COLUMBIA GROWTH FUND INC, 485BPOS, 1999-02-24

COLUMBIA GROWTH FUND INC
485BPOS, 1999-02-24

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Reg. Nos. 2-25785/811-1449

SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A

REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 [ X ]

Pre-Effective Amendment No. [ ]
------

Post-Effective Amendment No. 58 [ X ]
------

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [ X ]

Amendment No. 58 [ X ]
------

(Check appropriate box or boxes.)

COLUMBIA GROWTH FUND, INC.
(Exact Name of Registrant as Specified in Charter)

1301 SW Fifth Avenue, PO Box 1350, Portland, Oregon 97207
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, including Area Code: (503) 222-3600

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

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

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

X immediately upon filing pursuant to paragraph (b)
------
on __________ pursuant to paragraph (b)
------ ----------

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

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

Please forward copies of communications to:

Robert J. Moorman
Stoel Rives LLP
900 SW Fifth Avenue, Suite 2600
Portland, Oregon 97204
<PAGE>

[LOGO]

COLUMBIA FUNDS

PROSPECTUS
FEBRUARY 24, 1999

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

<PAGE>

DEAR INVESTOR:

We are pleased to present the newly simplified 1999 Columbia Funds
prospectus. We hope you find the revised content and enhanced design to be
more user-friendly and meaningful than ever before. We encourage you to read
the prospectus carefully before investing, since it will lend greater insight
to our investment philosophy, fund objectives, and management fees and
expenses.

As you may know, we are committed to providing our investors with consistent,
long-term investment returns while managing risk. And we work hard to keep
our expenses low, enabling more of your money to work for you.

Investing with Columbia is easy, and everything you need to know about
opening an account -- or adding to an existing account -- is included right
here. If you have any questions about these materials, please be sure to
contact us toll-free at 1-800-547-1707 or at (503) 222-3606 in Portland. One
of our Investor Services Representatives will be happy to assist you.

Thank you for your interest in Columbia Funds.

Sincerely,

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

<PAGE>

February 24, 1999
PROSPECTUS
- --------------------------------------------------------------------------------
TABLE OF CONTENTS

INTRODUCTION 1 A TEAM APPROACH TO INVESTING
1 RISK OF INVESTING IN MUTUAL FUNDS
- --------------------------------------------------------------------------------
INFORMATION 2 STOCK FUND INVESTING
ABOUT 3 BOND FUND INVESTING
COLUMBIA FUNDS 4 COLUMBIA COMMON STOCK FUND
6 COLUMBIA GROWTH FUND
8 COLUMBIA INTERNATIONAL STOCK FUND
10 COLUMBIA SPECIAL FUND
12 COLUMBIA SMALL CAP FUND
14 COLUMBIA REAL ESTATE EQUITY FUND
16 COLUMBIA BALANCED FUND
18 COLUMBIA U.S. GOVERNMENT SECURITIES FUND
20 COLUMBIA FIXED INCOME SECURITIES FUND
22 COLUMBIA NATIONAL MUNICIPAL BOND FUND
24 COLUMBIA MUNICIPAL BOND FUND
26 COLUMBIA HIGH YIELD FUND
28 COLUMBIA DAILY INCOME COMPANY
- --------------------------------------------------------------------------------
MANAGEMENT 30 COLUMBIA INVESTMENT TEAM
- --------------------------------------------------------------------------------
INVESTOR 33 PURCHASING SHARES
SERVICES 33 SELLING SHARES
34 IMPORTANT FUND POLICIES
38 INSTRUCTIONS FOR ACCOUNTS
40 DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
MORE ABOUT 43 PORTFOLIO SECURITIES
THE FUNDS 47 MORE ABOUT RISKS

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

<PAGE>

THE COLUMBIA FAMILY
OF NO-LOAD FUNDS

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

<PAGE>

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

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

[icon] GOAL AND STRATEGY
[icon] INVESTMENT RISKS
[icon] WHO SHOULD INVEST
[icon] HISTORICAL PERFORMANCE
[icon] EXPENSES
[icon] FINANCIAL HIGHLIGHTS

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

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

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

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

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

1
<PAGE>

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

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

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

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

STOCK FUND INVESTING
Columbia's stock funds invest principally in the stocks of public companies.
Companies sell shares of stock to help finance their business. Returns on stocks
are earned through a combination of dividends paid on each share and any
increase or decrease in the market price of the shares. The smaller the market
capitalization of a company, generally the less likely it will pay dividends.
That's because small companies tend to use excess earnings to help fund growth.
There are three generally accepted categories for market capitalization of U.S.
companies, which is the total value of a company's outstanding stock. Large cap
generally refers to companies with $7 billion or more in outstanding stock, mid
cap is considered to have $1.5 to $7 billion, and small cap is considered to
have less than $1.5 billion. Generally, the smaller a company's market cap, the
more volatile its stock is likely to be.

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

2
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term growth. Columbia's stock funds vary in their level of risk or volatility,
depending upon the types and average market capitalizations of the stocks they
hold.

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

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

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

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

3
<PAGE>

COLUMBIA COMMON STOCK FUND

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

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

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

- Long-term investors
- Investors seeking a large-cap fund to balance their bond or
small- and mid-cap stock portfolios
- Those willing to accept short-term price fluctuations

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

[GRAPH]

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

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS as of 12/31/98
Inception
1 Year 5 Years (10/1/91)
<S> <C> <C> <C>
Columbia Common Stock Fund 26.28% 20.60% 19.19%
S&P 500 Index 28.58% 24.07% 19.95%
</TABLE>

4
<PAGE>

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

<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(expenses that are paid out of Fund assets)
<S> <C>
Management Fees 0.60%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.20%
Total Annual Fund Operating Expenses 0.80%
</TABLE>

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

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C>
$82 $255 $444 $990
</TABLE>

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

<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR . . . . . . . . . . . . $22.02 $19.26 $18.59 $15.16 $15.29
- --------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income . . . . . . . . . . . . . . . . 0.09 0.29 0.25 0.26 0.27
Net gains or losses on securities (both realized
and unrealized) . . . . . . . . . . . . . . . . . . . 5.68 4.58 3.61 4.38 0.04
- --------------------------------------------------------------------------------------------------------------
Total from investment operations . . . . . . . . . . . 5.77 4.87 3.86 4.64 0.31
- --------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income . . . . . . . . . (0.13) (0.27) (0.23) (0.26) (0.25)
Distributions from capital gains . . . . . . . . . . . (3.26) (1.84) (2.96) (0.95) (0.19)
- --------------------------------------------------------------------------------------------------------------
Total distributions . . . . . . . . . . . . . . . . . (3.39) (2.11) (3.19) (1.21) (0.44)
- --------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR . . . . . . . . . . . . . . . $24.40 $22.02 $19.26 $18.59 $15.16
- --------------------------------------------------------------------------------------------------------------
TOTAL RETURN . . . . . . . . . . . . . . . . . . . . . . . 26.28% 25.37% 20.71% 30.84% 2.06%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in thousands) . . . . . . . . . . $797,147 $783,906 $536,760 $358,523 $124,263
Ratio of expenses to average net assets . . . . . . . . . . 0.80% 0.77% 0.76% 0.80% 0.84%
Ratio of net investment income to average net assets . . . 0.56% 1.37% 1.32% 1.68% 1.82%
Portfolio turnover rate . . . . . . . . . . . . . . . . . . 140.74% 90.23% 111.39% 75.36% 64.21%
</TABLE>

5
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COLUMBIA GROWTH FUND

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

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

- Long-term investors
- Investors seeking a fund with a growth investment strategy
- Those willing to accept short-term price fluctuations

[GRAPH]

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

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS as of 12/31/98
1 Year 5 Years 10 Years
<S> <C> <C> <C>
Columbia Growth Fund 30.34% 21.32% 18.73%
S&P 500 Index 28.58% 24.07% 19.21%
</TABLE>

6
<PAGE>

[icon] EXPENSES
As a Columbia shareholder, you pay no transaction fees, such as sales
load 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.

ANNUAL FUND OPERATING EXPENSES
(expenses that are paid out of Fund assets)

<TABLE>
<S> <C>
Management Fees 0.56%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.12%
Total Annual Fund Operating Expenses 0.68%
</TABLE>

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C>
$69 $218 $379 $847
</TABLE>

<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ...................... $ 34.34 $ 30.74 $ 29.84 $ 24.84 $ 26.38
- ----------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .......................... 0.03 0.19 0.19 0.31 0.29
Net gains or losses on securities (both realized
and unrealized) ............................... 10.39 7.90 6.04 7.86 (0.46)
Total from investment operations ............... 10.42 8.09 6.23 8.17 (0.17)
- ----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income ........... (0.08) (0.17) (0.17) (0.29) (0.26)
Distributions from capital gains ............... (2.17) (4.32) (5.16) (2.88) (1.11)
- ----------------------------------------------------------------------------------------------------------------------------
Total distributions ............................ (2.25) (4.49) (5.33) (3.17) (1.37)
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR ............................ $ 42.51 $ 34.34 $ 30.74 $ 29.84 $ 24.84
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN ............................................ 30.34% 26.32% 20.80% 32.98% -0.63%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in thousands) .................. $ 1,753,024 $ 1,324,918 $ 1,064,100 $ 848,731 $ 591,694
Ratio of expenses to average net assets ................. 0.68% 0.71% 0.71% 0.75% 0.81%
Ratio of net investment income to average net assets .... 0.21% 0.55% 0.63% 1.14% 1.12%
Portfolio turnover rate ................................. 105.25% 95.67% 75.49% 94.73% 79.28%
</TABLE>

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COLUMBIA INTERNATIONAL STOCK FUND

[icon] GOAL AND STRATEGY
The Fund seeks long-term capital appreciation by investing, under
normal market conditions, at least 65% of its total assets in stocks
issued by companies from at least three countries outside the U.S.
While the Fund's investments are not limited as to market
capitalization, the Fund intends to invest at least 75% of its assets
in companies with at least $500 million in market cap, which - in
foreign markets - is generally considered large and well-established.

[icon] WHO SHOULD INVEST?
This Fund is appropriate for:
- Long-term investors
- Those seeking stock market diversification outside the U.S.
- Those willing to accept substantial price fluctuations

[icon] INVESTMENT RISKS
This Fund has stock market risk and foreign investment risk. You could
lose money as a result of your investment.

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

Foreign investment risk means the Fund's portfolio may decline in
value due to the risks associated with international investing, such
as:
- Changes in currency exchange rates
- Foreign taxes that could reduce returns
- Potential political or economic instability of the country of
issuer, especially in emerging or developing countries
- Lack of uniform accounting, auditing, and financial reporting
standards, with less governmental regulation and oversight than
U.S. companies
- Less liquidity than U.S. securities
- Less public information compared to U.S. companies

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

[GRAPH]

BEST QUARTER: 4Q '98 at 21.24% WORST QUARTER: 3Q '98 at -17.69%

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS as of 12/31/98
Inception
1 Year 5 Years (10/1/92)
<S> <C> <C> <C>
Columbia International Stock Fund 12.83% 8.50% 11.79%
MSCI EAFE* 20.33% 9.51% 11.76%
</TABLE>

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

8
<PAGE>

ANNUAL FUND OPERATING EXPENSES
(expenses that are paid out of Fund assets)

<TABLE>
<S> <C>
Management Fees 1.00%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.56%
Total Annual Fund Operating Expenses 1.56%
</TABLE>

<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ......................... $ 13.70 $ 13.86 $ 13.07 $ 12.43 $ 12.96
- --------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) ...................... 0.00* 0.03 0.03 0.02 (0.02)
Net gains or losses on securities (both realized
and unrealized) and foreign currency transactions . 1.76 1.56 2.13 0.62 (0.30)
- --------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .................. 1.76 1.59 2.16 0.64 (0.32)
- --------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income .............. -- -- (0.23) -- --
Distributions from capital gains .................. (0.01) (1.75) (1.14) -- (0.21)
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions ............................... (0.01) (1.75) (1.37) -- (0.21)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR ............................... $ 15.45 $ 13.70 $ 13.86 $ 13.07 $ 12.43
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN ............................................... 12.83% 11.47% 16.59% 5.15% -2.47%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in thousands) .................... $ 134,193 $ 146,281 $ 125,510 $ 100,873 $ 118,484
Ratio of expenses to average net assets .................... 1.56% 1.62% 1.54% 1.54% 1.52%
Ratio of net investment income (loss) to average net assets (0.02)% 0.19% 0.22% 0.15% (0.21)%
Portfolio turnover rate .................................... 74.15% 121.53% 129.40% 156.09% 138.79%

* Amount represents less than $0.01 per share
</TABLE>

9
<PAGE>

COLUMBIA SPECIAL FUND

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

The small- and mid-cap stocks held by the Fund are subject to greater
risk than large-cap stocks because their issuers:
- May have limited operating histories, fewer financial resources,
and inexperienced management
- May depend on a small number of products or services
- May have low trading volumes, making it difficult to sell a
security or resulting in erratic or abrupt price movements

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

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

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

[GRAPH]
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
31.92% -12.39% 50.46% 13.70% 21.68% 2.29% 29.53% 13.07% 12.64% 16.64%
</TABLE>

BEST QUARTER: 1Q '91 at 24.37% WORST QUARTER: 3Q '90 at -29.31%

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS as of 12/31/98
1 Year 5 Years 10 Years
<S> <C> <C> <C>
Columbia Special Fund 16.64% 14.51% 16.83%
S&P MidCap 400 Index 19.11% 18.84% 19.30%
Russell 2000 -2.55% 11.87% 12.92%
</TABLE>

10
<PAGE>

ANNUAL FUND OPERATING EXPENSES
(expenses that are paid out of Fund assets)
<TABLE>
<S> <C>
Management Fees 0.87%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.16%
Total Annual Fund Operating Expenses 1.03%
</TABLE>

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C>
$105 $328 $569 $1,259
</TABLE>

<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ...................... $ 20.26 $ 19.85 $ 21.44 $ 18.69 $ 19.51
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) ................... (0.03) 0.01 (0.06) 0.03 0.08
Net gains or losses on securities (both realized
and unrealized) ............................. 3.40 2.50 2.85 5.45 0.36
- ----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations ............... 3.37 2.51 2.79 5.48 0.44
- ----------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income ........... (0.01) -- -- (0.02) (0.07)
Distributions from capital gains ............... 0.00* (2.10) (4.38) (2.71) (1.19)
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions ............................ (0.01) (2.10) (4.38) (2.73) (1.26)
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR ............................ $ 23.62 $ 20.26 $ 19.85 $ 21.44 $ 18.69
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN ............................................ 16.64% 12.64% 13.07% 29.53% 2.29%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in thousands) ................. $ 969,359 $ 1,249,718 $ 1,585,284 $ 1,384,415 $ 889,526
Ratio of expenses to average net assets ................. 1.03% 0.98% 0.94% 0.98% 1.05%
Ratio of net investment income (loss)
to average net assets ................................ (0.09)% 0.04% (0.29)% 0.16% 0.40%
Portfolio turnover rate ................................. 135.29% 166.46% 150.07% 182.99% 178.91%
* Amount represents less than $0.01 per share
</TABLE>

11
<PAGE>

COLUMBIA SMALL CAP FUND

[icon] GOAL AND STRATEGY
The Fund seeks significant capital appreciation by investing, under
normal market conditions, at least 65% of its assets in stocks, or
securities convertible into stocks, of companies with a market
capitalization below $1.5 billion when purchased. At the date of this
Prospectus, Columbia considers any company with an aggregate market
valuation of less than $1.5 billion to be "small cap." Upon notice to
shareholders, however, this definition may change if Columbia
determines, based on changes in market levels and accepted industry
definitions, that a different market capitalization is more
appropriate.

The small-cap stocks held by the Fund are subject to greater
volatility than large-cap stocks because small companies:
- May have limited operating histories, fewer financial resources,
and inexperienced management
- May be dependent on a small number of products or services
- May have low trading volumes, which may make it difficult to sell
a security or result in erratic or abrupt price movements

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

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

BEST QUARTER: 3Q '97 at 22.67% WORST QUARTER: 3Q '98 at -18.20%

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS as of 12/31/98
Inception
1 Year (10/1/96)
<S> <C> <C>
Columbia Small Cap Fund 4.69% 20.64%
Russell 2000 Index -2.55% 10.85%
</TABLE>

12
<PAGE>

ANNUAL FUND OPERATING EXPENSES
(expenses that are paid out of Fund assets)

<TABLE>
<S> <C>
Management Fees 1.00%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.34%
Total Annual Fund Operating Expenses 1.34%
</TABLE>

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C>
$136 $425 $734 $1,613
</TABLE>

<TABLE>
<CAPTION>
1998 1997 1996(1)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD .............. $ 16.65 $ 12.99 $ 12.00
- --------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss ...................... (0.09) (0.08) 0.00*
Net gains or losses on securities
(both realized and unrealized) ........... 0.87 4.51 0.99
- --------------------------------------------------------------------------------------------
Total from investment operations ......... 0.78 4.43 0.99
- --------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Distributions from capital gains ......... 0.00* (0.77) --
- --------------------------------------------------------------------------------------------
Total distributions ...................... -- (0.77) --
- --------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD .................... $ 17.43 $ 16.65 $ 12.99
- --------------------------------------------------------------------------------------------
TOTAL RETURN ...................................... 4.69% 34.10% 7.62%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) ......... $ 160,472 $ 96,431 $ 21,061
Ratio of expenses to average net assets ........... 1.34% 1.46% 1.61%
Ratio of net investment loss to average net assets (0.68)% (0.81)% 0.00%
Portfolio turnover rate ........................... 157.73% 171.75% 32.57%
* Amount represents less than $0.01 per share
</TABLE>
(1) From inception of operations on September 11, 1996. Ratios and portfolio
turnover rates are annualized.
(2) Not annualized.

13
<PAGE>

COLUMBIA REAL ESTATE EQUITY FUND

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

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

Real estate risk means the Fund may be subject to the same types of
risks associated with direct ownership of real estate:
- Declines in property value due to general, local and regional
economic conditions
- Overbuilding and extended vacancies of properties
- Increased property taxes
- Casualty or condemnation losses
- Changes in zoning laws
- Environmental clean up costs

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

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

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

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

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS as of 12/31/98
Inception
1 Year (4/1/94)
<S> <C> <C>
Columbia Real Estate Equity Fund -12.33% 13.01%
NAREIT* Index -17.51% 9.46%
</TABLE>
*National Association of Real Estate Investment Trusts

14
<PAGE>

ANNUAL FUND OPERATING EXPENSES
(expenses that are paid out of Fund assets)

<TABLE>
<S> <C>
Management Fees 0.75%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.26%
Total Annual Fund Operating Expenses 1.01%
</TABLE>

<TABLE>
<CAPTION>
1998 1997 1996 1995 1994(1)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD .................... $ 18.80 $ 16.16 $ 12.71 $ 11.72 $ 12.00
- ---------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .......................... 0.75 0.79 0.77 0.78 0.49
Net gains or losses on securities (both realized
and unrealized) ................................ (3.04) 3.15 3.94 1.12 (0.27)
- ---------------------------------------------------------------------------------------------------------------------
Total from investment operations ............... (2.29) 3.94 4.71 1.90 0.22
- ---------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income ........... (0.66) (0.62) (0.52) (0.49) (0.32)
Distributions from capital gains ............... -- (0.51) (0.53) (0.14) --
Returns of capital ............................. (0.09) (0.17) (0.21) (0.28) (0.18)
- ---------------------------------------------------------------------------------------------------------------------
Total distributions ............................ (0.75) (1.30) (1.26) (0.91) (0.50)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD .......................... $ 15.76 $ 18.80 $ 16.16 $ 12.71 $ 11.72
- ---------------------------------------------------------------------------------------------------------------------
TOTAL RETURN ............................................ -12.33% 24.74% 38.30% 16.86% 1.76%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) ............... $ 164,172 $ 151,554 $ 68,073 $ 21,587 $ 17,402
Ratio of expenses to average net assets ................. 1.01% 1.02% 1.06% 1.18% 1.14%
Ratio of net investment income to average net assets .... 4.60% 4.87% 6.23% 6.71% 6.28%
Portfolio turnover rate ................................. 5.62% 33.55% 45.82% 53.91% 7.61%
</TABLE>
(1) From inception of operations on March 16, 1994. Ratios and portfolio
turnover rates are annualized.
(2) Not annualized.

15
<PAGE>

COLUMBIA BALANCED FUND

[icon] GOAL AND STRATEGY
The Fund seeks high total return by investing in large-cap stocks and
debt securities. Normally, 35% to 65% of assets will be allocated to
stocks and 35% to 65% will be allocated to debt securities. Many of
the stocks will have a history of paying level or rising dividends,
and will be expected to continue paying dividends in the future. The
debt securities will be primarily investment-grade (rated BBB or
higher by S&P or Baa or higher by Moody's), or their unrated
equivalents, including obligations of the U.S. Government, its
agencies and instrumentalities, corporate debt securities,
asset-backed securities, collateralized bonds, and loan and mortgage
obligations.

[icon] INVESTMENT RISK
This Fund has stock market risk, interest rate risk, credit risk and
prepayment risk. You could lose money as a result of your investment.
Stock market risk means the stocks held by the Fund may decline in
value due to the activities and financial prospects of individual
companies or to general market and economic conditions. Interest rate
risk refers to the possibility that your investment may go down in
value when interest rates rise.

Credit risk refers to the possibility that the issuing company may not
be able to pay interest and principal when due.

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

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

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

[GRAPH]

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

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS as of 12/31/98
Inception
1 Year 5 Years (10/1/91)
<S> <C> <C> <C>
Columbia Balanced Fund 20.07% 14.82% 14.35%
S&P 500 Index 28.58% 24.07% 19.95%
Lehman Aggregate Bond Index 8.69% 7.27% 8.05%
</TABLE>

16
<PAGE>

ANNUAL FUND OPERATING EXPENSES
(expenses that are paid out of Fund assets)

<TABLE>
<S> <C>
Management Fees 0.50%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.17%
Total Annual Fund Operating Expenses 0.67%
</TABLE>

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C>
$68 $214 $373 $835
</TABLE>

<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR....................... $ 21.42 $ 20.32 $ 20.08 $ 17.28 $ 17.91
- --------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .......................... 0.72 0.84 0.76 0.73 0.65
Net gains or losses on securities (both realized
and unrealized) .............................. 3.52 2.92 1.58 3.54 (0.64)
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations ............... 4.24 3.76 2.34 4.27 0.01
- --------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income ........... (0.73) (0.83) (0.76) (0.73) (0.64)
Distributions from capital gains ............... (1.76) (1.83) (1.34) (0.74) --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions ............................ (2.49) (2.66) (2.10) (1.47) (0.64)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR ............................ $ 23.17 $ 21.42 $ 20.32 $ 20.08 $ 17.28
- --------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN ............................................ 20.07% 18.74% 11.78% 25.08% 0.10%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in thousands) .................. $ 975,381 $ 792,378 $ 672,593 $ 486,767 $ 249,670
Ratio of expenses to average net assets ................. 0.67% 0.68% 0.66% 0.69% 0.72%
Ratio of net investment income to
average net assets .................................... 3.22% 3.83% 3.82% 4.05% 3.82%
Portfolio turnover rate ................................. 127.57% 148.91% 133.21% 108.04% 98.48%
</TABLE>

17
<PAGE>

COLUMBIA U.S. GOVERNMENT SECURITIES FUND

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

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

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

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

[GRAPH]

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

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS as of 12/31/98
1 Year 5 Years 10 Years
<S> <C> <C> <C>
Columbia U.S. Government Securities Fund 6.43% 5.19% 6.90%
Merrill Lynch 1-3 Treasury Index 6.99% 5.99% 7.37%
</TABLE>

18
<PAGE>

ANNUAL FUND OPERATING EXPENSES
(expenses that are paid out of Fund assets)

<TABLE>
<S> <C>
Management Fees 0.50%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.39%
Total Annual Fund Operating Expenses 0.89%
</TABLE>

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C>
$91 $284 $493 $1,096
</TABLE>

<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR....................... $ 8.29 $ 8.24 $ 8.34 $ 7.99 $ 8.36
- -----------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .......................... 0.38 0.41 0.41 0.45 0.37
Net gains or losses on securities (both realized
and unrealized) ............................. 0.14 0.05 (0.10) 0.35 (0.37)
- -----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations ............... 0.52 0.46 0.31 0.80 --
- -----------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income ........... (0.38) (0.41) (0.41) (0.45) (0.37)
Distributions from capital gains ............... (0.04) -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions ............................ (0.42) (0.41) (0.41) (0.45) (0.37)
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR ............................ $ 8.39 $ 8.29 $ 8.24 $ 8.34 $ 7.99
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN ............................................ 6.43% 5.76% 3.85% 10.21% -0.03%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in thousands) .................. $ 40,578 $ 37,837 $ 40,776 $ 41,842 $ 33,512
Ratio of expenses to average net assets ................. 0.89% 0.87% 0.80% 0.79% 0.81%
Ratio of net investment income to average net assets .... 4.55% 4.99% 4.99% 5.45% 4.51%
Portfolio turnover rate ................................. 182.46% 184.43% 179.38% 253.17% 253.80%
</TABLE>

19
<PAGE>

COLUMBIA FIXED INCOME SECURITIES FUND

[icon] GOAL AND STRATEGY
The Fund seeks a high level of income by investing in a broad range of
debt securities with intermediate to long-term maturities. The Fund
intends to invest 95% of its assets, under normal market conditions,
in investment-grade debt securities (rated BBB or higher by S&P or Baa
or higher by Moody's), or their unrated equivalents, including
obligations of the U.S. Government, its agencies and
instrumentalities, corporate debt securities, asset-backed securities,
collateralized bonds, and loan and mortgage obligations.

