COLUMBIA INTERNATIONAL STOCK FUND INC, 485BPOS, 1997-02-24

COLUMBIA INTERNATIONAL STOCK FUND INC
485BPOS, 1997-02-24

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<PAGE>

Reg. Nos. 33-48994/811-7024
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. 5 [ X ]
-----

and/or

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

Amendment No. 7 [ X ]
-----

(Check appropriate box or boxes.)

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

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

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

John A. Kemp
1301 SW Fifth Avenue, PO Box 1350, Portland, Oregon 97207
(Name and Address of Agent for Service)

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

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

immediately upon filing pursuant to paragraph (b)
------

X on February 24, 1997 pursuant to paragraph (b)
------

60 days after filing pursuant to paragraph (a)
------
on ____________________ pursuant to paragraph (a) of Rule 485.
------
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 2300
Portland, Oregon 97204

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

An indefinite number of shares of Common Stock have been registered under the
Securities Act of 1933 by the Registrant. The Rule 24f-2 Notice for the year
ended December 31, 1996 will be filed on or before February 28, 1997.

<PAGE>

COLUMBIA INTERNATIONAL STOCK FUND, INC.

CROSS-REFERENCE SHEET

ITEM
- ------------------------------------------------
Location in
Part A - INFORMATION REQUIRED IN A PROSPECTUS Prospectus
-----------

Item 1. Cover Page . . . . . . . . . . . . . . . Cover

Item 2. Synopsis . . . . . . . . . . . . . . . . "Fund Expenses"

Item 3. Condensed Financial Information. . . . . "Financial
Highlights" and
"Performance"

Item 4. General Description of Registrant. . . . "Fund Descriptions"
and "Additional
Information"

Item 5. Management of the Fund . . . . . . . . . "Fund Management"

Item 5A. Management's Discussion of Fund. . . . . Contained in the
Performance Annual Report of the
Fund

Item 6. Capital Stock and Other Securities . . . "Fund Management";
Distributions and
"Taxes"; "Investor
Services"; "Fund
Descriptions"; and
Cover

Item 7. Purchase of Securities Being Offered . . "Investor Services";
"Fund Descriptions"
and "Fund
Management"

Item 8. Redemption or Repurchase . . . . . . . . "Investor Services"

Item 9. Pending Legal Proceedings. . . . . . . . Not applicable

Location in State-
Part B - INFORMATION REQUIRED IN A STATEMENT ment of Additional
OF ADDITIONAL INFORMATION Information
------------------

Item 10. Cover Page . . . . . . . . . . . . . . . Cover

Item 11. Table of Contents. . . . . . . . . . . . "Table of Contents"

Item 12. General Information and History. . . . . Not applicable

Item 13. Investment Objectives and Policies . . . "Investment
Restrictions" and
"Additional
Information
Regarding Certain
Investments by the
Funds." Additional
information is in
Prospectus under
"Fund Descriptions"
and "Additional
Information."

<PAGE>

Item 14. Management of the Fund . . . . . . . . . "Management"

Item 15. Control Persons and Principal
Holders of Securities. . . . . . . . . . "Management"

Item 16. Investment Advisory and Other Services . "Investment Advisory
and Other Fees Paid
to Affiliates" and
"Custodians."
Additional
information is in
Prospectus under
"Fund Management."

Item 17. Brokerage Allocation and Other Practices "Portfolio
Transactions"

Item 18. Capital Stock and Other Securities . . . All required
information is in
Prospectus under
"Fund Management."

Item 19. Purchase, Redemption and
Pricing of Securities
Being Offered. . . . . . . . . . . . . "Redemptions."
Additional
information is in
Prospectus under
"Investor Services."

Item 20. Tax Status . . . . . . . . . . . . . . . "Taxes." Additional
information is in
Prospectus under
Distributions and
"Taxes."

Item 21. Underwriters . . . . . . . . . . . . . . "Management"

Item 22. Calculation of Performance Data. . . . . "Yield and
Performance"

Item 23. Financial Statements . . . . . . . . . . "Accounting Services
and Financial
Statements"

<PAGE>
[LOGO]

COLUMBIA FUNDS
PROSPECTUS
February 24, 1997

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

COLUMBIA REAL ESTATE EQUITY FUND
----------------------------------------------------
----------------------------------------------------
COLUMBIA BALANCED FUND
----------------------------------------------------
----------------------------------------------------
COLUMBIA DAILY INCOME COMPANY
----------------------------------------------------
----------------------------------------------------
COLUMBIA U.S. GOVERNMENT SECURITIES FUND
----------------------------------------------------
----------------------------------------------------
COLUMBIA FIXED INCOME SECURITIES FUND
----------------------------------------------------
----------------------------------------------------
COLUMBIA MUNICIPAL BOND FUND
----------------------------------------------------
----------------------------------------------------
COLUMBIA HIGH YIELD FUND
<PAGE>

DEAR INVESTOR:

We are pleased to present the Columbia Funds prospectus for 1997. Inside, you
will find detailed descriptions of each of the Columbia Funds, including the
newest addition to our fund family, Columbia Small Cap Fund.

Each year, we attempt to further simplify our prospectus and make it as
meaningful as possible for our existing shareholders, as well as for those
considering an investment in Columbia Funds. We encourage you to read the
prospectus carefully before investing, since it will provide 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. 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 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/ J. Jerry Inskeep, Jr. /s/ John A. Kemp

J. Jerry Inskeep, Jr. John A. Kemp
CHAIRMAN PRESIDENT

<PAGE>
COLUMBIA FUNDS PROSPECTUS
-----------------------------------------------------------------

FEBRUARY 24, 1997

Columbia Funds is a family of 12 mutual funds managed by Columbia Funds
Management Company (the "Advisor"). All Columbia Funds are no-load funds, which
means you pay no sales charges to invest in the Funds. This Prospectus describes
the different investment objectives of each Columbia Fund and provides other
information about opening an account and conducting business with the Funds.
Please read it carefully before investing and retain it for future reference.

A Statement of Additional Information about the Funds dated February 24, 1997
has been filed with the Securities and Exchange Commission and is available
along with other related materials on the SEC's Internet Website
(http://www.sec.gov). For a printed copy of the Statement of Additional
Information, please call the Funds at 1-800-547-1707. The Statement of
Additional Information is legally a part of (incorporated by reference into)
this Prospectus.

THIS PROSPECTUS CONSTITUTES AN OFFER TO SELL SECURITIES OF A FUND ONLY IN THOSE
STATES WHERE THE FUND'S SHARES HAVE BEEN REGISTERED FOR SALE. A FUND WILL NOT
ACCEPT APPLICATIONS FROM PERSONS RESIDING IN STATES WHERE THE FUND'S SHARES ARE
NOT REGISTERED.

LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.

TABLE OF CONTENTS

FUND EXPENSES..................................................................1
FINANCIAL HIGHLIGHTS...........................................................2

FUND DESCRIPTIONS.............................................................14

Common Stock Fund...........................................................15

Growth Fund.................................................................15

International Stock Fund....................................................16

Special Fund................................................................17

Small Cap Fund..............................................................18

Real Estate Fund............................................................19

Balanced Fund...............................................................21

Money Market Fund...........................................................22

Government Bond Fund........................................................23

Bond Fund...................................................................24

Municipal Bond Fund.........................................................25

High Yield Fund.............................................................28
RISK FACTORS..................................................................31

PERFORMANCE...................................................................35

FUND MANAGEMENT...............................................................37

Investment Advisor..........................................................37

Investment Team.............................................................38

Personal Trading............................................................39

Other Service Providers.....................................................40

INVESTOR SERVICES.............................................................41

How to Open a New Account...................................................41

How to Purchase Shares......................................................41

Paying for Your Shares......................................................42

How to Redeem (Sell) Shares.................................................42

Payment of Redemption Proceeds..............................................44

How to Exchange Shares......................................................44

Processing Your Order.......................................................45

Determining Your Share Price................................................45

Investor Inquiries..........................................................46

Account Privileges..........................................................46

DISTRIBUTIONS AND TAXES.......................................................48

ADDITIONAL INFORMATION........................................................51

<PAGE>
COLUMBIA FUNDS PROSPECTUS
-----------------------------------------------------------------

T HE DIFFERENT INVESTMENT OBJECTIVES OF COLUMBIA FUNDS
ARE SUMMARIZED BELOW. MORE INFORMATION ABOUT THE FUNDS AND THE SERVICES
AVAILABLE TO SHAREHOLDERS ARE DESCRIBED IN DETAIL IN THIS PROSPECTUS.

-- NO SALES LOAD OR 12B-1 FEES --

MANY MUTUAL FUNDS CHARGE FEES TO COMPENSATE SALES REPRESENTATIVES FOR
PROMOTING AND SELLING THEIR FUNDS. THERE ARE FUNDS, HOWEVER, THAT CHARGE NO
SALES FEES WHEN YOU BUY SHARES. WITH THESE FUNDS, ALL OF YOUR MONEY, INSTEAD
OF JUST A PORTION, IS INVESTED. IN ADDITION, SOME "NO-LOAD" MUTUAL FUNDS
CHARGE AN ANNUAL 12B-1 FEE AGAINST FUND ASSETS TO HELP PAY FOR THE SALE OF
FUND SHARES. COLUMBIA FUNDS ARE SOLD WITHOUT SALES LOADS OR 12B-1 FEES; ALL
THE MONEY YOU PAY TO BUY SHARES IS INVESTED IN THE COLUMBIA FUND YOU SELECT.

-- STOCK FUNDS --

COLUMBIA COMMON STOCK FUND, INC.

(the "Common Stock Fund") seeks growth of capital and dividend income through a
diversified portfolio of common stocks issued primarily by larger, well
established companies, many of which have a history of paying dividends.

COLUMBIA GROWTH FUND, INC.

(the "Growth Fund") seeks long-term capital appreciation by investing primarily
in common stocks believed to offer above-average earnings growth.

COLUMBIA INTERNATIONAL STOCK FUND, INC.

(the "International Stock Fund") seeks long-term capital appreciation by
investing primarily in foreign equity securities. Under normal conditions, at
least 65% of its total assets will be invested in at least three countries other
than the United States.

COLUMBIA SPECIAL FUND, INC.

(the "Special Fund") seeks capital appreciation by investing in securities
considered to be more aggressive and carry greater risk than the market as a
whole (as measured by the S&P 500 Stock Index). The Fund invests primarily in
small to mid-sized companies, as well as special situations such as new issues,
companies that may benefit from technological or product developments or new
management, or companies involved in mergers and buyouts.

COLUMBIA SMALL CAP FUND, INC.

(the "Small Cap Fund") seeks significant capital appreciation by investing
primarily in common stocks of smaller companies ("small cap"). A company is
considered small cap if it has a market capitalization of less than $1 billion.
Investing in small cap companies may offer greater potential for capital growth,
but is generally riskier than investing in larger, more established companies.

COLUMBIA REAL ESTATE EQUITY FUND, INC.

(the "Real Estate Fund") seeks capital appreciation and above-average current
income, with equal emphasis, by investing primarily in equity securities of
companies that are principally engaged in the real estate industry, including
real estate investment trusts (REITs).

<PAGE>
COLUMBIA FUNDS PROSPECTUS
-----------------------------------------------------------------
-- BALANCED FUND --

COLUMBIA BALANCED FUND, INC.

(the "Balanced Fund") is designed to provide high total return (growth of
capital and income) by investing in common stocks and fixed income securities.

-- MONEY MARKET FUND --

COLUMBIA DAILY INCOME COMPANY

(the "Money Market Fund") seeks a high level of current income consistent with
the maintenance of liquidity and the preservation of capital by investing in
short-term, money market securities. Income is paid, compounded, and reinvested
daily. SHARES OF THE MONEY MARKET FUND ARE NEITHER INSURED NOR GUARANTEED BY THE
U.S. GOVERNMENT. WHILE THE FUND INTENDS TO MAINTAIN A CONSTANT NET ASSET VALUE
OF ONE DOLLAR PER SHARE, THERE IS NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO
SO.

-- BOND FUNDS --

COLUMBIA U.S. GOVERNMENT
SECURITIES FUND, INC.

(the "Government Bond Fund") seeks to provide shareholders with preservation of
capital and a high level of income. It invests substantially all of its assets
in U.S. Government obligations with a maximum maturity of three years. The
Fund's shares are not guaranteed by the U.S. Government.

COLUMBIA FIXED INCOME SECURITIES FUND, INC.

(the "Bond Fund") seeks a high level of income by investing in a broad range of
investment-grade, fixed income securities with intermediate- to long-term
maturities.

COLUMBIA MUNICIPAL BOND FUND, INC.

(the "Municipal Bond Fund") is a tax-exempt bond fund whose goal is to provide a
high level of income exempt from federal and State of Oregon income taxes.

The Municipal Bond Fund concentrates its investments in obligations of Oregon
issuers, to the extent consistent with its other investment objectives and
restrictions. Therefore, the Municipal Bond Fund's portfolio may be exposed to
special risks that would not affect funds that do not concentrate in obligations
of one state. See "Columbia Municipal Bond Fund -- Special Investment
Considerations."

COLUMBIA HIGH YIELD FUND, INC.

(the "High Yield Fund") seeks to provide a high level of current income by
investing primarily in lower-rated fixed income securities, commonly known as
"junk bonds." INVESTMENTS OF THIS TYPE ARE SUBJECT TO GREATER RISK OF LOSS OF
PRINCIPAL AND NONPAYMENT OF INTEREST THAN ARE HIGHER-RATED INVESTMENTS.
INVESTORS SHOULD CAREFULLY CONSIDER THESE RISKS BEFORE INVESTING. SEE "FUND
DESCRIPTIONS -- RISK FACTORS."

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

FOR FURTHER INFORMATION OR ASSISTANCE IN
OPENING AN ACCOUNT, PLEASE CALL 222-3606
IN PORTLAND OR 1-800-547-1707 NATIONWIDE
<PAGE>
FUND EXPENSES
-----------------------------------------------------------------

The following information is provided to assist you in understanding the various
costs and expenses that an investor in each Fund will bear directly or
indirectly. "Annual Fund Operating Expenses" are the expenses incurred by each
Fund for 1996, except as noted otherwise. Expenses paid by the Funds include
management fees as well as audit, transfer agent, custodian and legal fees and
other business operating expenses. For more information about Fund expenses, see
"Columbia Funds Prospectus -- No Sales Load or 12b-1 Fees" and "Fund
Management."

-- SHAREHOLDER TRANSACTION COSTS --
FOR ALL FUNDS

<TABLE>
<S> <C>
SALES LOAD IMPOSED ON PURCHASES...... NONE
SALES LOAD IMPOSED ON REINVESTED
DIVIDENDS............................ NONE
REDEMPTION FEES*..................... NONE
EXCHANGE FEES........................ NONE
*WIRE REDEMPTIONS MAY BE SUBJECT TO A FEE OF UP
TO $5, IN ADDITION TO ANY CHARGES BY YOUR BANK.
</TABLE>

- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- -----------------------------------------------------------------
(AS A PERCENTAGE OF AVERAGE NET ASSETS)

<TABLE>
<CAPTION>
INTERNATIONAL REAL MONEY
COMMON GROWTH STOCK SPECIAL SMALL CAP ESTATE BALANCED MARKET
STOCK FUND FUND FUND FUND FUND FUND FUND FUND
---------- ---------- ------------ ---------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees .60% .59% 1.00% .84% 1.00% .75% .50% .48%
12b-1 fees None None None None None None None None
Other expenses* .16% .12% .54% .10% .36% .31% .16% .14%
TOTAL OPERATING EXPENSES .76% .71% 1.54% .94% 1.36% 1.06% .66% .62%

<CAPTION>
GOVERNMENT HIGH
BOND MUNICIPAL YIELD
FUND BOND FUND BOND FUND FUND
----------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Management fees .50% .50% .50% .60%
12b-1 fees None None None None
Other expenses* .30% .14% .06% .40%
TOTAL OPERATING EXPENSES .80% .64% .56% 1.00%
</TABLE>

*"Other expenses" for the Small Cap Fund have been estimated for 1997. The
Advisor has voluntarily agreed to assume ordinary recurring expenses of the
High Yield Fund to the extent necessary to maintain a total operating expense
ratio of no more than 1%. "Other expenses" for the High Yield Fund for 1996
were .33% because of a reimbursement by the Advisor that is not expected to
occur in future years. As a result, total operating expenses for this Fund in
1996 were .93%. See "Financial Highlights -- Columbia High Yield Fund, Inc."

- --------------------------------------------------------------------------------
EXAMPLE OF EXPENSES
- -----------------------------------------------------------------

Assume that you have $1,000 to invest, each Fund has a hypothetical return of 5%
annually, and the above expense ratios remain the same. This table shows the
total expenses that you would pay indirectly if you closed your account after
each of the time periods shown:

<TABLE>
<CAPTION>
INTERNATIONAL REAL MONEY
COMMON GROWTH STOCK SPECIAL SMALL CAP ESTATE BALANCED MARKET
STOCK FUND FUND FUND FUND FUND FUND FUND FUND
---------- ---------- ------------ ---------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 year $8 $7 $16 $10 $14 $11 $7 $6
3 years $24 $23 $49 $30 $43 $34 $21 $20
5 years $42 $40 $84 $52 NA $58 $37 $35
10 years $94 $88 $183 $115 NA $129 $82 $77

<CAPTION>
GOVERNMENT HIGH
BOND MUNICIPAL YIELD
FUND BOND FUND BOND FUND FUND
----------- --------- ---------- ---------
<S> <C> <C> <C> <C>
1 year $8 $7 $6 $10
3 years $26 $20 $18 $32
5 years $44 $36 $31 $55
10 years $99 $80 $70 $122
</TABLE>

This example should not be considered a representation of past or future
expenses or performance; actual expenses and performance may be greater or less
than those shown.

-
1
<PAGE>
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD

The tables below have been audited by Coopers & Lybrand L.L.P., independent
accountants, as stated in their report appearing in the 1996 Annual Report to
Shareholders, which is incorporated by reference into the Statement of
Additional Information. Additional information about the performance of the
Funds for 1996, including a discussion by the investment advisor to the Funds,
is contained in the 1996 Annual Report to Shareholders. For a copy of that
report, please write to the Funds or call 1-800-547-1707.

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

-- COLUMBIA COMMON STOCK FUND, INC. --
---------------------------------------------

<TABLE>
<CAPTION>
1996 1995 1994 1993 1992 1991(1)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $18.59 $15.16 $15.29 $14.04 $13.15 $12.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income..................................... .25 .26 .27 .22 .24 .09
Net realized and unrealized gains on investments.......... 3.61 4.38 .04 2.08 1.06 1.17
- ------------------------------------------------------------------------------------------------------------------------
Total from investment operations........................ 3.86 4.64 .31 2.30 1.30 1.26
- ------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends (from net investment income).................... (.23) (.26) (.25) (.21) (.24) (.10 )
Distributions (from capital gains)........................ (2.96) (.95) (.19) (.84) (.17) (.01 )
- ------------------------------------------------------------------------------------------------------------------------
Total distributions..................................... (3.19) (1.21) (.44) (1.05) (.41) (.11 )
NET ASSET VALUE, END OF PERIOD $19.26 $18.59 $15.16 $15.29 $14.04 $13.15
TOTAL RETURN................................................ 20.71% 30.84% 2.06% 16.44% 9.99% 10.25% (2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $536,760 $358,523 $124,263 $100,715 $51,049 $20,457
Ratio of expenses to average net assets..................... .76% .80% .84% .84% .86% .86%
Ratio of net investment income to average net assets........ 1.32% 1.68% 1.82% 1.48% 1.97% 2.48%
Portfolio turnover rate..................................... 111.39% 75.36% 64.21% 90.90% 67.83% 12.08%
Average commission rate paid on portfolio transactions
(3)........................................................ $0.0601
</TABLE>

(1) From inception of operations on September 12, 1991. Ratios and portfolio
turnover rate are annualized.
(2) Not annualized.
(3) The average commission rate paid by the fund is computed by dividing the
dollar amount of commissions paid during the period by the total number of
shares purchased and sold during the period for which commissions were
charged.

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

-
2
<PAGE>
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD

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

-- COLUMBIA GROWTH FUND, INC. --
--------------------------------------

<TABLE>
<CAPTION>
-------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $29.84 $24.84 $26.38 $26.18 $26.26 $21.68 $23.40 $21.21 $20.19 $22.88
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income....... .19 .31 .29 .16 .17 .32 .45 .48 .52 .32
Net realized and unrealized
gains (losses) on
investments................ 6.04 7.86 (.46) 3.24 2.93 7.09 (1.23) 5.65 1.66 2.93
- --------------------------------------------------------------------------------------------------------------------------
Total from investment
operations............... 6.23 8.17 (.17) 3.40 3.10 7.41 (.78) 6.13 2.18 3.25
- --------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends (from net
investment income)......... (.17) (.29) (.26) (.18) (.20) (.39) (.48) (.54) (.52) (.61)
Distributions (from capital
gains)..................... (5.14) (2.87) (1.11) (2.98) (2.98) (2.44) (.46) (3.40) (.64) (5.33)
Distributions (in excess of
capital gains)............. (.02) (.01) (.04)
- --------------------------------------------------------------------------------------------------------------------------
Total distributions....... (5.33) (3.17) (1.37) (3.20) (3.18) (2.83) (.94) (3.94) (1.16) (5.94)
NET ASSET VALUE, END OF PERIOD $30.74 $29.84 $24.84 $26.38 $26.18 $26.26 $21.68 $23.40 $21.21 $20.19
TOTAL RETURN.................. 20.80% 32.98% -.63% 13.01% 11.82% 34.26% -3.31% 29.09% 10.81% 14.74%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)................... $1,064,100 $848,731 $591,694 $605,401 $518,366 $431,460 $270,667 $266,925 $204,353 $193,515
Ratio of expenses to average
net assets................... .71% .75% .81% .82% .86% .90% .96% .96% 1.04% 1.04%
Ratio of net investment income
to average net assets........ .63% 1.14% 1.12% .66% .77% 1.50% 2.08% 2.14% 2.33% 1.46%
Portfolio turnover rate....... 75.49% 94.73% 79.28% 105.64% 116.38% 163.91% 171.80% 166.06% 179.08% 197.38%
Average commission rate paid
on portfolio transactions
(1).......................... $0.0590
</TABLE>

(1) The average commission rate paid by the fund is computed by dividing the
dollar amount of commissions paid during the period by the total number of
shares purchased and sold during the period for which commissions were
charged.

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

-
3
<PAGE>
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD

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

-- COLUMBIA INTERNATIONAL STOCK FUND, INC. --
----------------------------------------------------

<TABLE>
<CAPTION>
1996 1995 1994 1993 1992(1)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $13.07 $12.43 $12.96 $9.95 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)........................................ .03 .02 (.02) (.02) (.03 )
Net realized and unrealized gains (losses) on investments and
foreign currency transactions...................................... 2.13 .62 (.30) 3.34 .11
- ------------------------------------------------------------------------------------------------------------------------
Total from investment operations.................................. 2.16 .64 (.32) 3.32 .08
- ------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends (from net investment income).............................. (.03)
Dividends (in excess of net investment income)...................... (.20)
Distributions (from capital gains).................................. (1.14) (.21) (.31) (.13 )(2)
- ------------------------------------------------------------------------------------------------------------------------
Total distributions............................................... (1.37) -- (.21) (.31) (.13 )
NET ASSET VALUE, END OF PERIOD $13.86 $13.07 $12.43 $12.96 $9.95
TOTAL RETURN.......................................................... 16.59% 5.15% -2.47% 33.37% .60% (3)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands).............................. $125,510 $100,873 $118,484 $73,047 $9,745
Ratio of expenses to average net assets............................... 1.54% 1.54% 1.52% 1.71% 2.22%
Ratio of net investment income (loss) to average net assets........... .22% .15% (.21)% (.62)% (1.28)%
Portfolio turnover rate............................................... 129.40% 156.09% 138.79% 144.78% 25.75%
Average commission rate paid on portfolio transactions (4)............ $0.0011
</TABLE>

(1) From inception of operations on September 10, 1992. Ratios and portfolio
turnover rates are annualized.

(2) Includes amounts distributed from net realized gains on foreign currency
transactions taxable as ordinary income.

(3) Not annualized.
(4) The average commission rate paid by the fund is computed by dividing the
dollar amount of commissions paid during the period by the total number of
shares purchased and sold during the period for which commissions were
charged.

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

-
4
<PAGE>
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD

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

-- COLUMBIA SPECIAL FUND, INC. (1) --

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

<TABLE>
<CAPTION>
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $21.44 $18.69 $19.51 $18.79 $17.45 $12.12 $13.85 $11.32 $9.26 $8.99
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss)................ (.06) .03 .08 .01 (.03) (.01) .01 .07 .03 (.08 )
Net realized and
unrealized gains
(losses) on
investments........... 2.85 5.45 .36 4.04 2.41 6.11 (1.72) 3.52 3.90 .35
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment
operations.......... 2.79 5.48 .44 4.05 2.38 6.10 (1.71) 3.59 3.93 .27
- ---------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends (from net
investment income).... (.02) (.07) (.02) (.01)
Dividends (in excess of
net investment
income)............... (.01)
Distributions (from
capital gains)........ (4.38) (2.68) (1.16) (3.32) (1.04) (.77) (1.05) (1.87)
Distributions (in
excess of capital
gains)................ (.03) (.03)
- ---------------------------------------------------------------------------------------------------------------------------------
Total
distributions....... (4.38) (2.73) (1.26) (3.33) (1.04) (.77) (.02) (1.06) (1.87) --
NET ASSET VALUE, END OF
PERIOD $19.85 $21.44 $18.69 $19.51 $18.79 $17.45 $12.12 $13.85 $11.32 $9.26
TOTAL RETURN............. 13.07% 29.53% 2.29% 21.68% 13.70% 50.46% -12.39% 31.92% 42.55% 3.04%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in thousands).......... $1,585,284 $1,384,415 $889,526 $772,741 $470,663 $264,358 $121,592 $95,939 $30,471 $20,567
Ratio of expenses to
average net assets...... .94% .98% 1.05% 1.12% 1.19% 1.22% 1.32% 1.35% 1.38% 1.44%
Ratio of net investment
income (loss) to average
net assets.............. (.29)% .16% .40% .01% (.25)% (.16)% .05% .18% .06% (.63)%
Portfolio turnover
rate.................... 150.07% 182.99% 178.91% 154.68% 116.75% 114.53% 147.04% 124.29% 244.36% 332.85%
Average commission rate
paid on portfolio
transactions (2)........ $0.0553
</TABLE>

(1) As of December 31, 1991, historical per share data has been restated to
reflect a 3 for 1 stock split to shareholders of record on January 31,
1992.
(2) The average commission rate paid by the fund is computed by dividing the
dollar amount of commissions paid during the period by the total number of
shares purchased and sold during the period for which commissions were
charged.

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

-
5
<PAGE>
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD

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

-- COLUMBIA SMALL CAP FUND, INC. --
----------------------------------------

<TABLE>
<CAPTION>
1996(1)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.00
INCOME FROM INVESTMENT OPERATIONS:
Net realized and unrealized gains on investments.................... .99
- ----------------------------------------------------------------------------------
Total from investment operations.................................. .99
NET ASSET VALUE, END OF PERIOD $12.99
TOTAL RETURN.......................................................... 7.62% (2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands).............................. $21,061
Ratio of expenses to average net assets............................... 1.61%
Ratio of net investment income to average net assets.................. 0.00%
Portfolio turnover rate............................................... 32.57%
Average commission rate paid on portfolio transactions (3)............ $0.0546
</TABLE>

(1) From inception of operations on September 11, 1996. Ratios and portfolio
turnover rates are annualized.

(2) Not annualized.

(3) The average commission rate paid by the fund is computed by dividing the
dollar amount of commissions paid during the period by the total number of
shares purchased and sold during the period for which commissions were
charged.

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

-
6
<PAGE>
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD

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

-- COLUMBIA REAL ESTATE EQUITY FUND, INC. --
--------------------------------------------------

<TABLE>
<CAPTION>
1996 1995 1994(1)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.71 $11.72 $12.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............................................... .77 .78 .49
Net realized and unrealized gains (losses) on investments........... 3.94 1.12 (.27 )
- ----------------------------------------------------------------------------------------------------
Total from investment operations.................................. 4.71 1.90 .22
- ----------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends (from net investment income).............................. (.52) (.49) (.31 )
Dividends (in excess of net investment income)...................... (.01 )
Distributions (from capital gains).................................. (.41)
Distributions (in excess of capital gains).......................... (.12) (.14)
Tax return of capital............................................... (.21) (.28) (.18 )
- ----------------------------------------------------------------------------------------------------
Total distributions............................................... (1.26) (.91) (.50 )
NET ASSET VALUE, END OF PERIOD $16.16 $12.71 $11.72
TOTAL RETURN.......................................................... 38.30% 16.86% 1.76% (2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands).............................. $68,073 $21,587 $17,402
Ratio of expenses to average net assets............................... 1.06% 1.18% 1.14%
Ratio of net investment income to average net assets.................. 6.23% 6.71% 6.28%
Portfolio turnover rate............................................... 45.82% 53.91% 7.61%
Average commission rate paid on portfolio transactions (3)............ $0.0594
</TABLE>

(1) From inception of operations on March 16, 1994. Ratios and portfolio
turnover rates are annualized.
(2) Not annualized.
(3) The average commission rate paid by the fund is computed by dividing the
dollar amount of commissions paid during the period by the total number of
shares purchased and sold during the period for which commissions were
charged.

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

-
7
<PAGE>
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD

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

-- COLUMBIA BALANCED FUND, INC. --
---------------------------------------

<TABLE>
<CAPTION>
1996 1995 1994 1993 1992 1991(1)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $20.08 $17.28 $17.91 $16.80 $16.05 $15.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income..................................... .76 .73 .65 .56 .58 .11
Net realized and unrealized gains (losses) on
investments.............................................. 1.58 3.54 (.64) 1.71 .82 1.10
- ------------------------------------------------------------------------------------------------------------------------
Total from investment operations........................ 2.34 4.27 .01 2.27 1.40 1.21
- ------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends (from net investment income).................... (.76) (.73) (.64) (.56) (.57) (.12 )
Dividends (in excess of net investment income)............ (.01)
Distributions (from capital gains)........................ (1.34) (.74) (.59) (.08) (.04 )
- ------------------------------------------------------------------------------------------------------------------------
Total distributions..................................... (2.10) (1.47) (.64) (1.16) (.65) (.16 )
NET ASSET VALUE, END OF PERIOD $20.32 $20.08 $17.28 $17.91 $16.80 $16.05
TOTAL RETURN................................................ 11.78% 25.08% .10% 13.62% 8.89% 7.80% (2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands).................... $672,593 $486,767 $249,670 $186,589 $90,230 $12,986
Ratio of expenses to average net assets..................... .66% .69% .72% .73% .81% .62%
Ratio of net investment income to average net assets........ 3.82% 4.05% 3.82% 3.32% 4.08% 3.41%
Portfolio turnover rate..................................... 133.21% 108.04% 98.48% 107.60% 138.08% 179.80%
Average commission rate paid on portfolio transactions
(3)........................................................ $0.0596
</TABLE>

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

-
8
<PAGE>
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD

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

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

<TABLE>
<CAPTION>
1996 1995 1994 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................ .048 .053 .036 .025 .032 .055 .075 .085 .068
- -----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations... .048 .053 .036 .025 .032 .055 .075 .085 .068
- -----------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends (from net investment
income)............................. (.048) (.053) (.036) (.025) (.032) (.055) (.075) (.085) (.068)
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions................ (.048) (.053) (.036) (.025) (.032) (.055) (.075) (.085) (.068)
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURN........................... 4.96% 5.49% 3.68% 2.51% 3.25% 5.66% 7.84% 8.89% 7.07%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)............................ $889,800 $800,656 $730,067 $544,500 $591,186 $737,584 $819,926 $703,704 $546,634
Ratio of expenses to average net
assets................................ .62% .64% .70% .75% .71% .69% .69% .73% .76%
Ratio of net investment income to
average net assets.................... 4.84% 5.34% 3.68% 2.49% 3.22% 5.53% 7.51% 8.49% 6.87%

1987
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................ .059
- ---------------------------------------
Total from investment operations... .059
- ---------------------------------------
LESS DISTRIBUTIONS:
Dividends (from net investment
income)............................. (.059 )
- ---------------------------------------
Total distributions................ (.059 )
NET ASSET VALUE, END OF PERIOD $1.00
TOTAL RETURN........................... 6.11%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)............................ $442,496
Ratio of expenses to average net
assets................................ .81%
Ratio of net investment income to
average net assets.................... 5.94%
</TABLE>

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

-
9
<PAGE>
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD

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

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

<TABLE>
<CAPTION>
1996 1995 1994 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $8.34 $7.99 $8.36 $8.35 $8.47 $8.43 $8.30 $8.17 $8.30
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................ .41 .45 .37 .32 .39 .53 .61 .63 .56
Net realized and unrealized gains
(losses) on investments............. (.10) .35 (.37) .17 .09 .50 .13 .13 (.13)
- -----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations... .31 .80 .49 .48 1.03 .74 .76 .43
- -----------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends (from net investment
income)............................. (.41) (.45) (.37) (.32) (.39) (.53) (.61) (.63) (.56)
Distributions (from capital gains)... (.16) (.21) (.46)
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions................ (.41) (.45) (.37) (.48) (.60) (.99) (.61) (.63) (.56)
NET ASSET VALUE, END OF PERIOD $8.24 $8.34 $7.99 $8.36 $8.35 $8.47 $8.43 $8.30 $8.17
TOTAL RETURN........................... 3.85% 10.21% .03% 5.91% 5.81% 12.72% 9.29% 9.63% 5.34%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)............................ $40,776 $41,842 $33,512 $35,877 $35,479 $34,867 $22,628 $13,349 $9,112
Ratio of expenses to average net
assets................................ .80% .79% .81% .75% .76% .76% .85% .85% .85%
Ratio of net investment income to
average net assets.................... 4.99% 5.45% 4.51% 3.74% 4.60% 6.18% 7.33% 7.66% 6.88%
Portfolio turnover rate................ 179.38% 253.17% 253.80% 254.59% 289.05% 309.13% 221.86% 158.96% 393.59%

1987
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $8.48
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................ .52
Net realized and unrealized gains
(losses) on investments............. (.18 )
- ---------------------------------------
Total from investment operations... .34
- ---------------------------------------
LESS DISTRIBUTIONS:
Dividends (from net investment
income)............................. (.52 )
Distributions (from capital gains)...
- ---------------------------------------
Total distributions................ (.52 )
NET ASSET VALUE, END OF PERIOD $8.30
TOTAL RETURN........................... 4.14%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)............................ $7,016
Ratio of expenses to average net
assets................................ .85%
Ratio of net investment income to
average net assets.................... 6.34%
Portfolio turnover rate................ 146.65%
</TABLE>

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

-
10
<PAGE>
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD

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

-- COLUMBIA FIXED INCOME SECURITIES FUND, INC. --
--------------------------------------------------------

<TABLE>
<CAPTION>
1996 1995 1994 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $13.51 $12.16 $13.44 $13.28 $13.59 $12.72 $12.75 $12.11 $12.23
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................ .85 .88 .83 .85 .95 1.00 1.03 1.04 1.04
Net realized and unrealized gains
(losses) on investments............. (.43) 1.35 (1.28) .52 .09 1.05 (.03) .64 (.12)
- -----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations... 0.42 2.23 (.45) 1.37 1.04 2.05 1.00 1.68 .92
- -----------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends (from net investment
income)............................. (.85) (.88) (.83) (.85) (.95) (1.00) (1.03) (1.04) (1.04)
Distributions (from capital gains)... (.36) (.40) (.18)
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions................ (.85) (.88) (.83) (1.21) (1.35) (1.18) (1.03) (1.04) (1.04)
NET ASSET VALUE, END OF PERIOD $13.08 $13.51 $12.16 $13.44 $13.28 $13.59 $12.72 $12.75 $12.11
TOTAL RETURN........................... 3.37% 18.91% -3.36% 10.47% 7.99% 16.84% 8.30% 14.35% 7.72%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)............................ $356,421 $316,259 $252,090 $300,532 $262,647 $207,271 $133,875 $110,525 $102,604
Ratio of expenses to average net
assets................................ .64% .65% .66% .66% .66% .69% .73% .74% .77%
Ratio of net investment income to
average net assets.................... 6.53% 6.80% 6.53% 6.14% 7.03% 7.63% 8.20% 8.27% 8.44%
Portfolio turnover rate................ 178.25% 137.41% 139.81% 118.80% 195.67% 158.95% 131.81% 114.00% 133.20%

1987
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $13.37
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................ 1.03
Net realized and unrealized gains
(losses) on investments............. (.87 )
- ---------------------------------------
Total from investment operations... .16
- ---------------------------------------
LESS DISTRIBUTIONS:
Dividends (from net investment
income)............................. (1.03 )
Distributions (from capital gains)... (.27 )
- ---------------------------------------
Total distributions................ (1.30 )
NET ASSET VALUE, END OF PERIOD $12.23
TOTAL RETURN........................... 1.35%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)............................ $100,286
Ratio of expenses to average net
assets................................ .82%
Ratio of net investment income to
average net assets.................... 8.21%
Portfolio turnover rate................ 114.16%
</TABLE>

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

-
11
<PAGE>
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD

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

-- COLUMBIA MUNICIPAL BOND FUND, INC. --
-----------------------------------------------

<TABLE>
<CAPTION>
1996 1995 1994 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.37 $11.48 $12.71 $12.17 $12.22 $11.65 $11.64 $11.42 $11.11
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................ .61 .63 .64 .66 .69 .72 .75 .76 .77
Net realized and unrealized gains
(losses) on investments............. (.16) .96 (1.23) .62 .07 .60 .02 .23 .34
- -----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations... .45 1.59 (.59) 1.28 .76 1.32 .77 .99 1.11
- -----------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends (from net investment
income) (1)......................... (.61) (.63) (.64) (.66) (.69) (.72) (.75) (.76) (.77)
Distributions (from capital gains)... (.06) (.07) (.08) (.12) (.03) (.01) (.01) (.03)
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions................ (.67) (.70) (.64) (.74) (.81) (.75) (.76) (.77) (.80)
NET ASSET VALUE, END OF PERIOD $12.15 $12.37 $11.48 $12.71 $12.17 $12.22 $11.65 $11.64 $11.42
TOTAL RETURN........................... 3.77% 14.15% -4.68% 10.73% 6.46% 11.73% 6.89% 8.95% 10.19%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)............................ $375,667 $383,796 $339,817 $430,367 $341,924 $285,099 $207,690 $166,590 $140,842
Ratio of expenses to average net
assets................................ .56% .57% .57% .58% .59% .59% .60% .61% .63%
Ratio of net investment income to
average net assets.................... 5.00% 5.22% 5.36% 5.25% 5.69% 6.07% 6.50% 6.59% 6.71%
Portfolio turnover rate................ 19.03% 21.45% 19.40% 9.92% 17.82% 15.28% 6.57% 10.61% 10.04%

1987
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.75
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................ .77
Net realized and unrealized gains
(losses) on investments............. (.64 )
- ---------------------------------------
Total from investment operations... .13
- ---------------------------------------
LESS DISTRIBUTIONS:
Dividends (from net investment
income) (1)......................... (.77 )
Distributions (from capital gains)...
- ---------------------------------------
Total distributions................ (.77 )
NET ASSET VALUE, END OF PERIOD $11.11
TOTAL RETURN........................... 1.23%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)............................ $118,438
Ratio of expenses to average net
assets................................ .66%
Ratio of net investment income to
average net assets.................... 6.84%
Portfolio turnover rate................ 20.78%
</TABLE>

(1) 100% exempt from federal taxation.

