File No.333-47058
Under Rule 497(c) of Regulation C
[BIRD LOGO]
COLUMBIA STRATEGIC VALUE FUND
COLUMBIA TECHNOLOGY FUND
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PROSPECTUS
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NOVEMBER 9, 2000
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NOVEMBER 9, 2000
PROSPECTUS
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TABLE OF CONTENTS
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INTRODUCTION 1 About this Prospectus
STRATEGIC VALUE FUND 1 Goal and Strategy
2 Investment Risks
2 Who Should Invest?
2 Historical Performance
3 Expenses
3 Financial Highlights
4 Goal and Strategy
TECHNOLOGY FUND 4 Investment Risks
5 Who Should Invest?
5 Historical Performance
6 Expenses
6 Financial Highlights
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MANAGEMENT 7 Columbia Investment Team
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INVESTOR SERVICES 8 Instructions for Accounts
11 Purchasing Shares
11 Selling Shares
12 Important Fund Policies
15 Distributions and Taxes
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MORE ABOUT THE FUNDS 17 Portfolio Securities
17 Investment Strategy
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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.
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INTRODUCTION
This section of the Prospectus is designed to provide you with important
information about investing in the Columbia Strategic Value Fund, Inc. and the
Columbia Technology Fund, Inc. (each a "Fund" and together the "Funds") by
describing the following:
[ICON] GOAL AND STRATEGY
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[ICON] INVESTMENT RISKS
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[ICON] WHO SHOULD INVEST?
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[ICON] HISTORICAL PERFORMANCE
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[ICON] EXPENSES
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[ICON] FINANCIAL HIGHLIGHTS
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For additional information about the strategies and risks of each Fund, please
refer to "More About the Funds" in the back of this Prospectus.
COLUMBIA STRATEGIC VALUE FUND
[ICON]GOAL AND STRATEGY
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The Fund seeks long-term growth of capital by using a "value" approach to invest
primarily in common stocks. This value approach emphasizes investments in
companies the portfolio manager believes are undervalued relative to their
intrinsic worth.
A company may be undervalued due to market or economic conditions, temporary
earnings declines, unfavorable developments affecting the company or other
factors. Such factors may provide buying opportunities at prices attractive when
compared to historical or market price- to-earnings (P/E) ratios, price-to-cash
flow ratios, book value or return on equity. These "undervalued" companies
typically have below-average earnings growth and above-average dividend yields.
The portfolio manager measures a company's value as a function of its P/E
ratios, price/cash flow ratios, asset value and discount to private market
value.
Typically, the portfolio manager will seek companies that are attractively
valued and that are demonstrating or show the potential to demonstrate improving
cash flow and return on invested capital. These companies may also include
special situations companies that are experiencing management changes or are
temporarily out of favor.
The Fund may invest in companies of any size, but expects to invest a
significant percentage of its assets in small and mid-cap sized companies. Most
of the assets will be invested in U.S.
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common stocks. The Fund, however, may invest in equity securities of foreign
issuers when consistent with the Fund's investment objective. To select stocks
for the Fund, the portfolio manager will generally use a bottom-up approach,
evaluating each company on the basis of its financial statements and operations.
Factors such as management, financial condition, industry dynamics, earnings
growth and profit margins, sales trends, dividend paying history and potential,
as well as financial ratios and investment in research and development, will all
be scrutinized as part of the portfolio manager's analysis.
[ICON] INVESTMENT RISKS
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As with all equity funds, this Fund is subject to 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. Because it concentrates on value stocks, this Fund is subject to the
risk that value stocks may be out of favor with investors for an extended period
of time. In addition, if the portfolio manager's perception of a company's value
is not realized in the expected time frame, the Fund's performance may suffer.
To the extent the Fund invests in small- and mid-cap stocks, there will be
greater risk than if the Fund invested only in large-cap stocks because:
o Their issuers may have limited operating histories, fewer financial
resources, and inexperienced management, and may depend on a small number
of products or services
o 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
Because the Fund may invest in foreign issuers, the Fund's total return may be
affected by fluctuations in currency exchange rates or political or economic
conditions in a particular country.
Your investment in the Fund is not a bank deposit and is not insured or endorsed
by any bank, government agency or the FDIC. The value of your investment will
fluctuate. You could lose money as a result of your investment or not make as
much as if you had invested elsewhere.
[ICON] WHO SHOULD INVEST?
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This Fund is appropriate for:
o Investors seeking to add a value oriented stock fund to their existing
holdings
o Those willing to accept substantial price fluctuations
[ICON] HISTORICAL PERFORMANCE
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Since the Fund is new, no historical performance is presented.
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[ICON] EXPENSES
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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. The Fund is
new, so the annual fund operating expenses are based on estimates for the
upcoming fiscal year. In the future, the amount of fees and expenses will depend
on the actual average net assets of the Fund during those years and a number of
other factors.
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Fee Table
Annual Fund Operating Expenses
(expenses that are paid out of Fund assets)
Management Fees 0.75%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.56%(1)
Total Annual Fund Operating Expenses 1.31%
(1) "Other Expenses" are based on the estimated expenses that
the Fund expects to incur in the upcoming fiscal year of
operation.
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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.
1 Year 3 Years
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$133 $415
[ICON] FINANCIAL HIGHLIGHTS
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Since the Fund is new, no financial information is presented.
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COLUMBIA TECHNOLOGY FUND
[ICON]GOAL AND STRATEGY
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The Fund seeks capital appreciation by investing, under normal market
conditions, at least 65% of its total assets in equity securities of technology
companies that may benefit from technological improvements, advancements or
developments and which have attractive growth prospects. These companies
generally fall into two categories: companies that the portfolio managers
believe have or will develop products, processes or services that will provide
significant technological improvements, advances or developments and companies
that the portfolio managers believe will benefit from their extensive reliance
on technology in connection with their operations and services.
The Fund may invest in companies from, among others, the biotechnology, cable
and network broadcasting, communications, computer hardware, computer services
and software, consumer electronics, defense, medical devices, pharmaceutical and
semiconductor industries. The Fund may invest in companies in all stages of
corporate development, ranging from new companies developing a promising
technology or scientific advancement to established companies with a record of
producing breakthrough products and technologies from research and development
efforts.
The Fund will invest in companies of all sizes, and expects to invest a
significant percentage of its assets in small and mid-cap sized companies. Most
of the assets will be invested in U.S. common stocks. The Fund, however, may
invest in equity securities of foreign issuers when consistent with the Fund's
investment objective.
To select stocks for the Fund, the portfolio managers will combine top down
analysis with bottom-up research. The top down approach begins with an overall
evaluation of the investment environment, taking into account broad indicators
such as economic growth, inflation, interest rates, monetary policy,
demographics and money flows. This review provides the portfolio managers with a
framework for allocations among industries and market capitalization. All stocks
undergo rigorous fundamental analysis, with consideration of such factors as
management, financial condition, industry dynamics, earnings growth and profit
margins, sales trends, dividend payment history and potential, as well as
investments in research and development.