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

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

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

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

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

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

[GRAPH]

BEST QUARTER: 2Q '89 at 8.03% WORST QUARTER: 1Q '94 at -3.04%

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS as of 12/31/98
1 Year 5 Years 10 Years
<S> <C> <C> <C>
Columbia Fixed Income Securities Fund 7.44% 6.93% 9.21%
Lehman Aggregate Bond Index 8.69% 7.27% 9.26%
</TABLE>

20
<PAGE>

ANNUAL FUND OPERATING EXPENSES
(expenses that are paid out of Fund assets)

<TABLE>
<S> <C>
Management Fees 0.50%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.15%
Total Annual Fund Operating Expenses 0.65%
</TABLE>

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C>
$66 $208 $362 $810
</TABLE>

<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ...................... $ 13.41 $ 13.08 $ 13.51 $ 12.16 $ 13.44
- ----------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .......................... 0.83 0.85 0.85 0.88 0.83
Net gains or losses on securities (both realized
and unrealized) .............................. 0.14 0.36 (0.43) 1.35 (1.28)
- ----------------------------------------------------------------------------------------------------------------------
Total from investment operations ............... 0.97 1.21 0.42 2.23 (0.45)
- ----------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income ........... (0.83) (0.85) (0.85) (0.88) (0.83)
Distributions from capital gains ............... (0.13) (0.03) -- -- --
- ----------------------------------------------------------------------------------------------------------------------
Total distributions ............................ (0.96) (0.88) (0.85) (0.88) (0.83)
- ----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR ............................ $ 13.42 $ 13.41 $ 13.08 $ 13.51 $ 12.16
TOTAL RETURN ............................................ 7.44% 9.56% 3.37% 18.91% -3.36%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in thousands) .................. $ 422,330 $ 381,333 $ 356,421 $ 316,259 $ 252,090
Ratio of expenses to average net assets ................. 0.65% 0.66% 0.64% 0.65% 0.66%
Ratio of net investment income to average net assets .... 6.15% 6.43% 6.53% 6.80% 6.53%
Portfolio turnover rate ................................. 107.06% 196.28% 178.25% 137.41% 139.81%
</TABLE>

21
<PAGE>

COLUMBIA NATIONAL MUNICIPAL BOND FUND

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

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

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

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

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

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

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

[icon] HISTORICAL PERFORMANCE
Since the Fund is new, it has no historical performance.

22
<PAGE>

ANNUAL FUND OPERATING EXPENSES
(expenses that are paid out of Fund assets)

<TABLE>
<S> <C>
Management Fees 0.50%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.54%(1)
Total Annual Fund Operating Expenses 1.04%
Expense Reimbursement 0.39%(2)
Net Expenses 0.65%
</TABLE>
(1) "Other expenses" are based on the estimated expenses that the Fund expects
to incur in its first year of operation.

(2) For the fiscal year ending December 31,1999, Columbia Funds Management
Company has contractually agreed to reimburse the Fund for all ordinary
expenses of the Fund to the extent necessary to maintain the Fund's Total
Annual Fund Operating Expenses at 0.65%.

<TABLE>
<CAPTION>
1 Year 3 Years
<S> <C>
$66 $208
</TABLE>

[icon] FINANCIAL HIGHLIGHTS
Since the Fund is new, there is no financial information.

23
<PAGE>

COLUMBIA MUNICIPAL BOND FUND

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

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

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

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

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

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

[GRAPH]

BEST QUARTER: 2Q '89 at 5.79% WORST QUARTER: 1Q '94 at -5.01%

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS as of 12/31/98
1 Year 5 Years 10 Years
<S> <C> <C> <C>
Columbia Municipal Bond Fund 5.58% 5.25% 7.08%
Lehman GO* 6.67% 6.12% 7.92%
</TABLE>
*Lehman General Obligation Bond Index

24
<PAGE>

ANNUAL FUND OPERATING EXPENSES
(expenses that are paid out of Fund assets)

<TABLE>
<S> <C>
Management Fees 0.50%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.08%
Total Annual Fund Operating Expenses 0.58%

</TABLE>

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C>
$59 $186 $324 $726
</TABLE>

<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ...................... $ 12.47 $ 12.15 $ 12.37 $ 11.48 $ 12.71
- ------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .......................... 0.58 0.60 0.61 0.63 0.64
Net gains or losses on securities (both realized
and unrealized) .............................. 0.10 0.39 (0.16) 0.96 (1.23)
- ------------------------------------------------------------------------------------------------------------------
Total from investment operations ............... 0.68 0.99 0.45 1.59 (0.59)
- ------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income ........... (0.58) (0.60) (0.61) (0.63) (0.64)
Distributions from capital gains ............... (0.11) (0.07) (0.06) (0.07) --
Total distributions ............................ (0.69) (0.67) (0.67) (0.70) (0.64)
- ------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR ............................ $ 12.46 $ 12.47 $ 12.15 $ 12.37 $ 11.48
- ------------------------------------------------------------------------------------------------------------------
TOTAL RETURN ............................................ 5.58% 8.36% 3.77% 14.15% -4.68%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in thousands) .................. $ 462,809 $ 409,148 $ 375,667 $ 383,796 $ 339,817
Ratio of expenses to average net assets ................. 0.58% 0.57% 0.56% 0.57% 0.57%
Ratio of net investment income to average net assets .... 4.60% 4.87% 5.00% 5.22% 5.36%
Portfolio turnover rate ................................. 16.50% 16.88% 19.03% 21.45% 19.40%
</TABLE>

25
<PAGE>

COLUMBIA HIGH YIELD FUND

[icon] GOAL AND STRATEGY
The Fund seeks a high level of income, with capital appreciation as a
secondary objective, by investing in non-investment grade corporate
debt securities, commonly referred to as "junk bonds." Normally, the
Fund will invest at least 80% of its assets in bonds rated Ba or B by
Moody's or BB or B by S&P. No more than 10% of the Fund's assets will
be invested in securities rated Caa by Moody's or CCC by S&P, and none
of the Fund's assets will be invested in securities below these
grades. By concentrating on the highest quality junk bonds, the Fund
seeks access to higher yielding bonds without assuming all the risk
associated with the broader junk bond market.

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

[icon] WHO SHOULD INVEST?
This Fund is appropriate for:
- Those willing to accept substantial price fluctuations
- Investors seeking to boost the yield of their bond portfolio

[icon] HISTORICAL PERFORMANCE
The bar chart below illustrates how the Fund's total return has varied
from year to year, while the table compares Fund performance over time
to the Lipper High Yield Bond Fund Index, which reflects
equally-weighted performance of the 30 largest mutual funds within its
category. This information may help provide an indication of the
Fund's risks and potential rewards. All figures assume the
reinvestment of dividends. Past performance cannot guarantee future
results.

[GRAPH]

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

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS as of 12/31/98
Inception
1 Year 5 Years (10/1/93)
<S> <C> <C> <C>
Columbia High Yield Fund 6.26% 9.11% 8.80%
Lipper High Yield Index -0.08% 7.63% 8.17%
</TABLE>

26
<PAGE>

ANNUAL FUND OPERATING EXPENSES
(expenses that are paid out of Fund assets)

<TABLE>
<S> <C>
Management Fees 0.60%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.35%
Total Annual Fund Operating Expenses 0.95%
</TABLE>

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C>
$97 $303 $525 $1,166
</TABLE>

<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ...................... $ 10.04 $ 9.94 $ 9.88 $ 9.04 $ 9.94
- --------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .......................... 0.76 0.81 0.81 0.82 0.80
Net gains or losses on securities (both realized
and unrealized) .............................. (0.15) 0.40 0.07 0.84 (0.90)
- --------------------------------------------------------------------------------------------------------------
Total from investment operations ............... 0.61 1.21 0.88 1.66 (0.10)
- --------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income ........... (0.76) (0.81) (0.81) (0.82) (0.80)
Distributions from capital gains ............... (0.05) (0.30) (0.01) -- --
- --------------------------------------------------------------------------------------------------------------
Total distributions ............................ (0.81) (1.11) (0.82) (0.82) (0.80)
- --------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR ............................ $ 9.84 $ 10.04 $ 9.94 $ 9.88 $ 9.04
- --------------------------------------------------------------------------------------------------------------
TOTAL RETURN ............................................ 6.26% 12.70% 9.43% 19.12% -0.92%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in thousands) .................. $ 57,524 $ 39,278 $ 28,818 $ 23,471 $ 12,834
Ratio of expenses to average net assets ................. 0.95% 1.00% 0.93% 1.00% 1.00%
Ratio of net investment income to average net assets .... 7.52% 8.05% 8.29% 8.62% 8.69%
Portfolio turnover rate ................................. 79.22% 124.23% 62.27% 51.60% 36.67%
Ratio of expenses to average net assets
before voluntary reimbursement ........................ 0.95% 1.02% 1.00% 1.06% 1.19%
</TABLE>

27
<PAGE>

COLUMBIA DAILY INCOME COMPANY

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

The Fund's assets will be invested in short-term debt obligations
maturing within one year. The average dollar-weighted maturity of the
portfolio will not exceed 90 days.

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

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

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

[GRAPH]

BEST QUARTER: 2Q '89 at 2.31% WORST QUARTER: 2Q '93 at 0.60%

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS as of 12/31/98
1 Year 5 Years 10 Years
<S> <C> <C> <C>
Columbia Daily Income Company 5.09% 4.87% 5.23%
</TABLE>

28
<PAGE>

ANNUAL FUND OPERATING EXPENSES
(expenses that are paid out of Fund assets)

<TABLE>
<S> <C>
Management Fees 0.47%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.15%
Total Annual Fund Operating Expenses 0.62%
</TABLE>

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C>
$63 $199 $346 $774
</TABLE>

[icon] FINANCIAL HIGHLIGHTS

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

<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ..................... 0.050 0.050 0.048 0.053 0.036
Total from investment operations .......... 0.050 0.050 0.048 0.053 0.036
- ----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income ...... (0.050) (0.050) (0.048) (0.053) (0.036)
- ----------------------------------------------------------------------------------------------------------------------------
Total distributions ....................... (0.050) (0.050) (0.048) (0.053) (0.036)
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR ....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN ....................................... 5.09% 5.11% 4.96% 5.49% 3.68%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in thousands) ............. $ 1,109,141 $ 1,169,096 $ 889,800 $ 800,656 $ 730,067
Ratio of expenses to average net assets ............ 0.62% 0.63% 0.62% 0.64% 0.70%
Ratio of net investment income to average net assets 4.97% 4.99% 4.84% 5.34% 3.68%
</TABLE>

29
<PAGE>

MANAGEMENT

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

For the year ended December 31, 1998, the investment advisory fees paid to
Columbia by each of the Funds, expressed as a percentage of net assets, were as
follows:

<TABLE>
<S> <C>
Columbia Common Stock Fund 0.60%
Columbia Growth Fund 0.56%
Columbia International Stock Fund 1.00%
Columbia Special Fund 0.87%
Columbia Small Cap Fund 1.00%
Columbia Real Estate Equity Fund 0.75%
Columbia Balanced Fund 0.50%
Columbia U.S. Government Securities Fund 0.50%
Columbia Fixed Income Securities Fund 0.50%
Columbia National Municipal Bond Fund NA*
Columbia Municipal Bond Fund 0.50%
Columbia High Yield Fund 0.60%
Columbia Daily Income Company 0.47%
</TABLE>

*Fund Commenced Operations February 1999

COLUMBIA INVESTMENT TEAM

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

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

[Sidenote]
COLUMBIA'S INVESTMENT TEAM IS RESPONSIBLE FOR DEVELOPING INVESTMENT THEMES AND
STRATEGIES FOR THE FUNDS.

30
<PAGE>

COMMON STOCK FUND -- TEAM MANAGED (SINCE 1998).
Based on an analysis of macro-economic factors and the investment environment,
Columbia's Asset Allocation Committee is responsible for determining the sector
or industry weightings for the Fund. Individual members of the Investment Team
then select securities within the sectors or asset classes for which they have
research and analytic responsibility.

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

INTERNATIONAL STOCK FUND -- JAMES M. McALEAR (SINCE 1992).
A Vice President of Columbia, Mr. McAlear joined Columbia in 1992. Previously,
he was a Senior Vice President of IDS International, Inc. (1985-1992) and an
Executive Director for Merrill Lynch Europe (1972-1985). He received a Master of
Arts degree in economics from Michigan State University in 1964.

SPECIAL FUND -- RICHARD J. JOHNSON (SINCE 1998).
A Vice President of Columbia and a Chartered Financial Analyst, Mr. Johnson
joined Columbia in 1994. Previously, he served as a Portfolio Manager and
Analyst at Provident Investment Counsel (1990-1994). A 1980 graduate of
Occidental College, Mr. Johnson received a Master of Business Administration
degree from the Anderson School of Management at UCLA in 1990.

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

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

BALANCED FUND -- TEAM MANAGED (SINCE 1998).
Based on an analysis of macro-economic factors and the investment environment,
Columbia's Asset Allocation Committee is responsible for determining the Fund's
weightings in stocks, bonds and cash investments. That committee is also
responsible for determining the sector or industry

31
<PAGE>

weightings of the equity portion of the Fund. Columbia's Bond Team is
responsible for determining the sector emphasis among different types of fixed
income securities. Individual members of the entire Investment Team then select
the securities within the sector or asset classes for which they have research
and analytic responsibility.

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

FIXED INCOME SECURITIES FUND -- LEONARD A. APLET AND JEFFREY L. RIPPEY (SINCE
1989).
A Vice President of Columbia and a Chartered Financial Analyst, Mr.
Aplet joined Columbia in 1987. Previously, he was an employee of the Farmers
Home Administration (1976-1985). Mr. Aplet received a Master of Business
Administration degree from the University of California at Berkeley in 1987.

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

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

HIGH YIELD FUND -- JEFFREY L. RIPPEY (SINCE 1993).

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

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

[Sidenote]
THE RULES THAT GOVERN PERSONAL TRADING BY INVESTMENT PERSONNEL ARE BASED ON THE
PRINCIPLE THAT EMPLOYEES HAVE A FIDUCIARY DUTY TO CONDUCT THEIR TRADES IN A
MANNER THAT IS NOT DETRIMENTAL TO THE FUNDS OR THEIR SHAREHOLDERS.

32
<PAGE>

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

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

PURCHASING SHARES
Shares of Columbia Funds are available at net asset value ("NAV"), which means
that you pay no sales charges or commissions to invest. A Fund's share price, or
NAV, is determined each business day at the close of regular trading on the New
York Stock Exchange ("NYSE"), typically 4 p.m. Eastern Time. Your investment
will be priced at the NAV next calculated after your order is accepted by the
Funds. Investments received for Columbia Daily Income Company must be converted
to federal funds, so there may be a one-day delay in your investment. All Bond
Funds and Columbia Daily Income Company will begin to earn interest on the day
after the investment is made.

SELLING SHARES
You can sell (redeem) shares any day the NYSE is open for business. Your shares
will be redeemed at their net asset value, calculated after your valid
redemption request is accepted by the Funds. This means you pay no fees to sell
shares.

When redeeming, please keep these important points in mind:

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

Normally, your redemption proceeds will be transmitted the day after the
effective date of the redemption. Proceeds transmitted by way of ACH (Automated
Clearing House) are usually credited to your bank account on

[Sidenote]
INVESTMENT MINIMUMS

FIRST TIME FUND INVESTMENT:
$1,000 Minimum for all Funds but the Special and Small Cap Funds, which
have $2,000 minimums

SUBSEQUENT FUND INVESTMENT:
$100 for all Funds

AUTOMATIC INVESTMENT PLAN:
$50 for all Funds

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

- - Personal checks for investment should be drawn on U.S. banks, must meet
Fund investment minimum requirements and be made payable to Columbia Funds
- - Columbia will not accept cash investments
- - Columbia reserves the right to reject any investment
- - If your investment is cancelled because your check did not clear the bank
or because the Funds were unable to debit your bank account, you will be
responsible for any losses or fees imposed by your bank or attributable to
a loss in value of the shares purchased
- - Columbia may reject any third party checks submitted for investment

33
<PAGE>

the second business day following the request. Except as provided by rules of
the Securities and Exchange Commission, redemption proceeds will be transmitted
to you within seven days of the redemption date.

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

DRAFTWRITING IN COLUMBIA DAILY INCOME COMPANY
If you are a Columbia Daily Income Company shareholder, you may redeem shares by
draft if you have completed the signature card attached to your original
application. Drafts will be furnished to you free of charge. Drafts may not be
written for less than $500. Your investment will earn daily income until your
draft is presented for payment. Of course, your draft can only be paid if you
have sufficient funds invested in Columbia Daily Income Company. A draft is a
redemption and, therefore, subject to the Fund's approval. The draftwriting
service may be terminated upon written notice.

IMPORTANT FUND POLICIES

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

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 busi-

[Sidenote]
WILL A FUND EVER BE CLOSED TO NEW INVESTORS?

While Columbia reserves the right to close a Fund to new investors in the
future, all Funds are now open to new investors. Columbia will carefully
consider a number of factors prior to closing a Fund to new investors, including
a Fund's total assets and its flow of new money. If a Fund does close, existing
Fund shareholders may continue to invest in that Fund. But once a shareholder's
account in that Fund is closed, no new investments will be accepted.

34
<PAGE>

ness. Consequently, the calculation of a Fund's NAV may take place at a time
that is different than when prices are determined for certain foreign funds. 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 Columbia), the
policies and fees may be different than those described here. Banks, brokers,
401(k) plans, financial advisors and financial supermarkets (a "Financial
Intermediary") may charge transaction fees and may set different minimum
investments or limitations on buying or selling shares. Also, because these
arrangements reduce or eliminate the need for the Fund's transfer agent to
provide account services, the Funds and Columbia may pay the Financial
Intermediary a recordkeeping or account servicing fee. All 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 the
Financial Intermediary has agreed to act as an agent for the Fund, the Fund will
be deemed to have received a purchase or redemption order when an authorized
Financial Intermediary or its delegate accepts the order. The order will be
priced at the Fund's net asset value next computed after it is accepted by the
Financial Intermediary or its delegate.

EXCHANGES.
To prevent excessive exchange activity to the detriment of other shareholders,
only four exchanges per Fund are allowed per year. When exchanging into a new
Fund, be sure you read the part of the Prospectus that pertains to the Fund you
exchange into. This privilege may be revoked or modified at any time.

[Sidenote]
WHEN IS A SIGNATURE GUARANTEE NECESSARY?

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

- - Redemption requests over $50,000

- - Redemption checks that are made payable to someone other than those
registered on the account

- - A request to send proceeds to an address or account other than those of
record

- - The mailing address for your redemption check has changed in the last 10
days

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

35
<PAGE>

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

AUTOMATIC WITHDRAWALS.
Automatic withdrawals are redeemed within seven days after the end of the month
or quarter to which they relate. To the extent redemptions for automatic
withdrawals exceed dividends declared on shares in your account, the number of
shares in your account will be reduced. If the value of your account falls below
the Fund minimum, your account is subject to being closed on 60 days written
notice.

INVOLUNTARY REDEMPTIONS.
Upon 60 days prior written notice, a Fund may redeem all of your shares without
your consent if:
- - Your account balance falls below $500
- - You are a U.S. shareholder and fail to provide a certified taxpayer
identification number
- - You are a foreign shareholder and fail to provide a current Form W-8,
"Certificate of Foreign Status."
If your shares are redeemed by the Fund, payment will be made promptly at the
Fund's current net asset value, and may result in a realized capital gain or
loss.

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

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<PAGE>

SHAREHOLDER STATEMENTS.
To stay informed about the status of your account, every Columbia Funds
shareholder receives either monthly or quarterly statements. With the exception
of recurring activity - such as an automatic investment or withdrawal plan, all
transactions in your account will be confirmed with a statement. Financial
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 financial
report and the Funds' annually updated prospectus will be mailed to accounts
with the same Tax Identification Number. In addition, shareholders or multiple
accounts at the same mailing address can eliminate duplicate enclosures for
statements mailed to that address by filing a SAVMAIL form with the Funds. For a
SAVMAIL form or to receive additional copies of any financial report or
Prospectus, please call an Investor Services Representative at 1-800-547-1707.

[Sidenote]
RECEIVE CUSTOMIZED INVESTMENT MANAGEMENT WITH A PRIVATE MANAGEMENT ACCOUNT

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

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

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

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<PAGE>

INSTRUCTIONS FOR ACCOUNTS

OPENING A NEW ACCOUNT

BY MAIL [icon]

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

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

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

You can download an application and prospectus from our website at
www.columbiafunds.com.

BY TELEPHONE [icon]

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.

AUTOMATICALLY [icon]

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

IN PERSON [ICON]

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

7:30-5:00 PST

Visit Columbia Funds, conveniently located in downtown Portland.

BUYING SHARES

BY MAIL [icon]

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

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

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

BY TELEPHONE [icon]

1-800-547-1707
WIRE: Invest using federal funds wired from your bank. Since each Fund has
a different wire number, call us for instructions.

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

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

AUTOMATICALLY [icon]

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

IN PERSON [icon]

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

7:30-5:00 PST

Visit Columbia Funds, conveniently located in downtown Portland.

38
<PAGE>

SELLING (REDEEMING) SHARES

BY MAIL [icon]

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

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

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

BY TELEPHONE [icon]

1-800-547-1707

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

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

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

AUTOMATICALLY [icon]

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

IN PERSON [icon]

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

7:30-5:00 PST

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

TAX-ADVANTAGED INVESTING WITH A COLUMBIA IRA OR RETIREMENT PLAN

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

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

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

RETIREMENT PLANS
A number of retirement plan options are available for small- to mid-size
businesses. Contact Columbia for further information.

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<PAGE>

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

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

INCOME AND CAPITAL GAINS DISTRIBUTIONS

NET INVESTMENT NET REALIZED LONG-
FUND INCOME TERM CAPITAL GAINS

Growth Fund Declared and paid Declared and paid
International Stock Fund in December in December
Special Fund
Small Cap Fund
- --------------------------------------------------------------------------------
Common Stock Fund Declared and paid each Declared and paid
Real Estate Fund calendar quarter in December
Balanced Fund
- --------------------------------------------------------------------------------
Bond Funds Declared daily and Declared and paid in
paid monthly December
- --------------------------------------------------------------------------------
Money Market Fund Declared and paid daily Declared and paid
in December (if any)

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

TAX EFFECT OF DISTRIBUTIONS

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

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<PAGE>

In general, distributions are taxable as follows:

TAXABILITY OF DISTRIBUTIONS

TYPE OF DISTRIBUTION TAXABLE AT

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

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

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

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

[Sidenote]
DISTRIBUTIONS BY THE COLUMBIA STOCK FUNDS WILL CONSIST PRIMARILY OF CAPITAL
GAINS, AND DISTRIBUTIONS BY THE COLUMBIA BOND FUNDS AND THE MONEY MARKET FUND
WILL CONSIST PRIMARILY OF ORDINARY INCOME. [icon]

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<PAGE>

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

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

TAXABILITY OF TRANSACTIONS

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

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

42
<PAGE>

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

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

PORTFOLIO SECURITIES

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

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

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

43
<PAGE>

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

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

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

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

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

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

44
<PAGE>

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

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

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

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

45
<PAGE>

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

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

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

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

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

46
<PAGE>

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

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

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

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

47
<PAGE>

instrumentalities, as well as those rated as shown below by the following rating
agencies:

INVESTMENT-GRADE SECURITIES

RATING AGENCY LONG-TERM DEBT SECURITY SHORT-TERM DEBT SECURITY

Standard & Poors (S&P) At least BBB At least A-3 or SP-2
- --------------------------------------------------------------------------------
Moody's Investors
Services, Inc. (Moody's) At least Baa At least Prime-3 or MIG
4/VMIG4

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

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

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

[Sidenote]
INTEREST RATE RISK REFERS TO THE POSSIBILITY THAT THE NET ASSET VALUE OF THE
FIXED INCOME PORTFOLIOS MAY DECLINE DUE TO AN INCREASE IN INTEREST RATES.