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

-
12
<PAGE>
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD

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

-- COLUMBIA HIGH YIELD FUND, INC. --
-----------------------------------------

<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $9.88 $9.04 $9.94
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............................................................................ .81 .82 .80
Net realized and unrealized gains (losses) on investments........................................ .07 .84 (.90)
- -----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations............................................................... .88 1.66 (.10)
- -----------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends (from net investment income)........................................................... (.81) (.82) (.80)
Distributions (from capital gains)............................................................... (.01)
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions............................................................................ (.82) (.82) (.80)
NET ASSET VALUE, END OF PERIOD $9.94 $9.88 $9.04
TOTAL RETURN....................................................................................... 9.43% 19.12% -.92%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands)........................................................... $28,818 $23,471 $12,834
Ratio of expenses to average net assets (3)........................................................ 0.93% 1.00% 1.00%
Ratio of net investment income to average net assets............................................... 8.29% 8.62% 8.69%
Portfolio turnover rate............................................................................ 62.27% 51.60% 36.67%

1993(1)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............................................................................ .18
Net realized and unrealized gains (losses) on investments........................................ (.06 )
- ---------------------------------------------------------------------------------------------------
Total from investment operations............................................................... .12
- ---------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends (from net investment income)........................................................... (.18 )
Distributions (from capital gains)...............................................................
- ---------------------------------------------------------------------------------------------------
Total distributions............................................................................ (.18 )
NET ASSET VALUE, END OF PERIOD $9.94
TOTAL RETURN....................................................................................... 1.12% (2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands)........................................................... $5,940
Ratio of expenses to average net assets (3)........................................................ 1.00%
Ratio of net investment income to average net assets............................................... 7.30%
Portfolio turnover rate............................................................................ 0.00%
</TABLE>

(1) From inception of operations on September 15, 1993. Ratios and portfolio
turnover rates are annualized.
(2) Not annualized.
(3) The ratio was 1.00% in 1996, 1.06% in 1995, 1.19% in 1994 and 2.03% in
1993, before voluntary reimbursement of certain expenses by the investment
advisor.

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

-
13
<PAGE>
FUND DESCRIPTIONS
-----------------------------------------------------------------

The Columbia Family of Funds consists of 12 no-load mutual funds designed to
meet a wide range of financial and investment objectives. Each Fund is an
open-end management investment company (that is, a "mutual fund") and, except
for the Municipal Bond Fund, is diversified. Although the Municipal Bond Fund
holds a large number of individual securities, it is not considered
"diversified" as defined under the Investment Company Act because of its
concentration in Oregon municipal securities. Each Fund is managed by Columbia
Funds Management Company (the "Advisor").

-- A TEAM APPROACH TO INVESTING --

Columbia Funds are managed by the Advisor using a team approach (please see
"Fund Management"). Stocks and bonds are selected using a "top down, sector
rotation" emphasis, supplemented by a bottom up, company analysis. The top down
analysis begins with an overall evaluation of the investment environment before
focusing on individual security selection. As part of this review, the
investment team considers such broad indicators as:

- - economic growth, because industries and asset classes behave differently at
various stages of a business cycle,

- - inflation, which is a major factor in determining the price investors are
willing to pay for a given level of earnings (price/earnings ratio),

- - interest rates, which provide information about the cost of money and the
attractiveness of different asset classes,

- - Federal Reserve policy, which controls the availability of money to help
regulate the economy,

- - corporate profits, which indicate the overall health and prosperity of
companies whose stocks and bonds are publicly traded,

- - demographics, which refer to the characteristics and dynamics of the
population, and

- - money flows, which refer to the current and expected level of equity
investments by major classes of investors.

To ensure depth and breadth of analysis, each Columbia investment team member
has responsibility for analyzing and researching specific market sectors or
industries, and bringing their findings to team meetings for review and
discussion. Once individual sectors are identified for emphasis, securities
within the targeted sectors are recommended based on fundamental and technical
analysis.

"S
ECTOR ROTATION" REFERS TO THE DYNAMIC PROCESS OF
EMPHASIZING OR DE-EMPHASIZING INVESTMENT IN INDUSTRY GROUPS OR ASSET CLASSES
BASED ON THEIR RELATIVE ATTRACTIVENESS.

Fundamental analysis employed for security selection is based on a thorough
review of individual companies, including such factors as:

- - financial condition

- - quality of management

- - industry dynamics

- - earnings growth and profit margins

- - sales trends

- - potential for new product development

- - dividend payment history and potential

- - financial ratios -- including price/earnings and price/book ratios

- - investment in research and development.

For fixed income securities, a top down analysis is also used to determine
sector emphasis between different types of instruments used by a Fund (for
example, corporate bonds, Treasuries, or mortgage pass-through securities) and
desired levels of average quality, maturity and duration. These determinations
are made in light of each Fund's individual investment objective.

A top down, sector rotation emphasis enables the investment team to better
understand the long-term prospects of a particular security, based on the
characteristics of the existing economy and investor temperament.

-
14
<PAGE>
FUND DESCRIPTIONS
-----------------------------------------------------------------
This approach is intended to give Columbia's investment team greater ability to
anticipate and act upon market change, understand its effect on the risk and
rewards of fund securities, and thereby generate consistent, competitive results
over the long term.

While "top down, sector rotation" is an important element of the Advisor's
investment process, identifying individual companies with growth potential is
also important to the process. In addition, fundamental analysis of individual
companies may have greater importance when a Fund is researching investment in
small to mid-size companies.

Although the Funds will generally emphasize investments for long-term capital
appreciation, a Fund may invest for short-term capital appreciation when
management believes it is consistent with sound investment practices and the
Fund's overall objective. These determinations will be made without a vote of
the shareholders of the Fund. There is no assurance that the Funds will achieve
their investment objectives.

-- COLUMBIA COMMON --

STOCK FUND
-------------------------

The Common Stock Fund was incorporated on June 13, 1991 under Oregon law and
began offering shares to the public on October 1, 1991.

-- INVESTMENT OBJECTIVE --

The investment objective of the Common Stock Fund is to provide growth of
capital and dividend income for shareholders through a professionally managed,
diversified portfolio consisting primarily (at least 65%, and up to 100%, of its
assets under normal investing conditions) of common stocks. This objective may
not be changed without a vote of a majority of the outstanding voting securities
of the Common Stock Fund.

The Common Stock Fund invests primarily in larger companies that are well
established. Many of the common stocks that will make up the Fund's portfolio
are expected to have a history of paying level or rising dividends. The Fund may
invest up to one-third 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.

-- INVESTMENT RESTRICTIONS AND --
RISK FACTORS

For information about the risks of investing in the Fund, including the risks of
investing in foreign securities, please see "Risk Factors." For information on
the investment by the Fund in repurchase agreements, illiquid securities,
when-issued securities, options, and temporary investments, please see
"Additional Infor-
mation." A description of other investment restrictions and certain investment
practices of the Common Stock Fund is included in the Statement of Additional
Information. The Fund's investment restrictions include a prohibition on
investing more than 5% of its total assets at cost in either illiquid securities
or the securities of companies that have a record of less than three years of
continuous operation.

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

The Growth Fund was incorporated on November 25, 1966 under Oregon law and began
offering shares to the public on June 16, 1967.

-- INVESTMENT OBJECTIVE --

The Growth Fund seeks to increase shareholders' capital by selecting
investments, primarily common stocks, that the Advisor expects to increase in
market value. This objective may not be changed without a vote of a majority of
the outstanding voting securities of the Growth Fund.

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The Growth Fund seeks to achieve its objective by investing in companies that
are believed to have above-average earnings growth over the long term. The
Advisor believes that such companies typically have strong competitive positions
within their industry groups. In addition, the Growth Fund may invest in common
stocks issued by companies located in developed foreign countries, principally
those located in North America, Western Europe, or Asia, provided that less than
10% of the value of its assets are so invested.

-- INVESTMENT RESTRICTIONS AND --
RISK FACTORS

For information about the risks of investing in the Fund, including the risks of
investing in foreign securities, please see "Risk Factors." For information on
the investment by the Fund in repurchase agreements, illiquid securities,
when-issued securities, options, and temporary investments, please see
"Additional Infor-
mation." A description of other investment restrictions and certain investment
practices of the Growth Fund is included in the Statement of Additional
Information. The Fund's investment restrictions include a prohibition on
investing more than 5% of its total assets at cost in either illiquid securities
or the securities of companies that have a record of less than three years of
continuous operation.

-- COLUMBIA INTERNATIONAL --

STOCK FUND
--------------------------------

The International Stock Fund was incorporated on June 29, 1992 under Oregon law
and began offering shares to the public on October 1, 1992.

-- INVESTMENT OBJECTIVE --

The International Stock Fund seeks to provide long-term capital appreciation by
investing primarily in equity securities of companies based outside the United
States. This objective may not be changed without a vote of a majority of the
outstanding voting securities of the Fund. Under normal market conditions, the
International Stock Fund will invest at least 65% of its total assets in equity
securities (i.e., common stock and preferred stock), including securities
convertible into equity securities, of issuers from at least three countries
other than the United States.

At least 75% of the Fund's equity securities will, under normal conditions, be
invested in securities of well-capitalized, seasoned companies. The Fund
considers a foreign company well capitalized if it has an aggregate market
valuation of over $500 million. The International Stock Fund may invest in
smaller, less seasoned companies when the Advisor believes they offer attractive
opportunities consistent with the Fund's overall investment objective. An
investment in a less seasoned company may involve greater risks than an
investment in a larger, more established company. See "Risk Factors --
Investments in Small and Unseasoned Companies." In addition to investing in
equity securities, the Fund may also enter into foreign currency exchange
contracts and purchase other securities to protect against fluctuations in
exchange rates. These securities are described below and under "Additional
Information."

The International Stock Fund may invest in companies located anywhere in the
world but intends to invest principally in the following countries: Austria,
Belgium, Denmark, Finland, France, Germany, Italy, The Netherlands, Norway,
Spain, Sweden, Switzerland, the United Kingdom, Australia, Hong Kong, Japan, New
Zealand, Singapore, Canada, and Mexico. 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. The Fund may invest more
heavily in U.S. companies (up to 35% of its total assets) when the Advisor
believes foreign market or economic conditions or trends in currency exchange
rates favor domestic securities.

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-- CURRENCY MANAGEMENT --

The value of the International Stock Fund 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 adverse 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 contract.
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.
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.

The International Stock 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. The 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 the
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 International Stock 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 International Stock Fund will be successful.

-- INVESTMENT RESTRICTIONS AND --
RISK FACTORS

For more information about the risks of investing in the Fund, including the
risks of investing in foreign securities, please see "Risk Factors." For
information on the investment by the Fund in repurchase agreements, illiquid
securities, when-issued securities, options, and temporary investments, please
see "Additional Information." A description of other investment restrictions and
certain investment practices of the International Stock Fund is included in the
Statement of Additional Information. The International Stock Fund's investment
restrictions include a prohibition on investing more than 5% of its total assets
in the securities of companies that have a record of less than 3 years of
continuous operations or more than 10% of its total assets in illiquid
securities.

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

The Special Fund was incorporated on July 18, 1985 under Oregon law and began
offering shares to the public on November 20, 1985.

-- INVESTMENT OBJECTIVE --

The investment objective of the Special Fund is to achieve capital appreciation
for shareholders by investing in securities the Advisor believes are more
aggressive than the market as a whole (as measured by the S&P

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FUND DESCRIPTIONS
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500 Stock Index) and therefore carry more risk than the market as a whole. This
objective may be changed by the Board of Directors without shareholder approval
upon 30 days written notice. In the unlikely event the Fund changes its
investment objective, shareholders should consider whether the Fund remains an
appropriate investment.

The Special Fund intends to invest primarily in small to mid-size companies (for
example, companies with capitalizations that are less than the average for the
companies included in the S&P 500 Stock Index). However, the Special Fund may
invest in larger companies when the Advisor believes they offer comparable
capital appreciation opportunities or to stabilize the Fund's portfolio.
Management reserves the right to determine the percentage of the Special Fund's
assets that will be invested in smaller companies.

The Special Fund may also 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. Up to one-third of the Fund's assets may be invested in foreign
securities.

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

-- INVESTMENT RESTRICTIONS AND --
RISK FACTORS

Investments in unseasoned companies and special situations may involve greater
risks than more traditional equity investments because the securities may be
more likely to experience unexpected fluctuations in price. For this reason, the
Special Fund should only be used as part of a balanced investment portfolio. The
Special Fund is designed for that portion of an investor's funds that can be
appropriately invested in securities with greater risk but also greater
potential for appreciation.

For information about the risks of investing in the Fund, including portfolio
turnover and the risks of investing in smaller companies and foreign securities,
please see "Risk Factors." For information on the investment by the Fund in
repurchase agreements, illiquid securities, when-issued securities, options, and
temporary investments, please see "Additional Information." A description of
other investment restrictions and certain investment practices of the Special
Fund is included in the Statement of Additional Information.

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

The Small Cap Fund was incorporated on May 31, 1996 under Oregon law and began
offering shares to the public on October 1, 1996.

-- INVESTMENT OBJECTIVE --

The investment objective of the Small Cap Fund is to achieve significant capital
appreciation by investing, in normal circumstances, at least 65 percent of the
value of the Fund's total assets in common stocks, or securities convertible
into common stocks, of "small cap" companies. A company is considered small cap
if it has an aggregate market capitalization of less than $1 billion. Upon
notice to shareholders, the definition of small cap may be modified if the
Advisor determines, based on changes in market levels and accepted industry
definitions, that a different market capitalization is more appropriate. There
is no minimum aggregate market capitalization for a company to be considered an
appropriate investment for the Fund. The Fund may, however, invest from time to
time up to 35 percent of the value of its total assets in the securities of
larger, more established companies when the Advisor believes they offer capital
appreciation potential that is generally comparable to small cap securities. The
Fund's investment objective may not be changed without shareholder approval.

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FUND DESCRIPTIONS
-----------------------------------------------------------------

The Small Cap Fund may also invest in debt securities or preferred stock that is
convertible into or exchangeable for small cap stocks. Convertible debt
securities, typically unsecured, are interest bearing and represent a claim to
the corporation's earnings and assets before common and preferred stock owners,
generally on par with unsecured creditors. Convertible preferred stocks are
securities that represent a claim to the corporation's earnings and assets
before common stock owners but after bond owners. Investments by the Fund in
convertible debt or preferred stock could be a substitute for an investment in
the underlying common stock in circumstances where only the convertible security
is available in quantities necessary to satisfy the Fund's investment needs (for
example, in the case of a new issuance of convertible securities). In addition,
such securities may be purchased if the conversion price of the convertible
security is comparable to the price of the underlying common stock. In this
case, a preferred position with respect to the corporation's earnings and assets
may be preferable to holding common stock.

The Small Cap Fund may invest up to 25% of its total assets in foreign
securities or American Depository Receipts ("ADRs") for foreign securities.
Subject to that limitation, the Fund may invest in companies located anywhere in
the world but expects to invest principally in the following countries:
Argentina, Australia, Brazil, Canada, Chile, China, Hong Kong, Indonesia, Japan,
Malaysia, Mexico, New Zealand, Singapore, and any country in Western Europe. For
a discussion of the special risks involved with investing in foreign securities,
see "Risk Factors -- Foreign Securities."

-- INVESTMENT RESTRICTIONS AND --
RISK FACTORS

Investments in small cap companies may involve greater risks than investments in
larger companies, with a corresponding effect on the Fund's net asset value. For
this reason, the Fund is not intended to be used as the sole investment in your
portfolio. The Fund is designed for that portion of a portfolio that can
appropriately be invested in securities with greater risk but also greater
potential for appreciation.

For information about the risks of investing in the Fund, including portfolio
turnover and the risks of investing in smaller companies and foreign securities,
please refer to "Risk Factors." For information on the investment by the Fund in
repurchase agreements,
illiquid securities, when-issued securities, options, and temporary investments,
please see "Additional Information." A description of other investment
restrictions and certain investment practices of the Fund is included in the
Statement of Additional Information.

-- COLUMBIA REAL ESTATE --

EQUITY FUND
------------------------------

The Real Estate Fund was incorporated on December 29, 1993 under Oregon law and
began offering shares to the public on April 1, 1994.

-- INVESTMENT OBJECTIVE --

The Real Estate Fund seeks, with equal emphasis, capital appreciation and
above-average current income by investing primarily in the equity securities of
companies in the real estate industry. With respect to current income, the Fund
seeks to provide a yield that exceeds the composite yield of securities
comprising the S&P 500. The Fund's investment objective may not be changed
without a vote of a majority of the outstanding shares of the Fund.

Under normal conditions, the Real Estate Fund will invest at least 65% of its
total assets in the equity securities 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. These companies may include, among others: equity real
estate investment

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<PAGE>
FUND DESCRIPTIONS
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trusts ("REITs"), which own primarily commercial income properties; mortgage
REITs, which make construction, development, and long-term mortgage loans; and
real estate brokers or developers. The Fund will not invest directly in real
estate. Equity securities include common stock, preferred stock, and securities
convertible into common stock. The Fund may invest up to 20% of its total assets
in foreign real estate industry companies.

The Real Estate Fund may also 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. The Fund's Advisor anticipates that investments outside the
real estate industry will be primarily in securities of companies whose products
and services are related to the real estate industry. They 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 types of non-convertible debt securities in which the Real Estate Fund may
invest include corporate debt securities (bonds, debentures, and notes),
asset-backed securities, bank obligations, collateralized bonds, loan and
mortgage obligations, commercial paper, repurchase agreements, savings and loan
obligations, and U.S. Government and agency obligations. The Fund will only
invest in "investment-grade" debt securities, which are securities that, at the
time of investment, are rated Baa or higher by Moody's Investors Services, Inc.
("Moody's") or BBB or higher by Standard & Poor's Corporation ("Standard &
Poor's") or, if unrated, are believed by the Advisor to be equivalent to
securities with those ratings. Although debt securities rated Baa by Moody's or
BBB by Standard & Poor's are believed to have adequate capacity to pay principal
and interest, they have speculative characteristics because they lack certain
protective elements. In addition, the prices of securities rated Baa by Moody's
or BBB by Standard & Poor's may be more sensitive to adverse economic changes
than securities with a higher investment rating. The Fund will evaluate the
appropriateness, in light of the then existing circumstances, of retaining any
security whose credit rating drops below the rating it held when purchased by
the Fund.

The Real Estate Fund may invest without limit in shares of REITs, which pool
investors' funds for investment primarily in income-producing real estate or
real estate-related loans or interests.
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.

-- INVESTMENT RESTRICTIONS AND --
RISK FACTORS

Although the Real Estate Fund does not invest in real estate directly, the Fund
may be subject to risks similar to those associated with the direct ownership of
real estate (in addition to stock market risk) because of its policy of
concentration in the securities of companies in the real estate industry. For
more information about the risks of investing in the Fund, including the risks
of investing in real estate securities and foreign securities,

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FUND DESCRIPTIONS
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please see "Risk Factors." For information on the investment by the Fund in
repurchase agreements, illiquid securities, when-issued securities, options, and
temporary investments, please see "Additional Information." A description of
other investment restrictions and certain investment practices of the Real
Estate Fund is included in the Statement of Additional Information.

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

The Balanced Fund was incorporated on June 13, 1991 under Oregon law and began
offering shares to the public on October 1, 1991.

-- INVESTMENT OBJECTIVE --

The investment objective of the Balanced Fund is to provide shareholders with a
high total return (growth of capital and income) by investing in common stocks
and fixed income securities. This objective may not be changed without a vote of
a majority of the outstanding voting securities of the Fund.

The Advisor intends to use top down analysis to determine appropriate weightings
between common stocks and fixed income securities, based on expected relative
returns for those two classes of assets. The Advisor does not intend to try to
time the markets, and changes between the asset classes normally will be made
gradually. Under normal investing conditions, the assets of the Balanced Fund
will be allocated within the following parameters: 35-65% in common stocks and
35-65% in fixed income securities. At least 25% of the Balanced Fund's assets
will be invested at all times in nonconvertible fixed income securities.
Individual security selection for each portion of the Balanced Fund is discussed
separately below.

-- COMMON STOCKS --

The Balanced Fund selects equity securities based on the same factors used to
select securities for the Common Stock Fund. See "A Team Approach to Investing"
and "Columbia Common Stock Fund -- Investment Objective." The Balanced Fund may
invest up to one-third of its common stock portfolio in companies located in
developed foreign countries, principally those located in North America, Western
Europe, or Asia. Further information regarding securities in which the Balanced
Fund may invest is provided in the Statement of Additional Information.

-- FIXED INCOME SECURITIES --

The Balanced Fund seeks to provide shareholders with significant income through
an investment of a portion of its total assets in fixed income securities,
consisting of the same type of securities that may form the portfolio for the
Bond Fund. For information on the types of fixed income securities that will be
held by the Balanced Fund and the effect of changes in interest rates on the
values of such securities, see "Columbia Fixed Income Securities Fund --
Investment Objective."

The Balanced Fund intends to use cash or cash equivalents to maintain liquidity
and to partially protect against declines in value of common stocks and longer-
term fixed income securities. All of the Balanced Fund's cash equivalent assets
will be invested in short-term obligations maturing within one year. Cash
equivalent investments by the Balanced Fund normally will not exceed 10% of the
Fund's assets and may include: securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities and repurchase agreements
relating to these securities; bank deposits and other financial institution
obligations; commercial paper rated A-1 by Standard & Poor's, Prime 1 by
Moody's, or, if not rated, issued by companies that, at the date of investment,
have an outstanding debt issue rated AA or better by Standard & Poor's or Aa or
better by Moody's; and other corporate obligations, including bonds and notes
that, at the date of investment, are rated AA or better by Standard & Poor's or
Aa or better by Moody's.

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FUND DESCRIPTIONS
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-- INVESTMENT RESTRICTIONS AND --
RISK FACTORS

For more information about the risks of investing in the Fund, including the
risks of investing in foreign securities, please see "Risk Factors." For
information on the investment by the Fund in repurchase agreements, illiquid
securities, when-issued securities, options, and temporary investments, please
see "Additional Information." A description of other investment restrictions and
certain investment practices of the Balanced Fund is included in the Statement
of Additional Information. The Balanced Fund's investment restrictions include a
prohibition on investing more than 5% of its total assets at cost in illiquid
securities or the equity securities of companies that have a record of less than
three years of continuous operations.

-- COLUMBIA DAILY --

INCOME COMPANY
----------------------

The Money Market Fund was incorporated on July 22, 1974 under Oregon law and
began offering shares to the public on October 1, 1974.

-- INVESTMENT OBJECTIVE --

The investment objective of the Money Market Fund is to provide a high level of
current income consistent with the maintenance of liquidity and the preservation
of capital. This investment objective may not be changed without a vote of a
majority of the outstanding voting securities of the Money Market Fund.

Investments by the Money Market 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 Standard & Poor's or Moody's, is rated
A-1 by Standard & Poor's and Prime 1 by Moody's or, if not rated, is
determined to be of comparable quality by the Money Market Fund.

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 Standard & Poor's 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
Money Market 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 Money Market Fund to be of comparable quality to the
obligations described in paragraphs 2 or 3 above. Currently, these
obligations are certificates of deposit, bankers' acceptances, and letters
of credit.

All of the Money Market Fund's assets will be invested in short-term debt
obligations maturing within one year. The average dollar-weighted maturity of
the portfolio may not exceed 90 days. The Money Market Fund will buy and sell
securities in an effort to improve current income return from its assets,
trading holdings when there appear to be advantages from moving between
particular instruments within the high-grade money market. The Money Market Fund
may realize capital gains or losses from such trading.

Further information regarding securities in which the Money Market Fund may
invest and the rating systems used by the Money Market Fund in selecting
investments is provided in the Statement of Additional Information.

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-- INVESTMENT RESTRICTIONS AND --
RISK FACTORS

A description of the investment restrictions and certain investment practices of
the Money Market Fund is included in the Statement of Additional Information.
The Money Market Fund's portfolio will be affected by general changes in
interest rates, since these changes increase or decrease the value of the assets
held. The value of these assets generally will vary inversely to changes in
prevailing interest rates. If interest rates increase after an asset is
purchased, the asset, if sold, may be sold at a price below its cost. The Money
Market Fund's normal policy is to hold investments until maturity. The Money
Market Fund anticipates that, except for efforts to improve current income, only
heavy redemptions would cause it to sell securities below their purchase price.

-- COLUMBIA U.S. GOVERNMENT --

SECURITIES FUND
-----------------------------------

The Government Bond Fund was incorporated on October 16, 1986 under Maryland law
and began offering shares to the public on November 6, 1986. The Government Bond
Fund was reincorporated under Oregon law on April 29, 1988.

-- INVESTMENT OBJECTIVE --

The Government Bond Fund seeks to provide shareholders with preservation of
capital and a high level of income. This investment objective may not be changed
without a vote of the majority of the outstanding voting securities of the
Government Bond Fund.
T O ACHIEVE ITS INVESTMENT OBJECTIVE, THE
GOVERNMENT BOND FUND INVESTS SUBSTANTIALLY ALL ITS ASSETS IN DIRECT
OBLIGATIONS OF THE U.S. GOVERNMENT.

Direct obligations of the U.S. Government fall into three categories -- bills,
notes, and bonds -- distinguished primarily by their maturity at the time of
issuance. Treasury bills have maturities of one year or less at the time of
issuance. Treasury notes currently have maturities of 1 to 10 years. Treasury
bonds can be issued with any maturity of more than 10 years. Because the
Government Bond Fund will restrict investments to obligations with a maturity of
three years or less, the Government Bond Fund will not acquire Treasury bonds
upon issuance, but may acquire previously issued Treasury bonds that will mature
within three years of the purchase date.

The Government Bond Fund may commit up to 25 percent of its total assets to
when-issued and delayed-delivery purchases. Although the Government Bond Fund
would have ownership rights to these obligations, it will not be required to pay
for them until they are delivered to the Government Bond Fund, normally 15 to 45
days later. Descriptions of when-issued and delayed-delivery purchases are
provided under "Additional Information."

No security in the portfolio will have a maturity in excess of three years.
Securities will be selected on the basis of the Advisor's 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. Shifting the average maturity of the portfolio in
response to anticipated changes in interest rates will generally be carried out
through the sale of securities and the purchase of different securities within
the desired maturity range. This may result in greater realized capital gains
and losses than if the Government Bond Fund generally held all securities to
maturity.

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-- INVESTMENT RESTRICTIONS AND --
RISK FACTORS

The Government Bond Fund may invest up to 10% of its net assets in repurchase
agreements for direct obligations of the U.S. Government. See "Additional
Information." A description of the investment restrictions and certain
investment practices of the Government Bond Fund is included in the Statement of
Additional Information. The principal risk of an investment in the Government
Bond Fund is interest rate risk, which is discussed under "Risk Factors."

-- COLUMBIA FIXED INCOME --

SECURITIES FUND
-------------------------------

The Bond Fund was incorporated on October 12, 1982 under Delaware law and began
offering shares to the public on February 25, 1983. The Bond Fund was
reincorporated under Oregon law on April 29, 1988.

-- INVESTMENT OBJECTIVE --

The Bond Fund seeks to provide shareholders with a high level of income,
consistent with preservation of capital. To achieve this objective, the Bond
Fund invests in a broad range of fixed income securities, consisting of
corporate debt securities (bonds, debentures, and notes), asset-backed
securities, bank obligations, collateralized bonds, loan and mortgage
obligations, commercial paper, preferred stocks, repurchase agreements, savings
and loan obligations, and U.S. Government and agency obligations. Debt
securities and preferred stocks may be convertible into, or exchangeable for,
common stocks, and may have warrants attached. Information regarding these
securities is provided in the Statement of Additional Information. This
investment objective may not be changed without a vote of a majority of the
outstanding voting securities of the Bond Fund.

T O ACHIEVE ITS INVESTMENT OBJECTIVE, THE BOND FUND
EXPECTS TO INVEST A MAJOR PORTION (NORMALLY AT LEAST 95%) OF ITS ASSETS IN
INVESTMENT-GRADE DEBT SECURITIES.

"Investment-grade" debt securities are considered to be those which, at the time
of investment are: (a) rated Baa or higher by Moody's; (b) rated BBB or higher
by Standard & Poor's; or (c) unrated, but believed by the Advisor to be
equivalent to securities with those ratings. Up to 5% of the Bond Fund's assets
may be invested in lower-grade securities (rated Ba or B by Moody's or BB or B
by Standard & Poor's) when the Advisor believes these securities present
attractive investment opportunities despite their speculative characteristics.
For information on the risks of lower-rated securities, see "Risk Factors --
Lower-Rated Securities."

Although bonds rated Baa or BBB are believed to have adequate capacity to pay
principal and interest, they have speculative characteristics because they lack
certain protective elements. In addition, the prices of bonds rated Baa or BBB
may be more sensitive to adverse economic changes or individual corporate
developments than bonds with higher investment ratings. The Fund will evaluate
the appropriateness, in light of the then existing circumstances, of retaining
any security whose credit rating drops below Baa or BBB after its purchase by
the Bond Fund. Additional ratings information is provided under "Additional
Information -- Bond Ratings."

A portion of the Bond Fund's portfolio will ordinarily be invested in
obligations issued by the U.S. Government and its agencies and instrumentalities
(such as the Federal Home Loan Mortgage Corp., the Government National Mortgage
Association, the Federal National Mortgage Association, and the Federal Housing
Administration) and in short-term corporate obligations when the Advisor
believes the issuer is financially

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sound. The Bond Fund may also invest in repurchase agreements, which are
described under "Additional Information."

The Bond Fund will usually invest some portion of its assets in collateralized
mortgage obligations ("CMOs") issued by a U.S. agency or instrumentality, or in
privately issued CMOs that carry an investment-grade rating. The holder of a CMO
is entitled to interest and/or principal payments that are fully collateralized
by a portfolio or pool of mortgages or mortgage-backed securities. CMOs are
generally issued in different classes, with different priorities as to the
receipt of interest and/or principal payments on the underlying mortgages. In
addition to the interest rate risk carried by all fixed income securities,
mortgage-related securities and CMOs are also subject to risks relating to cash
flow uncertainty; that is, the risk that assumed prepayment rates on the
underlying mortgages will increase or decrease. Changes in assumed prepayment
rates have the effect of shortening or lengthening the effective maturity of the
CMO held by the Fund, which may have an adverse effect on the value of the CMO.
The Bond 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.

There are no limitations on the average maturity of the Bond Fund's portfolio.
Securities will be selected on the basis of the Advisor's assessment of interest
rate trends and the liquidity of various instruments under prevailing market
conditions. Shifting the average maturity of the portfolio in response to
anticipated changes in interest rates will generally be carried out through the
sale of securities and the purchase of different securities within the desired
maturity range. This may result in a greater level of realized capital gains and
losses than if the Bond Fund held all securities to maturity. Portfolio
decisions will be made solely on the basis of investment, rather than tax,
considerations. Generally, the securities purchased will be of an intermediate
maturity (less than 10 years) when interest rates are expected to rise and of a
relatively long maturity (over 10 years) when interest rates are expected to
decline.

-- INVESTMENT RESTRICTIONS --
AND RISK FACTORS

For information on the risks of investing in the Fund, please see "Risk Factors
- -- Credit and Interest Rate Risk." For information on the investment by the Fund
in repurchase agreements, illiquid securities, when-
issued securities, and temporary investments, please see "Additional
Information." A description of other investment restrictions and certain
investment practices of the Bond Fund is included in the Statement of Additional
Information.

-- COLUMBIA MUNICIPAL --

BOND FUND
---------------------------

The Municipal Bond Fund was incorporated on October 31, 1983 under Delaware law
and began offering shares to the public on July 2, 1984. The Municipal Bond Fund
was reincorporated under Oregon law on April 29, 1988.

-- INVESTMENT OBJECTIVE --

The Municipal Bond Fund seeks to provide shareholders with as high a level of
income exempt from federal income taxes as is consistent with preservation of
capital. Consistent with this primary objective, the Municipal Bond Fund seeks
to provide shareholders with income exempt from State of Oregon income taxes,
and it may concentrate up to 100% of its investments in obligations of Oregon
issuers. These investment objectives may not be changed without a vote of a
majority of the outstanding voting securities of the Municipal Bond Fund.