[ICON] INVESTMENT RISKS
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This Fund is subject to 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.
Because the Fund concentrates in the technology market sector, the Fund's share
price will likely be subject to more volatility than the overall stock market.
The risks of investing only in technology-related stocks may be greater than
investing in other market sectors or in a more diversified portfolio because of:
o Competitive pressures among technology companies that result in aggressive
pricing of their products or services
o Short product cycles due to accelerated rate of technological developments
o Varying investor enthusiasm for technology and technology-related stocks
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Additionally, the price of technology stocks will likely fluctuate more than
securities of companies not dependent upon or associated with technology because
technology companies are affected by scientific and technological developments
and advancements and, for biotechnology companies in particular, may be subject
to government regulation, including approval of their products. Technology
companies may also be subject to greater business risks and, accordingly, more
sensitive to changes in economic conditions than companies in other market
sectors. In addition, the share price of technology companies may be affected
more than other companies in different market sectors by disappointing quarterly
or annual earnings results, such as lower sales or profits than originally
projected.
The small- and mid-cap stocks held by the Fund are subject to greater risk than
large-cap stocks because:
o Their issuers may have limited operating histories, fewer financial
resources, and inexperienced management, and may depend on a small number
of products or services
o Small- and mid-cap stocks, in general, may have low trading volumes, making
it difficult to sell a security or resulting in erratic or abrupt price
movements, and small cap stocks in the technology industries tend to be
subject to more erratic or abrupt price movements than small cap companies
in other industries
The Fund is non-diversified, which means it may invest a relatively high
percentage of its assets in a limited number of issuers. Accordingly, the Fund's
investment returns may be more likely affected by changes in the market value
and returns of any one holding in the Fund's portfolio.
The Fund is concentrated, which means it may invest a higher percentage of its
assets in specific industries within the technology sector. Accordingly, any
economic, political and regulatory developments in a particular technology
industry may have a greater impact on the Fund's net asset value and cause the
Fund's returns to be more volatile than a fund that does not concentrate its
investments.
Because the Fund may invest in foreign issuers, the Fund's total return may be
affected by fluctuations in currency exchange rates or political or economic
conditions in a particular country.
Your investment in the Fund is not a bank deposit and is not insured or endorsed
by any bank, government agency or the FDIC. The value of your investment will
fluctuate. You could lose money as a result of your investment or not make as
much as if you had invested elsewhere.
[ICON] WHO SHOULD INVEST?
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This Fund is appropriate for:
o Long-term, aggressive growth investors
o Those investors seeking a fund with an aggressive growth investment
strategy that invests in technology companies
o Those willing to accept significant short-term price fluctuations
[ICON] HISTORICAL PERFORMANCE
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Since the Fund is new, no historical performance is presented.
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[ICON] EXPENSES
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As a Columbia shareholder, you pay no transaction fees such as sales loads or
redemption and exchange fees when you buy or sell shares of the Fund. The table
below describes the fees and expenses that you may pay if you buy and hold
shares of the Fund. The Fund is new, so the annual fund operating expenses are
based on estimates for the upcoming fiscal year. In the future, the amount of
fees and expenses will depend on the actual average net assets of the Fund
during those years and a number of other factors.
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Fee Table
Annual Fund Operating Expenses
(expenses that are paid out of Fund assets)
Management Fees 1.00%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.44%(1)
Total Annual Fund Operating Expenses 1.44%
(1) "Other Expenses" are based on the estimated expenses that
the Fund expects to incur in the upcoming fiscal year of
operation.
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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.
1 Year 3 Years
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$147 $456
[ICON] FINANCIAL HIGHLIGHTS
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Since the Fund is new, no financial information is presented.
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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 their business affairs, subject to oversight by the
Funds' Board of Directors. Columbia or its predecessor has acted as an
investment adviser since 1967. For the services to be provided to each Fund,
Columbia will receive an annual fee from each Fund, expressed as a percentage of
the Fund's daily net assets, equal to the following:
Columbia Strategic Value Fund 0.75%
Columbia Technology Fund 1.00%
COLUMBIA INVESTMENT TEAM
Strategic Value Fund
Since inception of the Fund, day-to-day investment management of the Fund has
been the responsibility of Robert A. Unger. Mr. Unger, a Vice President and
Chartered Financial Analyst, has been with Columbia since 1984 as a portfolio
manager.
Technology Fund
Messrs. Chad L. Fleischman and Steven N. Marshman are the co-portfolio managers
for the Fund and are responsible for implementing and maintaining the Fund's
investment themes and strategies. Mr. Fleischman, a Vice President of Columbia
and a Chartered Financial Analyst, joined the Columbia Investment Team in 1988
as a portfolio manager and securities analyst.
Mr. Marshman, a Vice President of Columbia (since 1997) and Chartered Financial
Analyst, joined Columbia in 1992. Mr. Marshman joined the Investment Team as an
equity security analyst in 1995 and has been a portfolio manager since 1997.
For additional information about the Funds' management and investment strategy,
see "MORE ABOUT THE FUNDS" in this Prospectus.
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.
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AT-A-GLANCE INSTRUCTIONS FOR ACCOUNTS
HOW TO OPEN AN ACCOUNT
By Mail
Complete an application and send it to the address below with your check
for at least the minimum fund investment:
By Regular Mail
Columbia Financial Center
P.O. Box 1350
Portland, OR 97207-1350
By Overnight Carrier
Columbia Financial Center
1301 S.W. Fifth Avenue
Portland, OR 97201-5601
By Telephone
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.
On the Internet
Download a prospectus and an application from our Web site at:
www.columbiafunds.com. 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 a Fund each month. Sign up for
AIP on the application, or call us for a form.
In Person
7:30-5:00 PST
Visit Columbia Funds at the address below, conveniently located in downtown
Portland:
Columbia Financial Center
1301 S.W. Fifth Avenue
Portland, OR 97201-5601
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HOW TO PURCHASE FUND SHARES
By Mail
Send your investment to the address below. Be sure to enclose an investment
slip from the bottom of your statement.
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
By Telephone
1-800-547-1707
Wire: Invest using federal funds wired from your bank. Call us for
instructions.
Exchange: Use the proceeds from the redemption in a Columbia Fund to
purchase shares of a Fund. The exchange must be between Funds 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 a Fund.
On the Internet
Exchange: Call us for a personal identification number to access your
account online through our Web site at www.columbiafunds.com. Then, use
the proceeds from the redemption in a Columbia Fund to purchase shares
of a Fund provided the Funds have 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 a Fund 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.
In Person
7:30-5:00 PST
Visit Columbia Funds at the address below, conveniently located in downtown
Portland:
Columbia Financial Center
1301 S.W. Fifth Avenue
Portland, OR 97201-5601
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HOW TO SELL FUND SHARES
By Mail
Send your redemption request to the address below. 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.