48
<PAGE>

ZERO-COUPON SECURITIES.
The High Yield Fund intends to invest in lower-rated debt securities structured
as zero-coupon securities. A zero-coupon security has no cash-coupon payments.
Instead, the issuer sells the security at a substantial discount from its
maturity value. The interest equivalent received by the investor from holding
this security to maturity is the difference between the maturity value and the
purchase price. Zero-coupon securities are more volatile than cash pay
securities. The Fund accrues income on these securities prior to the receipt of
cash payments. The Fund intends to distribute substantially all of its income to
its shareholders to qualify for pass-through treatment under the tax laws and
may, therefore, need to use its cash reserves to satisfy distribution
requirements.

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

YEAR 2000.
Many of the services provided to the Funds by Columbia and other service
providers depend on the proper functioning of their computer software systems
and those of their outside service providers. Many computer software systems in
use today cannot distinguish the year 2000 from the year 1900 because of the way
dates are encoded and calculated. Such an event could have a negative impact on
handling securities trades, payments of interest and dividends, pricing and
account services. Although, at this time, there is no assurance that there will
be no adverse impact on the Funds, Columbia has informed the Funds that it has
been actively working on necessary changes to its computer systems to prepare
for the year 2000 and expects that its systems, and those of the Funds' outside
service providers, will be ready for the year 2000. However, despite Columbia's
efforts and contingency plans, noncompliant computer systems could have

49
<PAGE>

a material adverse effect on a Fund's business, operations, or financial
condition. Additionally, a Fund's performance could be hurt if a computer-system
failure at a company or governmental unit affects the price of securities the
Fund owns.

EURO CURRENCY CONVERSION.
On January 1, 1999 the European Monetary Union ("EMU") introduced a new single
currency, the Euro, to replace the national currency of participating member
nations. To the extent a Fund holds investments in nations replaced by the Euro,
the investment process, including trading, foreign exchange, payments,
settlements, cash accounts, custody and accounting, will be impacted. Although
it is not possible to predict the ongoing impact of the Euro on the Funds, the
transition and the elimination of currency risk among nations participating in
the EMU may change the economic environment and behavior of investors,
particularly in European markets.

The adoption of the Euro does not reduce the currency risk presented by
fluctuations in value of the U.S. dollar to other currencies, and, in fact,
currency exchange risk may be magnified. Also, increased market volatility may
result. Additional risks that may result include the fact that European issuers
in which a Fund invests may face substantial conversion costs, which may not be
accurately anticipated and may impact issuer profitability and creditworthiness.

ALTERNATIVE MINIMUM TAX.
If you are subject to the federal alternative minimum tax, up to 10% of each of
the Municipal Bond Fund's net assets may be invested in debt securities subject
to the alternative minimum tax.

50
<PAGE>

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

ANNUAL AND SEMIANNUAL REPORTS.
While the Prospectus describes the Funds' potential investments, these reports
detail the Funds' actual investments as of the report date. The reports include
a discussion by Fund management of recent market conditions, economic trends,
and Fund strategies that significantly affected the Fund's 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 SAI, request other information and discuss your
questions about the Funds by contacting the Fund, at:

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

You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, D.C. (telephone 1-800-SEC-0330) or by sending your request and a
duplicating fee to the SEC's Public Reference Section, Washington, D.C.
20549-6009. Reports and other information regarding the Funds are also on the
SEC's Internet website at http://www.sec.gov.

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

51
<PAGE>

[LOGO]

COLUMBIA FUNDS
-1301 S.W. Fifth Avenue, Portland, Oregon 97201-

-DIRECTORS-
------------------------------------------------
James C. George
J. Jerry Inskeep, Jr.
Thomas R. Mackenzie
Richard L. Woolworth

-INVESTMENT ADVISOR-
------------------------------------------------
COLUMBIA FUNDS MANAGEMENT COMPANY
1300 S.W. Sixth Avenue
Portland, Oregon 97201

-LEGAL COUNSEL-
------------------------------------------------
STOEL RIVES LLP
900 S.W. Fifth Avenue, Suite 2300
Portland, Oregon 97204-1268

-AUDITORS-
------------------------------------------------
PRICEWATERHOUSECOOPERS LLP
1300 S.W. Fifth Avenue, Suite 3100
Portland, Oregon 97201

-TRANSFER AGENT-
------------------------------------------------
COLUMBIA TRUST COMPANY
1301 S.W. Fifth Avenue
Portland, Oregon 97201

FUNDS DISTRIBUTED BY PROVIDENT DISTRIBUTORS, INC.

<PAGE>

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

[LOGO]

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

COLUMBIA FUNDS

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

PROSPECTUS AND 1998 ANNUAL REPORT

FEBRUARY 24, 1999

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

COLUMBIA
GROWTH
FUND

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

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

<PAGE>

February 24, 1999
PROSPECTUS
- --------------------------------------------------------------------------------
TABLE OF CONTENTS

<TABLE>
<CAPTION>
<S> <C> <C>
INTRODUCTION 2 A TEAM APPROACH TO INVESTING
3 RISK OF INVESTING IN MUTUAL FUNDS
3 STOCK FUND INVESTING
4 COLUMBIA GROWTH FUND
- --------------------------------------------------------------------------------
MANAGEMENT 6 COLUMBIA INVESTMENT TEAM
- --------------------------------------------------------------------------------
INVESTOR 7 BUYING OR SELLING SHARES
SERVICES 7 EXCHANGING SHARES
7 IMPORTANT FUND POLICIES
8 DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
MORE ABOUT 9 PORTFOLIO SECURITIES
THE FUND 9 MORE ABOUT RISKS
- --------------------------------------------------------------------------------
ANNUAL REPORT 12
</TABLE>

<PAGE>

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

This Prospectus is designed for use by participants of employee benefit plans
and provides important information about investing in Columbia Growth Fund,
Inc. (the "Fund") by describing the following:

[icon] GOAL AND STRATEGY
[icon] INVESTMENT RISKS
[icon] WHO SHOULD INVEST
[icon] HISTORICAL PERFORMANCE
[icon] EXPENSES
[icon] FINANCIAL HIGHLIGHTS

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

A TEAM APPROACH TO INVESTING
Columbia takes a unique approach to investing, where the Fund is managed using
the expertise of the entire investment team. Through this team effort,
individual analysts and portfolio managers have responsibility for tracking
specific sectors or industries of the market, identifying securities within
those areas that are expected to reward shareholders.

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

2
<PAGE>

RISK OF INVESTING IN MUTUAL FUNDS
Mutual funds are not bank deposits and are not insured or endorsed by any bank,
government agency or the FDIC. The value of your investment will likely
fluctuate. Because you could lose money by investing in the Fund, please be sure
to read all the risk disclosure carefully before investing. A detailed
discussion of investment risks is located at the back of this Prospectus under
"More About the Fund."

STOCK FUND INVESTING
Stock funds invest principally in the stocks of public companies. Companies
sell shares of stock to help finance their business. Returns on stocks are
earned through a combination of dividends paid on each share and any increase
or decrease in the market price of the shares. The smaller the market
capitalization of a company, generally the less likely it will pay dividends.
That's because small companies tend to use excess earnings to help fund
growth. There are three generally accepted categories for market
capitalization of U.S. Companies, which is the total value of a company's
outstanding stock. LARGE-CAP generally refers to companies with $7 billion or
more in outstanding stock, MID-CAP is considered to have $1.5 to $7 billion
and SMALL-CAP is considered to have less than $1.5 billion. Generally, the
smaller a company's market cap, the more volatile its stock is likely to be.

Generally, stock fund returns fluctuate more than bond and money market fund
returns, but stocks historically have offered investors the most long-term
growth. A stock fund varies in its level of risk or volatility, depending upon
the types and average market capitalization of the stocks it holds.

3
<PAGE>

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

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

[GRAPH]

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

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS as of 12/31/98
1 Year 5 Years 10 Years
<S> <C> <C> <C>
Columbia Growth Fund 30.34% 21.32% 18.73%
S&P 500 Index 28.58% 24.07% 19.21%
</TABLE>

4
<PAGE>

ANNUAL FUND OPERATING EXPENSES
(expenses that are paid out of Fund assets)

<TABLE>
<S> <C>
Management Fees 0.56%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.12%
Total Annual Fund Operating Expenses 0.68%
</TABLE>

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C>
$69 $218 $379 $847
</TABLE>

<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ...................... $ 34.34 $ 30.74 $ 29.84 $ 24.84 $ 26.38
- ----------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .......................... 0.03 0.19 0.19 0.31 0.29
Net gains or losses on securities (both realized
and unrealized) ............................... 10.39 7.90 6.04 7.86 (0.46)
- ----------------------------------------------------------------------------------------------------------------------------
Total from investment operations ............... 10.42 8.09 6.23 8.17 (0.17)
- ----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends from net investment income ........... (0.08) (0.17) (0.17) (0.29) (0.26)
Distributions from capital gains ............... (2.17) (4.32) (5.16) (2.88) (1.11)
- ----------------------------------------------------------------------------------------------------------------------------
Total distributions ............................ (2.25) (4.49) (5.33) (3.17) (1.37)
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR ............................ $ 42.51 $ 34.34 $ 30.74 $ 29.84 $ 24.84
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN ............................................ 30.34% 26.32% 20.80% 32.98% -0.63%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in thousands) .................. $ 1,753,024 $ 1,324,918 $ 1,064,100 $ 848,731 $ 591,694
Ratio of expenses to average net assets ................. 0.68% 0.71% 0.71% 0.75% 0.81%
Ratio of net investment income to average net assets .... 0.21% 0.55% 0.63% 1.14% 1.12%
Portfolio turnover rate ................................. 105.25% 95.67% 75.49% 94.73% 79.28%
</TABLE>

5
<PAGE>

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

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

For the year ended December 31, 1998, the investment advisory fee paid to
Columbia by the Fund, expressed as a percentage of net assets, was 0.56%.

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

Since 1992, Alexander S. Macmillan has been responsible for implementing and
maintaining the investment themes and strategies developed by the Team, while
adhering to the specific goal and strategy of the Fund. A Vice President of
Columbia and a Chartered Financial Analyst, Mr. Macmillan joined Columbia in
1989. Previously, he was a Vice President and Portfolio Manager for Gardner &
Preston Moss (1982-1989). He received a Master of Business Administration
degree from the Amos Tuck School at Dartmouth College in 1980.

PERSONAL TRADING
Members of the Investment Team and other employees of the Fund 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 Fund and Columbia. The rules that
govern personal trading by investment personnel are based on the principle that
employees owe a fiduciary duty to conduct their trades in a manner that is not
detrimental to the Fund or its shareholders. For more information on the Code of
Ethics and specific trading restrictions, see the Fund's Statement of Additional
Information.

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

6
<PAGE>

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

This section is designed to acquaint you with the different services and
policies associated with an investment in the Fund.

BUYING OR SELLING SHARES
Shares of the Fund offered by this Prospectus are available through your
employer retirement plan. Your plan administrator or employee benefits
office can provide you with information about how to buy and sell shares of
the Fund.

EXCHANGING SHARES
Your retirement plan may permit you to exchange your investment in shares of
the Fund for shares of another Fund in the Columbia Family of Funds or for
shares of another option available under the plan. See your plan
administrator or employee benefits office for details on the rules in your
plan governing exchanges.

IMPORTANT FUND POLICIES

HOW SHARES ARE PRICED.
The Fund's share price, or net asset value ("NAV"), is determined each
business day that the New York Stock Exchange ("NYSE") is open for business,
at the close of regular trading on the exchange, typically 4 p.m. Eastern
time. Your purchase or redemption order will be priced at the NAV next
calculated after your order is accepted by the Fund. The NAV of the Fund is
calculated by subtracting the Fund's liabilities from its assets and dividing
the result by the number of outstanding shares. The 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
market value.

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

INCOME AND CAPITAL GAINS DISTRIBUTIONS
The 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) is declared and paid
in December, and net long-term capital gains (gains realized on the sale of a
security by the Fund) are declared and paid

7
<PAGE>

in December. Participants in employer-sponsored retirement plans must
reinvest all distributions.

TAX EFFECT OF DISTRIBUTIONS

SHAREHOLDERS OF THE FUND.
Distributions from the Fund are generally not taxable to shareholders who
purchase Fund shares through an employer-sponsored retirement plan. Instead, the
distributions will accumulate in your retirement plan account on a tax-deferred
basis, and taxes normally will be paid when you make withdrawals from your
account. Please consult your plan administrator for more information about the
tax consequences of making purchases or withdrawals through your
employer-sponsored retirement plan.

TAXABILITY OF TRANSACTIONS.

If you purchase your Fund shares through an employer-sponsored retirement
plan account, the exchange of Fund shares for another investment fund
available under your plan will generally not result in any taxable income.
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 Fund. You should consult your tax professional
or plan administrator about the tax consequences of investing
in the Fund and your retirement plan.
--------------------------------------------------------------

MORE ABOUT THE FUND
- ---------------------------

This section contains additional information about the Fund and its risks. For a
more detailed description of the Fund and its investment strategy and risks,
please request a copy of the Fund's Statement of Additional Information.

8
<PAGE>

PORTFOLIO SECURITIES

TEMPORARY INVESTMENTS.
Under adverse market conditions, the Fund may depart from its principal
investment strategies by taking defensive positions in response to adverse
economic or market conditions. When the Fund assumes a temporary defensive
position, it generally will not invest in securities designed to achieve its
investment goal.

PORTFOLIO TURNOVER.
The Fund generally intends to purchase securities for long-term investment
rather than short-term gains. When circumstances warrant, however, the 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 the Fund's
transaction costs, including brokerage commissions. Historical portfolio
turnover rates for the Fund are under "Financial Highlights" in the description
of the Fund at the beginning of this Prospectus.

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

YEAR 2000.
Many of the services provided to the Fund by Columbia and other service
providers depend on the proper functioning of their computer software systems
and those of their outside service providers. Many computer software systems in
use today cannot distinguish the year 2000 from the year 1900 because of the way
dates are encoded and calculated. Such an event could have a negative impact on
handling securities trades, payments of interest and dividends, pricing and
account services. Although, at this time, there is no assurance that there will
be no adverse impact on the Fund, Columbia has informed the Fund that it has
been actively working on necessary changes to its computer systems to prepare
for the year 2000 and expects that its systems, and those of the Fund's outside
service providers, will be ready for the year 2000. However, despite Columbia's
efforts and contingency plans, noncompliant computer systems could have a
material adverse effect on the Fund's business, operations, or financial
condition. Additionally, the Fund's performance could be hurt if a
computer-system failure at a company or governmental unit affects the price
of securities the Fund owns.

9
<PAGE>

EURO CURRENCY CONVERSION.
On January 1, 1999 the European Monetary Union ("EMU") introduced a new
single currency, the Euro, to replace the national currency of participating
member nations. To the extent the Fund holds investments in nations'
currencies replaced by the Euro, the investment process, including trading,
foreign exchange, payments, settlements, cash accounts, custody and
accounting, will be impacted. Although it is not possible to predict the
ongoing impact of the Euro on the Fund, the transition and the elimination of
currency risk among nations participating in the EMU may change the economic
environment and behavior of investors, particularly in European markets.

10
<PAGE>

FOR YOUR INFORMATION You can find additional information about the Fund in
the following documents:

ANNUAL AND SEMIANNUAL REPORTS.
While the Prospectus describes the 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 Fund's performance during the reporting period.

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

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

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

You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, D.C. (telephone 1-800-SEC-0330) or by sending your request and a
duplicating fee to the SEC's Public Reference Section, Washington, D.C.
20549-6009. Reports and other information regarding the Fund are also on the
SEC's Internet website at http://www.sec.gov.

SEC file number: 811-1449

<PAGE>

1998 ANNUAL REPORT

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

An Overview of the Markets

A LOOK BACK AT 1998

1998 was an extraordinary year in many respects, most notably in the divergence
of returns among different types of investments. Volatility and uncertainty
characterized the markets, especially in the latter half of the year. Stock
investors took a wild ride as the S&P 500 rose 17.71% in the first half, then
fell 14.46% in the month of August, only to recover the year's gains and finish
up 28.58% for the full year. This marked an unprecedented fourth consecutive
year of greater than 20% returns for U.S. equity markets.

Although market breadth improved in the fourth quarter, the smaller cap Russell
2000 Index ended the year with a loss of 2.55%. International markets generally
performed poorly with the exception of Europe, which rose in anticipation of the
benefits of the impending European Monetary Union.

The bond market proved no exception to this pattern of divergent returns.
Investors' flight to quality pushed yields on 30-year U.S. Treasuries to their
lowest level in 30 years. However, yields on corporate, municipal and
mortgage-backed debt barely budged. The difference between rates on bonds issued
by the Treasury and those issued by corporations or municipalities remains at
historically high levels.

YIELD SPREAD: THE DIFFERENCE BETWEEN
CORPORATES AND TREASURIES*

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
INTEREST RATE %
<S> <C>
1/5/1990 1.10
1/12/1990 1.05
1/19/1990 1.05
1/26/1990 1.00
2/2/1990 1.00
2/9/1990 1.00
2/16/1960 1.00
2/23/1990 1.00
3/2/1990 1.00
3/9/1990 0.95
3/16/1990 0.95
3/23/1990 0.95
3/30/1990 0.90
4/6/1990 0.90
4/13/1990 0.90
4/20/1990 0.90
4/27/1990 0.90
5/4/1990 0.90
5/11/1990 0.90
5/18/1990 0.90
5/25/1990 0.90
6/1/1990 0.90
6/8/1990 0.90
6/15/1990 0.90
6/22/1990 0.90
6/26/1990 0.90
7/6/1990 0.90
7/13/1990 0.90
7/20/1990 0.90
7/27/1990 0.90
8/3/1990 0.90
8/10/1990 0.90
8/17/1990 0.90
8/24/1990 0.90
8/31/1990 0.90
9/7/1990 0.90
9/14/1990 0.90
9/21/1990 0.90
9/28/1990 1.00
10/5/1990 1.10
10/12/1990 1.10
10/19/1990 1.15
10/26/1990 1.20
11/2/1990 1.20
11/9/1990 1.20
11/16/1990 1.25
11/23/1990 1.25
11/30/1990 1.25
12/7/1990 1.20
12/14/1990 1.20
12/21/1990 1.20
12/28/1990 1.20
1/4/1991 1.20
1/11/1991 1.20
1/18/1991 1.20
1/25/1991 1.20
2/1/1991 1.15
2/8/1991 1.15
2/15/1991 1.15
2/22/1991 1.10
3/1/1991 1.00
3/8/1991 1.00
3/15/1991 0.95
3/22/1991 0.95
3/29/1991 0.90
4/5/1991 0.90
4/12/1991 0.90
4/19/1991 0.90
4/26/1991 0.90
5/3/1991 0.90
5/10/1991 0.90
5/17/1991 0.90
5/24/1991 0.90
5/31/1991 0.85
6/7/1991 0.85
6/14/1991 0.85
6/21/1991 0.85
6/28/1991 0.85
7/5/1991 0.90
7/12/1991 0.90
7/19/1991 0.90
7/26/1991 0.90
8/2/1991 0.90
8/9/1991 0.90
8/16/1991 0.90
8/23/1991 0.90
8/30/1991 0.90
9/6/1991 0.90
9/13/1991 0.90
9/20/1991 0.90
9/27/1991 0.95
10/4/1991 0.95
10/11/1991 0.95
10/18/1991 0.90
10/25/1991 0.90
11/1/1991 0.90
11/8/1991 0.85
11/15/1991 0.85
11/22/1991 0.85
11/29/1991 0.85
12/6/1991 0.85
12/13/1991 0.85
12/20/1991 0.85
12/27/1991 0.85
1/3/1992 0.85
1/10/1992 0.80
1/17/1992 0.80
1/24/1992 0.80
1/31/1992 0.75
2/7/1992 0.75
2/14/1992 0.70
2/21/1992 0.70
2/28/1992 0.70
3/6/1992 0.70
3/13/1992 0.70
3/20/1992 0.70
3/27/1992 0.73
4/3/1992 0.75
4/10/1992 0.75
4/17/1992 0.78
4/24/1992 0.78
5/1/1992 0.77
5/8/1992 0.69
5/15/1992 0.65
5/22/1992 0.65
5/29/1992 0.65
6/5/1992 0.68
6/12/1992 0.65
6/19/1992 0.65
6/26/1992 0.65
7/3/1992 0.65
7/10/1992 0.64
7/17/1992 0.64
7/24/1992 0.65
7/31/1992 0.67
8/7/1992 0.67
8/14/1992 0.72
8/21/1992 0.75
8/28/1992 0.75
9/4/1992 0.76
9/11/1992 0.76
9/18/1992 0.78
9/25/1992 0.80
10/2/1992 0.77
10/9/1992 0.87
10/16/1992 0.87
10/23/1992 0.87
10/30/1992 0.84
11/6/1992 0.84
11/13/1992 0.81
11/20/1992 0.77
11/27/1992 0.77
12/4/1992 0.76
12/11/1992 0.76
12/18/1992 0.76
12/25/1992 0.76
1/1/1993 0.76
1/8/1993 0.73
1/15/1993 0.71
1/22/1993 0.70
1/29/1993 0.70
2/5/1993 0.70
2/12/1993 0.70
2/19/1993 0.67
2/26/1993 0.67
3/5/1993 0.65
3/12/1993 0.65
3/19/1993 0.66
3/26/1993 0.66
4/2/1993 0.66
4/9/1993 0.67
4/16/1993 0.68
4/23/1993 0.65
4/30/1993 0.65
5/10/1993 0.65
5/17/1993 0.65
5/24/1993 0.65
5/31/1993 0.65
6/7/1993 0.65
6/14/1993 0.65
6/21/1993 0.63
6/28/1993 0.63
7/6/1993 0.63
7/12/1993 0.63
7/19/1993 0.63
7/26/1993 0.62
8/2/1993 0.62
8/9/1993 0.62
8/16/1993 0.60
8/23/1993 0.60
8/30/1993 0.60
9/6/1993 0.62
9/13/1993 0.62
9/20/1993 0.63
9/27/1993 0.65
10/4/1993 0.65
10/11/1993 0.65
10/18/1993 0.65
10/25/1993 0.65
11/1/1993 0.63
11/8/1993 0.63
11/15/1993 0.63
11/22/1993 0.63
11/29/1993 0.63
12/6/1993 0.62
12/13/1993 0.61
12/20/1993 0.61
12/27/1993 0.61
1/3/1994 0.61
1/10/1994 0.57
1/17/1994 0.57
1/24/1994 0.55
1/31/1994 0.53
2/7/1994 0.53
2/14/1994 0.53
2/21/1994 0.53
2/28/1994 0.55
3/7/1994 0.55
3/14/1994 0.57
3/21/1994 0.59
3/28/1994 0.59
4/4/1994 0.59
4/11/1994 0.61
4/18/1994 0.62
4/25/1994 0.62
5/2/1994 0.62
5/9/1994 0.65
5/16/1994 0.65
5/23/1994 0.65
5/30/1994 0.65
6/6/1994 0.65
6/13/1994 0.62
6/20/1994 0.62
6/27/1994 0.58
7/4/1994 0.58
7/11/1994 0.58
7/18/1994 0.58
7/25/1994 0.56
8/1/1994 0.56
8/8/1994 0.56
8/15/1994 0.56
8/22/1994 0.53
8/29/1994 0.53
9/5/1994 0.53
9/12/1994 0.53
9/19/1994 0.52
9/26/1994 0.52
10/3/1994 0.56
10/10/1994 0.56
10/17/1994 0.56
10/24/1994 0.56
10/31/1994 0.56
11/7/1994 0.56
11/14/1994 0.56
11/21/1994 0.59
11/28/1994 0.60
12/5/1994 0.60
12/12/1994 0.63
12/19/1994 0.63
12/26/1994 0.63
1/3/1995 0.63
1/9/1995 0.63
1/16/1995 0.63
1/23/1995 0.60
1/30/1995 0.60
2/6/1995 0.58
2/13/1995 0.58
2/20/1995 0.57
2/27/1995 0.57
3/6/1995 0.57
3/13/1995 0.56
3/20/1995 0.56
3/27/1995 0.56
4/3/1995 0.56
4/10/1995 0.56
4/17/1995 0.54
4/24/1995 0.53
5/1/1995 0.53
5/8/1995 0.49
5/15/1995 0.47
5/22/1995 0.47
5/30/1995 0.52
6/5/1995 0.56
6/12/1995 0.62
6/19/1995 0.62
6/26/1995 0.62
7/3/1995 0.62
7/10/1995 0.62
7/24/1995 0.62
7/31/1995 0.57
8/7/1995 0.57
8/14/1995 0.57
8/21/1995 0.57
8/28/1995 0.56
9/4/1995 0.56
9/11/1995 0.56
9/18/1995 0.58
9/25/1995 0.58
10/2/1995 0.57
10/9/1995 0.57
10/16/1995 0.57
10/23/1995 0.57
10/30/1995 0.62
11/6/1995 0.64
11/13/1995 0.64
11/20/1995 0.64
11/27/1995 0.64
12/4/1995 0.58
12/11/1995 0.58
12/18/1995 0.57
1/2/1996 0.57
1/8/1996 0.55
1/15/1996 0.55
1/22/1996 0.55
1/29/1996 0.55
2/5/1996 0.54
2/12/1996 0.52
2/19/1996 0.52
2/26/1996 0.52
3/4/1996 0.52
3/11/1996 0.52
3/25/1996 0.52
4/1/1996 0.52
4/8/1996 0.52
4/15/1996 0.55
4/22/1996 0.54
4/29/1996 0.51
5/6/1996 0.51
5/13/1996 0.50
5/20/1996 0.50
5/27/1996 0.50
6/3/1996 0.50
6/10/1996 0.50
6/17/1996 0.50
6/24/1996 0.50
7/1/1996 0.50
7/8/1996 0.50
7/15/1996 0.50
7/22/1996 0.50
7/29/1996 0.50
8/12/1996 0.50
9/3/1996 0.50
9/9/1996 0.50
9/16/1996 0.50
9/23/1996 0.50
9/30/1996 0.50
10/7/1996 0.50
10/14/1996 0.50
10/21/1996 0.50
10/28/1996 0.50
11/4/1996 0.50
11/11/1996 0.48
11/18/1996 0.48
11/25/1996 0.50
12/2/1996 0.50
12/9/1996 0.52
12/16/1996 0.53
12/30/1996 0.53
1/6/1997 0.53
1/13/1997 0.52
1/20/1997 0.52
1/27/1997 0.50
2/3/1997 0.50
2/10/1997 0.50
2/17/1997 0.50
2/24/1997 0.49
3/3/1997 0.48
3/10/1997 0.48
3/17/1997 0.52
3/24/1997 0.52
3/31/1997 0.55
4/14/1997 0.55
4/21/1997 0.55
4/28/1997 0.56
5/5/1997 0.58
5/12/1997 0.58
5/19/1997 0.56
5/26/1997 0.54
6/2/1997 0.54
6/9/1997 0.51
6/16/1997 0.51
6/23/1997 0.51
7/7/1997 0.51
7/14/1997 0.51
7/21/1997 0.51
7/28/1997 0.50
8/4/1997 0.50
8/11/1997 0.50
8/18/1997 0.54
8/25/1997 0.56
9/1/1997 0.56
9/8/1997 0.58
9/15/1997 0.58
9/29/1997 0.58
10/6/1997 0.58
10/13/1997 0.59
10/20/1997 0.59
10/27/1997 0.64
11/3/1997 0.72
11/10/1997 0.72
11/17/1997 0.72
11/24/1997 0.70
12/1/1997 0.68
12/8/1997 0.66
12/15/1997 0.66
12/22/1997 0.70
12/29/1997 0.70
1/5/1998 0.70
1/12/1998 0.70
1/20/1998 0.74
1/26/1998 0.74
2/2/1998 0.75
2/9/1998 0.75
2/17/1998 0.70
2/23/1998 0.70
3/2/1998 0.70
3/9/1998 0.67
3/16/1998 0.67
3/23/1998 0.68
3/30/1998 0.68
4/10/1998 0.68
4/17/1998 0.67
4/24/1998 0.67
5/1/1998 0.67
5/8/1998 0.67
5/15/1998 0.68
5/22/1998 0.68
5/29/1998 0.71
6/5/1998 0.75
6/12/1998 0.83
6/19/1998 0.83
6/26/1998 0.84
7/6/1998 0.84
7/20/1998 0.84
7/27/1998 0.84
8/10/1998 0.88
8/17/1998 0.92
8/24/1998 0.96
8/31/1998 1.14
9/8/1998 1.12
9/14/1998 1.12
9/21/1998 1.12
9/28/1998 1.12
10/5/1998 1.12
10/12/1998 1.25
10/19/1998 1.30
10/26/1998 1.30
11/2/1998 1.25
11/9/1998 1.13
11/16/1998 1.10
11/23/1998 1.00
11/30/1998 1.00
12/4/1998 1.08
12/11/1998 1.12
SOURCE - COLUMBIA MANAGEMENT COMPANY
</TABLE>