The Municipal Bond Fund normally expects to invest substantially all of its
assets in municipal securities, of which at least 60% are expected to pay
interest that is

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exempt from Oregon income taxes. Municipal securities are debt obligations
issued by or on behalf of states, territories, and possessions of the United
States and their political subdivisions, agencies, authorities, and
instrumentalities, the interest from which, in the opinion of bond counsel, is
not includible in gross income for federal income tax purposes. The Municipal
Bond Fund may invest temporarily in other securities for defensive purposes.

All of the Municipal Bond Fund's bond portfolio will be invested in municipal
securities which, at the time of investment, are either:

- - general obligation bonds of Oregon or its political subdivisions;

- - rated Baa or higher by Moody's or rated BBB or higher by Standard & Poor's; or

- - not rated, but believed by its Advisor to be equivalent to securities with
those ratings.

Although bonds rated Baa or BBB are believed to have adequate capacity to pay
principal and interest, they have speculative characteristics because they lack
certain protective elements. In addition, the prices of bonds rated Baa or BBB
may be more sensitive to adverse economic changes than bonds with a higher
investment rating. The Fund will evaluate the appropriateness of retaining any
security whose credit rating drops below Baa or BBB after its purchase by the
Fund. Additional ratings information is provided under "Additional Information."
A
LTHOUGH THE MUNICIPAL BOND FUND'S PORTFOLIO WILL BE
ACTIVELY MANAGED, THE FUND WILL GENERALLY PURCHASE PORTFOLIO SECURITIES FOR
LONG-TERM HOLDINGS.

From time to time, the Municipal Bond Fund may invest temporarily in securities
that produce income subject to federal income tax. These investments may consist
of 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 statement in excess of $100 million;
commercial paper rated Prime 1 by Moody's, A-1 or better by Standard & Poor's,
or, if not rated, issued by a company that, at the date of investment by the
Municipal Bond Fund, has an outstanding debt issue rated AA or better by
Standard & Poor's or Aa or better by Moody's; and repurchase agreements for any
of these types of investments. Interest earned from these investments will be
taxable to investors. Except for temporary defensive purposes, the Municipal
Bond Fund will not invest more than 20% of its net assets in securities that
produce income subject to federal income tax.

The Municipal Bond Fund will generally have an average portfolio maturity of 10
years or longer, although average maturity may be expected to vary when the
Advisor anticipates general movements in interest rates. Securities may be
purchased or sold at a discount or premium depending upon market conditions at
the time of the transaction.

Although the Municipal Bond Fund intends to concentrate its investments in
municipal securities that are exempt from State of Oregon income taxes, a
portion of the interest earned on municipal securities held by the Municipal
Bond Fund may be subject to State of Oregon income taxes. The Municipal Bond
Fund expects to invest up to 25% of its assets in general obligation bonds of
the State of Oregon, including bonds issued by divisions of the State of Oregon
and backed by the full faith and credit of the State of Oregon, or any higher
percentage permitted from time to time by the Internal Revenue Code.

The Municipal Bond Fund expects to invest all or a portion of the balance of its
assets in municipal securities of other Oregon issuers, for which there may not
be an active trading market, and in obligations of Puerto Rico, Guam, and the
possessions of the United States, the interest on which is exempt from State of
Oregon

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26
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income taxes. However, the Municipal Bond Fund may, for liquidity reasons, also
invest in actively-traded municipal securities of issuers in other states, the
interest on which will be subject to State of Oregon income taxes.

-- SPECIAL INVESTMENT CONSIDERATIONS --

Subject to its investment restrictions, the Municipal Bond Fund may engage in a
variety of securities transactions, some of which may present special risks as
described below. Further information regarding these matters is provided under
"Additional Information" and in the Statement of Additional Information.

CONCENTRATION IN OREGON BONDS. The Municipal Bond Fund's objective is to
concentrate its investments, to the extent possible, in obligations of Oregon
issuers and other obligations, the interest on which is exempt from State of
Oregon income taxes. This concentration may cause the Municipal Bond Fund's
portfolio to be exposed to special risks that do not apply to funds that do not
concentrate in obligations of one state. Only investors subject to Oregon
personal income taxes will receive the state tax benefits resulting from the
concentration in obligations of Oregon issuers.

Because most issues of municipal bonds in Oregon, other than certain bonds
issued by the State, are relatively small, the Advisor believes there is not an
active trading market for municipal bonds of Oregon issuers other than general
obligation bonds issued by the State of Oregon. Therefore, relatively small
changes in the supply or demand for bonds of these other Oregon issuers can have
a large impact on the market price of the bonds. If the Municipal Bond Fund were
required to sell bonds held in its portfolio because of redemptions in large
amounts or for other reasons, the sale could significantly reduce the market
value of these securities, which could result in a reduction in the net asset
value of the Fund's shares.

To maintain sufficient liquidity in the Municipal Bond Fund's portfolio for
normal redemptions, management intends to invest a significant portion of the
Municipal Bond Fund's assets in general obligations of the State of Oregon and
in municipal bonds of other issuers for which there is an active trading market.
However, this strategy will not completely insulate the Municipal Bond Fund's
investments from liquidity risk.

Certain municipal securities purchased by the Municipal Bond Fund from Oregon
issuers may rely in whole or in part on ad valorem real property taxes as a
source of revenue for the payment of principal and interest. There are state
constitutional and statutory limitations on the issuance of bonds payable from
tax revenues. In November 1990, Oregon voters passed a statewide initiative
(Measure 5) that limits ad valorem property taxes, subject to certain
exceptions. These exceptions include ad valorem property taxes levied to pay
general obligation indebtedness that is specifically approved by the voters,
general obligation indebtedness outstanding at the time of the adoption of
Measure 5, and general obligation indebtedness specifically authorized by other
provisions of the Oregon Constitution. A new ad valorem property tax limitation
constitutional amendment adopted by the voters in November 1997 (Measure 47)
"rolls back" ad valorem property taxes and generally limits future property tax
increases. As a result, there will be a significant reduction in the amount of
ad valorem property tax revenues available to local governments to fund
operations that have traditionally been financed from these taxes.

The State of Oregon does not impose any ad valorem property taxes to fund state
operations, but it is expected that the State will provide financial support to
school districts and certain units of local government adversely affected by
Measure 5 or Measure 47. In addition, recent constitutional amendments relating
to criminal sentencing are expected to require the State to undertake a major
program of prison financing and expansion in the near future. Limitations on ad
valorem property taxes and the revenue replacement efforts by the State are
expected to continue to have a significant effect on the operating funds
available to state and local

-
27
<PAGE>
FUND DESCRIPTIONS
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governments. Limiting the ability of governments to issue new general obligation
debt because of limits on property tax revenues could reduce the number of
municipal bonds of Oregon issuers available for purchase by the Municipal Bond
Fund and could adversely affect the market value of bonds issued by Oregon
issuers generally.

Because of the Municipal Bond Fund's concentration in obligations of Oregon
issuers, unfavorable economic conditions in Oregon could adversely affect the
market value of municipal bonds held by the Municipal Bond Fund or the ability
of these issuers to make required payments. For example, proposed restrictions
on the level of timber harvests on federal and private lands, if adopted, could
have a generally negative economic effect, particularly in certain rural
counties that receive significant direct revenues based on timber harvests. In
addition, any restrictions on the use and control of river and stream waters to
protect diminishing salmon runs could adversely affect electricity rates,
agricultural development, commercial and recreational fishing industries, and
the costs of river navigation.

-- INVESTMENT RESTRICTIONS --
AND RISK FACTORS

For additional information on the risks of investing in the Fund, please see
"Risk Factors -- Credit and Interest Rate Risk." New issues of municipal bonds
are usually offered on a when-issued basis, with delivery and payment normally
taking place within 45 days after the date of the commitment to purchase. The
Municipal Bond Fund may invest in repurchase agreements. Descriptions of
repurchase agreements and when-issued and delayed-delivery purchases are
provided under "Additional Information." A description of other investment
restrictions and certain investment practices of the Municipal Bond Fund is
included in the Statement of Additional Information.

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

The Columbia High Yield Fund was incorporated on June 30, 1993 under Oregon law
and began offering shares to the public on October 1, 1993.

-- INVESTMENT OBJECTIVE --

The High Yield Fund's primary investment objective is to provide shareholders
with a high level of current income by investing primarily in lower-rated fixed
income securities. Capital appreciation is a secondary objective when consistent
with the objective of high current income. The High Yield Fund may invest in the
same types of fixed income securities as the Bond Fund. See "Columbia Fixed
Income Securities Fund -- Investment Objective." The High Yield Fund's objective
may not be changed without a vote of a majority of the outstanding voting
securities of the Fund.

To achieve its investment objective, the High Yield Fund generally will invest
at least 65% of its total assets in high yielding fixed income securities rated
Ba or lower by Moody's or BB or lower by Standard & Poor's. Because the Fund
intends to invest primarily in "upper tier" noninvestment grade securities (that
is, BB- or B-rated), no more than 10% of the Fund's total assets will be
invested in fixed income securities rated Caa or lower by Moody's or CCC or
lower by Standard & Poor's. The Fund may also invest in unrated fixed income
securities when the Advisor believes the security is of comparable quality to
that of securities eligible for purchase by the Fund. If the credit rating of a
security drops below the rating it held when purchased by the Fund, the Fund
will evaluate the appropriateness of retaining that security.
T HE FUND INTENDS TO INVEST PRIMARILY IN "UPPER
TIER" NONINVESTMENT-GRADE SECURITIES (THAT IS, BB-OR B-RATED).

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Securities rated Ba or less by Moody's or BB or less by Standard & Poor's are
considered to be noninvestment grade. These types of bonds are commonly referred
to as "junk bonds." They are subject to a high degree of risk, and are
considered speculative by the major credit rating agencies with respect to the
issuer's ability to meet principal and interest payments. The High Yield Fund is
designed for investors who are willing to assume substantial risks of
significant fluctuations in principal value in order to achieve a high level of
current income. The Fund should represent only a portion of a balanced
investment program. See "Risk Factors" for a description of the risks of
investing in lower-rated securities and "Additional Information" for a
description of corporate bond ratings.

The table below shows the ratings assigned to the fixed income securities held
by the High Yield Fund during 1996. These figures, expressed as a percentage of
total net assets, are dollar-weighted averages of month-end holdings for 1996.
The Fund did not hold any securities unrated by either Moody's or Standard &
Poor's or securities rated above Baa/BBB or below B/B during 1996.

-- HIGH YIELD FUND BOND RATINGS --

<TABLE>
<CAPTION>
MOODY'S STANDARD & POOR'S
- ----------------------- -----------------------
RATING AVERAGE RATING AVERAGE
- ---------- ----------- ---------- -----------
BAA 0.1% BBB 5.1%
<S> <C> <C> <C> <C>
BA 49.9% BB 53.0%
B 43.6% B 33.8%
</TABLE>

There are no limitations on the average maturity of the High Yield Fund's
portfolio. Securities will be selected on the basis of the Advisor's assessment
of interest rate trends and the liquidity of various instruments under
prevailing market conditions. Shifting the average maturity of the portfolio in
response to anticipated changes in interest rates generally will be carried out
through the sale of securities and the purchase of different securities within
the desired maturity range. This may result in greater realized capital gains
and losses than if the Fund held all securities to maturity. Portfolio decisions
will be made solely on the basis of investment, rather than tax, considerations.

The High Yield Fund may invest in corporate debt securities or preferred stocks
that are convertible into or exchangeable for common stock. The Fund may acquire
common stock in the following circumstances:

- - in connection with the purchase of a unit of securities that includes both
fixed income securities and common stock;

- - when fixed income securities held by the Fund are converted by the issuer into
common stock;

- - upon the exercise of warrants attached to fixed income securities held by the
Fund; and

- - when purchased as part of a corporate transaction in which the holders of
common stock will receive newly issued fixed income securities.

Common stock acquired by the Fund in these circumstances may be held to permit
orderly disposition or to establish long-term holding periods for income tax
purposes.

The High Yield Fund may invest up to 10% of its total assets in fixed income
securities of foreign issuers, including foreign governments, denominated in
U.S. dollars.

Special tax considerations are associated with investing in lower-rated debt
securities structured as zero coupon or 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 debt plus an amount representing accrued interest

-
29
<PAGE>
FUND DESCRIPTIONS
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since the last payment. Zero coupon and pay-in-kind securities are more volatile
than cash pay securities. The High Yield 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.

The High Yield Fund generally will not trade in securities for short-term
profits but, when circumstances warrant, it may purchase and sell securities
without regard to the length of time held. A high portfolio turnover may
increase transaction costs and may affect taxes paid by shareholders to the
extent short-term gains are distributed.

-- INVESTMENT RESTRICTIONS --
AND RISK FACTORS

For information on the risks of investing in the Fund, including the specific
risks of lower-rated securities, please see "Risk Factors." For information on
the investment by the Fund in repurchase agreements, illiquid securities,
when-issued securities, loan transactions, and temporary investments, please see
"Additional Information." A description of other investment restrictions and
certain investment practices of the High Yield Fund is included in the Statement
of Additional Information.

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RISK FACTORS
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An investment in any mutual fund, including any of the Columbia Funds, involves
certain risks, some of which are explained under the description of each Fund.
General market risk and other specific risks associated with different types of
securities used by the Funds, including foreign securities, lower-rated bonds,
and stocks of small companies, are discussed below.

STOCK MARKET RISK. The principal risk associated with a stock mutual fund is
that the stocks held by the fund will decline in value. Stock values may
fluctuate in response to the activities and financial prospects of an individual
company or in response to general market and economic conditions. Investments in
smaller or unseasoned companies may be both more volatile and more speculative.
See "Investments in Small and Unseasoned Companies."
A LTHOUGH COMMON STOCKS HAVE HISTORICALLY
PROVIDED LONG-TERM RETURNS THAT ARE GREATER THAN OTHER TYPES OF INVESTMENTS,
STOCK RETURNS HAVE ALSO BEEN MORE VOLATILE OVER SHORTER PERIODS OF TIME.

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
short-term trades result in gains on securities held one year or less,
shareholders will be subject to taxes at ordinary income rates. See
"Distributions and Taxes." Historical portfolio turnover rates for all Funds,
except the Small Cap Fund, are shown in the "Financial Highlights" section. The
Small Cap Fund is new, but the annual portfolio turnover rate is generally not
expected to exceed 125% under normal market conditions.

FOREIGN SECURITIES. The International Stock Fund, and to a much lesser extent
the other Stock Funds and the Balanced Fund, are subject to the risks of
investing in foreign securities. Foreign securities, which are generally
denominated in foreign currencies, and forward currency exchange contracts
involve risks not typically associated with investing in domestic securities.
The value of a Fund's portfolio will be affected by changes in currency exchange
rates and in currency exchange regulations to the extent the Fund holds foreign
securities. Foreign securities may be subject to foreign taxes that would reduce
their effective yield. Certain foreign governments levy withholding taxes
against dividend and interest income. Although in some countries a portion of
these taxes is recoverable, the unrecovered portion of any foreign withholding
taxes would reduce the income a Fund receives from its foreign investments.

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

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

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RISK FACTORS
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The International Stock Fund may invest a portion of its assets in developing
countries or in countries with new or developing capital markets, such as
countries in Eastern Europe, Latin America, South America or Southeast Asia. The
considerations noted above regarding the risk of investing in foreign securities
are generally more significant for these investments. 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. Investments in
these markets may involve significantly greater risks, as well as the potential
for greater gains.

In addition to investing directly in foreign equity securities, the Funds may
also purchase such securities in the form of American Depository Receipts
("ADRs") and Global Depository Receipts ("GDRs"). 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.

REAL ESTATE SECURITIES. The Real Estate Fund may be subject to risks similar to
those associated with the direct ownership of real estate (in addition to
securities market risks) because of its policy of concentrating in the
securities of companies in the real estate industry. These risks include
declines in the value of real estate, risks related to general, local, and
regional economic conditions, dependence on management skills and heavy cash
flow, possible lack of availability of mortgage funds, overbuilding, extended
vacancies of properties, increased competition, increases in property taxes and
operating expenses, changes in zoning laws, losses due to costs resulting from
the clean-up of environmental problems, liability to third parties for damages
resulting from environmental problems, casualty or condemnation losses, natural
disasters, limitations on rents, changes in neighborhood values and the appeal
of properties to tenants, and changes in interest rates. These risks may be more
significant to the extent the Fund's investments are concentrated in a
particular geographic region.
T HE REAL ESTATE FUND WILL INVEST ONLY IN SECURITIES
ISSUED BY COMPANIES IN THE REAL ESTATE INDUSTRY. THE FUND WILL NOT INVEST IN
REAL ESTATE DIRECTLY.

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 any credit extended. Further, 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 meets its obligations to the REIT. If a
borrower or lessee defaults, a REIT may experience delays in enforcing its
rights as a mortgagee or lessor and may incur substantial costs associated with
protecting its investments.

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32
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RISK FACTORS
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INVESTMENTS IN SMALL AND UNSEASONED COMPANIES. Investments by the International
Stock Fund, the Special Fund and the Small Cap Fund in small or unseasoned
companies may be regarded as speculative. These companies may have limited or
unprofitable operating histories, limited financial resources, and inexperienced
management. In addition, they often face competition from larger or more
established firms that have greater resources. Securities of small and young
companies are frequently traded in the over-the-counter market or on regional
exchanges where low trading volumes may result in erratic or abrupt price
movements. To dispose of these securities, a Fund may have to sell them over an
extended period of time or below the original purchase price. Because of these
factors, an investment in these Funds may be subject to greater price
fluctuations than an investment in a fund that invests primarily in larger, more
established companies.

SPECIAL SITUATIONS. Special situations are those in which the Advisor to the
Special Fund and Small Cap Fund expects a substantial change in the market value
of a company's securities due to a new development. An example would be a small
company expected to emerge as a leader in a new business area. Other special
situations include acquisitions, mergers, reorganizations, management changes,
product developments, and the awarding of large contracts. Because these types
of situations may involve major corporate changes and a high degree of
uncertainty as to market effects, investments in special situations are
characterized by higher risk as well as the potential for higher returns.

CREDIT AND INTEREST RATE RISK. All fixed income securities are subject to two
types of risk: credit risk and interest rate risk. Credit risk refers to the
ability of the issuer to meet interest and principal payments when due.
Generally, lower-rated (but higher yielding) bonds, such as those acquired by
the High Yield Fund, are subject to greater credit risk than higher quality (but
lower yielding) bonds, such as those held by the Bond Fund. See "Risk Factors --
Lower-Rated Securities." The ratings of fixed income securities by Moody's and
Standard & Poor's are a generally accepted barometer of credit risk. See
"Additional Information -- Bond Ratings."

Interest rate risk refers to fluctuations in the net asset value of any
portfolio of fixed income securities resulting from the inverse relationship
between the price of fixed income securities and interest rates.
W HEN INTEREST RATES RISE, BOND PRICES GENERALLY
FALL AND, CONVERSELY, WHEN INTEREST RATES FALL, BOND PRICES GENERALLY
RISE.

The change in net asset value depends upon several factors, including a bond's
maturity date. In general, bonds with longer maturities are more sensitive to
interest rate changes than bonds with shorter maturities.

LOWER-RATED SECURITIES. The lower-rated but higher yielding bonds purchased by
the High Yield Fund may be issued in connection with corporate restructurings,
such as leveraged buyouts, mergers, acquisitions, debt recapitalizations, or
similar events. In addition, high yield bonds are often issued by smaller, less
creditworthy companies or by companies with substantial debt. The securities
ratings by Moody's and Standard & Poor's are based largely on the issuer's
historical financial condition and the rating agency's investment analysis at
the time of the rating. As a result, the rating assigned to a security does not
necessarily reflect the issuer's current financial condition, which may be
better or worse than the rating indicates. Credit ratings are only one factor
the Advisor relies on in evaluating lower-rated fixed income securities. The
analysis by the Advisor of a lower-rated security may also include consideration
of the issuer's experience and managerial strength, changing financial
condition, borrowing requirements or debt maturity schedules, regulatory
concerns, and responsiveness to changes in business conditions and interest
rates. The Advisor also

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RISK FACTORS
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may consider relative values based on anticipated cash flow, interest or
dividend coverage, balance sheet analysis, and earnings prospects.
B ECAUSE OF THE NUMBER OF INVESTMENT
CONSIDERATIONS INVOLVED IN INVESTING IN LOWER-RATED SECURITIES, ACHIEVEMENT
OF THE FUND'S INVESTMENT OBJECTIVE MAY BE MORE DEPENDENT UPON THE ADVISOR'S
CREDIT ANALYSIS THAN IS THE CASE WITH INVESTING IN HIGHER QUALITY DEBT
SECURITIES.

The market for lower-rated debt securities is relatively new and until recently
its growth has paralleled a long economic expansion. Past experience, therefore,
may not provide an accurate indication of future performance of this market,
particularly during an economic recession. An economic downturn or increase in
interest rates is likely to have a greater negative effect on the ability of the
issuers of the High Yield Fund's securities to pay principal and interest, meet
projected business goals, and obtain additional financing. These circumstances
also may result in a higher incidence of defaults compared to higher-rated
securities. As a result, adverse changes in economic conditions and increases in
interest rates may adversely affect the market for lower-rated debt securities,
the value of such securities in the Fund's portfolio, and, therefore, the Fund's
net asset value. As a result, investment in the Fund is more speculative than
investment in a fund that invests primarily in higher-rated debt securities.

Although the High Yield Fund intends generally to purchase lower-rated
securities that have secondary markets, these markets may be less liquid and
less active than markets for higher-rated securities. These factors may limit
the ability of the Fund to sell lower-rated securities at their expected value.
Adverse publicity and investor perceptions, whether or not based on fundamental
analysis, may decrease the values and liquidity of lower-rated debt securities,
especially in a thinly traded market. If market quotations are not readily
available for the Fund's lower-rated or nonrated securities, these securities
will be valued by a method the Advisor believes accurately reflects fair value.
Judgment plays a greater role in valuing lower-rated debt securities than it
does in valuing securities for which more extensive quotations and last sale
information are available.

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34
<PAGE>
PERFORMANCE
-----------------------------------------------------------------

This section is designed to help you understand terms used to describe Fund
performance, such as "total return," "average annual total return," and "yield."
For additional information on yield and total return calculations for each of
the Funds, see the Statement of Additional Information.

-- UNDERSTANDING "RETURN" --

"TOTAL RETURN" REFERS TO THE CHANGE IN VALUE OF AN INVESTMENT IN A FUND OVER A
STATED PERIOD, ASSUMING THE REINVESTMENT OF ANY DIVIDENDS AND CAPITAL GAINS.
"AVERAGE ANNUAL TOTAL RETURN" IS A HYPOTHETICAL RATE OF RETURN THAT, IF
ACHIEVED ANNUALLY, WOULD HAVE PRODUCED THE SAME TOTAL RETURN IF PERFORMANCE
HAD BEEN CONSTANT OVER THE ENTIRE PERIOD. AVERAGE ANNUAL TOTAL RETURNS SMOOTH
OUT THE VARIATIONS IN PERFORMANCE BUT ARE NOT THE SAME AS ACTUAL ANNUAL
RESULTS.
-- YIELD --

The Money Market Fund, the Common Stock Fund, the Real Estate Fund, the Balanced
Fund, and each of the Bond Funds will, from time to time, advertise or quote
current yields. The current yield of the Money Market Fund refers to the net
income generated by an investment in that Fund over a stated seven-day period.
This income is then annualized. This means that the amount of income generated
by the investment during that week is assumed to be generated each week over a
52-week period and is shown as a percentage of the investment. The Money Market
Fund may also advertise or quote its compound effective yield, which is
calculated similarly, but, when annualized, the income earned by an investment
in the Fund is assumed to be reinvested. The compound effective yield will be
slightly higher than the current yield because of the compounding effect of this
assumed reinvestment.

- --------------------------------------------------------------------------------
FUND PERFORMANCE
- -----------------------------------------------------------------
The table below shows yield and total return performance information for the
periods ended December 31, 1996.

<TABLE>
<CAPTION>
TOTAL
AVERAGE ANNUAL TOTAL RETURN RETURN
CURRENT COMPOUND ------------------------------------- -----------
YIELD YIELD 1 YEAR 5 YEAR 10 YEAR 1 YEAR
<S> <C> <C> <C> <C> <C> <C>
Stock Funds
Common Stock Fund............................... 1.87% N/A 20.71% 15.60% 16.78%* 20.71%
Growth Fund..................................... N/A N/A 20.80% 15.07% 15.70% 20.80%
International Stock Fund........................ N/A N/A 16.59% 11.62%* N/A 16.59%
Special Fund.................................... N/A N/A 13.07% 15.69% 18.14% 13.07%
Small Cap Fund.................................. N/A N/A N/A N/A N/A 7.62%*
Real Estate Fund................................ 4.62%+ N/A 38.30% 19.44%* N/A 38.30%
Balanced Fund
Balanced Fund................................... 4.08% N/A 11.78% 11.60% 12.49%* 11.78%
Bond Funds
Government Bond Fund............................ 5.03% N/A 3.85% 5.10% 6.63% 3.85%
Bond Fund....................................... 6.40% N/A 3.37% 7.22% 8.39% 3.37%
Municipal Bond Fund............................. 4.63% N/A 3.77% 5.89% 6.81% 3.77%
High Yield Fund................................. 7.65%++ N/A 9.43% 8.42%* N/A 9.43%
Money Market Fund
Money Market Fund............................... 4.87% 4.99% 4.96% 3.97% 5.53% 4.96%
Market Comparisons
S&P 500 Stock Index............................. 22.96% 15.22% 15.29% 22.96%
Russell 2000 Stock Index........................ 16.49% 15.64% 12.41% 16.49%
Lehman Aggregate Bond Index..................... 3.63% 7.04% 8.47% 3.63%

5 YEAR 10 YEAR
<S> <C> <C>
Stock Funds
Common Stock Fund............................... 106.42% 127.58%*
Growth Fund..................................... 101.72% 329.77%
International Stock Fund........................ 60.41%* N/A
Special Fund.................................... 107.28% 429.42%
Small Cap Fund.................................. N/A N/A
Real Estate Fund................................ 64.46%* N/A
Balanced Fund
Balanced Fund................................... 73.13% 86.63%*
Bond Funds
Government Bond Fund............................ 28.24% 89.98%
Bond Fund....................................... 41.71% 123.84%
Municipal Bond Fund............................. 33.11% 93.19%
High Yield Fund................................. 30.59%* N/A
Money Market Fund
Money Market Fund............................... 21.52% 71.27%
Market Comparisons
S&P 500 Stock Index............................. 103.06% 314.72%
Russell 2000 Stock Index........................ 106.86% 222.07%
Lehman Aggregate Bond Index..................... 40.50% 125.46%
</TABLE>

* PARTIAL PERIODS: COMMON STOCK FUND AND BALANCED FUND SINCE 10/1/91;
INTERNATIONAL STOCK FUND SINCE 10/1/92; HIGH YIELD FUND SINCE 10/1/93; REAL
ESTATE FUND SINCE 4/1/94; SMALL CAP FUND SINCE 10/1/96.

+ SOME PORTION OF THE NET INVESTMENT INCOME OF THE REAL ESTATE FUND USED TO
CALCULATE CURRENT YIELD IS A TAX RETURN OF CAPITAL. SEE "DISTRIBUTIONS AND
TAXES."
++ WITHOUT THE REIMBURSEMENT OF CERTAIN EXPENSES BY THE HIGH YIELD FUND'S
ADVISOR, THE CURRENT YIELD WOULD HAVE BEEN 7.58%.

-
35
<PAGE>
PERFORMANCE
-----------------------------------------------------------------

The current yield for the Common Stock Fund, the Real Estate Fund, the Balanced
Fund, and each of the Bond Funds represents the annualization of the Fund's net
investment income over a recent 30-day period divided by that Fund's net asset
value at the end of that period.

-- PERFORMANCE COMPARISONS --

The Funds may compare their performance to other mutual funds and to the mutual
fund industry as a whole, as quoted by ranking services such as Lipper
Analytical Services, Inc. or Morningstar, Inc., or as reported in financial
publications such as BARRON'S, BUSINESS WEEK, FORBES, MONEY MAGAZINE, and THE
WALL STREET JOURNAL. The Funds may also compare their performance to that of a
recognized stock or bond index, such as the S&P 500 Stock Index, the Russell
2000 Stock Index, the Lehman Aggregate Bond Index, and other relevant indices.
Unmanaged indices may assume the reinvestment of dividends, but generally do not
reflect deductions for administrative and management costs and expenses.

P ERFORMANCE INFORMATION ON THE FUNDS DOES NOT
GUARANTEE FUTURE RESULTS. SHARE PRICE AND RETURNS WILL FLUCTUATE, AND YOU MAY
HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES OF A FUND (EXCEPT, UNDER NORMAL
CIRCUMSTANCES, FOR THE MONEY MARKET FUND).

In addition, the Funds may also compare their performance to other
income-producing securities such as: (i) money market funds; (ii) various bank
products (such as certificates of deposit and money market deposit accounts);
and (iii) U.S. Treasury bills or notes. There are differences between these
income-producing alternatives and the Funds other than their yields. For
example, the yields of the Funds are not fixed and will fluctuate. In addition,
your investment is not insured and its yield is not guaranteed. Although the
yields of bank money market deposit 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. There is no fluctuation in principal
value. Withdrawal of these deposits before maturity will normally be subject to
a penalty.

-
36
<PAGE>
FUND MANAGEMENT
-----------------------------------------------------------------

-- BOARD OF DIRECTORS --

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 policies, performance, expenses, and other business
matters.

-- INVESTMENT ADVISOR --

Each Fund has contracted with Columbia Funds Management Company (the "Advisor")
to provide investment advisory services. The Advisor has acted in this capacity
since 1982. Until December 1985, the Advisor was a wholly-owned subsidiary of
Columbia Management Co. ("CMC"), which was organized in 1969 and acts as
investment manager for approximately $13 billion of assets of other
institutions. In December 1985, CMC and its subsidiaries were reorganized, and
the Advisor is now owned principally by its employees, including J. Jerry
Inskeep, Jr. and James F. Rippey, who are also principal shareholders of CMC.
The address of the Advisor is 1300 S.W. Sixth Avenue, P.O. Box 1350, Portland,
Oregon 97207-1350.

Under the investment advisory contract with each Fund, the Advisor provides
research, advice, and supervision with respect to investment matters and
determines what securities to purchase or sell and what portion of the Fund's
assets to invest. The Advisor provides office space and pays all executive
salaries and expenses and ordinary office expenses of each Fund (other than the
expenses of clerical services relating to the administration of the Fund).
Certain employees of the Advisor are also officers of the Funds and, subject to
the authority of each Fund's Board of Directors, are responsible for the overall
management of the Funds' business affairs.

The investment advisory fee of each Fund is accrued daily and paid monthly based
on the following fee schedule:

-- ADVISOR FEE SCHEDULE --

<TABLE>
<CAPTION>
ANNUAL RATE
(AS A PERCENTAGE OF DAILY NET
FUND ASSETS)
- --------------------- -----------------------------
BALANCED FUND .50% ON ALL ASSETS
GOVERNMENT BOND FUND
BOND FUND
MUNICIPAL BOND FUND
<S> <C>
- ----------------------------------------------------
MONEY MARKET FUND .50% ON FIRST $500 MILLION
.45% ON NEXT $500 MILLION
.40% ON ASSETS OVER $1
BILLION
- ----------------------------------------------------
COMMON STOCK FUND .60% ON ALL ASSETS
HIGH YIELD FUND
- ----------------------------------------------------
GROWTH FUND .75% ON FIRST $200 MILLION
.625% ON NEXT $300 MILLION
.50% ON ASSETS OVER $500
MILLION
- ----------------------------------------------------
REAL ESTATE FUND .75% ON ALL ASSETS
- ----------------------------------------------------
SPECIAL FUND 1.00% ON FIRST $500 MILLION
.75% ON ASSETS OVER $500
MILLION
- ----------------------------------------------------
INTERNATIONAL STOCK 1.00% ON ALL ASSETS
FUND
SMALL CAP FUND
</TABLE>

The advisory fees for the Small Cap Fund, the Real Estate Fund, the Special
Fund, and the International Stock Fund, while comparable to the fees paid by
other mutual funds with similar investment objectives, are higher than the fees
paid by most mutual funds.

For the year ended December 31, 1996, the investment advisory fees incurred by
the Funds, expressed as a percentage of average net assets, were as follows:

<TABLE>
<S> <C>
Common Stock Fund 0.60%
Growth Fund 0.59%
International Stock Fund 1.00%
Special Fund 0.84%
Small Cap Fund 1.00%
Real Estate Fund 0.75%
Balanced Fund 0.50%
Money Market Fund 0.48%
Government Bond Fund 0.50%
Bond Fund 0.50%
Municipal Bond Fund 0.50%
High Yield Fund 0.60%
</TABLE>

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37
<PAGE>
FUND MANAGEMENT
-----------------------------------------------------------------

The Advisor has entered into an agreement with CMC under which CMC provides the
Advisor with statistical and other factual information, advice regarding
economic factors and trends, and advice as to occasional transactions in
specific securities. CMC, upon receipt of specific instructions from the
Advisor, also contacts brokerage firms to conduct securities transactions for
the Funds. The Advisor 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.

Each Fund assumes the following costs and expenses: costs relating to corporate
matters; cost of services to shareholders; transfer and dividend paying agent
fees; custodian fees; legal, auditing, and accounting expenses; disinterested
directors' fees; taxes and governmental fees; interest; brokers' commissions;
transaction expenses; cost of stock certificates and any other expenses
(including clerical expenses) of issue, sale, repurchase, or redemption of its
shares; expenses of registering or qualifying its shares for sale; transfer
taxes; all expenses of preparing its registration statements, prospectuses, and
reports; and the cost of printing and delivering to shareholders its
prospectuses and reports.

Third-party administrators of tax-qualified retirement plans and other financial
institutions may establish omnibus accounts with the Funds and provide
sub-transfer agency, recordkeeping, or other services to participants and
beneficial owners in the omnibus accounts. In recognition that these
arrangements reduce or eliminate the need for the Fund's transfer agent to
provide such services, the Funds may pay the administrator or entity a
sub-transfer agent or recordkeeping fee. Information on each Fund's expenses as
a percentage of its average net assets is located under "Fund Expenses" and
"Financial Highlights."

T HE ADVISOR HAS VOLUNTARILY AGREED TO ASSUME THE
ORDINARY RECURRING EXPENSES OF THE HIGH YIELD FUND FOR 1997 TO THE EXTENT
THESE EXPENSES, TOGETHER WITH THE FUND'S ADVISORY FEE, EXCEED 1% OF THE FUND'S
AVERAGE NET ASSETS FOR THOSE PERIODS.

-- COLUMBIA INVESTMENT TEAM --

The Advisor uses an investment team approach to analyze investment themes and
strategies for the Funds. Members of the Investment Team are responsible for the
analysis of particular industries or types of fixed income securities and for
recommendations on individual securities within those industries or asset
categories. Investment decisions for a Fund are then made by the Investment Team
and the following portfolio managers who are responsible for investment
decisions on behalf of each Fund:

COMMON STOCK FUND. Alan J. Folkman (since 1996), a Senior Vice President and
director of the Advisor. Mr. Folkman is the Chief Investment Officer of the
Investment Team and joined the Advisor in 1975. With over 30 years of investment
management experience, Mr. Folkman also supervises the Investment Team in
establishing broad investment strategies and determining portfolio guidelines
for each of the Funds.

GROWTH FUND. Alexander S. Macmillan (since 1992), a Vice President of the
Advisor and a Chartered Financial Analyst. Prior to joining the Investment Team
in 1989, Mr. Macmillan was a Vice President and Portfolio Manager for Gardner &
Preston Moss (1982-1989). Mr. Macmillan received a Masters of Business
Administration from the Amos Tuck School at Dartmouth College in 1980.