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
By Telephone
1-800-547-1707
Redeem shares by phone (unless you have declined this service on the
application). Proceeds from telephone redemptions may be mailed on 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 a Fund to purchase
shares of another Columbia Fund, provided they have the same account
number. To exchange shares, call us.
On the Internet
Exchange: Call us for a personal identification number to access your
account online through our Web site at www.columbiafunds.com. Then, use
the proceeds from the redemption in a Fund to purchase shares of
another Columbia Fund, provided they have the same account number. To
exchange shares, use our secure account e-mail.
Automatic
For accounts over $5,000, redeem shares on a regular basis through a
transfer of funds from your Fund account directly to the bank designated on
your application ($50 minimum withdrawal).
In Person
7:30-5:00 PST
Although you can visit Columbia Funds at the address below to make a
redemption request, availability of the proceeds will vary. Please call
ahead for details.
Columbia Financial Center
1301 S.W. Fifth Avenue
Portland, OR 97201-5601
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INVESTOR SERVICES
This section is designed to acquaint you with the different services
and policies associated with an investment in a Fund. For an at-a-glance summary
of account instructions see page 8.
Purchasing Shares
Shares of the 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 a
Fund.
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 a Fund.
There are no fees to sell shares.
When redeeming, please keep these important points in mind:
o A signature guarantee may be required. See page 13 for examples of when
a signature guarantee is required.
o Any certificated shares will require the return of the certificate
before a redemption can be made.
o Redemptions of an IRA will require completion of additional paperwork
for the purposes of IRS tax reporting.
o Redemption requests must be signed by all owners on the account.
o 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, but in any event your redemption proceeds
will be sent to you no later than seven days from the redemption date; provided,
however, a Fund may suspend your right of redemption or postpone the payment
date at times when the NYSE is closed or during certain other periods as
permitted by the Securities and Exchange Commission. Proceeds transmitted by way
of ACH (Automated Clearing House) are usually credited to your bank account on
the second business day following the request.
Also, before selling recently purchased shares, please note that 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. Additionally, each 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.
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Investment Minimums
First Time Fund Investment:
$1,000 minimum for each Fund.
Subsequent Fund Investment:
$100 for each Fund.
Automatic Investment Plan:
$50 for each Fund (minimum requirements for first time investments are
waived).
When investing in the Funds, please keep these important points in
mind:
o Personal checks for investment should be drawn on U.S. funds, must meet
Fund investment minimum requirements and be made payable to Columbia
Funds
o Columbia will not accept cash investments
o Columbia reserves the right to reject any investment
o If your investment is cancelled because your check did not clear the
bank or because a Fund is 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.
o Columbia may reject any third party checks submitted for investment.
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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. Each
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 be priced only on days that the NYSE is open for trading.
The NAV of a Fund is calculated by subtracting the Fund's liabilities from its
assets and dividing the result by the number of outstanding shares. Each Fund
uses 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 the Fund. Debt securities with remaining maturities of
less than 60 days will generally be valued based on amortized cost, which
approximates fair value.
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 foreign securities held by the
Fund. 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.
Financial Intermediaries
If you invest through a third party (rather than directly with the
Funds' transfer agent), 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. Your total cost of investing in a Fund will be
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increased to the extent of any fees charged by your Financial Intermediary.
Also, because these arrangements reduce or eliminate the need for the Funds'
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 a 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.
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When is a Signature Guarantee Necessary?
To protect against fraud, a signature guarantee is required for each of
the following written redemption requests:
o Redemption requests over $50,000
o Redemption checks that are made payable to someone other than those
registered on the account
o A request to send proceeds to an address or account other than those of
record
o The mailing address for your redemption check has changed in the last
ten 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.
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Exchange
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 to read the Prospectus of 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 Funds' annual limit (including market timing
transactions).
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
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reduced. If the value of your account falls below a Fund's 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:
o Your Fund balance falls below $500
o You are a U.S. shareholder and fail to provide a certified taxpayer
identification number
o You are a foreign shareholder and fail to provide a current Form W-8,
"Certificate of Foreign Status"
If your shares are redeemed by a 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 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 shareholder of
each Fund receives a statement at least quarterly. 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.
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Receive Customized Investment Management with a Private Management Account
For custom 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:
o .75% on the first $500,000
o .50% on the next $500,000
o .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
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14
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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 contribute 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 contribute 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.
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DISTRIBUTIONS AND TAXES
Income and Capital Gains Distributions
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 to
shareholders once a year, usually in December. The amount of capital gains
distributed will depend on the amount of capital gains realized from the sale of
a Fund's portfolio securities. Unless you elect to receive your distributions in
cash, income (dividends) and capital gain distributions will be reinvested in
additional shares at the net asset value, as calculated after payment of the
distribution, at the close of business on the dividend payment date.
15
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Tax Effect of Distributions and Transactions
Distributions from each Fund 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
you have been invested in a Fund and whether the distributions are reinvested or
taken as cash. In general, distributions are taxable as follows:
---------------------------------------------------------------------
Taxability of Distributions
Type of Tax Rate for Tax Rate for 28%
Distribution 15% Bracket Bracket or Higher
------------ ----------- -----------------
Income Dividends Ordinary Income Rate Ordinary Income Rate
Short Term Capital Gains Ordinary Income Rate Ordinary Income Rate
Long Term Capital Gains 10% 20%
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Each Fund expects that, as a result of its investment objective to
achieve capital appreciation, its distributions will consist primarily of
capital gains. Each year the Funds will send you information detailing the
amount of ordinary income and capital gains distributed to you for the previous
year.
"Buying a Dividend." If you buy shares of either 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 Funds' NAV
and your cost basis in the purchased shares are 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.
Taxability of Transactions
The sale of Fund shares in your account may produce a gain or loss and
is a taxable event. For tax purposes, an exchange of shares of a Fund for shares
of another fund managed by Columbia is the same as a sale. Shareholders are
responsible for any tax liabilities generated by their transactions.
--------------------------------------------------------------------------------
State and 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 or plan
administrator about the tax consequences of investing in the Funds.
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16
<PAGE>
MORE ABOUT THE FUNDS
This section contains additional information about the Funds and their risks.
For a more detailed description of each Fund and its investment strategy and
risks, please request a copy of the Funds' Statement of Additional Information.
PORTFOLIO SECURITIES
The Funds invest primarily in common stocks. The Funds consider securities that
trade like common stocks, such as depositary receipts, convertible debt and
convertible preferred stocks, to be common stocks. A convertible security
generally entitles the holder to receive interest or dividends until the
convertible security matures or is redeemed, converted or exchanged. The Funds
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. In addition, the Strategic Value Fund considers interests in real
estate investment trusts ("REITs") to be common stocks.
The Funds may also invest in the common stocks, including American Depository
Receipts and Global Depository Receipts, of foreign issuers. The common stocks
of foreign issuers purchased by a Fund will likely 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.