* 10-Year A-rated Industrial Bonds versus 10-Year Treasury Bonds: the
higher the plot points, the greater the differences in yields.

In order to calm financial markets and head off the effects of a slower world
economy on the U.S., the Federal Reserve lowered short-term interest rates by a
total of .75% in three steps during late 1998, leading the markets to stage a
spectacular recovery. Technology and Internet stocks, pharmaceutical companies,
consumer retailers and communications names were among the best performing
sectors in 1998, while commodity, real estate, oils and basic industry stocks
lagged for the year.

MARKET OUTLOOK

The outlook for the U.S. economy seems to be more dependent than ever on
developments overseas, and conditions in many regions around the world are a
cause for concern. While it seems clear that world growth is slowing, it is
still difficult to judge how this will affect the domestic economy. It appears
likely that there will be continued pressure on U.S. corporate profits stemming
from overseas activity in 1999.

We expect U.S. economic growth to slow from the rapid pace of previous years.
However, after the concerted efforts of the Federal Reserve and other central
banks worldwide to reduce rates, we do not anticipate a recession. These easing
actions have steadied financial markets so that share prices have recovered,
credit spreads have stabilized and new issue activity has resumed.

Buoyed by low interest rates, consumer spending has grown faster than income
recently, generating a negative savings rate. Such strong growth in demand seems
unsustainable and consumers may be quick to cut back if their expectations are
deflated. Given these concerns, Wall Street earnings estimates for 1999 seem
optimistic. The present benign inflation environment, however, leaves the Fed
ample room to adjust rates down to reassure investors and refuel consumption.

12
<PAGE>

1998 ANNUAL REPORT

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

AN OVERVIEW OF THE MARKETS

ANALYSTS' 1999 EARNINGS ESTIMATES
MAY BE OPTIMISTIC

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
(% CHANGE)
<S> <C>
1994
Q1 16.50%
Q2 15.10%
Q3 19.80%
Q4 21.50%
1995
Q1 22.50%
Q2 22.00%
Q3 19.50%
Q4 13.20%
1996
Q1 10.40%
Q2 11.50%
Q3 9.70%
Q4 14.20%
1997
Q1 15.80%
Q2 11.70%
Q3 13.00%
Q4 10.30%
1998
Q1 5.00%
Q2 5.10%
Q3 (7.70)%
Q4 est. (1.50)%
1999 est.
Q1 7.20%
Q2 12.00%
Q3 23.70%
Q4 23.80%
SOURCE: I/B/E/S Inc.
</TABLE>

INVESTMENT STRATEGY

Throughout 1998, a narrow universe of growth stocks saw strong price gains,
while the broader market lagged, due to ongoing concerns about profit growth.
For example, 10 companies in the S&P 500 Index accounted for 43% of its gain.
Expectations for moderating growth in the U.S. and around the world lead us to
emphasize companies with strong records of delivering solid earnings gains in a
more difficult environment. We expect that divergence in earnings and profit
growth prospects among various sectors could lead to a continuing gap between
the best and worst performing groups over the coming months.

Columbia's focus remains on stocks we expect to be favorably influenced by such
investment themes as "Aging of America" and "Technology Age." While we believe
the long-term trends underlying the themes remain in place, we are taking a more
selective investment approach to groups within the themes. To this end, we are
concentrating on industries we expect to benefit from growth in secular
spending, which can continue to expand even in a downturn. Therefore, the Fund
is positioned with strong weightings in technology, communications and
pharmaceutical stocks.

Given our expectations for slower growth, we expect interest rates to remain
stable or trend lower. It seems unlikely that the Fed will take action to raise
or lower its key rate in the near term until conditions in the U.S. and overseas
become clearer. Inflation seems to be under control, and the U.S. budget surplus
continues to reduce the government's demand for new funds. In this environment,
both nominal and real yields (real yields are interest rates minus inflation) on
bonds look particularly attractive.

So that you may evaluate how the Fund performed given this economic and
financial market backdrop, the following page contains a discussion of the
Fund's investment activity during 1998, along with a graph illustrating the
growth of $10,000 over various time periods. The Fund compares its performance
to a relevant benchmark. Unlike the Fund, however, the benchmark index is not
actively managed and has no operating expenses, portfolio transaction costs or
cash flows.

Thank you for your investment. We appreciate your confidence and look forward to
serving your investment needs in the years to come.

THE INVESTMENT TEAM
COLUMBIA FUNDS
FEBRUARY 1999

13
<PAGE>
INVESTMENT REVIEW
- --------------------------------------------------------------------------------

[LOGO]
- -------------------------------------------------
-------------------------------------------------

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

Columbia Growth Fund gained 30.34% for the year ended December 31, 1998,
outperforming the S&P 500, which returned 28.58% for the same period. In a
volatile year for the stock market, the Fund maintained its focus on stocks with
dependable earnings growth. Throughout the year, investment themes also shaped
stock selection, as we targeted issues poised to profit from the aging of
America and technological advances around the world. This led to an emphasis in
health care and segments of technology and financial stocks.

TOP TEN HOLDINGS

<TABLE>
<CAPTION>
% of Net Assets
<S> <C>
Microsoft Corp. 4.5
Cisco Systems, Inc. 4.0
Abercrombie & Fitch Co. 3.4
General Electric Co. 3.2
Pfizer, Inc. 3.2
Tyco International Ltd. 3.0
Bristol-Myers Squibb Co. 2.8
Warner-Lambert Co. 2.7
MCI Worldcom, Inc. 2.5
Safeway, Inc. 2.3
</TABLE>

As of December 31, 1998

With consumer spending and economic growth healthy in the first quarter of the
year, the Fund benefited from increased exposure to domestic and consumer
issues. By the third quarter, however, fears escalated that consumer spending
would wane as individuals saw their wealth decrease with the sharp decline in
stock prices. Concerns about a slowdown in spending depressed the Fund's
consumer-oriented holdings, such as retail, radio broadcasting and cruise lines.
We anticipated the Federal Reserve Board would adopt more stimulative policies,
so we maintained and then increased our exposure to these consumer issues.

Responding to fears of an economic slowdown, the Fed lowered rates three times
between September 29 and November 17. This, combined with news of fiscal policy
changes in Brazil and Japan, rekindled consumer and investor confidence. In the
fourth quarter, the Fund's consumer issues advanced sharply, and we further
increased exposure to this sector, while purchasing more technology stocks and
other higher growth issues. Much of the Fund's one-year return can be attributed
to its 25.59% gain in the fourth quarter.

SECTORS OF EMPHASIS

<TABLE>
<CAPTION>
% of Net Assets
<S> <C>
Technology 21.3
Health 20.0
Consumer Non-Durables 14.0
Finance 13.0
Food and Household Products 8.1
</TABLE>

As of December 31, 1998

Despite the trend of strong consumer spending, we believe that growth of U.S.
corporate earnings and world economies will slow. Accordingly, we will continue
to emphasize issues that offer dependable earnings growth in a slowing economy.

GROWTH OF $10,000 OVER 20 YEARS

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 1998

<S> <C> <C>
CGF S&P 500
1 Year 30.34% 28.58%
5 Years 21.32% 24.07%
10 Years 18.73% 19.21%
20 Years 18.90% 17.71%
COLUMBIA GROWTH FUND S&P 500
12/31/1978 $10,000.00 $10,000.00
12/31/1979 $14,057.00 $11,835.00
12/31/1980 $19,662.93 $15,663.62
12/31/1981 $18,996.36 $14,888.27
12/31/1982 $27,841.06 $18,089.25
12/31/1983 $33,815.75 $22,144.86
12/31/1984 $31,928.84 $23,508.99
12/31/1985 $42,168.41 $30,928.42
12/31/1986 $45,086.47 $36,693.48
12/31/1987 $51,732.21 $38,627.23
12/31/1988 $57,324.46 $45,020.03
12/31/1989 $74,000.15 $59,250.86
12/31/1990 $71,550.75 $57,443.71
12/31/1991 $96,064.03 $74,946.81
12/31/1992 $107,418.80 $80,657.76
12/31/1993 $121,393.99 $88,788.06
12/31/1994 $120,629.20 $89,960.06
12/31/1995 $160,412.72 $123,767.05
12/31/1996 $193,778.56 $152,183.97
12/31/1997 $244,781.08 $202,952.54
12/31/1998 $319,144.00 $260,920.00
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
</TABLE>

14
<PAGE>
SCHEDULE OF INVESTMENTS
-----------------------------------------------------------------

[LOGO]
- ------------------------- -------------------------

-- COLUMBIA GROWTH FUND, INC. --

------

<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
DECEMBER 31, 1998 AMOUNT VALUE(1)
------------ ---------------
<S> <C> <C>
COMMON STOCKS (98.7%)
BASIC INDUSTRIES & MANUFACTURING (6.7%)
MACHINERY CAPITAL SPENDING
EMERSON ELECTRIC CO.............. 136,000 $ 8,508,500
GENERAL ELECTRIC CO.............. 547,800 55,909,837
TYCO INTERNATIONAL LTD........... 700,000 52,806,250
---------------
TOTAL BASIC INDUSTRIES &
MANUFACTURING..................... 117,224,587
---------------
BUSINESS & CONSUMER SERVICES (8.7%)
SERVICES & PUBLISHING (3.6%)
*CERIDIAN CORP.................... 275,000 19,198,438
*FISERV, INC...................... 400,750 20,613,578
SERVICE CORPORATION INT'L........ 287,600 10,946,775
SERVICEMASTER CO................. 573,750 12,658,359
---------------
63,417,150
---------------
MEDIA & ENTERTAINMENT (3.9%)
*CHANCELLOR MEDIA CORP............ 225,600 10,800,600
*CLEAR CHANNEL COMMUNICATIONS,
INC............................. 394,000 21,473,000
COMCAST CORP. (CLASS A
SPECIAL)........................ 201,800 11,843,137
*INFINITY BROADCASTING CORP.
(CLASS A)....................... 650,300 17,801,963
*JACOR COMMUNICATIONS, INC........ 100,000 6,437,500
---------------
68,356,200
---------------
POLLUTION CONTROL (1.2%)
WASTE MANAGEMENT, INC............ 449,275 20,947,447
---------------
TOTAL BUSINESS & CONSUMER
SERVICES.......................... 152,720,797
---------------
CONSUMER CYCLICAL (15.3%)
CONSUMER DURABLE (1.3%)
FEDERAL-MOGUL CORP............... 400,000 23,800,000
---------------
CONSUMER NON-DURABLE (14.0%)
*ABERCROMBIE & FITCH CO........... 830,834 58,781,506
*BED, BATH & BEYOND, INC.......... 330,800 11,288,550
CARNIVAL CORP.................... 455,000 21,840,000
*CONSOLIDATED STORES CORP......... 929,800 18,770,338
DAYTON-HUDSON CORP............... 623,100 33,803,175
*FEDERATED DEPARTMENT STORES,
INC............................. 500,000 21,781,250
LOWE'S COS., INC................. 600,000 30,712,500
ROYAL CARIBBEAN CRUISES LTD...... 400,000 14,800,000
TANDY CORP....................... 317,000 13,056,437

<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE(1)
------------ ---------------
<S> <C> <C>
WAL-MART STORES, INC............. 100,000 $ 8,143,750
WARNACO GROUP, INC. (CLASS A).... 492,800 12,443,200
---------------
245,420,706
---------------
TOTAL CONSUMER CYCLICAL............ 269,220,706
---------------
CONSUMER STAPLES (28.1%)
FOOD & HOUSEHOLD PRODUCTS (8.1%)
AVON PRODUCTS, INC............... 523,800 23,178,150
GILLETTE CO...................... 293,900 14,199,044
*MEYER (FRED), INC................ 400,400 24,124,100
RITE AID CORP.................... 577,950 28,644,647
*SAFEWAY, INC..................... 655,400 39,938,437
WALGREEN CO...................... 190,400 11,150,300
---------------
141,234,678
---------------
HEALTH (20.0%)
ALLEGIANCE CORP.................. 300,000 13,987,500
AMERICAN HOME PRODUCTS CORP...... 545,800 30,735,363
*BOSTON SCIENTIFIC CORP........... 1,468,800 39,382,200
BRISTOL-MYERS SQUIBB CO.......... 363,000 48,573,938
CARDINAL HEALTH, INC............. 450,150 34,155,131
GUIDANT CORP..................... 212,800 23,461,200
HBO & CO......................... 100,000 2,862,500
MCKESSON CORP.................... 425,800 33,664,812
PFIZER, INC...................... 441,100 55,330,481
SCHERING-PLOUGH CORP............. 373,600 20,641,400
WARNER-LAMBERT CO................ 636,000 47,819,250
---------------
350,613,775
---------------
TOTAL CONSUMER STAPLES............. 491,848,453
---------------
FINANCIAL (13.0%)
ALLSTATE CORP.................... 544,400 21,027,450
AMERICAN GENERAL CORP............ 300,000 23,400,000
AMERICAN INTERNATIONAL GROUP,
INC............................. 186,337 18,004,813
BANKAMERICA CORP................. 563,712 33,893,184
CIT GROUP, INC. (CLASS A)........ 600,000 19,087,500
FANNIE MAE....................... 356,800 26,403,200
FIRST UNION CORP................. 383,800 23,339,837
FREDDIE MAC...................... 250,700 16,154,481
MELLON BANK CORP................. 247,200 16,995,000
MORGAN STANLEY, DEAN WITTER,
DISCOVER & CO................... 300,000 21,300,000
SUNAMERICA, INC.................. 100,000 8,112,500
---------------
TOTAL FINANCIAL.................... 227,717,965
---------------
</TABLE>

<PAGE>
SCHEDULE OF INVESTMENTS
-----------------------------------------------------------------

[LOGO]
- ------------------------- -------------------------

-- COLUMBIA GROWTH FUND, INC. --

------

<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE(1)
------------ ---------------
<S> <C> <C>
COMMON STOCKS (CONTINUED)
TECHNOLOGY (21.3%)
*AMERICA ONLINE, INC.............. 235,500 $ 34,088,625
*ASCEND COMMUNICATIONS, INC....... 203,400 13,373,550
*CISCO SYSTEMS, INC............... 761,050 70,634,953
COMPAQ COMPUTER CORP............. 400,800 16,808,550
*COMPUTER SCIENCES CORP........... 533,200 34,358,075
*DELL COMPUTER CORP............... 200,400 14,666,775
*EMC CORP......................... 300,300 25,525,500
*GATEWAY 2000, INC................ 392,100 20,070,619
INTEL CORP....................... 240,100 28,466,856
LUCENT TECHNOLOGIES, INC......... 175,000 19,250,000
*MICROSOFT CORP................... 562,600 78,025,588
*TELLABS, INC..................... 264,100 18,107,356
---------------
TOTAL TECHNOLOGY................... 373,376,447
---------------
UTILITIES (5.6%)
COMMUNICATIONS
ALLTEL CORP...................... 300,000 17,943,750
AT&T CORP........................ 174,300 13,116,075
*MCI WORLDCOM, INC................ 600,000 43,050,000
SBC COMMUNICATIONS, INC.......... 200,300 10,741,088
*TELE-COMMUNICATIONS, INC. TCI
GROUP (SERIES A)................ 228,900 12,661,031
---------------
TOTAL UTILITIES.................... 97,511,944
---------------
TOTAL COMMON STOCKS
(COST $1,103,730,738)............. 1,729,620,899
---------------
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE(1)
------------ ---------------
<S> <C> <C>
REPURCHASE AGREEMENT (1.5%)
J.P. MORGAN SECURITIES, INC.
4.970% DATED 12/31/1998,
DUE 01/04/1999 IN THE
AMOUNT OF $26,913,239.
COLLATERALIZED BY
U.S. TREASURY BILLS
DUE 06/24/1999,
U.S. TREASURY BONDS
6.500% DUE 11/15/2026,
U.S. TREASURY NOTES 5.375% DUE
06/30/2000 TO 07/31/2000.
(COST $26,909,575)................ $26,909,575 $ 26,909,575
---------------
TOTAL INVESTMENTS (100.2%)
(COST $1,130,640,313)................. 1,756,530,474
RECEIVABLES LESS LIABILITIES (-0.2%)... (3,506,933)
---------------
NET ASSETS (100.0%).................... $ 1,753,023,541
---------------
---------------
</TABLE>

(1) See Note 1 of Notes to Financial Statements.

* Non-income producing.

See Notes to Financial Statements.

16
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
-----------------------------------------------------------------

[LOGO]
- ------------------------- -------------------------

-- COLUMBIA GROWTH FUND, INC. --

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

<TABLE>
<CAPTION>
DECEMBER 31, 1998

<S> <C>
ASSETS:
Investments at identified cost............. $1,103,730,738
- --------------------------------------------- --------------
Investments at value....................... $1,729,620,899
Temporary cash investments, at cost........ 26,909,575
Receivable for:
Interest................................. 121,175
Dividends................................ 656,083
Investments sold......................... 5,705,743
Capital stock sold....................... 3,786,805
--------------
Total assets............................... 1,766,800,280
--------------
LIABILITIES:
Payable for:
Capital stock redeemed................... 7,342,603
Dividends and distributions.............. 5,251,720
Investment management fee................ 780,487
Accrued expenses......................... 401,929
--------------
Total liabilities.......................... 13,776,739
--------------
NET ASSETS................................... $1,753,023,541
--------------
--------------
NET ASSETS consist of:
Undistributed net investment income........ $ 31,399
Unrealized appreciation on investments..... 625,890,161
Undistributed net realized loss from
investments............................... (4,438,960)
Capital shares............................. 412,388
Capital paid in............................ 1,131,128,553
--------------
$1,753,023,541
--------------
--------------
SHARES OF CAPITAL STOCK OUTSTANDING.......... 41,238,820
--------------
--------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE *........................... $ 42.51
--------------
--------------
</TABLE>

* The net asset value per share is computed by dividing net assets applicable
to outstanding shares by shares of capital stock outstanding.

See Notes to Financial Statements.

17
<PAGE>

STATEMENT OF OPERATIONS

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

[LOGO]
- ------------------------- -------------------------

-- COLUMBIA GROWTH FUND, INC. --

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

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998

<S> <C>
INVESTMENT INCOME:
Income:
Dividends................................ $ 12,068,714
Interest................................. 1,555,149
------------
Total income........................... 13,623,863
------------
Expenses:
Investment management fees............... 8,591,359
Shareholder servicing costs.............. 1,269,928
Reports to shareholders.................. 296,169
Financial information and accounting..... 65,078
Custodian fees........................... 57,375
Bank transaction and checking fees....... 37,637
Registration fees........................ 76,644
Legal, insurance and auditing fees....... 53,488
Other.................................... 20,121
------------
Total expenses......................... 10,467,799
------------
Net investment income...................... 3,156,064
------------
REALIZED GAIN AND UNREALIZED APPRECIATION
FROM INVESTMENT TRANSACTIONS:
Net realized gain from investments......... 77,263,496
Net unrealized appreciation on
investments............................... 322,622,139
------------
Net gain on investments.................... 399,885,635
------------
Net increase in net assets resulting from
operations................................ $403,041,699
------------
------------
</TABLE>

See Notes to Financial Statements.

18
<PAGE>

STATEMENTS OF CHANGES IN NET ASSETS

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

[LOGO]
- ------------------------- -------------------------

-- COLUMBIA GROWTH FUND, INC. --

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

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
NET INCREASE IN NET ASSETS: 1998 1997
-------------- --------------
<S> <C> <C>
Operations:
Net investment income......................... $ 3,156,064 $ 6,692,676
Net realized gain from investments............ 77,263,496 150,238,079
Change in net unrealized appreciation on
investments.................................. 322,622,139 122,000,869
-------------- --------------
Net increase in net assets resulting from
operations................................... 403,041,699 278,931,624

Distributions to shareholders:
From net investment income.................... (3,081,414) (5,838,423)
In excess of net investment income............ (50,967)* --
From net realized gain from investment
transactions................................. (79,945,012) (148,364,649)
In excess of net realized gain from investment
transactions................................. (5,463,435)* --

Capital share transactions, net................. 113,604,981 136,089,618
-------------- --------------
Net increase in net assets.................... 428,105,852 260,818,170

NET ASSETS:
Beginning of year............................... 1,324,917,689 1,064,099,519
-------------- --------------
End of year..................................... $1,753,023,541 $1,324,917,689
-------------- --------------
-------------- --------------
- --------------------------------------------------
-------------- --------------
Undistributed net investment income $ 31,399 $ 1,999,579
</TABLE>

* On a tax basis, there was no return of capital.

See Notes to Financial Statements.

19
<PAGE>

NOTES TO FINANCIAL STATEMENTS

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

-- 1. SIGNIFICANT ACCOUNTING POLICIES --

Columbia Growth Fund, Inc. (CGF) is an open-end, diversified investment company
registered under the Investment Company Act of 1940, as amended. The policies
described below are consistently followed by CGF in the preparation of its
financial statements in conformity with generally accepted accounting
principles.