INTERNATIONAL STOCK FUND. James M. McAlear (since inception of the Fund in
1992), a Vice President of the Advisor. Prior to joining the Investment Team in
1992, Mr. McAlear was a Senior Vice President of IDS International, Inc.
(1985-1992) and an Executive Director for Merrill Lynch Europe (1972-1985). Mr.
McAlear received an M.A. in Economics from Michigan State University in 1964.

SPECIAL FUND. Alan J. Folkman (since 1997). Mr. Folkman also served as
portfolio manager of the Special Fund from its inception in 1985 through June
1994.

-
38
<PAGE>
FUND MANAGEMENT
-----------------------------------------------------------------

SMALL CAP FUND. Richard J. Johnson (since inception of the Fund in 1996), a
Vice President of the Advisor and a Chartered Financial Analyst. Mr. Johnson is
also the portfolio manager for CMC Small Cap Fund, a mutual fund managed by CMC,
and CTC Small Stock Fund, a collective investment fund managed by Columbia Trust
Company. Before joining Columbia, Mr. Johnson served as a Portfolio Manager and
Analyst at Provident Investment Counsel (1990-1994). A 1980 graduate of
Occidental College, Mr. Johnson received a Masters of Business Administration
from the Anderson School of Management at UCLA in 1990.

REAL ESTATE FUND. David W. Jellison (since inception of the Fund in 1994), a
Vice President of the Advisor and a Chartered Financial Analyst. Prior to
joining the Investment Team in 1992, Mr. Jellison was a Senior Research
Associate for RCM Capital Management (1987-1992). Mr. Jellison received a Master
of Management from the J. L. Kellogg Graduate School of Management of
Northwestern University in 1984.

BALANCED FUND. Michael W. Powers (since inception of the Fund in 1991), a Vice
President of the Advisor and a Chartered Financial Analyst. Mr. Powers served as
Portfolio Manager for the Growth Fund from 1984 to 1986. Prior to joining the
Investment Team in 1979, Mr. Powers was an Assistant Vice President of the Trust
Company of the West (1975-1979). Mr. Powers received a Masters of Business
Administration from UCLA in 1974.

MONEY MARKET FUND AND COLUMBIA BOND FUNDS. Thomas L. Thomsen, a Vice President
and director of the Advisor, has principal oversight responsibility for
investment strategies on behalf of the Money Market Fund (since 1988) and each
of the Columbia Bond Funds (since their respective inceptions). Prior to joining
the Investment Team 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). Mr. Thomsen is
also responsible for overseeing the following managers who implement the
investment strategies for these Funds on a daily basis.

MONEY MARKET FUND. Leonard A. Aplet (since 1988), a Vice President of the
Advisor and a Chartered Financial Analyst. Mr. Aplet received a Masters of
Business Administration from the University of California at Berkeley prior to
joining the Investment Team in 1987.

GOVERNMENT BOND FUND. Jeffrey L. Rippey (since 1987), a Vice President of the
Advisor and a Chartered Financial Analyst. Prior to joining the Investment Team
in 1981, Mr. Rippey worked in the Trust Department of Rainier National Bank
(1978-1981).

BOND FUND. Leonard A. Aplet and Jeffrey L. Rippey (both since 1989).

MUNICIPAL BOND FUND. Mr. Thomsen and Greta R. Clapp (since 1992), a Vice
President of the Advisor and a Chartered Financial Analyst. Prior to joining the
Investment Team in 1991, Ms. Clapp received her Masters of Business
Administration from the University of Michigan (1990) and was an Assistant Vice
President and Portfolio Manager at The Putnam Companies (1985-1988).

HIGH YIELD FUND. Jeffrey L. Rippey (since inception of the Fund in 1993).

-- PERSONAL TRADING --

Members of the Investment Team and other personnel of the Funds or the Advisor
are permitted to trade securities for their own or family accounts, subject to
the rules of the Code of Ethics adopted by the Funds and the Advisor.

The Funds have adopted the recommendations of the Investment Company Institute,
an organization composed of members of the mutual fund industry, relating

-
39
<PAGE>
FUND MANAGEMENT
-----------------------------------------------------------------

to restrictions on personal trading. For more information on the Code of Ethics
and specific trading restrictions, see the Statement of Additional Information.

T HE 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 FUNDS OR THEIR SHAREHOLDERS.

-- OTHER SERVICE PROVIDERS --

TRANSFER AGENT. Columbia Trust Company acts as transfer agent and dividend
paying agent for the Funds. Its address is 1301 S.W. Fifth Avenue, P.O. Box
1350, Portland, Oregon 97207-1350. The Advisor is the principal shareholder, and
certain officers of the Funds are minority shareholders, of Columbia Trust
Company.

COLUMBIA FINANCIAL CENTER INCORPORATED. Columbia Financial Center Incorporated
("Columbia Financial"), a registered securities broker and a member of the
National Association of Securities Dealers, Inc., acts as a distributor of
shares of the Funds. Its address is 1301 S.W. Fifth Avenue, P.O. Box 1350,
Portland, Oregon 97207-1350. You may invest or redeem your investment in a Fund
through Columbia Financial, which will not charge a commission for handling your
order. J. Jerry Inskeep, Jr., director and chairman of each Fund, and James F.
Rippey, director of each Fund, are the principal shareholders of Columbia
Financial.

CUSTODIANS. United States National Bank of Oregon, 321 S.W. Sixth Avenue,
Portland, Oregon 97208, serves as general custodian for all Funds other than the
International Stock Fund. Morgan Stanley Trust Company, One Pierrepont Plaza,
Brooklyn, New York, NY 11201, serves as general custodian for the International
Stock Fund and provides custody services to those other Funds that may hold
foreign securities.

-- OTHER INFORMATION --

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

SHAREHOLDER MEETINGS. The Funds are not required to hold annual shareholder
meetings. Special meetings may be called, however, as required or deemed
desirable for purposes such as electing directors, changing fundamental
investment policies, or approving an investment management agreement. The
holders of not less than 10% of the shares of a Fund may request in writing that
a special meeting be called for a specified purpose. If such a special meeting
is called to vote on the removal of one or more directors of a Fund,
shareholders of the Fund will be assisted in communications with other
shareholders of the Fund.

COMBINED PROSPECTUS. Although each Fund is offering only its own shares, it is
possible that one Fund might become liable for a misstatement in this Prospectus
relating to another Fund. The Board of Directors of each Fund has considered
this factor in approving the use of this single Prospectus.

-
40
<PAGE>
INVESTOR SERVICES
-----------------------------------------------------------------

This section is designed to provide you with information about opening an
account and conducting transactions with Columbia Funds. In addition,
information is provided on the different types of accounts and services offered
by the Funds as well as the policies relating to those services.

-- HOW TO OPEN A NEW ACCOUNT --

Please complete and sign a Columbia Funds application and make your check
payable to Columbia Funds for the minimum required investment. See "Minimum
Investments." Please be sure to include a tax identification number on your
application or it may be rejected and returned to you. The completed application
and a check should be mailed to:

Columbia Financial Center
P.O. Box 1350
Portland, Oregon 97207-1350
Attn.: New Accounts

-- HOW TO PURCHASE SHARES --

Shares of each Fund are offered at the share price, or net asset value ("NAV"),
next determined after an order is accepted. See "Processing Your Order" and
"Determining Your Share Price." Shares can be purchased in the following ways:

IN PERSON: Investments can be made in person by visiting Columbia Funds at 1301
S.W. Fifth Avenue, Portland, Oregon between 7:30 a.m. and 5:00 p.m. on any
business day that the New York Stock Exchange (NYSE) is open for business.

BY MAIL: Send a check, with either a completed Investment Slip from the bottom
of a confirmation statement, or a letter indicating the account number and
registration, to:

Columbia Financial Center
P.O. Box 1350
Portland, Oregon 97207-1350
Attn.: Investments

BY WIRE: You may have your bank wire federal funds. Call the Funds for
instructions and notification that money is being wired:

Portland area 222-3606
Nationwide (toll-free)
1-800-547-1707

BY TELEPHONE: You may make additional investments in a Fund by telephone from a
predesignated bank account ("Televest"). The minimum investment that can be made
by Televest is $100. Shareholders must complete the appropriate sections of the
application or call the Funds to request a Televest application. An investment
using Televest is processed on the day the Fund receives your investment from
your bank, usually the business day following the day of your telephone call.

-- MINIMUM INVESTMENTS --

ALL FUNDS HAVE A MINIMUM INITIAL INVESTMENT REQUIREMENT OF $1,000 EXCEPT THE
SPECIAL FUND AND THE SMALL CAP FUND, WHICH HAVE A $2,000 MINIMUM. THESE
MINIMUMS ARE WAIVED FOR ACCOUNTS USING THE AUTOMATIC INVESTMENT PLAN.
SUBSEQUENT INVESTMENTS (OTHER THAN THROUGH THE AUTOMATIC INVESTMENT PLAN) MUST
BE AT LEAST $100 AND SHOULD ALWAYS IDENTIFY YOUR NAME, THE FUND'S NAME, AND
YOUR ACCOUNT NUMBER. MANAGEMENT OF EACH FUND MAY, AT ITS SOLE DISCRETION,
WAIVE THE MINIMUM PURCHASE AND ACCOUNT SIZE REQUIREMENTS FOR CERTAIN GROUP
PLANS OR ACCOUNTS OPENED BY AGENTS OR FIDUCIARIES (SUCH AS A BANK TRUST
DEPARTMENT, INVESTMENT ADVISOR, OR SECURITIES BROKER) OR IN OTHER
CIRCUMSTANCES.

BY AUTOMATIC INVESTMENT: Investments in a Fund may be made automatically from
your bank under Columbia's Automatic Investment Plan ("AIP"). Shareholders whose
bank is a member of the National Automated Clearing House Association may choose
to have amounts of $50 or more automatically transferred

-
41
<PAGE>
INVESTOR SERVICES
-----------------------------------------------------------------
from a bank checking account to a designated Fund on or about the 5th or 20th,
or both, of each month. Shareholders must complete the AIP section of the
application or a separate AIP form to participate in the AIP. If you stop
investing in a Fund using an AIP, your account may be closed if you fail to
reach or maintain a minimum account balance. See "Account Privileges --
Involuntary Redemptions."

BY EXCHANGE: You may purchase shares of any Fund with the proceeds from a
redemption of shares of any other Columbia Fund with the same account number.
See "How to Exchange Shares."

THROUGH YOUR BROKER-DEALER OR BANK: You may purchase or redeem shares of a Fund
through your broker, bank, or other financial institution, which may charge a
commission or fee for assisting in handling your order and which may be required
to be registered as a broker or dealer under federal or state securities laws.

CLOSING A FUND TO NEW INVESTORS: The Advisor to the Funds reserves the right at
its discretion to close a Fund to new investors. A number of factors may be
considered in making such a decision, including the total assets and flow of new
investments into the Fund. If a Fund is closed, shareholders who maintain open
accounts with the Fund may make additional investments in the Fund. Once a
shareholder's account in that Fund is closed, however, additional investments
may not be possible.

-- PAYING FOR YOUR SHARES --

Payment for Fund shares is subject to the following policies:

- - Checks should be drawn on U.S. banks and made payable to Columbia Funds.

- - Never send cash or cash equivalents; the Funds will not accept responsibility
for their receipt.

- - The Funds reserve the right to reject any order.

- - If your order is canceled because your check did not clear the bank or the
Funds were unable to debit your predesignated bank account, you will be
responsible for any losses or fees imposed by your bank or attributable to a
loss in value of the shares purchased.

- - The Funds may reject any third party checks used to make an investment or open
a new account.

-- HOW TO REDEEM (SELL) SHARES --

You may redeem all or a portion of your investment in a Fund on any business day
that the NYSE is open for business. All redemptions of shares of a Fund will be
at the share price (NAV) computed after receipt of a valid redemption request.
In every case, sufficient full and fractional shares will be redeemed to cover
the amount of the redemption request.

If certificates for Fund shares have been issued to you, they must be returned
to the Fund and properly endorsed before a redemption of these shares may be
processed. Redemptions from a Columbia-sponsored IRA or retirement plan require
the completion of certain additional forms to ensure compliance with IRS
regulations. If a redemption request cannot be processed for any of these
reasons, the redemption request will be returned to you and no redemption will
be made until a valid request is submitted. Shares can be redeemed in the
following ways:

IN WRITING: You may redeem shares of a Fund by providing a written instruction
to the Fund at the address below. A signature guarantee may be required. Please
see "Signature Requirements."

Columbia Financial Center
P.O. Box 1350
Portland, Oregon 97207-1350
Attn.: Redemptions

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<PAGE>
INVESTOR SERVICES
-----------------------------------------------------------------

SIGNATURE REQUIREMENTS: Redemption requests must be signed by each shareholder
required to sign on the account. Accounts in the names of corporations,
fiduciaries, and institutions may require additional documentation. Please
contact Columbia Funds if your account falls into one of these categories.

To protect you and the Funds against fraud, a SIGNATURE GUARANTEE is also
required in any of the following situations:

- - The redemption request exceeds $50,000.

- - You request a check made payable to anyone other than the shareholder(s) of
record or other predesignated party.

- - You request that proceeds be sent to an address other than the address of
record or to an account other than a previously designated bank account.

- - You would like the check mailed to an address that has changed in the last 10
days.

- - You wish to transfer or change ownership of the account.

The Funds reserve that right to require a signature guarantee in other
circumstances or to reject an order for certain legal reasons. You may obtain a
signature guarantee from an eligible guarantor institution such as a bank,
broker-dealer, credit union, savings and loan association, national securities
exchange or trust company. A notary public cannot provide a signature guarantee.

BY TELEPHONE: You may redeem shares by telephone unless you decline this
service by checking the appropriate box on the application. Proceeds from
telephone redemptions may be mailed only to the registered name and address on
your account or transferred to the bank designated on the application or to
another Fund. A maximum of $50,000 may be redeemed by telephone and mailed to
your registered address. There is no such limitation on telephone redemptions
transferred to your bank. Telephone redemptions may be made by calling the Funds
between 7:30 a.m. and 5:00 p.m., Pacific Time, at:

Portland area 222-3606
Nationwide (toll-free)
1-800-547-1707

You may experience some difficulty in implementing a telephone redemption during
periods of drastic economic or financial market changes. Telephone redemption
privileges may be modified or terminated at any time without notice to
shareholders. Please see "Account Privileges -- Telephone Redemptions."

BY DRAFT -- MONEY MARKET FUND ONLY: Redemption by draft is available to Money
Market Fund investors who complete the appropriate section of the application.
The Money Market Fund will provide you with free drafts issued by the Money
Market Fund's bank. You may make drafts payable to any person for amounts of
$500 or more. Your investment will continue to earn income until your draft is
presented to the Money Market Fund's bank for collection. Redemptions are by
draft and, therefore, payment is subject to the Money Market Fund's approval.
The redemption by draft service may be terminated by the bank or the Money
Market Fund upon written notice to the other.

The processing of drafts against the Money Market Fund's account is subject to
the bank's rules and regulations. THESE ARRANGEMENTS DO NOT ESTABLISH A CHECKING
OR OTHER ACCOUNT BETWEEN YOU AND THE BANK FOR THE PURPOSE OF FEDERAL DEPOSIT
INSURANCE OR OTHERWISE. The agreements and procedures described above relate
solely to the bank's intermediary status for redemption of investments in the
Money Market Fund.

YOUR DRAFT WILL NOT BE PAID UNLESS SUFFICIENT COLLECTED FUNDS ARE AVAILABLE IN
YOUR MONEY MARKET FUND ACCOUNT. SEE "PAYMENT OF REDEMPTION PROCEEDS."

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BY AUTOMATIC WITHDRAWAL: 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.

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

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

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

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

-- PAYMENT OF REDEMPTION PROCEEDS --

Redemption proceeds are normally transmitted in the manner specified in the
redemption request on the business day following the effective date of the
redemption. Proceeds transmitted over the Automated Clearing House (ACH) system
are usually credited to a shareholder's account on the second business day
following the redemption request. Except as provided by rules of the Securities
and Exchange Commission, redemption proceeds must be transmitted to you within
seven days of the redemption date.

REDEMPTION OF RECENTLY PURCHASED SHARES. Although you may redeem shares of a
Fund (other than the Money Market Fund) that you have recently purchased by
check, the Fund may hold the redemption proceeds until payment for the purchase
of such shares has cleared, which may take up to 15 days from the date of
purchase. No interest is paid on the redemption proceeds after the redemption
date and before the proceeds are sent to you. If you request the redemption (by
draft or other means) of Money Market Fund shares recently purchased by check,
the redemption will not be effective, and proceeds will not be transmitted,
unless the purchase of those shares has cleared. 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.

-- HOW TO EXCHANGE SHARES --

You may use proceeds from the redemption of shares of any Fund to purchase
shares of other Funds offering shares for sale in your state of residence. There
is no charge for this exchange privilege. Before making an exchange, you should
read the 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. Certain
restrictions may apply to exchange transactions. See "Account Privileges --
Exchange Privilege."

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-- PROCESSING YOUR ORDER --

Orders received by a Fund other than the Money Market Fund will be processed the
day they are received. Since the Money Market Fund 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.

-- DETERMINING YOUR SHARE PRICE --

The share price, or NAV, of each Fund is determined by the Advisor, under
procedures approved by the Fund's Board of Directors, as of the close of regular
trading (normally 4 p.m. New York time) on each day the NYSE is open for
business and at other times determined by the Board of Directors. The NAV is
computed by dividing the value of all assets of the Fund, less its liabilities,
by the number of shares outstanding.

Portfolio securities will be valued according to the market value obtained from
the broadest and most representative markets. These market quotations, depending
on local convention or regulation, may be the last sale price, last bid or asked
price, or the mean between the last bid and asked price as of, in each case, the
close of the applicable exchange or other designated time. Securities for which
market quotations are not readily available and other assets will be valued at
fair value as determined in good faith under procedures established by and under
the general supervision of the Board of Directors of each Fund. These procedures
may include valuing portfolio securities by reference to other securities with
comparable ratings, interest rates, and maturities and by using pricing
services. Fair value for debt securities for which market quotations are not
readily available and with remaining maturities of less than 60 days is based on
cost adjusted for amortization of discount or premium and accrued interest
(unless the Board of Directors believes unusual circumstances indicate another
method of determining fair value should be used).

Trading in securities on many foreign securities exchanges and over-the-counter
markets is completed at various times before the close of the NYSE. In addition,
trading of these foreign securities may not take place on all NYSE business
days. Trading may take place in various foreign markets on Saturday or on other
days the NYSE is not open for business and on which a Fund's NAV is therefore
not calculated. The calculation of a Fund's NAV may not take place
contemporaneously with the determination of the prices of a Fund's portfolio
foreign securities. Events affecting the values of portfolio foreign securities
that occur between the time the prices are determined and the close of the NYSE
will not be reflected in a Fund's calculation of NAV unless the Board of
Directors determines that the event would materially affect the NAV. Assets of
foreign securities are translated from the local currency into U.S. dollars at
the prevailing exchange rates.

Municipal Bond Fund portfolio securities for which market quotations are readily
available will be valued at

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INVESTOR SERVICES
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the bid price. Management of the Municipal Bond Fund believes that, although
substantially all of the Municipal Bond Fund's securities are readily
marketable, a significant portion of the Municipal Bond Fund's portfolio will
not have reliable market quotations readily available on a timely basis for the
daily valuation of the Fund's portfolio.

-- INVESTOR INQUIRIES --

If you have any questions about this Prospectus, the Funds or your account,
please call the Funds at:

Portland area 222-3606
Nationwide (toll-free) 1-800-547-1707

or write or visit the Funds at:

Columbia Financial Center
1301 S.W. Fifth Avenue
Portland, Oregon 97201

-- ACCOUNT PRIVILEGES --

EXCHANGE PRIVILEGE. Telephone exchange privileges are available to you
automatically unless you decline this service by checking the appropriate box on
the application. Telephone exchanges may be made from 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.

TELEPHONE REDEMPTIONS. The Funds do not accept responsibility for the
authenticity of telephone instructions, and, accordingly, shareholders who have
approved telephone redemptions assume the risk of any losses due to fraudulent
telephone instructions that a Fund reasonably believes to be genuine. The Funds
employ certain procedures to determine whether telephone instructions are
genuine, including requesting personal shareholder information prior to acting
on telephone instructions, providing written confirmations of each telephone
transaction, and recording all telephone instructions. A Fund may be liable for
losses due to fraudulent telephone instructions if it fails to follow these
procedures. For your protection, the ability to redeem by telephone and have the
proceeds mailed to your registered address may be suspended for up to 30 days
following an account address change. This suspension period will not apply to
written redemption requests, which can be made at any time. See "How to Redeem
(Sell) Shares."

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 the
account, you may during the 60-day notice period either: (i) add to your
account to bring it to the required minimum, or (ii) establish an Automatic
Investment Plan with a minimum monthly investment of $50.

- - 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."

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.

TAXPAYER IDENTIFICATION NUMBER. Federal law requires each Fund to withhold 31%
of dividends and redemption proceeds paid to certain shareholders who have not
complied with certain tax regulations. The Funds will generally not accept an
investment to establish a new account that does not comply with these
regulations. You will be asked to certify on your account application that the
social security number or tax identification number provided is correct and that
you are

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INVESTOR SERVICES
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not subject to 31% backup withholding for previous underreporting of income to
the Internal Revenue Service.

SHAREHOLDER STATEMENTS AND REPORTS. The Funds will send a separate confirmation
of each nonroutine transaction that affects your account balance or
registration. Routine, pre-authorized transactions are confirmed in the monthly
or quarterly account statements provided to shareholders. The types of pre-
authorized transactions that will be confirmed on your account statement
include:

- - Periodic share purchases through an Automatic Investment Plan

- - Reinvestment of dividends and capital gains distributions

- - Automatic withdrawals or exchanges between Funds

Each Fund will mail to its shareholders on or before January 31 of each year a
summary of the federal
income tax status of the Fund's distributions for the preceding year.

Financial reports on the Funds, which include a listing of each Fund's portfolio
securities, are mailed semiannually to shareholders. To reduce Fund expenses,
only one such report and the annually updated prospectus will be mailed to
accounts with the same Tax Identification Number. In addition, shareholders or
multiple accounts at the same mailing address can elect to eliminate duplicate
mailings to that address by filing a SAVMAIL form with the Funds. For a SAVMAIL
form or to receive additional copies of any shareholder report or prospectus,
please call an Investor Services Representative at 1-800-547-1707.

-- IRAS, SEP IRAS, AND --
RETIREMENT PLANS

Investors may invest in each Fund other than the Municipal Bond Fund through
Columbia's regular, SIMPLE, or SEP IRA programs, or Columbia's Prototype Money
Purchase Pension and Profit Sharing Plan. Please contact Columbia Funds for
further information and application forms. Investments may also be made in these
Funds in connection with established retirement plans.

-- PRIVATE MANAGEMENT ACCOUNTS --

Columbia Trust Company offers Private Management Accounts that provide
investment management tailored to the specific investment objectives of
individuals, institutions, trusts, and estates, using the Funds as investment
vehicles. 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 million

The minimum fee for this service is $1,000 and the maximum fee is $15,000. These
fees are in addition to investment advisory fees paid by each Fund to the
Advisor. For additional information, please call Columbia Trust Company at
503-222-3600.

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-- DISTRIBUTIONS --

Each Fund is required to distribute to shareholders each year all of its net
investment income and any net realized capital gains. Net investment income
(income from dividends, interest and any net realized short-term capital gains)
is distributed by a Fund as a dividend. Any net long-term capital gains realized
on the sale of portfolio securities by a Fund are distributed as capital gains
distributions. Distributions are paid as follows:

<TABLE>
<CAPTION>
DIVIDENDS CAPITAL GAINS
------------------- -------------------
<S> <C> <C>
Growth Fund Declared and Declared and
International Stock Fund paid in December paid in December
Special Fund
Small Cap Fund
- -------------------------------------------------------------------
Common Stock Fund Declared and paid Declared and paid
Real Estate Fund each calendar in December
Balanced Fund quarter
- -------------------------------------------------------------------
Money Market Fund Declared and paid Declared and paid
daily daily (if any)
- -------------------------------------------------------------------
Bond Funds Declared daily and Declared and paid
paid monthly in December
- -------------------------------------------------------------------
</TABLE>

If you redeem all of your shares of a Columbia Bond Fund, the undistributed
dividends on the redeemed shares will be paid at that time.

All dividends paid on the Money Market Fund will be reinvested automatically in
additional shares at net asset value, which, in effect, compounds the
shareholder's income daily. The Money Market Fund expects normally to have
positive net investment income each day. However, if a sharp rise in interest
rates or some other factor causes it to have negative net investment income, the
Money Market Fund will reduce the number of shares outstanding. Each shareholder
account will contribute that day to the Money Market Fund that amount of shares
representing the account's negative net income. Through this procedure, the
Money Market Fund intends to maintain its net asset value at a constant one
dollar per share.

-- DISTRIBUTION OPTIONS --

Unless you select a different option, all dividends and capital gains
distributions are reinvested in additional shares at a price equal to the NAV at
the close of business on the reinvestment date. You may elect at any time, by
notifying the Funds, to receive your distributions in cash or to reinvest them
in another Columbia Fund.

-- TAXATION OF DISTRIBUTIONS --

The tax character of distributions from a Fund is the same whether they are paid
in cash or reinvested in additional shares. Dividends declared in October,
November, or December to shareholders of record as of a date in one of those
months and paid the following January will be reportable as if received by the
shareholders on December 31. This section provides only a brief summary of the
major tax considerations affecting each Fund and its shareholders and is not a
complete or detailed explanation of tax matters. Investors should consult their
tax advisors concerning the tax consequences of investing in the Funds.

FEDERAL INCOME TAXES -- EXCLUDING THE MUNICIPAL BOND FUND. Distributions from
the Funds (other than the Municipal Bond Fund) of net investment income or net
realized short-term capital gains are generally taxable to shareholders as
ordinary income. Distributions designated as the excess of net long-term capital
gain over net short-term capital loss are taxable to shareholders as long-term
capital gain, regardless of the length of time the shareholder held the Fund's
shares. A portion of any dividends received from the Growth Fund, the
International Stock Fund (to the extent dividends from U.S. companies constitute
a portion of that Fund's investment income), the Special Fund, the Small Cap
Fund, the Common Stock Fund, and the Balanced Fund may be eligible for the
dividends received deduction available to corporate shareholders. To the extent
the Real Estate Fund's income is

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derived from interest and distributions from REITs, distributions from the Fund
will not qualify for the dividends received deduction.

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 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 Fund. Information on
the tax status of distributions by the Funds is mailed to shareholders each year
on or before January 31.

FEDERAL INCOME TAXES -- MUNICIPAL BOND FUND. The Municipal Bond Fund expects to
distribute all of its net investment income and realized capital gains to
shareholders. Distributions from the Municipal Bond Fund will have the following
federal income tax consequences for shareholders.

- - Distributions properly designated by the Municipal Bond Fund as representing
net tax-exempt interest received on municipal bonds, including municipal bonds
of Puerto Rico, Guam, and certain other possessions of the United States,
("exempt-interest dividends") will not be includible by shareholders in gross
income for federal income tax purposes. For purposes of this "Distributions
and Taxes" section, municipal bonds are those obligations that pay interest
that is not includible in gross income under Section 103 of the Internal
Revenue Code (the "Code").

- - Distributions representing net taxable interest received 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.

- - Distributions properly designated by the Municipal Bond Fund as representing
the excess of net long-term capital gain over net short-term capital loss will
be taxable to shareholders as long-term capital gain, regardless of the length
of time the shares of the Municipal Bond Fund have been held by such
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.

Dividends attributable to interest on certain private activity bonds issued
after August 7, 1986 must be included in alternative minimum taxable income for
the purpose of determining liability, if any, for corporate and individual
alternative minimum taxes. The Municipal Bond Fund does not expect to invest in
any such bonds, although it may do so in the future. Additional information
regarding special tax treatment that applies to corporations that receive
exempt-interest dividends is provided in the Statement of Additional
Information.

The Municipal Bond Fund expects that none of its distributions will qualify for
the dividends received deduction for corporations. Interest on indebtedness
incurred or continued by a shareholder to purchase or carry shares of the
Municipal Bond Fund will not be deductible.

STATE INCOME TAXES -- EXCLUDING THE MUNICIPAL BOND FUND. In addition to federal
taxes, shareholders of the Funds may be subject to state and local taxes on
distributions from the Funds. Shareholders should consult with their tax
advisors concerning state and local tax consequences of investing in the Funds.
Individuals, trusts, and estates resident in Oregon will generally not be
subject to Oregon personal income taxes on dividends properly designated by the
Government Bond Fund as derived from interest on U.S. Government obligations.
The laws of other states may differ, and persons subject to tax in other states
should consult their personal tax advisors.

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DISTRIBUTIONS AND TAXES
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STATE INCOME TAXES -- MUNICIPAL BOND FUND. Individuals, trusts, and estates
resident in Oregon 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, such
individuals, trusts, and estates will be subject to the Oregon personal income
tax on distributions derived from other types of income received by the
Municipal Bond Fund. 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.
Local taxes and the tax consequences to nonresidents and part-year residents are
beyond the scope of this discussion. For further information, please consult
your tax advisor.

"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 earnings. This tax
result is extremely unlikely in the case of the Money Market Fund, which
distributes its earnings daily and has few or no capital gains.

-- TAXATION OF THE FUNDS --

Each Fund intends to qualify as a regulated investment company under the Code.
By qualifying and meeting certain other requirements, a Fund generally will not
be subject to federal income taxes to the extent it distributes to its
shareholders its net investment income and realized capital gains. Each Fund
intends to make sufficient distributions to relieve itself from liability for
federal income taxes.

-- FOREIGN TAXATION --

Investment income received by the International Stock Fund and derived from
foreign securities may be subject to foreign income taxes withheld by the
foreign company. The United States has entered into tax treaties with many
foreign countries that entitle a fund to a reduced rate of tax or an exemption
from tax on this income. It is impossible to determine the effective rate of
foreign tax in advance because the amount of the International Stock Fund's
assets to be invested within various countries will fluctuate and the extent to
which foreign tax refunds will be recovered is uncertain. The International
Stock Fund intends to operate so as to qualify for treaty-reduced tax rates
where applicable.

If the International Stock Fund has paid withholding or other taxes to foreign
governments during the year, the taxes will reduce the International Stock
Fund's income. In that event, the International Stock Fund may qualify for and
make an election under the Code so that shareholders will be required to treat
as taxable income their pro rata portion of the income taxes paid by the
International Stock Fund to foreign countries and may, subject to limitations,
be able to claim a credit or deduction for the same amount. Although the
International Stock Fund intends to meet the requirements of the Code to "pass
through" these foreign taxes, there can be no assurance the International Stock
Fund will be able to do so.

-
50
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-- REPURCHASE AGREEMENTS --

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

-- ILLIQUID SECURITIES --

No illiquid securities will be acquired if, upon purchase, more than 5% of the
value of the Common Stock Fund's, the Growth Fund's, or the Balanced Fund's, or
more than 10% of the International Stock Fund's, the Special Fund's, the Small
Cap Fund's, the Real Estate Fund's, or the High Yield 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 a Fund's net asset value.

Under current interpretations of the Staff of the Securities and Exchange
Commission, the following securities in which a Fund may invest will be
considered illiquid:

- - repurchase agreements maturing in more than seven days;

- - restricted securities (securities whose public resale is subject to legal
restrictions);

- - options, with respect to specific securities, not traded on a national
securities exchange that are not readily marketable; and

- - any other securities in which a Fund may invest that are not readily
marketable.

The International Stock Fund, the Small Cap Fund, the High Yield Fund, and the
Real Estate Fund may purchase without limit, however, certain restricted
securities that can be resold to qualifying institutions pursuant to a
regulatory exemption under SEC Rule 144A ("Rule 144A securities"). If a dealer
or institutional trading market exists for Rule 144A securities, such securities
may be deemed to be liquid and thus treated as exempt from those Fund's
liquidity restrictions. Under the supervision of the Boards of Directors of the
Funds, the Advisor determines the liquidity of Rule 144A securities and, through
reports from the Advisor, the Boards of Directors monitor trading activity in
these securities. In reaching liquidity decisions, the Advisor will consider,
among other things, the following factors:

- - the frequency of trades and price quotes for the security;

- - the number of dealers willing to purchase or sell the security and the number
of other potential purchasers;

- - dealer undertakings to make a market in the security; and

-
51
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ADDITIONAL INFORMATION
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- - 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 transfer).

Because institutional trading in Rule 144A securities is relatively new, it is
difficult to predict accurately how these markets will develop. If institutional
trading in Rule 144A securities declines, the liquidity of these Funds could be
adversely affected to the extent any of them are invested in such securities.

-- OPTIONS AND FINANCIAL --
FUTURES TRANSACTIONS

Each of the International Stock Fund, the Special Fund, the Common Stock Fund,
the Growth Fund, the Small Cap Fund, the Balanced Fund, the Real Estate Fund,
and the High Yield Fund may invest up to 5% of its net assets in premiums on put
and call exchange-traded options. A call option gives the holder (buyer) the
right to purchase a security at a specified price (the exercise price) at any
time until a certain date (the expiration date). A put option gives the buyer
the right to sell a security at the exercise price at any time until the
expiration date. These Funds may also purchase options on securities indices and
foreign currencies. Options on securities indices are similar to options on a
security except that, rather than the right to take or make delivery of a
security at a specified price, an option on a securities index gives the holder
the right to receive, on exercise of the option, an amount of cash if the
closing level of the securities index on which the option is based is greater
than, in the case of a call, or less than, in the case of a put, the exercise
price of the option. A Fund may enter into closing transactions, exercise its
options, or permit the options to expire. These Funds may only write call
options on securities or securities indices that are covered. A call option on a
security is covered if written on a security the 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 will 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 Advisor, are expected to be substantially similar to those of the index.
Call options 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. These Funds may write such options on up to 25% of their net
assets.

These Funds may also engage in financial futures transactions, including foreign
currency financial futures transactions. Financial futures contracts are
commodity contracts that obligate the long or short holder to take or make
delivery of a specified quantity of a financial instrument, such as a security,
or the cash value of a securities index, during a specified future period at a
specified price. Each Fund's investment restrictions do not limit the percentage
of the Fund's assets that may be invested in financial futures transactions.
Each Fund, however, does not intend to enter into financial futures transactions
for which the aggregate initial margin exceeds 5% of the net assets of the Fund
after taking into account unrealized profits and unrealized losses on any such
transactions it has entered into. A Fund may engage in futures transactions only
on commodities exchanges or boards of trade.

The Funds will not engage in transactions in index options, financial futures
contracts, or related options for speculation, but only as an attempt to hedge
against market conditions affecting the values of securities that a 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 its securities to the extent that the stock index moves in a
similar pattern to the prices of the securities held. The correlation, however,
between stock indices and price movements of the stocks in which a Fund will
generally invest may be imperfect. Each Fund expects, nonetheless, that the use

-
52
<PAGE>
ADDITIONAL INFORMATION
-----------------------------------------------------------------
of put options that relate to such indices will, in certain circumstances,
protect against declines in values of specific portfolio securities or a Fund's
portfolio generally. Although the purchase of a put option may partially protect
a Fund from a decline in the value of a particular security or its portfolio
generally, the cost of a put will reduce the potential return on the security or
the portfolio if either increases in value.

Upon entering into a futures contract, a Fund would be required to deposit with
its custodian in a segregated account cash or certain U.S. Government securities
in an amount known as the "initial margin." This amount, which is subject to
change, is in the nature of a performance bond or a good faith deposit on the
contract and would be returned to the Fund upon termination of the futures
contract, assuming all contractual obligations have been satisfied.

The principal risks of options and futures transactions are:

- - imperfect correlation between movements in the prices of options, currencies,
or futures contracts and movements in the prices of the securities or
currencies hedged or used for cover;

- - lack of assurance that a liquid secondary market will exist for any particular
option, futures, or foreign currency contract at any particular time;

- - the need for additional skills and techniques beyond those required for normal
portfolio management;

- - losses on futures contracts resulting from market movements not anticipated by
the investment advisor; and

- - possible need to defer closing out certain options or futures contracts in
order to continue to qualify for beneficial tax treatment afforded "regulated
investment companies" under the Internal Revenue Code.

