as to the
payment of principal and interest, the value of the Fund's shares is not
guaranteed by the U.S. Government. You could lose money as a result of
your investment.

[icon] WHO SHOULD INVEST?
--------------------------------
This Fund is appropriate for:
- Risk-averse, short-term investors
- Those willing to accept only a small amount of price volatility
- Those focused on the preservation of assets rather than the
appreciation of assets
- Those looking to diversify a balanced portfolio with a short-term,
income-earning investment

[icon] HISTORICAL PERFORMANCE
------------------------------------------------------------------------
The bar chart below illustrates how the Fund's total return has varied
from year to year, while the table compares Fund performance over time
to the Merrill Lynch 1-3 Treasury Index, which represents the average
return of all Treasury notes with a 1- to 3-year maturity. This
information may help provide an indication of the Fund's risks and
potential rewards. All figures assume the reinvestment of dividends.
Past performance cannot guarantee future results.

[CHART]

BEST QUARTER: 3Q '91 at 4.23% WORST QUARTER: 1Q '92 at -0.93%

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS as of 12/31/99
- -------------------------------------------------------------------------------
1 Year 5 Years 10 Years
<S> <C> <C> <C>
Columbia U.S. Government Securities Fund 1.80% 5.57% 6.11%
- -------------------------------------------------------------------------------
Merrill Lynch 1-3 Treasury Index 3.06% 6.51% 6.59%
- -------------------------------------------------------------------------------
</TABLE>

18
<PAGE>

- --------------------------------------------------------------------------------
BOND FUNDS
- --------------------------------------------------------------------------------

[icon] EXPENSES
------------------------------------------------------------------------

<TABLE>
<CAPTION>
- -------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- -------------------------------------------------------------------
(expenses that are paid out of Fund assets)
<S> <C>
MANAGEMENT FEES 0.50%
Distribution and/or Service (12b-1) Fees None
OTHER EXPENSES 0.41%
Total Annual Fund Operating Expenses 0.91%
</TABLE>

[icon] FINANCIAL HIGHLIGHTS
------------------------------------------------------------------------

<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ................. $8.39 $8.29 $8.24 $8.34 $7.99
- ------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ........................... 0.33 0.38 0.41 0.41 0.45
Net realized and unrealized gains
(losses) on investments ...................... (0.18) 0.14 0.05 (0.10) 0.35
- ------------------------------------------------------------------------------------------------------------------
Total from investment operations ................ 0.15 0.52 0.46 0.31 0.80
- ------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income ............ (0.33) (0.38) (0.41) (0.41) (0.45)
Distributions from capital gains ................ (0.01) (0.04) - - -
- ------------------------------------------------------------------------------------------------------------------
Total distributions ............................. (0.34) (0.42) (0.41) (0.41) (0.45)
- ------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR ....................... $8.20 $8.39 $8.29 $8.24 $8.34
- ------------------------------------------------------------------------------------------------------------------
TOTAL RETURN ....................................... 1.80% 6.43% 5.76% 3.85% 10.21%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in thousands) ............. $38,072 $40,578 $37,837 $40,776 $41,842
Ratio of expenses to average net assets ............ 0.91% 0.89% 0.87% 0.80% 0.79%
Ratio of net investment income to average
net assets ...................................... 4.09% 4.55% 4.99% 4.99% 5.45%
Portfolio turnover rate ............................ 211% 182% 184% 179% 253%
</TABLE>

19
<PAGE>

COLUMBIA FIXED INCOME SECURITIES FUND
- ----------------------------------------

[icon] GOAL AND STRATEGY
--------------------------------

The Fund seeks a high level of income by investing in a broad range of
debt securities with intermediate to long-term maturities. The Fund
intends to invest 90% of its assets, under normal market conditions, in
investment-grade debt securities (rated BBB or higher by S&P or Baa or
higher by Moody's), or their unrated equivalents, including obligations
of the U.S. Government, its agencies and instrumentalities, corporate
debt securities, asset-backed securities, collateralized bonds, and loan
and mortgage obligations.

[icon] INVESTMENT RISKS
--------------------------------
This Fund has interest rate risk, credit risk, and prepayment risk. You
could lose money as a result of your investment.

Interest rate risk refers to the possibility that your investment may go
down in value when interest rates rise.

Credit risk refers to the possibility the issuer of a bond may not be
able to pay interest and principal when due.

Prepayment risk refers to the possibility that the mortgage securities
held by the Fund may be adversely affected by changes in prepayment
rates on the underlying mortgages.

[icon] WHO SHOULD INVEST?
--------------------------------
This Fund is appropriate for:
- Long-term, income-oriented investors
- Investors willing to accept greater price fluctuation than is
generally associated with short-term bonds
- Those looking to diversify their stock port-folio with a fund
investing in bonds

[icon] HISTORICAL PERFORMANCE
------------------------------------------------------------------------

The bar chart below illustrates how the Fund's total return has varied
from year to year, while the table compares Fund performance over time
to the Lehman Aggregate Bond Index, an unmanaged index composed of
investment-grade U.S. Treasury and agency securities, corporate bonds
and mortgage-backed bonds. This information may help provide an
indication of the Fund's risks and potential rewards. All figures assume
the reinvestment of dividends. Past performance cannot guarantee future
results.

[CHART]

BEST QUARTER: 2Q '95 at 6.36% WORST QUARTER: 1Q '94 at -3.04%

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS as of 12/31/99
- -------------------------------------------------------------------------------
1 Year 5 Years 10 Years
<S> <C> <C> <C>
Columbia Fixed Income Securities Fund -1.50% 7.34% 7.59%
- -------------------------------------------------------------------------------
Lehman Aggregate Bond Index -0.82% 7.73% 7.70%
- -------------------------------------------------------------------------------
</TABLE>

20
<PAGE>

- --------------------------------------------------------------------------------
BOND FUNDS
- --------------------------------------------------------------------------------

[icon] EXPENSES
------------------------------------------------------------------------

<TABLE>
<CAPTION>
- -------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- -------------------------------------------------------------------
(expenses that are paid out of Fund assets)
<S> <C>
MANAGEMENT FEES 0.50%
Distribution and/or Service (12b-1) Fees None
OTHER EXPENSES 0.14%
Total Annual Fund Operating Expenses 0.64%
</TABLE>

[icon] FINANCIAL HIGHLIGHTS
------------------------------------------------------------------------

<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ................. $13.42 $13.41 $13.08 $13.51 $12.16
- ------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ........................... 0.78 0.83 0.85 0.85 0.88
Net realized and unrealized gains
(losses) on investments ...................... (0.98) 0.14 0.36 (0.43) 1.35
- ------------------------------------------------------------------------------------------------------------------
Total from investment operations ................ (0.20) 0.97 1.21 0.42 2.23
- ------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income ............ (0.78) (0.83) (0.85) (0.85) (0.88)
Distributions from capital gains ................ (0.00)* (0.13) (0.03) - -
- ------------------------------------------------------------------------------------------------------------------
Total distributions ............................. (0.78) (0.96) (0.88) (0.85) (0.88)
- ------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR ....................... $12.44 $13.42 $13.41 $13.08 $13.51
- ------------------------------------------------------------------------------------------------------------------
TOTAL RETURN ....................................... -1.50% 7.44% 9.56% 3.37% 18.91%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in thousands) ............. $397,147 $422,330 $381,333 $356,421 $316,259
Ratio of expenses to average net assets ............ 0.64% 0.65% 0.66% 0.64% 0.65%
Ratio of net investment income to
average net assets .............................. 6.03% 6.15% 6.43% 6.53% 6.80%
Portfolio turnover rate ............................ 155% 107% 196% 178% 137%
</TABLE>

* Amount represents less than $0.01 per share.

21
<PAGE>

COLUMBIA NATIONAL MUNICIPAL BOND FUND
- ----------------------------------------

[icon] GOAL AND STRATEGY
--------------------------------
The Fund seeks a high level of income exempt from federal income tax by
investing up to 100%, but no less than 80%, of its assets in municipal
securities issued by state and local governments, their agencies and
authorities, as well as the District of Columbia and U.S. territories
and possessions, to finance various public or private projects. The Fund
will only invest in municipal securities rated investment grade by a
securities rating agency or, if unrated, determined by Columbia to be of
equivalent investment quality. The Fund intends to maintain an average
portfolio maturity of approximately 10 to 12 years.

[icon] INVESTMENT RISKS
--------------------------------

This Fund has interest rate risk, credit risk, political risk and
geographic risk. You could lose money as a result of your investment.

Interest rate risk refers to the possibility that your investment may go
down in value when interest rates rise.

Credit risk refers to the possibility the issuer of a bond may not be
able to pay interest and principal when due.

Political risk refers to the chance that a significant change in tax
laws affecting municipal bonds or federal income tax rates, or even
serious discussions on these topics in Congress, could impact the demand
for municipal bonds and cause their prices to fall.

Geographic risk refers to the potential for price declines resulting
from a negative development in a single state in which the Fund holds
bonds.

[icon] WHO SHOULD INVEST?
--------------------------------
This Fund is appropriate for:
- Investors seeking income exempt from federal income tax
- Investors willing to accept greater price fluctuation than is
generally associated with short-term bonds
- Conservative, long-term investors nearing or in retirement

[icon] HISTORICAL PERFORMANCE
------------------------------------------------------------------------

Since the Fund did not begin operations until February 10, 1999, no
historical performance is presented.

22
<PAGE>

- --------------------------------------------------------------------------------
BOND FUNDS
- --------------------------------------------------------------------------------

[icon] EXPENSES
--------------------------------

<TABLE>
<CAPTION>
- -------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- -------------------------------------------------------------------
(expenses that are paid out of Fund assets)
<S> <C>
MANAGEMENT FEES 0.50%
Distribution and/or Service (12b-1) Fees None
OTHER EXPENSES 1.22%
Total Annual Fund Operating Expenses 1.72%
Expense Reimbursement 1.07%*
Net Expenses 0.65%
</TABLE>

*For the fiscal year ending December 31, 2000, the advisor has contractually
agreed to reimburse the Fund for all ordinary expenses to the extent necessary
to maintain Total Annual Fund Operating Expenses at 0.65%.

[icon] FINANCIAL HIGHLIGHTS
------------------------------------------------------------------------

This table will help you understand the Fund's financial performance for
the period indicated. Certain information reflects financial results for
a single Fund share. Total return shows how much your Fund investment
increased or decreased during each period, assuming reinvested dividends
and distributions. PricewaterhouseCoopers LLP, independent accountants,
has audited this information. Their report, along with the Fund's
financial statements, is included in the Funds' annual report, which is
available upon request.

<TABLE>
<CAPTION>
1999(1)
- ----------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD..................... $10.00
- ----------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................................. 0.34
Net realized and unrealized losses
on investments..................................... (0.72)
- ----------------------------------------------------------------------
Total from investment operations...................... (0.38)
- ----------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income.................. (0.34)
- ----------------------------------------------------------------------
Total distributions................................... (0.34)
- ----------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD........................... $9.28
- ----------------------------------------------------------------------
TOTAL RETURN............................................. -3.93%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands)................. $10,135
Ratio of expenses to average net assets.................. 0.65%(3)
Ratio of expenses to average net
assets before reimbursement........................... 1.72%(3)
Ratio of net investment income to
average net assets.................................... 4.21%(3)
Portfolio turnover rate.................................. 12%(3)
</TABLE>

(1) From inception of operations on February 10, 1999.
(2) Not annualized.
(3) Annualized.

23
<PAGE>

COLUMBIA OREGON MUNICIPAL BOND FUND
- ----------------------------------------

[icon] GOAL AND STRATEGY
--------------------------------
The Fund seeks a high level of income exempt from federal and Oregon
income tax by investing up to 100%, but no less than 80%, of its assets
in municipal securities issued by the State of Oregon (and its political
subdivisions, agencies, authorities and instrumentalities). Normally,
the Fund will invest in Oregon municipal securities rated investment
grade (by a securities rating agency) or, if unrated, determined by
Columbia to be of equivalent investment quality. The Fund intends to
maintain an average portfolio maturity of approximately 10 to 12 years.

[icon] INVESTMENT RISKS
--------------------------------

This Fund has interest rate risk, credit risk, political risk and
geographic risk. You could lose money as a result of your investment.
Interest rate risk refers to the possibility that your investment value
may go down when interest rates rise. Credit risk refers to the
possibility that the issuer of a bond may not be able to pay interest
and principal when due.

Geographic risk refers to the fact that the Fund's concentration in
Oregon tax-exempt bonds may cause it to be exposed to risks that do not
apply to other bond funds:
- Low trading volumes for Oregon municipal bonds
- Unfavorable economic conditions in Oregon
- Legal and legislative changes affecting the ability of Oregon
municipalities to issue bonds

The Fund is non-diversified, which means it may invest a greater
percentage of its assets in one issuer.

[icon] WHO SHOULD INVEST?
------------------------------------------------------------------------
This Fund is appropriate for:

- Oregon residents seeking income exempt from federal and state personal
income tax
- Those able to accept more price fluctuation than is generally
associated with short-term bonds
- Conservative, long-term investors nearing or in retirement

[icon] HISTORICAL PERFORMANCE
------------------------------------------------------------------------

The bar chart below illustrates how the Fund's total return has varied
from year to year, while the table compares Fund performance over time
to the Lehman General Obligation Bond Index, which represents average
market weighted performance of general obligation bonds that have been
issued in the last five years with maturities greater than one year.
This information may help provide an indication of the Fund's risks and
potential rewards. All figures assume the reinvestment of dividends.
Past performance cannot guarantee future results.

[CHART]

BEST QUARTER: 1Q '95 at 5.76% WORST QUARTER: 1Q '94 at -5.01%

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS as of 12/31/99
- -------------------------------------------------------------------------------
1 Year 5 Years 10 Years
<S> <C> <C> <C>
Columbia Oregon Municipal Bond Fund -2.65% 5.70% 5.88%
- -------------------------------------------------------------------------------
Lehman General Obligation Bond Index -1.51% 6.82% 6.72%
- -------------------------------------------------------------------------------
</TABLE>

24
<PAGE>

- --------------------------------------------------------------------------------
BOND FUNDS
- --------------------------------------------------------------------------------

[icon] EXPENSES
------------------------------------------------------------------------

<TABLE>
<CAPTION>
- -------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- -------------------------------------------------------------------
(expenses that are paid out of Fund assets)
<S> <C>
MANAGEMENT FEES 0.50%
Distribution and/or Service (12b-1) Fees None
OTHER EXPENSES 0.07%
Total Annual Fund Operating Expenses 0.57%
</TABLE>

[icon] FINANCIAL HIGHLIGHTS
------------------------------------------------------------------------

<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ................. $12.46 $12.47 $12.15 $12.37 $11.48
- ------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ........................... 0.56 0.58 0.60 0.61 0.63
Net realized and unrealized gains
(losses) on investments ...................... (0.88) 0.10 0.39 (0.16) 0.96
- ------------------------------------------------------------------------------------------------------------------
Total from investment operations ................ (0.32) 0.68 0.99 0.45 1.59
- ------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income ............ (0.56) (0.58) (0.60) (0.61) (0.63)
Distributions from capital gains ................ (0.02) (0.11) (0.07) (0.06) (0.07)
- ------------------------------------------------------------------------------------------------------------------
Total distributions ............................. (0.58) (0.69) (0.67) (0.67) (0.70)
- ------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR ....................... $11.56 $12.46 $12.47 $12.15 $12.37
- ------------------------------------------------------------------------------------------------------------------
TOTAL RETURN ....................................... -2.65% 5.58% 8.36% 3.77% 14.15%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in thousands) ............. $409,919 $462,809 $409,148 $375,667 $383,796
Ratio of expenses to average net assets ............ 0.57% 0.58% 0.57% 0.56% 0.57%
Ratio of net investment income to
average net assets .............................. 4.64% 4.60% 4.87% 5.00% 5.22%
Portfolio turnover rate ............................ 28% 17% 17% 19% 21%
</TABLE>

25
<PAGE>

COLUMBIA HIGH YIELD FUND
- ----------------------------------------

[icon] GOAL AND STRATEGY
--------------------------------

The Fund seeks a high level of income, with capital appreciation as a
secondary goal, by investing in non-investment- grade corporate debt
securities, commonly referred to as "junk" or "high-yield" bonds.
Normally, the Fund will invest at least 80% of assets in bonds rated Ba
or B by Moody's or BB or B by S&P. No more than 10% of the Fund's assets
will be invested in securities rated Caa by Moody's or CCC by S&P, and
no Fund assets will be invested in securities below these grades. By
focusing on higher quality junk bonds, the Fund seeks access to higher
yielding bonds without assuming all the risk associated with the broader
lower-rated bond market.

[icon] INVESTMENT RISKS
--------------------------------
This Fund has interest rate risk and credit risk. You could lose money
as a result of your investment. Interest rate risk refers to the
possibility that your investment may go down in value when interest
rates rise. Credit risk refers to the possibility that the issuing
company may not be able to pay interest and principal when due. The Fund
generally invests in lower-rated bonds subject to greater default risk
than higher-rated, lower yielding bonds. High yield bonds may be issued
to fund corporate restructurings, such as leveraged buyouts, mergers,
acquisitions, debt recapitalizations, or similar events. High yield
bonds are often issued by smaller, less creditworthy companies or by
companies with substantial debt. The prices of high yield bonds are
generally more sensitive than higher-rated bonds to the financial
condition of the issuer and adverse changes in the economy.

[icon] WHO SHOULD INVEST?
--------------------------------

This Fund is appropriate for:
- Those willing to accept substantial price fluctuations
- Investors seeking to boost their bond portfolio's yield

[icon] HISTORICAL PERFORMANCE
------------------------------------------------------------------------

The bar chart below illustrates how the Fund's total return has varied
from year to year, while the table compares Fund performance over time
to two benchmarks. The Salomon BB Index measures the total return of
bonds with a maturity of at least one year and includes bonds rated BB+,
BB or BB- by S&P or bonds rated Ba1, Ba2 or Ba3 by Moody's. The Lipper
High Yield Bond Fund Index reflects equally-weighted performance of the
30 largest mutual funds within its category. This information may help
provide an indication of the Fund's risks and potential rewards. All
figures assume the rein vestment of dividends. Past performance cannot
guarantee future results.

[CHART]

BEST QUARTER: 2Q '95 at 5.56% WORST QUARTER: 1Q '94 at -2.01%

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS as of 12/31/99
- -------------------------------------------------------------------------------
Inception
1 Year 5 Years (10/1/93)
<S> <C> <C> <C>
Columbia High Yield Fund 2.38% 9.83% 7.76%
- -------------------------------------------------------------------------------
Salomon BB Index 2.24% 10.73% 8.51%
- -------------------------------------------------------------------------------
Lipper High Yield Bond Fund Index 4.78% 9.46% 7.62%
- -------------------------------------------------------------------------------
</TABLE>

26
<PAGE>

- --------------------------------------------------------------------------------
BOND FUNDS
- --------------------------------------------------------------------------------

[icon] EXPENSES
------------------------------------------------------------------------

<TABLE>
<CAPTION>
- -------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- -------------------------------------------------------------------
(expenses that are paid out of Fund assets)
<S> <C>
MANAGEMENT FEES 0.60%
Distribution and/or Service (12b-1) Fees None
OTHER EXPENSES 0.31%
Total Annual Fund Operating Expenses 0.91%
</TABLE>

[icon] FINANCIAL HIGHLIGHTS
------------------------------------------------------------------------

<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ................. $9.84 $10.04 $9.94 $9.88 $9.04
- ------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income. .......................... 0.74 0.76 0.81 0.81 0.82
Net realized and unrealized gains
(losses) on investments ...................... (0.51) (0.15) 0.40 0.07 0.84
- ------------------------------------------------------------------------------------------------------------------
Total from investment operations ................ 0.23 0.61 1.21 0.88 1.66
- ------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income ............ (0.74) (0.76) (0.81) (0.81) (0.82)
Distributions from capital gains ................ (0.01) (0.05) (0.30) (0.01) -
- ------------------------------------------------------------------------------------------------------------------
Total distributions ............................. (0.75) (0.81) (1.11) (0.82) (0.82)
- ------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR ....................... $9.32 $9.84 $10.04 $9.94 $9.88
- ------------------------------------------------------------------------------------------------------------------
TOTAL RETURN ....................................... 2.38% 6.26% 12.70% 9.43% 19.12%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in thousands) ............. $71,678 $57,524 $39,278 $28,818 $23,471
Ratio of expenses to average net assets ............ 0.91% 0.95% 1.00% 0.93% 1.00%
Ratio of expenses to average net assets
before voluntary reimbursement .................. 0.91% 0.95% 1.02% 1.00% 1.06%
Ratio of net investment income to
average net assets .............................. 7.71% 7.52% 8.05% 8.29% 8.62%
Portfolio turnover rate ............................ 49% 79% 124% 62% 52%
</TABLE>

27
<PAGE>

COLUMBIA DAILY INCOME COMPANY
- ----------------------------------------

[icon] GOAL AND STRATEGY
--------------------------------
The Fund seeks a high level of income consistent with the maintenance of
liquidity and the preservation of capital by investing primarily in the
following high quality money market securities: securities issued by the
U.S. Government and its agencies and instrumentalities, whose principal
and interest are guaranteed; commercial paper which, if rated by S&P or
Moody's, is rated, at the time of purchase, A-1 by S&P and Prime 1 by
Moody's or, if not rated, is determined to be of comparable quality by
the Fund; and other high quality corporate debt with average maturities
of less than 12 months. The Fund's assets will be invested in short-term
debt obligations maturing within one year. The average dollar-weighted
maturity of the portfolio will not exceed 90 days.

[icon] INVESTMENT RISKS
--------------------------------
An investment in this or any other money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency. Although the Fund seeks to preserve the value of
shareholders' investments at $1 per share, it is possible to lose money
by investing in the Fund. Additionally, there is a chance that the
Fund's returns may not keep pace with the rate of inflation over the
long term.

[icon] WHO SHOULD INVEST?
--------------------------------
This Fund is appropriate for:
- Short-term, risk averse investors
- Investors focused on the preservation of assets rather than the
appreciation of assets
- Investors seeking liquidity

[icon] HISTORICAL PERFORMANCE
------------------------------------------------------------------------
The bar chart below illustrates how the Fund's total return has varied
from year to year, while the table shows performance over time. This
information may help provide an indication of the Fund's risks and
potential rewards. All figures assume the reinvestment of dividends.
Past performance cannot guarantee future results.

[CHART]

BEST QUARTER: 2Q '90 at 1.93% WORST QUARTER: 2Q '93 at 0.60%

28
<PAGE>

- --------------------------------------------------------------------------------
MONEY MARKET FUND
- --------------------------------------------------------------------------------

[icon] EXPENSES
------------------------------------------------------------------------

<TABLE>
<CAPTION>
- -------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- -------------------------------------------------------------------
(expenses that are paid out of Fund assets)
<S> <C>
MANAGEMENT FEES 0.47%
Distribution and/or Service (12b-1) Fees None
OTHER EXPENSES 0.17%
Total Annual Fund Operating Expenses 0.64%
</TABLE>

[icon] FINANCIAL HIGHLIGHTS
------------------------------------------------------------------------

<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ................. $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ........................... 0.046 0.050 0.050 0.048 0.053
- ----------------------------------------------------------------------------------------------------------------------
Total from investment operations ................ 0.046 0.050 0.050 0.048 0.053
- ----------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income ............ (0.046) (0.050) (0.050) (0.048) (0.053)
- ----------------------------------------------------------------------------------------------------------------------
Total distributions ............................. (0.046) (0.050) (0.050) (0.048) (0.053)
- ----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR ....................... $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN ....................................... 4.71% 5.09% 5.11% 4.96% 5.49%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in thousands) ............. $1,165,289 $1,109,141 $1,169,096 $889,800 $800,656
Ratio of expenses to average net assets ............ 0.64% 0.62% 0.63% 0.62% 0.64%
Ratio of net investment income to
average net assets .............................. 4.61% 4.97% 4.99% 4.84% 5.34%
</TABLE>

29
<PAGE>

MANAGEMENT
- ---------------------------------------

The Funds' investment adviser is Columbia Funds Management Company ("Columbia"),
P.O. Box 1350, Portland, Oregon 97207-1350. Columbia is responsible for managing
the Funds' portfolios and its business affairs, subject to oversight by the
Funds' Boards of Directors. Columbia or its predecessor has acted as an
investment adviser since 1967.

For the year ended December 31, 1999, the investment advisory fees paid to
Columbia by each of the Funds, expressed as a percentage of net assets, were as
follows:

<TABLE>
<S> <C>
Columbia Common Stock Fund 0.60%
Columbia Growth Fund 0.55%
Columbia International Stock Fund 1.00%
Columbia Special Fund 0.91%
Columbia Small Cap Fund 1.00%
Columbia Real Estate Equity Fund 0.75%
Columbia Balanced Fund 0.50%
Columbia U.S. Government Securities Fund 0.50%
Columbia Fixed Income Securities Fund 0.50%
Columbia National Municipal Bond Fund 0.50%
Columbia Oregon Municipal Bond Fund 0.50%
Columbia High Yield Fund 0.60%
Columbia Daily Income Company 0.47%
</TABLE>

[SIDENOTE:]
Columbia's Investment Team is responsible for developing investment themes and
strategies for the Funds. [LOGO]

COLUMBIA INVESTMENT TEAM
Columbia's Investment Team is responsible for developing investment themes and
strategies for the Funds. Thomas L. Thomsen is President, Chief Investment
Officer and a Director of Columbia and supervises the Team's activities. Prior
to joining Columbia in 1978, Mr. Thomsen was a Senior Investment Officer for the
Treasury Department of the State of Oregon (1974-1978) and a Fixed Income
Portfolio Manager for First National Bank of Oregon (1969-1973).

For most Funds, a lead portfolio manager is responsible for implementing and
maintaining the investment themes and strategies developed by the Team, while
adhering to the specific goal and strategy of the Fund.

COMMON STOCK FUND -- TEAM MANAGED (SINCE 1998).
Based on an analysis of macro-economic factors and the investment
environment, Columbia's Asset Allocation Committee is responsible for
determining the sector or industry weightings for the Fund. Individual

30
<PAGE>

- --------------------------------------------------------------------------------
MANAGEMENT
- --------------------------------------------------------------------------------

members of the Investment Team then select securities within the sectors or
asset classes for which they have research and analytic responsibility.

GROWTH FUND -- ALEXANDER S. MACMILLAN (SINCE 1992).
A Vice President of Columbia and a Chartered Financial Analyst, Mr. Macmillan
joined Columbia in 1989. Previously, he was a Vice President and Portfolio
Manager for Gardner & Preston Moss (1982-1989). He received a Master of Business
Administration degree from the Amos Tuck School at Dartmouth College in 1980.

INTERNATIONAL STOCK FUND -- JAMES M. MCALEAR (SINCE 1992).

A Vice President of Columbia, Mr. McAlear joined Columbia in 1992. Previously,
he was a Senior Vice President of American Express Financial Advisors
(1985-1992) and an Executive Director for Merrill Lynch Europe (1972-1985). He
received a Master of Arts degree in economics from Michigan State University in
1964.

SPECIAL FUND -- RICHARD J. JOHNSON (SINCE 1998).
A Vice President of Columbia and a Chartered Financial Analyst, Mr. Johnson
joined Columbia in 1994. Previously, he served as a Portfolio Manager and
Analyst at Provident Investment Counsel (1990-1994). Mr. Johnson received a
Master of Business Administration degree from the Anderson School of Management
at UCLA in 1990.

SMALL CAP FUND -- RICHARD J. JOHNSON (SINCE 1996).

REAL ESTATE EQUITY FUND -- DAVID W. JELLISON (SINCE 1994).
A Vice President of Columbia and a Chartered Financial Analyst, Mr. Jellison
joined Columbia in 1992. Previously, he was a Senior Research Associate for RCM
Capital Management (1987-1992). Mr. Jellison received a Master of Management
degree from the J.L. Kellogg Graduate School of Management at Northwestern
University in 1984.

BALANCED FUND -- TEAM MANAGED (SINCE 1998).
Based on an analysis of macro-economic factors and the investment
environment, Columbia's Asset Allocation Committee is responsible for
determining the Fund's weightings in stocks, bonds and cash investments. That
committee is also responsible for determining the sector or industry weightings
of the equity portion of the Fund. Columbia's Bond Team is responsible for
determining the sector emphasis among different types of fixed income
securities. Individual members of the entire Investment Team then select the
securities within the sector or asset classes for which they have research and
analytic responsibility.

31
<PAGE>

U.S. GOVERNMENT SECURITIES FUND -- JEFFREY L. RIPPEY (SINCE 1987).
A Vice President of Columbia and a Chartered Financial Analyst, Mr. Rippey
joined Columbia in 1981. Previously, he worked in the Trust Department of
Rainier National Bank (1978-1981). Mr. Rippey is a 1978 graduate of Pacific
Lutheran University.

FIXED INCOME SECURITIES FUND -- LEONARD A. APLET (SINCE 1989) AND JEFFREY L.
RIPPEY (SINCE 1989).

A Vice President of Columbia and a Chartered Financial Analyst, Mr. Aplet joined
Columbia in 1987. Previously, he was an employee of the Farmers Home
Administration (1976-1985). Mr. Aplet received a Master of Business
Administration degree from the University of California at Berkeley in 1987.

[SIDENOTE:]
The rules that govern personal trading by investment personnel are based on the
principle that employees have a fiduciary duty to conduct their trades in a
manner that is not detrimental to the Funds or their shareholders. [LOGO]

NATIONAL MUNICIPAL BOND FUND -- GRETA R. CLAPP (SINCE 1999).
A Vice President of Columbia and a Chartered Financial Analyst, Ms. Clapp joined
Columbia in 1991. Previously, she was an Assistant Vice President and Portfolio
Manager at The Putnam Companies (1985-1988). Ms. Clapp received a Master of
Business Administration degree from the University of Michigan in 1990.

OREGON MUNICIPAL BOND FUND -- GRETA R. CLAPP (SINCE 1992).

HIGH YIELD FUND -- JEFFREY L. RIPPEY (SINCE 1993) AND KURT M. HAVNAER
(SINCE 2000).

A Vice President of Columbia and a Chartered Financial Analyst, Mr. Havnaer
joined Columbia in 1996. Previously, he worked as a Portfolio Manager, Analyst
and Trader for SAFECO Asset Management Co. (1991-1996). Mr. Havnaer received a
Master of Business Administration degree from Seattle University in 1991.

COLUMBIA DAILY INCOME COMPANY -- LEONARD A. APLET
(SINCE 1988).

PERSONAL TRADING
Members of the Investment Team and other employees of the Funds or Columbia are
permitted to trade securities for their own or family accounts, subject to the
rules of the Code of Ethics adopted by the Funds and Columbia. The rules that
govern personal trading by investment personnel are based on the principle that
employees have a fiduciary duty to conduct their trades in a manner that is not
detrimental to the Funds or their shareholders. For more information on the Code
of Ethics and specific trading restrictions, see the Funds' Statement of
Additional Information.

32
<PAGE>

- --------------------------------------------------------------------------------
INVESTOR SERVICES
- --------------------------------------------------------------------------------

INVESTOR SERVICES
- ---------------------------------------

This section is designed to acquaint you with the different services and
policies associated with an investment in Columbia Funds. For an at-a-glance
summary of account instructions, please see page 38.