INVESTMENT VALUATION. The values of CGF's equity investments are based on the
last sale prices reported by the principal securities exchanges on which the
investments are traded, or, in the absence of recorded sales, at the closing bid
prices on such exchanges or over-the-counter markets. Securities for which
market quotations are not readily 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. Temporary cash investments in
short-term securities (principally repurchase agreements) are valued at cost,
which approximates market.

INTEREST AND DIVIDEND INCOME. Interest income is recorded on the accrual basis
and dividend income is recorded on the ex-dividend date.

SHAREHOLDER DISTRIBUTIONS. CGF distributes net investment income and any net
realized gains annually. Distributions to shareholders are recorded on the
ex-dividend date. Income and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for net operating losses, deferral of losses from wash sales, and
return of capital received from real estate investment trusts.

USE OF ESTIMATES. The preparation of the financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

FEDERAL INCOME TAXES. CGF has made no provision for federal income taxes on net
investment income or net realized gains from sales of investment securities,
since it is the intention of CGF to comply with the provisions of the Internal
Revenue Code available to certain investment companies, and to make
distributions of income and security profits sufficient to relieve it from
substantially all federal income taxes.

OTHER. Investment transactions are accounted for on the date the investments
are purchased or sold. The cost of investments sold is determined by the use of
the specific identification method for both financial reporting and income tax
purposes. Realized gains and losses from investment transactions and unrealized
appreciation or depreciation of investments are reported on the basis of
identified costs.

CGF, through its custodian, receives delivery of underlying securities
collateralizing repurchase agreements (included in temporary cash investments).
Market values of these securities are required to be at least 100% of the cost
of the repurchase agreements. CGF's investment adviser determines that the value
of the underlying securities is at all times at least equal to the resale price.
In the event of default or bankruptcy by the other party to the agreement,
realization and/or retention of the collateral may be subject to legal
proceedings.

20
<PAGE>

NOTES TO FINANCIAL STATEMENTS

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

-- 2. INVESTMENT TRANSACTIONS --

Aggregate purchases, sales and maturities, net realized gain and unrealized
appreciation of investments, excluding temporary cash investments, as of and for
the year ended December 31, 1998, were as follows:

<TABLE>
<S> <C>
PURCHASES:
Investment securities other than
U.S. Government obligations..... $1,612,295,388
----------------
----------------
SALES AND MATURITIES:
Investment securities other than
U.S. Government obligations..... $1,584,390,311
----------------
----------------
NET REALIZED GAIN:
Investment securities other than
U.S. Government obligations..... $ 77,263,496
----------------
----------------
UNREALIZED APPRECIATION
(DEPRECIATION) AS OF DECEMBER 31,
1998:
Appreciation..................... $ 631,181,726
Depreciation..................... (5,291,565)
----------------
Net unrealized appreciation.... $ 625,890,161
----------------
----------------
UNREALIZED APPRECIATION
(DEPRECIATION) FOR FEDERAL INCOME
TAX PURPOSES AS OF DECEMBER 31,
1998:
Appreciation..................... $ 627,928,419
Depreciation..................... (6,485,616)
----------------
Net unrealized appreciation.... $ 621,442,803
----------------
----------------
For federal income tax purposes,
the cost of investments owned at
December 31, 1998................. $1,108,178,096
----------------
----------------
</TABLE>

The net realized gain includes proceeds of $345,394 from shareholder class
action suits related to securities held.

21
<PAGE>

NOTES TO FINANCIAL STATEMENTS

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

-- 3. CAPITAL STOCK --

<TABLE>
<CAPTION>
SHARES: 1998 1997
-------------- --------------
<S> <C> <C>
Shares sold................... 12,502,270 9,453,209
Shares issued for reinvestment
of dividends................. 1,958,431 4,230,608
-------------- --------------
14,460,701 13,683,817
Less shares redeemed.......... (11,802,719) (9,715,431)
-------------- --------------
Net increase in shares........ 2,657,982 3,968,386
-------------- --------------
AMOUNTS:
Sales......................... $ 483,570,772 $ 329,861,186
Reinvestment of dividends..... 83,252,983 145,279,077
-------------- --------------
566,823,755 475,140,263
Less redemptions.............. (453,218,774) (339,050,645)
-------------- --------------
Net increase.................. $ 113,604,981 $ 136,089,618
-------------- --------------
-------------- --------------
Capital stock authorized
(shares)..................... 100,000,000
Par Value..................... $ .01
</TABLE>

-- 4. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES --

<TABLE>
<S> <C>
Investment management fees incurred..... $8,591,359
Investment management fee computation
basis (percentage of daily net assets
per annum)............................. 0.75 of 1% to
$200,000,000 daily
net assets; 0.625 of
1% between
$200,000,000 and
$500,000,000; and
0.50 of 1%
in excess of
$500,000,000

Transfer agent fee (included in
shareholder servicing costs)........... $1,070,063
Fees earned by directors not affiliated
with each Fund's investment adviser,
transfer agent, or Columbia Management
Co..................................... $15,130
</TABLE>

The investment adviser of CGF is Columbia Funds Management Company (CFMC). The
transfer agent for CGF is Columbia Trust Company (CTC), a majority owned
subsidiary of CFMC. The transfer agent is compensated based on a per account
fee.

CFMC, CTC and Columbia Management Company (CMC), an affiliated company, are
indirect subsidiaries of Fleet Financial Group, Inc. (Fleet), a publicly owned
multi-bank holding company registered under the Bank Holding Company Act of
1956. J. Jerry Inskeep, Jr., an officer and director of CGF, is affiliated with
Fleet, but receives no compensation or other payment from CGF.

22
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

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

TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
COLUMBIA GROWTH FUND, INC. (CGF)

In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Columbia Growth Fund, Inc., an
investment company, at December 31, 1998, and the results of its operations and
the changes in its net assets for the years ended December 31, 1998 and 1997,
and the financial highlights for the periods presented therein, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities owned as of December 31, 1998
by correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.

PRICEWATERHOUSECOOPERS LLP
Portland, Oregon
February 12, 1999

23
<PAGE>

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

[LOGO]

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

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

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

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

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

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

FUNDS DISTRIBUTED BY PROVIDENT DISTRIBUTORS, INC.

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

<PAGE>

Part B-I

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

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

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

STATEMENT OF ADDITIONAL INFORMATION

Columbia Funds
1300 SW Sixth Avenue
PO Box 1350
Portland, Oregon 97207
(503) 222-3600

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

This Statement of Additional Information is not a Prospectus. It
relates to a Prospectus dated February 24, 1999 (the "Prospectus") and should
be read in conjunction with the Prospectus. Copies of the Prospectus are
available without charge upon request to any of the Funds or by calling
1-800-547-1037.

The Funds' (other than the Columbia National Municipal Bond Fund) most
recent Annual Report to shareholders is a separate document supplied with
this Statement of Additional Information, and the financial statements,
accompanying notes and report of independent accountants appearing in this
Annual Report are incorporated by reference into this Statement of Additional
Information.

<PAGE>

TABLE OF CONTENTS

<TABLE>
<S> <C>
Description of the Funds . . . . . . . . . . . . . . . . . . . . . . . . 3
Investment Restrictions. . . . . . . . . . . . . . . . . . . . . . . . . 22
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Investment Advisory and Other Fees Paid to Affiliates. . . . . . . . . . 47
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . 49
Capital Stock and Other Securities . . . . . . . . . . . . . . . . . . . 52
Purchase, Redemption and Pricing of Shares . . . . . . . . . . . . . . . 53
Custodians . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Accounting Services and Financial Statements . . . . . . . . . . . . . . 59
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Yield and Performance. . . . . . . . . . . . . . . . . . . . . . . . . . 69
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 74
</TABLE>

February 24, 1999

<PAGE>

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

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

INVESTMENTS HELD AND INVESTMENT PRACTICES BY THE FUNDS

The Prospectus describes the fundamental investment objective and the
principal investment strategy applicable to each Fund. Each Fund's investment
objective may not be changed without shareholder approval, other than the
Special Fund, which may be changed by the Fund's Board of Directors without
shareholder approval upon 30 days written notice. What follows is additional
information regarding securities in which a Fund may invest and investment
practices in which it may engage. To determine whether a Fund purchases such
securities or engages in such practices, see the chart on pages 20 and 21 of
this Statement of Additional Information.

SECURITIES RATING AGENCIES

The following is a description of the bond ratings used by Moody's Investor
Services, Inc. ("Moody's") and Standard & Poor's Corporation ("S&P").
Subsequent to its purchase by the Fund, a security may cease to be rated, or its
rating may be reduced below the criteria set forth for the Fund. Neither event
would require the elimination of the security from the Fund's portfolio, but the
Adviser will consider that event in its determination of whether the Fund should
continue to hold such security in its portfolio.

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

Aaa - Best quality; smallest degree of investment risk.

Aa - High quality by all standards.

Aa and Aaa are known as high-grade bonds.

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

<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

CCC - Current identifiable vulnerability to default and dependent upon
favorable business, financial, and economic conditions to meet timely payments
of interest and repayments of principal. In the event of adverse business,
financial, or

<PAGE>

economic conditions, they are not likely to have the capacity to pay interest
and repay principal.

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

CERTIFICATES OF DEPOSIT

Certificates of deposit are receipts issued by a U.S. bank in exchange for
the deposit of funds. The bank agrees to pay the amount deposited, plus
interest, to the bearer of the receipt on the date specified on the certificate.
Because the certificate is negotiable, it can be traded in the secondary market
before maturity. Under current FDIC regulations, $100,000 is the maximum
insurance payable on certificates of deposit issued to a Fund by any one bank.
Therefore, certificates of deposit purchased by a Fund may not be fully insured.

BANKERS' ACCEPTANCES

Time drafts are drawn on a U.S. bank by an exporter or importer to obtain
funds to pay for specific merchandise or, less frequently, foreign exchange.
The draft is then "accepted" by the U.S. bank (the drawee), which, in effect,
unconditionally guarantees to pay the face value of the instrument on its
maturity date. The face of the instrument specifies the dollar amount involved,
the maturity date, and the nature of the underlying transaction.

LETTERS OF CREDIT

Letters of Credit are issued by banks and authorize the beneficiary to draw
drafts upon such banks for acceptance and payment under specified conditions.

COMMERCIAL PAPER

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

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

<PAGE>

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

GOVERNMENT SECURITIES

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

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

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

MORTGAGE-BACKED SECURITIES AND MORTGAGE PASS-THROUGH SECURITIES

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

<PAGE>

mortgage-backed securities (see "Collateralized Mortgage Obligations"), and in
other types of mortgage-related securities.

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

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

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

Government-related guarantors (i.e., not backed by the full faith and
credit of the U.S. Government) include the Federal National Mortgage Association
("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC"). FNMA is a
government-sponsored corporation owned entirely by private stockholders. It is
subject to regulation by the Secretary of Housing and Urban Development. FNMA

<PAGE>

purchases conventional (i.e., not insured or guaranteed by any government
agency) mortgages from a list of approved seller/servicers, which include state
and federally-chartered savings and loan associations, mutual savings banks,
commercial banks and credit unions and mortgage bankers. Pass-through
securities issued by FNMA are guaranteed as to timely payment of principal and
interest by FNMA, but are not backed by the full faith and credit of the U.S.
Government.

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

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

COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS")

CMOs are hybrids between mortgage-backed bonds and mortgage pass-through
securities. Similar to a bond, interest and prepaid principal are paid, in most
cases, semiannually. CMOs may be collateralized by whole mortgage loans but are
more typically collateralized by portfolios of mortgage pass-through securities,
guaranteed by GNMA, FHLMC, or FNMA, and their income streams.

<PAGE>

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

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

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

OTHER MORTGAGE-BACKED SECURITIES

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

OTHER ASSET-BACKED SECURITIES

The securitization techniques used to develop mortgage-backed securities
are being applied to a broad range of assets. Through the use of trusts and
special purpose

<PAGE>

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

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

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

FLOATING OR VARIABLE RATE SECURITIES

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

<PAGE>

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

LOAN TRANSACTIONS

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

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

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

OPTIONS AND FINANCIAL FUTURES TRANSACTIONS

Certain Funds may invest up to 5% of its net assets in premiums on put and
call exchange-traded options. A call option gives the holder (buyer) the right
to purchase a security at a specified price (the exercise price) at any time
until a certain date (the expiration date). A put option gives the buyer the
right to sell a security at the exercise price at any time until the expiration
date. The Fund may also purchase options on securities indices. Options on
securities indices are similar to options on a security

<PAGE>

except that, rather than the right to take or make delivery of a security at a
specified price, an option on a securities index gives the holder the right to
receive, on exercise of the option, an amount of cash if the closing level of
the securities index on which the option is based is greater than, in the case
of a call, or less than, in the case of a put, the exercise price of the option.
A Fund may enter into closing transactions, exercise its options, or permit the
options to expire. A Fund may only write call options that are covered. A call
option is covered if written on a security a Fund owns or if the Fund has an
absolute and immediate right to acquire that security without additional cash
consideration upon conversion or exchange of other securities held by the Fund.
If additional cash consideration is required, that amount must be held in a
segregated account by the Fund's custodian bank. A call option on a securities
index is covered if the Fund owns securities whose price changes, in the opinion
of the Adviser, are expected to be substantially similar to those of the index.
A call option may also be covered in any other manner in accordance with the
rules of the exchange upon which the option is traded and applicable laws and
regulations. Each Fund permitted to engage in option transactions may write
such options on up to 25 percent of its net assets.

Financial futures contracts, including interest rate futures transactions,
are commodity contracts that obligate the long or short holder to take or make
delivery of a specified quantity of a financial instrument, such as a security
or the cash value of a securities index, during a specified future period at a
specified price. The investment restrictions for the Funds permitted to engage
in financial futures transactions do not limit the percentage of the Fund's
assets that may be invested in financial futures transactions. None of the
Funds, however, intend to enter into financial futures transactions for which
the aggregate initial margin exceeds 5 percent of the net assets of the Fund
after taking into account unrealized profits and unrealized losses on any such
transactions it has entered into. A Fund may engage in futures transactions
only on commodities exchanges or boards of trade.

A Fund will not engage in transactions in index options, financial futures
contracts, or related options for speculation. A Fund may engage in these
transactions only as an attempt to hedge against market conditions affecting the
values of securities that the Fund owns or intends to purchase. When a Fund
purchases a put on a stock index or on a stock index future not held by the
Fund, the put protects the Fund against a decline in the value of all securities
held by it to the extent that the stock index moves in a similar pattern to the
prices of the securities held. The correlation, however, between indices and
price movements of the securities in which a Fund will generally invest may be
imperfect. A Fund expects, nonetheless, that the use of put options that relate
to such indices will, in certain circumstances, protect against declines in
values of specific portfolio securities or the Fund's portfolio generally.
Although the purchase of a put option may partially protect 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.

<PAGE>

Upon entering into a futures contract, a Fund will be required to deposit
with its custodian in a segregated account cash, certain U.S. government
securities, or any other portfolio assets as permitted by the Securities and
Exchange Commission rules and regulations in an amount known as the "initial
margin." This amount, which is subject to change, is in the nature of a
performance bond or a good faith deposit on the contract and would be 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 SECURITIES

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

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

There is generally less government regulation of stock exchanges, brokers,
and listed companies abroad than in the United States. In addition, with
respect to certain foreign countries, there is a possibility of the adoption of
a policy to withhold dividends at the source, or of expropriation,
nationalization, confiscatory taxation, or diplomatic developments that could
affect investments in those countries. Finally, in the event of default on a
foreign debt obligation, it may be more difficult for a Fund to

<PAGE>

obtain or enforce a judgement against the issuers of the obligation. The Funds
will normally execute their portfolio securities transactions on the principal
stock exchange on which the security is traded.

The considerations noted above regarding the risk of investing in foreign
securities are generally more significant for investments in emerging or
developing countries, such as countries in Eastern Europe, Latin America, South
America or Southeast Asia. These countries may have relatively unstable
governments and securities markets in which only a small number of securities
trade. Markets of developing or emerging countries may generally be more
volatile than markets of developed countries. Investment in these markets may
involve significantly greater risks, as well as the potential for greater gains.

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

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

CURRENCY CONTRACTS

The value of a Fund invested in foreign securities will fluctuate as a
result of changes in the exchange rates between the U.S. dollar and the
currencies in which the foreign securities or bank deposits held by the Fund are
denominated. To reduce or limit exposure to changes in currency exchange rates
(referred to as "hedging"), a Fund may enter into forward currency exchange
contracts that, in effect, lock in a rate of exchange during the period of the
forward contracts. Forward contracts are usually entered into with currency
traders, are not traded on securities exchanges, and usually have a term of less
than one year, but can be renewed. A default on a contract would deprive a Fund
of unrealized profits or force a Fund to cover its commitments for purchase or
sale of currency, if any, at the market price. A Fund will enter into forward
contracts only for hedging purposes and not for speculation. If required by the
Investment Company Act or the Securities and Exchange Commission, a Fund may

<PAGE>

"cover" its commitment under forward contracts by segregating cash or liquid
high-grade securities with a Fund's custodian in an amount not less than the
current value of the Fund's total assets committed to the consummation of the
contracts. Under normal market conditions, no more than 25% of the
International Stock Fund's assets may be committed to the consummation of
currency exchange contracts.

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

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

REPURCHASE AGREEMENTS

A Fund may invest in repurchase agreements, which are agreements by which
the Fund purchases a security and simultaneously commits to resell that security
to the seller (a commercial bank or securities dealer) at a stated price within
a number of days (usually not more than seven) from the date of purchase. The
resale price reflects the purchase price plus a rate of interest that is
unrelated to the coupon rate or maturity of the purchased security. Repurchase
agreements may be considered loans by the Fund collateralized by the underlying
security. The obligation of the seller to pay the stated price is in effect
secured by the underlying security. The seller will be required to maintain the
value of the collateral underlying any repurchase agreement at a level at least
equal to the price of the repurchase agreement. In the case of default by the
seller, the Fund could incur a loss. In the event of a bankruptcy proceeding
commenced against the seller, the Fund may incur costs and delays in realizing
upon the collateral. A Fund will enter into repurchase agreements only with
those banks or securities dealers who are deemed creditworthy pursuant to
criteria adopted by the Board of Directors of each Fund. There is no limit on
the portion of the Fund's assets that may be invested in repurchase agreements
with maturities of seven days or less.

ILLIQUID SECURITIES

"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

<PAGE>

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

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

CONVERTIBLE SECURITIES AND WARRANTS

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

<PAGE>

investment objective of capital appreciation. The purchaser of a warrant
expects the market price of the underlying security will exceed the purchase
price of the warrant plus the exercise price of the warrant, thus resulting in a
profit. If the market price never exceeds the purchase price plus the exercise
price of the warrant before the expiration date of the warrant, the purchaser
will suffer a loss equal to the purchase price of the warrant.

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

INVESTMENTS IN SMALL AND UNSEASONED COMPANIES

Unseasoned and small companies may have limited or unprofitable operating
histories, limited financial resources, and inexperienced management. In
addition, they often face competition from larger or more established firms that
have greater resources. Securities of small and unseasoned companies are
frequently traded in the over-the-counter market or on regional exchanges where
low trading volumes may result in erratic or abrupt price movements. To dispose
of these securities, a Fund may need to sell them over an extended period or
below the original purchase price. Investments by a Fund in these small or
unseasoned companies may be regarded as speculative.

DOLLAR ROLL TRANSACTIONS

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

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

<PAGE>

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

WHEN-ISSUED SECURITIES

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

EURODOLLAR AND YANKEE OBLIGATIONS

Eurodollar bank obligations are dollar-denominated certificates of deposit
and time deposits issued outside the U.S. capital markets by foreign branches of
U.S. banks and by foreign banks. Yankee obligations are dollar denominated
obligations issued in the U.S. capital markets by foreign banks. Eurodollar and
Yankee obligations are subject to the same risks that pertain to domestic
issues, notably credit risk and interest rate risk. Additionally, Eurodollar
(and to a limited extent, Yankee) obligations are subject to many of the same
risks as investing in foreign securities.

ZERO-COUPON AND PAY-IN-KIND SECURITIES

A zero-coupon security has no cash coupon payments. Instead, the issuer
sells the security at a substantial discount from its maturity value. The
interest equivalent received by the investor from holding this security to
maturity is the difference between the maturity value and the purchase price.
Pay-in-kind securities are securities that pay interest in either cash or
additional securities, at the issuer's option, for a specified period. The
price of pay-in-kind securities is expected to reflect the market value of
the underlying accrued interest, since the last payment. Zero-coupon and pay-

<PAGE>

in-kind securities are more volatile than cash pay securities. The Fund accrues
income on these securities prior to the receipt of cash payments. The Fund
intends to distribute substantially all of its income to its shareholders to
qualify for pass-through treatment under the tax laws and may, therefore, need
to use its cash reserves to satisfy distribution requirements.

TEMPORARY INVESTMENTS

When, as a result of market conditions, the Adviser determines a temporary
defensive position is warranted to help preserve capital, a Fund may without
limit temporarily retain cash, or invest in prime commercial paper, high-grade
debt securities, securities of the U.S. Government and its agencies and
instrumentalities, and high-quality money market instruments, including
repurchase agreements. The International Stock Fund may invest in such
securities issued by entities organized in the United States or any foreign
country, denominated in U.S. dollars or foreign currency. When a Fund assumes a
temporary defensive position, it is not invested in securities designed to
achieve its investment objective.

<PAGE>

Securities and Investment Practices

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

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

<PAGE>

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

Dollar Roll Transactions O + NA NA O O NA
- -------------------------------------------------------------------------------------------------------
When Issued Securities O O O O O O O
- -------------------------------------------------------------------------------------------------------
Eurodollar/Yankee Obligations NA O NA NA 10%, O O NA
- -------------------------------------------------------------------------------------------------------
Zero Coupon/Pay in Kind NA O NA NA O O NA
- -------------------------------------------------------------------------------------------------------
Real Estate (excluding Reits) X X X X X X X
- -------------------------------------------------------------------------------------------------------
REIT's NA O NA NA O O NA
- -------------------------------------------------------------------------------------------------------
Borrowing 5%, * 5%, * 33.3%, * 33.3%, * 5%, * 5%, * 33.3%, *
- -------------------------------------------------------------------------------------------------------
Municipal Bonds NA NA + + NA NA NA
- -------------------------------------------------------------------------------------------------------
</TABLE>

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

<PAGE>

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

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

COLUMBIA COMMON STOCK FUND, INC.

The Common Stock Fund may not:

1. Buy or sell commodities. However, the Fund may invest in futures
contracts relating to broadly based stock indices, subject to the restrictions
in paragraph 15.

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

3. Buy or sell real estate. However, the Fund may purchase or hold
readily marketable securities issued by companies, such as real estate
investment trusts, which operate in real estate or interests therein.

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

<PAGE>

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

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

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

9. Issue senior securities, bonds, or debentures.

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

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

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

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

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

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

<PAGE>

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

COLUMBIA GROWTH FUND, INC.

The Growth Fund may not:

1. Buy or sell commodities or commodity contracts.

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

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

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

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

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

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

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

9. Issue senior securities, bonds, or debentures.

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

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

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

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

<PAGE>

14. Buy securities on margin or make short sales.

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

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

COLUMBIA INTERNATIONAL STOCK FUND, INC.

The International Stock Fund may not:

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

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

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

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

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

<PAGE>

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

8. Purchase securities of other investment companies, except in
connection with a merger, consolidation, acquisition, or reorganization, or by
purchase in the open market of securities of closed-end investment companies
where no underwriter or dealer's commission or profit, other than customary
broker's commission, is involved and only if immediately thereafter not more
than (i) 3 percent of the total outstanding voting stock of such company is
owned by the Fund, (ii) 5 percent of the Fund's total assets would be invested
in any one such company, and (iii) 10 percent of the Fund's total assets would
be invested in such securities.

9. Issue senior securities, bonds, or debentures.

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

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

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

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

<PAGE>

facilities of a recognized securities association or are listed on a recognized
securities or commodities exchange or similar entity.

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

COLUMBIA SPECIAL FUND, INC.

The Special Fund may not:

1. Buy or sell commodities. However, the Fund may invest in futures
contracts relating to broadly based stock indices, subject to the restrictions
in paragraph 15.

3. Buy or sell real estate. However, the Fund may purchase or hold
readily marketable securities issued by companies such as real estate investment
trusts, which operate in real estate or interests therein.

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

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

<PAGE>

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

9. Issue senior securities, bonds, or debentures.

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

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

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

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

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

COLUMBIA SMALL CAP FUND, INC.

The Small Cap Fund may not:

1. Buy or sell commodities. However, the Fund may invest in futures
contracts relating to broadly based stock indices, subject to the restrictions
in paragraph 15.

<PAGE>

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

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

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

9. Issue senior securities, bonds, or debentures.

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

12. Invest its funds in the securities of any company if the purchase, at
the time thereof, would cause more than 10 percent of the value of the Fund's
total assets to

29
<PAGE>

be invested in companies which, including predecessors and parents, have a
record of less than three years continuous operation.

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

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

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

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

COLUMBIA REAL ESTATE EQUITY FUND, INC.