-- TEMPORARY INVESTMENTS --

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

-- WHEN-ISSUED SECURITIES --

Delayed-delivery or when-issued transactions arise when securities are purchased
or sold by a Fund, with payment and delivery taking place in the future, to
secure what is considered to be an advantageous price and yield to the Fund at
the time of the transaction. When-issued securities are subject to market
fluctuations, and no interest accrues to a Fund until delivery. The value of the
securities may be less at the time of delivery than it was when the commitment
was made. When a Fund engages in when-issued and delayed-delivery transactions,
the Fund relies on the buyer or seller, as the case may be, to complete the
sale. Failure to do so may result in the Fund missing the opportunity to obtain
a price or yield considered to be advantageous. When-issued and delayed-delivery
transactions typically occur approximately 30 days or more before delivery is
due. However, no payment or delivery is made by a Fund until it receives payment
or delivery from the other party to the transaction. A separate account of
liquid assets consisting of cash, U.S. Government securities, or other high
grade debt obligations and equal to the value of such purchase commitments will
be maintained by the Fund's custodian until payment is made. To the extent a
Fund engages in when-issued and delayed-delivery transactions, it will do so to
acquire

-
53
<PAGE>
ADDITIONAL INFORMATION
-----------------------------------------------------------------
portfolio securities consistent with its investment objectives and policies and
not for investment leverage. The Funds may use spot and forward foreign 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.

-- PURCHASE OF INVESTMENT --
COMPANIES SECURITIES

The International Stock Fund may purchase securities of closed-end investment
companies that invest in equity securities of a foreign country or countries.
Purchasing the shares of this type of investment company may be the only or most
efficient way to invest in certain countries. The International Stock Fund may
not invest more than 10% of its total assets in other investment companies. See
the Statement of Additional Information for a discussion of additional
investment limitations on these types of investments. The return on investment
in these securities will be reduced by the operating expenses of those
closed-end investment companies.

-- DOLLAR ROLL TRANSACTIONS --

The Balanced Fund and the Bond Fund may enter into dollar roll transactions with
selected banks and broker-dealers. Dollar roll transactions consist of the sale
by the Fund of mortgage-backed securities, together with a commitment to
purchase similar, but not identical, securities at a future date, at the same
price. In addition, the Fund is paid a fee as consideration for entering into
the commitment to purchase. Dollar rolls may be renewed after cash settlement
and initially involve only a firm commitment agreement by the Fund to buy a
security. The Balanced Fund and the Bond Fund will not use such transactions for
leveraging purposes, and accordingly, if required by the Securities and Exchange
Commission or any applicable law, will segregate cash, U.S. Government
securities, or other high grade debt obligations in an amount sufficient to meet
their purchase obligations under these transactions.

-- LOAN TRANSACTIONS --

The Bond Fund, the Real Estate Fund, and the High Yield Fund may lend their
portfolio securities to qualified institutional investors for the short-term
purpose of realizing additional income. The aggregate value of all securities
loaned may not exceed 33-1/3% of a Fund's total assets, and such loans will be
collateralized by cash, cash equivalents, or an irrevocable letter of credit in
accordance with regulations adopted by the Securities and Exchange Commission.
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 a Fund's management to have a satisfactory credit
rating. For more information on loan transactions, see the Statement of
Additional Information.

-
54
<PAGE>
ADDITIONAL INFORMATION
-----------------------------------------------------------------

-- BOND RATINGS --

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.

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 payments of interest and principal 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 lacking 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.

CA -- Speculative to a high degree; often in default or have other marked
shortcomings.

C -- Lowest rated class of bonds; extremely poor prospects of ever attaining any
real investment standing.

Standard & Poor's bond ratings:

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

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

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

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

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

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

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

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

CC -- Typically subordinated to senior debt that is assigned an actual or
implied CCC rating.

C -- Typically subordinated to senior debt that is assigned an actual or implied
CCC-debt rating.

C1 -- No interest is being paid.

Bonds rated BB, B, CCC, CC, and C 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 C the highest 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.

-
55
<PAGE>
NOTES
<PAGE>

[LOGO]

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

-- DIRECTORS --
------------------------------------------
JAMES C. GEORGE
J. JERRY INSKEEP, JR.
JOHN A. KEMP
THOMAS R. MACKENZIE
JAMES F. RIPPEY
RICHARD L. WOOLWORTH

-- OFFICERS --
------------------------------------------
J. JERRY INSKEEP, JR., CHAIRMAN
JOHN A. KEMP, PRESIDENT
GEORGE L. HANSETH, SENIOR VICE PRESIDENT
ALBERT D. CORRADO, VICE PRESIDENT
LAWRENCE S. VIEHL, VICE PRESIDENT
JEFF B. CURTIS, SECRETARY

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

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

-- AUDITORS --
------------------------------------------
COOPERS & LYBRAND L.L.P.
1300 S.W. FIFTH AVENUE, SUITE 2700
PORTLAND, OREGON 97201

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

FUNDS DISTRIBUTED BY COLUMBIA FINANCIAL CENTER INCORPORATED, MEMBER NASD
<PAGE>

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

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 DAILY INCOME COMPANY
COLUMBIA U.S. GOVERNMENT SECURITIES FUND, INC.
COLUMBIA FIXED INCOME SECURITIES FUND, INC.
COLUMBIA MUNICIPAL BOND FUND, INC.
COLUMBIA HIGH YIELD FUND, INC.

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

STATEMENT OF ADDITIONAL INFORMATION

Columbia Financial Center

1301 S.W. Fifth Avenue
P.O. Box 1350
Portland, Oregon 97207
1-800-547-1707

This Statement of Additional Information contains information relating to
12 mutual funds: Columbia Common Stock Fund, Inc. (the "Common Stock Fund"),
Columbia Growth Fund, Inc. (the "Growth Fund"), Columbia International Stock
Fund, Inc. (the "International Stock Fund"), Columbia Special Fund, Inc. (the
"Special Fund"), Columbia Small Cap Fund, Inc. (the "Small Cap Fund"), Columbia
Real Estate Equity Fund, Inc. (the "Real Estate Fund"), Columbia Balanced Fund,
Inc. (the "Balanced Fund"), Columbia Daily Income Company (the "Money Market
Fund"), Columbia U.S. Government Securities Fund, Inc. (the "Government Bond
Fund"), Columbia Fixed Income Securities Fund, Inc. (the "Bond Fund"), Columbia
Municipal Bond Fund, Inc. (the "Municipal Bond Fund"), and Columbia High Yield
Fund, Inc. (the "High Yield Fund"). The terms Fund or Funds when used in this
Statement of Additional Information refer to these funds. Each of the Funds is
an open-end investment company of the management type. Each Fund is a
diversified fund except for the Municipal Bond Fund, which is a nondiversified
fund due to its concentration in Oregon municipal bonds. Each Fund is a
separate Oregon corporation and has a specific investment objective.

This Statement of Additional Information is not a Prospectus. It relates
to a Prospectus dated February 24, 1997 (the "Prospectus") and should be read in
conjunction with the Prospectus. Copies of the Prospectus are available without
charge upon written request to any of the Funds or by calling 1-800-547-1707.

February 24, 1997

1
<PAGE>

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

Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Investment Advisory and Other Fees Paid to Affiliates. . . . . . . . . . . . . 4
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Redemptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Custodians . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Accounting Services and Financial Statements . . . . . . . . . . . . . . . . . 8
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Yield and Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Investment Restrictions. . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Additional Information Regarding Certain
Investments by the Funds. . . . . . . . . . . . . . . . . . . . . . . . . .33

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

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 Common Stock
Fund and the Balanced Fund, the International Stock Fund, the High Yield Fund,
the Real Estate Fund, and the Small Cap Fund have been held since July 1991,
July 1992, July 1993, January 1994, and August 1996, respectively, and except as
otherwise indicated.

J. JERRY INSKEEP, JR.,*+ Chairman and Director of each Fund; Chairman, Director,
and a principal shareholder of Columbia Funds Management Company (the "Advisor")
and Columbia Management Co.; Chairman and Director of Columbia Trust Company
(the "Trust Company"); Director of Columbia Financial Center Incorporated
("Columbia Financial"); Chairman and Trustee of CMC Fund Trust ("CMC Trust").

JAMES F. RIPPEY,*+ Director of each Fund; President, Director, and a principal
shareholder of the Advisor and Columbia Management Co.; President and a Director
of the Trust Company; President and Trustee of CMC Trust.

JAMES C. GEORGE, Director of each Fund (since June 1994). Mr. George, the
former Investment Manager of the Oregon State Treasury (1966-1992), is an
investment consultant; 1001 S.W. Fifth Avenue, Portland, Oregon 97204.

JOHN A. KEMP,* Director (since June 1994) and President of each Fund; Senior
Vice President and Director of the Advisor, Columbia Management Co., and the
Trust Company; Senior Vice President, Treasurer, and Director of Columbia
Financial; Vice President and Trustee of CMC Trust.

THOMAS R. MACKENZIE, Director of each Fund. Mr. Mackenzie is a Director of
Group Mackenzie, (architecture, planning, interior design, engineering),
0690 S.W. Bancroft Street, Portland, Oregon 97201.

RICHARD L. WOOLWORTH,+ Director of each Fund. Mr. Woolworth is Chairman and
Chief Executive Officer of Blue Cross and Blue Shield of Oregon and Chairman
and Chief Executive Officer of The Benchmark Group, health insurers; 100 S.W.
Market Street, Portland, Oregon 97201.

GEORGE L. HANSETH,* Senior Vice President and Treasurer of each Fund; Vice
President and Director of the Advisor, Columbia Management Co., and the Trust
Company; President and Director of Columbia Financial; Vice President and
Trustee of CMC Trust.

2
<PAGE>

ALBERT D. CORRADO,* Vice President of each Fund; Vice President of the Advisor
and the Trust Company.

LAWRENCE S. VIEHL,* Vice President of each Fund, the Advisor, Columbia
Management Co., the Trust Company, and CMC Trust.

JEFF B. CURTIS,* Secretary of each Fund and CMC Trust (since April 1994);
General Counsel, Vice President, Vice President and Secretary of the Advisor,
Columbia Management Co., the Trust Company, and Columbia Financial (since
March 1993). Attorney with Stoel Rives (1986-1993), a law firm in Portland,
Oregon

*These officers and directors are "interested persons" as defined by the
Investment Company Act of 1940 and receive no directors fees or salaries from
the Funds. Their business address is 1300 S.W. Sixth Avenue, P.O. Box 1350,
Portland, Oregon 97207.

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

Columbia Financial, a registered securities broker and a member of the
National Association of Securities Dealers, Inc., is authorized under a
distribution agreement with each Fund to sell shares of that Fund. Columbia
Financial does not charge any fees or commissions to investors or the Funds for
the sale of shares of a Fund.

At January 31, 1997, 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.

PERCENTAGE OF
TOTAL SHARES
FUND SHARES* OUTSTANDING
---- ------- -------------

Common Stock Fund 281,058.352 1.0%
Growth Fund 254,592.384 0.7%
International Stock Fund 152,027.827 1.7%
Special Fund 350,792.191 0.4%
Small Cap Fund 109,063.989 4.6%
Real Estate Fund 234,845.843 4.5%
Balanced Fund 288,140.980 0.9%
Money Market Fund 24,530,425.470 2.8%
Government Bond Fund 76,671.716 1.6%
Bond Fund 162,910.241 0.6%
Municipal Bond Fund 1,172,040.642 3.7%
High Yield Fund 145,012.900 4.7%

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

At January 31, 1997, 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 with respect to the following record owners: Charles Schwab &
Co., Inc., 101 Montgomery Street, San Francisco, California 94104, which
owned 1,942,767.638 shares of the Bond Fund (7.3 percent of the total shares
outstanding), 1,770,133.756 shares of the Growth Fund (5.0 percent of the
total shares outstanding), and 6,974,699.505 shares of the Special Fund (8.9
percent of the total shares outstanding); Standard Insurance Co., P.O. Box
711, Portland, Oregon 97207, which owned 664,352.842 shares of the Government
Bond Fund (13.5 percent of the total shares outstanding); Wells Fargo Bank,
as Trustee, P.O. Box 9800, Calabasas, CA 91302, which owned 1,846,217.621
shares of the Balanced Fund (5.5 percent of the total shares outstanding);
Donaldson Lufkin & Jenrette Securities Corp., P.O. Box 2052, Jersey City, New
Jersey 07303, which owned 454,493.923 shares of the Real Estate Fund (8.7
percent of the total shares outstanding); National Financial Services Corp.,
P.O. Box 3908, Church St. Station, New York, NY 10008, which owns 427,450.715
shares of the Real Estate Fund (8.2 percent of the total

3
<PAGE>

shares outstanding); and Bankers Trust Co. of CA as Trustee, 300 S. Grand
Ave., Los Angeles, CA 90071, which owned 5,626,030.945 shares of the Common
Stock Fund (19.8 percent of the total shares outstanding).

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

Information regarding services performed by the Advisor for the Funds and
the formula for calculating the fees are set forth in the Prospectus under "Fund
Management." Advisory fees paid by each of the Funds for each of the last three
years were:

FUND 1996 1995 1994
---- ---- ---- ----

Common Stock Fund $2,686,585 $1,453,843 $698,094
Growth Fund $5,711,080 $4,483,699 $3,848,301
International Stock Fund $1,157,227 $1,013,873 $1,166,165
Special Fund $12,880,541 $10,125,466 $7,771,263
Small Cap Fund $40,273 * --- ---
Real Estate Fund $232,413 $138,673 $77,003 *
Balanced Fund $2,935,512 $1,871,284 $1,146,605
Money Market Fund $4,009,904 $3,611,202 $3,060,583
Government Bond Fund $206,591 $187,343 $172,703
Bond Fund $1,668,004 $1,413,769 $1,345,156
Municipal Bond Fund $1,881,542 $1,840,676 $1,921,227
High Yield Fund $150,432 $109,022 $56,944

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

The Advisor has entered into an agreement with Columbia Management Co.
pursuant to which Columbia Management Co. provides the Advisor with statistical
and other factual information, advice regarding economic factors and trends, and
advice as to occasional transactions in specific securities. Columbia
Management Co., upon receipt of specific instructions from the Advisor, contacts
brokerage firms to effect securities transactions for the Funds. The Advisor
pays Columbia Management Co. a fee for this service. No amounts are paid by the
Funds to Columbia Management Co. pursuant to the agreement, and Fund expenses
are not increased as a result of this agreement.

The Trust Company, of which the Advisor is a principal shareholder and
certain officers of the Funds are minority shareholders, acts as custodian of
certain Individual Retirement Accounts (IRAs) and sponsor of Prototype Money
Purchase Pension and Profit Sharing Plans that invest in the Funds. The Trust
Company charges account holders an annual fee of $25 per IRA account (fee is
waived for accounts over $25,000) and a retirement plan setup fee of $100 and an
annual fee of $50.

The Trust Company also acts as transfer agent and dividend crediting agent
for each of the Funds. Its address is 1301 S.W. Fifth Avenue, P.O. Box 1350,
Portland, Oregon 97207. It issues certificates for shares of the Funds upon
request and records and disburses dividends. Until December 31, 1996, each
Fund, other the Money Market Fund, paid the Trust Company a per-account fee of
$1.00 per month for each shareholder account existing at any time during the
month. The Money Market Fund paid the Trust Company a per-account fee of $1.50
per month for the first 25,000 accounts existing at any time during the month,
$1.00 per month for the next 25,000 accounts, $.75 per month for the next 25,000
accounts, and $.50 per month for all accounts in excess of 75,000. In addition,
each Fund pays the Trust Company for extra administrative services performed at
cost in accordance with a schedule set forth in the agreements and reimburses
the Trust Company for certain out-of-pocket expenses

4
<PAGE>

incurred in carrying out its duties under the agreements. Fees paid to the Trust
Company for services performed in 1996 under the transfer agent agreements were
$218,624 for the Common Stock Fund, $510,664 for the Growth Fund, $181,749 for
the International Stock Fund, $663,083 for the Special Fund, $ 3,700 for the
Small Cap Fund, $24,214 for the Real Estate Fund, $301,673 for the Balanced
Fund, $578,095 for the Money Market Fund, $33,282 for the Government Bond Fund,
$172,277 for the Bond Fund, $79,716 for the Municipal Bond Fund, and $19,989 for
the High Yield Fund. Effective January 1, 1997, each Fund pays the Trust Company
a per-account fee of $1.50 per month for each shareholder account existing at
any time during the month.

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

Each Fund will not generally invest in securities for short-term capital
appreciation but, when business and economic conditions, market prices, or a
Fund's investment policy warrant, individual security positions may be sold
without regard to the length of time they have been held. The historical
portfolio turnover rates for each Fund, other than the Small Cap Fund, is
disclosed in the Prospectus under "Financial Highlights." The Small Cap Fund
began operations in 1996 and expects that its portfolio turnover rate will
generally not exceed 125 percent.

Securities owned by the Funds may be purchased with brokerage commissions
or on a principal basis without brokerage commissions. The Funds may also
purchase securities from underwriters, the price of which will include a
commission or concession paid by the issuer to the underwriter. The purchase
price of securities purchased from dealers serving as market makers will include
the spread between the bid and asked prices. Each Fund that may purchase
foreign securities pursuant to its investment policy anticipates that its
brokerage transactions involving securities of companies domiciled in countries
other than the United States will normally be conducted on the principal stock
exchanges of those countries. In most international markets, commission rates
are not negotiable and may be higher than negotiated commission rates available
in the United States. There is generally less government supervision and
regulation of foreign stock exchanges and broker-dealers than in the United
States.

Prompt execution of orders at the most favorable price will be the primary
consideration of the Funds in transactions where brokerage fees are involved.
Research, statistical, and other services also may be taken into consideration
in selecting broker-dealers. These services may include: advice concerning the
value of securities, the advisability of investing in, purchasing, or selling
securities, and the availability of securities or the purchasers or sellers of
securities; and furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio strategies, and performance
of accounts. While the Funds have no arrangements or formulas as to either the
allocation of brokerage transactions or commission rates paid thereon, a
commission in excess of the amount of commission another broker or dealer would
have charged for effecting that transaction may be paid by a Fund if management
of that Fund determines in good faith that the commission is reasonable in
relation to the value of the brokerage and research services provided, viewed in
terms of either that particular transaction or management's overall
responsibilities with respect to that Fund.

Allocation of transactions to obtain research services for the Advisor
enables the Advisor to supplement its own research and analysis with the
statistics, information, and views of others. While it is not possible to place
a dollar value on these services, it is the opinion of the Advisor that the
receipt of such services will not reduce the overall expenses for its research
or those of its affiliated companies. The fees paid to the Advisor by a Fund
would not be reduced as a result of the receipt of such information and services
by a Fund. The receipt of research services from brokers or dealers might be
useful to the Advisor and its affiliates in rendering investment management
services to the Funds or other clients; and, conversely, information provided by
brokers or dealers who have executed orders on behalf of other clients might be
useful to the Advisor in carrying out its obligations to a Fund. Total
brokerage commissions paid by each of the respective Funds for each of the last
three years were:

5
<PAGE>

FUND 1996 1995 1994
---- ---- ---- ----

Common Stock Fund $1,266,686 $686,464 $228,382
Growth Fund $1,606,969 $1,718,227 $1,123,285
International Stock Fund $724,559 $925,886 $861,944
Special Fund $4,280,666 $5,161,705 $4,276,852
Small Cap Fund $19,164 * --- ---
Real Estate Fund $114,020 $47,879 $37,624 *
Balanced Fund $572,539 $472,821 $251,005

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

No brokerage commissions were paid by the Money Market Fund, the Government Bond
Fund, the Bond Fund, the Municipal Bond Fund, or the High Yield Fund during the
last three years.

The Board of Directors of each Fund will from time to time review whether
the recapture for the benefit of the Fund of some portion of the brokerage
commissions or similar fees paid by the Fund on portfolio transactions is
legally permissible and, if so, determine, in the exercise of its business
judgment, whether it would be advisable for the Fund to seek such recapture.

Although the officers and directors of each Fund are the same, investment
decisions for each Fund are made independently from those of the other Funds or
accounts managed by Columbia Management Co. The same security is sometimes held
in the portfolio of more than one fund or account. Simultaneous transactions
are inevitable when several funds or accounts are managed by the same investment
advisor, particularly when the same security is suitable for the investment
objective of more than one fund or account. In the event of simultaneous
transactions, allocations among the Funds or accounts will be made on an
equitable basis.

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

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

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REDEMPTIONS
- --------------------------------------------------------------------------------

Information regarding redemptions is set forth in the Prospectus under
"Investor Services -- How to Redeem (Sell) Shares." As discussed under "Investor
Services -- Account Privileges -- Telephone Redemptions" in the Prospectus, the
Funds do not accept responsibility for the authenticity of telephone
instructions relating to redemptions and, accordingly, shareholders who have
approved telephone redemption assume the risk of any losses due to fraudulent
telephone instructions that a Fund reasonably believes to be genuine. The Funds
employ certain procedures to determine if telephone instructions are genuine,
including requesting personal shareholder information prior to acting on
telephone instructions, providing written confirmations of each telephone
transaction, and recording all telephone instructions. A Fund may be liable for
losses due to fraudulent telephone instructions if it fails to follow these
procedures.

A Fund may suspend the determination of net asset value and the right of
redemption for any period (1) when the New York Stock Exchange is closed, other
than customary weekend and holiday closings, (2) when trading on the New York
Stock Exchange is restricted, (3) when an emergency exists as a result of which
disposal of securities owned by the Fund is not reasonably practicable or it is
not reasonably practicable for the Fund to determine the value of its net
assets, or (4) as the Securities and Exchange Commission may by order permit for
the protection of security holders, provided that applicable rules and
regulations of the Securities and Exchange Commission which govern as to whether
the conditions prescribed in (2) or (3) exist are complied with. The New York
Stock Exchange observes the following holidays: New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving, and
Christmas. In the case of suspension of the right to redeem, shareholders may
withdraw their redemption request or receive payment based upon the net asset
value computed upon the termination of the suspension.

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

United States National Bank of Oregon ("USNB" or "Custodian"), 321 S.W.
Sixth Avenue, Portland, Oregon 97208, acts as the general Custodian for each
Fund, except the International Stock Fund. USNB provides custody services to
the International Stock Fund with respect to domestic securities held by that
Fund. Morgan Stanley Trust Company ("Morgan Stanley" or "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 Funds. The Custodians do not exercise
any supervisory function in the purchase and sale of portfolio securities or
payment of dividends.

Portfolio securities purchased in the United States are maintained in the
custody of the Fund's Custodian. Portfolio securities purchased outside the
United States are maintained in the custody of foreign banks, trust companies,
or depositories that have sub-custodian arrangements with Morgan Stanley (the
"foreign sub-custodians"). Each of the domestic and foreign custodial
institutions holding portfolio securities of the Funds has been approved by the
Board of Directors of the Funds in accordance with regulations under the
Investment Company Act of 1940.

The Board of Directors reviews, at least annually, whether it is in the
best interest of the Funds and their shareholders to maintain Fund assets, in
each of the countries in which the Funds invest, with particular foreign sub-
custodians in those countries, pursuant to contracts between the foreign sub-
custodians and Morgan Stanley. The review includes an assessment of the risk of
holding Fund assets in that country (including risks of

7
<PAGE>

expropriation or imposition of exchange controls), the operational capability
and reliability of the foreign sub-custodian, and the impact of local laws on
the custody arrangement. The Board of Directors of each Fund that may purchase
foreign securities is aided in its review by Morgan Stanley, which has assembled
the network of foreign sub-custodians used by those Funds, as well as by the
Advisor and counsel. With respect to foreign sub-custodians, however, there can
be 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 costs of obtaining
jurisdiction over, or enforcing judgments 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 administrative 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,
1996, the selected per share data and ratios under the caption "Financial
Highlights," and the report of Coopers & Lybrand L.L.P., independent
accountants, are included in the 1996 Annual Report to Shareholders of the
Funds. A copy of the 1996 Annual Report to Shareholders accompanies this
Statement of Additional Information and is incorporated herein by reference.
Coopers & Lybrand L.L.P., 1300 SW Fifth Avenue, Suite 2700, 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");

(b) derive less than 30 percent of its gross income from the sale or other
disposition of any of the following, if held for less than three months: stock,
securities, foreign currencies (or options, futures, or forward contracts on
foreign currencies) that are not directly related to the Fund's principal
business of investing in stocks or securities (or options and futures with
respect to stocks or securities), or certain other assets (the "30 Percent
Test"); and

(c) diversify its holdings so that, at the end of each quarter, (i) 50
percent or more of the value of the assets of the Fund is represented by cash,
government securities, and other securities limited, in respect of any one
issuer of such other securities, to an amount not greater than 5 percent of the
value of the assets of the Fund and 10 percent of the outstanding voting
securities of such issuer, and (ii) not more than 25 percent of the value of the
assets of the Fund is invested in the securities (other than government
securities) of any one issuer or of two or more issuers that the Fund "controls"
within the meaning of Section 851 of the Code and that meet certain requirements

8
<PAGE>

(the "Diversification Test"). In addition, a Fund must file, or have filed, a
proper election with the Internal Revenue Service.

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

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

Two possible exceptions to marking-to-market relate to hedging transactions
and mixed straddles. A hedging transaction is defined for purposes of Section
1256 as a transaction (1) that a Fund properly identifies as a hedging
transaction, (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.

SPECIAL ASPECTS OF 30 PERCENT TEST WITH RESPECT TO FOREIGN CURRENCY. A
Fund may choose to defer the closing out of a forward currency contract beyond
the time when it would otherwise be advantageous to do so to avoid realizing
excessive gains on securities or currencies held less than three months and not
directly related to the Fund's principal business of investing in stock or
securities (or options and futures with respect to stocks or securities). In
the case of a designated hedge, increases and decreases during the period of the
hedge in the value of positions that are part of the designated hedge are netted
for purposes of the 30 Percent Test. A designated hedge for these purposes is
generally an option to sell or a contract that reduces a taxpayer's risk of loss
and that the taxpayer clearly identifies.

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

9
<PAGE>

tax basis of their shares in the Fund by the differences between their pro rata
shares of such gains and their tax credits.

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 intends to have at least 50 percent of the
value of its total assets at the close of each quarter of its taxable year
consist of obligations the interest on which is not includible in gross income
for federal income tax purposes under Section 103 of the Code. As a result, the
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 as
representing net tax-exempt interest received on municipal bonds (including
municipal bonds of Guam, Puerto Rico, and certain other possessions of the
United States) will not be includible by shareholders in gross income for
federal income tax purposes (except for shareholders who are, or are related to,
"substantial users," as discussed below). Distributions representing net
taxable interest received by the 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
less than six months 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 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
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.

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<PAGE>

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 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 portfolio will be
made by the 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.

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 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 includible in gross income. In some cases, the interest on such
bonds could become taxable from the date of issuance. The Municipal Bond Fund
will not monitor any issuers or any municipal bonds to attempt to ensure that
the interest remains tax-exempt.

If the 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 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 value of portfolio securities held by the Municipal
Bond Fund would be affected.

OTHER FUNDS. Shareholders of Funds other than the 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 Money Market Fund, 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 as long-term capital gain, regardless
of the length of time the shares of the Fund have been held by shareholders.
For noncorporate taxpayers, the highest rate that applies to long-term capital
gains is lower than the highest rate that applies to ordinary income. Any loss
that is realized and allowed on redemption of shares of the Fund less than 6
months from the date of purchase of the shares and following the receipt of a
capital gain dividend will be treated as a long-term capital loss to the extent
of the capital gain dividend. For this purpose, Section 852(b)(4) of the Code
contains special rules on the computation of a shareholder's holding period.

11
<PAGE>

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, 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 Money Market Fund, 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 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

12
<PAGE>

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 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.
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. 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.

As a result of the Section 853 election, shareholders of the
International Stock Fund will be required to include in income their
proportionate share of (1) any dividend paid by the International Stock Fund
that represents foreign-source income (in addition to any other taxable
distributions received from the Fund) and (2) the foreign income taxes paid
by the International Stock Fund. Each shareholder may choose to claim either
a credit or a deduction for his or her proportionate share of the foreign
income taxes paid by the International Stock Fund. A shareholder's use of
the credits resulting from the Fund's election will be subject to the 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. No deduction for foreign taxes may be claimed under the Code
by individual shareholders who do not itemize deductions on their federal
income tax returns. Each shareholder should discuss the use of foreign tax
credits, the Section 904 limits and the deduction for foreign income taxes
with the shareholder's tax advisor.

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
certain non-U.S. corporations that receive at least 75 percent of their annual
gross income from passive sources (such as sources that produce certain
interest, dividends, royalties, capital gains, or rental income) or hold at
least 50 percent of their assets in such passive sources ("passive foreign
investment companies"), the Fund could be subject to federal income tax and
additional interest charges on "excess distributions" received from such
companies or gain from the sale of stock in such companies, even if all income
or gain actually received by a Fund is distributed to its shareholders in a
timely manner. A Fund would not be able to pass through to its shareholders any
credit or deduction for such tax. Accordingly, each Fund expects to limit its
investments in such passive foreign investment companies and expects to attempt
to undertake appropriate actions to limit its tax liability, if any, with
respect to such investments. The Internal Revenue Service has proposed
regulations that, if adopted, will allow a regulated investment company to

13
<PAGE>

avoid the tax and interest charge with respect to a passive foreign investment
company by electing to mark the stock to market each year.

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

STATE INCOME TAXES

MUNICIPAL BOND FUND. Individuals, trusts, and estates resident in
Oregon 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 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. Local taxes and the tax consequences to nonresidents and
part-year residents are beyond the scope of this discussion.

The exemption of certain interest income for federal income tax purposes
will not necessarily result in a similar exemption under the laws of a
particular state or local taxing authority. Each shareholder should consult a
tax advisor in this regard. Capital gains distributed to shareholders will
generally be subject to state and local taxes. The 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 Municipal
Bond Fund during the preceding year.

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.

GOVERNMENT BOND FUND. Individuals, trusts, and estates resident in Oregon
will not be subject to Oregon personal income taxes 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

14
<PAGE>

shareholder. The laws of other states may differ, and persons subject to tax in
other states should consult their personal tax advisors.

OTHER FUNDS. The state tax consequences of investments in the Funds, other
than Oregon state tax consequences with respect to the Municipal Bond Fund and
the Government Bond Fund, are beyond the scope of the tax discussions in the
Prospectus and this Statement of Additional Information.

ADDITIONAL INFORMATION

The foregoing summary and the summary included in the Prospectus under
"Taxes" of tax consequences of investment in the 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 by legislative or
administrative action. Local taxes are beyond the scope of this discussion.
Prospective investors in the Funds are urged to consult their own tax advisors
regarding specific questions as to federal, state, or local taxes.

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

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

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

THE MONEY MARKET FUND

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

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
---
(base period return + 1) 7 -1 = Compounded Effective Yield

The determination of net change in the value of an account for purposes of
the Money Market Fund 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 Money Market
Fund 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.

15
<PAGE>

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

Where: a = dividends and interest earned during the period.

b = expenses accrued for the period.

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.

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

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.

16
<PAGE>

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:

P(1+T)n = ERV

Where: P = a hypothetical initial payment of $1000

T = average annual total return

n = number of years

ERV = ending redeemable value of a hypothetical $1000 payment made at
the beginning of the 1, 5, and 10-year periods (or fractional
portion thereof)

Total return figures may also be published for recent 1, 5, and 10-year
periods where the total return figures represent the percentage return for the
1, 5, and 10-year periods that would equate the initial amount invested to the
ending redeemable value.

If a Fund's registration statement under the Investment Company Act of 1940
has been in effect less than 1, 5, or 10 years, the time period during which the
registration statement has been in effect will be substituted for the periods
stated.

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, Dow Jones, Russell,
and Nasdaq stock indices, the NAREIT Equity Index, and the Shearson Lehman
and Salomon bond indices, or, with respect to the International Stock Fund, a
suitable international index, such as the Morgan Stanley Capital
International Europe, Australia, 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.

17
<PAGE>

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
Money Market Fund) 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.
There is no fluctuation in principal value. Withdrawal of these deposits prior
to maturity will normally be subject to a penalty.

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

The Prospectus sets forth the investment objectives and certain
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 Common Stock 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 Common Stock
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 Common Stock 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).

18
<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 Common Stock 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
Common Stock 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 Common
Stock 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 Common Stock
Fund may acquire portfolio securities under circumstances where, if the
securities are later publicly offered or sold by the Common Stock 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 Common
Stock 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 Common Stock Fund's net assets taken at
market may, at any time, be held as collateral for such sales.

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

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

Some of the policies described above prohibit particular practices. Other
policies (paragraphs 5, 11, 12, and 14) permit specified practices but limit the
portion of the Common Stock Fund's assets that may be so invested. During the
last year, the Common Stock Fund did not engage in any of these permitted
practices and has no current intention of doing so in the foreseeable future.

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 Growth Fund may buy readily
marketable securities such as Real Estate Investment Trusts.)

19
<PAGE>

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 Growth 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 Growth 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.

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

Some of the policies described above prohibit particular practices. Other
policies (paragraphs 11, 12, and 15) permit specified practices but limit the
portion of the Growth Fund's assets that may be so invested. During the last
year, the Growth Fund did not engage in any of these permitted practices and has
no current intention of doing so in the foreseeable future.

COLUMBIA INTERNATIONAL STOCK FUND, INC.

The International Stock Fund may not:

1. Buy or sell commodities. However, the International Stock 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 International
Stock 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.

20
<PAGE>

3. Buy or sell real estate. However, the International Stock 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 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 International Stock 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 by the International Stock Fund.

7. Purchase the securities of any issuer (including any foreign
government issuer) if the purchase, at the time thereof, would cause more than 5
percent of the value of the total assets of the Fund at market value to be
invested in the securities of that issuer (other than obligations of the U.S.
government and its agencies and instrumentalities), with reference to 75 percent
of the assets of the International Stock 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 International Stock Fund's total assets
would be invested in any one such company, and (iii) 10 percent of the
International Stock 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 International
Stock Fund may acquire portfolio securities in circumstances where, if the
securities are later publicly offered or sold by the International Stock 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 International Stock 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 International Stock 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 International Stock Fund's net assets taken
at market may, at any time, be held as collateral for such sales.

21
<PAGE>

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

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

Some of the policies described above prohibit particular practices. Other
policies (paragraphs 5, 8, 11, 12, and 14) permit specified practices but limit
the portion of the International Stock Fund's assets that may be so invested.
Subject to the investment restriction, the International Stock Fund expects to
engage in the practices described in paragraphs 5 (restricted securities) and 8
(investment companies). The International Stock Fund has no intention of
engaging in the other permitted practices in the foreseeable future.

COLUMBIA SPECIAL FUND, INC.

The Special Fund may not:

1. Buy or sell commodities. However, the Special 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 Special 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 Special 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 Special 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
Special 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 Special
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 Special Fund
may acquire portfolio securities under circumstances where, if the securities
are later publicly offered or sold by the Special 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 assets value. Any
borrowing must only be temporarily from banks and for extraordinary or emergency
purposes.

22
<PAGE>

12. Invest its funds in the securities of any company if the purchase, at
the time thereof, would cause more than 10 percent of the value of the Special
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 Special 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.

Some of the policies described above prohibit particular practices. Other
policies (paragraphs 5, 11, 12, and 14) permit specified practices but limit the
portion of the Special Fund's assets that may be so invested. Other than
paragraph 12, the Special Fund did not engage in any of these permitted
practices during the last year and has no current intention of doing so in the
foreseeable future.

COLUMBIA SMALL CAP FUND, INC.

The Small Cap Fund may not:

1. Buy or sell commodities. However, the Small Cap 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 Small Cap 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 Small Cap 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 Small Cap 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
Small Cap Fund at market value to be invested in the securities of that

23
<PAGE>

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

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

12. Invest its funds in the securities of any company if the purchase, at
the time thereof, would cause more than 10 percent of the value of the Small Cap
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 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.