Investments in foreign equity securities, which investments may not exceed 25%
of a Fund's assets, involve other risks such as greater fluctuations in price
and less liquidity than U.S. securities and possible political or economic
instability of the country of the issuer.
INVESTMENT STRATEGY
Strategic Value Fund.
In making decisions as to the portfolio securities to hold, the portfolio
manager employs fundamental research and evaluates the issuer based on its
financial statements and operations. The portfolio manager focuses on the
quality of the issuer and the price of an individual issuer's common stock, and
generally not on economic sector or market-timing strategies. The portfolio
manager's strategy used to measure a company's value is its P/E ratio,
price/cash flow ratio, price/book ratio and price-to-private market values. A
P/E ratio is the relationship between the price of a stock and earnings per
share and it attempts to measure how much investors are willing to pay for
future earnings. This figure is determined by dividing a stock's market price by
the issuing company's earnings per share. Price/cash flow is the relationship
between the price of a stock and the company's available cash from operations
and helps provide an understanding about future cash flow.
In addition to measuring value by focusing on issuing companies' P/E ratios and
price/cash flow ratios, factors the portfolio manager looks for in selecting
investments include:
o Estimated private market value in excess of current stock price. Private
market value is the price an investor would pay to own the entire company.
o Management with demonstrated ability and commitment to the company
o Low market valuations relative to earnings forecasts, book value, cash flow
and sales.
17
<PAGE>
Technology Fund.
Columbia's Investment Team meets twice weekly to review the dynamics of the
overall investment and economic environment. This evaluation leads to the
development of broad investment themes, which create a framework for allocation
among industries and market capitalization and stock selection. This approach to
investment management is often referred to as "top down, sector rotation."
Messrs. Fleischman and Marshman, as the Fund's portfolio co-managers, are
primarily responsible for implementing and maintaining the Fund's investment
themes and strategies developed by the Investment Team. They will collaborate to
monitor the overall portfolio weightings in various sectors of the technology
industry, as well as the overall allocation of the Fund's portfolio to both
large cap stocks versus small/mid cap stocks. Using the expertise of the
Investment Team, Mr. Fleischman will provide the primary top-down perspective in
managing the Fund, and Mr. Marshman will provide input on proposed changes to
the overall characteristics and the industry sector and capitalization
allocations of the Fund. Based upon these industry sector and capitalization
allocations, Mr. Fleischman shall have responsibility for selecting large cap
stocks and Mr. Marshman shall have responsibility for selecting mid- and small
cap stocks based upon fundamental and technical analysis. This involves a
bottom-up review of individual companies, where the managers look at such
factors as financial condition, quality of management, industry dynamics,
earnings growth, profit margins, sales trends, and price/earnings and price/book
ratios.
Concentration.
The Fund is concentrated which means it may invest more than 25% of its assets
in specific industries within the technology sector, such as the biotechnology,
cable and network broadcasting, communications, computer hardware, computer
services and software, consumer electronics, defense, medical devices,
pharmaceutical and semiconductor industries.
Temporary Investments.
Under adverse market conditions, each Fund 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. Also, shareholders may realize taxable
gains as a result.
18
<PAGE>
FOR YOUR INFORMATION
You can find additional information about the Funds in the following documents:
Annual and Semiannual Reports.
While the Prospectus describes each Fund's potential investments, these reports
detail the Fund's actual investments as of the report date. The reports also
include a discussion by Fund management of recent market conditions, economic
trends, and Fund strategies that significantly affected the Funds' 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 polices.
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 copies of the SAI, request other information and
discuss your questions about each Fund 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: 811-10161
811-10159
19
<PAGE>
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COLUMBIA STRATEGIC VALUE FUND, INC.
COLUMBIA TECHNOLOGY FUND, INC.
--------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
COLUMBIA STRATEGIC VALUE FUND, INC.
COLUMBIA TECHNOLOGY FUND, INC.
1300 S.W. Sixth Avenue
P.O. Box 1350
Portland, Oregon 97207
(503) 222-3600
This Statement of Additional Information contains information relating
to the Columbia Strategic Value Fund, Inc. and the Columbia Technology Fund,
Inc. (each a "Fund" and together, the "Funds").
This Statement of Additional Information is not a Prospectus. It
relates to a Prospectus dated November 9, 2000 (the "Prospectus") and should be
read in conjunction with the Prospectus. Copies of the Prospectus are available,
without charge, upon written request to the Fund or by calling 1-800-547-1037.
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TABLE OF CONTENTS
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Description of the Funds....................................................2
Investment Restrictions.....................................................6
Management..................................................................9
Investment Advisory and Other Fees Paid to Affiliates.......................11
Portfolio Transactions......................................................12
Capital Stock and Other Securities..........................................14
Purchase, Redemption and Pricing of Shares..................................14
Custodians..................................................................15
Accounting Services and Financial Statements................................16
Taxes.......................................................................16
Yield and Performance.......................................................20
Financial Statements........................................................21
November 9, 2000
<PAGE>
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DESCRIPTION OF THE FUNDS
--------------------------------------------------------------------------------
Each Fund is an open-end, management investment company. The Strategic
Value 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 Technology Fund is non-diversified, which means that the
Fund may invest a greater percentage of its assets in the securities of a single
issuer (such as stock issued by a single corporate issuer) than the Strategic
Value Fund. Because the Technology Fund may invest in a relatively small number
of issuers, it will be more susceptible to risks associated with a single
economic, regulatory or scientific occurrence than a more diversified fund might
be. The investment adviser for the Fund 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 strategies applicable to the Funds. Each Fund's investment
objective may not be changed by the Fund's Board of Directors without
shareholder approval. What follows is additional information regarding
securities in which the Funds may invest and investment practices in which they
may engage.
Options and Financial Futures Transactions
------------------------------------------
Each Fund may invest up to 5 percent 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. Each 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 than, in the case of a put, the exercise price of the option. Each Fund may
enter into closing transactions, exercise its options, or permit the options to
expire.
Each Fund may also write call options but only if such call 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 rules of the exchange upon which the option is traded and applicable laws
and regulations. Each Fund 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 do not
limit the percentage of a Fund's assets that may be invested in financial
futures transactions. Neither Fund, however, intends 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. Each Fund may
engage in futures transactions only on commodities exchanges or boards of trade.
The Funds will not engage in transactions in index options, financial
futures contracts, or related options for speculation. Each Fund may engage in
these transactions only as an attempt to hedge against market
2
<PAGE>
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 a Fund's
portfolio generally. Although the purchase of a put option may partially protect
a Fund from a decline in the value of a particular security or its portfolio
generally, the cost of a put will reduce the potential return on the security or
the portfolio if either increases in value.