The Real Estate Fund may not:

1. Buy or sell commodities or commodity futures contracts.

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

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

4. Purchase illiquid securities, including restricted securities and
repurchase agreements of more than seven days maturity, if upon the purchase
more than 10 percent of the value of the Fund's net assets would consist of
these securities. "Illiquid securities" are securities that may not be sold or
disposed of in the ordinary course of business within seven days at
approximately the price used to determine the

<PAGE>

Fund's net asset value and include restricted securities that are subject to
legal or contractual restrictions on resale. Certain restricted securities that
can be resold to qualifying institutions pursuant to a regulatory exemption
under Rule 144A of the Securities Act of 1933 and for which a dealer or
institutional trading market exists may be deemed to be liquid securities by the
Board of Directors of the Fund and, in that event, will not be subject to the
above investment restriction.

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

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

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

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

9. Issue senior securities, bonds, or debentures.

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

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

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

13. Invest in companies to exercise control or management.

14. Buy any securities or other property on margin, except for short-term
credits necessary for clearing transactions and except that margin payments and
other

<PAGE>

deposits in connection with transactions in options, futures, and forward
contracts shall not be deemed to constitute purchasing securities on margin.

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

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

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

COLUMBIA BALANCED FUND, INC.

The Balanced Fund may not:

1. Buy or sell commodities. However, the Fund may invest in futures
contracts relating to broadly based stock indices, subject to the restrictions
in paragraph 15.

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).

<PAGE>

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

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

9. Issue senior securities, bonds, or debentures.

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

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

<PAGE>

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

COLUMBIA U.S. GOVERNMENT SECURITIES FUND, INC.

The Government Bond Fund may not:

1. Issue senior securities, bonds, or debentures.

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

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

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

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

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

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

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

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

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

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

12. Purchase securities of other investment companies.

<PAGE>

COLUMBIA FIXED INCOME SECURITIES FUND, INC.

The Bond Fund may not:

1. Buy or sell commodities or commodity futures contracts.

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

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

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

7. Purchase the securities of any issuer if the purchase, at the time
thereof, would cause more than 5 percent of the value of its total assets at
market value to be

<PAGE>

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

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

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

10. Issue senior securities, bonds, or debentures.

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

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

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

14. Invest in companies to exercise control or management.

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

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

COLUMBIA NATIONAL MUNICIPAL BOND FUND, INC.

The National Municipal Bond Fund may not:

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

<PAGE>

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

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

4. Buy or sell commodities or commodity future contracts.

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

6. Issue senior securities, bonds, or debentures.

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

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

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

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

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

COLUMBIA MUNICIPAL BOND FUND, INC.

The Municipal Bond Fund may not:

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

<PAGE>

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

4. Buy or sell commodities or commodity future contracts.

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

6. Issue senior securities, bonds, or debentures.

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

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

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

COLUMBIA HIGH YIELD FUND, INC.

The High Yield Fund may not:

1. Buy or sell commodities or commodity futures contracts.

<PAGE>

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

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

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

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

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

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

<PAGE>

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

10. Issue senior securities, bonds, or debentures.

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

14. Invest in companies to exercise control or management.

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

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

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

COLUMBIA DAILY INCOME COMPANY

The Columbia Daily Income Company may not:

1. Borrow money to improve portfolio yield except as a temporary measure
to avoid disruptive redemptions, and not for investment purposes. Borrowings
will not

<PAGE>

exceed 33 1/3 percent of total assets and will be repaid from the proceeds of
sales of the Fund's shares or as maturities allow.

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

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

4. Buy or sell real estate.

5. Buy or sell commodities or commodity contracts.

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

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

8. Purchase securities on margin.

9. Sell securities short.

10. Write or purchase put or call options.

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

12. Invest in companies to exercise control or management.

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

<PAGE>

INVESTMENT RESTRICTIONS UNDER RULE 2a-7

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

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

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

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

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

<PAGE>

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

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

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

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

J. JERRY INSKEEP, JR.,*+ Age 68, Chairman, President, and Director of each Fund;
Chairman, President, and Trustee of CMC Fund Trust ("CMC Trust"); Consultant to
Fleet Financial Group, Inc. ("Fleet") (since December 1997); formerly Chairman
and a Director of Columbia Funds Management Company (the "Adviser"), Columbia
Management Co., and Columbia Trust Company (the "Trust Company"); formerly a
Director of Columbia Financial Center Incorporated ("Columbia Financial"). Mr.
Inskeep's business address is 1300 S.W. Sixth Avenue, P.O. Box 1350, Portland,
Oregon 97207.

JAMES C. GEORGE, Age 66, Director of each Fund (since June 1994); Trustee of CMC
Trust (since December 1997). Mr. George was the Investment Manager of the
Oregon State Treasury between 1966 and 1992. Since 1992, Mr. George has been an
investment consultant. Mr. George's business address is 1001 S.W. Fifth Avenue,
Portland, Oregon 97204.

<PAGE>

THOMAS R. MACKENZIE, Age 71, Director of each Fund; Trustee of CMC Trust (since
December 1997); Founder and Director of Group Mackenzie (architecture, planning,
interior design, engineering). Mr. Mackenzie's business address is 0690 S.W.
Bancroft Street, Portland, Oregon 97201.

ROBERT J. MOORMAN, Age 47, *Secretary of each Fund and CMC Trust (since January
1998); Attorney with Stoel Rives LLP. Mr. Moorman's business address is 900
S.W. Fifth Avenue, Suite 2600, Portland, Oregon 97204-1268.

RICHARD L. WOOLWORTH,+ Age 57, Director of each Fund; Trustee of CMC Trust;
Chairman of Blue Cross and Blue Shield of Oregon; Chairman and Chief Executive
Officer of the Regence Group, health insurers. Mr. Woolworth's business address
is 200 S.W. Market Street, Portland, Oregon 97201.

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

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

<PAGE>

The following table sets forth compensation received by the disinterested
directors for 1998. No officer of the Funds received any compensation from the
Funds in 1998.

COMPENSATION TABLE

<TABLE>
<CAPTION>
Compensation from
Aggregate compensation Fund Complex,
Director From Fund, per Director per Director**
-------- ----------------------- ----------------
<S> <C> <C>
Thomas R. Mackenzie Common Stock Fund $2,761 $31,000
James C. George Growth Fund $4,968
International Stock Fund $464
Special Fund $3,445
Small Cap Fund $396
Real Estate Fund $535
Balanced Fund $2,917
Columbia Daily Income Company $3,484
Government Bond Fund $128
Bond Fund $1,340
Municipal Bond Fund $1,404
High Yield Fund $158

Richard L. Woolworth* Common Stock Fund $2,887 $32,000
Growth Fund $5,194
International Stock Fund $485
Special Fund $3,602
Small Cap Fund $414
Real Estate Fund $559
Balanced Fund $3,050
Columbia Daily Income Company $3,641
Government Bond Fund $134
Bond Fund $1,401
Municipal Bond Fund $1,468
High Yield Fund $165
</TABLE>

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

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

<PAGE>

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

At January 31, 1999, officers and directors of each of the respective Funds
owned of record or beneficially the aggregate number of shares of each of the
respective Funds as set forth below.

<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL SHARES
FUND SHARES OUTSTANDING
---- ------ -----------
<S> <C> <C>
Common Stock Fund 67,434 0.20%
Growth Fund 48,225 0.11%
International Stock Fund 11,629 0.13%
Special Fund 29,882 0.07%
Small Cap Fund 13,857 0.14%
Real Estate Fund 9,105 0.08%
Balanced Fund 11,070 0.02%
Government Bond Fund 154 0%
Bond Fund 208,817 0.62%*
Municipal Bond Fund 775,480 2.05%*
High Yield Fund 26,154 0.42%
Columbia Daily Income Company 61,651,392 5.72%*
</TABLE>

* Includes shares held by the Adviser and Columbia Management Co.

At January 31, 1999, to the knowledge of the Funds, no person owned of
record or beneficially more than 5 percent of the outstanding shares of any Fund
except the following record owners: Charles Schwab & Co., Inc., 101 Montgomery
Street, San Francisco, California 94104, which owned 2,641,105 shares of the
Bond Fund (8.03 percent of the total shares outstanding), 2,272,883 shares of
the Growth Fund (5.54 percent of the total shares outstanding), 2,306,423 shares
of the Common Stock Fund (6.88 percent of the total shares outstanding), 470,914
shares of the High Yield Fund (7.64 percent of the total shares outstanding),
3,726,637 shares of the Real Estate Fund (33.3 percent of the total shares
outstanding), 2,635,400 shares of the Special Fund (6.77 percent of the total
shares outstanding), 515,936 shares of the Small Cap Fund (5.47 percent of the
total shares outstanding); Standard Insurance Company, P.O. Box 711, Portland,
Oregon 97207, which owned 2,796,211 shares of the Special Fund (7.18 percent of
the total shares outstanding); National Financial Service Corp., P.O. Box 3908
Church Street Station, New York, New York 10008, which owned 658,298 shares

<PAGE>

of the Real Estate Fund (5.88 percent of the total shares outstanding); FTC &
Company, P.O. Box 173736, Denver, Colorado 80217, which owned 629,507 shares of
the Real Estate Fund (5.62 percent of the total shares outstanding); Wells Fargo
Bank Trustee, P.O. Box 9800, Calabasas, California 91372, which owned 2,926,177
shares of the Balanced Fund (6.77 percent of the total shares outstanding),
1,910,525 shares of the Common Stock Fund (5.70 percent of the total shares
outstanding); Wells Fargo Bank Trustee, Trust & Investor Services, P.O. Box
9800, Calabasas, California 91372, which owned 1,707,347 shares of the Common
Stock Fund (5.09 percent of the shares outstanding).

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

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

The Adviser provides office space and pays all executive salaries and
executive expenses of the Fund. The Fund assumes its costs relating to
corporate matters, cost of services to shareholders, transfer and dividend
paying agent fees, custodian fees, legal and auditing expenses, disinterested
director fees, taxes and governmental fees, interest, brokers' commissions,
transaction expenses, cost of stock certificates and any other expenses
(including clerical expenses) of issue, sale, repurchase, or redemption of its
shares, expenses of registering or qualifying its shares for sale, transfer
taxes, and all other expenses of preparing its registration statement,
prospectuses, and reports.

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

<PAGE>

<TABLE>
<CAPTION>
FUND 1998 1997 1996
---- ---- ---- ----
<S> <C> <C> <C>
Common Stock Fund $5,136,336 $4,158,273 $2,686,585
Growth Fund $8,591,359 $7,019,161 $5,711,080
International Stock Fund $1,414,138 $1,504,787 $1,157,227
Special Fund $9,054,501 $12,373,140 $12,880,541
Small Cap Fund $1,246,153 $547,892 $40,273*
Real Estate Fund $1,221,370 $864,343 $232,413
Balanced Fund $4,512,177 $3,826,628 $2,935,512
Government Bond Fund $194,507 $194,230 $206,591
Bond Fund $2,050,200 $1,821,809 $1,668,004
National Municipal Bond Fund** --- --- ---
Municipal Bond Fund $2,149,321 $1,952,213 $1,881,542
High Yield Fund $292,249 $211,632 $150,432
Columbia Daily Income Company $5,005,974 $4,296,685 $4,009,904
</TABLE>

---------------
* For that portion of the year the Fund was in operation.
** The Fund commenced operations February 1999.

The Adviser has entered into an agreement with Columbia Management Co.
("CMC"), under which CMC provides the Adviser with statistical and other factual
information, advice regarding economic factors and trends, and advice as to
occasional transactions in specific securities. CMC, upon receipt of specific
instructions from the Adviser, also contacts brokerage firms to conduct
securities transactions for the Funds. The Adviser pays CMC a fee for these
services. A Fund's expenses are not increased by this arrangement, and no
amounts are paid by a Fund to CMC under this agreement.

The transfer agent and dividend crediting agent for the Funds is Columbia
Trust Company ("Trust Company"). Its address is 1301 SW Fifth Avenue, P.O. Box
1350, Portland, Oregon 97207. It issues certificates for shares of the Funds,
if requested, and records and disburses dividends for the Funds. During 1998,
each Fund paid the Trust Company a per account fee of $1.66 per month for each
shareholder account with the Fund existing at any time during the month. In
addition, each Fund pays the Trust Company for extra administrative services
performed at cost in accordance with a schedule set forth in the agreement
between the Trust Company and the Fund and reimburses the Trust Company for
certain out-of-pocket expenses incurred in carrying out its duties under that
agreement. In addition to the transfer agent services described above, the
Trust Company has hired First Data Investor Services Group, Inc. ("First Data")
as a sub-transfer agent to provide services related to fund transactions
processed through the National Securities Clearing Corporation on behalf of the
Common Stock Fund, Growth Fund, Special Fund, Real Estate Fund, Small Cap Fund,
Balanced Fund, High Yield Fund and Bond Fund. Each of the above Funds has
agreed to pay the Trust Company the costs incurred by Trust Company in
connection with the services provided by First Data.

<PAGE>

Fees paid to the Trust Company for services performed in 1998 under each
transfer agent agreement were $566,008 for the Common Stock Fund, $1,070,063 for
the Growth Fund, $351,255 for the International Stock Fund, $883,820 for the
Special Fund, $205,425 for the Small Cap Fund, $196,454 for the Real Estate
Fund, $631,375 for the Balanced Fund, $48,648 for the Government Bond Fund,
$279,982 for the Bond Fund, $121,757 for the Municipal Bond Fund, $54,467 for
the High Yield Fund, and $734,286 for the Columbia Daily Income Company.

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

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

Each Fund will not generally invest in securities for short-term capital
appreciation but, when business and economic conditions, market prices, or the
Fund's investment policy warrant, individual security positions may be sold
without regard to the length of time they have been held. This may result in a
higher portfolio turnover rate and increase a Fund's transaction costs,
including brokerage commissions. To the extent short-term trades result in
gains on securities held less than one year, shareholders will be subject to
taxes at ordinary income rates. See TAXES in this Statement of Additional
Information.

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

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

<PAGE>

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) the
broker's experience and financial stability and the execution services it
renders to the Adviser on a continuing basis; and (vii) reasonableness of
commission.

Research, statistical, and other services offered by the broker also may be
taken into consideration in selecting broker-dealers. These services may
include: advice concerning the value of securities, the advisability of
investing in, purchasing, or selling securities, and the availability of
securities or the purchasers or sellers of securities; and furnishing analyses
and reports concerning issuers, industries, securities, economic factors and
trends, portfolio strategies, and performance of accounts. A commission in
excess of the amount of a commission another broker or dealer would have charged
for effecting a transaction may be paid by a Fund if the Adviser determines in
good faith that the commission is reasonable in relation to the value of the
brokerage and research services provided, viewed in terms of either that
particular transaction or management's overall responsibilities with respect to
the Fund.

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

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

The receipt of proprietary and third party research services or products
from brokers or dealers might be useful to the Adviser and its affiliates in
rendering

<PAGE>

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

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

<TABLE>
<CAPTION>
FUND 1998 1997 1996
---- ---- ---- ----
<S> <C> <C> <C>
Common Stock Fund $2,596,285 $1,328,730 $1,266,686
Growth Fund $3,732,855 $2,168,003 $1,606,969
International Stock Fund $524,840 $864,293 $724,559
Special Fund $3,382,721 $6,140,893 $4,280,666
Small Cap Fund $375,120 $225,828 $19,164*
Real Estate Fund $110,166 $194,113 $114,020
Balanced Fund $1,220,034 $737,793 $572,539
</TABLE>

---------------
* For that portion of the year the Fund was in operation.

No brokerage commissions were paid by the Columbia Daily Income Company,
the Government Bond Fund, the Bond Fund, the Municipal Bond Fund, or the High
Yield Fund during the last three years. Of the commissions paid in 1998, the
Common Stock Fund paid $91,560, the Growth Fund paid $38,634, the Special Fund
paid $20,596, the Small Cap Fund paid $23,360, and the Balanced Fund paid
$36,312, to acquire third-party research or products.

Provided each Fund's Board of Directors is satisfied that the Fund is
receiving the most favorable price and execution available, the Adviser may
consider the sale of the Fund's shares as a factor in the selection of brokerage
firms to execute its portfolio transactions. The placement of portfolio
transactions with brokerage firms who sell shares of a Fund is subject to rules
adopted by the National Association of Securities Dealers. The Adviser may use
research services provided by and allocate purchase and sale orders for
portfolio securities to certain financial institutions, including, to the extent
permitted by law or order of the SEC, financial institutions that are affiliated
with the Adviser, if the Adviser believes that the quality of the transaction
and the commission are comparable to what they would be with other qualified
brokerage firms. For the fiscal year ended December 31, 1998, the Common Stock
Fund, Special Fund and Balanced Fund paid $5,190, $3,000 and $1,080,
respectively, in brokerage commissions to Quick & Reilly, Inc., an affiliate of
the Adviser. In each case the percentage of aggregate brokerage commissions
paid to, and the aggregate dollar amount of transactions involving, Quick &
Reilly did not exceed 1%.

<PAGE>

Investment decisions for each Fund are made independently from those of the
other Funds or accounts or other investment pools managed by the Adviser or any
affiliate of the Adviser. The same security is sometimes held in the portfolio
of more than one Fund or account. Simultaneous transactions are inevitable when
several Funds or accounts are managed by the same investment adviser,
particularly when the same security is suitable for the investment objective of
more than one Fund or account. In the event of simultaneous transactions,
allocations among the Fund or accounts will be made on an equitable basis.

Since 1967, the Adviser and the Funds have had a Code of Ethics (the
"Code") that sets forth general and specific standards relating to the
securities trading activities of all their employees. The purpose of the Code
is to ensure that all employees conduct their personal transactions in a manner
that does not interfere with the portfolio transactions of the Funds or the
Adviser's other clients or take unfair advantage of their relationship with the
Adviser. The specific standards in the Code include, among others, a
requirement that all employee trades be pre-cleared; a prohibition on investing
in initial public offerings; required pre-approval of an investment in private
placements; a prohibition on portfolio managers trading in a security seven days
before or after a trade in the same security by an account over which the
manager exercises investment discretion; and a prohibition on realizing any
profit on the trading of a security held less than 60 days. Certain securities
and transactions, such as mutual fund shares or U.S. Treasuries and purchases of
options on securities indexes or securities under an automatic dividend
reinvestment plan, are exempt from the restrictions in the Code because they
present little or no potential for abuse. Certain transactions involving the
stocks of large capitalization companies are exempt from the seven day black-out
period and short-term trading prohibitions because such transactions are highly
unlikely to affect the price of these stocks. In addition to the trading
restrictions, the Code contains reporting obligations that are designed to
ensure compliance and allow the Adviser's Ethics Committee to monitor that
compliance.

The Adviser and the Funds have also adopted a Policy and Procedures
Designed to Detect and Prevent Insider Trading (the "Insider Trading Policy").
The Insider Trading Policy prohibits any employee from trading, either
personally or on behalf of others (including a client account), on the basis of
material nonpublic information. All employees are required to certify each year
that they have read and complied with the provisions of the Code and the Insider
Trading Policy.

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

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

<PAGE>

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

All shares of each Fund have equal voting, redemption, dividend, and
liquidation rights. All issued and outstanding shares of a Fund are fully paid
and nonassessable. Shares have no preemptive or conversion rights. Fractional
shares have the same rights proportionately as full shares. The shares of a
Fund do not have cumulative voting rights, which means that the holders of more
than 50 percent of the shares of the Fund, voting for the election of directors,
can elect all the directors.

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

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

PURCHASES AND REDEMPTIONS

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

INVESTMENT MINIMUMS. Although the Adviser has established minimum
investment amounts, it may, at its sole discretion, waive the minimum
purchase and account size requirements for certain group plans or
accounts opened by agents or fiduciaries (such as a bank trust
department, investment adviser, or securities broker), for individual
retirement plans or in other circumstances.

<PAGE>

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

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

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

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

Fixed Amount - you may elect to receive a monthly or quarterly
fixed amount of $50 or more.

Automatic withdrawals will be made within seven days after the end of
the month or quarter to which they related.

To the extent redemptions for automatic withdrawals exceed
dividends declared on shares in your account, the number of shares in
your account will be reduced. If the value of your account falls
below the Fund minimum, your account is subject to be closed on 60
days written notice. The minimum withdrawal amount has been
established for administrative convenience and should not be
considered as recommended for all investors. For tax reporting, a
capital gain or loss may be realized on each fixed-amount withdrawal.

An automatic withdrawal plan may be modified or terminated at any
time upon prior notice by the Fund or the shareholder.

REDEMPTION OF RECENTLY PURCHASED SHARES. If a Fund has not yet
collected payment for the shares you are selling, it may delay sending
the proceeds until it has collected payment, which may take up to 15
days from the

<PAGE>

purchase date. No interest is paid on the redemption proceeds after
the redemption date and before the proceeds are sent to you. If you
request the redemption (by draft or other means) of Columbia Daily
Income Company shares recently purchased by check, the proceeds will
not be transmitted until the earlier to occur of your check clearing
or 15 days from the purchase date. These holding periods do not apply
to the redemption of shares purchased by bank wire or with a cashiers
or certified check.

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

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

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

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

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

<PAGE>

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

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

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

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

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

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

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

<PAGE>

incur brokerage fees upon the sale of any securities distributed upon
redemption.

PRICING OF SHARES

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

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

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

Investments in the Columbia Daily Income Company and other temporary cash
investments are carried at values deemed best to reflect their fair values as
determined in good faith by the Adviser, under procedures adopted by the Fund's
Board of Directors. These

<PAGE>

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 Funds' NAV calculation. In
the case of such foreign security, if an event that is likely to affect
materially the value of a portfolio security occurs between the time the foreign
price is determined and the time the Fund's NAV is calculated, it may be
necessary to value the security in light of that event.

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

U S Bank N.A. (a "Custodian"), 321 SW Sixth Avenue, Portland, Oregon 97208,
acts as general custodian for each Fund, except the International Stock Fund.
The Custodian provides custody services to the International Stock Fund with
respect to domestic securities held by the Fund. Chase Manhattan Bank ("Chase"
or a "Custodian"), One Pierrepont Plaza, Brooklyn, New York 11201, acts as the
general custodian for the International Stock Fund and provides custody services
to those Funds that invest in foreign securities. The Custodians hold all
securities and cash of the Funds, receive and pay for securities purchased,
deliver against payment securities sold, receive and collect income from
investments, make all payments covering expenses of the Funds, and perform other
administrative duties, all as directed by authorized officers of the Adviser.
The Custodians do not exercise any supervisory function in the purchase and sale
of portfolio securities or payment of dividends.

Portfolio securities purchased in the United States are maintained in the
custody of the Fund's custodian. Portfolio securities purchased outside the
United States by the Funds are maintained in the custody of foreign banks, trust
companies, or depositories that have sub-custodian arrangements with Chase (the
"foreign sub-custodians"). Each of the domestic and foreign custodial
institutions that may hold portfolio securities of the Funds has been approved
by the Board of Directors of the Funds or, in the case of foreign securities, at
the discretion of the Board, by Chase, as a delegate of the Board of Directors,
all in accordance with regulations under the 1940 Act.

The Adviser determines whether it is in the best interest of the Funds and
their shareholders to maintain a Fund's assets in each of the countries in which
the Fund invests ("Prevailing Market Risk"). The review of Prevailing Market
Risk includes an assessment of the risk of holding a Fund's assets in a country,
including risks of expropriation or imposition of exchange controls. In
evaluating the foreign sub-custodians, the Board of Directors, or its delegate,
will review the operational capability

<PAGE>

and reliability of the foreign sub-custodian. With respect to foreign
investments and the selection of foreign sub-custodians, however, there is no
assurance that the Funds, and the value of their shares, will not be adversely
affected by acts of foreign governments, financial or operational difficulties
of the foreign sub-custodians, difficulties and cost of obtaining jurisdiction
over, or enforcing judgements against, the foreign sub-custodians, or the
application of foreign law to a Fund's foreign sub-custodial arrangement.
Accordingly, an investor should recognize that the risks involved in holding
assets abroad are greater than those associated with investing in the United
States.

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

The financial statements of each Fund for the year ended December 31, 1998,
the selected per share data and ratios under the caption "Financial Highlights,"
and the report of PricewaterhouseCoopers LLP, independent accountants, are
included in the 1998 Annual Report to Shareholders of the Funds.
PricewaterhouseCoopers LLP, 1300 S.W. Fifth Avenue, Suite 3100, Portland, Oregon
97201, in addition to examining the financial statements of the Funds, assists
in the preparation of the tax returns of the Funds and in certain other matters.

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

FEDERAL INCOME TAXES

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

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

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

<PAGE>

securities, to an amount not greater than 5 percent of the value of the assets
of the Fund and 10 percent of the outstanding voting securities of such issuer,
and (ii) not more than 25 percent of the value of the assets of the Fund is
invested in the securities (other than government securities) of any one issuer
or of two or more issuers that the Fund "controls" within the meaning of Section
851 of the Code and that meet certain requirements (the "Diversification Test").
In addition, a Fund must file, or have filed, a proper election with the
Internal Revenue Service.