PURCHASING SHARES
Shares of Columbia Funds are available at net asset value ("NAV"), which means
that you pay no sales charges or commissions to invest. Your investment will be
priced at the NAV next calculated after your order is accepted by the Funds.
Investments received for Columbia Daily Income Company must be converted to
federal funds, so there may be a one-day delay in your investment. All Bond
Funds and Columbia Daily Income Company will begin to earn interest on the day
after the investment is made.

SELLING SHARES
You can sell (redeem) shares any day the New York Stock Exchange ("NYSE") is
open for business. Your shares will be redeemed at their net asset value,
calculated after your valid redemption request is accepted by the Funds.
There are no fees to sell shares.

When redeeming, please keep these important points in mind:
- - A signature guarantee may be required. See page 35 for examples of when a
signature guarantee is required.
- - Any certificated shares will require the return of the certificate before a
redemption can be made.
- - Redemptions of an IRA will require the completion of additional paperwork
for the purposes of IRS tax reporting.
- - Redemption requests must be signed by all owners on the account.
- - Redemption requests from corporations, fiduciaries and intermediaries may
require additional documentation.

Normally, your redemption proceeds will be sent to you the day after the
effective date of the redemption. Except as provided by rules of the Securities
and Exchange Commission, redemption proceeds will be sent to you no later than
seven days from the redemption date. Proceeds transmitted by way of ACH
(Automated Clearing House) are usually credited to your bank account on the
second business day following the request.

[SIDENOTE:]
- --------------------------------------------------------------------------------

INVESTMENT MINIMUMS

FIRST TIME FUND INVESTMENT:
$1,000 Minimum for all Funds but the Special and Small Cap Funds, which have
$2,000 minimums
SUBSEQUENT FUND INVESTMENT:
$100 for all Funds
AUTOMATIC INVESTMENT PLAN:
$50 for all Funds (minimum requirements for first time investments are
waived)

When investing in the Funds, please keep these important points in mind:

- - Personal checks for investment should be drawn on U.S. funds, must meet Fund
investment minimum requirements and be made payable to Columbia Funds
- - Columbia will not accept cash investments
- - Columbia reserves the right to reject any investment
- - If your investment is cancelled because your check did not clear the bank
or because the Funds were unable to debit your 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
- - Columbia may reject any third party checks submitted for investment

33
<PAGE>

Also, before selling recently purchased shares, please note that if the Fund has
not yet collected payment for the shares you are selling, it may delay sending
the proceeds until it has collected payment, which may take up to 15 days from
the purchase date. Additionally, the Fund reserves the right to redeem shares
in-kind under unusual circumstances. In-kind payment means payment will be made
to you in portfolio securities rather than cash. In that event, you will incur
transaction costs if you sell the securities for cash.

[SIDENOTE:]
- --------------------------------------------------------------------------------
WILL A FUND EVER BE CLOSED TO NEW INVESTORS?

While Columbia reserves the right to close a Fund to new investors in the
future, all Funds are now open to new investors. Columbia will carefully
consider a number of factors prior to closing a Fund to new investors, including
a Fund's total assets and its flow of new money. If a Fund does close, existing
Fund shareholders may continue to invest in that Fund so long as the
shareholder's account remains open.

DRAFTWRITING IN COLUMBIA DAILY INCOME COMPANY.
If you are a Columbia Daily Income Company shareholder, you may redeem shares by
draft if you have completed the signature card attached to your original
application. Drafts will be furnished to you free of charge. Drafts may not be
written for less than $250. Your investment will earn daily income until your
draft is presented for payment. Of course, your draft can only be paid if you
have sufficient funds invested in Columbia Daily Income Company. A draft is a
redemption and, therefore, subject to the Fund's approval. The draftwriting
service may be terminated upon written notice.

IMPORTANT FUND POLICIES

HOW SHARES ARE PRICED.

All purchases, redemptions and exchanges will be processed at the NAV next
calculated after your request is received and accepted by a Fund. A Fund's NAV
is calculated at the close of the regular trading session of the NYSE (normally
4:00 p.m. Eastern time).

Shares will only be priced on days that the NYSE is open for trading. The NAV of
a Fund is calculated by subtracting a Fund's liabilities from its assets and
dividing the result by the number of outstanding shares. The Funds use market
prices in valuing portfolio securities. Securities for which market quotations
are not available will be valued at fair value as determined in good faith under
procedures established by and under the general supervision of the Board of
Directors of each Fund. Debt securities with remaining maturities of less than
60 days will generally be valued based on amortized cost, which approximates
market value.

34
<PAGE>

- --------------------------------------------------------------------------------
INVESTOR SERVICES
- --------------------------------------------------------------------------------

Trading on many foreign securities markets is completed at various times before
the close of the NYSE or on days the NYSE is not open for business.
Consequently, the calculation of a Fund's NAV may take place at a time that is
different than when prices are determined for funds holding foreign securities.
As a result, events affecting the values of foreign portfolio securities that
occur between the time the prices are determined and the close of the NYSE will
not be reflected in a Fund's calculation of NAV, unless the Board of Directors
or Columbia, if delegated by the Board, determines that the event would
materially affect the NAV.

[SIDENOTE:]
- --------------------------------------------------------------------------------
WHEN IS A SIGNATURE GUARANTEE NECESSARY?

To protect against fraud, a signature guarantee is required for each of the
following written redemption requests:

- - Redemption requests over $50,000
- - Redemption checks that are made payable to someone other than those
registered on the account
- - A request to send proceeds to an address or account other than those of
record
- - The mailing address for your redemption check has changed in the last 10 days

Columbia may require signature guarantees in other situations or reject a
redemption for legal reasons. Signature guarantees are available from a bank,
broker dealer, credit union, savings and loan, national securities exchange or
trust company. A notary public cannot supply a signature guarantee.

FINANCIAL INTERMEDIARIES.

If you invest through a third-party (rather than directly with Columbia), the
policies and fees for transacting business may be different than those described
here. Banks, brokers, 401(k) plans, financial advisors and financial
supermarkets (a "Financial Intermediary") may charge transaction fees and may
set different minimum investments or limitations on buying or selling shares.
Also, because these arrangements reduce or eliminate the need for the Fund's
transfer agent to provide account services, the Funds and Columbia may pay the
Financial Intermediary a recordkeeping or account servicing fee. Many Financial
Intermediaries enter into an agreement with the Funds that authorizes them to
accept purchase and redemption orders on behalf of the Funds. To the extent that
the Financial Intermediary has agreed to act as an agent for the Fund, the Fund
will be deemed to have received a purchase or redemption order when an
authorized Financial Intermediary or its delegate accepts the order. The order
will be priced at the Fund's net asset value next computed after it is accepted
by the Financial Intermediary or its delegate.

EXCHANGES.

On any business day, you may exchange all or a portion of your shares into any
other available Columbia Fund. To prevent excessive exchange activity to the
detriment of other shareholders, only four exchanges per Fund are allowed per
year. When exchanging into a new Fund, be sure you read the part of the
Prospectus that pertains to the Fund you exchange into. This privilege may be
revoked or modified at any time, and the Funds reserve the right to reject any
exchange request. For example, the Funds may reject exchanges from accounts
engaged in or known to engage in trading that exceeds the Fund's annual limit
(including market timing transactions).

35
<PAGE>

TELEPHONE REDEMPTIONS.

To determine whether telephone instructions are genuine, Columbia will request
personal shareholder information when you call. All telephone instructions are
recorded and a written confirmation of the redemption is mailed to the address
of record. Proceeds from a telephone redemption may only be mailed to the
registered name and address on the account, or transferred to your predesignated
bank account or to another Columbia Fund under the same account number. For your
protection, the ability to redeem by phone and have the proceeds mailed to your
address may be suspended for up to 30 days following an address change. You may
be liable for any fraudulent telephone instructions as long as Columbia takes
reasonable measures to verify the identity of the caller.

AUTOMATIC WITHDRAWALS.

Automatic withdrawals are redeemed 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 balance requirement, your account is subject to being closed on
60 days written notice.

INVOLUNTARY REDEMPTIONS.
Upon 60 days prior written notice, a Fund may redeem all of your shares without
your consent if:

- - Your Fund balance falls below $500
- - You are a U.S. shareholder and fail to provide a certified taxpayer
identification number
- - You are a foreign shareholder and fail to provide a current Form W-8,
"Certificate of Foreign Status"
- - You engage in activities that are illegal or otherwise believed detrimental to
the Funds

If your shares are redeemed by the Fund, payment will be made promptly at the
Fund's current net asset value, and may result in a realized capital gain or
loss.

TAXPAYER IDENTIFICATION NUMBER.
Federal law requires each Fund to withhold 31% of dividends and redemption
proceeds paid to shareholders who have not complied with certain tax
requirements. You will be asked to certify on your account application that the
Social Security number provided is correct and that you are not subject to 31%
backup withholding for previous underreporting of income to the

36
<PAGE>

- --------------------------------------------------------------------------------
INVESTOR SERVICES
- --------------------------------------------------------------------------------

IRS. The Funds will generally not accept new investments that do not comply
with these requirements.

SHAREHOLDER STATEMENTS.

To stay informed about the status of your account, every Columbia Funds
shareholder receives either monthly or quarterly statements. With the exception
of recurring activity, such as an automatic investment or withdrawal plan, you
will receive a confirmation for all transactions in your account. Shareholder
reports are mailed to shareholders twice a year, and you'll also receive an
annual tax report detailing the taxable characteristics of any Fund
distributions from the prior year. To reduce Fund expenses, only one shareholder
report and the Funds' annually updated prospectus will be mailed to accounts
with the same Tax Identification Number or the same family name registered at
the same address. In addition, shareholders or multiple accounts at the same
mailing address can eliminate duplicate enclosures for statements mailed to that
address by filing a SAVMAIL form with the Funds. For a SAVMAIL form or to
receive additional copies of any financial report or Prospectus, please call an
Investor Services Representative at 1-800-547-1707. If you do not wish to have
your shareholder reports and prospectuses consolidated, please call us and we
will send you individual copies within 30 days of your request.

[SIDENOTE:]
- --------------------------------------------------------------------------------
RECEIVE CUSTOMIZED INVESTMENT MANAGEMENT WITH A PRIVATE MANAGEMENT ACCOUNT

For custom asset allocation services among the Columbia Funds, Columbia Trust
Company offers the Private Management Account for investments over $150,000. The
annual fee for this service is:

- - .75% on the first $500,000
- - .50% on the next $500,000
- - .25% on assets over $1,000,000

The minimum fee for this service is $1,000 and the maximum fee is $15,000. These
fees are in addition to the underlying expenses of the Funds making up the
Private Management Account. For additional information, please call
1-800-547-1037, x2200.

37
<PAGE>

AT-A-GLANCE INSTRUCTIONS FOR ACCOUNTS

- --------------------------------------------------------------------------------
OPENING A NEW ACCOUNT
- --------------------------------------------------------------------------------
BY MAIL [GRAPHIC]

REGULAR MAIL
Columbia Financial Center
P.O. Box 1350
Portland, OR 97207-1350

OVERNIGHT CARRIER
Columbia Financial Center
1301 S.W. Fifth Avenue
Portland, OR 97201-5601

Complete an application and send it to the address above with your check for at
least the minimum fund investment.

- --------------------------------------------------------------------------------
BY TELEPHONE [GRAPHIC]

1-800-547-1707
WIRE: Once you submit a completed application, you may open an account using
federal funds wired from your bank. Since each Fund has a different wire number,
call us for instructions.

- --------------------------------------------------------------------------------

INTERNET [GRAPHIC]

www.columbiafunds.com

Download a prospectus and an application from our Web site. Mail a completed
application with your initial investment to the address above.

- --------------------------------------------------------------------------------

AUTOMATIC

A minimum of $50 lets you open an account, provided you establish an automatic
investment plan (AIP). This means that investments are transferred automatically
from your bank to the Columbia Fund(s) of your choice each month.
Sign up for AIP on the application, or call us for a form.

- --------------------------------------------------------------------------------
IN PERSON [GRAPHIC]

Columbia Financial Center
1301 S.W. Fifth Avenue
Portland, OR 97201-5601

7:30-5:00 PST

Visit Columbia Funds, conveniently located in downtown Portland.

- --------------------------------------------------------------------------------
BUYING SHARES
- --------------------------------------------------------------------------------
BY MAIL [GRAPHIC]

REGULAR MAIL
Columbia Financial Center
P.O. Box 1350
Portland, OR 97207-1350

OVERNIGHT CARRIER
Columbia Financial Center
1301 S.W. Fifth Avenue
Portland, OR 97201-5601

Send your investment to the above address. Be sure to enclose an investment slip
from the bottom of your statement.

- --------------------------------------------------------------------------------
BY TELEPHONE [GRAPHIC]

1-800-547-1707

WIRE: Invest using federal funds wired from your bank. Since each Fund has a
different wire number, call us for instructions.

EXCHANGE: Use the proceeds from the redemption in one Fund to purchase shares of
another Fund with the same account number. To exchange shares, call us.

TELEVEST: Provided the service is already set up on your account (use the
application or call us for a form), request a transfer from your bank for
investment in the Columbia Funds.

- --------------------------------------------------------------------------------

INTERNET [GRAPHIC]

www.columbiafunds.com

EXCHANGE: Call us for a personal identification number to access your account
online. Then, use the proceeds from the redemption in one Fund to purchase
shares of another Fund with the same account number. Submit your exchange
request through our secure account e-mail.

- --------------------------------------------------------------------------------
AUTOMATIC

Arrange to have investments transferred automatically from your bank account to
the Columbia Fund(s) of your choice on the 5th, 20th, or both, of each month.
Sign up for AIP on the application or call us for a form. AIP investment minimum
is $50 per Fund.

- --------------------------------------------------------------------------------
IN PERSON [GRAPHIC]

Columbia Financial Center
1301 S.W. Fifth Avenue
Portland, OR 97201-5601

7:30-5:00 PST

Visit Columbia Funds, conveniently located in downtown Portland.

38
<PAGE>

- --------------------------------------------------------------------------------
INVESTOR SERVICES
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
SELLING (REDEEMING) SHARES
- --------------------------------------------------------------------------------
BY MAIL [GRAPHIC]

REGULAR MAIL
Columbia Financial Center
P.O. Box 1350
Portland, OR 97207-1350

OVERNIGHT CARRIER
Columbia Financial Center
1301 S.W. Fifth Avenue
Portland, OR 97201-5601

Send your redemption request to the above address. Redemption requests must be
signed by each shareholder required to sign on the account. A signature
guarantee may be required. Accounts in the names of corporations, fiduciaries,
and intermediaries may require additional documentation.

- --------------------------------------------------------------------------------
BY TELEPHONE [GRAPHIC]

1-800-547-1707

Redeem shares by phone (unless you have declined this service on the
application.) Proceeds from telephone redemptions may be mailed only to the
account owner at the address of record (maximum $50,000) or transferred to a
bank designated on the application (any amount).

WIRE: Call us to request a wire redemption. Your request must be at least
$1,000, and the bank wire cost for each redemption will be charged against your
Columbia account. Your bank may impose a fee.

EXCHANGE: Use the proceeds from the redemption of one Fund to
purchase shares of another Fund with the same account number. To exchange
shares, call us.

- --------------------------------------------------------------------------------

INTERNET [GRAPHIC]

www.columbiafunds.com

- --------------------------------------------------------------------------------
AUTOMATIC

For accounts over $5,000, redeem shares on a regular basis through a transfer of
funds from your Columbia account directly to the bank designated on your
application ($50 minimum withdrawal).

- --------------------------------------------------------------------------------
IN PERSON [GRAPHIC]

Columbia Financial Center
1301 S.W. Fifth Avenue
Portland, OR 97201-5601

7:30-5:00 PST

Although you can visit Columbia Funds to make a redemption request, availability
of the proceeds will vary. Please call ahead for details.

[SIDENOTE:]
TAX-ADVANTAGED INVESTING WITH A COLUMBIA IRA OR RETIREMENT PLAN

The following accounts require special applications. For an application and more
details about tax-advantaged investing, call us at 1-800-547-1707.

TRADITIONAL IRA
A Traditional IRA allows you to invest a maximum of $2,000 each year and earn
tax-deferred returns. Your contributions may be tax deductible. Deductions may
be limited if your income exceeds a certain level or if you participate in
certain retirement plans. Any withdrawals of tax deductible contributions and
tax-deferred earnings are taxable at your regular income tax rate. Early
withdrawals also may be subject to penalties. You may choose to roll over
retirement plan proceeds into an IRA in order to prolong tax-deferred savings.

ROTH IRA
A Roth IRA allows you to invest a maximum of $2,000 each year, the returns on
which are tax-free. Your contributions are not tax deductible. Your ability to
invest in a Roth IRA may be limited if your income exceeds a certain level.
Tax-free withdrawals are available after a five-year holding period, provided
you are over 59-1/2, a first time homebuyer, or satisfy other requirements.

EDUCATION IRA
This account allows you to contribute a maximum of $500 each year, the returns
on which generally are tax free when used to fund certain higher education
expenses of a child. Your contributions are not tax deductible. Your ability to
invest in an Education IRA may be limited if your income exceeds a certain
level.

RETIREMENT PLANS

A number of retirement plan options are available for small- to mid-size
businesses. Contact Columbia at 1-800-547-1037, extension 2115 for further
information.

39
<PAGE>

DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
Each Fund distributes to shareholders its net investment income and net realized
capital gains. Net investment income (income from dividends, interest and any
net realized short-term capital gains) and net long-term capital gains (gains
realized on the sale of a security by a Fund) are distributed as follows:

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
INCOME AND CAPITAL GAINS DISTRIBUTIONS
- --------------------------------------------------------------------------------
<S> <C> <C>
NET INVESTMENT NET REALIZED LONG-
FUND INCOME TERM CAPITAL GAINS

Growth Fund Declared and paid Normally declared
International Stock Fund in December and paid in
Special Fund December
Small Cap Fund
- --------------------------------------------------------------------------------

Common Stock Fund Declared and paid each Normally declared
Real Estate Equity Fund calendar quarter and paid in
Balanced Fund December
- --------------------------------------------------------------------------------
U.S. Government Declared daily and Normally declared
Securities Fund paid monthly and paid in
Fixed Income December
Securities Fund
National Municipal
Bond Fund
Oregon Municipal
Bond Fund
High Yield Fund
- --------------------------------------------------------------------------------
Money Market Fund Declared and paid daily Declared and paid
in December (if
any)
</TABLE>

Unless you elect to receive your distributions in cash, income and capital gain
distributions will be reinvested in additional shares on the dividend payment
date.

TAX EFFECT OF DISTRIBUTIONS

SHAREHOLDERS OF FUNDS OTHER THAN MUNICIPAL BOND FUNDS.
Distributions from the Funds are taxable unless a shareholder is exempt from
federal or state income taxes or the investment is in a tax-advantaged account.
The tax status of any distribution is the same regardless of how long a
shareholder has been invested in the Fund and whether distributions are
reinvested or taken as cash.

40
<PAGE>

- --------------------------------------------------------------------------------
DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------

In general, distributions are taxable as follows:

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TAXABILITY OF DISTRIBUTIONS
- --------------------------------------------------------------------------------
<S> <C>
TYPE OF DISTRIBUTION TAXABLE AT

Dividend Income Ordinary Income Rate
- --------------------------------------------------------------------------------
Short-Term Capital Gains Ordinary Income Rate
- --------------------------------------------------------------------------------
Long-Term Capital Gains 20% or 10% (depending on
whether you are in the
28% or 15% tax bracket)
</TABLE>

[SIDENOTE:]
Distributions by the Columbia stock funds will consist primarily of capital
gains, and distributions by the Columbia bond funds and the Money Market Fund
will consist primarily of ordinary income.

Distributions by the Columbia stock funds will consist primarily of capital
gains, and distributions by the Columbia bond funds and the Money Market Fund
will consist primarily of ordinary income. In January, the Funds will send
shareholders information detailing the net investment income and capital gains
distributed in the prior year.

"BUYING A DIVIDEND." If you buy shares of a Fund before it pays a distribution,
you will pay the full price of the shares and receive a portion of the purchase
price back in the form of a taxable distribution. The Fund's NAV and your cost
basis in the purchased shares is reduced by the amount of the distribution. The
impact of this tax result is most significant when shares are purchased shortly
before an annual distribution of capital gains or other income. This tax result
is extremely unlikely in the case of the Money Market Fund, which distributes
its net investment income daily and has few or no capital gains.

SHAREHOLDERS OF MUNICIPAL BOND FUNDS.
FEDERAL TAXES. A substantial portion of the net investment income distributed by
the Municipal Bond Funds will be tax-exempt interest and will not be includible
in a shareholder's gross income for federal income tax purposes. A portion of
net income distributed by these Funds may, however, be taxable as ordinary
income to the extent the distribution represents taxable interest received from
sources other than municipal bonds or taxable accrued market discount on the
sale or redemption of municipal bonds. Additionally, even though shareholders
generally will not be taxed on distributions of tax-exempt interest, to the
extent these Funds have net capital gains, shareholders will be taxed on the
gain at the applicable capital gains rate.

41
<PAGE>

STATE INCOME TAXES.

NATIONAL MUNICIPAL BOND FUND: Distributions from this Fund may be exempt from
the income tax of a state, if the distributions are derived from tax-exempt
interest paid on the municipal securities of that state or its political
subdivisions. Those distributions may not be exempt from another state's income
tax, however. In addition, distributions derived from capital gains generally
will be subject to state income tax. Shareholders of the National Municipal Bond
Fund should consult their tax advisors regarding whether any portion of
distributions received from that Fund is exempt from state income tax, because
exemption may depend upon whether the shareholder is an individual, whether the
individual is subject to tax in any given state, the residence of the
individual, and the particular state tax treatment of mutual funds.

OREGON MUNICIPAL BOND FUND: Individuals, trusts, and estates will not pay Oregon
personal income tax on distributions from the Oregon Municipal Bond Fund that
are derived from tax-exempt interest paid on the municipal securities of the
State of Oregon, its political subdivisions and certain other issuers (including
Puerto Rico and Guam). However, individuals, trusts, and estates that are
subject to Oregon personal income tax are generally subject to Oregon personal
income tax on distributions derived from other types of income received by the
Oregon Municipal Bond Fund, including capital gains. Furthermore, it is expected
that corporations subject to the Oregon corporation excise or income tax will be
subject to that tax on the income from the Fund, including income that is exempt
for federal purposes.

TAXABILITY OF TRANSACTIONS
The sale of Fund shares or the exchange of Fund shares for shares of another
Fund is considered a taxable event that may produce a gain or loss. Shareholders
are responsible for any tax liabilities generated by their transactions.

---------------------------------------------------------------
Local taxes are beyond the scope of this discussion. This
section provides only a brief summary of tax information
related to the Funds. You should consult your tax
professional about the tax consequences of investing in the
Funds.
---------------------------------------------------------------

42
<PAGE>

- --------------------------------------------------------------------------------
MORE ABOUT THE FUNDS
- --------------------------------------------------------------------------------

MORE ABOUT THE FUNDS
- ---------------------------------------

This section contains additional information about the risks and types of
securities in which the Funds will principally invest. For a more detailed
description of each Fund and its investment strategy, please request a copy of
the Funds' Statement of Additional Information.

PORTFOLIO SECURITIES
INTERNATIONAL STOCK FUND.

The Fund intends to invest principally in the equity securities of companies
located in the following countries: Argentina, Australia, Brazil, Canada,
Finland, France, Germany, Hong Kong, India, Ireland, Italy, Japan, Korea,
Malaysia, The Netherlands, New Zealand, Norway, Portugal, Singapore, Spain,
Sweden, Switzerland, Thailand, and the United Kingdom. Equity securities in
which the Fund may invest include common stocks, preferred stocks, securities
convertible into common stocks and securities that carry the right to buy common
stocks. Although the Fund intends to invest primarily in companies located
outside the United States, it is permitted to invest up to 35% of its total
assets in U.S. companies, and it is more likely to do that when it believes
foreign market or economic conditions or trends in currency exchange rates favor
domestic securities.

Most of the securities held by the Fund will be denominated in foreign
currencies. This means that the value of the securities will be affected by
changes in the exchange rate between the U.S. dollar and foreign currencies.
In managing currency exposure, the Fund may enter into forward
currency contracts. A forward currency contract involves an agreement to
purchase or sell a specified currency at a specified future price set at the
time of the contract. When the Fund enters into a contract for the purchase or
sale of a security denominated in a foreign currency, it may desire to "lock in"
the U.S. dollar price of the security. The Fund will only enter into forward
contracts for hedging and not for purposes of speculation. Under normal market
conditions, no more than 25 percent of the Fund's assets may be committed to
currency exchange contracts.

SPECIAL FUND.
Although the Special Fund intends to invest primarily in small- to mid-cap
companies, it may invest in larger companies when Columbia believes they offer
comparable capital appreciation opportunities or to stabilize the Fund's
portfolio. Columbia will constantly monitor economic conditions to determine the
appropriate percentage of the Fund's assets that will be invested in small- to
mid-cap companies.

43
<PAGE>

The Fund may also invest in securities convertible into or exercisable for
common stock (including preferred stock, warrants, and debentures) and certain
options and financial futures contracts.

SMALL CAP FUND.
The Fund will invest, under normal conditions, at least 65% of the value of its
total assets in common stocks, or in securities convertible into common stocks,
of small-cap companies. Securities convertible into common stock may include
both debt securities and preferred stock. The Fund may also invest in warrants,
which are options to buy a stated number of underlying securities at a specified
price any time during the life of the warrants.

There is no minimum aggregate market valuation for a company to be considered an
appropriate investment for the Fund. The Fund may also invest up to 35% of its
net assets in the securities of large-cap companies when their stocks offer
capital appreciation potential that is generally comparable to small-cap
securities.

REAL ESTATE EQUITY FUND.

The Fund will invest a substantial portion of its assets in REITs. A REIT is not
taxed on income distributed to shareholders if it complies with several
requirements relating to its organization, ownership, assets, and income, and a
requirement that it distribute to its shareholders at least 95% of its taxable
income (other than net capital gains) for each taxable year.

REITs are generally classified as equity REITs, mortgage REITs, and hybrid
REITs. An equity REIT, which invests the majority of its assets directly in real
properties -- such as shopping centers, malls, multi-family housing, and
commercial properties -- derives its income primarily from rents and lease
payments. An equity REIT can also realize capital gains by selling properties
that have appreciated in value. A mortgage REIT, which invests the majority of
its assets in real estate mortgages, derives its income primarily from interest
payments. A hybrid REIT combines the characteristics of equity REITs and
mortgage REITs.

The Fund may invest up to 35% of its total net assets in equity securities of
companies outside the real estate industry and in non-convertible debt
securities. Investments outside the real estate industry will consist primarily
of securities of companies whose products and services are related to the real
estate industry. These may include manufacturers and distributors of building
supplies, financial institutions that make or service mortgages, or companies
with substantial real estate assets relative to their stock market valuations,
such as certain retailers and railroads. The Fund will only invest in
"investment-grade" debt securities.

44
<PAGE>

- --------------------------------------------------------------------------------
MORE ABOUT THE FUNDS
- --------------------------------------------------------------------------------

FIXED INCOME SECURITIES FUND AND BALANCED FUND.
The Fixed Income Securities Fund and the Balanced Fund may invest in a variety
of debt securities such as bonds, debentures, notes, equipment trust
certificates, and short-term obligations (those having maturities of 12 months
or less), such as prime commercial paper and bankers' acceptances, domestic
certificates of deposit, obligations of or guaranteed by the U.S. Government and
its agencies and instrumentalities, mortgage-backed certificates,
mortgage-backed securities and other similar securities representing ownership
in a pool of loans.

Mortgage-backed securities are securities representing interests in "pools" of
mortgages in which payments of both interest and principal on the securities are
made monthly, in effect, "passing through" monthly payments made by the
individual borrowers on the mortgage loans that underlie the securities (net of
fees paid to the issuer or guarantor of the securities).

Payment of principal and interest on some mortgage pass-through
securities (but not the market value of the securities themselves) may be
guaranteed by the full faith and credit of the U.S. Government (in the case of
securities guaranteed by the Government National Mortgage Association ("GNMA"))
or guaranteed by agencies or instrumentalities of the U.S. Government (in the
case of securities guaranteed by the Federal National Mortgage Association
("FNMA") or the Federal Home Loan Mortgage Corporation ("FHLMC"), which are
supported only by the discretionary authority of the U.S. Government to purchase
the agency's obligations). Mortgage pass-through securities created by
non-governmental issuers (such as commercial banks, savings and loan
institutions, private mortgage insurance companies, mortgage bankers and other
secondary market issuers) may be supported with various credit enhancements such
as pool insurance, guarantees issued by governmental entities, a letter of
credit from a bank or senior/subordinated structures.

The Funds will usually invest some portion of their assets in collateralized
mortgage obligations ("CMOs") issued by U.S. agencies or instrumentalities or in
privately issued CMOs that carry an investment-grade rating. CMOs are hybrid
instruments with characteristics of both mortgage-backed bonds and mortgage
pass-through securities. Similar to a mortgage pass-through, interest and
prepaid principal on a CMO are paid, in most cases, monthly. CMOs may be
collateralized by whole mortgage loans but are more typically collateralized by
portfolios of mortgage pass-through securities guaranteed by GNMA, FHLMC, or
FNMA. CMOs are structured in multiple classes, with each class bearing a
different stated maturity

45
<PAGE>

or interest rate. A Fund will only invest in those CMOs whose characteristics
and terms are consistent with the average maturity and market risk profile of
the other fixed income securities held by the Fund.

Each Fund is permitted to invest in asset-backed securities, subject to the
Fund's rating and quality requirements. Through the use of trusts and special
purpose subsidiaries, various types of assets, including home equity and
automobile loans and credit card and other types of receivables, as well as
purchase contracts, financing leases and sales agreements entered into by
municipalities, are being securitized in pass-through structures similar to the
mortgage pass-through structures described above.

MUNICIPAL BOND FUNDS.

While each of the Funds attempts to invest 100% of its assets in tax-free
municipal securities, each Fund may invest up to 20% of its assets in securities
that pay taxable interest. In such circumstances, the Fund will invest in
obligations of the U.S. Government or its agencies or instrumentalities;
obligations of U.S. banks (including certificates of deposit, bankers'
acceptances and letters of credit) that are members of the Federal Reserve
System and that have capital surplus and undivided profits as of the date of
their most recent published financial statements in excess of $100 million;
commercial paper rated Prime 1 by Moody's, A-1 or better by S&P, or if not
rated, issued by a company that, at the time of investment by the Fund, has an
outstanding debt issue rated AA or better by S&P or Aa or better by Moody's; and
repurchase agreements for any of these types of investments. The Funds may also
invest in the obligations of Puerto Rico, the U.S. Virgin Islands and Guam, the
interest on which is generally exempt from state income taxes.

TEMPORARY INVESTMENTS.
Under adverse market conditions, each Fund (other than Columbia Daily Income
Company) may depart from its principal investment strategies by taking defensive
positions in response to adverse economic or market conditions. When a Fund
assumes a temporary defensive position, it generally will not invest in
securities designed to achieve its investment goal.