Upon entering into a futures contract, each 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 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
-------------------------
Each Fund may invest up to 25 percent of its portfolio in common stocks
issued by companies located in developed foreign countries, principally those
companies located in North America, Western Europe or Asia. The Funds may also
invest in preferred stock, including securities convertible into equity
securities American Depository Receipts ("ADR's") and Global Depository Receipts
("GDR's"). Foreign 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 will 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. Each Fund will
normally execute its portfolio securities transactions on the principal stock
exchange on which the security is traded.
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<PAGE>
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.
Repurchase Agreements
---------------------
Each 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. Each 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
-------------------
Each Fund may not invest more than 10 percent of its assets in 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) subject to the exception described in the
following paragraph, restricted securities (securities whose public resale is
subject to legal restrictions); (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.
Each of the Funds 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, these securities
are considered to be liquid and thus not subject to the Fund's 10% limitation on
the investment in restricted or other illiquid securities. Under the supervision
of the Trustees of the Trust, the Adviser determines the liquidity of Rule 144A
securities and, through reports from the Adviser, the Trustees 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.
4
<PAGE>
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 the Funds 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 each 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 each 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.
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.
Investments in IPOs
-------------------
To the extent consistent with its investment objective, both Funds may
invest in initial public offerings of equity securities. The market for such
securities may be more volatile and entail greater risk of loss than investments
in more established companies.
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. Each Fund may use spot
and forward currency exchange transactions to reduce the risk associated with
fluctuations in exchange rates when foreign securities are purchased or sold on
a when-issued or delayed delivery basis.
5
<PAGE>
Investments in REITs
--------------------
The Strategic Value Fund may invest in Real Estate Investment Trusts
("REITs"). REITs are pooled investment vehicles that invest primarily in real
estate-- such as shopping centers, malls, multi-family housing, or commercial
property, or real estate-related loans such as mortgages. Investing in REITs
involve unique risks and may be affected by changes in the value of the
underlying property owned by the REIT or affected by the quality of the credit
extended. REITs are significantly affected by the market for real estate and are
subject to many of the same risks associated with direct ownership in real
estate. Furthermore, REITs are dependent upon management skills and subject to
heavy cash flow dependency.
Temporary Investments
---------------------
When, as a result of market conditions, the Adviser determines a
temporary defensive position is warranted to help preserve capital, the Funds
may, without limit, temporarily retain cash, or invest in prime commercial
paper, high-grade debt securities, securities of the U.S. Government and its
agencies and instrumentalities, and high-quality money market instruments,
including repurchase agreements. When a Fund assumes a temporary defensive
position, it is not invested in securities designed to achieve its investment
objective.
--------------------------------------------------------------------------------
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 Technology Fund, Inc.
The Technology Fund may not:
1. Buy or sell commodities or commodities contracts or oil, gas or
mineral programs, except that the Fund may purchase, sell or enter into
financial futures contracts and options on future contracts, foreign currency
forward contracts, foreign currency options, or any interest rate,
securities-related or foreign currency related hedging instrument, including
swap agreements and other derivative instruments, subject to compliance with any
applicable provisions of the federal securities or commodities laws.
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, which operate in real estate or interests therein.
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), provided however, 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.
4. Purchase securities of other open-end investment companies except as
permitted by Section 12(d)(1)(A) of the Investment Company Act of 1940.
6
<PAGE>
5. 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.
6. Borrow money, issue senior securities, or pledge, mortgage or
hypothecate its assets, except that the Fund may (i) borrow from banks, but only
if immediately after each borrowing there is asset coverage of 300 percent, (ii)
enter into transactions in options futures, options on futures, and other
derivative instruments as described in the Prospectus and this Statement of
Additional Information (the deposit of assets in escrow in connection with the
writing of covered put and call options and the purchase of securities on a
when-issued or delayed delivery basis, collateral arrangements with respect to
initial or variation margin deposit for futures contracts and commitments
entered into under swap agreements or other derivative instruments, will not be
deemed to be pledges of the Fund's assets), (iii) enter into reverse repurchase
agreements, dollar roll transactions or economically similar transactions to the
extent its commitment under such transaction is covered by the segregation of
assets, and (iv) borrow money as a temporary measure for extraordinary or
emergency purposes provided that such borrowings do not exceed 5 percent of the
gross assets of the Fund valued at the lesser of cost or market value, and the
Fund does not 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.
7. 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.
8. Invest in companies for the purpose of exercising control or
management.
9. 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.
10. Buy any securities or other property on margin except for use of
short-term credit necessary for clearance of purchases and sales of portfolio
securities, but the Fund may make margin deposits in connection with
transactions in options, futures, and options on futures or purchase or sell
puts or calls, or confirmations thereof.
11. Purchase illiquid securities, if upon the purchase more than 10% of
the value of the Fund's net assets would consist of these securities. See
"DESCRIPTION OF THE FUNDS, INVESTMENTS HELD AND INVESTMENT PRACTICES BY THE
FUNDS" for a complete discussion of illiquid securities.
Columbia Strategic Value Fund, Inc.
The Strategic Value Fund may not:
1. Buy or sell commodities or commodities contracts or oil, gas or
mineral programs, except that the Fund may purchase, sell or enter into
financial futures contracts and options on future contracts, foreign currency
forward contracts, foreign currency options, or any interest rate,
securities-related or foreign currency related hedging instrument, including
swap agreements and other derivative instruments, subject to compliance with any
applicable provisions of the federal securities or commodities laws.
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.
7
<PAGE>
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), provided, however, 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.
5. 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.
6. Purchase securities of other open-end investment companies except as
permitted by Section 12(d)(1)(A) of the Investment Company Act of 1940.
7. 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.
8. Borrow money, issue senior securities, or pledge, mortgage or
hypothecate its assets, except that the Fund may (i) borrow from banks, but only
if immediately after each borrowing there is asset coverage of 300 percent, (ii)
enter into transactions in options futures, options on futures, and other
derivative instruments as described in the Prospectus and this Statement of
Additional Information (the deposit of assets in escrow in connection with the
writing of covered put and call options and the purchase of securities on a
when-issued or delayed delivery basis, collateral arrangements with respect to
initial or variation margin deposit for futures contracts and commitments
entered into under swap agreements or other derivative instruments, will not be
deemed to be pledges of the Fund's assets), (iii) enter into reverse repurchase
agreements, dollar roll transactions or economically similar transactions to the
extent its commitment under such transaction is covered by the segregation of
assets, and (iv) borrow money as a temporary measure for extraordinary or
emergency purposes provided that such borrowings do not exceed 5 percent of the
gross assets of the Fund valued at the lesser of cost or market value, and the
Fund does not 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.
9. 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.
10. Invest in companies for the purpose of exercising control or
management.
11. 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.
12. Buy any securities or other property on margin except for use of
short-term credit necessary for clearance of purchases and sales of portfolio
securities, but the Fund may make margin deposits in connection with
transactions in options, futures, and options on futures or purchase or sell
puts or calls, or confirmations thereof.