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

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

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

SPECIAL ASPECTS OF 90 PERCENT TEST WITH RESPECT TO FOREIGN CURRENCY. For
purposes of the 90 Percent Test, foreign currency gains that are not directly
related to a Fund's principal business of investing in stocks or securities (or
options and futures

<PAGE>

with respect to stock or securities) may be excluded from qualifying income by
regulation. No such regulations, however, have been issued.

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

Two possible exceptions to marking-to-market relate to hedging transactions
and mixed straddles. A hedging transaction is defined for purposes of Section
1256 as a transaction (1) that a Fund properly identifies as a hedging
transaction, (2) that is entered into in the normal course of business primarily
to reduce the risk of price changes or currency fluctuations with respect to the
Fund's investments, and (3) results in ordinary income or loss. A mixed
straddle is a straddle where (1) at least one (but not all) of the straddle
positions are Section 1256 contracts and (2) the Fund properly identifies each
position forming part of the straddle. A straddle for these purposes generally
is offsetting positions with respect to personal property. A Fund holds
offsetting positions generally if there is a substantial diminution of the
Fund's risk of loss from holding a position by reason of its holding one or more
other positions.

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

Distributions properly designated by the Municipal Bond Fund and the
National Municipal Bond Fund as representing net tax-exempt interest received on
municipal bonds (including municipal bonds of Guam, Puerto Rico, and certain
other issuers) will not be includable by shareholders in gross income for
federal income tax purposes

<PAGE>

(except for shareholders who are, or are related to, "substantial users," as
discussed below). Distributions representing net taxable interest received by
the Municipal Bond Fund and the National Municipal Bond Fund from sources other
than municipal bonds, representing the excess of net short-term capital gain
over net long-term capital loss, or representing taxable accrued market discount
on the sale or redemption of municipal bonds, will be taxable to shareholders as
ordinary income.

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

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

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

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

Certain foreign corporations may be subject to the "branch profits tax"
under Section 884 of the Code. The receipt of dividends from the Municipal Bond
Fund and

<PAGE>

the National Municipal Bond Fund may increase the liability of the foreign
corporation under the branch profits tax, even if such dividends are generally
tax-exempt.

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

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

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

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

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

<PAGE>

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

GENERAL CONSIDERATIONS. Distributions properly designated by any Fund as
representing the excess of net long-term capital gain over net short-term
capital loss are taxable to shareholders at the applicable long-term capital
gains rate, regardless of the length of time the shares of the Fund have been
held by shareholders. For noncorporate taxpayers, the highest rate that applies
to long-term capital gains is lower than the highest rate that applies to
ordinary income. Any loss that is realized and allowed on redemption of shares
of the Fund 6 months or less from the date of purchase of the shares and
following the receipt of a capital gain dividend will be treated as a long-term
capital loss to the extent of the capital gain dividend. For this purpose,
Section 852(b)(4) of the Code contains special rules on the computation of a
shareholder's holding period.

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

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

<PAGE>

National Municipal Bond Fund, as tax-exempt interest, or in the case of the Real
Estate Fund, as a tax return of capital.

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

Each Fund is generally required to obtain from its shareholders a
certification of the shareholder's taxpayer identification number and certain
other information. Each Fund generally will not accept an investment to
establish a new account that does not comply with this requirement. If a
shareholder fails to certify such number and other information, or upon receipt
of certain notices from the Internal Revenue Service, the Fund may be required
to withhold 31 percent of any reportable interest or dividends, or redemption
proceeds, payable to the shareholder, and to remit such sum to the Internal
Revenue Service, for credit toward the shareholder's federal income taxes. A
shareholder's failure to provide a social security number or other tax
identification number may subject the shareholder to a penalty of $50 imposed by
the Internal Revenue Service. In addition, that failure may subject the Fund to
a separate penalty of $50. This penalty will be charged against the
shareholder's account, which will be closed. Closure of the account may result
in a capital gain or loss.

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

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

The Code allows the deduction by certain individuals, trusts, and estates
of "miscellaneous itemized deductions" only to the extent that such deductions
exceed 2 percent of adjusted gross income. The limit on miscellaneous itemized
deductions will NOT apply, however, with respect to the expenses incurred by any
"publicly offered regulated investment company." Each Fund believes that it is
a publicly offered regulated investment company because its shares are
continuously offered pursuant to a

<PAGE>

public offering (within the meaning of Section 4 of the Securities Act of 1933,
as amended). Therefore, the limit on miscellaneous itemized deductions should
not apply to expenses incurred by any of the Funds.

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

FOREIGN INCOME TAXES

The International Stock Fund invests in the securities of foreign
corporations and issuers. To a lesser extent, the Common Stock Fund, the Growth
Fund, the Special Fund, the Small Cap Fund, the Real Estate Fund, the Balanced
Fund, and the High Yield Fund may also invest in such foreign securities.
Foreign countries may impose income taxes, generally collected by withholding,
on foreign-source dividends and interest paid to a Fund. These foreign taxes
will reduce a Fund's distributed income and a Fund's return. The Funds
generally expect to incur, however, no foreign income taxes on gains from the
sale of foreign securities.

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

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

<PAGE>

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

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

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

INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES. If a Fund invests in
an entity that is classified as a "passive foreign investment company" ("PFIC")
for federal income tax purposes, the application of certain provisions of the
Code applying to PFICs could result in the imposition of certain federal income
taxes on the Fund. It is anticipated that any taxes on a Fund with respect to
investments in PFICs would be insignificant.

INVESTMENTS IN REAL ESTATE INVESTMENT TRUSTS THAT INVEST IN REMICS.

The Real Estate Fund may invest in REITs that hold residual interests in
real estate mortgage investment conduits ("REMICs"). Under Treasury regulations
that have not yet been issued, but may apply retroactively, a portion of the
Real Estate Fund's income from a REIT that is attributable to the REIT's
residual interest in a REMIC (referred to in the Code as an "excess inclusion")
will be subject to federal income tax in all events. These regulations are also
expected to provide that excess inclusion income of a regulated investment
company, such as the Real Estate Fund, will be allocated to shareholders of the
regulated investment company in proportion to the dividends received by such
shareholders, with the same consequences as if the shareholders held the related
REMIC residual interest directly. In general, excess inclusion income allocated
to shareholders (i) cannot be offset by net operating losses (subject to a
limited exception for certain thrift institutions), (ii) will constitute
unrelated business taxable income to entities (including a qualified pension
plan, an individual retirement account, a 401(k) plan, a Keogh plan or other
tax-exempt entity) subject to tax on unrelated business income, thereby
potentially requiring such an entity that is allocated excess inclusion income,
and otherwise might not be required to

<PAGE>

file a tax return, to file a tax return and pay tax on such income, and (iii) in
the case of a foreign shareholder, will not qualify for any reduction in U.S.
federal withholding tax. In addition, if at any time during any taxable year a
"disqualified organization" (as defined in the Code) is a record holder of a
share in a regulated investment company, then the regulated investment company
will be subject to a tax equal to that portion of its excess inclusion income
for the taxable year that is allocable to the disqualified organization,
multiplied by the highest federal income tax rate imposed on corporations. The
Real Estate Fund does not intend to invest in REITs, a substantial portion of
the assets of which consists of residual interests in REMICs.

STATE INCOME TAXES

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

MUNICIPAL BOND FUND. Individuals, trusts, and estates will not be subject
to the Oregon personal income tax on distributions from the Municipal Bond Fund
that are derived from tax-exempt interest paid on the municipal bonds of Oregon
and its political subdivisions and certain other issuers (including Puerto Rico
and Guam). However, these individuals, trusts, and estates that are subject to
Oregon personal income tax also generally will be subject to the Oregon personal
income tax on distributions from the Municipal Bond Fund that are derived from
other types of income, including interest on the municipal bonds of states,
other than Oregon. Furthermore, it is expected that corporations subject to the
Oregon corporation excise or income tax will be subject to that tax on income
from the Municipal Bond Fund, including income that is exempt for federal
purposes. Shares of the Municipal Bond Fund will not be subject to Oregon
property tax. Additional discussion regarding local taxes, and the tax rules of
states other than Oregon, are beyond the scope of this discussion.

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

<PAGE>

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

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

GENERAL INFORMATION

Capital gains distributed to shareholders of both the Municipal Bond Fund
and the National Municipal Bond Fund will generally be subject to state and
local taxes. Further discussion regarding the state and local tax consequences
of investments in the Funds are beyond the scope of the tax discussions in the
Prospectus and this Statement of Additional Information.

ADDITIONAL INFORMATION

The foregoing summary and the summary included in the Prospectus under
"Distributions and Taxes" of tax consequences of investment in the Funds are
necessarily general and abbreviated. No attempt has been made to present a
complete or detailed explanation of tax matters. Furthermore, the provisions of
the statutes and regulations on which they are based are subject to change,
prospectively or retroactively, by legislative or administrative action. Local
taxes are beyond the scope of this discussion. Prospective investors in the
Funds are urged to consult their own tax advisors regarding specific questions
as to federal, state, or local taxes.

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

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

The Funds will from time to time advertise or quote their respective yields
and total return performance. These figures represent historical data and are
calculated according to Securities and Exchange Commission ("SEC") rules
standardizing such computations. The investment return and principal value
(except, under normal

<PAGE>

circumstances, for the Columbia Daily Income Company) will fluctuate so that
shares when redeemed may be worth more or less than their original cost.

THE COLUMBIA DAILY INCOME COMPANY

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

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

The current yield for Columbia Daily Income Company for the seven days
ended December 31, 1998 was 4.64%.

Compounded effective yield is calculated by daily compounding of the base
period return referred to above. This calculation is made by adding 1 to the
base period return, raising the sum to a number equal to 365 divided by 7, and
subtracting 1 from the result, I.E.:

365/7
[(base period return + 1) ]-1 = Compounded Effective Yield

The compounded effective yield for the Columbia Daily Income Company for
the seven days ended December 31, 1998 was 4.74%.

The determination of net change in the value of an account for purposes of
the Columbia Daily Income Company yield calculations reflects the value of
additional shares purchased with income dividends from the original share and
income dividends declared on both the original share and the additional shares.
The determination of net change does not reflect realized gains or losses from
the sale of securities or unrealized appreciation or depreciation. The Columbia
Daily Income Company includes unrealized appreciation or depreciation, as well
as realized gains or losses, in the determination of actual daily dividends.
Therefore, the quoted yields as calculated above may differ from the actual
dividends paid.

THE COMMON STOCK FUND, THE REAL ESTATE FUND, THE BALANCED FUND,
AND THE BOND FUNDS

Current yields of the Common Stock Fund, the Real Estate Fund, the Balanced
Fund, the Government Bond Fund, the Bond Fund, the Municipal Bond Fund, and the
High Yield Fund are calculated by dividing the net investment income per share
earned during an identified 30-day period by the maximum offering price per
share on the last day of the same period, according to the following formula:

6
Yield = 2 [( a-b + 1) -1]
---
cd

<PAGE>

Where: a = dividends and interest earned during the period.

b = expenses accrued for the period (net of reimbursement).

c = the average daily number of shares outstanding during the period
that were entitled to receive dividends.

d = the maximum offering price per share on the last day of the
period.

The Funds use generally accepted accounting principles in determining
actual income paid, and these principles differ in some instances from SEC rules
for computing income for the above yield calculations. Therefore, the quoted
yields as calculated above may differ from the actual dividends paid. For the
30 day period ended December 31, 1998 the current yields for the Common Stock
Fund, the Real Estate Fund, the Balanced Fund, the Government Bond Fund, the
Bond Fund, the Municipal Bond Fund and the High Yield Fund were 0.29%, 5.08%,
2.83%, 3.77%, 5.81%, 3.91%, and 7.15%, respectively.

The Municipal Bond Fund may publish a tax equivalent yield for Oregon
shareholders that represents the yield that an investor must receive on a fully
taxable investment to achieve the same after-tax results at the highest then
existing marginal combined Oregon and federal income tax rates, calculated
according to the following formula:

Tax Equivalent Yield = a + c + e
--- ---
1-b 1-d

Where: a = that portion of the current yield of the Fund that is exempt from
federal and Oregon income tax.

b = highest then-existing marginal combined Federal and Oregon income
tax rate.

c = that portion of the current yield of the Fund that is only exempt
from federal gross income tax.

d = highest then-existing federal income tax rate.

e = that portion of the current yield of the Fund that is not tax
exempt.

The Municipal Bond Fund may also publish a tax equivalent yield for
nonresidents of Oregon that represents the yield that an investor must receive
on a fully taxable investment to achieve the same after-tax results of the
highest then-existing marginal federal income tax rate, calculated according to
the following formula:

Tax Equivalent Yield = a + c
---
1-b

<PAGE>

Where: a = that portion of the current yield of the Fund that is exempt from
federal income tax.

b = highest then-existing marginal federal income tax rate.

c = that portion of the current yield of the Fund that is not tax
exempt.

The Government Bond Fund may publish a tax equivalent yield for Oregon
shareholders that represents the yield that an investor must receive on a fully
taxable investment to achieve the same after-tax results at the highest then
existing marginal Oregon income tax rate, calculated according to the following
formula:

Tax Equivalent Yield = a + c
---
1-b

Where: a = that portion of the current yield of the Fund that is exempt from
Oregon income tax.

b = highest then existing marginal Oregon income tax rate.

c = that portion of the current yield of the Fund that is not exempt
from Oregon income tax.

The Funds may also publish average annual total return quotations for
recent 1, 5, and 10-year periods (or a fractional portion thereof) computed by
finding the average annual compounded rates of return over the 1, 5, and 10-year
periods that would equate the initial amount invested to the ending redeemable
value, according to the following formula:

n
P(1+T) = ERV

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.

<PAGE>

If a Fund's registration statement under the Investment Company Act of 1940
has been in effect less than 1, 5, or 10 years, the time period during which the
registration statement has been in effect will be substituted for the periods
stated.

The Funds may compare their performance to other mutual funds with
similar investment objectives and to the mutual fund industry as a whole, as
quoted by ranking services and publications of general interest. For
example, these services or publications may include Lipper Analytical
Services, Inc., Schabacker's Total Investment Service, Barron's, Business
Week, Changing Times, The Financial Times, Financial World, Forbes,
Investor's Daily, Money, Morningstar, Inc., Personal Investor, The Economist,
The Wall Street Journal, and USA Today. These ranking services and
publications rank the performance of the Funds against all other funds over
specified periods and against funds in specified categories.

The Funds may also compare their performance to that of a recognized stock or
bond index including the Standard & Poor's 500, Standard & Poor's Midcap 400,
Dow Jones, Russell 2000, Nasdaq stock indices, the NAREIT Equity Index, the
Shearson Lehman and Salomon bond indices, and the Merrill Lynch 1-3 Treasury
Index or, with respect to the International Stock Fund, a suitable
international index, such as the Morgan Stanley Capital International Europe,
Australasia, Far East Index or the FT-S&P Actuaries Europe-Pacific Index.
The comparative material found in advertisements, sales literature, or in
reports to shareholders may contain past or present performance ratings.
This is not to be considered representative or indicative of future results
or future performance. Unmanaged indices may assume the reinvestment of
dividends, but generally do not reflect deductions for administrative and
management costs and expenses.

In addition, the Funds may also compare their performance to other
income-producing securities such as (i) money market funds; (ii) various bank
products (based on average rates of bank and thrift institution certificates of
deposit, money market deposit accounts, and other accounts as reported by the
Bank Rate Monitor and other financial reporting services, including newspapers);
and (iii) U.S. treasury bills or notes. There are differences between these
income-producing alternatives and the Funds other than their yields, some of
which are summarized below.

The yields of the Funds are not fixed and will fluctuate. The principal
value of your investment in each Fund (except, under normal circumstances, the
Columbia Daily Income Company) at redemption may be more or less than its
original cost. In addition, your investment is not insured and its yield is not
guaranteed. Although the yields of bank money market deposit and other similar
accounts will fluctuate, principal will not fluctuate and is insured by the
Federal Deposit Insurance Corporation up to $100,000. Bank passbook savings
accounts normally offer a fixed rate of interest, and their principal and
interest are also guaranteed and insured. Bank certificates of deposit offer
fixed or variable rates for a set term. Principal and fixed rates are
guaranteed and insured up to $100,000. There is no fluctuation in principal
value. Withdrawal of these deposits prior to maturity will normally be subject
to a penalty.

<PAGE>

- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

The Funds' most recent Annual Report to shareholders is a separate document
supplied with this Statement of Additional Information, and (except for the
National Municipal Bond Fund) the financial statements, accompanying notes and
report of independent accountants appearing in the Annual report are
incorporated by reference into this Statement of Additional Information. The
financial statement, accompanying notes and report of independent accountants
for the National Municipal Bond Fund, follow this Statement of Additional
Information.

<PAGE>

Part B-I

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

COLUMBIA GROWTH FUND, INC.

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

STATEMENT OF ADDITIONAL INFORMATION

COLUMBIA GROWTH FUND, INC.
1300 SW Sixth Avenue
PO Box 1350
Portland, Oregon 97207
(503) 222-3600

This Statement of Additional Information contains information relating to
the Columbia Growth Fund, Inc. (the "Fund").

This Statement of Additional Information is not a Prospectus. It relates
to a Prospectus dated February 24, 1999 (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 or
by contacting your retirement plan administrator.

1
<PAGE>

TABLE OF CONTENTS

Description of the Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Investment Advisory and Other Fees Paid to Affiliates . . . . . . . . . . . . 10
Portfolio Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Capital Stock and Other Securities. . . . . . . . . . . . . . . . . . . . . . 13
Purchase, Redemption and Pricing of Shares. . . . . . . . . . . . . . . . . . 13
Custodians. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Accounting Services and Financial Statements. . . . . . . . . . . . . . . . . 16
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Yield and Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

February 24, 1999

<PAGE>

- --------------------------------------------------------------------------------
DESCRIPTION OF THE FUND
- --------------------------------------------------------------------------------

The Fund is an open-end, management investment company. The Fund is
diversified, which means that, with respect to 75% of its total assets, the Fund
will not invest more than 5% of its assets in the securities of any single
issuer. The investment adviser for 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 FUND

The Prospectus describes the fundamental investment objective and the
principal investment strategies applicable to the Fund. The Fund's investment
objective may not be changed without shareholder approval. What follows is
additional information regarding securities in which the Fund may invest and
investment practices in which it may engage.

3
<PAGE>

OPTIONS AND FINANCIAL FUTURES TRANSACTIONS

The Fund may invest up to 5% of its net assets in premiums on put and call
exchange-traded options. A call option gives the holder (buyer) the right to
purchase a security at a specified price (the exercise price) at any time until
a certain date (the expiration date). A put option gives the buyer the right to
sell a security at the exercise price at any time

4
<PAGE>

until the expiration date. The Fund may also purchase options on securities
indices. Options on securities indices are similar to options on a security
except that, rather than the right to take or make delivery of a security at a
specified price, an option on a securities index gives the holder the right to
receive, on exercise of the option, an amount of cash if the closing level of
the securities index on which the option is based is greater than, in the case
of a call, or less than, in the case of a put, the exercise price of the option.
The Fund may enter into closing transactions, exercise its options, or permit
the options to expire. The Fund may only write call options that are covered.
A call option is covered if written on a security a Fund owns or if the Fund has
an absolute and immediate right to acquire that security without additional cash
consideration upon conversion or exchange of other securities held by the Fund.
If additional cash consideration is required, that amount must be held in a
segregated account by the Fund's custodian bank. A call option on a securities
index is covered if the Fund owns securities whose price changes, in the opinion
of the Adviser, are expected to be substantially similar to those of the index.
A call option may also be covered in any other manner in accordance with the
rules of the exchange upon which the option is traded and applicable laws and
regulations. The 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 Fund do not limit the
percentage of the Fund's assets that may be invested in financial futures
transactions. The Fund, however, does not intend to enter into financial
futures transactions for which the aggregate initial margin exceeds 5 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. The Fund
may engage in futures transactions only on commodities exchanges or boards of
trade.

The Fund will not engage in transactions in index options, financial
futures contracts, or related options for speculation. The Fund may engage in
these transactions only as an attempt to hedge against market conditions
affecting the values of securities that the Fund owns or intends to purchase.
When a Fund purchases a put on a stock index or on a stock index future not held
by the Fund, the put protects the Fund against a decline in the value of all
securities held by it to the extent that the stock index moves in a similar
pattern to the prices of the securities held. The correlation, however, between
indices and price movements of the securities in which the Fund will generally
invest may be imperfect. The Fund expects, nonetheless, that the use of put
options that relate to such indices will, in certain circumstances, protect
against declines in values of specific portfolio securities or the Fund's
portfolio generally. Although the purchase of a put option may partially
protect the Fund from a decline in the value of a particular security or its
portfolio generally, the cost of a put will reduce the potential return on the
security or the portfolio if either increases in value.

Upon entering into a futures contract, the Fund 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.

FOREIGN SECURITIES

The Fund may invest up to 10% 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 Fund may invest in
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

5
<PAGE>

recoverable, the unrecovered portion of any foreign withholding taxes would
reduce the income a Fund receives from its foreign investments.

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

CURRENCY CONTRACTS

The Fund's value will fluctuate as a result of changes in the exchange
rates between the U.S. dollar and the currencies in which the foreign
securities or bank deposits held by the Fund are denominated. To reduce or
limit exposure to changes in currency exchange rates (referred to as
"hedging"), the Fund may enter into forward currency exchange contracts that,
in effect, lock in a rate of exchange during the period of the forward
contracts. Forward contracts are usually entered into with currency traders,
are not traded on securities exchanges, and usually have a term of less than
one year, but can be renewed. A default on a contract would deprive the Fund
of unrealized profits or force the Fund to cover its commitments for purchase
or sale of currency, if any, at the market price. The Fund will enter into
forward contracts only for hedging purposes and not for speculation. If
required by the Investment Company Act or the Securities and Exchange
Commission, the Fund may "cover" its commitment under forward contracts by
segregating cash or liquid high-grade securities with the Fund's custodian in
an amount not less than the current value of the Fund's total assets
committed to the consummation of the contracts.

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

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

REPURCHASE AGREEMENTS

The 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. The Fund will enter into repurchase agreements only with
those banks or securities dealers who are deemed creditworthy pursuant to
criteria adopted by the Board of Directors of the Fund. There is no limit on
the portion of the Fund's assets that may be invested in repurchase agreements
with maturities of seven days or less.

6
<PAGE>

ILLIQUID SECURITIES

The Fund may not invest more than 5% 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 the Fund may invest will be
considered illiquid: (1) repurchase agreements maturing in more than seven
days; (2) restricted securities (securities whose public resale is subject to
legal restrictions); (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 the Fund may invest that are not readily
marketable.

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 Fund in convertible debentures or convertible
preferred stock would be a substitute for an investment in the underlying common
stock, primarily either in circumstances where only the convertible security is
available in quantities necessary to satisfy the Fund's investment needs (for
example, in the case of a new issuance of convertible securities) or where,
because of financial market conditions, the conversion price of the convertible
security is comparable to the price of the underlying common stock, in which
case a preferred position with respect to the corporation's earnings and assets
may be preferable to holding common stock.

Warrants are options to buy a stated number of underlying securities at a
specified price any time during the life of the warrants. The securities
underlying these warrants will be the same types of securities that the 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, the Fund may need to sell them over an extended period or
below the original purchase price. Investments by the Fund in these small or
unseasoned companies may be regarded as speculative.

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 issuers of stocks and bonds, private
placement and U.S. Government securities may be sold in this manner. To the
extent a Fund engages in when-issued and delayed-delivery transactions, it will
do so to acquire portfolio securities consistent with its investment objectives
and policies and not for investment leverage. A Fund may use spot and forward
currency exchange transactions to reduce the risk associated with fluctuations
in exchange rates when securities are purchased or sold on a when-issued or
delayed delivery basis.

TEMPORARY INVESTMENTS

When, as a result of market conditions, the Adviser determines a temporary
defensive position is warranted to help preserve capital, the Fund may without
limit temporarily retain cash, or invest in prime commercial paper, high-grade
debt securities, securities of the U.S. Government and its agencies and
instrumentalities, and high-quality money

7
<PAGE>

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

The Fund may not:

1. Buy or sell commodities or commodity contracts.

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

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

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

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

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

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

9. Issue senior securities, bonds, or debentures.

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

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

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

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

14. Buy securities on margin or make short sales.

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

8
<PAGE>

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

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

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

J. JERRY INSKEEP, JR.,*+ Age 68, Chairman, President, and Director of the
Columbia Funds; Chairman, President, and Trustee of CMC Fund Trust ("CMC
Trust"); Consultant to Fleet Financial Group, Inc. ("Fleet") (since December
1997); formerly Chairman and a Director of Columbia Funds Management Company
(the "Adviser"), Columbia Management Co., and Columbia Trust Company (the
"Trust Company"); formerly a Director of Columbia Financial Center
Incorporated ("Columbia Financial"). Mr. Inskeep's business address is 1300
S.W. Sixth Avenue, P.O. Box 1350, Portland, Oregon 97207.