PORTFOLIO TURNOVER.
Each Fund generally intends to purchase securities for long-term investment
rather than short-term gains. When circumstances warrant, however, a Fund may
sell securities without regard to the length of time they have been held. This
may result in a higher portfolio turnover rate and increase a Fund's transaction
costs, including brokerage commissions. To the extent

46
<PAGE>

- --------------------------------------------------------------------------------
MORE ABOUT THE FUNDS
- --------------------------------------------------------------------------------

short-term trades result in gains on securities held one year or less,
shareholders will be subject to taxes on these gains at ordinary income rates.
See "Information about Your Investment, DISTRIBUTIONS AND TAXES." Historical
portfolio turnover rates are shown under "Financial Highlights" in the
description of each Fund at the beginning of this Prospectus.

[SIDENOTE:]
Interest rate risk refers to the possibility that the net asset value of the
fixed income portfolios may decline due to an increase in interest
rates. [GRAPHIC]

MORE ABOUT RISKS
This section provides more information about the risks of investing in the
Funds, which you should consider before you invest.

REITs.

The Real Estate Equity Fund will, and the other Stock Funds as part of their
principal investment strategy may, invest in REITs. Investment in REITs carries
with it many of the same risks associated with direct ownership in real estate.
In addition to these risks, equity REITs may be affected by changes in the value
of the underlying property owned by the REIT, while mortgage REITs may be
affected by the quality of the credit extended. Furthermore, REITs are dependent
upon management skills, may not be diversified, and are subject to heavy cash
flow dependency, defaults by borrowers, and self-liquidation. In addition, a
REIT could fail to qualify for tax-free pass-through of income under the
Internal Revenue Code or fail to maintain its exemption from registration under
the Investment Company Act. The above factors may also adversely affect a
borrower's or a lessee's ability to meet its obligations to the REIT. If a
borrower or lessee defaults, a REIT may experience delays in enforcing its
rights as mortgagee or lessor and may incur substantial costs associated with
protection of its investments.

INTEREST RATE RISK.
Interest rate risk refers to the possibility that the net asset value of the
fixed income portfolios may decline due to an increase in interest rates.

When interest rates go up, the value of a bond fund's portfolio will likely
decline because fixed income securities in the portfolio are paying a lower
interest rate than what investors could obtain in the current market. When
interest rates go down, the value of a bond fund's portfolio will likely
rise, because fixed income securities in the portfolio are paying a higher
interest rate than newly issued fixed income securities. The amount of change
in the value of a bond fund's portfolio depends upon several factors,
including the maturity date of the fixed income securities in the portfolio.
In general, fixed income securities with longer maturities are more sensitive
to interest rate changes than securities with shorter maturities. To
compensate for the higher risk, bonds with longer maturities generally offer
higher yields than bonds with shorter maturities.

47
<PAGE>

CREDIT RISK.
The fixed income securities in the Funds' portfolios are subject to credit risk.
Credit risk refers to the possibility that the issuer of a bond may fail to make
timely payments of interest or principal. Other than the High Yield Fund and, to
a small extent, the Fixed Income Securities Fund, which both may invest in
non-investment grade securities, the Funds will only invest in investment-grade
fixed income securities. Investment-grade securities are those issued by the
U.S. Government, its agencies, and instrumentalities, as well as those rated as
shown below by the following rating agencies:

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
INVESTMENT-GRADE SECURITIES
- --------------------------------------------------------------------------------
RATING AGENCY LONG-TERM SHORT-TERM
DEBT SECURITY DEBT SECURITY
<S> <C> <C>
Standard & Poor's (S&P) At least BBB At least A-3 or SP-2
- --------------------------------------------------------------------------------
Moody's Investors
Service, Inc. (Moody's) At least Baa AT least Prime-3 or MIG 4/VMIG4
- --------------------------------------------------------------------------------
</TABLE>

The Funds may also invest in securities unrated by these agencies if Columbia
determines the security to be of equivalent investment quality to an investment
grade security. Investment-grade securities are subject to some credit risk.
Bonds in the lowest-rated investment-grade category have speculative
characteristics. Changes in economic conditions or other circumstances are more
likely to weaken the ability of the issuer to make principal and interest
payments on these bonds than is the case for higher-rated bonds. Discussion
concerning the risks of investing in non-investment grade bonds can be found in
the description of the High Yield Fund. In addition, the ratings of securities
provided by Moody's and S&P are estimates by the rating agencies of the credit
quality of the securities. The ratings may not take into account every risk
related to whether interest or principal will be repaid on a timely basis. See
the Statement of Additional Information for a complete discussion of bond
ratings.

ZERO-COUPON SECURITIES.
The High Yield Fund intends to invest in lower-rated debt securities
structured as zero-coupon securities. A zero-coupon security has no

48
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MORE ABOUT THE FUNDS
- --------------------------------------------------------------------------------

cash-coupon payments. Instead, the issuer sells the security at a substantial
discount from its maturity value. The interest equivalent received by the
investor from holding this security to maturity is the difference between the
maturity value and the purchase price. Zero-coupon securities are more
volatile than cash pay securities. The Fund accrues income on these
securities prior to the receipt of cash payments. The Fund intends to
distribute substantially all of its income to its shareholders to qualify for
pass-through treatment under the tax laws and may, therefore, need to use its
cash reserves to satisfy distribution requirements.

MORTGAGE RELATED SECURITIES AND COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS").
Mortgage related securities and CMOs are subject to risks relating to cash flow
uncertainty; that is, the risk that actual prepayment on the underlying
mortgages will not correspond to the prepayment rate assumed by the Fund
(prepayment risk). Unscheduled or early payments on the underlying mortgages may
shorten the securities' effective maturities and reduce their growth potential.
A decline in interest rates may lead to a faster rate of repayment of the
underlying mortgage and expose the Fund to a lower rate of return on
reinvestment. To the extent that mortgage-backed securities are held by the
Fund, the prepayment right of mortgages may limit the increase in net asset
value of the Fund because the value of the mortgage-backed securities held by
the Fund may not appreciate as rapidly as the price of non-callable debt
securities.

ALTERNATIVE MINIMUM TAX.
If you are subject to the federal alternative minimum tax, you should be aware
that up to 10% of each of the Municipal Bond Funds' net assets may be invested
in debt securities, the interest on which is subject to the alternative minimum
tax.

CONCENTRATION RISK.
The Oregon Municipal Bond Fund is "non-diversified," which means that it may
invest a greater percentage of its assets in the securities of a single issuer.
As a result, it may be more susceptible to risks associated with a single
economic, political or regulatory occurrence than a more diversified portfolio
might be.

49
<PAGE>

FOR YOUR INFORMATION
You can find additional information on the Funds in the following documents:

ANNUAL AND SEMIANNUAL REPORTS.

While the Prospectus describes the Funds' potential investments, these reports
detail the Funds' actual investments as of the report date. The reports include
a discussion by Fund management of recent market conditions, economic trends,
and Fund strategies that significantly affected Fund performance during the
reporting period.

STATEMENT OF ADDITIONAL INFORMATION ("SAI").
The SAI supplements the Prospectus and contains further information about each
Fund and its investment restrictions, risks and policies.

A current SAI for the Funds is on file with the Securities and Exchange
Commission and is incorporated into this Prospectus by reference, which means it
is considered part of this Prospectus. You can get free copies of the current
annual/semiannual report and SAI, request other information, and discuss your
questions about the Funds by contacting the Funds at:

COLUMBIA FUNDS
1301 S.W. Fifth Avenue
Portland, Oregon 97201
Telephone: Portland (503) 222-3606
Nationwide 1-800-547-1707
www.columbiafunds.com

Information about the Funds (including the SAI) can be reviewed and copied at
the SEC's Public Reference Room in Washington, D.C. Information about the
operation of the Public Reference Room may be obtained by calling the SEC at
1-800-SEC-0330. Reports and other information regarding the Funds are also on
the SEC's Internet site at http://www.sec.gov; copies of this information may be
obtained, after paying a duplicating fee, by electronic request at the SEC's
e-mail address of [email protected], or by writing the SEC's Public Reference
Section, Washington, D.C. 20549-0102.

SEC file number: 811-6341 (CCSF)
811-1449 (CGF)
811-7024 (CISF)
811-4362 (CSF)
811-7671 (CSCF)
811-8256 (CREF)
811-6338 (CBF)
811-4842 (CUSG)
811-3581 (CFIS)
811-7832 (CNBF)
811-3983 (CMBF)
811-7834 (CHYF)
811-2507 (CDIC)

50
<PAGE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

[LOGO]

COLUMBIA FUNDS
-- 1301 S.W. FIFTH AVENUE, PORTLAND, OREGON 97201 --

-- DIRECTORS --
----------------------------------------------------------------
JAMES C. GEORGE
J. JERRY INSKEEP, JR.
THOMAS R. MACKENZIE
RICHARD L. WOOLWORTH

-- INVESTMENT ADVISOR --
----------------------------------------------------------------
COLUMBIA FUNDS MANAGEMENT COMPANY
1300 S.W. SIXTH AVENUE
PORTLAND, OREGON 97201

-- LEGAL COUNSEL --
----------------------------------------------------------------
STOEL RIVES LLP
900 S.W. FIFTH AVENUE, SUITE 2300
PORTLAND, OREGON 97204-1268

-- INDEPENDENT ACCOUNTANTS --
----------------------------------------------------------------
PRICEWATERHOUSECOOPERS LLP
1300 S.W. FIFTH AVENUE, SUITE 3100
PORTLAND, OREGON 97201

-- TRANSFER AGENT --
----------------------------------------------------------------
COLUMBIA TRUST COMPANY
1301 S.W. FIFTH AVENUE
PORTLAND, OREGON 97201

FUNDS DISTRIBUTED BY PROVIDENT DISTRIBUTORS, INC.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

Part B-I

- --------------------------------------------------------------------------------

COLUMBIA COMMON STOCK FUND, INC.
COLUMBIA GROWTH FUND, INC.
COLUMBIA INTERNATIONAL STOCK FUND, INC.
COLUMBIA SPECIAL FUND, INC.
COLUMBIA SMALL CAP FUND, INC.
COLUMBIA REAL ESTATE EQUITY FUND, INC.
COLUMBIA BALANCED FUND, INC.
COLUMBIA U.S. GOVERNMENT SECURITIES FUND, INC.
COLUMBIA FIXED INCOME SECURITIES FUND, INC.
COLUMBIA NATIONAL MUNICIPAL BOND FUND, INC.
COLUMBIA OREGON MUNICIPAL BOND FUND, INC.
COLUMBIA HIGH YIELD FUND, INC.
COLUMBIA DAILY INCOME COMPANY

- --------------------------------------------------------------------------------

STATEMENT OF ADDITIONAL INFORMATION

Columbia Funds
1300 S.W. Sixth Avenue
P.O. Box 1350
Portland, Oregon 97207
(503) 222-3600

This Statement of Additional Information contains information relating
to 13 mutual funds: Columbia Common Stock Fund, Inc. (the "Common Stock Fund" or
"CCSF"), Columbia Growth Fund, Inc. (the "Growth Fund" or "CGF"), Columbia
International Stock Fund, Inc. (the "International Stock Fund" or "CISF"),
Columbia Special Fund, Inc. (the "Special Fund" or "CSF"), Columbia Small Cap
Fund, Inc. (the "Small Cap Fund" or "CSCF"), Columbia Real Estate Equity Fund,
Inc. (the "Real Estate Fund" or "CREF"), Columbia Balanced Fund, Inc. (the
"Balanced Fund" or "CBF"), Columbia U.S. Government Securities Fund, Inc. (the
"Government Bond Fund" or "CUSG"), Columbia Fixed Income Securities Fund, Inc.
(the "Bond Fund" or "CFIS"), Columbia National Municipal Bond Fund, Inc. (the
"National Municipal Bond Fund" or "CNMF"), Columbia Oregon Municipal Bond Fund,
Inc. (the "Oregon Municipal Bond Fund" or "CMBF"), Columbia High Yield Fund,
Inc. (the "High Yield Fund" or "CHYF"), and Columbia Daily Income Company (the
"Columbia Daily Income Company" or "CDIC") (each a "Fund" and together the
"Funds").

This Statement of Additional Information is not a Prospectus. It
relates to a Prospectus dated February 22, 2000 (the "Prospectus") and should be
read in conjunction with the Prospectus. Copies of the Prospectus are available
without charge upon request to any of the Funds or by calling 1-800-547-1037.

The Funds' most recent Annual Report to shareholders is a separate
document supplied with this Statement of

<PAGE>

Additional Information, and the financial statements, accompanying notes and
report of independent accountants appearing in this Annual Report are
incorporated by reference into this Statement of Additional Information.

2
<PAGE>

TABLE OF CONTENTS

Description of the Funds......................................................3
Investment Restrictions.......................................................23
Management....................................................................43
Investment Advisory and Other Fees Paid to Affiliates.........................47
Portfolio Transactions........................................................49
Capital Stock and Other Securities............................................52
Purchase, Redemption and Pricing of Shares....................................53
Custodians....................................................................57
Accounting Services and Financial Statements..................................58
Taxes.........................................................................
Yield and Performance.........................................................68
Financial Statements..........................................................71

February 22, 2000

3
<PAGE>

- --------------------------------------------------------------------------------
DESCRIPTION OF THE FUNDS
- --------------------------------------------------------------------------------

Each of the Funds is an open-end, management investment company. Each
Fund, other than the Oregon Municipal Bond Fund, is diversified, which means
that, with respect to 75% of its total assets, the Fund will not invest more
than 5% of its assets in the securities of any single issuer. The investment
adviser for each of the Funds is Columbia Funds Management Company (the
"Adviser"). See the section entitled "INVESTMENT ADVISORY AND OTHER FEES PAID TO
AFFILIATES" for further information about the Adviser.

INVESTMENTS HELD AND INVESTMENT PRACTICES BY THE FUNDS

The Prospectus describes the fundamental investment objective and the
principal investment strategy applicable to each Fund. Each Fund's investment
objective may not be changed without shareholder approval, other than the
Special Fund, which may be changed by the Fund's Board of Directors without
shareholder approval upon 30 days written notice. What follows is additional
information regarding securities in which a Fund may invest and investment
practices in which it may engage. To determine whether a Fund purchases such
securities or engages in such practices, see the chart on pages 21 and 22 of
this Statement of Additional Information.

SECURITIES RATING AGENCIES

Rating agencies are private services that provide ratings of the credit
quality of fixed income securities. The following is a description of the fixed
income securities ratings used by Moody's Investor Services, Inc. ("Moody's")
and Standard & Poor's Corporation ("S&P"). Subsequent to its purchase by the
Fund, a security may cease to be rated, or its rating may be reduced below
the criteria set forth for the Fund. Neither event would require the
elimination of the security from the Fund's portfolio, but the Adviser will
consider that event in its determination of whether the Fund should continue
to hold such security in its portfolio. Ratings assigned by a particular
rating agency are not absolute standards of credit quality and do not
evaluate market risk. Rating agencies may fail to make timely changes in
credit ratings and an issuer's current financial condition may be better or
worse than a rating indicates.

BOND RATINGS. MOODY'S -- The following is a description of Moody's
bond ratings:

Aaa - Best quality; smallest degree of investment risk.

Aa - High quality by all standards.

Aa and Aaa are known as high-grade bonds.

A - Many favorable investment attributes; considered upper medium-grade
obligations.

4
<PAGE>

Baa - Medium-grade obligations; neither highly protected nor poorly
secured. Interest and principal appear adequate for the present, but certain
protective elements may be lacking or may be characteristically unreliable over
any great length of time.

Ba - Speculative elements; future cannot be considered well assured.
Protection of interest and principal payments may be very moderate and not well
safeguarded during both good and bad times over the future.

B - Generally lack characteristics of a desirable investment. Assurance
of interest and principal payments or of maintenance of other terms of the
contract over any long period of time may be small.

Caa - Poor standing, may be in default; elements of danger with respect
to principal or interest.

S&P -- The following is a description of S&P's bond ratings:

AAA - Highest rating; extremely strong capacity to pay principal and
interest.

AA - Also high-quality with a very strong capacity to pay principal and
interest; differ from AAA issues only by a small degree.

A - Strong capacity to pay principal and interest; somewhat more
susceptible to the adverse effects of changes in circumstances and economic
conditions.

BBB - Adequate capacity to pay principal and interest; normally exhibit
adequate protection parameters, but adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay principal
and interest than for higher-rated bonds.

Bonds rated AAA, AA, A, and BBB are considered investment grade bonds.

BB - Less near-term vulnerability to default than other speculative
grade debt; face major ongoing uncertainties or exposure to adverse business,
financial, or economic conditions that could lead to inadequate capacity to meet
timely interest and principal payments.

B - Greater vulnerability to default but presently have the capacity to
meet interest payments and principal repayments; adverse business, financial, or
economic conditions would likely impair capacity or willingness to pay interest
and repay principal.

CCC - Current identifiable vulnerability to default and dependent upon
favorable business, financial, and economic conditions to meet timely payments
of interest and repayments of principal. In the event of adverse business,
financial, or economic conditions, they are not likely to have the capacity to
pay interest and repay principal.

5
<PAGE>

Bonds rated BB, B, and CCC are regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. BB indicates the least degree of speculation and CCC a higher degree
of speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.

A Fund may purchase unrated securities (which are not rated by a rating
agency) if its portfolio manager determines that a security is of comparable
quality to a rated security that the Fund may purchase. Unrated securities may
be less liquid than comparable rated securities and involve the risk that the
portfolio manager may not accurately evaluate the security's comparative credit
rating. Analysis of the creditworthiness of issuers of high yield securities may
be more complex than for issuers of higher-quality fixed income securities. To
the extent that a Fund invests in high yield and/or unrated securities, the
Fund's success in achieving its investment objective is determined more heavily
on the portfolio manager's creditworthiness analysis than if the Fund invested
exclusively in higher-quality and rated securities.

NON-INVESTMENT GRADE SECURITIES ("JUNK BONDS")

Investments in securities rated below investment grade that are
eligible for purchase by certain of the Funds (i.e., rated Ba or lower by
Moody's or BB or lower S&P), and in particular, by the Columbia High Yield Fund,
are described as "speculative" by both Moody's and S&P. Investment in lower
rated corporate debt securities ("high yield securities" or "junk bonds")
generally provides greater income and increased opportunity for capital
appreciation than investments in higher quality securities, but they also
typically entail greater price volatility and principal and income risk.
These high yield securities are regarded as predominately speculative with
respect to the issuer's continuing ability to meet principal and interest
payments. Analysis of the creditworthiness of issuers of debt securities that
are high yield may be more complex than for issuers of higher quality debt
securities.

High yield securities may be more susceptible to real or perceived
adverse economic and competitive industry conditions than investment grade
securities. The prices of high yield securities have been found to be less
sensitive to interest-rate changes than higher-rated

6
<PAGE>

investments, but more sensitive to adverse economic downturns or individual
corporate developments. A projection of an economic downturn or of a period of
rising interest rates, for example, could cause a decline in high yield security
prices because the advent of a recession could lessen the ability of a highly
leveraged company to make principal and interest payments on its debt
securities. If an issuer of high yield securities defaults, in addition to
risking payment of all or a portion of interest and principal, the Funds
investing in such securities may incur additional expenses to seek recovery. The
Adviser seeks to reduce these risks through diversification, credit analysis and
attention to current developments and trends in both the economy and financial
markets.

The secondary market on which high yield securities are traded may be
less liquid than the market for higher grade securities. Less liquidity in the
secondary trading market could adversely affect the price at which Funds could
sell a high yield security, and could adversely affect the daily net asset value
of the shares. Adverse publicity and investor perceptions, whether or not based
on fundamental analysis, may decrease the values and liquidity of high yield
securities, especially in a thinly-trade market. When secondary markets for high
yield securities are less liquid than the market for higher grade securities, it
may be more difficult to value the securities because such valuation may require
more research, and elements of judgment may play a greater role in the valuation
because there is less reliable, objective data available. The Adviser seeks to
minimize the risks of investing in all securities through diversification,
in-depth credit analysis and attention to current developments in interest rates
and market conditions.

The use of credit ratings as the sole method of evaluating high yield
securities can involve certain risks. For example, credit ratings evaluate the
safety of principal and interest payments, not the market value risk of high
yield securities. Also, credit rating agencies may fail to change credit ratings
in a timely fashion to reflect events since the security was last rated. The
Adviser does not rely solely on credit ratings when selecting securities for the
Funds, and develops its own independent analysis of issuer credit quality. If a
credit rating agency changes the rating of a portfolio security held by a Fund,
the Fund may retain the portfolio security if the Adviser deems it in the best
interest of shareholders.

BANK OBLIGATIONS

7
<PAGE>

Bank obligations in which the Funds may invest include certificates of
deposit, bankers' acceptances, and fixed time deposits. Certificates of deposit
are negotiable certificates issued against funds deposited in a commercial bank
for a definite period of time and earning a specified return. Bankers'
acceptances are negotiable drafts or bills of exchange, normally drawn by an
importer of exporter to pay for specific merchandise, which are "accepted" by a
bank, meaning, in effect, that the bank unconditionally agrees to pay the face
value of the instrument on maturity. Fixed time deposits are bank obligations
payable at a stated maturity date and bearing interest at a fixed rate. Fixed
time deposit may be withdrawn on demand by the investor, but may be subject to
early withdrawal penalties which vary depending upon market conditions and the
remaining maturity of the obligation. There are no contractual restrictions on
the right to transfer a beneficial interest in a fixed time deposit to a third
party, although there is no market for such deposits.

Bank obligations include foreign bank obligations including Eurodollar
and Yankee obligations. Eurodollar bank obligations are dollar certificates of
deposits and time deposits issued outside the U.S. capital markets by foreign
branches of U.S. banks and by foreign banks. Yankee obligations are
dollar-denominated obligations issued in the U.S. capital markets by foreign
banks. Bank obligations are subject to the same risks that pertain to domestic
issues, notably credit risk and interest rate risk. Additionally, foreign bank
obligations are subject to many of the same risks as investments in foreign
securities (see "Foreign Equity Securities" below.) Obligations of foreign banks
involve somewhat different investment risks than those affecting obligations of
United States banks, including the possibilities that their liquidity could be
impaired because of future political and economic developments, that their
obligations may be less marketable than comparable obligations of Untied States
banks, that a foreign jurisdiction might impose withholding taxes on interest
income payable on those obligations, that foreign deposits may be seized or
nationalized, that foreign governmental restrictions such as exchange controls
may be adopted which might adversely affect the payment of principal and
interest on those obligations and that the selection of those obligations may be
more difficult because there may be less publicly available information
concerning foreign banks or the accounting, auditing and financial reporting
standards, practices and requirements applicable to foreign banks may differ
from those applicable to United States banks. Foreign banks are not generally
subject to examination by any U.S. Government agency or instrumentality.

COMMERCIAL PAPER

8
<PAGE>

A1 and Prime 1 are the highest commercial paper ratings issued by S&P
and Moody's, respectively.

Commercial paper rated A1 by S&P has the following characteristics: (1)
liquidity ratios are adequate to meet cash requirements; (2) long-term senior
debt is rated A or better; (3) the issuer has access to at least two additional
channels of borrowing; (4) basic earnings and cash flow have an upward trend
with an allowance made for unusual circumstances; (5) typically, the issuer's
industry is well established and the issuer has a strong position within the
industry; and (6) the reliability and quality of management are unquestioned.

Among the factors considered by Moody's in assigning ratings are the
following: (1) evaluation of the management of the issuer; (2) economic
evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to competition and customer acceptance; (4)
liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over
a period of 10 years; (7) financial strength of a parent company and the
relationships which exist with the issuer; and (8) recognition by the management
of obligations which may be present or may arise as a result of public interest
questions and preparation to meet such obligations.

GOVERNMENT SECURITIES

Government securities may be either direct obligations of the U.S.
Treasury or may be the obligations of an agency or instrumentality of the United
States.

TREASURY OBLIGATIONS. The U.S. Treasury issues a variety of marketable
securities that are direct obligations of the U.S. Government. These securities
fall into three categories - bills, notes, and bonds distinguished primarily by
their maturity at time of issuance. Treasury bills have maturities of one year
or less at the time of issuance, while Treasury notes currently have maturities
of 1 to 10 years. Treasury bonds can be issued with any maturity of more than 10
years.

OBLIGATIONS OF AGENCIES AND INSTRUMENTALITIES. Agencies and
instrumentalities of the U.S. Government are created to fill specific
governmental roles. Their activities are primarily financed through securities
whose issuance has been authorized by Congress. Agencies and instrumentalities
include Export Import Bank, Federal Housing Administration, Government National
Mortgage Association, Tennessee Valley Authority, Banks for Cooperatives,
Farmers Home Administration, Federal Home Loan Banks, Federal Intermediate
Credit Banks, Federal Land Banks, Federal National Mortgage Association, Federal
Home Loan Mortgage Corp., U.S. Postal System, and Federal Finance Bank. Although
obligations of "agencies" and "instrumentalities" are not direct obligations of
the U.S. Treasury, payment of the interest or principal on these obligations is
generally backed directly or indirectly by the U.S. Government. This support can
range from backing by the full faith and credit of the United States or U.S.
Treasury guarantees to the backing solely of the issuing instrumentality itself.

9
<PAGE>

MORTGAGE-BACKED SECURITIES AND MORTGAGE PASS-THROUGH SECURITIES

Mortgage-backed securities are interests in pools of mortgage loans,
including mortgage loans made by savings and loan institutions, mortgage
bankers, commercial banks and others. Mortgage-backed securities are sold to
investors by various governmental, government-related and private organizations
as further described below. A Fund may also invest in debt securities that are
secured with collateral consisting of mortgage-backed securities (see
"Collateralized Mortgage Obligations") and in other types of mortgage-related
securities.

Because principal may be prepaid at any time, mortgage-backed
securities involve significantly greater price and yield volatility than
traditional debt securities. A decline in interest rates may lead to a faster
rate of repayment of the underlying mortgages and expose the Fund to a lower
rate of return upon reinvestment. To the extent that mortgage-backed securities
are held by a Fund, the prepayment right will tend to limit to some degree the
increase in net asset value of the Fund because the value of the mortgage-backed
securities held by the Fund may not appreciate as rapidly as the price of
non-callable debt securities. When interest rates rise, mortgage prepayment
rates tend to decline, thus lengthening the duration of mortgage-related
securities and increasing their price volatility, affecting the price volatility
of a Fund's shares.

Interests in pools of mortgage-backed securities differ from other
forms of debt securities, which normally provide for periodic payment of
interest in fixed amounts with principal payments at maturity or specified call
dates. Instead, these securities provide a monthly payment which consists of
both interest and principal payments. In effect, these payments are a
"pass-through" of the monthly payments made by the individual borrowers on their
mortgage loans, net of any fees paid to the issuer or guarantor of such
securities. Additional payments are caused by repayments of principal resulting
from the sale of the underlying property, refinancing or foreclosure, net of
fees or costs incurred. Some mortgage-related securities (such as securities
issued by the Government National Mortgage Association) are described as
"modified pass-through." These securities entitle the holder to receive all
interest and principal payments owed on the mortgage pool, net of certain fees,
at the scheduled payment dates regardless of whether or not the mortgagor
actually makes the payment.

The principal governmental guarantor of mortgage-related securities is
the Government National Mortgage Association ("GNMA"). GNMA is a wholly owned
U.S. Government corporation within the Department of Housing and Urban
Development. GNMA is authorized to guarantee, with the full faith and credit of
the U.S. Government, the timely payment of principal and interest on securities
issued by institutions approved by GNMA (such as savings and loan institutions,
commercial banks, and mortgage bankers) and backed by pools of FHA-insured or
VA-guaranteed mortgages. These guarantees, however, do not apply to the market
value or yield of mortgage-backed securities or to the value of a Fund's shares.
Also, GNMA securities often are purchased at a premium over the maturity value
of the underlying mortgages. This premium is not guaranteed and will be lost if
prepayment occurs.

10
<PAGE>

Government-related guarantors (i.e., not backed by the full faith and
credit of the U.S. Government) include the Federal National Mortgage Association
("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC"). FNMA is a
government-sponsored corporation owned entirely by private stockholders. It is
subject to regulation by the Secretary of Housing and Urban Development. FNMA
purchases conventional (i.e., not insured or guaranteed by any government
agency) mortgages from a list of approved seller/servicers, which include state
and federally-chartered savings and loan associations, mutual savings banks,
commercial banks, credit unions and mortgage bankers. Pass-through securities
issued by FNMA are guaranteed as to timely payment of principal and interest by
FNMA, but are not backed by the full faith and credit of the U.S. Government.

FHLMC is a corporate instrumentality of the U.S. Government and was
created in 1970 for the purpose of increasing the availability of mortgage
credit for residential housing. Its stock is owned by the twelve Federal Home
Loan Banks. FHLMC issues Participation Certificates ("PCs"), which represent
interests in conventional mortgages from FHLMC's national portfolio. FHLMC
guarantees the timely payment of interest and ultimate collection of principal,
but PCs are not backed by the full faith and credit of the U.S. Government.

Commercial banks, savings and loan institutions, private mortgage
insurance companies, mortgage bankers, and other secondary market issuers also
create pass-through pools of conventional mortgage loans. These issuers may, in
addition, be the originators and/or servicers of the underlying mortgage loans
as well as the guarantors of the mortgage-related securities. Pools created by
non-governmental issuers generally offer a higher rate of interest than
government and government-related pools because there are no direct or indirect
government or agency guarantees of payments. However, timely payment of interest
and principal of these pools may be supported by various forms of insurance or
guarantees, including individual loan, title, pool and hazard insurance and
letters of credit. The insurance and guarantees are issued by governmental
entities, private insurers, and the mortgage poolers. Such insurance and
guarantees and the creditworthiness of its issuers will be considered in
determining whether a mortgage-related security meets a Fund's investment
quality standards. There is no assurance that the private insurers or guarantors
will meet their obligations under the insurance policies or guarantee
arrangements. A Fund may buy mortgage-related securities without insurance or
guarantees if, through an examination of the loan experience and practices of
the originators/servicers and poolers, the Adviser determines that the
securities meet the Fund's quality standards. Although the market for such
securities is becoming increasingly liquid, securities issued by certain private
organizations may not be readily marketable.

COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOs")

CMOs are hybrids between mortgage-backed bonds and mortgage
pass-through securities. Similar to a bond, interest and prepaid principal are
paid, in most cases, semiannually. CMOs may be collateralized by whole mortgage
loans but are more typically

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collateralized by portfolios of mortgage pass-through securities, guaranteed by
GNMA, FHLMC, or FNMA, and their income streams.

CMOs are structured into multiple classes, each bearing a different
stated maturity. Actual maturity and average life will depend upon the
prepayment experience of the collateral. CMOs provide for a modified form of
call protection through a de facto breakdown of the underlying pool of mortgages
according to how quickly the loans are repaid. Monthly payment of principal
received from the pool of underlying mortgages, including prepayments, is first
returned to investors holding the shortest maturity class. Investors holding the
longer maturity classes receive principal only after the first class has been
retired. An investor is partially protected against a sooner than desired return
of principal by the sequential payments. The prices of certain CMOs, depending
on their structure and the rate of prepayments, can be volatile. Some CMOs may
also not be as liquid as other securities.