8
<PAGE>
13. Purchase illiquid securities, if upon the purchase more than 10% of
the value of the Fund's net assets would consist of these securities. See
"DESCRIPTION OF THE FUNDS, INVESTMENTS HELD AND INVESTMENT PRACTICES BY THE
FUNDS" for a complete discussion of illiquid securities.
--------------------------------------------------------------------------------
MANAGEMENT
--------------------------------------------------------------------------------
Each Fund is managed under the supervision of the Board of Directors,
which has responsibility for overseeing decisions relating to the investment
policies and objectives of the Fund. The Board of Directors of each Fund meets
quarterly to review the Fund's investment policies, performance, expenses, and
other business matters. The directors and officers of each Fund are listed
below, together with their principal business occupations. All principal
business positions have been held for more than five years, except that
positions with each of the Funds have been held since November 1, 2000, and
except as otherwise indicated. The term "Columbia Funds" refers to each of the
Funds, 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. and Columbia
Daily Income Company.
J. JERRY INSKEEP, JR.,* + Age 69, Chairman and Director of the Columbia Funds;
Chairman and Trustee of CMC Fund Trust ("CMC Trust"); Consultant to FleetBoston
Financial Corporation (since December 1997); formerly President of the CMC Trust
and the Columbia Funds; formerly Chairman and a Director of Columbia Funds
Management Company (the "Adviser"), Columbia Management Co., and Columbia Trust
Company (the "Trust Company"); and 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 the Columbia Funds (since June 1994) and
Trustee of CMC Trust (since December 1997). Mr. George, former investment manger
of the Oregon State Treasury (1966-1992), is an investment consultant. Mr.
George's business address is 1001 S.W. Fifth Avenue, Portland, Oregon 97204.
PATRICK J. SIMPSON, Age 56, Director of the Columbia Funds (since April 2000)
and Trustee of CMC Trust (since April 2000); attorney with Perkins Coie LLP. Mr.
Simpson's business address is 1211 S.W. Fifth Avenue, Suite 1500, Portland,
Oregon 97204.
RICHARD L. WOOLWORTH, + Age 59, Director of the Columbia Funds and Trustee of
CMC Trust; Chairman of Regence Blue Cross and Blue Shield of Oregon, health
insurers. Mr. Woolworth's address is 200 S.W. Market Street, Portland, Oregon
97201.
JEFF B. CURTIS,* Age 46, President and Assistant Secretary of the Columbia Funds
and CMC Trust (since April 2000); Director and President of Columbia Financial
(since October 1999); Director and Senior Vice President (since January 1999)
and Secretary (since April 1993) of the Trust Company; Director (since December
1997) and Senior Vice President (since January 1999) of the Adviser and Columbia
Management Co. Prior to his current officer positions, Mr. Curtis was Vice
President and General Counsel of the Adviser, Columbia Management Co., the Trust
Company, and Columbia Financial (from April 1993 to December 1998). Mr. Curtis's
business address is 1300 S.W. Sixth Avenue, Portland, Oregon 97207.
THOMAS L. THOMSEN,* Age 56, Vice President of the Columbia Funds and CMC Trust
(since April 2000); President and Chief Investment Officer (since December 1997)
and Director (since 1980) of the Trust Company; Director (since 1982), President
and Chief Investment Officer (since December 1997) of the Adviser; Director
(since 1989), President and Chief Investment Officer (since December 1997) of
Columbia Management Co. Prior
9
<PAGE>
to his current officer positions, Mr. Thomsen was Vice President of the Adviser,
Columbia Management Co. and the Trust Company. Mr. Thomsen's business address is
1300 S.W. Sixth Avenue, Portland, Oregon 97207.
MYRON G. CHILD,* Age 60, Vice President of the Columbia Funds and CMC Trust
(since April 2000); Vice President of the Trust Company (since December 1997);
Vice President of the Adviser and Columbia Management Co. (since December 1997).
Prior to becoming Vice President of the Adviser and Columbia Management Co., Mr.
Child was Corporate Controller (from March 1981 to November 1997). Mr. Child's
business address is 1300 S.W. Sixth Avenue, Portland, Oregon 97207.
KATHLEEN M. GRIFFIN,* Age 41, Vice President of the Columbia Funds and CMC Trust
(since April 2000); Vice President of Columbia Financial (since December 1997).
Prior to becoming a Vice President of Columbia Financial, Ms. Griffin was
Manager of Shareholder Communications (from January 1995 to November 1997). Ms.
Griffin's business address is 1300 S.W. Sixth Avenue, Portland, Oregon 97207.
JEFFREY L. LUNZER,* Age 39, Vice President of the Columbia Funds and CMC Trust
(since April 2000); Vice President of the Trust Company (since April 2000), the
Adviser and Columbia Management Co. (since January 1999). Prior to becoming Vice
President of the Trust Company, the Adviser and Columbia Management Co., Mr.
Lunzer was the Columbia Funds' Controller (from December 1998 to December 1999).
Prior to joining the Adviser and Columbia Management Co., Mr. Lunzer was Vice
President and Accounting Manager for WM Shareholder Services, Inc., a subsidiary
of Washington Mutual Bank (from 1984 to November 1998), and Treasurer and Fund
Officer of WM Group of Funds, a mutual fund company (from 1988 to November
1998). Mr. Lunzer's business address is 1300 S.W. Sixth Avenue, Portland, Oregon
97207.
SUSAN J. WOODWORTH,* Age 48, Vice President of the Columbia Funds and CMC Trust
(since April 2000); Vice President of the Trust Company (since December 1997).
Prior to becoming Vice President of the Trust Company, Ms. Woodworth was Manager
of Mutual Fund Operations (from July 1980 to November 1997). Ms. Woodworth's
business address is 1300 S.W. Sixth Avenue, Portland, Oregon 97207.
MARK A. WENTZIEN,* Age 40, Secretary of the Columbia Funds and CMC Trust (since
April 2000); Director, Vice President and Secretary of Columbia Financial (since
January 1999); Associate Counsel of the Trust Company (since January 1999); Vice
President-Legal of the Adviser and Columbia Management Co. (since July 1999),
and Associate Counsel (from April 1997 to June 1999). Prior to joining the
Adviser and Columbia Management Co., Mr. Wentzien was an attorney with the law
firm of Davis Wright Tremaine LLP (from September 1985 to April 1997). Mr.
Wentzien's business address is 1300 S.W. Sixth Avenue, Portland, Oregon 97207.
*These individuals are "interested persons" as defined by the
Investment Company Act of 1940 (the "1940 Act") and receive no fees or salaries
from any of the Columbia Funds or the CMC Trust.
+ Member 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.
Provident Distributors, Inc. ("PDI"), a registered securities broker
and a member of the National Association of Securities Dealers, Inc., is the
principal underwriter for each Fund, and is authorized under a distribution
agreement with the Funds to sell shares of the Funds. 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 the Funds.