JAMES C. GEORGE, Age 66, Director of the Columbia Funds (since June 1994);
Trustee of CMC Trust (since December 1997). Mr. George, was the former
Investment Manager of the Oregon State Treasury between 1966 and 1992. Since
1992, Mr. George has been an investment consultant. Mr. George's business
address is 1001 S.W. Fifth Avenue, Portland, Oregon 97204.

THOMAS R. MACKENZIE, Age 71, Director of the Columbia Funds; Trustee of CMC
Trust (since December 1997); Founder and Director of Group Mackenzie
(architecture, planning, interior design, engineering). Mr. Mackenzie's
business address is 0690 S.W. Bancroft Street, Portland, Oregon 97201.

ROBERT J. MOORMAN, Age 47, *Secretary of the Columbia Funds and CMC Trust
(since January 1998); Attorney with Stoel Rives LLP. Mr. Moorman's business
address is 900 S.W. Fifth Avenue, Suite 2600, Portland, Oregon 97204-1268.

RICHARD L. WOOLWORTH,+ Age 57, Director of the Columbia Funds; Trustee of CMC
Trust; Chairman of Blue Cross and Blue Shield of Oregon; Chairman and Chief
Executive Officer of the Regence Group, health insurers. Mr. Woolworth's
business address is 200 S.W. Market Street, Portland, Oregon 97201.

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

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

The following table sets forth compensation received by the disinterested
directors for 1998. No officer of the Fund received any compensation from the
Fund in 1998.

COMPENSATION TABLE

Aggregate Compensation Compensation from
Director From the Fund Fund Complex**
-------- ---------------------- -----------------

Thomas R. Mackenzie $4,968 $31,000
James C. George $4,968 $31,000
Richard L. Woolworth* $5,194 $32,000

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

9
<PAGE>

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

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

At January 31, 1999, officers and directors of the Fund owned of record or
beneficially less than 1.00% of the total outstanding shares of the Fund.

At January 31, 1999, to the knowledge of the Fund, no person owned of
record or beneficially more than 5 percent of the outstanding shares of the Fund
except the following record owners: Charles Schwab & Co., Inc., 101 Montgomery
Street, San Francisco, California 94104, which owned 2,272,883 shares of the
Fund (5.54 percent of the total shares outstanding).

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

Information regarding calculation of the advisory fee payable to the
Adviser is set forth in the Prospectus. Advisory fees paid by the Fund for
1996, 1997 and 1998 were $5,711,080, $7,019,161 and $8,591,359 respectively.

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 Fund. The Adviser pays CMC a fee for these
services. A Fund's expenses are not increased by this arrangement, and no
amounts are paid by the Fund to CMC under this agreement.

The transfer agent and dividend crediting agent for the Fund is Columbia
Trust Company ("Trust Company"). Its address is 1301 SW Fifth Avenue, P.O. Box
1350, Portland, Oregon 97207. It issues certificates for shares of the Fund, if
requested, and records and disburses dividends for the Fund. During 1998, the
Fund paid the Trust Company a per account fee of $1.66 per month for each
shareholder account with the Fund existing at any time during the month. In
addition, the Fund pays the Trust Company for extra administrative services
performed at cost in accordance with a schedule set forth in the agreement
between the Trust Company and the Fund and reimburses the Trust Company for
certain out-of-pocket expenses incurred in carrying out its duties under that
agreement. In addition to the transfer agent services described above, the
Trust Company has hired First Data Investor Services Group, Inc. ("First Data")
as a sub-transfer agent to provide services related to Fund transactions
processed through the National Securities Clearing Corporation on behalf of the
Fund. The Fund has agreed to pay the Trust Company the costs incurred by Trust
Company in connection with the services provided by First Data.

Fees paid to the Trust Company by the Fund for services performed in 1998
under its transfer agent agreement were $1,070,063.

10
<PAGE>

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

The Fund will not generally invest in securities for short-term capital
appreciation but, when business and economic conditions, market prices, or the
Fund's investment policy warrant, individual security positions may be sold
without regard to the length of time they have been held. This may result in a
higher portfolio turnover rate and increase the Fund's transaction costs,
including brokerage commissions. To the extent short term trades result in
gains on securities held less than one year, shareholders will be subject to
taxes at ordinary income rates. See TAXES in this Statement of Additional
Information.

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

Prompt execution of orders at the most favorable price will be the primary
consideration of the Fund 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) the broker's experience and financial stability and the
execution services it renders to the Adviser on a continuing basis; and (vii)
reasonableness of commission.

Research, statistical, and other services offered by the broker also may be
taken into consideration in selecting broker-dealers. These services may
include: advice concerning the value of securities, the advisability of
investing in, purchasing, or selling securities, and the availability of
securities or the purchasers or sellers of securities; and furnishing analyses
and reports concerning issuers, industries, securities, economic factors and
trends, portfolio strategies, and performance of accounts. A commission in
excess of the amount of a commission another broker or dealer would have charged
for effecting a transaction may be paid by the 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.

11
<PAGE>

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 Fund 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 Fund 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 Fund.

Total brokerage commissions paid by the Fund for 1996, 1997 and 1998 were
$1,606,969, $2,168,003 and $3,732,855 respectively. Of the commissions paid in
1998, the Fund paid $38,634, to acquire third-party research or products.

Provided the 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 the Fund is subject to
rules adopted by the National Association of Securities Dealers. The Adviser
may use research services provided by and allocate purchase 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.

Investment decisions for the 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 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 Fund or accounts
will be made on an equitable basis.

Since 1967, the Adviser and the Fund has 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 purpose of the Code is to ensure
that all employees conduct their personal transactions in a manner that does not
interfere with the portfolio transactions of the Fund or the Adviser's other
clients or take unfair advantage of their relationship with the Adviser. The
specific standards in the Code include, among others, a requirement that all
employee trades be pre-cleared; a prohibition on investing in initial public
offerings; required pre-approval of an investment in private placements; a
prohibition on portfolio managers trading in a security seven days before or
after a trade in the same security by an account over which the manager
exercises investment discretion; and a prohibition on realizing any profit on
the trading of a security held less than 60 days. Certain securities and
transactions, such as mutual fund shares or U. S. Treasuries and purchases of
options on securities indexes or securities under an automatic dividend
reinvestment plan, are exempt from the restrictions in the Code because they
present little or no potential for abuse. Certain transactions involving the
stocks of large capitalization companies are exempt from the seven day black-out
period and short-term trading prohibitions because such transactions are highly
unlikely to affect the price of these stocks. In addition to the trading
restrictions, the Code contains reporting obligations that are designed to
ensure compliance and allow the Adviser's Ethics Committee to monitor that
compliance.

The Adviser and the Fund have also adopted a Policy and Procedures Designed
to Detect and Prevent Insider Trading (the "Insider Trading Policy"). The
Insider Trading Policy prohibits any employee 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.

12
<PAGE>

The Fund is an Oregon corporation and was organized in 1967.

All shares of the Fund have equal voting, redemption, dividend, and
liquidation rights. All issued and outstanding shares of the Fund are fully
paid and nonassessable. Shares have no preemptive or conversion rights.
Fractional shares have the same rights proportionately as full shares. The
shares of the Fund do not have cumulative voting rights, which means that 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 the
Fund of (i) 67 percent or more of the shares present or represented by proxy at
the meeting, if the holders of more than 50 percent of the outstanding shares
are present or represented by proxy, or (ii) more than 50 percent of the
outstanding shares, whichever is less.

PURCHASES AND REDEMPTIONS

Shares of the Fund offered by this Prospectus are available only through
an employee retirement plan. The plan administrator or the employee benefits
office for such plan can provide information about how to buy and sell shares
of the Fund.

<PAGE>

PRICING OF SHARES

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

14
<PAGE>

The 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 the Fund's shares, the following
procedures are utilized whenever applicable. The 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 purchasing debt
securities, the Fund uses market value to value such securities as quoted by
dealers who are market makers in these securities or by an independent pricing
service, unless the Adviser determines that a fair value determination should be
made using procedures and guidelines established by and under the general
supervision of the Fund's Board of Directors. Market values are based on the
average of bid and ask prices, or by reference to other securities with
comparable ratings, interest rates and maturities. Certain debt securities for
which daily market quotations are not readily available, or for which the
Adviser believes the quotations do not accurately value the security in
question, may be valued by the Adviser, pursuant to guidelines established by
the Fund's Board of Directors, with reference to fixed income securities whose
prices are more readily obtainable and whose durations are comparable to the
securities being valued.

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

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.

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

U S Bank N.A. (a "Custodian"), 321 SW Sixth Avenue, Portland, Oregon 97208,
acts as general custodian for the Fund. Chase Manhattan Bank ("Chase" or a
"Custodian"), One Pierrepont Plaza, Brooklyn, New York 11201, provides custody
services to the Fund for its investments in foreign securities. The Custodians
hold all securities and cash of the Fund, receive and pay for securities
purchased, deliver against payment securities sold, receive and collect income
from investments, make all payments covering expenses of the Fund, and perform
other administrative duties, all as directed by authorized officers of the
Adviser. The Custodians do not exercise any supervisory function in the
purchase and sale of portfolio securities or payment of dividends.

Portfolio securities purchased in the United States are maintained in the
custody of the Fund's Custodian. Portfolio securities purchased outside the
United States by the Fund 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 Fund has been approved by
the Board of Directors of the 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 the 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 the 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

15
<PAGE>

review the operational capability and reliability of the foreign sub-custodian.
With respect to foreign investments and the selection of foreign sub-custodians,
however, there is no assurance that the 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 the Fund's foreign
sub-custodial arrangement. Accordingly, an investor should recognize that the
risks involved in holding assets abroad are greater than those associated with
investing in the United States.

The financial statements of the Fund for the year ended December 31, 1998,
the selected per share data and ratios under the caption "Financial Highlights,"
and the report of PricewaterhouseCoopers LLP, independent accountants, are
included in the 1998 Annual Report to Shareholders of the Fund.
PricewaterhouseCoopers LLP, 1300 S.W. Fifth Avenue, Suite 3100, Portland, Oregon
97201, in addition to examining the financial statements of the Fund, assists in
the preparation of the tax returns of the Fund and in certain other matters.

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

FEDERAL INCOME TAXES

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

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

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

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

A regulated investment company that meets the requirements described above
is taxed only on its "investment company taxable income," which generally equals
the undistributed portion of its ordinary net income and any excess of net
short-term capital gain over net long-term capital loss. In addition, any
excess of net long-term capital gain over net short-term capital loss that is
not distributed is taxed to the Fund at corporate capital gain tax rates. The
policy of the Fund is to apply capital loss carry-forwards as a deduction
against future capital gains before making a capital gain distribution to
shareholders. Under rules that are beyond the scope of this discussion, certain
capital losses and certain

16
<PAGE>

net foreign currency losses resulting from transactions occurring in November
and December of a taxable year may be taken into account either in that taxable
year or in the following taxable year.

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

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 the 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, the 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.

17
<PAGE>

FOREIGN INCOME TAXES

The 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 the Fund. These foreign taxes
will reduce the Fund's distributed income and a Fund's return. The 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 the 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 on the Fund. It is anticipated that any taxes on the Fund with respect to
investments in PFICs would be insignificant.

GENERAL INFORMATION

With respect to shares purchased through a tax-deferred employee benefit
plan, capital gains distributions paid by the Fund will generally not be
subject to current taxation, but will accumulate in the plan account on a
tax-deferred basis.

Employer sponsored retirement plans are governed by complex rules.
Shareholders participating in an employer's plan should consult their plan
administrator, plan's summary plan description, or a professional tax advisor
regarding the tax consequences of participation in the plan, contributions
to, and withdrawals from the plan.

ADDITIONAL INFORMATION

The foregoing summary and the summary included in the Prospectus under
"Distributions and Taxes" of tax consequences of investment in the Fund are
necessarily general and abbreviated. No attempt has been made to present a
complete or detailed explanation of tax matters. Furthermore, the provisions of
the statutes and regulations on which they are based are subject to change,
prospectively or retroactively, by legislative or administrative action. Local
taxes are beyond the scope of this discussion. Prospective investors in the
Fund are urged to consult their own tax advisors regarding specific questions as
to federal, state, or local taxes.

18
<PAGE>

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

The 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.

The Fund may publish average annual total return quotations for recent 1,
5, and 10-year periods (or a fractional portion thereof) computed by finding the
average annual compounded rates of return over the 1, 5, and 10-year periods
that would equate the initial amount invested to the ending redeemable value,
according to the following formula:

n
P(1+T) = ERV

Where: P = a hypothetical initial payment of $1000

T = average annual total return

n = number of years

ERV = ending redeemable value of a hypothetical $1000 payment made at
the beginning of the 1, 5, and 10-year periods (or fractional
portion thereof)

The Fund may compare its performance to other mutual funds with similar
investment objectives and to the mutual fund industry as a whole, as quoted by
ranking services and publications of general interest. For example, these
services or publications may include Lipper Analytical Services, Inc.,
Schabacker's Total Investment Service, Barron's, Business Week, Changing Times,
The Financial Times, Financial World, Forbes, Investor's Daily, Money,
Morningstar, Inc., Personal Investor, The Economist, The Wall Street Journal,
and USA Today. These ranking services and publications rank the performance of
the Fund against all other funds over specified periods and against funds in
specified categories.

The Fund may also compare its performance to that of a recognized stock
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
- --------------------------------------------------------------------------------

The Fund's most recent Annual Report to shareholders is attached to the
Fund's Prospectus, and the financial statements, accompanying notes and report
of independent accountants appearing in the Annual Report are incorporated by
reference into this Statement of Additional Information.

<PAGE>

COLUMBIA GROWTH FUND, INC.

PART C

OTHER INFORMATION

Item 23. EXHIBITS

(a) Registrant's Articles of Incorporation.(1)

(b) Restated Bylaws.(1)

(d) Investment Advisory Contract.(1)

(e) Distribution Agreement.(1)

(f) Not applicable.

(g1) Custodian Contract with U S Bank N.A.(1)

(g2) Custodian Agreement with Morgan Stanley Trust Company.(1)

(h1) Transfer Agent Agreement.(1)

(h2) Amendment No. 1 to Transfer Agent Agreement.(2)

(i) Opinion of Counsel - Not applicable for this filing.

(j) Consent of Accountants.*

(k) Omitted Financial Statements - Not applicable.

(l) Not applicable.

(m) 12b-1 Plan - Not applicable.

(n) Financial Data Schedule.*

(o) Plan Adopting Multiple Classes of Shares - Not applicable.

(p) All Powers of Attorney.(1)

(1) Incorporated herein by reference to Post-Effective Amendment No.
55 to Registrant's Registration Statement on Form N-1A, File No.
2-25785 filed February 23, 1998.

(2) Incorporated herein by reference to Post-Effective Amendment No.
56 to Registrant's Registration Statement on Form N-1A, File No.
2-25785 filed December 7, 1998.

* Filed herewith.

C-1
<PAGE>

Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

The Registrant is controlled by its Board of Directors, whose members
also serve as members of the Boards of Directors or Trustees of the following
investment companies: Columbia Common Stock Fund, Inc., Columbia Special Fund
Inc., Columbia International Stock Fund, Inc., Columbia Balanced Fund, Inc.,
Columbia Small Cap Fund, Inc., Columbia Daily Income Company, Columbia Fixed
Income Securities Fund, Inc., Columbia Municipal Bond Fund, Inc., Columbia U.S.
Government Securities Fund, Inc., Columbia Real Estate Equity Fund, Inc.,
Columbia National Municipal Bond Fund, Inc., Columbia High Yield Fund, Inc., and
CMC Fund Trust, each of which, including the Registrant, is organized under the
laws of the State of Oregon. The Registrant and all of the other investment
companies listed above, except for CMC Fund Trust, have investment advisory
contracts with Columbia Funds Management Company, an Oregon corporation ("the
Adviser"). Each series of CMC Fund Trust has an investment advisory contract
with Columbia Management Co., an Oregon corporation ("CMC"). Fleet Financial
Group, Inc. ("Fleet") is a publicly owned multibank holding company registered
under the Bank Holding Company Act of 1956. CMC, the Adviser, Columbia Trust
Company and Columbia Financial Center Incorporated are indirect wholly owned
subsidiaries of Fleet. See "Management" and "Investment Advisory and Other Fees
paid to Affiliates" in the Statement of Additional Information.

Item 25. INDEMNIFICATION

Oregon law and the articles of incorporation and bylaws of the
Registrant provide that any director or officer of the Registrant may be
indemnified by the Registrant against all expenses incurred by him in connection
with any claim, action, suit or proceeding, civil or criminal, by reason of his
being an officer, director, employee or agent of the Registrant to the fullest
extent not prohibited by the Oregon Business Corporation Act and the Investment
Company Act of 1940 and related regulations and interpretations of the
Securities and Exchange Commission.

Insofar as reimbursement or indemnification for expenses incurred by a
director or officer in legal proceedings arising under the Securities Act of
1933 may be permitted by the above provisions or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
reimbursement or indemnification is against public policy as expressed in the
Act and therefore unenforceable. In the event that any claim for
indemnification under the above provisions is asserted by an officer or director
in connection with the securities being registered, the Registrant, unless in
the opinion of its counsel the matter has already been settled by controlling
precedent, will (except insofar as such claim seeks reimbursement of expenses
paid or incurred by an officer or director in the successful defense of any such
action, suit, or proceeding or claim, issue, or matter therein) submit to a
court of appropriate jurisdiction the question whether indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

The Registrant's directors and officers are also named insureds under
an insurance policy issued by ICI Mutual Insurance Company.

Item 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR

Information regarding the businesses of the Advisor and its officers
and directors is set forth under "Management" in the Prospectus and under
"Management" and "Investment Advisory and Other Fees Paid to Affiliates" in the
Statement of Additional Information and is incorporated herein by reference.
Neither the Adviser nor any of its directors or officers has engaged in any
business, profession, vocation or employment other than that of providing
investment management services. Columbia Trust Company also acts as trustee
and/or agent for the investment of the assets of pension and profit sharing
plans in pooled accounts.

C-2
<PAGE>

Item 27. PRINCIPAL UNDERWRITERS

Pursuant to a distribution agreement with each of the Columbia Funds,
including the Registrant, Provident Distributors, Inc. is authorized to sell
shares of each fund to the public. No commission or other compensation is
received by Provident Distributors, Inc. in connection with the sale of shares
of the Columbia Funds. Certain information on each director and officer of by
Provident Distributors, Inc. is set forth below:

Name and Principal Positions and Offices Positions and Offices
Business Address with Provident Distributors with Registrant
- -------------------- --------------------------- ---------------------

Monroe J. Haegele CEO and Director None
Four Falls Corporate Center
6th Floor
West Conshohocken, PA 19428

Jane Haegele President None
Four Falls Corporate Center
6th Floor
West Conshohocken, PA 19428

Philip H. Rinnander Secretary None
Four Falls Corporate Center
6th Floor
West Conshohocken, PA 19428

Item 28. LOCATION OF ACCOUNTS AND RECORDS

The records required to be maintained under Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 to 31a-3 thereunder are
maintained by the Registrant, Columbia Funds Management Company, and Columbia
Trust Company at 1301 S.W. Fifth Avenue, Portland, Oregon 97201. Records
relating to the Registrant's portfolio securities are also maintained by U S
Bank N.A., 321 S.W. Sixth Avenue, Portland, Oregon 97208 and Chase Manhattan
Bank, One Pierrepont Plaza, Brooklyn, New York 11201.

Item 29. MANAGEMENT SERVICES

Not applicable.

Item 30. UNDERTAKINGS

Not applicable.

C-3
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in this City of Portland
and State of Oregon on the 24th day of February, 1999.

COLUMBIA GROWTH FUND, INC.

By J. JERRY INSKEEP, JR.

--------------------------------------
J. Jerry Inskeep, Jr.
President

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below on
the 24th day of February, 1999 by the following persons in the capacities
indicated.

(i) Principal executive officer:

J. JERRY INSKEEP, JR. President, Chairman, and Director
-------------------------------
J. Jerry Inskeep, Jr.

(ii) Principal accounting and
financial officer:

J. JERRY INSKEEP, JR. President, Chairman, and Director
-------------------------------
J. Jerry Inskeep, Jr.

(iii)Directors:

* JAMES C. GEORGE Director
-------------------------------
James C. George

* THOMAS R. MACKENZIE Director
-------------------------------
Thomas R. Mackenzie

* RICHARD L. WOOLWORTH Director
-------------------------------
Richard L. Woolworth

* By J. JERRY INSKEEP, JR.
-------------------------------
J. Jerry Inskeep, Jr.
as Attorney-in-fact

C-4

<PAGE>

COLUMBIA GROWTH FUND, INC.

EXHIBIT INDEX

EXHIBIT DESCRIPTION

(a) Registrant's Articles of Incorporation.(1)

(b) Restated Bylaws.(1)

(d) Investment Advisory Contract.(1)

(e) Distribution Agreement.(1)

(f) Not applicable.

(g1) Custodian Contract with U S Bank N.A.(1)

(g2) Custodian Agreement with Morgan Stanley Trust Company.(1)

(h1) Transfer Agent Agreement.(1)

(h2) Amendment No. 1 to Transfer Agent Agreement.(2)

(i) Opinion of Counsel - Not applicable for this filing.

(j) Consent of Accountants.*

(k) Omitted Financial Statements - Not applicable.

(l) Not applicable.

(m) 12b-1 Plan - Not applicable.

(n) Financial Data Schedule.*

(o) Plan Adopting Multiple Classes of Shares - Not applicable.

(p) All Powers of Attorney.(1)

(1) Incorporated herein by reference to Post-Effective Amendment No.
55 to Registrant's Registration Statement on Form N-1A, File No.
2-25785 filed February 23, 1998.

(2) Incorporated herein by reference to Post-Effective Amendment No.
56 to Registrant's Registration Statement on Form N-1A, File No.
2-25785 filed December 7, 1998.

* Filed herewith.

C-5

<PAGE>
<ARTICLE> 6 EXHIBIT (N)
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
AUDITED ANNUAL REPORT OF THE COLUMBIA FUNDS DATED DECEMBER 31, 1998, AND
THE AUDITED ANNUAL REPORT OF THE COLUMBIA FUNDS DATED DECEMBER 31, 1997,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000022105
<NAME> COLUMBIA GROWTH FUND, INC.

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 1,103,730,738
<INVESTMENTS-AT-VALUE> 1,729,620,899
<RECEIVABLES> 10,269,806
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 26,909,575
<TOTAL-ASSETS> 1,766,800,280
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 13,776,739
<TOTAL-LIABILITIES> 13,776,739
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,131,540,941
<SHARES-COMMON-STOCK> 41,238,820
<SHARES-COMMON-PRIOR> 38,580,838
<ACCUMULATED-NII-CURRENT> 31,399
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (4,438,960)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 625,890,161
<NET-ASSETS> 1,753,023,541
<DIVIDEND-INCOME> 12,068,714
<INTEREST-INCOME> 1,555,149
<OTHER-INCOME> 0
<EXPENSES-NET> 10,467,799
<NET-INVESTMENT-INCOME> 3,156,064
<REALIZED-GAINS-CURRENT> 77,263,496
<APPREC-INCREASE-CURRENT> 322,622,139
<NET-CHANGE-FROM-OPS> 403,041,699
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,132,381
<DISTRIBUTIONS-OF-GAINS> 85,408,447
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 12,502,270
<NUMBER-OF-SHARES-REDEEMED> 11,802,719
<SHARES-REINVESTED> 1,958,431
<NET-CHANGE-IN-ASSETS> 428,105,852
<ACCUMULATED-NII-PRIOR> 1,999,579
<ACCUMULATED-GAINS-PRIOR> 1,714,128
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 8,591,359
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 10,467,799
<AVERAGE-NET-ASSETS> 1,533,809,159
<PER-SHARE-NAV-BEGIN> 34.34
<PER-SHARE-NII> .03
<PER-SHARE-GAIN-APPREC> 10.39
<PER-SHARE-DIVIDEND> .08
<PER-SHARE-DISTRIBUTIONS> 2.17
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 42.51
<EXPENSE-RATIO> .68
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>

Exhibit (j)

CONSENT OF INDEPENDENT ACCOUNTANTS

February 24, 1999

To the Board of Directors of Columbia Growth Fund, Inc.:

We consent to the inclusion in Post-Effective Amendment No. 58 to the
Registration Statement of Columbia Growth Fund, Inc. on Form N-1A (File No.
2-25785) of our report dated February 12, 1999, on our audit of the financial
statements and financial highlights of the Columbia Growth Fund, Inc., which
report is included in the Annual Report to Shareholders for the year ended
December 31, 1998. We also consent to the reference to our firm under the
captions "Accounting Services and Financial Statements" and "Financial
Highlights".

PricewaterhouseCoopers LLP