In a typical CMO transaction, a corporation issues multiple series,
(e.g., A, B, C, Z) of CMO bonds ("Bonds"). Proceeds of the Bond offering are
used to purchase mortgages or mortgage pass-through certificates ("Collateral").
The Collateral is pledged to a trustee as security for the Bonds. Principal and
interest payments from the Collateral are used to pay principal on the Bonds in
the order A, B, C, Z. The Series A, B, and C bonds all pay interest currently.
Interest on the Series Z Bond is accrued and added to principal and a like
amount is paid as principal on the Series A, B, or C Bond currently being paid
off. When the Series A, B, and C Bonds are paid in full, interest and principal
on the Series Z Bond begins to be paid currently. With some CMOs, the issuer
serves as a conduit to allow loan originators (primarily builders or savings and
loan associations) to borrow against their loan portfolios.

A Fund will invest only in those CMOs whose characteristics and terms
are consistent with the average maturity and market risk profile of the other
fixed income securities held by the Fund.

OTHER MORTGAGE-BACKED SECURITIES

The Adviser expects that governmental, government-related or private
entities may create mortgage loan pools and other mortgage-related securities
offering mortgage pass-through and mortgage-collateralized investment in
addition to those described above. The mortgages underlying these securities may
include alternative mortgage instruments; that is, mortgage instruments whose
principal or interest payments may vary or whose terms to maturity may differ
from customary long-term fixed rate mortgages. As new types of mortgage-related
securities are developed and offered to investors, the Adviser will, consistent
with a Fund's investment objective, policies and quality standards, consider
making investments in such new types of mortgage-related securities.

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<PAGE>

OTHER ASSET-BACKED SECURITIES

The securitization techniques used to develop mortgage-backed
securities are being applied to a broad range of assets. Through the use of
trusts and special purpose corporations, various types of assets, including
automobile loans, computer leases and credit card and other types of
receivables, are being securitized in pass-through structures similar to
mortgage pass-through structures described above or in a structure similar to
the CMO structure. Consistent with a Fund's investment objectives and policies,
the Fund may invest in these and other types of asset-backed securities that may
be developed in the future. In general, the collateral supporting these
securities is of shorter maturity than mortgage loans and is less likely to
experience substantial prepayments with interest rate fluctuations.

These other asset-backed securities present certain risks that are not
presented by mortgage-backed securities. Primarily, these securities may not
have the benefit of any security interest in the related assets. Credit card
receivables are generally unsecured and the debtors are entitled to the
protection of state and federal consumer credit laws, many of which give debtors
the right to set off certain amounts owed on the credit cards, thereby reducing
the balance due. There is the possibility that recoveries on repossessed
collateral may not, in some cases, be available to support payments on these
securities.

Asset-backed securities are often backed by a pool of assets
representing the obligations of a number of direct parties. To reduce the effect
of failures by obligors on underlying assets to make payments, the securities
may contain elements of credit support which fall into two categories: (i)
liquidity protection and (ii) protection against losses resulting from ultimate
default by an obligor or the underlying assets. Liquidity protection refers to
the making of advances, generally by the entity administering the pool of
assets, to ensure that the receipt of payments on the underlying pool occurs in
a timely fashion. Protection against losses results from payment of the
insurance obligations on at least a portion of the assets in the pool. This
protection may be provided through guarantee policies or letters of credit
obtained by the issuer or sponsor from third parties, through various means of
structuring the transaction or through a combination of such approaches. The
Fund will not pay any additional or separate fees for credit support. The degree
of credit support provided for each issue is generally based on historical
information respecting the level of credit risk associated with the underlying
assets. Delinquency or loss in excess of that anticipated, or failure of the
credit support could adversely affect the return on an investment in such a
security.

FLOATING OR VARIABLE RATE SECURITIES

Floating or variable rate securities have interest rates that
periodically change according to the rise and fall of a specified interest rate
index or a specific fixed-income security that is used as a benchmark. The
interest rate typically changes every six months, but for some securities the
rate may fluctuate weekly, monthly, or quarterly. The index used is often the
rate for 90- or 180-day Treasury Bills. Variable-rate and floating-rate
securities may have interest rate ceilings or caps that fix the interest rate on
such a security if, for example, a specified index exceeds a predetermined
interest rate. If an interest rate on a security held by

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<PAGE>

the Fund becomes fixed as a result of a ceiling or cap provision, the interest
income received by the Fund will be limited by the rate of the ceiling or cap.
In addition, the principal values of these types of securities will be adversely
affected if market interest rates continue to exceed the ceiling or cap rate.

LOAN TRANSACTIONS

Loan transactions involve the lending of securities to a broker-dealer
or institutional investor for its use in connection with short sales, arbitrage,
or other securities transactions. If made, loans of portfolio securities by a
Fund will be in conformity with applicable federal and state rules and
regulations. The purpose of a qualified loan transaction is to afford a Fund the
opportunity to continue to earn income on the securities loaned and at the same
time to earn income on the collateral held by it.

It is the view of the Staff of the SEC that a Fund is permitted to
engage in loan transactions only if the following conditions are met: (1) the
Fund must receive at least 100 percent collateral in the form of cash or cash
equivalents, E.G., U.S. Treasury bills or notes, or an irrevocable letter of
credit; (2) the borrower must increase the collateral whenever the market value
of the securities loaned (determined on a daily basis) rises above the level of
the collateral; (3) the Fund must be able to terminate the loan, after notice,
at any time; (4) the Fund must receive reasonable interest on the loan or a flat
fee from the borrower, as well as amounts equivalent to any dividends, interest,
or other distributions on the securities loaned and any increase in market
value; (5) the Fund may pay only reasonable custodian fees in connection with
the loan; (6) voting rights on the securities loaned may pass to the borrower;
however, if a material event affecting the investment occurs, the Board of
Directors must be able to terminate the loan and vote proxies or enter into an
alternative arrangement with the borrower to enable the Board to vote proxies.
Excluding items (1) and (2), these practices may be amended from time to time as
regulatory provisions permit.

While there may be delays in recovery of loaned securities or even a
loss of rights in collateral supplied if the borrower fails financially, loans
will be made only to firms deemed by the Adviser to be of good standing and will
not be made unless, in the judgment of the Adviser, the consideration to be
earned from such loans would justify the risk.

OPTIONS AND FINANCIAL FUTURES TRANSACTIONS

Certain Funds 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.
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

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<PAGE>

than, in the case of a put, the exercise price of the option. A Fund may enter
into closing transactions, exercise its options, or permit the options to
expire.

A Fund may also write call options, but only if such options are
covered. A call option is covered if written on a security a Fund owns or if the
Fund has an absolute and immediate right to acquire that security without
additional cash consideration upon conversion or exchange of other securities
held by the Fund. If additional cash consideration is required, that amount must
be held in a segregated account by the Fund's custodian bank. A call option on a
securities index is covered if the Fund owns securities whose price changes, in
the opinion of the Adviser, are expected to be substantially similar to those of
the index. A call option may also be covered in any other manner in accordance
with the rules of the exchange upon which the option is traded and applicable
laws and regulations. Each Fund permitted to engage in option transactions may
write such options on up to 25 percent of its net assets.

Financial futures contracts, including interest rate futures
transactions, 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 investment restrictions for the Funds permitted
to engage in financial futures transactions do not limit the percentage of the
Fund's assets that may be invested in financial futures transactions. None of
the Funds, however, intend to enter into financial futures transactions for
which the aggregate initial margin exceeds 5 percent of the net assets of the
Fund after taking into account unrealized profits and unrealized losses on any
such transactions it has entered into. A Fund may engage in futures transactions
only on commodities exchanges or boards of trade.

A Fund will not engage in transactions in index options, financial
futures contracts, or related options for speculation. A Fund may engage in
these transactions only as an attempt to hedge against market conditions
affecting the values of securities that the Fund owns or intends to purchase.
When a Fund purchases a put on a stock index or on a stock index future not held
by the Fund, the put protects the Fund against a decline in the value of 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
indices and price movements of the securities in which a Fund will generally
invest may be imperfect. It is expected 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
a Fund from a decline in the value of a particular security or its portfolio
generally, the cost of a put will reduce the potential return on the security or
the portfolio if either increases in value.

Upon entering into a futures contract, a Fund will be required to
deposit with its custodian in a segregated account cash, certain U.S. government
securities, or any other portfolio assets as permitted by the Securities and
Exchange Commission rules and regulations 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

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<PAGE>

returned to the Fund upon termination of the futures contract, assuming all
contractual obligations have been satisfied.

The principal risks of options and futures transactions are: (a)
possible 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; (b) lack of assurance that a liquid
secondary market will exist for any particular options or futures contract when
needed; (c) the need for additional skills and techniques beyond those required
for normal portfolio management; (d) losses on futures contracts resulting from
market movements not anticipated by the investment adviser; and (e) possible
need to defer closing out certain options or futures contracts to continue to
qualify for beneficial tax treatment afforded "regulated investment companies"
under the Code.

FOREIGN EQUITY SECURITIES

Foreign equity securities include common stock and preferred stock,
including securities convertible into equity securities, American Depository
Receipts ("ADR's") and Global Depository Receipts ("GDR's"). Foreign equity
securities, which are generally denominated in foreign currencies, involve risks
not typically associated with investing in domestic securities. Foreign
securities may be subject to foreign taxes that would reduce their effective
yield. Certain foreign governments levy withholding taxes against dividend and
interest income. Although in some countries a portion of these taxes is
recoverable, the unrecovered portion of any foreign withholding taxes would
reduce the income a Fund receives from its foreign investments.

Foreign investments involve other risks, including possible political
or economic instability of the country of the issuer, the difficulty of
predicting international trade patterns, and the possibility of currency
exchange controls. Foreign securities may also be subject to greater
fluctuations in price than domestic securities. There may be less publicly
available information about a foreign company than about a domestic company.
Foreign companies generally are not subject to uniform accounting, auditing, and
financial reporting standards comparable to those of domestic companies.

There is generally less government regulation of stock exchanges,
brokers, and listed companies abroad than in the United States. In addition,
with respect to certain foreign countries, there is a possibility of the
adoption of a policy to withhold dividends at the source, or of expropriation,
nationalization, confiscatory taxation, or diplomatic developments that could
affect investments in those countries. Finally, in the event of default on a
foreign debt obligation, it may be more difficult for a Fund to obtain or
enforce a judgement against the issuers of the obligation. The Funds will
normally execute their portfolio securities transactions on the principal stock
exchange on which the security is traded.

The considerations noted above regarding the risk of investing in
foreign securities are generally more significant for investments in emerging or
developing countries, such as countries in Eastern Europe, Latin America, South
America or Southeast Asia. These

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<PAGE>

countries may have relatively unstable governments and securities markets in
which only a small number of securities trade. Markets of developing or emerging
countries may generally be more volatile than markets of developed countries.
Investment in these markets may involve significantly greater risks, as well as
the potential for greater gains.

ADRs in registered form are dollar-denominated securities designed for
use in the U.S. securities markets. ADRs are sponsored and issued by domestic
banks and represent and may be converted into underlying foreign securities
deposited with the domestic bank or a correspondent bank. ADRs do not eliminate
the risks inherent in investing in the securities of foreign issuers. By
investing in ADRs rather than directly in the foreign security, however, a Fund
may avoid currency risks during the settlement period for either purchases or
sales. There is a large, liquid market in the United States for most ADRs. GDRs
are receipts representing an arrangement with a major foreign bank similar to
that for ADRs. GDRs are not necessarily denominated in the currency of the
underlying security.

Additional costs may be incurred in connection with a Fund's foreign
investments. Foreign brokerage commissions are generally higher than those in
the United States. Expenses may also be incurred on currency conversions when a
Fund moves investments from one country to another. Increased custodian costs as
well as administrative difficulties may be experienced in connection with
maintaining assets in foreign jurisdictions.

FOREIGN FIXED INCOME SECURITIES

Foreign fixed income securities include debt securities of foreign
corporate issuers, certain foreign bank obligations (see "Bank Obligations"),
obligations of foreign governments or their subdivisions, agencies and
instrumentalities, and obligations of supranational entities such as the World
Bank, the European Investment Bank, and the Asian Development Bank. Any of these
securities may be denominated in foreign currency or U.S. Dollars, or may be
traded in U.S. dollars in the United States although the underlying security is
usually denominated in a foreign currency.

The risk of investing in foreign fixed income securities are the same
as the risks of investing in foreign equity securities. Additionally, investment
in sovereign debt (debit issues by governments and their agencies and
instrumentality) can involve a high degree of risk. The governmental entity that
controls the repayment of sovereign debt may not be available or willing to
repay the principal and/or interest when due in accordance with the terms of the
debt. A governmental entity's willingness or ability to repay principal and
interest due in a timely manner may be affected by, among other factors, its
cash flow situation, the extent of its foreign reserves, the availability of
sufficient foreign exchange on the date a payment is due, the relative size of
the debt service burden to the economy as a whole, the governmental entity's
policy toward the International Monetary Fund, and the political constraints to
which a governmental entity may be subject Governmental entities may also depend
on expected disbursements from foreign governments, multilateral agencies and
others to reduce principal and interest arrearages on their debt. The commitment
on the part of these governments, agencies and others to make such disbursements
may be conditioned on a governmental

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<PAGE>

entity's implementation of economic reforms and/or economic performance and the
timely service of such debtor's obligations. Failure to implement such reforms,
achieve such levels of economic performance or repay principal or interest when
due may result in the cancellation of such third parties' commitments to lend
funds to the governmental entity, which may further impair such debtor's ability
or willingness to service its debts in a timely manner. Consequently,
governmental entities may default on their sovereign debt. Holders of sovereign
debt (including the Funds) may be requested to participate in the rescheduling
of such debt and to the extend further loans to governmental entities. There is
no bankruptcy proceeding by which sovereign debt on which governmental entities
have defaulted may be collected in while or in part.

CURRENCY CONTRACTS

The value of a Fund invested in foreign securities will fluctuate as a
result of changes in the exchange rates between the U.S. dollar and the
currencies in which the foreign securities or bank deposits held by the Fund are
denominated. To reduce or limit exposure to changes in currency exchange rates
(referred to as "hedging"), a Fund may enter into forward currency exchange
contracts that, in effect, lock in a rate of exchange during the period of the
forward contracts. Forward contracts are usually entered into with currency
traders, are not traded on securities exchanges, and usually have a term of less
than one year, but can be renewed. A default on a contract would deprive a Fund
of unrealized profits or force a Fund to cover its commitments for purchase or
sale of currency, if any, at the market price. A Fund will enter into forward
contracts only for hedging purposes and not for speculation. If required by the
Investment Company Act or the Securities and Exchange Commission, a Fund may
"cover" its commitment under forward contracts by segregating cash or liquid
high-grade securities with a Fund's custodian in an amount not less than the
current value of the Fund's total assets committed to the consummation of the
contracts. Under normal market conditions, no more than 25% of the International
Stock Fund's assets may be committed to the consummation of currency exchange
contracts.

A Fund may also purchase or sell foreign currencies on a "spot" (cash)
basis or on a forward basis to lock in the U.S. dollar value of a transaction at
the exchange rate or rates then prevailing. A Fund will use this hedging
technique in an attempt to insulate itself against possible losses resulting
from a change in the relationship between the U.S. dollar and the relevant
foreign currency during the period between the date a security is purchased or
sold and the date on which payment is made or received.

Hedging against adverse changes in exchange rates will not eliminate
fluctuation in the prices of a Fund's portfolio securities or prevent loss if
the prices of those securities decline. In addition, the use of forward
contracts may limit potential gains from an appreciation in the U.S. dollar
value of a foreign currency. Forecasting short-term currency market movements is
very difficult, and there is no assurance that short-term hedging strategies
used by a Fund will be successful.

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<PAGE>

REPURCHASE AGREEMENTS

A Fund may invest in repurchase agreements, which are agreements by
which the Fund purchases a security and simultaneously commits to resell that
security to the seller (a commercial bank or 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
that 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 price of the repurchase agreement. In the case of
default by the seller, the Fund could incur a loss. In the event of a bankruptcy
proceeding commenced against the seller, the Fund may incur costs and delays in
realizing upon the collateral. A Fund will enter into repurchase agreements only
with those banks or securities dealers who are deemed creditworthy pursuant to
criteria adopted by the Adviser. There is no limit on the portion of a Fund's
assets that may be invested in repurchase agreements with maturities of seven
days or less.

ILLIQUID SECURITIES

"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 SEC, the following instruments in which a
Fund may invest will be considered illiquid: (1) repurchase agreements maturing
in more than seven days; (2) restricted securities (securities whose public
resale is subject to legal restrictions, except as described in the following
paragraph); (3) options, with respect to specific securities, not traded on a
national securities exchange that are not readily marketable; and (4) any other
securities in which a Fund may invest that are not readily marketable.

The International Stock Fund, the Small Cap Fund, the High Yield Fund
and the Real Estate Fund may purchase without limit, however, certain restricted
securities that can be resold to qualifying institutions pursuant to a
regulatory exemption under Rule 144A ("Rule 144A securities"). If a dealer or
institutional trading market exists for Rule 144A securities, such securities
are deemed to be liquid and thus exempt from that Fund's liquidity restrictions.
Under the supervision of the Board of Directors of the Funds, the Adviser
determines the liquidity of Rule 144A securities and, through reports from the
Adviser, the Board of Directors monitor trading activity in these securities. In
reaching liquidity decisions, the Adviser will consider, among other things, the
following factors: (1) the frequency of trades and quotes for the security; (2)
the number of dealers willing to purchase or sell the security and the number of
other potential purchasers; (3) dealer undertakings to make a market in the
security; and (4) 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). If institutional trading in Rule 144A
securities declines, a Fund's liquidity could be adversely affected to the
extent it is invested in such securities.

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CONVERTIBLE SECURITIES AND WARRANTS

Convertible debentures are interest-bearing debt securities, typically
unsecured, that represent an obligation of the corporation providing the owner
with claims to the corporation's earnings and assets before common and preferred
stock owners, generally on par with unsecured creditors. If unsecured, claims of
convertible debenture owners would be inferior to claims of secured debt
holders. Convertible preferred stocks are securities that represent an ownership
interest in a corporation providing the owner with claims to the corporation's
earnings and assets before common stock owners, but after bond owners.
Investments by a Fund in convertible debentures or convertible preferred stock
would be a substitute for an investment in the underlying common stock,
primarily either 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) or where,
because of financial market conditions, the conversion price of the convertible
security is comparable to the price of the underlying common stock, in which
case a preferred position with respect to the corporation's earnings and assets
may be preferable to holding common stock.

Warrants are options to buy a stated number of underlying securities at
a specified price any time during the life of the warrants. The securities
underlying these warrants will be the same types of securities that a Fund will
invest in to achieve its investment objective of capital appreciation. The
purchaser of a warrant expects the market price of the underlying security will
exceed the purchase price of the warrant plus the exercise price of the warrant,
thus resulting in a profit. If the market price never exceeds the purchase price
plus the exercise price of the warrant before the expiration date of the
warrant, the purchaser will suffer a loss equal to the purchase price of the
warrant.

To the extent the High Yield Fund or the Bond Fund acquires common
stock through exercise of conversion rights or warrants or acceptance of
exchange or similar offers, the common stock will not be retained in the
portfolio. Orderly disposition of these equity securities will be made
consistent with management's judgement as to the best obtainable price.

INVESTMENTS IN SMALL AND UNSEASONED COMPANIES

Unseasoned and small 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 unseasoned companies are
frequently traded in the over-the-counter market or on regional exchanges where
low trading volumes may result in erratic or abrupt price movements. To dispose
of these securities, a Fund may need to sell them over an extended period or
below the original purchase price. Investments by a Fund in these small or
unseasoned companies may be regarded as speculative.

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<PAGE>

DOLLAR ROLL TRANSACTIONS

"Dollar roll" transactions consist of the sale by a Fund to a bank or
broker-dealer (the "counterparty") of GNMA certificates or other mortgage-backed
securities together with a commitment to purchase from the counterparty similar,
but not identical, securities at a future date and at the same price. The
counterparty receives all principal and interest payments, including
prepayments, made on the security while it is the holder. The Fund receives a
fee from the counterparty as consideration for entering into the commitment to
purchase. Dollar rolls may be renewed over a period of several months with a new
purchase and repurchase price fixed and a cash settlement made at each renewal
without physical delivery of securities. Moreover, the transaction may be
preceded by a firm commitment agreement pursuant to which the Fund agrees to buy
a security on a future date.

A Fund will not use such transactions for leveraging purposes and,
accordingly, will segregate cash, U.S. Government securities or other high grade
debt obligations in an amount sufficient to meet their purchase obligations
under the transactions. The Funds will also maintain asset coverage of at least
300% for all outstanding firm commitments, dollar rolls and other borrowings.

Dollar rolls may be treated for purposes of the Investment Company Act
of 1940 (the "1940 Act") as borrowings of the Fund because they involve the sale
of a security coupled with an agreement to repurchase. Like all borrowings, a
dollar roll involves costs to the Fund. For example, while a Fund receives a fee
as consideration for agreeing to repurchase the security, the Fund foregoes the
right to receive all principal and interest payments while the counterparty
holds the security. These payments to the counterparty may exceed the fee
received by the Fund, thereby effectively charging the Fund interest on its
borrowing. Further, although the Fund can estimate the amount of expected
principal prepayment over the term of the dollar roll, a variation in the actual
amount of prepayment could increase or decease the cost of the Fund's borrowing.

WHEN-ISSUED SECURITIES

When-issued, delayed-delivery and forward transactions generally
involve the purchase of a security with payment and delivery in the future
(i.e., beyond normal settlement). A Fund does not earn interest on such
securities until settlement and bears the risk of market value fluctuations in
between the purchase and settlement dates. New issues of stocks and bonds,
private placement and U.S. Government securities may be sold in this manner. To
the extent a Fund engages in when-issued and delayed-delivery transactions, it
will do so to acquire portfolio securities consistent with its investment
objectives and policies and not for investment leverage. A Fund may use spot and
forward currency exchange transactions to reduce the risk associated with
fluctuations in exchange rates when securities are purchased or sold on a
when-issued or delayed delivery basis.

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<PAGE>

ZERO-COUPON AND PAY-IN-KIND SECURITIES

A zero-coupon security has no cash coupon payments. Instead, the issuer
sells the security at a substantial discount from its maturity value. The
interest equivalent received by the investor from holding this security to
maturity is the difference between the maturity value and the purchase price.
Pay-in-kind securities are securities that pay interest in either cash or
additional securities, at the issuer's option, for a specified period. The price
of pay-in-kind securities is expected to reflect the market value of the
underlying accrued interest, since the last payment. Zero-coupon and pay-in-kind
securities are more volatile than cash pay securities. The Fund accrues income
on these securities prior to the receipt of cash payments. The Fund intends to
distribute substantially all of its income to its shareholders to qualify for
pass-through treatment under the tax laws and may, therefore, need to use its
cash reserves to satisfy distribution requirements.

TEMPORARY INVESTMENTS

When, as a result of market conditions, the Adviser determines a
temporary defensive position is warranted to help preserve capital, a 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. The International Stock Fund may invest in such
securities issued by entities organized in the United States or any foreign
country, denominated in U.S. dollars or foreign currency. When a Fund assumes a
temporary defensive position, it is not invested in securities designed to
achieve its investment objective.

NON-DIVERSIFIED

The Oregon Municipal Bond Fund is "non-diversified," which means that
it may invest a greater percentage of its assets in the securities of a single
issuer than the other Funds. Since the Fund invests in a relatively small number
of issuers it is more susceptible to risks associated with a single economic,
political, or regulatory occurrence than a more diversified portfolio might be.
Some of those issuers also may present substantial credit or other risks.
Similarly, the Fund may be more sensitive to adverse economic, business or
political developments if it invests a substantial portion of its assets in the
bonds of similar projects or from issuers in the same state.

22
<PAGE>

Securities and Investment Practices

<TABLE>
<CAPTION>
- --------------------------------------- ------------ ---------- ------------ ------------ ---------- -----------
CCSF CGF CISF CSF CSCF CREF
- --------------------------------------- ------------ ---------- ------------ ------------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment Grade Securities (Baa or * * * * * *
higher by Moody's, BBB or higher by
S&P), other than U.S. Government
obligations and municipal securities
- --------------------------------------- ------------ ---------- ------------ ------------ ---------- -----------
Non-Investment Grade Securities X X X X X X
- --------------------------------------- ------------ ---------- ------------ ------------ ---------- -----------
Domestic Bank Obligations * * * * * *
- --------------------------------------- ------------ ---------- ------------ ------------ ---------- -----------
U.S. Government Securities * * * * * *
- --------------------------------------- ------------ ---------- ------------ ------------ ---------- -----------
Mortgage-Backed Securities NA NA NA NA NA NA
- --------------------------------------- ------------ ---------- ------------ ------------ ---------- -----------
CMO's NA NA NA NA NA NA
- --------------------------------------- ------------ ---------- ------------ ------------ ---------- -----------
Asset-Backed Securities NA NA NA NA NA NA
- --------------------------------------- ------------ ---------- ------------ ------------ ---------- -----------
Floating or Variable Rate NA NA NA NA NA NA
- --------------------------------------- ------------ ---------- ------------ ------------ ---------- -----------
Loan Transactions X X X X O O
- --------------------------------------- ------------ ---------- ------------ ------------ ---------- -----------
Options & Financial Futures O O O O O O
- --------------------------------------- ------------ ---------- ------------ ------------ ---------- -----------
Foreign Equities
- --------------------------------------- ------------ ---------- ------------ ------------ ---------- -----------
Developed Countries 33.3%, O 10%, O + 33.3%, O 25%, O 20%, O
- --------------------------------------- ------------ ---------- ------------ ------------ ---------- -----------
Emerging Countries X X + X X X
- --------------------------------------- ------------ ---------- ------------ ------------ ---------- -----------
ADR's 33.3%, O 10%, O + 33.3%, O 25%, O X
- --------------------------------------- ------------ ---------- ------------ ------------ ---------- -----------
Currency Contracts
- --------------------------------------- ------------ ---------- ------------ ------------ ---------- -----------
Hedging O O 25%, + O O O
- --------------------------------------- ------------ ---------- ------------ ------------ ---------- -----------
Speculation X X X X X X
- --------------------------------------- ------------ ---------- ------------ ------------ ---------- -----------
Spot Basis O O + O O O
- --------------------------------------- ------------ ---------- ------------ ------------ ---------- -----------
Repurchase Agreements * * * * * *
- --------------------------------------- ------------ ---------- ------------ ------------ ---------- -----------
Restricted/Illiquid (CISF, CSCF, and 5%, O 5%, O 10%, O 10%, O 10%, O 10%, O
CREF exclude 144A securities from
definition of illiquid)
- --------------------------------------- ------------ ---------- ------------ ------------ ---------- -----------
Convertible Securities/Warrants O O O + + +
- --------------------------------------- ------------ ---------- ------------ ------------ ---------- -----------
Unseasoned/less than three years 5%, O 5%, O 5%, O 10%, + 10%, + 5%, +
operating history
- --------------------------------------- ------------ ---------- ------------ ------------ ---------- -----------
Small Companies O O O + + +
- --------------------------------------- ------------ ---------- ------------ ------------ ---------- -----------
Dollar Roll Transactions NA NA NA NA NA NA
- --------------------------------------- ------------ ---------- ------------ ------------ ---------- -----------
When-Issued Securities O O O O O O
- --------------------------------------- ------------ ---------- ------------ ------------ ---------- -----------
Foreign Fixed Income Securities NA NA O NA NA NA
(including Foreign Bank Obligations)
- --------------------------------------- ------------ ---------- ------------ ------------ ---------- -----------
Zero Coupon/Pay in Kind NA NA NA NA NA NA
- --------------------------------------- ------------ ---------- ------------ ------------ ---------- -----------
Real Estate (excluding REITs) X X X X X X
- --------------------------------------- ------------ ---------- ------------ ------------ ---------- -----------
REIT's + + O + + +
- --------------------------------------- ------------ ---------- ------------ ------------ ---------- -----------

23
<PAGE>

<CAPTION>
- --------------------------------------- ------------ ---------- ------------ ------------ ---------- -----------
CCSF CGF CISF CSF CSCF CREF
- --------------------------------------- ------------ ---------- ------------ ------------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Borrowing 5%, * 5%, * 33.3%, * 5%, * 5%, * 5%, *
- --------------------------------------- ------------ ---------- ------------ ------------ ---------- -----------
Municipal Bonds NA NA NA NA NA NA
- --------------------------------------- ------------ ---------- ------------ ------------ ---------- -----------
</TABLE>

+ Permitted - Part of principal investment strategy
X Fundamental policy/not permitted
O Permitted - Not a principal investment strategy
* Temporary Investment or cash management purposes
% Percentage of total or net assets that Fund may invest
NA Not an investment strategy

24
<PAGE>

<TABLE>
<CAPTION>
- --------------------------------------- ------------ ---------- ------------ ------------- --------- ------------- -----------
CUSG CFIS CMBF CNMF CHYF CBF CDIC
- --------------------------------------- ------------ ---------- ------------ ------------- --------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment Grade Securities (Baa or O + O O O + NA
higher by Moody's, BBB or higher by
S&P), other than U.S. Government
obligations and municipal securities
- --------------------------------------- ------------ ---------- ------------ ------------- --------- ------------- -----------
Non-Investment Grade Securities NA 10%, O NA NA + 10%, O NA
- --------------------------------------- ------------ ---------- ------------ ------------- --------- ------------- -----------
Domestic Bank Obligations * * * * * * +
- --------------------------------------- ------------ ---------- ------------ ------------- --------- ------------- -----------
Commercial Paper * * * * * * +
- --------------------------------------- ------------ ---------- ------------ ------------- --------- ------------- -----------
U.S. Government Securities + + * * * + +
- --------------------------------------- ------------ ---------- ------------ ------------- --------- ------------- -----------
Mortgage-Backed Securities NA + NA NA O + NA
- --------------------------------------- ------------ ---------- ------------ ------------- --------- ------------- -----------
CMO's NA + NA NA O + NA
- --------------------------------------- ------------ ---------- ------------ ------------- --------- ------------- -----------
Asset-Backed Securities NA + NA NA O + NA
- --------------------------------------- ------------ ---------- ------------ ------------- --------- ------------- -----------
Floating or Variable Rate NA + NA NA O + NA
- --------------------------------------- ------------ ---------- ------------ ------------- --------- ------------- -----------
Loan Transactions X O O X O X X
- --------------------------------------- ------------ ---------- ------------ ------------- --------- ------------- -----------
Options & Financial Futures X X X X O O X
- --------------------------------------- ------------ ---------- ------------ ------------- --------- ------------- -----------
Foreign Equities
- --------------------------------------- ------------ ---------- ------------ ------------- --------- ------------- -----------
Developed Countries NA NA NA NA NA 33.3%, O NA
- --------------------------------------- ------------ ---------- ------------ ------------- --------- ------------- -----------
Emerging Countries NA NA NA NA NA X NA
- --------------------------------------- ------------ ---------- ------------ ------------- --------- ------------- -----------
ADR's NA NA NA NA NA 33.3%, O NA
- --------------------------------------- ------------ ---------- ------------ ------------- --------- ------------- -----------
Currency Contracts
- --------------------------------------- ------------ ---------- ------------ ------------- --------- ------------- -----------
Hedging NA NA NA NA NA O NA
- --------------------------------------- ------------ ---------- ------------ ------------- --------- ------------- -----------
Speculation NA NA NA NA NA X NA
- --------------------------------------- ------------ ---------- ------------ ------------- --------- ------------- -----------
Spot Basis NA NA NA NA NA O NA
- --------------------------------------- ------------ ---------- ------------ ------------- --------- ------------- -----------
Repurchase Agreements * * * * * * *
- --------------------------------------- ------------ ---------- ------------ ------------- --------- ------------- -----------
Restricted/Illiquid (CHYF excludes X 10%, O 10%, O 10%, O 10%, O 5%, O X
144A securities from definition of
illiquid)
- --------------------------------------- ------------ ---------- ------------ ------------- --------- ------------- -----------
Convertible Securities/Warrants NA O NA NA O O NA
- --------------------------------------- ------------ ---------- ------------ ------------- --------- ------------- -----------
Unseasoned/less than three years NA 5%, O NA NA 5%, + 5%, O NA
operating history
- --------------------------------------- ------------ ---------- ------------ ------------- --------- ------------- -----------
Small Companies NA NA NA NA + O NA
- --------------------------------------- ------------ ---------- ------------ ------------- --------- ------------- -----------
Dollar Roll Transactions O O NA NA O O NA
- --------------------------------------- ------------ ---------- ------------ ------------- --------- ------------- -----------
When-Issued Securities O O O O O O O
- --------------------------------------- ------------ ---------- ------------ ------------- --------- ------------- -----------
Foreign Fixed Income Securities NA 20%, O NA NA 10%, O 20%, O NA
(including Foreign Bank Obligations)
- --------------------------------------- ------------ ---------- ------------ ------------- --------- ------------- -----------
Zero Coupon/Pay in Kind NA O O O O O NA
- --------------------------------------- ------------ ---------- ------------ ------------- --------- ------------- -----------

25
<PAGE>

<CAPTION>
- --------------------------------------- ------------ ---------- ------------ ------------- --------- ------------- -----------
CUSG CFIS CMBF CNMF CHYF CBF CDIC
- --------------------------------------- ------------ ---------- ------------ ------------- --------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Real Estate (excluding REITs) X X X X X X X
- --------------------------------------- ------------ ---------- ------------ ------------- --------- ------------- -----------
REIT's NA O NA NA O O NA
- --------------------------------------- ------------ ---------- ------------ ------------- --------- ------------- -----------
Borrowing 5%, * 5%, * 33.3%, * 33.3%, * 5%, * 5%, * 33.3%, *
- --------------------------------------- ------------ ---------- ------------ ------------- --------- ------------- -----------
Municipal Bonds NA O + + NA O NA
- --------------------------------------- ------------ ---------- ------------ ------------- --------- ------------- -----------
</TABLE>

26
<PAGE>

- --------------------------------------------------------------------------------
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------

The Prospectus sets forth the investment objectives and principal
investment strategies applicable to each Fund. The following is a list of
investment restrictions applicable to each Fund. If a percentage limitation is
adhered to at the time of an investment by a Fund, a later increase or decrease
in percentage resulting from any change in value or net assets will not result
in a violation of the restriction. A Fund may not change these restrictions
without the approval of a majority of its shareholders, which means the vote at
any meeting of shareholders of a Fund of (i) 67 percent or more of the shares
present or represented by proxy at the meeting (if the holders of more than 50
percent of the outstanding shares are present or represented by proxy) or (ii)
more than 50 percent of the outstanding shares, whichever is less.