Some of the policies described above prohibit particular practices. Other
policies (paragraphs 5, 11, 12, and 14) permit specified practices but limit the
portion of the Fund's assets that may be so invested. Subject to the investment
restriction, the Fund expects to engage in the practices described in paragraph
12. The Fund has no current intention of engaging in the other permitted
practices in the foreseeable future.

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 Real Estate 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 Real Estate 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.

24
<PAGE>

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 Real Estate 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 Real Estate 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 Real Estate 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 Real Estate 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 Real Estate Fund.

7. Purchase or retain securities of an issuer if those officers or
directors of the Real Estate Fund or the Advisor 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 Real Estate Fund
may acquire portfolio securities in circumstances where, if the securities are
later publicly offered or sold by the Real Estate 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 Real Estate 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 Real Estate 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 Real Estate Fund's total
assets to be invested in companies which, including predecessors and parents,
have a record of less than three years of continuous operation.

13. Invest in companies to exercise control or management.

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

15. Engage in short sales of securities except to the extent that it owns
other securities convertible into an equivalent amount of such securities.
These short sales may only be made to protect a profit in or to attempt to
minimize a loss with respect to convertible securities. In any event no more
than 10% of the Real Estate 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 Real Estate Fund may own
securities of companies engaged in those businesses.

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

25
<PAGE>

Some of the practices described above prohibit particular practices.
Certain policies described in paragraphs 3, 4, 5, 11, 12, and 15 permit
specified practices but limit the portion of the Real Estate Fund's assets that
may be so invested. During the last year, the Real Estate Fund did not engage
in any of these permitted practices, other than paragraph 12, and has no current
intention of doing so in the foreseeable future.

COLUMBIA BALANCED FUND, INC.

The Balanced Fund may not:

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

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

6. Purchase the securities of any issuer if the purchase, at the time
thereof, would cause more than 5 percent of the outstanding voting securities of
that issuer to be held in the Balanced 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
Balanced 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 Balanced
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 Balanced Fund
may acquire portfolio securities under circumstances where, if the securities
are later publicly offered or sold by the Balanced 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 assets 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 Balanced
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.

26
<PAGE>

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 Balanced 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.

Some of the policies described above prohibit particular practices. Other
policies (paragraphs 5, 11, 12, and 14) permit specified practices but limit the
portion of the Balanced Fund's assets that may be so invested. Subject to the
investment restriction, the Balanced Fund expects to engage in the practices
described in paragraph 5 (restricted securities). (See the Prospectus for
additional information.) The Balanced Fund has no intention of engaging in the
other permitted practices in the foreseeable future.

COLUMBIA DAILY INCOME COMPANY

The Money Market Fund may not:

1. Borrow money to improve portfolio yield except as a temporary measure
to avoid disruptive redemptions, and not for investment purposes. Borrowings
will not exceed 33 1/3 percent of total assets and will be repaid from the
proceeds of sales of the Money Market 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
Money Market 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 Money Market 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 Money
Market Fund is authorized to invest will not constitute loans) except that the
Money Market Fund may purchase and simultaneously resell for later delivery
obligations issued or guaranteed as to principal and interest by the United
States Government or any agency or instrumentality thereof if no more than 10
percent of the Money Market 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.

27
<PAGE>

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 Money Market 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.

Some of the policies described above prohibit particular practices. Other
policies (paragraphs 1, 6, and 11) permit specified practices but limit the
portion of the Money Market Fund's assets that may be so invested. The Money
Market Fund has not engaged in these permitted practices during the last year
and has no current intention of doing so in the foreseeable future.

INVESTMENT RESTRICTIONS UNDER RULE 2a-7

Rule 2a-7 under the Investment Company Act of 1940 requires that all
portfolio securities of a money market fund 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 Money Market 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 Money Market Fund may not invest more than 5 percent of its total
assets in the securities of any one issuer, except this limitation shall not
apply to U.S. Government securities and repurchase agreements thereon. The
Money Market 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 Money Market Fund may not make more than one such investment at any
one time.

Investment policies by the Money Market Fund are in certain circumstances
more restrictive than the restrictions under Rule 2a-7. In particular,
investments by the Money Market 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 Standard & Poor's Corporation
("S&P") or Moody's Investor Services, Inc. ("Moody's"), is rated A-1 by S&P's
and Prime 1 by Moody's or, if not rated, is determined to be of comparable
quality by the Board of Directors of the Money Market Fund.

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's 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

28
<PAGE>

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 Money Market 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 Money Market Fund to be of
comparable quality to the obligations described in paragraphs 2 or 3 above.
Currently these obligations are certificates of deposit, bankers' acceptances,
and letters of credit.

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 five 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 Government Bond 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
Government Bond 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 Government Bond Fund may invest and repurchase agreements with respect
to those obligations.

12. Purchase securities of other investment companies.

Some of the policies described above prohibit particular practices. Other
policies (paragraphs 3, 4, and 7) permit specified practices but limit the
portion of the Government Bond Fund's assets that may be so invested. Other
than the practices indicated in paragraph 7, the Government Bond Fund has not
engaged in any of these permitted practices during the last year and has no
current intention of doing so in the foreseeable future.

COLUMBIA FIXED INCOME SECURITIES FUND, INC.

The Bond Fund may not:

1. Buy or sell commodities or commodity futures contracts.

29
<PAGE>

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 (C/D's) and bankers'
acceptances with maturities not greater than one year. C/D's 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 Bond
Fund. Emphasis on investments in securities of a particular industry will be
shifted whenever the Advisor determines that such action is desirable for
investment reasons. The Board of Directors will periodically review these
decisions of the Advisor.

3. Buy or sell real estate. However, the Bond 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, and participation
interests in pools of real estate mortgage loans.

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 Bond 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 Bond 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 Bond 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 Bond
Fund or of its advisor if, or so long as, the officers and directors of the Bond
Fund and of its advisor 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 Bond Fund may
acquire portfolio securities in circumstances where, if the securities are later
publicly offered or sold by the Bond 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 Bond 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
Bond 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 Bond Fund's total
assets to be invested in companies which, including predecessors and parents,
have a record of less than three years of continuous operation.

30
<PAGE>

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 Bond Fund's net assets taken at market may,
at any time, be held as collateral for such sales.

Some of the practices described above prohibit particular practices. Other
policies (paragraphs 2, 4, 5, 12, 13, and 16) permit specified practices but
limit the portion of the Bond Fund's assets that may be so invested. Subject to
the investment restriction, the Bond Fund expects to engage in the practices
described in paragraph 5 (restricted securities). (See the Prospectus for
additional information.) The Bond Fund has no intention of engaging in the
other permitted practices in the foreseeable future.

COLUMBIA MUNICIPAL BOND FUND, INC.

The Municipal Bond Fund may not:

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

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

9. Underwrite securities of other issuers, except that the Municipal Bond
Fund may acquire portfolio securities in circumstances where, if the securities
are later publicly offered or sold by the Municipal Bond 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 Municipal
Bond Fund. For amounts borrowed, the Municipal Bond Fund shall maintain an
asset coverage of 300 percent for all borrowings. This restriction means that
the Municipal Bond Fund may not borrow money in an amount exceeding 50 percent
of its gross assets. The Municipal Bond 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.

31
<PAGE>

Some of the policies described above prohibit particular practices. Other
policies (paragraphs 5, 8, and 10) permit specified practices but limit the
portion of the Municipal Bond Fund's assets that may be so invested. Other than
the practices indicated in paragraph 5, the Municipal Bond Fund has not engaged
in any of these permitted practices during the last year and has no current
intention of doing so in the foreseeable future.

COLUMBIA HIGH YIELD FUND, INC.

The High Yield Fund may not:

1. Buy or sell commodities or commodity futures contracts.

2. Concentrate investments in any industry. However, it may (a) invest
up to 25 percent of the value of its total assets in any one industry,
(b) invest up to 100 percent of the value of its total assets in securities
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, and (c) invest for defensive purposes up to 80 percent of the
value of its total assets in certificates of deposit (CD's) and bankers'
acceptances with maturities not greater than one year. CD's 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 High Yield Fund.
Emphasis on investments in securities of a particular industry will be shifted
whenever the Advisor determines that such action is desirable for investment
reasons. The Board of Directors will periodically review these decisions of the
Advisor.

3. Buy or sell real estate. However, the High Yield 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.

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 High Yield Fund may lend portfolio securities to broker-
dealers or other institutional investors if, as a result thereof, the aggregate
value of all securities loaned does not exceed 33 1/3 percent of its total
assets.

5. Purchase 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 High Yield 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 High Yield Fund.

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

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

32
<PAGE>

10. Issue senior securities, bonds, or debentures.

11. Underwrite securities of other issuers, except the High Yield 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 gross assets
of the High Yield 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.

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

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 High Yield 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.

Some of the practices described above prohibit particular practices.
Certain policies described in paragraphs 4, 5, 12, 13, and 16 permit specified
practices but limit the portion of the High Yield Fund's assets that may be so
invested. Except for the practices described in paragraph 5, the Fund has no
current intention of engaging in any of these permitted practices in the
foreseeable future.

OTHER RESTRICTIONS

To permit the sale of shares of a Fund in certain states, a Fund may make
commitments more restrictive than the fundamental restrictions described above.
If the Board of Directors of that Fund determines that a commitment is no longer
in the best interests of that Fund and its shareholders, it will revoke the
commitment, terminate sales of its shares in the state(s) involved, and notify
the affected shareholders.

- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION REGARDING CERTAIN
INVESTMENTS BY THE FUNDS
- --------------------------------------------------------------------------------

INVESTMENTS BY THE BALANCED FUND, THE BOND FUND, AND THE HIGH YIELD FUND

Securities held in the portfolios of the Balanced Fund, the Bond Fund, and
the High Yield Fund may include a variety of fixed income 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

33
<PAGE>

or instrumentalities, Government National Mortgage Association (GNMA) mortgage-
backed certificates and other similar securities representing ownership in a
pool of loans ("pass-through securities"), and repurchase agreements with banks
or securities dealers relating to these securities. Portfolio securities may
have variable or "floating" interest rates. Information regarding certain of
these securities is included below. Investments may also be made in fixed income
preferred stocks. Debt securities and preferred stocks may be convertible into,
or exchangeable for, common stocks, and may have warrants attached.

Depending on prevailing market conditions, debt securities may be purchased
at a discount from face value, producing a yield of more than the coupon rate,
or at a premium over face value, producing a yield of less than the coupon rate.
In making investment decisions, a Fund's advisor will consider factors other
than current yield, such as preservation of capital, maturity, and yield to
maturity. Common stocks acquired through exercise of conversion rights or
warrants or acceptance of exchange or similar offers will not be retained in the
portfolio. Orderly disposition of these equity securities will be made
consistent with management's judgment as to the best obtainable price.

To achieve its investment objective, each of the Balanced Fund and the Bond
Fund expects to invest a major portion (normally at least 95 percent) of its
fixed income assets in investment grade debt securities. "Investment grade"
debt securities are considered to be those which at the time of the investment
are (a) rated BAA or higher by Moody's Investor Services, Inc. (Moody's),
(b) rated BBB or higher by Standard and Poor's Corporation (S&P), or
(c) unrated, but believed by the Advisor for the Balanced Fund and the Bond Fund
to be equivalent to securities with those ratings. See the Prospectus under
"Additional Information -- Bond Ratings" for information regarding investment-
grade securities. Up to five percent of such of the Balanced Fund's and Bond
Fund's assets may be invested in lower grade securities (rated Ba or B by
Moody's or BB or B by S&P) when the Balanced Fund's or Bond Fund's Advisor
believes these securities present attractive investment opportunities
notwithstanding their speculative characteristics. See the Prospectus under
"Risk Factors" for a description of the risks of investing in lower-rated
securities and under "Additional Information" for a description of corporate
bond ratings.

To achieve its investment objective, the High Yield Fund generally will
invest at least 65% of its total assets in high yielding fixed income securities
rated Ba or lower by Moody's or BB or lower by S&P. No more than 10% of the
Fund's total assets may be invested in fixed income securities rated Caa or
lower by Moody's or CCC or lower by S&P. The High Yield Fund may also invest in
unrated fixed income securities when the Fund's Advisor believes the security is
of comparable quality to that of securities eligible for purchase by the Fund.
Securities rated Ba or less by Moody's or BB or less by S&P, commonly referred
to as "junk bonds," are considered noninvestment grade securities, subject to a
high degree of risk, and considered speculative by the major credit rating
agencies with respect to the issuer's ability to meet principal and interest
payments. The High Yield Fund is designed for investors who are willing to
assume substantial risks of significant fluctuations in principal value in order
to achieve a high level of current income. The High Yield Fund should represent
only a portion of a balanced investment program. See the Prospectus under "Risk
Factors" for a description of the risks of investing in lower-rated securities
and under "Additional Information" for a description of corporate bond ratings.

GOVERNMENT SECURITIES

Government securities may be either direct obligations of the U.S.
Government 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, Treasury notes currently have maturities
of 1 to 10 years, and 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

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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 the backing of the full faith and credit of the
United States to U.S. Treasury guarantees, or to the backing solely of the
issuing instrumentality itself.

MORTGAGE-BACKED CERTIFICATES

GNMA (Government National Mortgage Association) Certificates
("Certificates") are mortgage-backed securities. The Certificates evidence part
ownership of a pool of mortgage loans. The Certificates which the Bond Fund may
purchase are of the "modified pass-through" type. "Modified pass-through"
Certificates entitle the holder to receive all interest and principal payments
owed on the mortgage pool, net of fees paid to the servicing agent and GNMA,
regardless of whether or not the mortgagor actually makes the payment.

THE GNMA GUARANTEE. The National Housing Act authorizes GNMA to guarantee
the timely payment of principal of and interest on securities backed by a group
(or pool) of mortgages insured by the FHA or guaranteed by the VA. The GNMA
guarantee is backed by the full faith and credit of the United States. GNMA is
also empowered to borrow without limitation from the U.S. Treasury to make any
payments required under its guarantee.

THE LIFE OF GNMA CERTIFICATES. The average life of GNMA Certificates is
likely to be substantially less than the original maturity of the mortgage pools
underlying the securities. Regular payments and prepayments of principal by
mortgagors and mortgage foreclosures will result in the return of the greater
part of principal invested well before the maturity of the mortgages in the
pool. (Because of the GNMA guarantee, foreclosures impose no risk to principal
investment.)

Because prepayment rates of individual mortgage pools will vary widely, it
is not possible to predict accurately the average life of a particular issue of
GNMA Certificates. However, statistics published by the FHA are normally used
as an indicator of the expected average life of GNMA Certificates. These
statistics indicate that the average life of single-family dwelling mortgages
with 25-30 year maturities, the type of mortgages backing the vast majority of
GNMA Certificates, is approximately 12 years. For this reason, it is standard
practice to treat GNMA Certificates as 30-year mortgage-backed securities which
prepay fully in the 12th year.

YIELD CHARACTERISTICS OF GNMA CERTIFICATES. The coupon rate of interest of
GNMA Certificates is lower than the interest rate paid on the VA-guaranteed or
FHA-insured mortgages underlying the Certificates, but only by the amount of the
fees paid to GNMA and the servicing agent. For the most common type of mortgage
pool, containing single-family dwelling mortgages, GNMA receives an annual fee
of 0.06 of 1 percent of the outstanding principal for providing its guarantee,
and the issuer is paid an annual fee of 0.44 of 1 percent for assembling the
mortgage pool and for passing through monthly payments of interest and principal
to Certificate holders.

The coupon rate by itself, however, does not indicate the yield which will
be earned on the Certificates for the following reasons:

1. Certificates may be issued at a premium or discount rather than at
par.

2. After issuance, certificates may trade in the secondary market at a
premium or discount.

3. Interest is earned monthly, rather than semi-annually as for
traditional bonds. Monthly payment has the effect of raising the effective yield
earned on GNMA Certificates.

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4. The actual yield of each GNMA Certificate is influenced by the
prepayment experience of the mortgage pool underlying the Certificate. That is,
if borrowers pay off their mortgages early, the principal returned to
Certificate holders may be reinvested at more or less favorable rates.

In quoting yields for GNMA Certificates, the standard practice is to assume
that the Certificates will have a 12-year life. Compared on this basis, GNMA
Certificates have historically yielded roughly .50 of 1 percent more than high-
grade corporate bonds and 1 percent more than U.S. Government and U.S.
Government Agency bonds. As the life of individual pools may vary widely,
however, the actual yield earned on any issue of GNMA Certificates may differ
significantly from the yield estimated on the assumption of a 12-year life.

MARKET FOR GNMA CERTIFICATES. Since the inception of the GNMA Mortgage-
Backed Securities program in 1970, the amount of GNMA Certificates outstanding
has grown rapidly. The size of the market and the active participation in the
secondary market by securities dealers and many types of investors make the GNMA
Certificates a highly liquid instrument. Prices of GNMA Certificates are
readily available from securities dealers and depend on, among other things, the
level of market interest rates, the Certificate's coupon rate, and the
prepayment experience of the pool of mortgages backing each Certificate.

OTHER PASS-THROUGH CERTIFICATES. The Funds may invest in other pass-
through securities. These are mortgage-backed securities for which the payments
on the underlying mortgages are passed from the mortgage holder through the
servicing agent, net of fees paid to the servicing agent, to the Fund. These
securities may be "modified pass-through certificates" (like GNMA certificates),
whereby the Fund would receive interest and principal payments regardless of
whether the mortgagors make the payments, or they may be "straight pass-through
certificates", whereby the Bond Fund would receive interest and principal only
to the extent actually collected by the servicing agent. The servicing agent
may be an instrumentality or agency of the U.S. Government or may be an
institution such as a bank or savings and loan association. The underlying
mortgages may be conventional mortgages as well as mortgages guaranteed by
federal agencies or instrumentalities. Straight pass-through securities involve
additional risks because payments are not guaranteed. However, this risk may be
mitigated to the extent that the underlying mortgages are guaranteed by a
federal agency or instrumentality or by a private insurance company. Examples
of pass-through securities that the Funds may purchase are: Federal National
Mortgage Association; Federal Home Loan Mortgage Corporation (Participation
Certificates); Conventional Mortgage Pass-Through Certificates (CONNIE MAC);
Residential Funding Corp. Participation Certificates and Federal Housing
Administration Insured Project Pass-Through Pools.

FLOATING OR VARIABLE RATE SECURITIES

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

COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOs")

CMOs are obligations fully collateralized by a portfolio of mortgages or
mortgage-related securities. Payments of principal and interest on the
mortgages are passed through to the holders of the CMOs on the same schedule as
they are received, although certain classes of CMOs have priority over others
with respect to the receipt of prepayments on the mortgages. Therefore,
depending on the type of CMOs in which a Fund invests, the investment may be
subject to a greater or lesser risk of prepayment than other types of mortgage-
related securities. Changes in assumed prepayment rates have the effect of
shortening or lengthening the effective maturity of the CMO held by a Fund.
CMOs may also be less marketable than other securities. A Fund will only invest
in CMOs issued by agencies or instrumentalities of the U.S. Government or
privately-issued CMOs

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<PAGE>

carrying investment-grade ratings. In addition, 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.

INVESTMENTS BY COLUMBIA MUNICIPAL BOND FUND, INC.

Municipal bonds are issued to obtain funds for various public purposes.
The two principal classifications of municipal bonds are "general obligation"
bonds and "revenue" or "special tax" bonds. General obligation bonds are
secured by the issuer's pledge of its full faith, credit, and taxing power for
the payment of principal and interest. Revenue and special tax bonds are
payable only from the revenue derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise or other
tax.

Industrial development, pollution control, or other private activity bonds
backed by private corporations do not generally have the pledge of the credit of
the issuing body but are secured only by the credit of the corporation
benefiting from the facilities being financed. For the purpose of the Municipal
Bond Fund's investment restrictions, identification of the "issuer" of municipal
bonds that are not general obligation bonds is made by the Advisor on the basis
of the characteristics of the obligation as described above, the most
significant of which is the source of funds for payment of principal and
interest on such bonds. The Municipal Bond Fund may invest more than 25 percent
of its assets in industrial development bonds or private activity bonds.

The yields of municipal bonds are dependent on a variety of factors,
including general money market conditions, general conditions of the municipal
bond market, size of the offering, the maturity of the obligation, whether
interest on the obligation is subject to alternative minimum tax, and rating of
the issue. The ratings of Moody's and S&P represent their opinions of the
quality of the municipal bonds they undertake to rate. These ratings, however,
are general and not absolute standards of quality. Consequently, municipal
bonds with the same maturity, coupon, and rating may have different yields,
while municipal bonds of the same maturity and coupon with different ratings may
have the same yield. The yield on municipal bonds is generally lower than on
corporate issues, but the interest paid is not includible in gross income for
federal income tax purposes.

The Municipal Bond Fund's investment restrictions permit it to borrow money
temporarily for extraordinary or emergency purposes in an amount not exceeding
50 percent of its gross assets. During any period in which large borrowings are
outstanding, the interest paid by the Municipal Bond Fund on such borrowings
would reduce the yield to shareholders. Accordingly, in the event of large
borrowings the yield to shareholders is expected to be lower than that of mutual
funds that restrict borrowings to a lower percentage of assets.

SECURITIES RATING AGENCIES

Subsequent to its purchase by a Fund, an issue may cease to be rated, or
its rating may be reduced below the criteria set forth for that Fund. Neither
event would require the elimination of bonds from the Fund's portfolio, but the
Advisor will consider that event in its determination of whether the Fund should
continue to hold such security in its portfolio. To the extent the ratings
accorded by S&P or Moody's for securities may change as a result of changes in
such organizations or changes in the rating systems, the Funds will attempt to
use comparison ratings as standards for its investments in bonds in accordance
with the policies described herein.

COMMERCIAL PAPER RATINGS. 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 allowance made for unusual circumstances; (5) typically, the
issuer's industry is well established and the issuer has a strong position
within the industry; and (6) the reliability and quality of management are
unquestioned.

Among the factors considered by Moody's in assigning ratings are the
following: (1) evaluation of the management of the issuer; (2) economic
evaluation of the issuer's industry or industries and an appraisal of

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<PAGE>

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 rise as a result of public interest
questions and preparation to meet such obligations.

BOND RATINGS. See the Prospectus under "Additional Information -- Bond
Ratings" for a description of the ratings used by Moody's and S&P.

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. Loans of portfolio securities of a Fund that is
permitted under its investment restrictions to make loans will be made (if at
all) in strictest 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.

Management of the Funds understands that it is the view of the Staff of the
Securities and Exchange Commission 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, 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 Directors must
be able to terminate the loan and vote proxies or enter into an alternative
arrangement with the borrower to enable the Directors 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 a Fund's management to be of good standing and
will not be made unless, in the judgment of the Fund's management, the
consideration to be earned from such loans would justify the risk. Such loan
transactions are referred to in this section as "qualified loan transactions."

CERTIFICATES OF DEPOSIT

Certificates of Deposit are receipts issued by a U.S. bank in exchange for
the deposit of funds. The U.S. 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
insured amount of 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 a
stated amount of 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.

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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

Commercial paper is an unsecured short-term note of indebtedness issued in
bearer form by business or banking firms to finance their short-term credit
needs.

WARRANTS

Warrants are in effect longer-term call options. They give the holder the
right to purchase a given number of shares of a particular company at specified
prices within certain periods of time. The purchaser of a warrant expects that
the market price of the security will exceed the purchase price of the warrant
plus the exercise price of the warrant, thus giving him a profit. Since the
market price may never exceed the exercise price before the expiration date of
the warrant, the purchaser of the warrant risks the loss of the purchase price
of the warrant. Warrants generally trade in the open market and may be sold
rather than exercised. Warrants are sometimes sold in unit form with other
securities of an issuer. Units of warrants and common stock may be employed in
financing young, unseasoned companies. The purchase price of a warrant varies
with the exercise price of the warrant, the current market value of the
underlying security, the life of the warrant, and various other investment
factors. Each Fund's investment restrictions do not limit the percentage of the
Fund's assets that may be invested in warrants, but each Fund does not intend to
invest more than 5 percent of its assets in warrants or more than 2 percent of
its assets in warrants that are not listed on the New York Stock Exchange or
American Stock Exchange.

DOLLAR ROLL TRANSACTIONS

The Balanced Fund and the Bond Fund may enter into "dollar roll"
transactions, which consist of the sale by the 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 Balanced Fund or the Bond Fund agrees to buy a
security on a future date.

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

Dollar rolls may be treated for purposes of the Investment Company Act of
1940 (the "1940 Act") as borrowings of the Fund because they involve the sale of
a security coupled with an agreement to repurchase. Like all borrowings, a
dollar roll involves costs to the Fund. For example, while the Fund receives a
fee as consideration for agreeing to repurchase the security, the Fund forgoes
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 decrease the cost of the Fund's
borrowing.

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<PAGE>

The entry into dollar rolls involves potential risks of loss which are
different from those related to the securities underlying the transactions. For
example, if the counterparty becomes insolvent, the Fund's right to purchase
from the counterparty might be restricted. Additionally, the value of such
securities may change adversely before the Fund is able to purchase them.
Similarly, the Fund may be required to purchase securities in connection with a
dollar roll at a higher price than may otherwise be available on the open
market. Since, as noted above, the counterparty is required to deliver a
similar, but not identical security to the Fund, the security which the Fund is
required to buy under the dollar roll may be worth less than an identical
security. Finally, there can be no assurance that the Balanced Fund's or the
Bond Fund's use of the cash that it receives from a dollar roll will provide a
return that exceeds borrowing costs.

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COLUMBIA INTERNATIONAL STOCK FUND, INC.

PART C

OTHER INFORMATION

Item 24. FINANCIAL STATEMENTS AND EXHIBITS

(a) Financial Statements:

Financial Highlights are located on page 4 of the Prospectus.
The Schedule of Investments and Statement of Assets and Liabilities as
of December 31, 1996, the related Statement of Operations for the year
ended December 31, 1996, the Statements of Changes in Net Assets for
the years ended December 31, 1996 and 1995, the selected per share
data and ratios under the caption "Financial Highlights," and the
notes thereto, and the report of Independent Accountants are included
in the Annual Report to Shareholders for the year ended December 31,
1996, which is incorporated into the Statement of Additional
Information by reference.

(b) Exhibits:

(1) Registrant's Articles of Incorporation.Incorporated by reference
to Exhibit 1 to the Registrant's Registration Statement, File
No. 33-48994.

(2) Registrant's Bylaws. Incorporated by reference to Exhibit 2 to
Post-Effective Amendment No. 4, File No. 33-48994. ("PEA No.
4").

(4A) Specimen Stock Certificate. Incorporated by reference to
Exhibit 4A to the Registrant's Pre-Effective Amendment No. 1,
File No. 33-48994 ("Pre-Effective Amendment No. 1").

(4B) Application. Incorporated by reference to Exhibit 4B to Form N-
1A, File No. 333-5863.

(5) Investment Advisory Contract. Incorporated by reference to
Exhibit 5 to Pre- Effective Amendment No. 1.

(6) Distribution Agreement. Incorporated by reference to Exhibit
(6) to PEA No. 4.

(8A) Custodian Contract with Morgan Stanley Trust Company.
Incorporated by reference to Exhibit 8 to Pre-Effective
Amendment No. 1.

(8B) Custodian Contract with United States National Bank of Oregon.
Incorporated by reference to Exhibit 8B to Post-Effective
Amendment No. 3.

(9) Transfer Agent Agreement. Incorporated by reference to Exhibit
9 to Pre-Effective Amendment No. 1.

(9B) Amendment to Transfer Agent Agreement.

(11) Consent of Accountants.

(12A) See paragraph (a) of Item 24.

(12B) Annual Report to Shareholders.

C-1

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(14) IRA and Money Purchase Pension and Profit Sharing Plan booklets.
Incorporated by reference to Exhibit 14 to Form N-1A, File No.
333-5863.

(17) All Powers of Attorney have been previously filed and are
incorporated herein by reference.

(27) Financial Data Schedule.

Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

The Registrant, Columbia Balanced Fund, Inc., Columbia Common Stock
Fund, Inc., Columbia Fixed Income Securities Fund, Inc., Columbia Growth Fund,
Inc., Columbia Small Cap Fund, Inc., Columbia Daily Income Company, Columbia
Special Fund, Inc., Columbia Municipal Bond Fund, Inc., Columbia U.S. Government
Securities Fund, Inc., Columbia Real Estate Equity Fund, Inc., and Columbia High
Yield Fund, Inc., each an Oregon corporation (collectively, the "Columbia
Funds"), have investment advisory contracts with Columbia Funds Management
Company (the "Advisor"), an Oregon corporation. Columbia Trust Company, an
Oregon corporation, is 79% owned by the Advisor. J. Jerry Inskeep, Jr. and
James F. Rippey own 14.9% and 27.2%, respectively, of the voting securities of
the Advisor; 33.4% each of the voting securities of Columbia Financial Center
Incorporated, an Oregon corporation; 41.1% of the voting securities of Columbia
Management Co., an Oregon corporation; and 3.6% and 0.8%, respectively, of the
voting securities of Columbia Trust Company. CMC Fund Trust, an Oregon business
trust, has an investment advisory contract with Columbia Management Co. See
"Management" in Part B. The Registrant does not have any subsidiaries.

Item 26. NUMBER OF HOLDERS OF SECURITIES

Number of Record Holders
Title of Class At December 31, 1996
-------------- ------------------------
Common Stock 15,550

Item 27. 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.

C-2

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The Registrant's directors and officers are also named insureds under
an insurance policy issued by ICI Mutual Insurance Company.

Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR

Information regarding the businesses of the Advisor and its officers
and directors is set forth under "Fund Management" in the Prospectus and under
"Management" and "Investment Advisory and Other Fees Paid to Affiliates" in the
Statement of Additional Information and is incorporated herein by reference.
Columbia Trust Company also acts as trustee and/or agent for the investment of
the assets of pension and profit sharing plans in pooled accounts.

Item 29. PRINCIPAL UNDERWRITERS

Pursuant to a distribution agreement with each of the Columbia Funds,
including the Registrant, Columbia Financial is authorized to sell shares of
each fund to the public. No commission or other compensation is received by
Columbia Financial in connection with the sale of shares of the Columbia Funds.
Certain information on each director and officer of Columbia Financial is set
forth below:

Name and Principal Positions and Offices Positions and Offices
Business Address with Columbia Financial with Registrant
- ------------------ ----------------------- ---------------------
J. Jerry Inskeep, Jr. Director Chairman and Director
1301 SW Fifth Avenue
Portland, OR 97201

George L. Hanseth President and Director Senior Vice President
1301 SW Fifth Avenue and Treasurer
Portland, OR 97201

John A. Kemp Senior Vice President, President and Director
1301 SW Fifth Avenue Treasurer and Director
Portland, OR 97201

Jeff B. Curtis Vice President, General Secretary
1301 SW Fifth Avenue Counsel and Secretary
Portland, OR 97201

Item 30. LOCATION OF ACCOUNTS AND RECORDS

The records required to be maintained under Section 31(a) of the Investment
Company Act of 1940 and Rules 31a-1 to 31a-3 thereunder are maintained by the
Registrant, Columbia Funds Management Company, and Columbia Trust Company at
1301 SW Fifth Avenue, Portland, Oregon 97201. Records relating to the
Registrant's portfolio securities are also maintained by Morgan Stanley Trust
Company, One Pierrepont Plaza, Brooklyn, New York 11201 and United States
National Bank of Oregon, 321 SW Sixth Avenue, Portland, Oregon 97208.

Item 31. MANAGEMENT SERVICES

Not applicable.

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Item 32. UNDERTAKINGS

The Registrant hereby undertakes to promptly call a meeting of the
shareholders of the Registrant for the purpose of voting on the removal of any
director of the Registrant when requested in writing by shareholders of at least
10 percent of the outstanding shares of Common Stock of the Registrant. The
Registrant undertakes to assist its shareholders in communicating with other
shareholders of the Registrant to the extent required by Section 16 of the
Investment Company Act of 1940 or any regulations promulgated thereunder.

The Registrant hereby undertakes, upon request and without charge, to
furnish a copy of the Registrant's annual report to shareholders to each person
to whom a prospectus is delivered.

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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, 1997.

COLUMBIA INTERNATIONAL STOCK FUND, INC.

By JOHN A. KEMP
------------------------------------
John A. Kemp
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, 1997 by the following persons in the capacities
indicated.

(i) Principal executive officer:

JOHN A. KEMP President and Director
- ------------------------------------
John A. Kemp

(ii) Principal accounting and
financial officer:

GEORGE L. HANSETH Senior Vice President
- ------------------------------------
George L. Hanseth

(iii) Directors:

* JAMES C. GEORGE Director
- ------------------------------------
James C. George

* J. JERRY INSKEEP, JR. Chairman of the Board and Director
- ------------------------------------
J. Jerry Inskeep, Jr.

* THOMAS R. MACKENZIE Director
- ------------------------------------
Thomas R. Mackenzie

* JAMES F. RIPPEY Director
- ------------------------------------
James F. Rippey

* RICHARD L. WOOLWORTH Director
- ------------------------------------
Richard L. Woolworth

* By JOHN A. KEMP
----------------------------
John A. Kemp
as Attorney-in-fact

C-5

<PAGE>

COLUMBIA INTERNATIONAL STOCK FUND, INC.

EXHIBIT INDEX

EXHIBIT NO. DESCRIPTION

(1) Registrant's Articles of Incorporation. Incorporated by
reference to Exhibit 1 to the Registrant's Registration
Statement, File No. 33-48994.

(2) Registrant's Bylaws. Incorporated by reference to Exhibit 2 to
Post-Effective Amendment No. 4, File No. 33-48994. ("PEA No. 4").

(4A) Specimen Stock Certificate. Incorporated by reference to Exhibit
4A to the Registrant's Pre-Effective Amendment No. 1, File No.
33-48994 ("Pre-Effective Amendment No. 1").

(4B) Application. Incorporated by reference to Exhibit 4B to Form
N-1A, File No. 333-5863.

(5) Investment Advisory Contract. Incorporated by reference to
Exhibit 5 to Pre-Effective Amendment No. 1.

(6) Distribution Agreement. Incorporated by reference to Exhibit (6)
to PEA No. 4.

(8A) Custodian Contract with Morgan Stanley Trust Company.
Incorporated by reference to Exhibit 8 to Pre-Effective Amendment
No. 1.

(8B) Custodian Contract with United States National Bank of Oregon.
Incorporated by reference to Exhibit 8B to Post-Effective
Amendment No. 3.

(9) Transfer Agent Agreement. Incorporated by reference to Exhibit 9
to Pre-Effective Amendment No. 1.

(9B) Amendment to Transfer Agent Agreement.

(11) Consent of Accountants.

(12A) See paragraph (a) of Item 24.

(12B) Annual Report to Shareholders.

(14) IRA and Money Purchase Pension and Profit Sharing Plan booklets.
Incorporated by reference to Exhibit 14 to Form N-1A, File No.
333-5863.

(17) All Powers of Attorney have been previously filed and are
incorporated herein by reference.

(27) Financial Data Schedule.

C-6

<PAGE>

Exhibit 9B

COLUMBIA INTERNATIONAL STOCK FUND, INC.
AMENDMENT TO TRANSFER AGENT AGREEMENT

JANUARY 1, 1997

The Transfer Agent Agreement dated as of August 12, 1992, between Columbia
International Stock Fund, Inc. and Columbia Trust Company (the "Agreement") is
amended as follows:

1. The Basic Fee under Schedule B of the Agreement is revised to $18.00 per
account per year. With respect to accounts closed during the year, the Basic
Fee shall be prorated based on the number of months the account was open,
including the month in which the account was closed.

2. This Amendment is effective January 1, 1997.

COLUMBIA INTERNATIONAL
STOCK FUND, INC.