At November 1, 2000, officers and directors of the Technology Fund, as
a group, owned of record or beneficially 40,000 shares, or approximately 57
percent of the total outstanding shares of the Fund, as follows: Mr. Curtis
owned 2,500 shares (3.5 percent of the total shares outstanding); Mr. Thomsen
owned 12,500 shares (17.6 percent of the total shares outstanding); and Mr.
Inskeep owned 25,000 shares (35.7 percent of the total shares outstanding).
10
<PAGE>
At November 1, 2000, officers and directors of the Strategic Value
Fund, as a group, owned of record or beneficially 40,000 shares, or
approximately 50 percent of the total outstanding shares of the Fund, as
follows: Mr. Curtis owned 2,500 shares (3.12 percent of the total shares
outstanding); Mr. Thomsen owned 12,500 shares (15.6 percent of the total shares
outstanding); and Mr. Inskeep owned 25,000 shares (31.6 percent of the total
shares outstanding). The Fund's portfolio manager, Mr. Robert Unger, owned
10,000 shares (11.1 percent of the total shares outstanding).
At November 1, 2000, to the knowledge of each Fund, no person other
than the officers and directors listed above owned of record or beneficially
more than 5 percent of the outstanding shares of either Fund, except the
following record owners:
Shares Beneficially Owned
Name and Address at November 1, 2000
---------------- -------------------------
Technology Fund
James Rippey 30,000 (42.9%)
c/o Columbia Funds Management Company
1300 S.W. Sixth Avenue
Portland, OR 97207
Strategic Value Fund
Mr. James Rippey 30,000 (37.5%)
c/o Columbia Funds Management Company
1300 S.W. Sixth Avenue
Portland, OR 97207
Mr. Jeffrey Rippey 10,000 (11.1%)
Columbia Funds Management Company
1300 S.W. Sixth Avenue
Portland, OR 97207
--------------------------------------------------------------------------------
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 each Fund's assets to invest.
The Adviser provides office space and pays all executive salaries and
executive expenses of the Funds. Each 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 by each
Fund to the Adviser is set forth in the Prospectus.
11
<PAGE>
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. Neither Fund's expenses are increased by this arrangement, and no
amounts are paid by either Fund to CMC under this agreement.
The transfer agent and dividend crediting agent for each Fund 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. Each
Fund expects to pay 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 intends to hire PFPC, Inc. ("PFPC") as a sub-transfer agent to provide
services related to each Fund's transactions processed through the National
Securities Clearing Corporation on behalf of the Funds. Each Fund has agreed to
pay the Trust Company the costs incurred by Trust Company in connection with the
services provided by PFPC.
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 it may purchase the securities
directly from a dealer that 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.
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 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) broker's experience and financial stability and the execution
services it renders to the Adviser on a continuing basis; and (vii)
reasonableness of commission.
12
<PAGE>
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 brokerage services 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 or brokerage service or product provided to the Adviser.
Proposed services or products 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 the Funds.
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 the Adviser. Each Fund may use Robertson Stephens to execute
purchase and sale orders. The percentage of aggregate brokerage commissions that
may be paid to, and the aggregate dollar amount of transactions involving,
Robertson Stephens is not expected to exceed 1 percent. In addition to the
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 each Fund.
Investment decisions for each Fund are made independently from those of
the other accounts or other investment pools managed by the Adviser or any
affiliate of the Adviser. The same security is sometimes held in
13
<PAGE>
the portfolio of more than one account. Simultaneous transactions are inevitable
when several accounts are managed by the same investment adviser, particularly
when the same security is suitable for the investment objective of more than one
account. In the event of simultaneous transactions, allocations among the Funds
or accounts will be made on an equitable basis.
Since 1967, the Adviser and the Funds (since their incorporation) 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 or any of the Columbia 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
access persons 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.
--------------------------------------------------------------------------------
CAPITAL STOCK AND OTHER SECURITIES
--------------------------------------------------------------------------------
Each Fund is an Oregon corporation and was organized in 2000.
All shares of each Fund have equal voting, redemption, dividend, and
liquidation rights. All issued and outstanding shares of each Fund are fully
paid and nonassessable. Shares have no preemptive or conversion rights.
Fractional shares have the same rights proportionately as full shares. The
shares of each Fund do not have cumulative voting rights, which means that 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
either 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.
14
<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 New York Stock
Exchange ("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
a Fund, less its liabilities, by the number of shares outstanding.
Each Fund may suspend the determination of the NAV of the 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 each 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. When a market quotation is not readily available or when the Adviser
believes a market quotation does not accurately value a security, the security
may be valued by the Adviser, pursuant to guidelines established by the Fund's
Board of Directors.
Investments in 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 each 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.
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 Fund's 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.
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CUSTODIANS
--------------------------------------------------------------------------------
U S Bank N.A. (a "Custodian"), 321 S.W. Sixth Avenue, Portland, Oregon
97208, acts as general custodian for each Fund. Chase Manhattan Bank ("Chase" or
a "Custodian"), One Pierrepont Plaza, Brooklyn, New York 11201, provides custody
services to the Funds for their investments in foreign securities. The
Custodians hold all securities and cash of each Fund, receive and pay for
securities purchased, deliver against payment securities sold, receive and
collect income from investments, make all payments covering expenses of the
Fund, and perform other administrative duties, all as directed by authorized
officers of the Adviser. The Custodians do not exercise any supervisory function
in the purchase and sale of portfolio securities or payment of dividends.
15
<PAGE>
Portfolio securities purchased in the United States are maintained in
the custody of the Funds' 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 have been approved
by the Board of Directors of each Fund 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 each Fund
and its shareholders to maintain the 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 a Fund, and the value of its
shares, will not be adversely affected by acts of foreign governments, financial
or operational difficulties of the foreign sub-custodians, difficulties and 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 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.
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ACCOUNTING SERVICES AND FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
Each Fund's opening balance sheet at October 27, 2000, together with
the Fund's report of PricewaterhouseCoopers LLP, independent accountants, is
included in this Statement of Additional Information under the heading
"Financial Statements." Since both Funds are new, no other financial statements
are available. The financial statements for the year ended December 31, 2000,
the selected per share data and ratios that will appear under the caption
"Financial Highlights" and the report of PricewaterhouseCoopers LLP, independent
accountants, will be included in the 2000 Annual Report to Shareholders of each
Fund. PricewaterhouseCoopers LLP, 1300 S.W. Fifth Avenue, Suite 3100, Portland,
Oregon 97201, in addition to examining the financial statements of the Funds,
will assist in the preparation of the tax returns of the Funds and in certain
other matters.
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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
16
<PAGE>
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, each Fund must file, or have filed, a
proper election with the Internal Revenue Service.
Part I of Subchapter M of the Code will apply to each Fund during a
taxable year only if it meets certain additional requirements. Among other
things, each 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, each 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 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.