COLUMBIA COMMON STOCK FUND, INC.

The Common Stock Fund may not:

1. Buy or sell commodities. However, the 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).

6. Purchase the securities of any issuer if the purchase, at the time
thereof, would cause more than 5 percent of the outstanding voting securities of
that issuer to be held in the 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

27
<PAGE>

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 5 percent of the value of the Fund's
total assets to be invested in companies which, including predecessors and
parents, have a record of less than three years continuous operation.

13. Invest in companies for the purpose of exercising control or
management.

14. Engage in short sales of securities except to the extent that it
owns an equal amount of the securities sold short or other securities
convertible into an equivalent amount of such securities ("short sales against
the box"). Such transactions may only be made to protect a profit in or to
attempt to minimize a loss with respect to convertible securities. In any event,
no more than 5 percent of the value of the Fund's net assets taken at market
may, at any time, be held as collateral for such sales.

15. Buy and sell puts and calls as securities, stock index futures or
options on stock index futures, or financial futures or options on financial
futures, unless such options are written by other persons and the options or
futures are offered through the facilities of a national securities association
or are listed on a national securities or commodities exchange.

16. Invest directly in oil, gas, or other mineral development or
exploration programs or leases; although, the Fund may own securities of
companies engaged in those businesses.

COLUMBIA GROWTH FUND, INC.

The Growth Fund may not:

1. Buy or sell commodities or commodity contracts.

2. Concentrate more than 25 percent of its investments in any one
industry.

28
<PAGE>

3. Buy or sell real estate. (However, the Fund may buy readily
marketable securities such as real estate investment trusts.)

4. Make loans, except through the purchase of a portion of an issue of
publicly distributed debt securities.

5. Hold more than 5 percent of the voting securities of any one
company.

6. Purchase the securities of any issuer if the purchase at the time
thereof would cause more than 5 percent of the assets of the Fund (taken at
value) to be invested in the securities of that issuer, except U.S.
Government bonds.

7. Purchase securities of any issuer when those officers and directors
of the Fund who individually own 1/2 of 1 percent of the securities of that
issuer together own 5 percent or more.

8. Purchase securities of other open-end investment companies.

9. Issue senior securities, bonds, or debentures.

10. Underwrite securities issued by others except as it may be deemed
to be an underwriter of restricted securities.

11. Borrow money in excess of 5 percent of its net asset value. Any
borrowing must only be temporarily from banks for extraordinary or emergency
purposes.

12. Invest more than 5 percent of its total assets at cost in the
securities of companies which (with predecessor companies) have a record of less
than three years continuous operation and equity securities which are not
readily marketable.

13. Invest in companies for purposes of control or management.

14. Buy securities on margin or make short sales.

15. Invest more than 5 percent of the value of its assets in securities
which are subject to legal or contractual restrictions on resale or are
otherwise not saleable.

16. Invest directly in oil, gas, or other mineral development or
exploration programs or leases; although, the Fund may own securities of
companies engaged in those businesses.

29
<PAGE>

COLUMBIA INTERNATIONAL STOCK FUND, INC.

The International Stock Fund may not:

1. Buy or sell commodities. However, the Fund may invest in futures
contracts or options on such contracts relating to broadly based stock indices,
subject to the restrictions in paragraph 15, and may enter into foreign currency
transactions.

2. Concentrate investments in any industry. However, the Fund may (a)
invest up to 25 percent of the value of its assets in any one industry and (b)
invest for temporary defensive purposes up to 100 percent of the value of its
assets in securities issued or guaranteed by the United States or its agencies
or instrumentalities.

4. Make loans to other persons, except by purchase of short-term
commercial paper, bonds, debentures, or other debt securities constituting part
of an issue and except to the extent the entry into repurchase agreements in
accordance with the Fund's investment restrictions may be deemed a loan.

5. Purchase a repurchase agreement with a maturity greater than seven
days or a security that is subject to legal or contractual restrictions on
resale or for which there are no readily available market quotations if, as a
result of such purchase, more than 10 percent of the assets of the Fund (taken
at current value) is invested in such securities. Certain restricted securities
that can be resold to qualifying institutions pursuant to a regulatory exemption
under Rule 144A of the Securities Act of 1933 and for which a dealer or
institutional trading market exists may be deemed to be liquid securities by the
Board of Directors of the Fund and, therefore, are not subject to this
investment restriction.

6. Purchase the securities of any issuer if the purchase, at the time
thereof, would cause more than 10 percent of the outstanding voting securities
of that issuer to be held by the Fund.

7. Purchase the securities of any issuer (including any foreign
government issuer) if the purchase, at the time thereof, would cause more than 5
percent of the value of the total assets of the Fund at market value to be
invested in the securities of that issuer (other than obligations of the U.S.
government and its agencies and instrumentalities), with reference to 75 percent
of the assets of the Fund.

8. Purchase securities of other investment companies, except in
connection with a merger, consolidation, acquisition, or reorganization, or by
purchase in the open market of securities of closed-end investment companies
where no underwriter or dealer's commission or profit, other than customary
broker's commission, is involved and only if immediately

30
<PAGE>

thereafter not more than (i) 3 percent of the total outstanding voting stock of
such company is owned by the Fund, (ii) 5 percent of the Fund's total assets
would be invested in any one such company, and (iii) 10 percent of the Fund's
total assets would be invested in such securities.

9. Issue senior securities, bonds, or debentures.

10. Underwrite securities of other issuers, except that the Fund may
acquire portfolio securities in circumstances where, if the securities are later
publicly offered or sold by the Fund, it might be deemed to be an underwriter
for purposes of the Securities Act of 1933.

11. Borrow money, except temporarily for extraordinary or emergency
purposes. For all amounts borrowed, the Fund will maintain an asset coverage of
300 percent. The Fund will not make any additional investments while borrowings
exceed 5 percent of the Fund's total assets.

12. Invest its funds in the securities of any company if the purchase
would cause more than 5 percent of the value of the 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.

15. Buy and sell puts and calls as securities, stock index futures or
options on stock index futures, or financial futures or options on financial
futures, unless such options are written by other persons and the options or
futures are offered through the facilities of a recognized securities
association or are listed on a recognized securities or commodities exchange or
similar entity.

16. Invest directly in oil, gas, or other mineral development or
exploration programs or leases; although, the Fund may own securities of
companies engaged in those businesses.

31
<PAGE>

COLUMBIA SPECIAL FUND, INC.

The Special 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.

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).

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.

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.

32
<PAGE>

12. Invest its funds in the securities of any company if the purchase,
at the time thereof, would cause more than 10 percent of the value of the Fund's
total assets to be invested in companies which, including predecessors and
parents, have a record of less than three years continuous operation.

13. Invest in companies for the purpose of exercising control or
management.

14. Engage in short sales of securities except to the extent that it
owns an equal amount of the securities sold short or other securities
convertible into an equivalent amount of such securities ("short sales against
the box"). Such transactions may only be made to protect a profit in or to
attempt to minimize a loss with respect to convertible securities. In any event,
no more than 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.

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.

COLUMBIA SMALL CAP FUND, INC.

The Small Cap 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.

4. Make loans to other persons (except by purchase of short-term
commercial paper, bonds, debentures, or other debt securities constituting part
of an issue).

5. Purchase a repurchase agreement with a maturity greater than seven
days or a security that is subject to legal or contractual restrictions on
resale or for which there are no

33
<PAGE>

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.

8. Purchase securities of other open-end investment companies.

9. Issue senior securities, bonds, or debentures.

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.

13. Invest in companies for the purpose of exercising control or
management.

14. Engage in short sales of securities except to the extent that it
owns an equal amount of the securities sold short or other securities
convertible into an equivalent amount of such securities ("short sales against
the box"). Such transactions may only be made to protect a profit in or to
attempt to minimize a loss with respect to securities held by the Fund. In any
event, no more than 10 percent of the value of the Fund's net assets taken at
market may, at any time, be held as collateral for such sales.

15. Buy and sell puts and calls as securities, stock index futures or
options on stock index futures, or financial futures or options on financial
futures, unless such options or futures are offered through the facilities of a
national securities association or are listed on a national securities or
commodities exchange. The Fund may write call options that are covered in
accordance with rules established by the Securities and Exchange Commission.

34
<PAGE>

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.

COLUMBIA REAL ESTATE EQUITY FUND, INC.

The Real Estate Fund may not:

1. Buy or sell commodities or commodity futures contracts.

2. Buy or sell real estate. However, the Fund may purchase or hold
readily marketable securities issued by companies, such as real estate
investment trusts, that operate in real estate or interests therein, and
participation interests in pools of real estate mortgage loans.

3. Make loans to other persons (except by purchase of short-term
commercial paper, bonds, debentures, or other debt securities constituting part
of an issue). The Fund may lend portfolio securities to broker-dealers or other
institutional investors if, as a result thereof, the aggregate value of all
securities loaned does not exceed 33 1/3% of its total assets.

4. Purchase illiquid securities, including restricted securities and
repurchase agreements of more than seven days maturity, if upon the purchase
more than 10 percent of the value of the Fund's net assets would consist of
these securities. "Illiquid securities" are securities that may not be sold or
disposed of in the ordinary course of business within seven days at
approximately the price used to determine the Fund's net asset value and include
restricted securities that are subject to legal or contractual restrictions on
resale. Certain restricted securities that can be resold to qualifying
institutions pursuant to a regulatory exemption under Rule 144A of the
Securities Act of 1933 and for which a dealer or institutional trading market
exists may be deemed to be liquid securities by the Board of Directors of the
Fund and, in that event, will not be subject to the above investment
restriction.

5. Purchase the securities of any issuer if the purchase, at the time
thereof, would cause more than 10% of the outstanding voting securities of that
issuer to be held in the Fund.

6. Purchase the securities of any issuer if the purchase, at the time
thereof, would cause more than 5% of the value of its total assets at market
value to be invested in the securities of that issuer (other than obligations of
the U.S. Government and its instrumentalities), with reference to 75% of the
assets of the Fund.

7. Purchase or retain securities of an issuer if those officers or
directors of the Fund or the Adviser who individually own more than 1/2 of 1% of
the outstanding securities of that issuer together own more than 5% of such
securities.

8. Purchase securities of other open-end investment companies.

35
<PAGE>

9. Issue senior securities, bonds, or debentures.

10. Underwrite securities of other issuers, except the Fund may acquire
portfolio securities in circumstances where, if the securities are later
publicly offered or sold by the Fund, it might be deemed to be an underwriter
for purposes of the Securities Act of 1933.

11. Borrow money except as a temporary measure for extraordinary or
emergency purposes. The Fund's borrowings may not exceed 5% of its gross assets
valued at the lesser of cost or market value, nor may it pledge, mortgage, or
hypothecate assets if the market value of such assets exceeds 10% of the gross
assets, valued at cost, of the Fund.

12. Invest in the securities of any company if the purchase, at the
time thereof, would cause more than 5% of the value of the 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 to exercise control or management.

14. Buy any securities or other property on margin, except for
short-term credits necessary for clearing transactions and except that margin
payments and other deposits in connection with transactions in options, futures,
and forward contracts shall not be deemed to constitute purchasing securities on
margin.

15. Engage in short sales of securities except to the extent that it
owns other securities convertible into an equivalent amount of such securities.
These short sales may only be made to protect a profit in or to attempt to
minimize a loss with respect to convertible securities. In any event, no more
than 10% of the Fund's net assets valued at market may, at any time, be held as
collateral for such sales.

16. Invest directly in oil, gas, or other mineral development or
exploration programs or leases; although, the Fund may own securities of
companies engaged in those businesses.

17. Concentrate investments in any one industry, except that the Fund
will invest at least 65% of the value of its total assets in securities of
companies principally engaged in the real estate industry.

COLUMBIA BALANCED FUND, INC.

The Balanced 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.

36
<PAGE>

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).

6. Purchase the securities of any issuer if the purchase, at the time
thereof, would cause more than 5 percent of the outstanding voting securities of
that issuer to be held in the Fund.

8. Purchase securities of other open-end investment companies.

9. Issue senior securities, bonds, or debentures.

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.

13. Invest in companies for the purpose of exercising control or
management.

37
<PAGE>

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.

COLUMBIA U.S. GOVERNMENT SECURITIES FUND, INC.

The Government Bond Fund may not:

1. Issue senior securities, bonds, or debentures.

2. Buy securities on margin, make short sales, or write put or call
options.

3. Borrow money in excess of 5 percent of its net asset value. Any
borrowing must only be temporarily from banks or other lending institutions for
extraordinary or emergency purposes.

4. Pledge, hypothecate, or transfer in any manner, as security for
indebtedness, any securities owned by the Fund, except as necessary in
connection with borrowings described in subparagraph 3 above. Any such pledge,
hypothecation, or transfer may not exceed 10 percent of the Fund's total assets,
at the lesser of cost or market value.

5. Underwrite securities of other issuers or acquire securities that
must be registered under the Securities Act of 1933, as amended, before they may
be sold to the public.

6. Purchase securities that are other than direct obligations of the
U.S. Government and repurchase agreements with respect to those obligations.

7. Invest more than 10 percent of total assets in repurchase
agreements.

8. Purchase or sell real estate or real estate contracts, including
futures contracts.

9. Purchase or sell commodities or commodities contracts, including
futures contracts.

38
<PAGE>

10. Purchase securities with maturities in excess of three years from
the date of purchase.

11. Make loans to other persons except by purchase of debt obligations
in which the Fund may invest and repurchase agreements with respect to those
obligations.

12. Purchase securities of other investment companies.

COLUMBIA FIXED INCOME SECURITIES FUND, INC.

The Bond Fund may not:

1. Buy or sell commodities or commodity futures contracts.

2. Concentrate investments in any industry. However, it may (a) invest
up to 25 percent of the value of its total assets in any one industry, (b)
invest up to 100 percent of the value of its total assets in securities issued
or guaranteed by the U.S. Government or its agencies or instrumentalities, and
(c) invest for defensive purposes up to 80 percent of the value of its total
assets in certificates of deposit (CDs) and bankers' acceptances with maturities
not greater than one year. CDs and banker's acceptances will be limited to
domestic banks which have total assets in excess of one billion dollars and are
subject to regulatory supervision by the U.S. Government or state governments.
Commitments to purchase securities issued or guaranteed by the U.S. Government
or its agencies or instrumentalities on a "when-issued" basis may not exceed 20
percent of the total assets of the Fund. Emphasis on investments in securities
of a particular industry will be shifted whenever the Adviser determines that
such action is desirable for investment reasons. The Board of Directors will
periodically review these decisions of the Adviser.

4. Make loans to other persons (except by purchase of short-term
commercial paper, bonds, debentures, or other debt securities constituting part
of an issue). The Fund may lend portfolio securities to broker-dealers or other
institutional investors if, as a result thereof, the aggregate value of all
securities loaned does not exceed 33 1/3 percent of its total assets.

39
<PAGE>

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 its total assets at
market value to be invested in the securities of that issuer (other than
obligations of the U.S. Government and its instrumentalities), with reference to
75 percent of the assets of the Fund.

8. Purchase or retain securities issued by an issuer, any of whose
officers or directors or security holders is an officer or director of the Fund
or of its adviser if, or so long as, the officers and directors of the Fund and
of its adviser together own beneficially more than 5 percent of any class of
securities of the issuer.

9. Purchase securities of other open-end investment companies.

10. Issue senior securities, bonds, or debentures.

11. Underwrite securities of other issuers, except the Fund may acquire
portfolio securities in circumstances where, if the securities are later
publicly offered or sold by the Fund, it might be deemed to be an underwriter
for purposes of the Securities Act of 1933.

12. Borrow money except as a temporary measure for extraordinary or
emergency purposes. Its borrowings may not exceed 5 percent of the value of the
gross assets of the Fund taken at the lesser of cost or market value, nor may it
pledge, mortgage, or hypothecate assets taken at market to an extent greater
than 10 percent of the value of the gross assets taken at cost of the Fund.

13. Invest in the securities of any company if the purchase, at the
time thereof, would cause more than 5 percent of the value of the Fund's total
assets to be invested in companies which, including predecessors and parents,
have a record of less than three years continuous operation.

14. Invest in companies to exercise control or management.

15. Buy any securities or other property on margin, or purchase or sell
puts or calls, or combinations thereof.

16. Engage in short sales of securities except to the extent that it
owns other securities convertible into an equivalent amount of such securities.
These short sales may only be made to protect a profit in or to attempt to
minimize a loss with respect to convertible securities. In any event, no more
than 10 percent of the value of the Fund's net assets taken at market may, at
any time, be held as collateral for such sales.

40
<PAGE>

COLUMBIA NATIONAL MUNICIPAL BOND FUND, INC.

The National Municipal Bond Fund may not:

1. Buy or sell real estate, but this shall not prevent the Fund from
investing in municipal obligations secured by real estate or interests therein.

2. Make loans to other persons except by purchase of debt securities
constituting all or part of an issue or through the loan of portfolio securities
and as otherwise permitted by the Fund's investment restrictions.

3. Purchase more than 10 percent of the voting securities of any
issuer.

4. Buy or sell commodities or commodity future contracts.

5. Purchase securities of other investment companies if, as a result of
the purchase, more than 10 percent of the assets of the Fund is invested in such
securities.

6. Issue senior securities, bonds, or debentures.

7. Sell securities short or buy any securities or other property on
margin, except for short-term credits necessary for clearing transactions.

8. Lend portfolio securities to broker-dealers or other institutional
investors if, as a result, the aggregate value of all securities loaned exceeds
33 1/3 percent of the total assets of the Fund.

9. Underwrite securities of other issuers, except that the Fund may
acquire portfolio securities in circumstances where, if the securities are later
publicly offered or sold by the Fund, it might be deemed an underwriter for
purposes of the Securities Act of 1933.

10. Borrow money except temporarily for extraordinary or emergency
purposes; nor may it pledge, mortgage, or hypothecate assets having a market
value greater than 10 percent of the cost of the gross assets of the Fund. For
amounts borrowed, the Fund shall maintain an asset coverage of 300 percent for
all borrowings. This restriction means that the Fund may not borrow money in an
amount exceeding 50 percent of its gross assets. The Fund will not make any
additional investments while borrowings exceed 5 percent of the value of the
Fund's total assets.

11. Invest more than 25 percent of its assets in a single industry.

41
<PAGE>

COLUMBIA OREGON MUNICIPAL BOND FUND, INC.

The Oregon Municipal Bond Fund may not:

1. Buy or sell real estate, but this shall not prevent the Fund from
investing in municipal obligations secured by real estate or interests therein.

3. Purchase more than 10 percent of the voting securities of any
issuer.

4. Buy or sell commodities or commodity future contracts.

5. Purchase securities of other investment companies if, as a result of
the purchase, more than 10 percent of the assets of the Fund is invested in such
securities.

6. Issue senior securities, bonds, or debentures.

7. Sell securities short or buy any securities or other property on
margin, except for short-term credits necessary for clearing transactions.

8. Lend portfolio securities to broker-dealers or other institutional
investors if, as a result, the aggregate value of all securities loaned exceeds
33 1/3 percent of the total assets of the Fund.

11. Invest more than 25 percent of its assets in a single industry.

42
<PAGE>

COLUMBIA HIGH YIELD FUND, INC.

The High Yield Fund may not:

1. Buy or sell commodities or commodity futures contracts.

2. Concentrate investments in any industry. However, it may (a) invest
up to 25 percent of the value of its total assets in any one industry, (b)
invest up to 100 percent of the value of its total assets in securities issued
or guaranteed by the U.S. Government or its agencies or instrumentalities, and
(c) invest for defensive purposes up to 80 percent of the value of its total
assets in CDs and bankers' acceptances with maturities not greater than one
year. CDs and banker's acceptances will be limited to domestic banks which have
total assets in excess of $1 billion and are subject to regulatory supervision
by the U.S. Government or state governments. Commitments to purchase securities
issued or guaranteed by the U.S. Government or its agencies or instrumentalities
on a "when-issued" basis may not exceed 20 percent of the total assets of the
Fund. Emphasis on investments in securities of a particular industry will be
shifted whenever the Adviser determines that such action is desirable for
investment reasons. The Board of Directors will periodically review these
decisions of the Adviser.

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, that operate in real estate or interests therein, and
participation interests in pools of real estate mortgage loans.

5. Purchase illiquid securities, including restricted securities and
repurchase agreements of more than seven days maturity, if upon the purchase
more than 10 percent of the value of the Fund's net assets would consist of
these securities. "Illiquid securities" are securities that may not be sold or
disposed of in the ordinary course of business within seven days at
approximately the price used to determine the Fund's net asset value and include
restricted securities that are subject to legal or contractual restrictions on
resale. Certain restricted securities that can be resold to qualifying
institutions pursuant to a regulatory exemption under Rule 144A of the
Securities Act of 1933 and for which a dealer or institutional trading market
exists may be deemed to be liquid securities by the Board of Directors of the
Fund and, therefore, are not subject to the above investment restriction.

6. Purchase the securities of any issuer if the purchase, at the time
thereof, would cause more than 10 percent of the outstanding voting securities
of that issuer to be held in the Fund.

43
<PAGE>

8. Purchase or retain securities of an issuer if those officers or
directors of the Fund or the Adviser who individually own more than 1/2 of 1% of
the outstanding securities of that issuer together own more than 5% of such
securities.

9. Purchase securities of other open-end investment companies.

10. Issue senior securities, bonds, or debentures.

12. Borrow money except as a temporary measure for extraordinary or
emergency purposes. Its borrowings may not exceed 5 percent of the gross assets
of the Fund valued at the lesser of cost or market value, nor may it pledge,
mortgage, or hypothecate assets valued at market to an extent greater than 10
percent of the gross assets valued at cost of the Fund.

14. Invest in companies to exercise control or management.

15. Buy any securities or other property on margin, except for
short-term credits necessary for clearing transactions and except that margin
payments and other deposits in connection with transactions in options, futures,
and forward contracts shall not be deemed to constitute purchasing securities on
margin.

16. Engage in short sales of securities except to the extent that it
owns other securities convertible into an equivalent amount of such securities.
These short sales may only be made to protect a profit in or to attempt to
minimize a loss with respect to convertible securities. In any event, no more
than 10 percent of the Fund's net assets valued at market may, at any time, be
held as collateral for such sales.

17. Invest directly in oil, gas, or other mineral development or
exploration programs or leases; although, the Fund may own securities of
companies engaged in those businesses.

44
<PAGE>

COLUMBIA DAILY INCOME COMPANY

The Columbia Daily Income Company may not:

1. Borrow money to improve portfolio yield except as a temporary
measure to avoid disruptive redemptions, and not for investment purposes.
Borrowings will not exceed 33 1/3 percent of total assets and will be repaid
from the proceeds of sales of the Fund's shares or as maturities allow.

2. Underwrite securities issued by others except as it may be deemed to
be an underwriter in a sale of restricted securities.

3. Invest more than 5 percent of its assets (exclusive of obligations
issued or guaranteed as to principal and interest by the U.S. Government or any
agency or instrumentality thereof) in the securities of any one issuer. The Fund
may invest up to 100 percent of its total assets in obligations of U.S. banks
which are members of the Federal Reserve System. However, the Fund will not
invest more than 25 percent of its assets in any other single industry.

4. Buy or sell real estate.

5. Buy or sell commodities or commodity contracts.

6. Make loans to others (the purchase of obligations in which the Fund
is authorized to invest will not constitute loans) except that the Fund may
purchase and simultaneously resell for later delivery obligations issued or
guaranteed as to principal and interest by the U.S. Government or any agency or
instrumentality thereof if no more than 10 percent of the Fund's total assets
would be subject to such repurchase agreements maturing in more than seven days.

7. Purchase common stocks, preferred stocks, warrants, or other equity
securities.

8. Purchase securities on margin.

9. Sell securities short.

10. Write or purchase put or call options.

11. Purchase a security which is subject to legal or contractual
restrictions on resale or for which there is no readily available market, except
that 10 percent of the Fund's total assets may be invested in repurchase
agreements maturing in more than seven days.

12. Invest in companies to exercise control or management.

45
<PAGE>

13. Invest in the securities of other investment companies, except
those acquired as part of a merger, consolidation, or acquisition of assets.

INVESTMENT RESTRICTIONS UNDER RULE 2a-7

Rule 2a-7 under the Investment Company Act of 1940 (the "1940 Act")
requires that all portfolio securities of the Columbia Daily Income Company have
at the time of purchase a maximum remaining maturity (as defined in the rule) of
13 months and that the Fund maintain a dollar-weighted average portfolio
maturity of not more than 90 days. (The Fund, however, will be invested in
short-term debt obligations maturing within 12 months.) Rule 2a-7 further
requires that investments by a money market fund must present minimal credit
risk and, if rated, must be rated within one of the two highest rating
categories for short-term debt obligations by at least two major rating agencies
assigning a rating to the securities or issuer or, if only one rating agency has
assigned a rating, by that agency. Purchases of securities which are unrated or
rated by only one rating agency must be approved or ratified by the Board of
Directors of the Fund. Securities that are rated (or that have been issued by an
issuer that is rated with respect to a class of short-term debt obligations, or
any security within that class, comparable in priority and quality with such
securities) in the highest category by at least two major rating agencies are
designated "First Tier Securities." Securities rated in the top two categories
by at least two major rating agencies, but which are not rated in the highest
category by two or more major rating agencies, are designated "Second Tier
Securities." Securities which are unrated may be purchased only if they are
deemed to be of comparable quality to rated securities. Under Rule 2a-7, a fund
may not invest more than the greater of 1 percent of its total assets or one
million dollars, measured at the time of investment, in the securities of a
single issuer that were Second Tier Securities when acquired by the fund. In
addition, a money market fund may not under Rule 2a-7 invest more than 5 percent
of its total assets in securities that were Second Tier Securities when
acquired.

The Fund may not invest more than 5 percent of its total assets in the
securities of any one issuer, except this limitation does not apply to U.S.
Government securities and repurchase agreements thereon. The Fund may, however,
invest more than 5 percent of its total assets in the First Tier Securities of a
single issuer for up to three business days, although the Fund may not make more
than one such investment at any one time.

Investment policies by the Fund are in certain circumstances more
restrictive than the restrictions under Rule 2a-7. In particular, investments by
the Fund are restricted to the following:

1. Securities issued or guaranteed as to principal and interest by the
U.S. Government or issued or guaranteed by agencies or instrumentalities thereof
and repurchase agreements relating to these securities.

2. Commercial paper which, if rated by S&P or Moody's is rated A-1 by
S&P and Prime 1 by Moody's or, if not rated, is determined to be of comparable
quality by the Board of Directors of the Fund.

46
<PAGE>

3. Other corporate debt securities with remaining maturities of less
than 12 months, including bonds and notes, of an issuer that has received
ratings from S&P and Moody's for its other short-term debt obligations as
described in paragraph 2 above, where such corporate debt securities are
comparable in priority and security to the rated short-term debt obligations or,
if no ratings are available, where such corporate debt securities are determined
to be of comparable quality under procedures approved by the Board of Directors
of the Fund.

4. Obligations of U.S. banks that are members of the Federal Reserve
System and have capital surplus and undivided profits as of the date of their
most recent published financial statements in excess of $100 million and are
determined by the Board of Directors of the Fund to be of comparable quality to
the obligations described in paragraphs 2 or 3 above. Currently these
obligations are CDs, bankers' acceptances, and letters of credit.

- --------------------------------------------------------------------------------
MANAGEMENT
- --------------------------------------------------------------------------------

Each Fund is managed under the supervision of its Board of Directors,
which has responsibility for overseeing decisions relating to the investment
policies and objectives of the Fund. The Board of Directors of each Fund meets
quarterly to review the Fund's investment polices, performance, expenses, and
other business matters. The directors and officers of the Funds are listed
below, together with their principal business occupations. All principal
business occupations have been held for more than five years, except that
positions with the Small Cap Fund and the Columbia National Municipal Bond Fund
have been held since August 1996 and January 1999, respectively, and except as
otherwise indicated.