By /s/ George L. Hanseth
------------------------------
Title: Senior Vice President

COLUMBIA TRUST COMPANY

By /s/ John A. Kemp
------------------------------
Title: Senior Vice President

<PAGE>

Exhibit 11

[LETTERHEAD]

CONSENT OF INDEPENDENT ACCOUNTANTS

To the Directors of Columbia International Stock Fund, Inc.:

We consent to the inclusion in Post-Effective Amendment No. 5 to the
Registration Statement of Columbia International Stock Fund, Inc. on Form N-1A
(File No. 33-48994) of our report, dated January 31, 1997 on our audit of the
financial statements and the financial highlights of the Fund, which report is
included in the Annual Report to Shareholders for the year ended December 31,
1996, which is included in the Post-Effective Amendment to the Registration
Statement. We also consent to the reference to our Firm under the caption
"Independent Accountants."

COOPERS & LYBRAND L.L.P.
Portland, Oregon
February 18, 1997

Coopers & Lybrand L.L.P. is a member of Coopers & Lybrand International,
a Swiss limited liability association.

<PAGE>
[LOGO]

COLUMBIA FUNDS
1996 ANNUAL REPORT

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 DAILY INCOME COMPANY
----------------------------------------------------
----------------------------------------------------
COLUMBIA U.S. GOVERNMENT SECURITIES FUND
----------------------------------------------------
----------------------------------------------------
COLUMBIA FIXED INCOME SECURITIES FUND
----------------------------------------------------
----------------------------------------------------
COLUMBIA MUNICIPAL BOND FUND
----------------------------------------------------
----------------------------------------------------
COLUMBIA HIGH YIELD FUND
<PAGE>
LETTER TO SHAREHOLDERS
---------------------------------------------------------

Dear Columbia Investor:

We are pleased to present the 1996 Columbia Funds Shareholder Report.
Inside, you will find updated financial information and summaries of
each fund's investment activity for the year, along with a chart
illustrating the growth of a hypothetical investment as compared to
each of the fund's industry benchmarks.

At Columbia, our goal has always been to provide consistent, long-term
performance for our shareholders while managing investment risk. In
these days of recordbreaking stock market performance, we wish to
reaffirm our commitment to careful, quality investment management. The
"Overview of the Markets" on page one of this report explains this
investment approach in greater detail, along with highlights of
current themes and strategies we are using to meet the objectives of
each fund. We hope that you find this information helpful as you
evaluate the performance of your investments.

As always, we appreciate the confidence and trust you have placed in
Columbia Funds, and we look forward to helping you achieve your
investment goals in the months and years to come.

<TABLE>
<S> <C>
Sincerely,

J. JERRY INSKEEP, JR. JOHN A. KEMP
CHAIRMAN PRESIDENT
</TABLE>
<PAGE>
TABLE OF CONTENTS
-----------------------------------------------------------------

ANNUAL REPORT, DECEMBER 31, 1996

AN OVERVIEW OF THE MARKETS.....................................................1
COLUMBIA COMMON STOCK FUND
Investment Review............................................................3
Financial Highlights........................................................15
Schedule of Investments.....................................................27
Statement of Assets and Liabilities.........................................62
Statement of Operations.....................................................65
Statements of Changes in Net Assets.........................................68
COLUMBIA GROWTH FUND
Investment Review............................................................4
Financial Highlights........................................................16
Schedule of Investments.....................................................29
Statement of Assets and Liabilities.........................................62
Statement of Operations.....................................................65
Statements of Changes in Net Assets.........................................68
COLUMBIA INTERNATIONAL STOCK FUND
Investment Review............................................................5
Financial Highlights........................................................17
Schedule of Investments.....................................................31
Statement of Assets and Liabilities.........................................62
Statement of Operations.....................................................65
Statements of Changes in Net Assets.........................................68
COLUMBIA SPECIAL FUND
Investment Review............................................................6
Financial Highlights........................................................18
Schedule of Investments.....................................................35
Statement of Assets and Liabilities.........................................62
Statement of Operations.....................................................65
Statements of Changes in Net Assets.........................................69
COLUMBIA SMALL CAP FUND
Investment Review............................................................7
Financial Highlights........................................................19
Schedule of Investments.....................................................38
Statement of Assets and Liabilities.........................................63
Statement of Operations.....................................................66
Statement of Changes in Net Assets..........................................69
COLUMBIA REAL ESTATE EQUITY FUND
Investment Review............................................................8
Financial Highlights........................................................20
Schedule of Investments.....................................................41
Statement of Assets and Liabilities.........................................63
Statement of Operations.....................................................66
Statements of Changes in Net Assets.........................................69
COLUMBIA BALANCED FUND
Investment Review............................................................9
Financial Highlights........................................................21
Schedule of Investments.....................................................42
Statement of Assets and Liabilities.........................................63
Statement of Operations.....................................................66
Statements of Changes in Net Assets.........................................70
COLUMBIA DAILY INCOME COMPANY
Investment Review...........................................................10
Financial Highlights........................................................22
Schedule of Investments.....................................................47
Statement of Assets and Liabilities.........................................63
Statement of Operations.....................................................66
Statements of Changes in Net Assets.........................................70
COLUMBIA U.S. GOVERNMENT SECURITIES FUND
Investment Review...........................................................11
Financial Highlights........................................................23
Schedule of Investments.....................................................49
Statement of Assets and Liabilities.........................................64
Statement of Operations.....................................................67
Statements of Changes in Net Assets.........................................70
COLUMBIA FIXED INCOME SECURITIES FUND
Investment Review...........................................................12
Financial Highlights........................................................24
Schedule of Investments.....................................................50
Statement of Assets and Liabilities.........................................64
Statement of Operations.....................................................67
Statements of Changes in Net Assets.........................................71
COLUMBIA MUNICIPAL BOND FUND
Investment Review...........................................................13
Financial Highlights........................................................25
Schedule of Investments.....................................................53
Statement of Assets and Liabilities.........................................64
Statement of Operations.....................................................67
Statements of Changes in Net Assets.........................................71
COLUMBIA HIGH YIELD FUND
Investment Review...........................................................14
Financial Highlights........................................................26
Schedule of Investments.....................................................59
Statement of Assets and Liabilities.........................................64
Statement of Operations.....................................................67
Statements of Changes in Net Assets.........................................71
NOTES TO FINANCIAL STATEMENTS.................................................72

COLUMBIA FUNDS
P.O. BOX 1350
PORTLAND, OR 97207-1350
222-3606
1-800-547-1707
<PAGE>
AN OVERVIEW OF THE MARKETS
-----------------------------------------------------------------

THE YEAR IN REVIEW

When we started the year, market consensus called for dull performance. The
market rallied early, however, and by the end of May, the S&P 500 Index of large
stocks was up almost 10%. The performance of small stocks was even stronger,
with the Russell 2000 Index up more than 15%.

This strong performance was largely attributable to increased earnings in a
rapidly growing economy. The Gross Domestic Product (GDP) increased from 0.3% in
the last quarter of 1995 to 4.7% in the second quarter of 1996. Not
surprisingly, this economic pick-up had an upward influence on interest rates,
and by mid-year investors became concerned that the Federal Reserve Board would
tighten the money supply.

Although the Fed did not take action, the hint of change led to a sharp market
decline through the end of July. By July's end, the Russell 2000 had given up
almost all its gain year-to-date. The annual gain for the S&P 500 was cut in
half to 5%.

During the summer, reports seemed to indicate that economic growth was slowing.
Investors reassessed the outlook and decided that low inflation and modest
growth would be good for stocks and bonds. Long-term interest rates declined,
helped by strong Japanese buying of U.S. bonds, and the stock market rapidly
accelerated. Also during this time, flows into equity mutual funds were strong
versus the offering of new equities, resulting in a positive supply-demand
scenario. From the end of July to the end of November, the S&P 500 increased
19.2%, including a 7.55% gain in the month of November alone. Smaller stocks
also increased in value, but at a more subdued rate.

In early December, Federal Reserve Chairman Alan Greenspan suggested that the
markets might be entering a speculative phase. However, the market's nervous
reaction to his statement hardly dented the 1995-96 combined gain. By recording
a positive return in 1996, the stock market enjoyed its sixth straight annual
advance, with the Dow Jones Industrial Averages up a record-breaking 11 out of
the past 12 years.

<TABLE>
<CAPTION>
BENCHMARK PERFORMANCE COMPARISONS
Average Annual Total Returns,
FOR THE PERIODS ENDED DECEMBER 31, 1996

1 year 3 years 5 years 10 years
---------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Standard & Poor's 500 22.96% 19.68% 15.22% 15.29%
Lehman Aggregate 3.63% 6.03% 7.04% 8.47%
Russell 2000 16.49% 13.68% 15.64% 12.41%
Financial Times/S&P Actuaries
Euro-Pacific 5.82% 8.51% 7.94% 8.58%
</TABLE>

CURRENT OUTLOOK

At this stage, one might expect the current economic cycle to begin showing
signs of age and inflationary pressures. However, the factors that have led to
excellent market performance appear intact. Inflation remains subdued, signaling
that interest rates could continue a long-term downward trend. (In the near
term, though, we expect interest rates to continue to react to news on economic
growth, inflation, currency fluctuations and foreign money flows into the U.S.
bond market.) Earnings remain positive, and money flows into financial assets
continue at or near record levels. Despite the temporary ebbs and flows that are
bound to occur in the U.S. economy, we seem to remain in an overall growth mode,
accompanied by modest inflation.

Although this economic backdrop continues to favor financial markets, the stock
market as a whole is selling at historically high levels. Using history as a
guide, high valuation levels can lead to increased volatility and decreased
gain. However, a fully priced market is seldom the sole cause for a long-term
bull market to end, and we are experiencing the greatest bull market of this
century. In the past, bull markets have waned when economic and financial
environments experience fundamental change. The consensus forecast for 1997

-
1
<PAGE>
AN OVERVIEW OF THE MARKETS
- --------------------------------------------------------------------------------
calls for subtle changes rather than a major shift to any important factors that
might seriously affect financial markets.

INVESTMENT STRATEGY

The risk to a high priced stock market is that it becomes increasingly
vulnerable to negative surprises. Such negative surprises could include a
stronger economy than forecasted ushering in higher inflation, a weaker economy
with a squeeze on profits, currency problems or some unforeseen event. In short,
risks are rising compared to rewards. We continue to find attractive stocks, but
have become more cautious about our asset mix between stocks and bonds, and have
reduced our holdings in stocks with high valuations and high expectations.

As commonly occurs when markets rise rapidly, investors tend to narrow their
focus to fewer, larger capitalized stocks with presumed high predictability.
This tendency means many stocks have been overlooked and offer value. We are
focusing our research on these companies. As we look to 1997, there continues to
be reason for optimism, but we are growing more cautious and are reluctant to
buy stocks solely based on recent price momentum.

So that you may evaluate how the Columbia Funds performed given this economic
and financial market backdrop, the following pages contain discussions of the
Funds' investment activity during 1996, along with graphs illustrating the
growth of $10,000 over various time periods. Each Fund compares its performance
to a relevant benchmark. Unlike the Funds, however, these benchmark indices are
not actively managed and have no operating expenses, portfolio transaction costs
or cash flows.

We hope that you find this information useful, and we look forward to helping
you meet your investment goals and needs in the months and years to come.

THE INVESTMENT TEAM
COLUMBIA FUNDS MANAGEMENT COMPANY
FEBRUARY 1997

-
2
<PAGE>
INVESTMENT REVIEW
-----------------------------------------------------------------

- ---- ----

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

Columbia Common Stock Fund had a total return of 20.71% for the twelve months
ended December 31, 1996. During the first half of the year, our "Graying of
America" theme had a positive influence on performance, where we emphasized such
sectors as travel and entertainment. As the stock market grew more nervous, we
increased our holdings in real estate investment trusts (REITs) and utilities
(communications, electric and gas). Toward the end of the year, the Fund
benefited from its exposure to banks, machinery, technology, energy, and real
estate. Sectors that did not perform as well included media, business services
and retailers.

Most recently, we have added to our banking and financial holdings, where stocks
are benefiting from positive earnings growth and industry consolidation. We have
also added to metals and autos, which we believe offer relative value and fit
within our framework of a strengthening economy. We decreased our holdings in
technology, consumer staples and health care, taking profits in several stocks
we believed were fully priced in the near term.

We enter 1997 with an emphasis in the basic materials and manufacturing sectors,
such as paper, aluminum and industrial equipment. We are also positive about the
prospects for REITs, energy and selected technology stocks. With the stock
market at relatively high valuations, we are focusing more attention on risk

versus reward, avoiding issues we believe are susceptible to disappointment.

GROWTH OF $10,000 SINCE INCEPTION

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
Columbia Common Stock Fund S&P 500
<S> <C> <C>
10/01/91 10,000 10,000
12/31/91 11,025 10,838
12/31/92 12,126 11,664
12/31/93 14,120 12,840
12/31/94 14,411 13,009
12/31/95 18,855 17,898
12/31/96 22,758 22,007
Average Annual Total Returns as of December 31,
1996
CCSF S&P 500
1 Year 20.17% 22.96%
5 Years 15.60% 15.22%
Since Inception 16.78% 16.05%
Past Performance is not predictive of future
results
</TABLE>

-
3
<PAGE>
INVESTMENT REVIEW
-----------------------------------------------------------------

- ---- ----

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

Columbia Growth Fund generated a total return of 20.80% for the one year period
ending December 31, 1996. Throughout the year, we have focused on such
investment themes as the "Graying of America," industry restructuring, and
digital technology, all of which benefited fund performance.

Toward the end of the year, market leadership was concentrated in the very
largest capitalized stocks due to investors' concern about a general slowing in
corporate profits. While stocks generally appreciated, most lagged the gains
achieved by the largest cap issues. Although this dynamic may persist awhile, we
believe that better, long-term opportunities exist in sectors outside the large
cap market, and we are focusing our research on these areas.

In addition, as many industries complete their restructuring efforts, Corporate
America is now increasing its emphasis on sales growth. As a result, we have
been searching out those organizations we believe have the opportunities,
strategies and resources to accelerate growth.

While the economy's growth rate has sped up from the third quarter's slow pace,
it is unclear whether a pickup in corporate revenue will be offset by an
increase in costs. We will be watching the Federal Reserve Board closely, in

case it moves to fight inflation fears by raising interest rates.

GROWTH OF $10,000 OVER 20 YEARS

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
Columbia Growth Fund S&P 500
<S> <C> <C>
12/31/76 10,000 10,000
12/31/77 9,989 9,270
12/31/78 10,792 9,866
12/31/79 15,170 11,676
12/31/80 21,220 15,454
12/31/81 20,501 14,689
12/31/82 30,046 17,847
12/31/83 36,494 21,848
12/31/84 34,458 23,194
12/31/85 45,509 30,514
12/31/86 48,658 36,202
12/31/87 55,830 38,110
12/31/88 61,865 44,417
12/31/89 79,862 58,457
12/31/90 77,218 56,674
12/31/91 103,673 73,943
12/31/92 115,928 79,577
12/31/93 131,010 87,599
12/31/94 130,184 88,755
12/31/95 173,119 122,109
12/31/96 209,128 150,146
Average Annual Total Returns as of December 31,
1996
CGF S&P 500
1 Year 20.80% 22.96%
5 Years 15.07% 15.22%
10 Years 15.70% 15.29%
20 Years 16.42% 14.51%
Past Performance is not predictive of future
results
</TABLE>

-
4
<PAGE>
INVESTMENT REVIEW
-----------------------------------------------------------------

- ---- ----

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

The Fund posted a total return of 16.59% for the year ended December 31, 1996.
This performance was significantly better than that of the Fund's benchmark
index, the FT/S&P Euro-Pac, which returned 5.82% for the same period.

Many stock markets around the world performed well during the period, ending the
year at record levels. Japan, the largest market outside the U.S., declined for
the year, however, and further negative pressure came from the weak Yen. Our
weighting in Japan was maintained at approximately half the Index's weighting.
During the second half of the year, this underweighting concentrated in Japanese
exporting industries, such as autos and electronics, which actually benefited
from a weaker Yen. Thus, we were able to offset some of the negative influence
of Japan.

Meanwhile, Canada, Hong Kong and the UK all enjoyed positive returns during the
year, and we have maintained solid weightings in those areas.

In addition, the Fund benefited from investments in Europe, such as Spain and
Italy, which enjoyed good performance throughout the year. Our European exposure
was offset somewhat by the strength of the U.S. dollar, but our conservative
hedging strategy helped to mitigate the overall weakness of foreign currencies.

We continue to favor a number of emerging markets, particularly Brazil and
India, both of which closed the year on a positive note.

Looking ahead, we have positioned the portfolio to take advantage of an
acceleration in worldwide growth during the coming year. And with the U.S. stock
market at record valuation levels, we believe an increasing number of investors
will diversify their portfolios overseas, which should benefit the world markets

and long-term investors in the Fund.

GROWTH OF $10,000 SINCE INCEPTION

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
Columbia International Stock Fund FT/S&P Euro-Pac S&P 500
<S> <C> <C> <C>
10/01/92 10,000 10,000 10,000
12/31/92 10,060 9,628 10,503
12/31/93 13,417 12,665 11,562
12/31/94 13,086 13,822 11,714
12/31/95 13,760 15,290 16,117
12/31/96 16,041 16,180 19,817
Average Annual Total Returns as of December 31,
1996
CISF S&P 500 FT/S&P Euro-Pac
1 Year 16.59% 22.96% 5.82%
Since Inception 11.62% 17.24% 11.84%
Past Performance is not predictive of future
results
</TABLE>

-
5
<PAGE>
INVESTMENT REVIEW
-----------------------------------------------------------------

- ---- ----

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

Columbia Special Fund posted a total return of 13.07% for 1996. While the Fund
enjoyed excellent returns through May, performance in the second half suffered
as several sectors that had performed well early in the year experienced sharp
declines. These included radio stocks, wireless telecommunication companies, and
selected service companies that were selling at relatively high price/earnings
multiples.

Most recently, we made a number of changes in the portfolio that we believe will
result in more positive performance results. We have reduced our holdings in
stocks selling at high price/earnings ratios that we believe are more vulnerable
to negative surprises. Technology, for instance, was reduced by year-end to
approximately 13% of assets from 25% during the third quarter. We have slightly
increased our allocation to foreign stocks to help balance some of the higher
valuations of the U.S. domestic stock market. In addition, we have increased our
emphasis in value stocks, where we look for a positive acceleration in earnings.
This has led us to invest in groups like paper, metals, energy, and certain
machinery stocks.

These shifts in emphasis are consistent with the Fund's long-term strategy of
investing about 50% of the portfolio in growth stocks, 35% to 45% in sectors and
themes we find attractive on a trading basis, and 5% to 10% of the portfolio in
special situations, such as companies that are restructuring for greater

efficiency and companies that may be involved in a takeover.

GROWTH OF $10,000 OVER 10 YEARS

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
Columbia Special Fund S&P 500 Russell 2000
<S> <C> <C> <C>
12/31/86 10,000 10,000 10,000
12/31/87 10,304 10,527 9,123
12/31/88 14,688 12,269 11,394
12/31/89 19,377 16,148 13,244
12/31/90 16,976 15,655 10,660
12/31/91 25,542 20,425 15,569
12/31/92 29,041 21,981 18,437
12/31/93 35,338 24,197 21,922
12/31/94 36,147 24,517 21,523
12/31/95 46,821 33,730 27,644
12/31/96 52,942 41,472 32,207
Average Annual Total Returns as of December 31,
1996
CSF S&P 500 Russell 2000
1 Year 13.07% 22.96% 16.49%
5 Years 15.69% 15.22% 15.64%
10 Years 18.14% 15.29% 12.41%
Past Performance is not predictive of future
results
</TABLE>

-
6
<PAGE>
INVESTMENT REVIEW
-----------------------------------------------------------------

- ---- ----

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

During the fourth quarter of 1996, the first three months of the Fund's
operation, Columbia Small Cap Fund returned 7.62%.

The Fund, which focuses on stocks with a market capitalization below $1 billion,
benefited from an overweighting in energy stocks during the period. The strength
of the energy sector was attributable to rising oil and gas prices and stronger
profits by both producers and service providers. Meanwhile, the Fund did not
benefit from a lower allocation to financial stocks, which rallied when
long-term interest rates fell below 6 1/2%.

Although large cap stocks outperformed small cap stocks in the fourth quarter
because of investor concern over a general slowing in corporate profits, we
remain optimistic about the prospects for small cap stocks during the coming
year. We also believe that a stronger dollar and continued moderate economic
growth will benefit relative performance of the small cap sector.

As we enter 1997, the Fund continues its focus on fundamental research to
identify attractively valued companies with above-average earnings growth. In
addition, we seek special situations, such as turnaround candidates, corporate
restructurings, and other scenarios where we believe the market is not correctly

recognizing a change in corporate fundamentals.

GROWTH OF $10,000 SINCE INCEPTION

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
Columbia Small Cap Fund Russell 2000
<S> <C> <C>
10/01/96 10,000 10,000
10/31/96 10,174 9,846
11/30/96 10,488 10,252
12/31/96 10,762 10,520
Average Annual Total Returns
as of December 31, 1996
CSCF Russell 2000
Since Inception 7.62% 5.20%
Past Performance is not predictive of future
results
</TABLE>

-
7
<PAGE>
INVESTMENT REVIEW
-----------------------------------------------------------------

- ---- ----

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

The Fund enjoyed a total return of 38.30% for the one year ended December 31,
1996. This positive performance was led by investments in the self storage,
office and hotel sectors throughout most of the year. Lagging sectors included
health care and retail, both of which had below-market weightings in the Fund.

Performance during the year was supported by increased investor interest in
REITs (real estate investment trusts). In an environment where the broader stock
market continues to achieve new highs, REITs offer attractive yields and sound
underlying fundamentals for investors looking to structure their portfolios more
defensively.

The Fund continues to seek capital appreciation and above-average current income
for its shareholders by investing primarily in equity securities of companies in
the real estate industry. These companies currently include equity REITs, which
own commercial income properties as well as real estate brokers and developers.

Looking ahead, we believe that the current flow of funds into REITs and a
moderate growth environment will continue to make this fund attractive for

long-term investors.

GROWTH OF $10,000 SINCE INCEPTION

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
National Association of Real
Columbia Real Estate Estate
<S> <C> <C>
Equity Fund Investment Trusts
4/01/94 10,000 10,000
6/30/94 10,134 10,184
9/30/94 9,907 9,976
12/31/94 10,175 9,978
3/31/95 9,967 9,961
6/30/95 10,560 10,547
9/30/95 11,063 11,044
12/31/95 11,891 11,501
3/31/96 12,143 11,762
6/30/96 12,703 12,285
9/30/96 13,897 13,089
12/31/96 16,446 15,556
Average Annual Total Returns as of December 31,
1996
CREF NAREIT
1 Year 38.30% 35.27%
Since Inception 19.44% 17.09%
Past Performance is not predictive of future
results
</TABLE>

-
8
<PAGE>
INVESTMENT REVIEW
-----------------------------------------------------------------

- ---- ----

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

Columbia Balanced Fund produced a total return of 11.78% for the twelve months
ended December 31, 1996. On the stock side of the portfolio, the Fund benefited
from holdings in finance, paper, technology, machinery and REITs (real estate
investment trusts). Insurance, consumer durables, transportation and telephone
sectors were among the laggards.

During the second half of the year, market strength has been concentrated in a
small number of the largest capitalized stocks, penalizing issues we believe
have fundamental strength and valuations that make them attractive on a
long-term basis. Therefore, we continue to focus on these issues as well as
companies with international exposure, in anticipation of an acceleration in
global economic growth for the coming year.

On the bond side of the portfolio, we have maintained a 40% to 45% weighting in
fixed income due to our concerns about the stock market's narrow focus. Early in
the year, however, bonds suffered from price declines as a result of rising
interest rates. We responded to this volatile environment by shortening the
average maturity of the bonds in the portfolio. We also have shifted our fixed
income emphasis to mortgage securities relative to both Treasuries and corporate
bonds because of their yield advantage and high credit quality. Despite the
lagging performance of bonds during the year, we believe that a highly valued
stock market will make fixed income more attractive to investors in 1997. We
also believe that the bond market offers a yield advantage not currently
available on the S&P 500 Index.

GROWTH OF $10,000 SINCE INCEPTION

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
Columbia Balanced Fund S&P 500 Lehman Aggregate
<S> <C> <C> <C>
10/01/91 10,000 10,000 10,000
12/31/91 10,780 10,838 10,507
12/31/92 11,738 11,664 11,285
12/31/93 13,337 12,840 12,385
12/31/94 13,350 13,009 12,023
12/31/95 16,699 17,898 14,244
12/31/96 18,663 22,007 14,761
Average Annual Total Returns as of December 31,
1996
CBF S&P 500 Lehman Aggregate
1 Year 11.78% 22.96% 3.63%
5 Years 11.60% 15.22% 7.04%
Since Inception 12.49% 16.05% 7.62%
Past performance is not predictive of future
results
</TABLE>

-
9
<PAGE>
INVESTMENT REVIEW
-----------------------------------------------------------------

- ---- ----

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

The Fund posted a total return of 4.96% for the twelve months ended December 31,
1996. Early in the year, a stronger than expected economy reversed investors'
beliefs that interest rates would continue their downward trend from the
previous year. As a result, interest rates began to climb in February and
remained volatile throughout the second quarter.

During the second half, a reasonably stable economy, benign inflationary
pressures and a neutral Federal Reserve policy kept interest rates in a narrow
trading range. Consequently, the yield of the Fund has remained very stable
throughout the year. Looking forward, we believe changes in yield will depend
upon Federal Reserve policy, which is driven by inflation rates, investors'
perceptions about economic growth, the dollar's relationship to other
currencies, and the supply/ demand scenario for funds. For example, any signs of
economic growth, coupled with increases in longer term rates, may result in an
increase in short-term interest rates for the coming year.

The Fund continues its policy of maintaining a very high quality portfolio,
investing primarily in commercial paper, U.S. Treasury Bills, U.S. Government
agency discount notes and certificates of deposit, all with maturities less than

one year.

GROWTH OF $10,000 OVER 10 YEARS

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
Consumer Price Index
Columbia Daily Income Company (inflation)
<S> <C> <C>
12/31/1986 10,000 10,000
12/31/1987 10,611 10,491
12/31/1988 11,361 10,918
12/31/1989 12,371 11,458
12/31/1990 13,341 12,201
12/31/1991 14,096 12,547
12/31/1992 14,554 12,929
12/31/1993 14,920 13,269
12/31/1994 15,469 13,618
12/31/1995 16,318 13,977
12/31/1996 17,127 14,437
Average Annual Total Returns
as of December 31, 1996 CDIC CPI
1 Year 4.96% 3.35%
5 Years 3.97% 2.85%
10 Years 5.53% 3.74%
Past Performance is not predictive of future
results
</TABLE>

-
10
<PAGE>
INVESTMENT REVIEW
-----------------------------------------------------------------

- ---- ----

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

The U.S. Government Securities Fund posted a total return of 3.85% for the
twelve months ended December 31, 1996. After enjoying a fine rally in 1995,
bonds across the entire yield curve were battered by a volatile interest rate
environment during 1996.

The stage was set in 1995 with a series of interest rate cuts by the Federal
Reserve Board in order to stimulate a faltering U.S. economy. Market
expectations for lower rates became so pronounced that by January 1996, yields
on three-month Treasury Bills were higher than on longer term, two-year
Treasuries as investors tried to lock in yields before they fell further.
However, interest rate expectations sharply reversed in February, following the
release of a surprisingly strong employment report. Instead of a rate reduction,
investors began to anticipate an interest rate increase, bidding down the price
of most bonds.

We responded to the rising interest rate environment by modestly shortening the
average maturity of the portfolio to between 2.4 years and 2.5 years during the
second quarter. As investors attempted to sort out the future direction of
Federal Reserve policy, interest rates drifted modestly down during the second
half of the year, enabling bonds in the portfolio to recover from earlier
depreciation.

We closed the year by shortening the average maturity of the portfolio to
approximately 2 years, as indications of economic strength became more apparent.
In the event that interest rates rise -- due to demand for funds, concerns about
inflation or expectations of possible Federal Reserve restraint -- we believe

that this more defensive positioning will serve the Fund well.

GROWTH OF $10,000 OVER 10 YEARS

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
Columbia U.S. Government Consumer Price
<S> <C> <C> <C>
Merrill 1-3 Treasury Index
Securities Fund Index (inflation)
12/31/86 10,000 10,000 10,000
12/31/87 10,414 10,565 10,491
12/31/88 10,970 11,223 10,918
12/31/89 12,027 12,443 11,458
12/31/90 13,144 13,654 12,201
12/31/91 14,816 15,249 12,547
12/31/92 15,676 16,209 12,929
12/31/93 16,603 17,086 13,269
12/31/94 16,598 17,184 13,618
12/31/95 18,293 19,074 13,977
12/31/96 18,998 20,020 14,437
Average Annual Total Returns
as of December 31, 1996
CUSG Merrill 1-3
1 Year 3.85% 4.98%
5 Years 5.10% 5.60%
10 Years 6.63% 7.19%
Past performance is not predictive of future
results
</TABLE>

-
11
<PAGE>
INVESTMENT REVIEW
-----------------------------------------------------------------

- ---- ----

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

The total return for the Fixed Income Securities Fund was 3.37% for the twelve
months ended December 31, 1996. During the first six months of the year, the
bond market suffered from a rising interest rate environment, and as interest
rates rise, prices on existing bonds generally fall. Thanks to a recovering bond
market during the second half of the year, however, the Fund was able to recover
from its earlier retraction.

Bond prices rallied in response to controlled economic growth, stable commodity
prices (such as precious metals and grains), benign inflationary pressures and a
neutral Federal Reserve policy. However, fixed income returns depend upon
investors' expectations for future inflation and economic growth. Nevertheless,
with moderate inflation expected for the coming year, we believe bonds are
fairly valued. Interest rates should remain in a narrow trading range unless
economic growth rapidly accelerates and inflationary pressures (particularly
labor costs) rise.

In preparing for the coming year, we have shifted to an above-market weighting
in mortgage securities relative to both Treasuries and corporate bonds because
of their yield advantage and high credit quality.

The Fund continues to maintain a standard of high quality, with 88% of the
portfolio rated A or higher. At year-end, average maturity had been shortened to
approximately 6 years and the fund's duration (a measure of risk) was around 4.6

years.

GROWTH OF $10,000 OVER 10 YEARS

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
Columbia Fixed Income Lehman Consumer Price
<S> <C> <C> <C>
Index
Securities Fund Aggregate (inflation)
12/31/1986 10,000 10,000 10,000
12/31/1987 10,135 10,276 10,491
12/31/1988 10,917 11,087 10,918
12/31/1989 12,484 12,698 11,458
12/31/1990 13,520 13,835 12,201
12/31/1991 15,797 16,049 12,547
12/31/1992 17,059 17,237 12,929
12/31/1993 18,845 18,917 13,269
12/31/1994 18,212 18,365 13,618
12/31/1995 21,656 21,757 13,977
12/31/1996 22,384 22,546 14,437
Average Annual Total Returns
as of December 31, 1996
Lehman
CFIS Aggregate
1 Year 3.37% 3.63%
5 Years 7.22% 7.04%
10 Years 8.39% 8.47%
Past Performance is not predictive of future
results
</TABLE>

-
12
<PAGE>
INVESTMENT REVIEW
-----------------------------------------------------------------

- ---- ----

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

Columbia Municipal Bond Fund's total return for the 1996 year was 3.77%. As the
market adjusted to investors' expectations for a stronger economy and interest
rates rose, the performance of bonds was held back during much of the year. The
Fund picked up most of its return during the fourth quarter, as interest rates
fell slightly on mixed economic reports and the market's perception that the
Federal Reserve Board would not raise interest rates.

During the year, low unemployment and strong growth in Oregon continued to
contribute to a flourishing local economy and improving credit quality for
municipal issues. There may be some pressure on local finances in the future as
the state grapples with the effects of Measure 47. Although the measure rolls
back property taxes, we believe that it will not significantly impact the
long-term credit quality of issues in the State.

We continue to structure the portfolio using high quality instruments with over
95% of the Fund's securities rated A or higher at year-end. The Fund's effective
average maturity remains intermediate-term at about 8 years. Fund duration (a
measure of risk) continues to hover around 6.5 years.

The Fund remains broadly diversified with a total of 236 bonds, including 227
different issues within the State of Oregon. As always, we are committed to
providing shareholders with high, after-tax returns while maintaining a low

level of both credit and volatility risk.

GROWTH OF $10,000 OVER 10 YEARS

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
Columbia Municipal Lehman General Consumer Price
<S> <C> <C> <C>
Index
Bond Fund Obligation Index (inflation)
12/31/1986 10,000 10,000 10,000
12/31/1987 10,123 10,154 10,491
12/31/1988 11,155 10,933 10,918
12/31/1989 12,153 12,038 11,458
12/31/1990 12,990 12,853 12,201
12/31/1991 14,514 14,318 12,547
12/31/1992 15,452 15,574 12,929
12/31/1993 17,109 17,401 13,269
12/31/1994 16,309 16,587 13,618
12/31/1995 18,616 19,267 13,977
12/31/1996 19,319 20,185 14,437
Average Annual Total Returns
as of December 31, 1996
CMBF Lehman G.O.
1 Year 3.77% 4.74%
5 Years 5.89% 7.10%
10 Years 6.81% 7.28%
Past performance is not predictive of future
results
</TABLE>

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

- ---- ----

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

[LOGO]

Columbia High Yield Fund returned 9.43% during 1996, solid performance during a
year when bonds along the entire yield curve were held back by rising interest
rates. Despite the challenging environment, Columbia High Yield Fund
significantly outperformed investment-grade bonds throughout the year, as yields
on high yield bonds declined and prices appreciated.

By mid-year, the bond market began to rally as the economy displayed signs of
slowing and investors no longer worried that the Federal Reserve would increase
rates. The rally proceeded through the end of November, and many bonds were able
to recover from previous losses. In December, however, new economic indicators
revealed that the economy was stronger than the bond market had been expecting.
Although bonds once again declined, the Fund did not decline by as much as
investment-grade bonds and, in fact, posted a modest gain in December.

Because the Fund focuses on "upper tier" non-investment grade securities, it did
not perform as well as the broader universe of junk bond funds. However, this
strategy helps the Fund to outperform when the broader junk bond market is out
of favor.

In keeping with the Fund's more conservative nature, just over half the
portfolio was rated Ba or higher on December 31, with 49% of the bonds rated B
by Moody's Investors Services. The Fund's average maturity and duration were

modestly shortened by year end to 4.7 years and 3.9 years, respectively.