17
<PAGE>
General Considerations. Shareholders of each 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 each Fund may qualify, in whole or
part, for the federal income tax dividends-received deduction, depending on the
amount of qualifying dividends received by each Fund. Qualifying dividends may
include those paid to each 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 each Fund by a shareholder. In
addition, to the extent that the Strategic Value Fund's income is derived from
interest and distributions from real estate investment trusts ("REITs"),
distributions from the Strategic Value Fund will not qualify for the
dividends-received deduction. Distributions of any excess of net long-term
capital gain over net short-term capital loss from a Fund are ineligible for the
dividends-received deduction.
Distributions properly designated by a Fund as representing the excess
of net long-term capital gain over net short-term capital loss are taxable to
shareholders as long-term capital gain, regardless of the length of time the
shares of the Fund have been held by shareholders. For noncorporate taxpayers,
the highest rate that applies to long-term capital gains is lower than the
highest rate that applies to ordinary income. Any loss that is realized and
allowed on redemption of shares of a 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 Strategic Value Fund may
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 a
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 each 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 its shareholders a statement of the federal income tax
status of all distributions, including a statement of the prior taxable year's
distributions which the Fund has designated to be treated as long-term capital
gain and, with respect to the Strategic Value Fund's holdings in REITs, 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.
Each fund is generally required to obtain from its shareholders a
certification of the shareholder's taxpayer identification number and certain
other information. Each Fund generally will not accept an investment to
establish a new account that does not comply with this requirement. If a
shareholder fails to certify such number and other information, or upon receipt
of certain notices from the Internal Revenue Service, the Fund may be required
to withhold 31 percent of any reportable interest or dividends, or redemption
proceeds, payable to the shareholder, and to remit such sum to the Internal
Revenue Service, for credit toward the shareholder's federal income taxes. A
shareholder's failure to provide a social security number or other tax
identification number may subject the shareholder to 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
18
<PAGE>
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 sufficient
distributions during the calendar year. The required distributions for each
calendar year generally equal the sum of (a) 98% of the ordinary income for the
calendar year plus (b) 98% of the capital gain net income for the one-year
period that ends on October 31 during the calendar year, 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% 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 the 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% 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 a Fund.
Foreign Income Taxes
Each Fund may also invest in securities of foreign corporations and
issuers. Foreign countries may impose income taxes, generally collected by
withholding, on foreign-source dividends and interest paid to a Fund. These
foreign taxes will reduce the Fund's distributed income and the Fund's return.
Each Fund generally expects 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 Fund intends 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
the Fund since the amount invested in particular countries will fluctuate and
the amounts of dividends and interest relative to total income will fluctuate.
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 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 Strategic Value 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 each 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 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 on such income, and (iii) in the
case of a foreign shareholder, will not qualify for any
19
<PAGE>
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 Strategic Value Fund does not intend to invest in any REIT
which has a substantial portion of its assets that consist of residual interests
in REMICs.
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 which they are based are subject to change,
prospectively or retroactively, by legislative or administrative action. State
and 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.
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YIELD AND PERFORMANCE
--------------------------------------------------------------------------------
Each Fund 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 will
fluctuate so that shares when redeemed may be worth more or less than their
original cost.
Each Fund may publish average annual total return quotations for recent
1, 5, and 10-year periods (or a fractional portion thereof) computed by finding
the average annual compounded rates of return over the 1, 5, and 10-year periods
that would equate the initial amount invested to the ending redeemable value,
according to the following formula:
P(1+T)n = 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 each Fund are set forth in the Fund's
Prospectus.
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<PAGE>
Each Fund may compare its performance to other mutual funds with
similar investment objectives and to the mutual fund industry as a whole, as
quoted by ranking services and publications of general interest. For example,
these services or publications may include Lipper Analytical Services, Inc.,
Schabacker's Total Investment Service, Barron's, Business Week, Changing Times,
The Financial Times, Financial World, Forbes, Investor's Daily, Money,
Morningstar, Inc., Personal Investor, The Economist, The Wall Street Journal,
and USA Today. These ranking services and publications rank the performance of
the Funds against all other funds over specified periods and against funds in
specified categories.
Each Fund may also compare its performance to that of a recognized
stock index including the Standard & Poor's 500, Dow Jones, Russell 2000, and
Nasdaq stock indices. The comparative material found in advertisements, sales
literature, or in reports to shareholders may contain past or present
performance ratings. This is not to be considered representative or indicative
of future results or future performance. Unmanaged indices may assume the
reinvestment of dividends, but generally do not reflect deductions for
administrative and management costs and expenses.
--------------------------------------------------------------------------------
FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
Below is the opening balance sheet of each Fund at October 27, 2000, as
prepared by PricewaterhouseCoopers LLP, independent accountants.
21
<PAGE>
COLUMBIA STRATEGIC VALUE FUND, INC.
Statement of Assets and Liabilities
October 27, 2000
ASSETS:
U.S. Treasury Bill, 5.935% due 11/09/2000, at cost $898,220
Repurchase Agreement
J.P. Morgan 6.57% dated 10/27/2000,
due 10/30/2000 in the amount of $1,929. $1,928
Cash $1
-----------------
Total Assets $900,149
Accrued expenses ($32)
Net assets $900,117
=================
Shares of capital stock outstanding 90,000
=================
Net asset value, offering and redemption price per share $10.00
=================
NOTES TO FINANCIAL STATEMENT:
1. Columbia Strategic Value Fund, Inc. was organized as an Oregon corporation
on September 21, 2000. On October 27, 2000, the fund sold 90,000 shares of
its common stock to certain directors and officers of the Fund for proceeds
of $900,000. The Fund has had no other transactions to date except for
those relating to organizational matters which have been paid by Columbia
Funds Management Company. The Fund has 100,000,000 shares of no par value
stock authorized. The Fund is registered under the Investment Company Act
of 1940, as amended, as an open-end diversified investment company.
2. The Fund is managed by Columbia Funds Management Company; Certain officers
and directors of the Fund are also officers and directors of Columbia Funds
Management Company.
3. Temporary cash investments in short-term securities (Principally repurchase
agreements and the U.S. Treasury bill) are valued at cost, which
approximates market.
4. Columbia Funds Management Company (CFMC) manages the Fund, and Columbia
Trust Company (CTC) is the transfer and shareholder servicing agent. CFMC
and CTC are indirect, wholly owned subsidiaries of FleetBoston Financial
Corporation, a publicly owned multi-bank holding company registered under
the Bank Holding Company Act of 1956.
22
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders of
Columbia Strategic Value Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of Columbia Strategic
Value Fund, Inc. (the Fund) at October 27, 2000, in conformity with accounting
principles generally accepted in the United States of America. This financial
statement is the responsibility of the Fund's management; our responsibility is
to express an opinion on the financial statement based on our audit. We
conducted our audit of this financial statement in accordance with standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statement is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statement, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit, which included confirmation of securities owned as of
October 27, 2000 by correspondence with the custodian, provides a reasonable
basis for our opinion.
PRICEWATERHOUSECOOPERS LLP
Portland, Oregon
October 27, 2000
23