J. JERRY INSKEEP, JR.,*+ Age 69, Chairman, President, and Director of each
Fund; Chairman, President, and Trustee of CMC Fund Trust ("CMC Trust");
Consultant to Fleet Boston Corporation ("Fleet") (since December 1997);
formerly Chairman and a Director of Columbia Funds Management Company (the
"Adviser"), Columbia Management Co., and Columbia Trust Company (the "Trust
Company"); formerly a Director of Columbia Financial Center Incorporated
("Columbia Financial"). Mr. Inskeep's business address is 1300 S.W. Sixth
Avenue, P.O. Box 1350, Portland, Oregon 97207.

JAMES C. GEORGE, Age 67, Director of each Fund (since June 1994); Trustee of CMC
Trust (since December 1997). Mr. George was the Investment Manager of the Oregon
State Treasury between 1966 and 1992. Since 1992, Mr. George has been an
investment consultant. Mr. George's business address is 1001 S.W. Fifth Avenue,
Portland, Oregon 97204.

THOMAS R. MACKENZIE, Age 72, Director of each Fund; Trustee of CMC Trust (since
December 1997); Founder and Director of Group Mackenzie (architecture, planning,
interior design, engineering). Mr. Mackenzie's business address is 0690 S.W.
Bancroft Street, Portland, Oregon 97201.

47
<PAGE>

ROBERT J. MOORMAN, Age 48, *Secretary of each Fund and CMC Trust (since January
1998); Attorney with Stoel Rives LLP. Mr. Moorman's business address is 900 S.W.
Fifth Avenue, Suite 2600, Portland, Oregon 97204-1268.

RICHARD L. WOOLWORTH,+ Age 58, Director of each Fund; Trustee of CMC Trust;
Chairman of Blue Cross and Blue Shield of Oregon; Chairman and Chief Executive
Officer of the Regence Group, health insurers. Mr. Woolworth's business address
is 200 S.W. Market Street, Portland, Oregon 97201.

*Mr. Inskeep and Mr. Moorman are "interested persons" as defined by the
Investment Company Act of 1940 and receive no directors fees or salaries from
the Funds.

+Members of the Executive Committee. The Executive Committee has all
powers of the Board of Directors when the Board is not in session, except as
limited by law.

48
<PAGE>

The following table sets forth compensation received by the
disinterested directors for 1999. No officer of the Funds received any
compensation from the Funds in 1999.

COMPENSATION TABLE

<TABLE>
<CAPTION>
Compensation from
Aggregate compensation Fund Complex,
Director From Fund, per Director per Director**
-------- ----------------------- --------------
<S> <C> <C> <C>
Thomas R. Mackenzie Common Stock Fund $2,600 $31,000
James C. George Growth Fund $5,862
International Stock Fund $473
Special Fund $2,381
Small Cap Fund $518
Real Estate Fund $625
Balanced Fund $3,109
Columbia Daily Income Company $3,409
Government Bond Fund $120
Bond Fund $1,295
Oregon Municipal Bond Fund $1387
High Yield Fund $205
National Municipal Bond Fund $16

Richard L. Woolworth* Common Stock Fund $2,718 $32,000
Growth Fund $6,128
International Stock Fund $494
Special Fund $2,489
Small Cap Fund $542

49
<PAGE>

<CAPTION>
Compensation from
Aggregate compensation Fund Complex,
Director From Fund, per Director per Director**
-------- ----------------------- --------------
<S> <C> <C> <C>
Real Estate Fund $653
Balanced Fund $3,250
Columbia Daily Income Company $3,564
Government Bond Fund $125
Bond Fund $1,354
Oregon Municipal Bond Fund $1,450
High Yield Fund $215
National Municipal Bond Fund $18
</TABLE>

*Includes compensation received by Mr. Woolworth for serving on each Fund's
Executive Committee.

**Includes compensation Messrs. Woolworth, Mackenzie and George received as
Trustees of CMC Trust. The Investment Adviser for CMC Trust is Columbia
Management Co., an affiliate of the Adviser.

50
<PAGE>

Provident Distributors, Inc. ("PDI"), a registered securities broker
and a member of the National Association of Securities Dealers, Inc., is the
principal underwriter for the Funds, and is authorized under a distribution
agreement with each Fund to sell shares of the Fund. Columbia Financial has
entered into a broker-dealer agreement with PDI to distribute the Funds' shares.
PDI and Columbia Financial do not charge any fees or commissions to investors or
the Funds for the sale of shares of a Fund.

At January 31, 2000, officers and directors, as a group, owned of
record or beneficially less than 1 percent of each Fund, other than the National
Municipal Bond Fund in which Mr. Inskeep owned 25,340 shares, 2.38 percent.

At January 31, 2000, to the knowledge of the Funds, no person owned of
record or beneficially more than 5 percent of the outstanding shares of any Fund
except the following record owners: Charles Schwab & Co., Inc., 101 Montgomery
Street, San Francisco, California 94104 which owned 2,630,238 shares of the Bond
Fund (8.40 percent of the total shares outstanding), 2,711,122 shares of the
Growth Fund (6.18 percent of the total shares outstanding), 2,302,818 shares of
the Special Fund (7.45 percent of the total shares outstanding), 2,612,773
shares of the Common Stock Fund (7.90 percent of the total shares outstanding),
2,513,634 shares of the Balanced Fund (6.05 percent of the total shares
outstanding), 1,000,470 shares of the High Yield Fund (12.96 percent of the
total shares outstanding), 7,920,361 shares of the Real Estate Fund (46.62
percent of the total shares outstanding); 1,394,939 shares of the Small Cap Fund
(11.92 percent of the total shares outstanding); Columbia Management Co., P.O.
Box 1350, Portland, Oregon 97201 which owned 70,928,473 shares of CDIC (5.86
percent of the total shares outstanding); Standard Insurance Company, P.O. Box
711, Portland, Oregon 97207, which owned 2,389,368 shares of the Special Fund
(7.73 percent of the total shares outstanding); National Financial Service
Corp., P.O. Box 3908 Church Street Station, New York, New York 10008 which owned
1,107,964 shares of the Real Estate Fund (6.52 percent of the total shares
outstanding); 412,907 shares of the High Yield Fund (5.35 percent of the total
shares outstanding); Wells Fargo Bank Trustee, P.O. Box 9800, Calabasas,
California 91372-0800, which owned 1,908,008 shares of the Common Stock Fund
(5.77 percent of the total shares outstanding); The Agnew Family Trust, P.O. Box
1350, Portland, Oregon 97201, which owned 176,276 shares of the National
Municipal Bond Fund (16.58 percent of the total shares outstanding); Lita
Luvera, P.O. Box 1350, Portland, Oregon, 97201, who owned 135,351 shares of the
National Municipal Bond Fund (12.73 percent of the total shares outstanding);
Gunilla Finrow, P.O. Box 1350, Portland, Oregon, 97201, who owned 118,607 shares
of the National Municipal Bond Fund (11.16 percent of the total shares
outstanding); Diane Huntsinger-Carson, P.O. Box 1350, Portland, Oregon, 97201,
who owned 58,766 shares of the National Municipal Bond Fund

51
<PAGE>

(5.53 percent of the total shares outstanding); Intermountain Health Care
401(K), P.O. Box 92956, Chicago, Illinois 60675 which owned 727,444 shares of
the Small Cap Fund (6.22 percent of the total shares outstanding).

- --------------------------------------------------------------------------------
INVESTMENT ADVISORY AND OTHER FEES PAID TO AFFILIATES
- --------------------------------------------------------------------------------

The investment adviser to each of the Funds is Columbia Funds
Management Company (the "Adviser"). The Adviser has entered into an investment
contract with each Fund. Pursuant to the investment contract, the Adviser
provides research, advice, and supervision with respect to investment matters
and determines which securities to purchase or sell and what portion of the
Fund's assets to invest.

The Adviser provides office space and pays all executive salaries and
executive expenses of the Fund. The Fund assumes its costs relating to corporate
matters, cost of services to shareholders, transfer and dividend paying agent
fees, custodian fees, legal and auditing expenses, disinterested director 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, and all other
expenses of preparing its registration statement, prospectuses, and reports.

Information regarding calculation of the advisory fee payable to the
Adviser is set forth in the Prospectus. Advisory fees paid by each of the Funds
for each of the last three years were:

52
<PAGE>

<TABLE>
<CAPTION>
Fund 1999 1998 1997
- ---- ---- ---- ----
<S> <C> <C> <C>
Common Stock Fund $5,181,352 $5,136,336 $4,158,273
Growth Fund $10,562,644 $8,591,359 $7,019,161
International Stock Fund $1,592,405 $1,414,138 $1,504,787
Special Fund $7,081,977 $9,054,501 $12,373,140
Small Cap Fund $1,745,238 $1,246,153 $547,892
Real Estate Fund $1,549,192 $1,221,370 $864,343
Balanced Fund $5,094,253 $4,512,177 $3,826,628
Government Bond Fund $194,635 $194,507 $194,230
Bond Fund $2,105,357 $2,050,200 $1,821,809
National Municipal Bond Fund* $27,095 -- --
Oregon Municipal Bond Fund $2,246,866 $2,149,321 $1,952,213
High Yield Fund $405,284 $292,249 $211,632
</TABLE>

53
<PAGE>

54
<PAGE>

---------------
* The Fund commenced operations February 1999.

The Adviser has entered into an agreement with Columbia Management Co.
("CMC"), under which CMC provides the Adviser 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 Adviser, also contacts brokerage firms to conduct
securities transactions for the Funds. The Adviser pays CMC a fee for these
services. A Fund's expenses are not increased by this arrangement, and no
amounts are paid by a Fund to CMC under this agreement.

The transfer agent and dividend crediting agent for the Funds is
Columbia Trust Company ("Trust Company"). Its address is 1301 S.W. Fifth Avenue,
P.O. Box 1350, Portland, Oregon 97207. It issues certificates for shares of the
Funds, if requested, and records and disburses dividends for the Funds. During
1999, each Fund paid the Trust Company a per account fee of $1.66 per month for
each shareholder account with the Fund existing at any time during the month. In
addition, each Fund pays the Trust Company for extra administrative services
performed at cost in accordance with a schedule set forth in the agreement
between the Trust Company and the Fund and reimburses the Trust Company for
certain out-of-pocket expenses incurred in carrying out its duties under that
agreement. In addition to the transfer agent services described above, the Trust
Company has hired PFPC, Inc. ("PFPC") as a sub-transfer agent to provide
services related to fund transactions processed through the National
Securities Clearing Corporation on behalf of the Common Stock Fund, Growth
Fund, Special Fund, Real Estate Fund, Small Cap Fund, Balanced Fund, High
Yield Fund and Bond Fund. Each of the above Funds has agreed to pay the Trust
Company the costs incurred by Trust Company in connection with the services
provided by PFPC.

55
<PAGE>

Fees paid to the Trust Company for services performed in 1999 under
each transfer agent agreement were $807,328 for the Common Stock Fund,
$1,384,392 for the Growth Fund, $474,023 for the International Stock Fund,
$904,070 for the Special Fund, $308,568 for the Small Cap Fund, $231,345 for the
Real Estate Fund, $900,945 for the Balanced Fund, $98,723 for the Government
Bond Fund, $373,761 for the Bond Fund, $171,378 for the Oregon Municipal Bond
Fund, $106,273 for the High Yield Fund, $972,451 for the Columbia Daily Income
Company and $27,113 for the Columbia National Municipal Bond Fund.

The Adviser, the Trust Company and CMC are indirect wholly owned
subsidiaries of Fleet Boston Corporation ("Fleet"). Fleet and its affiliates
provide a wide range of banking, financial, and investment products and services
to individuals and businesses. Their principal activities include customer and
commercial banking, mortgage lending and servicing, trust administration,
investment management, retirement plan services, brokerage and clearing
services, securities underwriting, private and corporate financing and advisory
activities, and insurance services.

- --------------------------------------------------------------------------------
PORTFOLIO TRANSACTIONS
- --------------------------------------------------------------------------------

Each 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. This may result
in a higher portfolio turnover rate and increase a Fund's transaction costs,
including brokerage commissions. To the extent short-term trades result in gains
on securities held less than one year, shareholders will be subject to taxes at
ordinary income rates. See TAXES in this Statement of Additional Information.

The Funds may purchase their portfolio securities through a securities
broker and pay the broker a commission, or they may purchase the securities
directly from a dealer which acts as principal and sells securities directly for
its own account without charging a commission. The purchase price of securities
purchased from dealers serving as market makers will include the spread between
the bid and asked prices. The Funds may also purchase securities from
underwriters, the price of which will include a commission or discount paid by
the issuer to the underwriter. There is generally no stated commission in the
case of fixed income securities that are traded in the over-the-counter market,
but the price paid by a Fund usually includes an undisclosed dealer commission
or mark-up.

Prompt execution of orders at the most favorable price will be the
primary consideration of the Funds in transactions where fees or commissions are
involved. Additional factors considered by the Adviser in selecting brokers to
execute a transaction include the: (i) professional capability of the executing
broker and the value and quality of the

56
<PAGE>

brokerage services provided; (ii) size and type of transaction; (iii) timing of
transaction in the context of market prices and trends; (iv) nature and
character of markets for the security to be purchased or sold; (v) the broker's
execution efficiency and settlement capability; (vi) the broker's experience and
financial stability and the execution services it renders to the Adviser on a
continuing basis; and (vii) reasonableness of commission.

Research, statistical, and other services offered by the broker 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. A commission in
excess of the amount of a commission another broker or dealer would have charged
for effecting a transaction may be paid by a Fund if the Adviser 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.

The Adviser receives a significant amount of proprietary research from
a number of brokerage firms, in most cases on an unsolicited basis. The Adviser
does not make any commitments to allocate brokerage for proprietary research.
The value of that research, however, is considered along with other factors in
the selection of brokers. This research is considered supplemental to the
Adviser's own internal research and does not, therefore, materially reduce the
overall expenses incurred by the Adviser for its research. On a semi-annual
basis, the Adviser's research analysts and portfolio managers participate in a
detailed internal survey regarding the value of proprietary research and the
skills or contributions made by the various brokerage analysts to the Adviser's
investment process. Firms are then confidentially ranked based on that survey.
Brokerage allocations are then made, as much as reasonably possible, based on
those rankings.

In limited circumstances, the Adviser may use a Fund's commissions to
acquire third party research or products that are not available through its
full-service brokers. In these arrangements, the Adviser pays an executing
broker a commission equal to the average rate paid on all other trades (e.g.,
$0.06) and achieves what it believes is best execution on the trade. The
executing broker then uses a portion of the commission to pay for a specific
research service or product provided to the Adviser. Proposed research to be
acquired in this manner must be approved by the Adviser's Chief Investment
Officer, who is responsible for determining that the research provides
appropriate assistance to the Adviser in connection with its investment
management of the Funds and that the price paid with broker commissions is fair
and reasonable.

The receipt of proprietary and third party research services or
products from brokers or dealers might be useful to the Adviser and its
affiliates in rendering investment management services to the Funds or other
clients. Conversely, research provided by brokers or dealers who have executed
orders on behalf of other clients of the Adviser and its affiliates might be
useful to the Adviser in carrying out its obligations to a Fund.

57
<PAGE>

Total brokerage commissions paid by each of the respective Funds for
each of the last three years were:

<TABLE>
<CAPTION>
FUND 1999 1998 1997
- ---- ---- ---- ----
<S> <C> <C> <C>
Common Stock Fund $1,569,579 $2,596,285 $1,328,730
Growth Fund $4,155,391 $3,732,855 $2,168,003
International Stock Fund $724,858 $524,840 $864,293
Special Fund $2,633,780 $3,382,721 $6,140,893
Small Cap Fund $421,852 $375,120 $225,828
Real Estate Fund $491,959 $110,166 $194,113
Balanced Fund $1,013,023 $1,220,034 $737,793
</TABLE>

No brokerage commissions were paid by the Columbia Daily Income
Company, the Government Bond Fund, the Bond Fund, the Oregon Municipal Bond
Fund, or the High Yield Fund during the last three years. Of the commissions
paid in 1999, the Common Stock Fund paid $159,719, the Growth Fund paid
$221,877, the Special Fund paid $150,730, the Small Cap Fund paid $19,894,
the Balanced Fund paid $81,562, and the Real Estate Fund paid $1,131, to acquire
third-party research or products.

Provided each Fund's Board of Directors is satisfied that the Fund is
receiving the most favorable price and execution available, the Adviser may
consider the sale of the Fund's shares as a factor in the selection of
brokerage firms to execute its portfolio transactions. The placement of
portfolio transactions with brokerage firms who sell shares of a Fund is
subject to rules adopted by the National Association of Securities Dealers.
The Adviser may use research services provided by and allocate purchase and
sale orders for portfolio securities to certain financial institutions,
including, to the extent permitted by law or order of the SEC, financial
institutions that are affiliated with the Adviser, if the Adviser believes
that the quality of the transaction and the commission are comparable to what
they would be with other qualified brokerage firms. On October 1, 1999
Robertson Stephens became an affiliated broker dealer of Adviser. Between
October 1, 1999 and the fiscal year ended December 31, 1999, the Special Fund
and Small Cap Fund paid $8,712 and $1,188, respectively, in brokerage
commissions to

58
<PAGE>
Robertson Stephens. In each case the percentage of aggregate brokerage
commissions paid to, and the aggregate dollar amount of transactions
involving Robertson Stephens, did not exceed 1% of the Funds' aggregate
brokerage commissions or 1% of the Funds' aggregate dollar amount of
transaction. In addition to agency transactions, the Funds may purchase
securities from an underwriting syndicate in which an affiliate is a member
of the underwriting syndicate. Such trades will be executed in accordance
with the rules and regulations of the Investment Company Act of 1940 as well
as procedures adopted by the Funds.

Investment decisions for each Fund are made independently from those of
the other Funds or accounts or other investment pools managed by the Adviser or
any affiliate of the Adviser. 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
adviser, 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 or accounts will be made on an
equitable basis.

Since 1967, the Adviser 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 their employees. The Code does not prohibit
employees from purchasing securities that may be purchased or held by the Funds,
but is intended to ensure that all employees conduct their personal transactions
in a manner that does not interfere with the portfolio transactions of the Funds
or the Adviser's other clients or take unfair advantage of their relationship
with the Adviser. The specific standards in the Code include, among others, a
requirement that all employee trades be pre-cleared; a prohibition on investing
in initial public offerings; required pre-approval of an investment in private
placements; a prohibition on portfolio managers trading in a security seven days
before or after a trade in the same security by an account 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 Adviser's Ethics Committee to monitor that
compliance.

The Adviser 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 from trading, either
personally or on behalf of others (including a client account), on the basis of
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.

59
<PAGE>

- --------------------------------------------------------------------------------
CAPITAL STOCK AND OTHER SECURITIES
- --------------------------------------------------------------------------------

Each Fund is an Oregon corporation and was organized in the year set
forth below opposite its name.

<TABLE>
<CAPTION>
FUND DATE
---- ----
<S> <C>
Common Stock Fund 1991
Growth Fund 1967
International Stock Fund 1992
Special Fund 1985
Small Cap Fund 1996
Real Estate Fund 1994
Balanced Fund 1991
Government Bond Fund 1986
Bond Fund 1983
National Municipal Bond Fund 1999
Oregon Municipal Bond Fund 1984
High Yield Fund 1993
Columbia Daily Income Company 1974
</TABLE>

All shares of each Fund have equal voting, redemption, dividend, and
liquidation rights. All issued and outstanding shares of a 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 a Fund
do not have cumulative voting rights, which means that the holders of more than
50 percent of the shares of the Fund, voting for the election of directors, can
elect all the directors.

Any reference to the phrase "vote of a majority of the outstanding
voting securities of the Fund" means the vote at any meeting of shareholders of
a Fund of (i) 67 percent or more of the shares present or represented by proxy
at the meeting, if the holders of more than 50 percent of the outstanding shares
are present or represented by proxy, or (ii) more than 50 percent of the
outstanding shares, whichever is less.

- --------------------------------------------------------------------------------
PURCHASE, REDEMPTION AND PRICING OF SHARES
- --------------------------------------------------------------------------------

PURCHASES AND REDEMPTIONS

A detailed discussion of how you may purchase, redeem and exchange
shares in each of the Funds is discussed in the Prospectus. The following
information and polices is supplemental to that found in the Prospectus.

60
<PAGE>

INVESTMENT MINIMUMS. Although the Adviser has established
minimum investment amounts, it 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
adviser, or securities broker), for individual retirement
plans or in other circumstances.

TELEPHONE REDEMPTIONS. You may experience some difficulty in
implementing a telephone redemption during periods of intense
economic or financial market changes or activity. Telephone
redemption privileges may be modified or terminated at any
time without notice to shareholders.

REDEMPTIONS BY DRAFT. The processing of drafts against a
Columbia Daily Income Company account is subject to the rules
and regulations of the Columbia Daily Income Company's
commercial bank. These arrangements do not establish a
checking or other account between you and the bank for the
purpose of Federal Deposits Insurance or otherwise. The
agreements and procedures followed by the Columbia Daily
Income Company relates solely to the bank's intermediary
status for redemption of investments in the Columbia Daily
Income Company.

AUTOMATIC WITHDRAWALS. If your account value in any Fund is
$5,000 or more, you may elect to receive automatic cash
withdrawals of $50 or more from that Fund in accordance with
either of the following withdrawal options:

Income earned - you may elect to receive any
dividends or capital gains distributions on your
shares, provided such dividends and distributions
exceed $25.00.

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 related.

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 be 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.

61
<PAGE>

REDEMPTION OF RECENTLY PURCHASED SHARES. If a Fund has not yet
collected payment for the shares you are selling, it may delay
sending the proceeds until it has collected payment, which may
take up to 15 days from the purchase date. No interest is paid
on the redemption proceeds after the redemption date and
before the proceeds are sent to you. If you request the
redemption (by draft or other means) of Columbia Daily Income
Company shares recently purchased by check, the proceeds will
not be transmitted until the earlier to occur of your check
clearing or 15 days from the purchase date. These holding
periods do not apply to the redemption of shares purchased by
bank wire or with a cashiers or certified check.

There is no charge for redemption payments that are
mailed. Amounts transferred by wire must be at least $1,000,
and the bank wire cost for each redemption will be charged
against your account. Your bank may also impose an incoming
wire charge.

EXCHANGES. You may use proceeds from the redemption of shares
of any Fund to purchase share of other Funds offering shares
for sale in your state of residence. Before making an
exchange, you should read the portions of the Prospectus
relating to the Fund or Funds into which the shares are to be
exchanged. The shares of the Fund to be acquired will be
purchased at the NAV next determined after acceptance of the
purchase order by that Fund in accordance with its policy for
accepting investments. The exchange of shares of one Fund for
shares of another Fund is treated, for federal income tax
purposes, as a sale on which you may realize a taxable gain or
loss.

Telephone exchange privileges are available to you
automatically, unless you decline this service by checking the
appropriate box on the application. Telephone exchanges may be
made from one Fund into another Fund only within the same
account number. To prevent the abuse of the exchange privilege
to the disadvantage of other shareholders, each Fund reserves
the right to terminate the exchange privilege of any
shareholder who makes more than four exchanges out of a Fund
during the calendar year. The exchange privilege may be
modified or terminated at any time, and any Fund may
discontinue offering its shares generally or in any particular
state without notice to shareholders.

INVOLUNTARY REDEMPTIONS. Upon 60 days prior written notice, a
Fund may redeem all of your shares without your consent if:

- Your account balance falls below $500. However, if
you wish to maintain that account, you may during
the 60-day notice period either: (i) add to your
account to bring it up to the required minimum, or
(ii) establish an Automatic Investment Plan with a
minimum monthly investment of $50.

62
<PAGE>

- You are a U.S. shareholder and fail to provide the
Fund with a certified taxpayer identification
number.

- You are a foreign shareholder and fail to provide
the Fund with a current Form W-8, "Certificate of
Foreign Status".

The Funds also reserve the right to close a
shareholder account if the shareholder's actions are deemed to
be detrimental to the Fund or its shareholders, including,
without limitation, violating the exchange policy set forth in
its Prospectus. If a Fund redeems shares, payment will be made
promptly at the current net asset value. A redemption may
result in a realized capital gain or loss.

PROCESSING YOUR ORDERS. Orders received by a Fund other than
the Columbia Daily Income Company will be processed the day
they are received. Since the Columbia Daily Income Company
invests in obligations normally requiring payment in federal
funds, purchase orders will not be processed unless received
in federal funds or until converted by the Fund into federal
funds. Checks or negotiable U.S. bank drafts require one day
to convert into federal funds. Checks drawn on banks that are
not members of the Federal Reserve System may take longer to
convert into federal funds. Prior to conversion into federal
funds, your money will not be invested or working for you.
Information about federal funds is available from any U.S.
bank that is a member of the Federal Reserve System.

Orders received before the close of regular trading
on the NYSE (normally 4 p.m. New York time) will be entered at
the Fund's share price computed that day. Orders received
after the close of regular trading on the NYSE will be entered
at the Fund's share price next determined. All investments
will be credited to your account in full and fractional shares
computed to the third decimal place. The Funds reserve the
right to reject any order.

Shares purchased will be credited to your account on
the record books of the applicable Fund. The Funds will not
issue share certificates except on request. Certificates for
fractional shares will not be issued.

REDEMPTIONS. Each Fund reserves the right to redeem Fund
shares in cash or by payment-in-kind. Each Fund has elected,
however, to be governed by Rule 18f-1 under the Investment
Company Act pursuant to which a Fund is obligated to redeem,
during any 90-day period, shares of a shareholder solely for
cash up to the lesser of $250,000 or 1 percent of the net
asset value of the Fund. A shareholder who is redeemed in kind
may incur brokerage fees upon the sale of any securities
distributed upon redemption.

63
<PAGE>

PRICING OF SHARES

The net asset value ("NAV") per share of each Fund is determined by the
Adviser, under procedures approved by the directors, as of the close of regular
trading (normally 4:00 p.m. New York time) on each day the NYSE is open for
business and at other times determined by the directors. The NAV per share is
computed by dividing the value of all assets of the Fund, less its liabilities,
by the number of shares outstanding.

A Fund may suspend the determination of the NAV of a Fund and the right
of redemption for any period (1) when the NYSE is closed, other than customary
weekend and holiday closings, (2) when trading on the NYSE is restricted, (3)
when an emergency exists as a result of which sale of securities owned by the
Fund is not reasonably practicable or it is not reasonably practicable for the
Fund to determine the value of the Fund's assets, or (4) as the SEC may by order
permit for the protection of security holders, provided the Fund complies with
rules and regulations of the SEC, which govern as to whether the conditions
prescribed in (2) or (3) exist. The NYSE observes the following holidays: New
Year's Day, Martin Luther King, Jr.'s Birthday, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving, and Christmas.

For purposes of calculating the NAV of a Fund's shares, the following
procedures are utilized whenever applicable. Each Fund's equity securities are
valued at the last sale price on the securities exchange or national securities
markets at which such securities primarily are traded. Securities not listed on
an exchange or national securities market, or securities in which there were no
transactions, are valued using the last bid price. Each Fund purchasing debt
securities uses market value to value such securities as quoted by dealers who
are market makers in these securities or by an independent pricing service,
unless the Adviser determines that a fair value determination should be made
using procedures and guidelines established by and under the general supervision
of the Fund's Board of Directors. Market values are based on the average of bid
and ask prices, or by reference to other securities with comparable ratings,
interest rates and maturities. Certain debt securities for which daily market
quotations are not readily available, or for which the Adviser believes the
quotations do not accurately value the security in question, may be valued by
the Adviser, pursuant to guidelines established by the Fund's Board of
Directors, with reference to fixed income securities whose prices are more
readily obtainable and whose durations are comparable to the securities being
valued.

Investments in the Columbia Daily Income Company and other temporary
cash investments are carried at values deemed best to reflect their fair values
as determined in good faith by the Adviser, under procedures adopted by the
Fund's Board of Directors. These values are based on cost, adjusted for
amortization of discount or premium and accrued interest, unless unusual
circumstances indicate that another method of determining fair value should be
used.

64
<PAGE>

The value of assets or liabilities initially expressed in a foreign
currency will, on a daily basis, be converted into U.S. dollars. Foreign
securities will be valued based upon the most recent closing price on their
principal exchange, or based upon the most recent price obtained by the Fund, if
the security is not priced on an exchange, even if the close of that exchange or
price determination is earlier than the time of the Funds' NAV calculation. In
the case of such foreign security, if an event that is likely to affect
materially the value of a portfolio security occurs between the time the foreign
price is determined and the time the Fund's NAV is calculated, it may be
necessary to value the security in light of that event.

- --------------------------------------------------------------------------------
CUSTODIANS
- --------------------------------------------------------------------------------

U S Bank N.A. (a "Custodian"), 321 S.W. Sixth Avenue, Portland, Oregon
97208, acts as general custodian for each Fund, except the International Stock
Fund. The Custodian provides custody services to the International Stock Fund
with respect to domestic securities held by the Fund. Chase Manhattan Bank
("Chase" or a "Custodian"), One Pierrepont Plaza, Brooklyn, New York 11201, acts
as the general custodian for the International Stock Fund and provides custody
services to those Funds that invest in foreign securities. The Custodians hold
all securities and cash of the Funds, receive and pay for securities purchased,
deliver against payment securities sold, receive and collect income from
investments, make all payments covering expenses of the Funds, and perform other
administrative duties, all as directed by authorized officers of the Adviser.
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 by the Funds are maintained in the custody of foreign banks, trust
companies, or depositories that have sub-custodian arrangements with Chase (the
"foreign sub-custodians"). Each of the domestic and foreign custodial
institutions that may hold portfolio securities of the Funds has been approved
by the Board of Directors of the Funds or, in the case of foreign securities, at
the discretion of the Board, by Chase, as a delegate of the Board of Directors,
all in accordance with regulations under the 1940 Act.

The Adviser determines whether it is in the best interest of the Funds
and their shareholders to maintain a Fund's assets in each of the countries in
which the Fund invests ("Prevailing Market Risk"). The review of Prevailing
Market Risk includes an assessment of the risk of holding a Fund's assets in a
country, including risks of expropriation or imposition of exchange controls. In
evaluating the foreign sub-custodians, the Board of Directors, or its delegate,
will review the operational capability and reliability of the foreign
sub-custodian. With respect to foreign investments and the selection of foreign
sub-custodians, however, there is no assurance that the Funds, and the value of
their shares, will not be adversely affected by acts of foreign governments,
financial or operational difficulties of the foreign sub-custodians,
difficulties and cost of obtaining jurisdiction over, or enforcing judgements
against, the foreign sub-custodians, or the application of foreign law to a
Fund's foreign sub-custodial

65
<PAGE>

arrangement. Accordingly, an investor should recognize that the risks involved
in holding assets abroad are greater than those associated with investing in the
United States.

- --------------------------------------------------------------------------------
ACCOUNTING SERVICES AND FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

The financial statements of each Fund for the year ended December 31,
1999, the selected per share data and ratios under the caption "Financial
Highlights," and the report of PricewaterhouseCoopers LLP, independent
accountants, are included in the 1999 Annual Report to Shareholders of the
Funds. PricewaterhouseCoopers LLP, 1300 S.W. Fifth Avenue, Suite 3100, Portland,
Oregon 97201, in addition to examining the financial statements of the Funds,
assists in the preparation of the tax returns of the Funds and in certain other
matters.

- --------------------------------------------------------------------------------
TAXES
- --------------------------------------------------------------------------------

FEDERAL INCOME TAXES

Each Fund intends and expects to meet continuously the tests for
qualification as a regulated investment company under Part I of Subchapter M of
the Internal Revenue Code of 1986, as amended (the "Code"). Each Fund believes
it satisfies the tests to qualify as a regulated investment company.

To qualify as a regulated investment company for any taxable year, each
Fund must, among other things:

(a) derive at least 90 percent of its gross income from dividends,
interest, payments with respect to securities loans, gains from the sale or
other disposition of stock, securities, or foreign currencies, or other income
(including but not limited to gains from options, futures, or forward contracts)
derived with respect to its business of investing in such stock, securities, or
currencies (the "90 Percent Test"); and

(b) diversify its holdings so that, at the end of each quarter, (i) 50
percent or more of the value of the assets of the Fund is represented by cash,
government securities, and other securities limited, in respect of any one
issuer of such other securities, to an amount not greater than 5 percent of the
value of the assets of the Fund and 10 percent of the outstanding voting
securities of such issuer, and (ii) not more than 25 percent of the value of the
assets of the Fund is invested in the securities (other than government
securities) of any one issuer or of two or more issuers that the Fund "controls"
within the meaning of Section 851 of the Code and that meet certain requirements
(the "Diversification Test"). In addition, a Fund must file, or have filed, a
proper election with the Internal Revenue Service.

66
<PAGE>

Part I of Subchapter M of the Code will apply to a Fund during a
taxable year only if it meets certain additional requirements. Among other
things, the Fund must: (a) have a deduction for dividends paid (without regard
to capital gain dividends) at least equal to the sum of 90 percent of its
investment company taxable income (computed without any deduction for dividends
paid) and 90 percent of its tax-exempt interest in excess of certain disallowed
deductions (unless the Internal Revenue Service waives this requirement), and
(b) either (i) have been subject to Part I of Subchapter M for all taxable years
ending after November 8, 1983 or (ii) as of the close of the taxable year have
no earnings and profits accumulated in any taxable year to which Part I of
Subchapter M did not apply.

A regulated investment company that meets the requirements described
above is taxed only on its "investment company taxable income," which generally
equals the undistributed portion of its ordinary net income and any excess of
net short-term capital gain over net long-term capital loss. In addition, any
excess of net long-term capital gain over net short-term capital loss that is
not distributed is taxed to a Fund at corporate capital gain tax rates. The
policy of each Fund is to apply capital loss carry-forwards as a deduction
against future capital gains before making a capital gain distribution to
shareholders. Under rules that are beyond the scope of this discussion, certain
capital losses and certain net foreign currency losses resulting from
transactions occurring in November and December of a taxable year may be taken
into account either in that taxable year or in the following taxable year.

If any net long-term capital gains in excess of net short-term capital
losses are retained by a Fund, requiring federal income taxes to be paid thereon
by the Fund, the Fund may elect to treat such capital gains as having been
distributed to shareholders. In the case of such an election, shareholders will
be taxed on such amounts as long-term capital gains, will be able to claim their
proportional share of the federal income taxes paid by the Fund on such gains as
credits against their own federal income tax liabilities, and generally will be
entitled to increase the adjusted tax basis of their shares in the Fund by the
differences between their pro rata shares of such gains and their tax credits.

SPECIAL ASPECTS OF 90 PERCENT TEST WITH RESPECT TO FOREIGN CURRENCY.
For purposes of the 90 Percent Test, foreign currency gains that are not
directly related to a Fund's principal business of investing in stocks or
securities (or options and futures with respect to stock or securities) may be
excluded from qualifying income by regulation. No such regulations, however,
have been issued.

Unless an exception applies, a Fund may be required to recognize some
income with respect to foreign currency contracts under the mark-to-market rules
of Section 1256 even though that income is not realized. Special rules under
Sections 1256 and 988 of the Code determine the character of any income, gain,
or loss on foreign currency contracts.

Two possible exceptions to marking-to-market relate to hedging
transactions and mixed straddles. A hedging transaction is defined for purposes
of Section 1256 as a transaction (1) that a Fund properly identifies as a
hedging transaction, and (2) that is entered into in the normal course of
business primarily to manage the risk of price changes or currency

67
<PAGE>

fluctuations with respect to the Fund's investments. A mixed straddle is a
straddle where (1) at least one (but not all) of the straddle positions are
Section 1256 contracts and (2) the Fund properly identifies each position
forming part of the straddle. A straddle for these purposes generally is
offsetting positions with respect to personal property. A Fund holds
offsetting positions generally if there is a substantial diminution of the
Fund's risk of loss from holding a position by reason of its holding one or
more other positions.

OREGON MUNICIPAL BOND FUND AND NATIONAL MUNICIPAL BOND FUND. In certain
cases, Subchapter M permits the character of tax-exempt interest received and
distributed by a regulated investment company to flow through for federal tax
purposes as tax-exempt interest to its shareholders, provided that 50 percent or
more of the value of its assets at the end of each quarter is invested in
municipal bonds. For purposes of this Statement of Additional Information, the
term "municipal bonds" refers to obligations that pay interest that is
tax-exempt under Section 103 of the Code. For purposes of this Statement of
Additional Information, the term "tax-exempt interest" refers to interest that
is not includable in gross income for federal income tax purposes. As discussed
below, however, tax-exempt interest may result in an increase in the taxes of
the recipient because of the alternative minimum tax, the environmental tax, the
branch profits tax, or under other provisions of the Code that are beyond the
scope of this Statement of Additional Information. The Oregon Municipal Bond
Fund and the National Municipal Bond Fund intend to have at least 50 percent of
the value of their total assets at the close of each quarter of their taxable
year consist of obligations the interest on which is not includable in gross
income for federal income tax purposes under Section 103 of the Code. As a
result, the Oregon Municipal Bond Fund's and the National Municipal Bond Fund's
dividends payable from net tax-exempt interest earned from municipal bonds
should qualify as exempt-interest dividends.

Distributions properly designated by the Oregon Municipal Bond Fund and
the National Municipal Bond Fund as representing net tax-exempt interest
received on municipal bonds (including municipal bonds of Guam, Puerto Rico, and
certain other issuers) will not be includable by shareholders in gross income
for federal income tax purposes (except for shareholders who are, or are related
to, "substantial users," as discussed below). Distributions representing net
taxable interest received by the Oregon Municipal Bond Fund and the National
Municipal Bond Fund from sources other than municipal bonds, representing the
excess of net short-term capital gain over net long-term capital loss, or
representing taxable accrued market discount on the sale or redemption of
municipal bonds, will be taxable to shareholders as ordinary income.

Any loss realized upon the redemption of shares of the Oregon Municipal
Bond Fund and the National Municipal Bond Fund six months or less from the date
of purchase of the shares and following receipt of an exempt-interest dividend
will be disallowed to the extent of such exempt-interest dividend. Section
852(b)(4) of the Code contains special rules on the computation of a
shareholder's holding period for this purpose.

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<PAGE>

Interest on indebtedness incurred or continued by shareholders to
purchase or carry shares of the Oregon Municipal Bond Fund and the National
Municipal Bond Fund will not be deductible for federal income tax purposes.
Under rules issued by the Internal Revenue Service, the purchase of such shares
may be considered to have been made with borrowed funds even though the borrowed
funds are not directly traceable to the purchase of shares. Special rules that
are beyond the scope of this Statement of Additional Information limit the
deduction of interest paid by financial institutions. Investors with questions
regarding these issues should consult their tax advisors.

Dividends attributable to interest on certain private activity bonds
issued after August 7, 1986 will be items of tax preference and must be included
in alternative minimum taxable income for the purpose of determining liability,
if any, for the 26-28% alternative minimum tax for individuals and the 20%
alternative minimum tax for corporations. Furthermore, the alternative minimum
taxable income for corporations includes an adjustment equal to 75 percent of
the excess of "adjusted current earnings" over the corporation's other federal
alternative minimum taxable income (computed without regard to "adjusted current
earnings" and without regard to any "alternative tax net operating loss"). See
Section 56(g) of the Code. For the purpose of alternative minimum tax for
corporations, ALL exempt-interest dividends, less any interest expense incurred
to purchase or carry shares paying exempt interest dividends, must be taken into
account as "adjusted current earnings." In addition, exempt-interest dividends
paid to corporate investors may be subject to tax under the environmental tax,
which applies at the rate of 0.12% on the excess of the "modified alternative
minimum taxable income" of the corporation over $2 million. See Section 59A of
the Code.

In some cases, exempt-interest dividends paid by the Oregon Municipal
Bond Fund and the National Municipal Bond Fund may indirectly affect the amount
of Social Security benefits or railroad retirement benefits that are taxable
income to an investor. See Section 86 of the Code.

Certain foreign corporations may be subject to the "branch profits tax"
under Section 884 of the Code. The receipt of dividends from the Oregon
Municipal Bond Fund and the National Municipal Bond Fund may increase the
liability of the foreign corporation under the branch profits tax, even if such
dividends are generally tax-exempt.

"Substantial users" (or persons related thereto) of facilities financed
by certain governmental obligations are not allowed to exclude from gross income
interest on such obligations. No investigation as to the substantial users of
the facilities financed by bonds in the Oregon Municipal Bond Fund's and the
National Municipal Bond Fund's portfolios will be made by the Oregon Municipal
Bond Fund and the National Municipal Bond Fund. Potential investors who may be,
or may be related to, substantial users of such facilities should consult their
tax advisors before purchasing shares of the Oregon Municipal Bond Fund or the
National Municipal Bond Fund.

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<PAGE>

At the respective times of issuance of the municipal bonds, opinions
relating to the validity thereof and to the exemption of interest thereon from
federal income tax generally were or will be rendered by bond counsel engaged by
the respective issuing authorities. The Oregon Municipal Bond Fund and the
National Municipal Bond Fund will not make any review of the issuance of the
municipal bonds or of the basis for such opinions. An opinion concerning
tax-exempt interest generally assumes continuing compliance with applicable
standards and restrictions. Certain circumstances or actions by an issuer after
the date of issuance can cause interest on municipal bonds to become includable
in gross income. In some cases, the interest on such bonds could become taxable
from the date of issuance. The Oregon Municipal Bond Fund and the National
Municipal Bond Fund will not monitor any issuers or any municipal bonds to
attempt to ensure that the interest remains tax-exempt.

If either the Oregon Municipal Bond Fund or the National Municipal
Bond Fund declares dividends attributable to taxable interest it has
received, it intends to designate as taxable the same percentage of the day's
dividend that the actual taxable income earned on that day bears to total
income earned on that day. Thus, the percentage of the dividend designated as
taxable, if any, may vary from day to day.

Shares of the Oregon Municipal Bond Fund and the National Municipal
Bond Fund generally would not be a suitable investment for a tax-exempt
institution, a tax-exempt retirement plan, or an individual retirement account.
To the extent that such an entity or account is tax-exempt, no additional
benefit would result from receiving tax-exempt dividends.

From time to time, proposals have been introduced before Congress to
restrict or eliminate the federal income tax exemption for interest on municipal
bonds. Similar proposals may be introduced in the future. If such a proposal
were enacted, the availability of municipal bonds for investment by the Oregon
Municipal Bond Fund and the National Municipal Bond Fund and the value of
portfolio securities held by the these Funds would be affected.

OTHER FUNDS. Shareholders of Funds other than the Oregon Municipal Bond
Fund and the National Municipal Bond Fund are taxed on distributions of net
investment income, or of any excess of net short-term capital gain over net
long-term capital loss, as ordinary income. Income distributions to corporate
shareholders from the Common Stock Fund, the Growth Fund, the International
Stock Fund, the Special Fund, and the Balanced Fund may qualify, in whole or
part, for the federal income tax dividends-received deduction, depending on the
amount of qualifying dividends received by the Fund. Qualifying dividends may
include those paid to a Fund by domestic corporations but do not include those
paid by foreign corporations. The dividends-received deduction equals 70 percent
of qualifying dividends received from a Fund by a shareholder. However,
distributions from the Columbia Daily Income Company, the Bond Fund, the
Government Bond Fund and the High Yield Fund are unlikely to so qualify because
the income of these Funds consists largely or entirely of interest rather than
dividends. In addition, to the extent the Real Estate Fund's income is derived
from interest and distributions from real estate investment trusts ("REITS"),
distributions from that Fund will not qualify for the dividends-received
deduction.

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<PAGE>

Distributions of any excess of net long-term capital gain over net
short-term capital loss from a Fund are ineligible for the dividends-received
deduction.

GENERAL CONSIDERATIONS. Distributions properly designated by any Fund
as representing the excess of net long-term capital gain over net short-term
capital loss are taxable to shareholders at the applicable long-term capital
gains rate, regardless of the length of time the shares of the Fund have been
held by shareholders. For noncorporate taxpayers, the highest rate that applies
to long-term capital gains is lower than the highest rate that applies to
ordinary income. Any loss that is realized and allowed on redemption of shares
of the Fund six months or less from the date of purchase of the shares and
following the receipt of a capital gain dividend will be treated as a long-term
capital loss to the extent of the capital gain dividend. For this purpose,
Section 852(b)(4) of the Code contains special rules on the computation of a
shareholder's holding period.

A portion of the income distributions from the Real Estate Fund will
include a tax return of capital because of the nature of the distributions
received by the Fund from its holdings in REITs. A tax return of capital is a
nontaxable distribution that reduces the tax cost basis of your shares in the
Real Estate Fund. The effect of a return of capital is to defer your tax
liability on that portion of your income distributions until you sell your
shares of the Real Estate Fund.

Distributions of taxable net investment income and net realized capital
gains will be taxable as described above, whether paid in shares or in cash.
Each distribution is accompanied by a brief explanation of the form and
character of the distribution. Within 60 days after the close of each calendar
year, each Fund issues to each shareholder a statement of the federal income tax
status of all distributions, including a statement of the prior calendar year's
distributions which the Fund has designated to be treated as long-term capital
gain and, in the case of the Oregon Municipal Bond Fund and the National
Municipal Bond Fund, as tax-exempt interest, or in the case of the Real Estate
Fund, as a tax return of capital.

A distribution may be taxable to a shareholder even if the distribution
reduces the net asset value of the shares held below their cost (and is in an
economic sense a return of the shareholder's capital). This tax result is most
likely when shares are purchased shortly before an annual distribution of
capital gains or other earnings. This tax result is extremely unlikely in the
case of the Columbia Daily Income Company, which distributes its earnings daily
and has few or no capital gains.

Each Fund is generally required to obtain from its shareholders a
certification of the shareholder's taxpayer identification number and certain
other information. Each Fund generally will not accept an investment to
establish a new account that does not comply with this requirement. If a
shareholder fails to certify such number and other information, or upon receipt
of certain notices from the Internal Revenue Service, the Fund may be required
to withhold 31 percent of any reportable interest or dividends, or redemption
proceeds, payable to the shareholder, and to remit such sum to the Internal
Revenue Service, for credit toward the shareholder's federal income taxes. A
shareholder's failure to provide a social security

71
<PAGE>

number or other tax identification number may subject the shareholder to a
penalty of $50 imposed by the Internal Revenue Service. In addition, that
failure may subject the Fund to a separate penalty of $50. This penalty will be
charged against the shareholder's account, which will be closed. Closure of the
account may result in a capital gain or loss.

If a Fund declares a dividend in October, November, or December payable
to shareholders of record on a certain date in such a month and pays the
dividend during January of the following year, the shareholders will be taxed as
if they had received the dividend on December 31 of the year in which the
dividend was declared. Thus, a shareholder may be taxed on the dividend in a
taxable year prior to the year of actual receipt.

A special tax may apply to a Fund if it fails to make enough
distributions during the calendar year. The required distributions for each
calendar year generally equal the sum of (a) 98 percent of the ordinary income
for the calendar year plus (b) 98 percent of the capital gain net income for the
one-year period that ends on October 31 during the calendar year (or for the
calendar year itself if the Fund so elects), plus (c) an adjustment relating to
any shortfall for the prior taxable year. If the actual distributions are less
than the required distributions, a tax of 4 percent applies to the shortfall.
A Fund may utilize earnings and profits distributed to shareholders on
redemptions made during the year in determining the actual distributions made
to shareholders for that year.

The Code allows the deduction by certain individuals, trusts, and
estates of "miscellaneous itemized deductions" only to the extent that such
deductions exceed 2 percent of adjusted gross income. The limit on miscellaneous
itemized deductions will NOT apply, however, with respect to the expenses
incurred by any "publicly offered regulated investment company." Each Fund
believes that it is a publicly offered regulated investment company because its
shares are continuously offered pursuant to a public offering (within the
meaning of Section 4 of the Securities Act of 1933, as amended). Therefore, the
limit on miscellaneous itemized deductions should not apply to expenses incurred
by any of the Funds.

The Funds may purchase zero coupon bonds and payment-in-kind ("PIK")
bonds. With respect to zero coupon bonds, a Fund recognizes
original-issue-discount income ratably over the life of the bond even though the
Fund receives no payments on the bond until the bond matures. With respect to
PIK bonds, a Fund recognizes interest income equal to the fair market value of
the bonds distributed as interest. Because a Fund must distribute 90 percent of
its income to remain qualified as a registered investment company, a Fund may be
forced to liquidate a portion of its portfolio to generate cash to distribute to
its shareholders with respect to original-issue-discount income from zero coupon
bonds and interest income from PIK bonds.

FOREIGN INCOME TAXES

The International Stock Fund invests in the securities of foreign
corporations and issuers. To a lesser extent, the Common Stock Fund, the Growth
Fund, the Special Fund, the Small Cap Fund, the Real Estate Fund, the Balanced
Fund, and the High Yield Fund may also invest in such foreign securities.
Foreign countries may impose income taxes, generally collected by withholding,
on foreign-source dividends and interest paid to a Fund. These

72
<PAGE>

foreign taxes will reduce a Fund's distributed income and a Fund's return. The
Funds generally expect to incur, however, no foreign income taxes on gains from
the sale of foreign securities.

The United States has entered into income tax treaties with many
foreign countries to reduce or eliminate the foreign taxes on certain dividends
and interest received from corporations in those countries. The Funds intend to
take advantage of such treaties where possible. It is impossible to predict with
certainty in advance the effective rate of foreign taxes that will be paid by a
Fund since the amount invested in particular countries will fluctuate and the
amounts of dividends and interest relative to total income will fluctuate.

U.S. FOREIGN TAX CREDITS OR DEDUCTIONS FOR SHAREHOLDERS OF THE
INTERNATIONAL STOCK FUND. Section 853 of the Code allows a regulated investment
company to make a special election relating to foreign income taxes if more than
50 percent of the value of the company's total assets at the close of its
taxable year consists of stock or securities in foreign corporations and the
company satisfies certain holding period requirements. The International Stock
Fund generally expects, if necessary, to qualify for and to make the election
permitted under Section 853 of the Code. Although the International Stock Fund
intends to meet the requirements of the Code to "pass through" such foreign
taxes, there can be no assurance that the Fund will be able to do so. The
International Stock Fund will elect under Section 853 of the Code only if it
believes that it is in the best interests of its shareholders to do so. None of
the other Columbia Funds that may invest in foreign securities will qualify
under Section 853 of the Code.

If the International Stock Fund elects pursuant to Section 853,
shareholders of that Fund will be required to include in income (in addition to
other taxable distributions) and will be allowed a credit or deduction for,
their pro rata portions of the qualifying income taxes paid by the Fund to
foreign countries. A shareholder's use of the credits resulting from the
election will be subject to limits of Section 904 of the Code. In general,
those limits will prevent a shareholder from using foreign tax credits to
reduce U.S. taxes on U.S. source income. Each shareholder should discuss the
use of foreign tax credits and the Section 904 limits with the shareholder's
tax adviser.

No deduction for foreign taxes may be claimed under the Code by
individual shareholders who do not elect to itemize deductions on their federal
income tax returns, although such a shareholder may claim a credit for foreign
taxes and in any event will be treated as having taxable income in the amount of
the shareholder's pro rata share of foreign taxes paid by the Fund.

Each year, the International Stock Fund will provide a statement to
each shareholder showing the amount of foreign taxes for which a credit or a
deduction may be available.

INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES. If a Fund invests
in an entity that is classified as a "passive foreign investment company"
("PFIC") for federal income tax purposes, the application of certain provisions
of the Code applying to PFICs could result in

73
<PAGE>

the imposition of certain federal income taxes and interest charges on the Fund.
It is anticipated that any taxes on a Fund with respect to investments in PFICs
would be insignificant.

INVESTMENTS IN REAL ESTATE INVESTMENT TRUSTS THAT INVEST IN REMICs.

The Real Estate Fund may invest in REITs that hold residual interests
in real estate mortgage investment conduits ("REMICs"). Under Treasury
regulations that have not yet been issued, but may apply retroactively, a
portion of the Real Estate Fund's income from a REIT that is attributable to the
REIT's residual interest in a REMIC (referred to in the Code as an "excess
inclusion") will be subject to federal income tax in all events. These
regulations are also expected to provide that excess inclusion income of a
regulated investment company, such as the Real Estate Fund, will be allocated to
shareholders of the regulated investment company in proportion to the dividends
received by such shareholders, with the same consequences as if the shareholders
held the related REMIC residual interest directly. In general, excess inclusion
income allocated to shareholders (i) cannot be offset by net operating losses
(subject to a limited exception for certain thrift institutions), (ii) will
constitute unrelated business taxable income to entities (including a qualified
pension plan, an individual retirement account, a 401(k) plan, a Keogh plan or
other tax-exempt entity) subject to tax on unrelated business income, thereby
potentially requiring such an entity that is allocated excess inclusion income,
and otherwise might not be required to file a tax return, to file a tax return
and pay tax on such income, and (iii) in the case of a foreign shareholder, will
not qualify for any reduction in U.S. federal withholding tax. In addition, if
at any time during any taxable year a "disqualified organization" (as defined in
the Code) is a record holder of a share in a regulated investment company, then
the regulated investment company will be subject to a tax equal to that portion
of its excess inclusion income for the taxable year that is allocable to the
disqualified organization, multiplied by the highest federal income tax rate
imposed on corporations. The Real Estate Fund does not intend to invest in
REITs, a substantial portion of the assets of which consists of residual
interests in REMICs.

STATE INCOME TAXES

NATIONAL MUNICIPAL BOND FUND. Distributions from this Fund may be
exempt from the income tax of a state, if the distributions are derived from
tax-exempt interest paid on the municipal securities of that state or its
political subdivisions. Those distributions may not be exempt from another
state's income tax, however. In addition, distributions derived from capital
gains generally will be subject to state income tax. Shareholders of the
National Municipal Bond Fund should consult their tax advisors regarding whether
any portion of distributions received from that Fund is exempt from state income
tax, because exemption may depend upon whether the shareholder is an individual,
subject to tax in any given state, the residence of the individual, and the
particular state tax treatment of mutual funds.

OREGON MUNICIPAL BOND FUND. Individuals, trusts, and estates will not
be subject to the Oregon personal income tax on distributions from the Oregon
Municipal Bond Fund that are derived from tax-exempt interest paid on the
municipal bonds of Oregon and its political subdivisions and certain other
issuers (including Puerto Rico and Guam). However,

74
<PAGE>

individuals, trusts, and estates that are subject to Oregon personal income
tax also generally are subject to the Oregon personal income tax on
distributions from the Oregon Municipal Bond Fund that are derived from other
types of income, including interest on the municipal bonds of states, other
than Oregon. Furthermore, it is expected that corporations subject to the
Oregon corporation excise or income tax will be subject to that tax on income
from the Oregon Municipal Bond Fund, including income that is exempt for
federal purposes. Shares of the Oregon Municipal Bond Fund will not be
subject to Oregon property tax. Additional discussion regarding local taxes,
and the tax rules of states other than Oregon, are beyond the scope of this
discussion.

Oregon generally taxes corporations on interest income from municipal
bonds. The Oregon Municipal Bond Fund is a corporation. However, ORS 317.309(2)
provides that a regulated investment company may deduct from such interest
income the exempt-interest dividends that are paid to shareholders. The Oregon
Municipal Bond Fund expects to distribute its interest income so that it will
not be liable for Oregon corporation excise or income taxes.

The Oregon Municipal Bond Fund and the National Municipal Bond Fund
will report annually to its shareholders the percentage and source, on a
state-by-state basis, of interest income on municipal bonds received by the Fund
during the preceding year.

GOVERNMENT BOND FUND. Individuals, trusts, and estates will not be
subject to Oregon personal income tax on dividends properly designated by the
Government Bond Fund as derived from interest on U.S. government obligations.
See ORS 316.683. If a shareholder pays deductible interest on debt incurred to
carry shares of the Government Bond Fund, the amount of the tax-exempt dividends
for state tax purposes will be reduced. If a shareholder sells shares of the
Government Bond Fund at a loss after holding them for six months or less, the
loss will be disallowed for state purposes to the extent of any state tax-exempt
dividend received by the shareholder. Local taxes, and the tax rules of states
other than Oregon, are beyond the scope of this discussion.

GENERAL INFORMATION

Capital gains distributed to shareholders of both the Oregon Municipal
Bond Fund and the National Municipal Bond Fund will generally be subject to
state and local taxes. Further discussion regarding the state and local tax
consequences of investments in the Funds 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
"Distributions and Taxes" of tax consequences of investment in the Funds are
necessarily general and abbreviated. No attempt has been made to present a
complete or detailed explanation of tax matters. Furthermore, the provisions of
the statutes and regulations on

75
<PAGE>

which they are based are subject to change, prospectively or retroactively, by
legislative or administrative action. Local taxes are beyond the scope of this
discussion. Prospective investors in the Funds are urged to consult their own
tax advisors regarding specific questions as to federal, state, or local taxes.

This discussion applies only to general U.S. shareholders. Foreign
investors and U.S. shareholders with particular tax issues or statuses should
consult their own tax advisors regarding the special rules that may apply to
them.

- --------------------------------------------------------------------------------
YIELD AND PERFORMANCE
- --------------------------------------------------------------------------------

The Funds will from time to time advertise or quote their respective
yields and total return performance. These figures represent historical data and
are calculated according to Securities and Exchange Commission ("SEC") rules
standardizing such computations. The investment return and principal value
(except, under normal circumstances, for the Columbia Daily Income Company) will
fluctuate so that shares when redeemed may be worth more or less than their
original cost.

THE COLUMBIA DAILY INCOME COMPANY

Current yield is calculated by dividing the net change in the value of
an account of one share during an identified seven-calendar-day period by the
value of the one share account at the beginning of the same period ($1.00) and
multiplying that base period return by 365/7, I.E.:

net change in value of account of one share x 365 = Current
- ------------------------------------------- --- Yield
value of account at beginning of period 7

The current yield for Columbia Daily Income Company for the seven days ended
December 31, 1999 was 5.43%.

Compounded effective yield is calculated by daily compounding of the
base period return referred to above. This calculation is made by adding 1 to
the base period return, raising the sum to a number equal to 365 divided by 7,
and subtracting 1 from the result, I.E.:

365/7
[(base period return + 1) ] -1 = Compounded Effective Yield

The compounded effective yield for the Columbia Daily Income Company for the
seven days ended December 31, 1999 was 5.58%.

The determination of net change in the value of an account for purposes
of the Columbia Daily Income Company yield calculations reflects the value of
additional shares purchased with income dividends from the original share and
income dividends declared on

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<PAGE>

both the original share and the additional shares. The determination of net
change does not reflect realized gains or losses from the sale of securities or
unrealized appreciation or depreciation. The Columbia Daily Income Company
includes unrealized appreciation or depreciation, as well as realized gains or
losses, in the determination of actual daily dividends. Therefore, the quoted
yields as calculated above may differ from the actual dividends paid.

THE THE REAL ESTATE FUND AND THE BOND FUNDS

Current yields of the Real Estate Fund, the Government Bond Fund,
the Bond Fund, the Oregon Municipal Bond Fund, the High Yield Fund, and the
National Municipal Bond Fund are calculated by dividing the net investment
income per share earned during an identified 30-day period by the maximum
offering price per share on the last day of the same period, according to the
following formula:

6
Yield = 2 [( a-b + 1) -1]
---
cd

Where: a = dividends and interest earned during the period.

b = expenses accrued for the period (net of reimbursement).

c = the average daily number of shares outstanding during the
period that were entitled to receive dividends.

d = the maximum offering price per share on the last day of the
period.

The Funds use generally accepted accounting principles in determining
actual income paid, and these principles differ in some instances from SEC rules
for computing income for the above yield calculations. Therefore, the quoted
yields as calculated above may differ from the actual dividends paid. For the 30
day period ended December 31, 1999 the current yields for the Real Estate Fund,
the Government Bond Fund, the Bond Fund, the Oregon Municipal Bond Fund, the
High Yield Fund and the National Municipal Bond Fund were 5.70%, 5.26%, 6.74%,
4.94%, 8.15%, and 4.81%, respectively.

The Oregon Municipal Bond Fund may publish a tax equivalent yield for
Oregon shareholders that represents the yield that an investor must receive on a
fully taxable investment to achieve the same after-tax results at the highest
then existing marginal combined Oregon and federal income tax rates, calculated
according to the following formula:

Tax Equivalent Yield = a + c + e
----------------
1-b 1-d

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<PAGE>

Where: a = that portion of the current yield of the Fund that is exempt from
federal and Oregon income tax.

b = highest then-existing marginal combined Federal and Oregon income
tax rate.

c = that portion of the current yield of the Fund that is only exempt
from federal gross income tax.

d = highest then-existing federal income tax rate.

e = that portion of the current yield of the Fund that is not tax
exempt.

The National Municipal Bond Fund may also publish a tax equivalent
yield for nonresidents of Oregon that represents the yield that an investor must
receive on a fully taxable investment to achieve the same after-tax results of
the highest then-existing marginal federal income tax rate, calculated according
to the following formula:

Tax Equivalent Yield = a + c
--------
1-b

Where: a = that portion of the current yield of the Fund that is exempt
from federal income tax.

b = highest then-existing marginal federal income tax rate.

c = that portion of the current yield of the Fund that is not tax
exempt.

The Government Bond Fund may publish a tax equivalent yield for Oregon
shareholders that represents the yield that an investor must receive on a fully
taxable investment to achieve the same after-tax results at the highest then
existing marginal Oregon income tax rate, calculated according to the following
formula:

Tax Equivalent Yield = a + c
--------
1-b

Where: a = that portion of the current yield of the Fund that is exempt from
Oregon income tax.

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<PAGE>

b = highest then existing marginal Oregon income tax rate.

c = that portion of the current yield of the Fund that is not exempt
from Oregon income tax.

The Funds may also publish average annual total return quotations for
recent 1, 5, and 10-year periods (or a fractional portion thereof) computed by
finding the average annual compounded rates of return over the 1, 5, and 10-year
periods that would equate the initial amount invested to the ending redeemable
value, according to the following formula:

n
P(1+T) = ERV

Where: P = a hypothetical initial payment of $1000

T = average annual total return

n = number of years

ERV = ending redeemable value of a hypothetical $1000 payment made
at the beginning of the 1, 5, and 10-year periods (or
fractional portion thereof)

Total return figures may also be published for recent 1, 5, and 10-year
periods where the total return figures represent the percentage return for the
1, 5, and 10-year periods that would equate the initial amount invested to the
ending redeemable value.

If a Fund's registration statement under the Investment Company Act of
1940 has been in effect less than 1, 5, or 10 years, the time period during
which the registration statement has been in effect will be substituted for the
periods stated. Total return figures for the Funds for the applicable periods is
set forth in the Funds' Prospectus in the Section entitled "INFORMATION ABOUT
THE COLUMBIA FUNDS."

The Funds may compare their performance to other mutual funds with
similar investment objectives and to the mutual fund industry as a whole, as
quoted by ranking services and publications of general interest. For example,
these services or publications may include Lipper Analytical Services, Inc.,
Schabacker's Total Investment Service, Barron's, Business Week, Changing Times,
The Financial Times, Financial World, Forbes, Investor's Daily, Money,
Morningstar, Inc., Personal Investor, The Economist, The Wall Street Journal,
and USA Today. These ranking services and publications rank the performance of
the Funds against all other funds over specified periods and against funds in
specified categories.

The Funds may also compare their performance to that of a recognized
stock or bond index including the Standard & Poor's 500, Standard & Poor's
Midcap 400, Dow Jones, Russell 2000, Nasdaq stock indices, the NAREIT Equity
Index, and the Shearson Lehman and

79
<PAGE>

Salomon bond indices, and the Merrill Lynch 1-3 Treasury Index or, with respect
to the International Stock Fund, a suitable international index, such as the
Morgan Stanley Capital International Europe, Australasia, Far East Index or the
FT-S&P Actuaries Europe-Pacific Index. The comparative material found in
advertisements, sales literature, or in reports to shareholders may contain past
or present performance ratings. This is not to be considered representative or
indicative of future results or future performance. Unmanaged indices may assume
the reinvestment of dividends, but generally do not reflect deductions for
administrative and management costs and expenses.

In addition, the Funds may also compare their performance to other
income-producing securities such as (i) money market funds; (ii) various bank
products (based on average rates of bank and thrift institution certificates of
deposit, money market deposit accounts, and other accounts as reported by the
Bank Rate Monitor and other financial reporting services, including newspapers);
and (iii) U.S. treasury bills or notes. There are differences between these
income-producing alternatives and the Funds other than their yields, some of
which are summarized below.

The yields of the Funds are not fixed and will fluctuate. The principal
value of your investment in each Fund (except, under normal circumstances, the
Columbia Daily Income Company) at redemption may be more or less than its
original cost. In addition, your investment is not insured and its yield is not
guaranteed. Although the yields of bank money market deposit and other similar
accounts will fluctuate, principal will not fluctuate and is insured by the
Federal Deposit Insurance Corporation up to $100,000. Bank passbook savings
accounts normally offer a fixed rate of interest, and their principal and
interest are also guaranteed and insured. Bank certificates of deposit offer
fixed or variable rates for a set term. Principal and fixed rates are guaranteed
and insured up to $100,000. There is no fluctuation in principal value.
Withdrawal of these deposits prior to maturity will normally be subject to a
penalty.

- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

The Funds' most recent Annual Report to shareholders is a separate
document supplied with this Statement of Additional Information, and the
financial statements, accompanying notes and report of independent accountants
appearing in the Annual report are incorporated by reference into this Statement
of Additional Information.

<PAGE>

COLUMBIA SMALL CAP FUND, INC.

PART C

OTHER INFORMATION

Item 23. EXHIBITS

(a) Registrant's Articles of Incorporation.(1)

(b) Restated Bylaws.(1)

(d) Investment Advisory Contract.(3)

(e) Distribution Agreement.(3)

(f) Not applicable.

(g1) Custodian Contract with U S Bank N.A.(2)

(g2) Custodian Agreement with Morgan Stanley Trust Company.(3)

(h1) Transfer Agent Agreement.(3)

(h2) Amendment No. 1 to Transfer Agent Agreement.(4)

(i) Opinion of Counsel - Not applicable for this filing.

(j) Consent of Accountants.*

(k) Omitted Financial Statements - Not applicable.

(l) Not applicable.

(m) 12b-1 Plan - Not applicable.

(n) Rule 18f-3 Plan - Not applicable.

(o) Not applicable.

(p) Code of Ethics.*

(q) All Powers of Attorney.(1)

(1) Incorporated herein by reference to Registrant's Initial
Registration Statement on Form N-1A, File No. 333-5863 filed June 13,
1996.

(2) Incorporated herein by reference to Pre-Effective Amendment No. 1
to Registrant's Registration Statement on Form N-1A, File No.
333-5863 filed August 27, 1996.

(3) Incorporated herein by reference to Pre-Effective Amendment No. 2
to Registrant's Registration Statement on Form N-1A, File No.
333-5863 filed September 18, 1996.

(4) Incorporated by reference to Post-Effective Amendment No. 3 to
Registrant's Registration Statement on Form N-1A, File No. 333-5863
filed December 7, 1998.

* Filed herewith.

C-1
<PAGE>

Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

The Registrant is controlled by its Board of Directors, whose members
also serve as members of the Boards of Directors or Trustees of the following
investment companies: Columbia Common Stock Fund, Inc., Columbia Special Fund
Inc., Columbia International Stock Fund, Inc., Columbia Growth Fund, Inc.,
Columbia Balanced, Inc., Columbia Daily Income Company, Columbia Fixed Income
Securities Fund, Inc., Columbia Oregon Municipal Bond Fund, Inc., Columbia U.S.
Government Securities Fund, Inc., Columbia Real Estate Equity Fund, Inc.,
Columbia National Municipal Bond Fund, Inc., Columbia High Yield Fund, Inc., and
CMC Fund Trust, each of which, including the Registrant, is organized under the
laws of the State of Oregon. The Registrant and all of the other investment
companies listed above, except for CMC Fund Trust, have investment advisory
contracts with Columbia Funds Management Company, an Oregon corporation ("the
Adviser"). Each series of CMC Fund Trust has an investment advisory contract
with Columbia Management Co., an Oregon corporation ("CMC"). Fleet Boston
Corporation ("Fleet") is a publicly owned multibank holding company registered
under the Bank Holding Company Act of 1956. CMC, the Adviser, Columbia Trust
Company and Columbia Financial Center Incorporated are indirect wholly owned
subsidiaries of Fleet. See "Management" and "Investment Advisory and Other Fees
paid to Affiliates" in the Statement of Additional Information.

Item 25. INDEMNIFICATION

The articles of incorporation and bylaws of the Registrant provide
that any director or officer of the Registrant may be indemnified by the
Registrant against all expenses incurred by him in connection with any claim,
action, suit or proceeding, civil or criminal, by reason of his being an
officer, director, employee or agent of the Registrant to the fullest extent 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 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR

Information regarding the businesses of the Advisor and its officers
and directors is set forth under "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.
Neither the Adviser nor any of its directors or officers has engaged in any
business, profession, vocation or employment other than that of providing
investment management services. 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.

C-2
<PAGE>

Item 27. PRINCIPAL UNDERWRITERS

Pursuant to a distribution agreement with each of the Columbia Funds,
including the Registrant, Provident Distributors, Inc. is authorized to sell
shares of each fund to the public. No commission or other compensation is
received by Provident Distributors, Inc. in connection with the sale of shares
of the Columbia Funds. Certain information on each director and officer of by
Provident Distributors, Inc. is set forth below:

Name and Principal Positions and Offices Positions and Offices
Business Address* With Provident Distributors With Registrant
- ------------------ --------------------------- ---------------------

Philip H. Rinnander President and Treasurer None

Jane Haegele Director and Secretary None

Lisa M. Buono Vice President and Compliance Officer None

Jason A. Greim Vice President None

Barbara A. Rice Vice President None

Jennifer K. Rinnander Vice President None

*The principal business address for each director and officer of Provident
Distributors, Inc. is:

Four Falls Corporate Center
6th Floor
West Conshohocken, PA 19428

Item 28. 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 S.W. Fifth Avenue, Portland, Oregon 97201. Records
relating to the Registrant's portfolio securities are also maintained by U S
Bank N.A., 321 S.W. Sixth Avenue, Portland, Oregon 97208 and The Chase Manhattan
Bank, 3 Chase Metrotech Center, Brooklyn, New York 11245.

Item 29. MANAGEMENT SERVICES

Not applicable.

C-3
<PAGE>

Item 30. UNDERTAKINGS

Not applicable.

C-4
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that this
Post-Effective Amendment meets all of the requirements for effectiveness
under Rule 485(b) under the Securities Act of 1933 and Registrant has duly
caused this Post-Effective Amendment to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Portland and State of Oregon on the 22nd day of February, 2000.

COLUMBIA SMALL CAP FUND, INC.

By J. JERRY INSKEEP, JR.
------------------------------
J. Jerry Inskeep, Jr.
President

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below on
the 22nd day of February, 2000 by the following persons in the capacities
indicated.

(i) Principal executive officer:

J. JERRY INSKEEP, JR. President, Chairman, and Director
- -------------------------------------
J. Jerry Inskeep, Jr.

(ii) Principal accounting and financial officer:

J. JERRY INSKEEP, JR. President, Chairman, and Director
- -------------------------------------
J. Jerry Inskeep, Jr.

(iii) Directors:

* JAMES C. GEORGE Director
- -------------------------------------
James C. George

* THOMAS R. MACKENZIE Director
- -------------------------------------
Thomas R. Mackenzie

* RICHARD L. WOOLWORTH Director
- -------------------------------------
Richard L. Woolworth

* By J. JERRY INSKEEP, JR.
-----------------------------
J. Jerry Inskeep, Jr.
as Attorney-in-fact

C-5
<PAGE>

COLUMBIA SMALL CAP FUND, INC.

EXHIBIT INDEX

EXHIBIT DESCRIPTION

(a) Registrant's Articles of Incorporation.(1)

(b) Restated Bylaws.(1)

(d) Investment Advisory Contract.(3)

(e) Distribution Agreement.(3)

(f) Not applicable.

(g1) Custodian Contract with U S Bank N.A.(2)

(g2) Custodian Agreement with Morgan Stanley Trust Company.(3)

(h1) Transfer Agent Agreement.(3)

(h2) Amendment No. 1 to Transfer Agent Agreement.(4)

(i) Opinion of Counsel - Not applicable for this filing.

(j) Consent of Accountants.*

(k) Omitted Financial Statements - Not applicable.

(l) Not applicable.

(m) 12b-1 Plan - Not applicable.

(n) Rule 18f-3 Plan - Not applicable.

(o) Not applicable.

(p) Code of Ethics.*

(q) All Powers of Attorney.(1)

(1) Incorporated herein by reference to Registrant's Initial Registration
Statement on Form N-1A, File No. 333-5863 filed June 13, 1996.

(2) Incorporated herein by reference to Pre-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-1A, File No. 333-5863 filed
August 27, 1996.

(3) Incorporated herein by reference to Pre-Effective Amendment No. 2 to
Registrant's Registration Statement on Form N-1A, File No. 333-5863 filed
September 18, 1996.

(4) Incorporated by reference to Post-Effective Amendment No. 3 to
Registrant's Registration Statement on Form N-1A, File No. 333-5863 filed
December 7, 1998.

C-6
<PAGE>

* Filed herewith.

C-7

<PAGE>

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in Post-Effective Amendment
No. 6 to the Registration Statement on Form N-1A (File No. 333-5863) of our
report dated February 4, 2000, relating to the financial statements and
financial highlights which appear in the December 31, 1999 Annual Report to
Shareholders of Columbia Small Cap Fund, Inc., which is also incorporated by
reference into the Registration Statement. We also consent to the references to
us under the headings "Accounting Services and Financial Statements" and
"Financial Highlights" in such Registration Statement.

PricewaterhouseCoopers LLP

Portland, Oregon
February 22, 2000

<PAGE>

CODE OF ETHICS
--------------

Effective: November 1, 1999

The following Code of Ethics (the "Code") is designed to comply with
Section 17(j) of the Investment Company Act of 1940 (the "1940 Act") and the
Insider Trading and Securities Fraud Enforcement Act of 1988 and has been
adopted by Columbia Management Co., Columbia Funds Management Company, Columbia
Trust Company, Columbia Financial Center Incorporated, and CMC Fund Trust and
each investment company managed by Columbia Funds Management Company
(collectively, "Columbia"). CMC Fund Trust and each investment company managed
by Columbia Funds Management Company are referred to in this Code as a "Columbia
Fund."

1. Statement of General Principles

The specific standards and guidelines set forth in the Code must be
applied and followed in the context of the following general fiduciary
principles that govern personal investment activities. The Code is based on
the principle that officers, directors and employees of Columbia owe a
fiduciary duty to conduct their personal securities transactions in a manner
that does not interfere with portfolio transactions or take unfair advantage
of their relationship with Columbia. This fiduciary duty is owed to both
Columbia advisory clients and shareholders of the Columbia Funds. Columbia
personnel must adhere to this general principle as well as the specific
requirements set forth in this Code. Columbia officers, directors and
employees should understand, however, that technical compliance with the
specific requirements of the Code does not automatically insulate them from
liability or a review of trades that show a pattern of a breach of an
individual's fiduciary duty.

Personnel should avoid situations that present actual as well as potential
conflicts of interest. As a general principle, it is imperative that Columbia's
officers, directors and employees also avoid any situation that might compromise
or call into question their exercise of independent judgment in the interest of
Columbia Fund shareholders and Columbia advisory clients. Areas of concerns
relating to independent judgment include, among others, unusual investment
opportunities, perks, and gifts of more than "de minimus" value from persons
doing or seeking to do business with Columbia.

Purchases or sales of securities shall be made only in accordance with this
Code and Columbia's Policy and Procedures Designed to Detect and Prevent Insider
Trading (the "Insider Trading Policy"). Although all employees and disinterested
directors/trustees of Columbia are covered by this Code and the Insider Trading
Policy, certain employees deemed under the Code to be "access persons" are
subject to greater trading restrictions and reporting obligations. Disinterested
directors/trustees, however, are generally subject to fewer trading restrictions
and reporting obligations because of their limited access to current investment
information.

<PAGE>

2. Definitions

(a) "Access person" means (i) any director or officer of Columbia, (ii) any
employee of Columbia who, in connection with his or her regular functions
or duties, makes, participates in, or obtains information regarding the
purchase or sale of a security by Columbia or whose functions relate to the
making of any recommendations with respect to such purchases or sales; and
(iii) any natural person in a control relationship to Columbia who obtains
information concerning recommendations made to Columbia with regard to the
purchase or sale of a security. The Ethics Committee shall maintain a list
of employees deemed to be access persons for purposes of this Code. "Access
person" does not include a disinterested director/trustee of a Columbia
Fund.

(b) A security is "being considered for purchase or sale" when a
recommendation to purchase or sell a security has been made and
communicated or, with respect to the person making the recommendation, when
such person seriously considers making such a recommendation.

(c) "Beneficial ownership" shall be interpreted in the same manner as it
would be in determining whether a person is subject to the provisions of
Section 16 of the Securities Exchange Act of 1934 and the rules and
regulations thereunder, which states that the term "beneficial owner" means
"any person who, directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise, has or shares a direct or
indirect pecuniary interest in" a security. The term "pecuniary interest"
is further defined to mean "the opportunity, directly or indirectly, to
profit or share in any profit derived from a transaction in the subject
securities." "Beneficial ownership" includes accounts of a spouse, minor
children and relatives resident in the home of the access person, as well
as accounts of another person if the employee obtains therefrom benefits
substantially equivalent to those of ownership. For additional information,
see appendix A.

(d) "Control" shall have the same meaning as that set forth in Section
2(a)(9) of the 1940 Act.

(e) "Disinterested director/trustee" means a director/trustee of a Columbia
Fund who is not an "interested person" of the Columbia Fund within the
meaning of Section 2(a)(19) of the 1940 Act.

(f) "Employee" means any employee or officer of Columbia or any Columbia
Fund. Employee does not include a disinterested director/trustee of a
Columbia Fund.

(g) "Purchase or sale of a security" includes, among other things, the
writing of an option to purchase or sell a security.

(h) "Security" shall have the meaning set forth in Section 2(a)(36) of the
Investment Company Act, except that it shall not include shares of
registered open-end investment companies, securities issued by the U.S.
Government or an instrumentality thereof, short-term debt securities that
are government securities within the meaning of Section 2(a)(16) of the
1940 Act, bankers' acceptances, bank certificates of deposit, commercial
paper and other money market instruments. Any prohibition or reporting
obligation relating to a

<PAGE>

security shall also apply to any option, warrant or right to purchase or
sell such security and to any security convertible or exchangeable for
such security.

3. Pre-Clearance of Transactions

All employees shall have all purchases or sales of any security in which
they have, or by reason of such purchase acquire, any direct or indirect
beneficial ownership approved in writing by the Columbia Trading Department or a
member of the Ethics Committee prior to effecting the transaction. Members of
the Ethics Committee are attached hereto as Appendix B.

NOTE: See the definition of security in Section 2(h) and the exemptions in
Section 5 to determine whether a transaction is subject to the pre-clearance
requirement. For example, transactions in an account over which an employee does
not have direct or indirect influence or control are exempt from this
pre-clearance requirement.

4. Prohibited Transactions

(a) General Restrictions:

(i) Prohibited Purchases and Sales. No employee or disinterested
director/trustee shall purchase or sell, directly or indirectly, any
security in which he or she has, or by reason of such transactions
acquires, any direct or indirect beneficial ownership and which to his or
her knowledge at the time of such purchase or sale (i) is being considered
for purchase or sale by Columbia or (ii) is being purchased or sold by
Columbia. In addition, all employees and disinterested directors/trustees
shall comply with the Insider Trading Policy, which prohibits any person
from purchasing or selling a security while in possession of material
non-public information or communicating such information in connection with
a transaction.

(ii) Initial Public Offerings. No employee shall purchase or sell
directly or indirectly, any equity security issued in an initial public
offering without the written approval by the Columbia Trading Department or
a member of the Ethics Committee prior to the transaction. A transaction by
an access person in an initial public offering will not be approved in any
circumstances.

(b) Restrictions Applicable only to Access Persons:

(i) Private Placements. No access person shall purchase any securities
issued in a private placement (as that term is generally recognized as an
exempt transaction from registration under the federal securities laws)
except pursuant to the prior written approval of the Ethics Committee,
which approval shall take into consideration, among other factors, whether
the investment opportunity should be reserved for a Columbia Fund or
Columbia advisory client and whether the opportunity is being offered to
the access person by virtue of his or her position with Columbia. In
addition, any access person who owns or has been authorized to acquire
securities in a private placement is required to disclose that ownership if
he or she plays a material role in Columbia's subsequent investment
decision regarding the same issuer of the security. In that circumstance,
Columbia's decision to purchase such

<PAGE>

securities must be subject to an independent review by members of the
Columbia Investment Team with no personal interest in the issuer.

(ii) 7-Day Blackout Period. No access person shall purchase or sell,
directly or indirectly, any security in which he or she has, or by reason
of the transaction acquires, any direct or indirect beneficial ownership
within a period of seven calendar days before and after a purchase or sale
by a Columbia Fund or advisory client over which the access person
exercises investment discretion. For example, if a Columbia Fund trades a
security on day one (e.g., on Monday), the access person may not trade
until day nine (e.g., the following Tuesday). Any profits realized on
trades within the proscribed periods shall be disgorged to Columbia for the
benefit of the appropriate Columbia Fund or advisory client or,
alternatively, to a charitable organization (qualified under Section 501(c)
of the Internal Revenue Code) of the access person's choice.

The black-out period restriction under this Section 4(b)(ii) should
not operate to the detriment of any Columbia Fund or advisory client.
Therefore, if an access person has executed a transaction in a security for
his or her account and within seven days thereafter desires to purchase or
sell that security for a Columbia Fund or advisory client over which he or
she exercises investment discretion, the access person shall submit a
written explanation to the Trading Desk or Ethics Committee describing the
circumstances relating to the decision to trade the security for the Fund
or client account. Based on the specific circumstances and a determination
that the access person has not otherwise violated the Code of Ethics,
including the Statement of General Principles in Section 1, the Trading
Desk or Ethics Committee may approve the trade by the Fund or advisory
client and, in that case, the prior personal transaction by the access
person shall not be considered a violation of the seven day black-out
period restriction. A written record of the approval by the Trading
Desk or the Ethics Committee, as the case may be, shall be maintained by
the Ethics Committee.

(iii) Short-Term Trading. For the purpose of preventing the unfair use
of information that may be obtained by an access person, any profit
realized by an access person from any purchase and sale, or any sale and
purchase, of any security in which he or she has, or by reason of the
transaction acquires, any direct or indirect beneficial ownership (other
than an exempted security under this Code), within any period of less than
60 days shall inure to and be recoverable by Columbia for the benefit of a
charitable organization (qualified under Section 501(c) of the Internal
Revenue Code) of his or her choice. This prohibition shall not apply unless
such access person was the beneficial owner of the security or of an
interest in the security both at the time of the purchase and sale, or sale
and purchase.

Exceptions to the short-term trading ban may be approved in advance by
the Ethics Committee where it is determined that no abuse is involved and
the equities of the situation strongly support an exception to the ban.
Circumstances that could provide the basis for an exception under this
paragraph may include for example, among other things, an involuntary
transaction that is the result of unforeseen corporate activity, the
disclosure of a previously nonpublic, material corporate, economic or
political event or activity that could cause a reasonable person in like
circumstances to sell a security even if originally purchased as a long
term investment, or the access person's economic circumstances materially
change

<PAGE>

in such a manner that enforcement of the short-term trading ban would
cause an extreme hardship on the access person.

(iv) Exemption for Large Cap Trades. The prohibitions in subsections
4(b)(ii) and (iii) shall not apply to the purchase or sale by the access
person of a security issued by a company with a market capitalization
greater than $10 billion if the number of shares in the transaction is less
than 1% of the average daily trading volume for the security for the 20-day
trading period immediately prior to the transaction. This exception to the
black-out period and short-term trading prohibitions recognizes that
transactions by the access person or Columbia which involve securities of
companies with high market capitalizations and high average daily trading
volumes are not likely to materially affect the price of the security
involved.

5. Exempted Transactions

In addition to any other exemptions in this Code and except as otherwise
noted below, the prohibitions of Section 4 and the pre-clearance required by
Section 3 of this Code shall not apply to:

(a) Purchases or sales effected in any account over which the employee has
no direct or indirect influence or control. Pre-approval of these accounts
may, at times, be required by the Ethics Committee. For additional
information see appendix A.

(b) Purchases or sales of securities that are not eligible for purchase or
sale by Columbia.

(d) Purchases which are part of an automatic dividend reinvestment plan.

(e) Purchases effected upon the exercise of rights issued by an issuer pro
rata to all holders of a class of its securities, to the extent such rights
were acquired from such issuer, and sales of such rights so acquired.

(f) Purchases and sales of financial futures or option contracts on
securities indexes traded on a national securities or commodities exchange.

(g) Purchases and sales approved by the Ethics Committee if it is
determined after appropriate inquiry that the transaction is not
potentially harmful to a Columbia Fund or advisory client because it would
be very unlikely to affect a highly institutional market, or because it
clearly is not related economically to the securities to be purchased, sold
or held by Columbia, and that the purchase or sale does not violate the
Insider Trading and Securities Fraud Enforcement Act of 1988.

6. Prohibited Activities by Employees and Access Persons

<PAGE>

(a) Gifts. Employees are prohibited from receiving, either directly or
indirectly, anything of value in excess of a "de minimus" amount from any
person or any employee of an entity that does or seeks to do business with
Columbia.

(b) Service as a Director. Access persons are prohibited from serving on
the boards of directors of publicly traded companies, absent a prior
authorization from the Ethics Committee based on a determination that the
board service would not be inconsistent with the interests of Columbia or
Columbia's advisory clients. This restriction shall not apply to access
persons serving on the board of directors or as a trustee of any Columbia
Fund.

7. Reporting

(a) Duplicate Confirmations and Account Statements. All employees shall
cause every broker with whom he or she maintains an account to provide
duplicate confirmations to Columbia for all securities transactions by the
employee. In addition, all access persons (excluding disinterested
directors/trustees) shall cause every such broker to send all monthly,
quarterly and annual statements of their accounts to Columbia. The
quarterly statements must be provided no later than 10 days after the end
of a calendar quarter. The quarterly statements must contain with respect
to any transaction during the calendar quarter in a security beneficially
owned by the access person (1) the date of the transaction, the title, the
interest rate and maturity date (if applicable), the number of shares and
the principal amount of each security involved; (2) the nature of the
transaction (i.e., purchase, sale or any other type of acquisition or
disposition); (3) the price of the security at which the transaction was
effected; (4) the name of the broker, dealer or bank with or through which
the transaction was effected; and (5) the date that the report is submitted
by the access person. The Trading Department will obtain duplicate
brokerage confirmations for all purchases and sales of a security by
employees (other than disinterested directors/trustees) and shall compile
summaries of all trades entered and all transactions completed. Such
reports shall include the name of the security, date of transaction,
quantity, price and the broker-dealer through which the transaction was
effected. The obligation to provide duplicate confirmations and account
statements applies to all brokerage accounts even if a transaction is
exempt from the prohibitions under this Code.

(b) Disclosure of All Personal Holdings. Within 10 days of commencement of
employment or becoming an access person and on an annual basis thereafter
(which information must be current as of a date no more than 30 days before
the report is submitted), each access person shall provide Columbia the
following information: (1) the title, number of shares and principal amount
of each security beneficially owned by the access person; (2) the name of
any broker, dealer or bank from whom the access person maintains an account
in which any securities were beneficially owned by the access person; and
(3) the date the report is submitted by the access person.

(c) Disinterested Director/Trustee. A disinterested director/trustee is
required to report a purchase or sale transaction in a security only if the
director/trustee, at the time of the transaction, knew or, in the ordinary
course of fulfilling his or her duties as a director/trustee of a Columbia
Fund, should have known that, during the 15-day period immediately
preceding or after the date of the transaction, such security is or was
purchased or sold by the Columbia Fund or is or was being considered for
purchase or sale.

<PAGE>

(d) Review of Securities Transactions and Holding Reports. Columbia shall
establish procedures to ensure that all securities transactions and
holdings reports submitted by access persons are reviewed by appropriate
management or compliance personnel.

8. Certification of Compliance

All employees and disinterested directors/trustees shall certify annually
(except that access persons shall certify on a quarterly basis) that they have
read and understood the Code and are subject thereto, have complied with the
requirements of the Code and have disclosed or reported all personal securities
transactions as required by the Code.

9. Sanctions

Upon discovering a violation of this Code, Columbia may impose such
sanctions as it deems appropriate, including, among other things, a letter of
censure or suspension or termination of the employment of the violator.

10. Report to the Board of Directors.

On an annual basis, the Ethics Committee shall prepare a written report
to the management of Columbia and the Boards of Directors/Trustees of the
Columbia Funds and the other Columbia companies that (1) describes any issues
arising under the Code since the last report including, but not limited to,
information about material violations of the Code and sanctions imposed in
response to the material violations; and (2) certifies that Columbia has
adopted procedures reasonably necessary to prevent violations of the Code.
Columbia shall present any material change to the Code to the Board of
Directors/Trustees no later than six months after adoption of the material
change.

<PAGE>

APPENDIX A - Beneficial Ownership

For purposes of the Code of Ethics, the term "beneficial ownership" shall
be interpreted in accordance with the definition of "beneficial owner" set forth
in Rule 16a-l(a)(2) under the Securities Exchange Act of 1934, as amended, which
states that the term "beneficial owner" means "any person who, directly or
indirectly, through any contract, arrangement, understanding, relationship or
otherwise, has or shares a direct or indirect pecuniary interest in" a security.
The term "pecuniary interest" is further defined to mean "the opportunity,
directly or indirectly, to profit or share in any profit derived from a
transaction in the subject securities."

The pecuniary interest standard looks beyond the record owner of
securities. As a result, the definition of beneficial ownership is extremely
broad and encompasses many situations which might not ordinarily be thought to
confer a "pecuniary interest" in or "beneficial ownership" of securities.

Securities Deemed to be "Beneficially Owned"

Securities owned "beneficially" would include not only securities held
by you for your own benefit, but also securities held (regardless of whether
or how they are registered) by others for your benefit in an account over
which you have influence or control, such as, for example, securities held
for you by custodians, brokers, relatives, executors, administrators, or
trustees. The term also includes securities held for your account by
pledgees, securities owned by a partnership in which you are a general
partner, and securities owned by any corporation that you control.

Set forth below are some examples of how beneficial ownership may arise in
different contexts.

Family Holdings. Securities held by members of your immediate family
sharing the same household are presumed to be beneficially owned by you. Your
"immediate family" includes any child, step-child, grandchild, parent,
step-parent, grandparent, spouse, significant other, sibling, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law
(but does not include aunts and uncles, or nieces and nephews). The definition
also includes adoptive relationships. You may also be deemed to be the
beneficial owner of securities held by an immediate family member not living in
your household if the family member is economically dependent upon you.

Partnership and Corporate Holdings. A general partner of a general or
limited partnership will generally be deemed to beneficially own securities held
by the partnership, as long as the partner has direct or indirect influence or
control over the management and affairs of the partnership. A limited partner
will generally not be deemed to beneficially own securities held by a limited
partnership, provided he or she does not own a controlling voting interest in
the partnership. If a corporation is your "alter ego" or "personal holding
company", the corporation's holdings of securities are attributable to you.

Trusts. Securities held by a trust of which you are a beneficiary and over
which you have any direct or indirect influence or control would be deemed to be
beneficially owned by you. An

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example would be where you as settlor have the power to revoke the trust
without the consent of another person, or have or share investment control
over the trust.

Estates. Ordinarily, the term "beneficial ownership" would not include
securities held by executors or administrators in estates in which you are a
legatee or beneficiary unless there is a specific bequest to you of such
securities, or you are the sole legatee or beneficiary and there are other
assets in the estate sufficient to pay debts ranking ahead of such bequest.

Securities Deemed Not to be "Beneficially Owned"

For purposes of the Code of Ethics, the term "beneficial ownership"
excludes securities or securities accounts held by you for the benefit of
someone else if you do not have a pecuniary interest in such securities or
accounts. For example, securities held by a trust would not be considered
beneficially owned by you if neither you nor an immediate family member is a
beneficiary of the trust. Another example illustrating the absence of pecuniary
interest, and therefore also of beneficial ownership, would be securities held
by an immediate family member not living in the same household with you, and who
is not economically dependent upon you.

"Influence or Control"

Transactions over which you have "no direct or indirect influence or
control" are not subject to the pre-clearance requirements or prohibited
transaction rules in Sections 3 and 4 of the Code of Ethics. See Section
5(a). To have "influence or control", you must have an ability to prompt,
induce or otherwise affect transactions in the account. Like "beneficial
ownership, the concept of influence or control encompasses a wide variety of
factual situations. An example of where influence or control exists would be
where you, as a beneficiary of a revocable trust, have significant ongoing
business and social relationships with the trustee of the trust. Examples of
where influence or control does not exist would be a true blind trust, or
securities held by a limited partnership in which your only participation is
as a non-controlling limited partner. The determining factor in each case
will be whether you have any direct or indirect influence or control over the
securities account. Employees with such blind trust or third party
discretionary accounts shall have their account agreement and/or governing
documents forwarded to Ethics Committee for review prior to trading pursuant
to this exemption. The account will only be exempt if the employee initially,
and on an annual basis thereafter, certifies that he or she maintains no
control or influence over the account.

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APPENDIX B - Members of Ethics Committee

Thomas A. Thomsen
Alexander S. Macmillan
Jeff B. Curtis
Mark A. Wentzien
Rich S. Mettler