GROWTH OF $10,000 SINCE INCEPTION

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
Columbia High Yield Fund Lipper High Yield Bond Fund Index Salomon BB
<S> <C> <C> <C>
10/1/1993 10,000 10,000 10,000
12/31/1993 10,112 10,498 10,185
3/31/1994 9,909 10,387 9,938
6/30/1994 9,845 10,249 9,840
9/30/1994 10,018 10,246 10,007
12/31/1994 10,019 10,112 10,047
3/31/1995 10,521 10,606 10,693
6/30/1995 11,106 11,165 11,454
9/30/1995 11,462 11,550 11,799
12/31/1995 11,935 11,870 12,321
3/31/1996 12,005 12,173 12,346
6/30/1996 12,032 12,368 12,431
9/30/1996 12,564 12,942 12,856
12/31/1996 13,059 13,372 13,428
Average Annual Total Returns
as of December 31, 1996
CHYF Salomon BB Lipper HYBF
1 Year 9.43% 8.99% 12.66%
Since Inception 8.42% 9.34% 9.20%
Past Performance is not predictive of future
results
</TABLE>

-
14
<PAGE>
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD

- ---- ----

-- COLUMBIA COMMON STOCK FUND, INC. --
--------------------------------------

<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $18.59 $15.16 $15.29 $14.04 $13.15
Income from investment operations:
Net investment income..................................... .25 .26 .27 .22 .24
Net realized and unrealized gains on investments.......... 3.61 4.38 .04 2.08 1.06
- --------------------------------------------------------------------------------------------------------------------
Total from investment operations........................ 3.86 4.64 .31 2.30 1.30
- --------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends (from net investment income).................... (.23) (.26) (.25) (.21) (.24)
Distributions (from capital gains)........................ (2.96) (.95) (.19) (.84) (.17)
- --------------------------------------------------------------------------------------------------------------------
Total distributions..................................... (3.19) (1.21) (.44) (1.05) (.41)
Net asset value, end of period $19.26 $18.59 $15.16 $15.29 $14.04
Total return................................................ 20.71% 30.84% 2.06% 16.44% 9.99%
Ratios/Supplemental data
Net assets, end of period (in thousands).................... $536,760 $358,523 $124,263 $100,715 $51,049
Ratio of expenses to average net assets..................... .76% .80% .84% .84% .86%
Ratio of net investment income to average net assets........ 1.32% 1.68% 1.82% 1.48% 1.97%
Portfolio turnover rate..................................... 111.39% 75.36% 64.21% 90.90% 67.83%
Average commission rate paid on portfolio transactions
(1)........................................................ $0.0601
</TABLE>

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

-
15
<PAGE>
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD

- ---- ----

-- COLUMBIA GROWTH FUND, INC. --
--------------------------------

<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $29.84 $24.84 $26.38 $26.18 $26.26
Income from investment operations:
Net investment income..................................... .19 .31 .29 .16 .17
Net realized and unrealized gains (losses) on
investments.............................................. 6.04 7.86 (.46) 3.24 2.93
- ---------------------------------------------------------------------------------------------------------------------
Total from investment operations........................ 6.23 8.17 (.17) 3.40 3.10
- ---------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends (from net investment income).................... (.17) (.29) (.26) (.18) (.20)
Distributions (from capital gains)........................ (5.14) (2.87) (1.11) (2.98) (2.98)
Distributions (in excess of capital gains)................ (.02) (.01) (.04)
- ---------------------------------------------------------------------------------------------------------------------
Total distributions..................................... (5.33) (3.17) (1.37) (3.20) (3.18)
Net asset value, end of period $30.74 $29.84 $24.84 $26.38 $26.18
Total return................................................ 20.80% 32.98% -.63% 13.01% 11.82%
Ratios/Supplemental data
Net assets, end of period (in thousands).................... $1,064,100 $848,731 $591,694 $605,401 $518,366
Ratio of expenses to average net assets..................... .71% .75% .81% .82% .86%
Ratio of net investment income to average net assets........ .63% 1.14% 1.12% .66% .77%
Portfolio turnover rate..................................... 75.49% 94.73% 79.28% 105.64% 116.38%
Average commission rate paid on portfolio transactions
(1)........................................................ $0.0590
</TABLE>

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

-
16
<PAGE>
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD

- ---- ----

-- COLUMBIA INTERNATIONAL STOCK FUND, INC. --
---------------------------------------------

<TABLE>
<CAPTION>
1996 1995 1994 1993 1992(1)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $13.07 $12.43 $12.96 $9.95 $10.00
Income from investment operations:
Net investment income (loss).............................. .03 .02 (.02) (.02) (.03)
Net realized and unrealized gains (losses) on investments
and foreign currency transactions........................ 2.13 .62 (.30) 3.34 .11
- --------------------------------------------------------------------------------------------------------------------
Total from investment operations........................ 2.16 .64 (.32) 3.32 .08
- --------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends (from net investment income).................... (.03)
Dividends (in excess of net investment income)............ (.20)
Distributions (from capital gains)........................ (1.14) (.21) (.31) (.13)(2)
- --------------------------------------------------------------------------------------------------------------------
Total distributions..................................... (1.37) -- (.21) (.31) (.13)
Net asset value, end of period $13.86 $13.07 $12.43 $12.96 $9.95
Total return................................................ 16.59% 5.15% -2.47% 33.37% .60%(3)
Ratios/Supplemental data
Net assets, end of period (in thousands).................... $125,510 $100,873 $118,484 $73,047 $9,745
Ratio of expenses to average net assets..................... 1.54% 1.54% 1.52% 1.71% 2.22%
Ratio of net investment income (loss) to average net
assets..................................................... .22% .15% (.21)% (.62)% (1.28)%
Portfolio turnover rate..................................... 129.40% 156.09% 138.79% 144.78% 25.75%
Average commission rate paid on portfolio transactions
(4)........................................................ $0.0011
</TABLE>

(1) From inception of operations on September 10, 1992. Ratios and portfolio
turnover rates are annualized.
(2) Includes amounts distributed from net realized gains on foreign currency
transactions taxable as ordinary income.
(3) Not annualized.
(4) The average commission rate paid by the fund is computed by dividing the
dollar amount of commissions paid during the period by the total number of
shares purchased and sold during the period for which commissions were
charged.

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

-
17
<PAGE>
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD

- ---- ----

-- COLUMBIA SPECIAL FUND, INC. --
---------------------------------

<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $21.44 $18.69 $19.51 $18.79 $17.45
Income from investment operations:
Net investment income (loss).............................. (.06) .03 .08 .01 (.03)
Net realized and unrealized gains on investments.......... 2.85 5.45 .36 4.04 2.41
- ----------------------------------------------------------------------------------------------------------------------
Total from investment operations........................ 2.79 5.48 .44 4.05 2.38
- ----------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends (from net investment income).................... (.02) (.07)
Dividends (in excess of net investment income)............ (.01)
Distributions (from capital gains)........................ (4.38) (2.68) (1.16) (3.32) (1.04)
Distributions (in excess of capital gains)................ (.03) (.03)
- ----------------------------------------------------------------------------------------------------------------------
Total distributions..................................... (4.38) (2.73) (1.26) (3.33) (1.04)
Net asset value, end of period $19.85 $21.44 $18.69 $19.51 $18.79
Total return................................................ 13.07% 29.53% 2.29% 21.68% 13.70%
Ratios/Supplemental data
Net assets, end of period (in thousands).................... $1,585,284 $1,384,415 $889,526 $772,741 $470,663
Ratio of expenses to average net assets..................... .94% .98% 1.05% 1.12% 1.19%
Ratio of net investment income (loss) to average net
assets..................................................... (.29)% .16% .40% .01% (.25)%
Portfolio turnover rate..................................... 150.07% 182.99% 178.91% 154.68% 116.75%
Average commission rate paid on portfolio transactions
(1)........................................................ $0.0553
</TABLE>

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

-
18
<PAGE>
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD

- ---- ----

-- COLUMBIA SMALL CAP FUND, INC. --
-----------------------------------

<TABLE>
<CAPTION>
1996(1)
<S> <C>
Net asset value, beginning of period $12.00
Income from investment operations:
Net realized and unrealized gains on investments............................................................ .99
- -------------------------------------------------------------------------------------------------------------------------
Total from investment operations.......................................................................... .99
Net asset value, end of period $12.99
Total return.................................................................................................. 7.62% (2)
Ratios/Supplemental data
Net assets, end of period (in thousands)...................................................................... $21,061
Ratio of expenses to average net assets....................................................................... 1.61%
Ratio of net investment income to average net assets.......................................................... 0.00%
Portfolio turnover rate....................................................................................... 32.57%
Average commission rate paid on portfolio transactions (3).................................................... $0.0546
</TABLE>

(1) From inception of operations on September 11, 1996. Ratios and portfolio
turnover rates are annualized.
(2) Not annualized.
(3) The average commission rate paid by the fund is computed by dividing the
dollar amount of commissions paid during the period by the total number of
shares purchased and sold during the period for which commissions were
charged.

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

-
19
<PAGE>
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD

- ---- ----

-- COLUMBIA REAL ESTATE EQUITY FUND, INC. --
--------------------------------------------

<TABLE>
<CAPTION>
1996 1995 1994(1)
<S> <C> <C> <C>
Net asset value, beginning of period $12.71 $11.72 $12.00
Income from investment operations:
Net investment income.............................................................. .77 .78 .49
Net realized and unrealized gains (losses) on investments.......................... 3.94 1.12 (.27 )
- -----------------------------------------------------------------------------------------------------------------------
Total from investment operations................................................. 4.71 1.90 .22
- -----------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends (from net investment income)............................................. (.52) (.49) (.31 )
Dividends (in excess of net investment income)..................................... (.01 )
Distributions (from capital gains)................................................. (.41)
Distributions (in excess of capital gains)......................................... (.12) (.14)
Tax return of capital.............................................................. (.21) (.28) (.18 )
- -----------------------------------------------------------------------------------------------------------------------
Total distributions.............................................................. (1.26) (.91) (.50 )
Net asset value, end of period $16.16 $12.71 $11.72
Total return......................................................................... 38.30% 16.86% 1.76% (2)
Ratios/Supplemental data
Net assets, end of period (in thousands)............................................. $68,073 $21,587 $17,402
Ratio of expenses to average net assets.............................................. 1.06% 1.18% 1.14%
Ratio of net investment income to average net assets................................. 6.23% 6.71% 6.28%
Portfolio turnover rate.............................................................. 45.82% 53.91% 7.61%
Average commission rate paid on portfolio transactions (3)........................... $0.0594
</TABLE>

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

-
20
<PAGE>
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD

- ---- ----

-- COLUMBIA BALANCED FUND, INC. --
----------------------------------

<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $20.08 $17.28 $17.91 $16.80 $16.05
Income from investment operations:
Net investment income..................................... .76 .73 .65 .56 .58
Net realized and unrealized gains (losses) on
investments.............................................. 1.58 3.54 (.64) 1.71 .82
- --------------------------------------------------------------------------------------------------------------------
Total from investment operations........................ 2.34 4.27 .01 2.27 1.40
- --------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends (from net investment income).................... (.76) (.73) (.64) (.56) (.57)
Dividends (in excess of net investment income)............ (.01)
Distributions (from capital gains)........................ (1.34) (.74) (.59) (.08)
- --------------------------------------------------------------------------------------------------------------------
Total distributions..................................... (2.10) (1.47) (.64) (1.16) (.65)
Net asset value, end of period $20.32 $20.08 $17.28 $17.91 $16.80
Total return................................................ 11.78% 25.08% .10% 13.62% 8.89%
Ratios/Supplemental data
Net assets, end of period (in thousands).................... $672,593 $486,767 $249,670 $186,589 $90,230
Ratio of expenses to average net assets..................... .66% .69% .72% .73% .81%
Ratio of net investment income to average net assets........ 3.82% 4.05% 3.82% 3.32% 4.08%
Portfolio turnover rate..................................... 133.21% 108.04% 98.48% 107.60% 138.08%
Average commission rate paid on portfolio transactions
(1)........................................................ $0.0596
</TABLE>

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

-
21
<PAGE>
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD

- ---- ----

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

<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
Income from investment operations:
Net investment income..................................... .048 .053 .036 .025 .032
- --------------------------------------------------------------------------------------------------------------------
Total from investment operations........................ .048 .053 .036 .025 .032
- --------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends (from net investment income).................... (.048) (.053) (.036) (.025) (.032)
- --------------------------------------------------------------------------------------------------------------------
Total distributions..................................... (.048) (.053) (.036) (.025) (.032)
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00
Total return................................................ 4.96% 5.49% 3.68% 2.51% 3.25%
Ratios/Supplemental data
Net assets, end of period (in thousands).................... $889,800 $800,656 $730,067 $544,500 $591,186
Ratio of expenses to average net assets..................... .62% .64% .70% .75% .71%
Ratio of net investment income to average net assets........ 4.84% 5.34% 3.68% 2.49% 3.22%
</TABLE>

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

-
22
<PAGE>
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD

- ---- ----

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

<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $8.34 $7.99 $8.36 $8.35 $8.47
Income from investment operations:
Net investment income..................................... .41 .45 .37 .32 .39
Net realized and unrealized gains (losses) on
investments.............................................. (.10) .35 (.37) .17 .09
- --------------------------------------------------------------------------------------------------------------------
Total from investment operations........................ .31 .80 -- .49 .48
- --------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends (from net investment income).................... (.41) (.45) (.37) (.32) (.39)
Distributions (from capital gains)........................ (.16) (.21)
- --------------------------------------------------------------------------------------------------------------------
Total distributions..................................... (.41) (.45) (.37) (.48) (.60)
Net asset value, end of period $8.24 $8.34 $7.99 $8.36 $8.35
Total return................................................ 3.85% 10.21% -.03% 5.91% 5.81%
Ratios/Supplemental data
Net assets, end of period (in thousands).................... $40,776 $41,842 $33,512 $35,877 $35,479
Ratio of expenses to average net assets..................... .80% .79% .81% .75% .76%
Ratio of net investment income to average net assets........ 4.99% 5.45% 4.51% 3.74% 4.60%
Portfolio turnover rate..................................... 179.38% 253.17% 253.80% 254.59% 289.05%
</TABLE>

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

-
23
<PAGE>
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD

- ---- ----

-- COLUMBIA FIXED INCOME SECURITIES FUND, INC. --
-------------------------------------------------

<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $13.51 $12.16 $13.44 $13.28 $13.59
Income from investment operations:
Net investment income..................................... .85 .88 .83 .85 .95
Net realized and unrealized gains (losses) on
investments.............................................. (.43) 1.35 (1.28) .52 .09
- --------------------------------------------------------------------------------------------------------------------
Total from investment operations........................ 0.42 2.23 (.45) 1.37 1.04
- --------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends (from net investment income).................... (.85) (.88) (.83) (.85) (.95)
Distributions (from capital gains)........................ (.36) (.40)
- --------------------------------------------------------------------------------------------------------------------
Total distributions..................................... (.85) (.88) (.83) (1.21) (1.35)
Net asset value, end of period $13.08 $13.51 $12.16 $13.44 $13.28
Total return................................................ 3.37% 18.91% -3.36% 10.47% 7.99%
Ratios/Supplemental data
Net assets, end of period (in thousands).................... $356,421 $316,259 $252,090 $300,532 $262,647
Ratio of expenses to average net assets..................... .64% .65% .66% .66% .66%
Ratio of net investment income to average net assets........ 6.53% 6.80% 6.53% 6.14% 7.03%
Portfolio turnover rate..................................... 178.25% 137.41% 139.81% 118.80% 195.67%
</TABLE>

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

-
24
<PAGE>
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD

- ---- ----

-- COLUMBIA MUNICIPAL BOND FUND, INC. --
----------------------------------------

<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $12.37 $11.48 $12.71 $12.17 $12.22
Income from investment operations:
Net investment income..................................... .61 .63 .64 .66 .69
Net realized and unrealized gains (losses) on
investments.............................................. (.16) .96 (1.23) .62 .07
- --------------------------------------------------------------------------------------------------------------------
Total from investment operations........................ .45 1.59 (.59) 1.28 .76
- --------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends (from net investment income) (1)................ (.61) (.63) (.64) (.66) (.69)
Distributions (from capital gains)........................ (.06) (.07) (.08) (.12)
- --------------------------------------------------------------------------------------------------------------------
Total distributions..................................... (.67) (.70) (.64) (.74) (.81)
Net asset value, end of period $12.15 $12.37 $11.48 $12.71 $12.17
Total return................................................ 3.77% 14.15% -4.68% 10.73% 6.46%
Ratios/Supplemental data
Net assets, end of period (in thousands).................... $375,667 $383,796 $339,817 $430,367 $341,924
Ratio of expenses to average net assets..................... .56% .57% .57% .58% .59%
Ratio of net investment income to average net assets........ 5.00% 5.22% 5.36% 5.25% 5.69%
Portfolio turnover rate..................................... 19.03% 21.45% 19.40% 9.92% 17.82%
</TABLE>

(1) 100% exempt from federal taxation.

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

-
25
<PAGE>
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD

- ---- ----

-- COLUMBIA HIGH YIELD FUND, INC. --
------------------------------------

<TABLE>
<CAPTION>
1996 1995 1994 1993(1)
<S> <C> <C> <C> <C>
Net asset value, beginning of period $9.88 $9.04 $9.94 $10.00
Income from investment operations:
Net investment income.................................................... .81 .82 .80 .18
Net realized and unrealized gains (losses) on investments................ .07 .84 (.90) (.06)
- ------------------------------------------------------------------------------------------------------------------------
Total from investment operations....................................... .88 1.66 (.10) .12
- ------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends (from net investment income)................................... (.81) (.82) (.80) (.18)
Distributions (from capital gains)....................................... (.01)
- ------------------------------------------------------------------------------------------------------------------------
Total distributions.................................................... (.82) (.82) (.80) (.18)
Net asset value, end of period $9.94 $9.88 $9.04 $9.94
Total return............................................................... 9.43% 19.12% -.92% 1.12%(2)
Ratios/Supplemental data
Net assets, end of period (in thousands)................................... $28,818 $23,471 $12,834 $5,940
Ratio of expenses to average net assets (3)................................ 0.93% 1.00% 1.00% 1.00%
Ratio of net investment income to average net assets....................... 8.29% 8.62% 8.69% 7.30%
Portfolio turnover rate.................................................... 62.27% 51.60% 36.67% 0.00%
</TABLE>

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

-
26
<PAGE>
SCHEDULE OF INVESTMENTS
-----------------------------------------------------------------

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

-- COLUMBIA COMMON STOCK FUND, INC. --
------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares or
Principal
December 31, 1996 Amount Value(1)
------------- --------------
<S> <C> <C>
Common Stocks (95.0%)
Banking & Finance (9.4%)
American Express Co. ................................................................. 100,900 $ 5,700,850
BankAmerica Corp. .................................................................... 73,800 7,361,550
First Chicago NBD Corp. .............................................................. 100,000 5,375,000
Great Western Financial Corp. ........................................................ 233,600 6,774,400
Morgan (J.P.) & Co., Inc. ............................................................ 74,300 7,253,537
NationsBank Corp. .................................................................... 52,500 5,131,875
PNC Bank Corp. ....................................................................... 157,900 5,940,988
U.S. Bancorp.......................................................................... 154,800 6,956,325
--------------
50,494,525
--------------
Building & Forestry Products (4.1%)
Champion International Corp. ......................................................... 258,100 11,162,825
Willamette Industries, Inc. .......................................................... 151,200 10,527,300
--------------
21,690,125
--------------
Business & Consumer Services (5.0%)
*ADT Ltd. ............................................................................ 330,000 7,548,750
Electronic Data Systems Corp. ........................................................ 229,500 9,925,875
Service Corp. Int'l. ................................................................. 337,500 9,450,000
--------------
26,924,625
--------------
Chemical (4.8%)
Grace (W.R.) & Co. ................................................................... 119,100 6,163,425
Hercules, Inc. ....................................................................... 171,100 7,400,075
IMC Global, Inc. ..................................................................... 183,000 7,159,875
Monsanto Co. ......................................................................... 126,700 4,925,462
--------------
25,648,837
--------------
Consumer Durable (3.6%)
Ford Motor Co. ....................................................................... 252,000 8,032,500
General Motors Corp. ................................................................. 200,000 11,150,000
--------------
19,182,500
--------------
Consumer Non-Durable (11.1%)
*Circus Circus Enterprises, Inc. ..................................................... 148,700 5,111,562
*Federated Department Stores, Inc. ................................................... 166,000 5,664,750
Marriott International, Inc. ......................................................... 97,000 5,359,250
Mattel, Inc. ......................................................................... 186,250 5,168,437
*Meyer (Fred), Inc. .................................................................. 300,000 10,650,000
Penney (J.C.), Inc. .................................................................. 109,200 5,323,500
*Price/Costco, Inc. .................................................................. 400,000 10,050,000
Rite Aid Corp. ....................................................................... 147,200 5,851,200
Rykoff-Sexton, Inc. .................................................................. 152,000 2,413,000
Sears, Roebuck & Co. ................................................................. 84,100 3,879,113
--------------
59,470,812
--------------

<CAPTION>
Shares or
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
Consumer Staples (4.0%)
Gillette Co. ......................................................................... 72,500 $ 5,636,875
Nabisco Holdings Corp. (Class A)...................................................... 127,000 4,937,125
PepsiCo, Inc. ........................................................................ 200,000 5,850,000
Procter & Gamble Co. ................................................................. 47,900 5,149,250
--------------
21,573,250
--------------
Energy (7.1%)
Amoco Corp. .......................................................................... 131,100 10,553,550
Mobil Corp. .......................................................................... 90,800 11,100,300
Royal Dutch Petroleum Co. ADR......................................................... 62,400 10,654,800
Union Pacific Resources Group, Inc. .................................................. 200,000 5,850,000
--------------
38,158,650
--------------
Entertainment & Media (1.7%)
Time Warner, Inc. .................................................................... 121,700 4,563,750
*Viacom, Inc. (Class B)............................................................... 135,500 4,725,562
--------------
9,289,312
--------------
Health (8.3%)
American Home Products Corp. ......................................................... 86,000 5,041,750
Bausch & Lomb, Inc. .................................................................. 156,000 5,460,000
Baxter International, Inc. ........................................................... 148,400 6,084,400
Johnson & Johnson..................................................................... 103,000 5,124,250
Merck & Co., Inc. .................................................................... 73,000 5,785,250
Pfizer, Inc. ......................................................................... 64,000 5,304,000
Pharmacia & Upjohn, Inc. ............................................................. 161,300 6,391,512
Warner-Lambert Co. ................................................................... 73,500 5,512,500
--------------
44,703,662
--------------
Insurance (3.2%)
Berkley (W.R.) Corp. ................................................................. 100,000 5,075,000
NAC Re Corp. ......................................................................... 60,400 2,046,050
TIG Holdings, Inc. ................................................................... 293,100 9,928,763
--------------
17,049,813
--------------
Machinery & Capital Spending (7.8%)
Case Corp. ........................................................................... 133,000 7,248,500
Caterpillar, Inc. .................................................................... 108,000 8,127,000
Deere & Co. .......................................................................... 206,700 8,397,188
Emerson Electric Co. ................................................................. 82,000 7,933,500
General Electric Co. ................................................................. 52,400 5,181,050
Honeywell, Inc. ...................................................................... 76,300 5,016,725
--------------
41,903,963
--------------
Metal Mining & Steel (6.4%)
Aluminum Company of America........................................................... 200,000 12,750,000
Homestake Mining Co. ................................................................. 708,000 10,089,000
</TABLE>

-
27
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-----------------------------------------------------------------

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

-- COLUMBIA COMMON STOCK FUND, INC. --
------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares or
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
</TABLE>

Common Stocks (Continued)
<TABLE>
<S> <C> <C>
Newmont Mining Corp. ................................................................. 187,500 $ 8,390,625
Worthington Industries, Inc. ......................................................... 169,000 3,063,125
--------------
34,292,750
--------------
Real Estate Securities (8.9%)
American Health Properties, Inc. ..................................................... 120,000 2,865,000
Associated Estates Realty Corp. ...................................................... 157,400 3,738,250
Beacon Properties Corp. .............................................................. 124,100 4,545,162
Cali Realty Corp. .................................................................... 94,000 2,902,250
Equity Residential Properties Trust................................................... 125,000 5,156,250
First Industrial Realty Trust, Inc. .................................................. 150,000 4,556,250
Highwoods Properties, Inc. ........................................................... 73,000 2,463,750
JP Realty, Inc. ...................................................................... 106,500 2,755,688
Liberty Property Trust................................................................ 120,000 3,090,000
Manufactured Home Communities, Inc. .................................................. 49,000 1,139,250
National Health Investors, Inc. ...................................................... 100,000 3,787,500
Simon Debartolo Group, Inc. .......................................................... 190,400 5,902,400
Spieker Properties, Inc. ............................................................. 79,000 2,844,000
Sun Communities, Inc. ................................................................ 50,400 1,738,800
--------------
47,484,550
--------------
Technology (6.5%)
Adobe Systems, Inc. .................................................................. 253,000 9,455,875
Ericsson (L.M.) Telephone Co. (Class B) ADR........................................... 200,000 6,037,500
Intel Corp. .......................................................................... 45,000 5,892,188
International Business Machines Corp. ................................................ 33,500 5,058,500
Motorola, Inc. ....................................................................... 140,000 8,592,500
--------------
35,036,563
--------------
<CAPTION>
Shares or
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
Utilities/Communications (1.0%)
Frontier Corp. ....................................................................... 244,300 $ 5,527,288
--------------
Utilities/Electric/Gas (2.1%)
Central & South West Corp. ........................................................... 160,000 4,100,000
Idaho Power Co. ...................................................................... 236,600 7,364,175
--------------
11,464,175
--------------
Total Common Stocks
(Cost $449,007,291) ................................................................. 509,895,400
--------------
Repurchase Agreement (4.1%)
Goldman Sachs Corp.
6.354% dated 12/31/96,
due 01/02/1997 in the
amount of $22,295,837.
Collateralized by U.S. Treasury Bond
6.500% due 11/15/2026
(Cost $22,288,098)................................................................... $ 22,288,098 22,288,098
--------------
Total Investments (99.1%)
(Cost $471,295,389)...................................................................... 532,183,498
Receivables less liabilities (0.9%)....................................................... 4,576,304
--------------
Net Assets (100.0%)....................................................................... $ 536,759,802
--------------
--------------
</TABLE>

(1) See Note 1 of Notes to Financial Statements.
* Non-income producing

The accompanying notes are an integral part
of the financial statements.

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

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

-- COLUMBIA GROWTH FUND, INC. --
-------------------------------------------------
<TABLE>
<CAPTION>
Shares or
Principal
December 31, 1996 Amount Value(1)
------------- --------------
<S> <C> <C>
Common Stocks (98.5%)
Aerospace (1.0%)
Boeing Co. ........................................................................... 102,980 $ 10,954,497
--------------
Banking & Finance (8.7%)
BankAmerica Corp. .................................................................... 100,000 9,975,000
Barnett Banks, Inc. .................................................................. 200,000 8,225,000
Bear Stearns Cos., Inc. .............................................................. 204,021 5,687,085
Dean Witter, Discover & Co. .......................................................... 125,440 8,310,400
Federal Home Loan Mortgage Corp. ..................................................... 177,300 19,525,163
Federal National Mortgage Assn. ...................................................... 306,800 11,428,300
Morgan Stanley Group, Inc. ........................................................... 200,000 11,425,000
NationsBank Corp. .................................................................... 189,700 18,543,175
--------------
93,119,123
--------------
Building & Forestry Products (1.2%)
*Crown Vantage, Inc. ................................................................. 376,320 3,198,720
Mead Corp. ........................................................................... 156,600 9,102,375
--------------
12,301,095
--------------
Business & Consumer Services (5.1%)
*Computer Sciences Corp. ............................................................. 175,400 14,404,725
Danka Business Systems plc ADR........................................................ 125,000 4,421,875
Electronic Data Systems Corp. ........................................................ 200,900 8,688,925
*FIserv, Inc. ........................................................................ 260,000 9,555,000
*Mail-Well, Inc. ..................................................................... 400,000 6,550,000
Service Corp. Int'l. ................................................................. 398,300 11,152,400
--------------
54,772,925
--------------
Chemical (2.5%)
Grace (W.R.) & Co. ................................................................... 269,900 13,967,325
Hercules, Inc. ....................................................................... 300,000 12,975,000
--------------
26,942,325
--------------
Consumer Durable (1.0%)
Chrysler Corp. ....................................................................... 158,800 5,240,400
General Motors Corp. ................................................................. 94,500 5,268,375
--------------
10,508,775
--------------
Consumer Non-Durable (21.0%)
American Stores Co. .................................................................. 100,000 4,087,500
*Central Tractor Farm & Country, Inc. ................................................ 210,100 2,888,875
*Consolidated Stores Corp. ........................................................... 375,000 12,093,750
*Corporate Express, Inc. ............................................................. 357,300 10,518,018
*Dollar Tree Stores, Inc. ............................................................ 140,000 5,355,000
*Federated Department Stores, Inc. ................................................... 615,000 20,986,875
*HFS, Inc. ........................................................................... 425,000 25,393,750
Mattel, Inc. ......................................................................... 500,000 13,875,000
*Neiman-Marcus Group, Inc. ........................................................... 400,000 10,200,000

<CAPTION>
Shares or
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
*Price/Costco, Inc. .................................................................. 300,000 $ 7,537,500
Rite Aid Corp. ....................................................................... 660,325 26,247,919
*Saks Holdings, Inc. ................................................................. 140,600 3,796,200
Sears, Roebuck & Co. ................................................................. 399,800 18,440,775
*Toys "R" Us, Inc. ................................................................... 200,000 6,000,000
Unifi, Inc. .......................................................................... 100,000 3,212,500
*United Auto Group, Inc. ............................................................. 201,900 5,198,925
Warnaco Group, Inc. (Class A)......................................................... 1,600,000 47,400,000
--------------
223,232,587
--------------
Consumer Staples (6.7%)
Gillette Co. ......................................................................... 289,500 22,508,625
Libbey, Inc. ......................................................................... 325,000 9,059,375
Philip Morris Cos., Inc. ............................................................. 229,600 25,858,700
Richfood Holdings, Inc. .............................................................. 162,500 3,940,625
Sunbeam Corp. ........................................................................ 400,000 10,300,000
--------------
71,667,325
--------------
Energy (1.2%)
Anadarko Petroleum Corp. ............................................................. 112,000 7,252,000
Apache Corp. ......................................................................... 113,700 4,022,137
Union Pacific Resources Group, Inc. .................................................. 50,000 1,462,500
--------------
12,736,637
--------------
Energy Services (0.7%)
Schlumberger Ltd. .................................................................... 75,000 7,490,625
--------------
Entertainment & Media (2.0%)
Time Warner, Inc. .................................................................... 400,000 15,000,000
*Viacom, Inc. (Class B)............................................................... 175,000 6,103,125
--------------
21,103,125
--------------
Health (11.4%)
Aetna, Inc. .......................................................................... 195,000 15,600,000
*Amgen, Inc. ......................................................................... 200,000 10,875,000
*Apria Healthcare Group, Inc. ........................................................ 1,778,520 33,347,250
Bausch & Lomb, Inc. .................................................................. 100,000 3,500,000
*BioChem Pharma, Inc. ................................................................ 275,000 13,818,750
*Ethical Holdings Ltd. ADR............................................................ 300,000 1,743,750
*Genesis Health Ventures, Inc. ....................................................... 194,400 6,050,700
*Inhale Therapeutic Systems........................................................... 140,000 2,117,500
Johnson & Johnson..................................................................... 178,500 8,880,375
Merck & Co., Inc. .................................................................... 100,000 7,925,000
*Penederm, Inc. ...................................................................... 172,200 2,130,975
Warner-Lambert Co. ................................................................... 200,000 15,000,000
--------------
120,989,300
--------------
Hotels & Gaming (5.1%)
*Circus Circus Enterprises, Inc. ..................................................... 633,600 21,780,000
</TABLE>

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

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

-- COLUMBIA GROWTH FUND, INC. --
-------------------------------------------------
<TABLE>
<CAPTION>
Shares or
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
</TABLE>

Common Stocks (Continued)
<TABLE>
<S> <C> <C>
*Host Marriott Corp. ................................................................. 400,000 $ 6,400,000
Marriott International, Inc. ......................................................... 127,100 7,022,275
*MGM Grand, Inc. ..................................................................... 50,000 1,743,750
*Rio Hotel & Casino, Inc. ............................................................ 300,400 4,393,350
*Station Casinos, Inc. ............................................................... 1,226,600 12,419,325
--------------
53,758,700
--------------
Insurance (3.9%)
Allstate Corp. ....................................................................... 300,000 17,362,500
American International Group, Inc. ................................................... 96,150 10,408,238
Berkley (W.R.) Corp. ................................................................. 237,500 12,053,125
TIG Holdings, Inc. ................................................................... 50,000 1,693,750
--------------
41,517,613
--------------
Machinery & Capital Spending (5.8%)
Case Corp. ........................................................................... 200,000 10,900,000
Emerson Electric Co. ................................................................. 155,000 14,996,250
General Electric Co. ................................................................. 218,900 21,643,738
*Rockwell International Corp. ........................................................ 240,000 14,610,000
--------------
62,149,988
--------------
Metal Mining & Steel (0.3%)
Aluminum Company of America........................................................... 50,000 3,187,500
--------------
Real Estate Securities (5.6%)
Amli Residential Properties Trust..................................................... 180,500 4,219,187
Arden Realty Group, Inc. ............................................................. 89,000 2,469,750
Beacon Properties Corp. .............................................................. 237,100 8,683,788
Camden Property Trust................................................................. 166,250 4,758,906
Duke Realty Investments, Inc. ........................................................ 84,100 3,237,850
Equity Residential Properties Trust................................................... 219,900 9,070,875
Highwoods Properties, Inc. ........................................................... 200,000 6,750,000
JP Realty, Inc. ...................................................................... 350,000 9,056,250
Public Storage, Inc. ................................................................. 50,000 1,550,000
Simon Debartolo Group, Inc. .......................................................... 144,300 4,473,300
TriNet Corporate Realty Trust, Inc. .................................................. 146,000 5,183,000
--------------
59,452,906
--------------
Technology (14.2%)
Adobe Systems, Inc. .................................................................. 350,300 13,092,462
*Adtran, Inc. ........................................................................ 39,500 1,639,250
*Altera Corp. ........................................................................ 150,000 10,903,125
*Ascend Communications, Inc. ......................................................... 100,000 6,212,500
*Cascade Communications Corp. ........................................................ 100,000 5,512,500
*Cisco Systems, Inc. ................................................................. 170,000 10,816,250
*Compaq Computer Corp. ............................................................... 100,000 7,425,000
Computer Associates International, Inc. .............................................. 140,000 6,965,000
<CAPTION>
Shares or
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
Ericsson (L.M.) Telephone Co. (Class B) ADR........................................... 500,000 $ 15,093,750
*General Instrument Corp. ............................................................ 25,000 540,625
Intel Corp. .......................................................................... 175,000 22,914,063
Motorola, Inc. ....................................................................... 125,800 7,720,975
Nokia Corp. ADR (Class A)............................................................. 200,000 11,525,000
*Oracle Corp. ........................................................................ 328,350 13,708,613
*Tellabs, Inc. ....................................................................... 200,000 7,525,000
*3Com Corp. .......................................................................... 126,600 9,289,275
--------------
150,883,388
--------------
Utilities/Communications (1.1%)
*Paging Network, Inc. ................................................................ 500,000 7,625,000
Vodafone Group plc ADR................................................................ 100,000 4,137,500
--------------
11,762,500
--------------
Total Common Stocks
(Cost $867,008,781) ................................................................. 1,048,530,934
--------------
Convertible Bond (0.3%)
Consumer Non-Durable (0.3%)
Saks Holdings, Inc.
5.500% 09/15/2006
(Cost $3,000,000).................................................................... $ 3,000,000 2,745,000
--------------
Total investments, excluding temporary cash investment
(Cost $870,008,781) ................................................................. 1,051,275,934
--------------
Repurchase Agreement (0.8%)
Goldman Sachs Corp.
6.354% dated 12/31/1996,
due 01/02/1997 in the
amount of $8,045,753.
Collateralized by U.S. Treasury Bond
6.500% due 11/15/2026
(Cost $8,042,960).................................................................... 8,042,960 8,042,960
--------------
Total Investments (99.6%)
(Cost $878,051,741)...................................................................... 1,059,318,894
Receivables less liabilities (0.4%)....................................................... 4,780,625
--------------
Net Assets (100.0%)....................................................................... $1,064,099,519
--------------
--------------
</TABLE>

(1) See Note 1 of Notes to Financial Statements.
* Non-income producing.

The accompanying notes are an integral part
of the financial statements.

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<TABLE>
<CAPTION>
Shares or
Principal
December 31, 1996 Amount Value(1)
------------- --------------
<S> <C> <C>
Common Stocks (86.1%)
Australia (1.8%)
Reinsurance Australia Corp., Ltd. (Insurance)......................................... 570,000 $ 2,218,201
Austria (0.9%)
OMV AG (Oil Exploration & Production)................................................. 5,500 619,625
Oesterreichische Elektrizitaetswirtschafts AG (Verbund) (Class A) (Utilities -
Electric)............................................................................ 7,000 523,482
--------------
1,143,107
--------------
Brazil (1.0%)
Companhia Energetica de Minas Gerais SA, ADR (Utilities - Electric)................... 22,776 773,701
Usinas Siderurgicas de Minas Gerais SA, ADR (Metals, Mining & Steel).................. 45,000 460,350
--------------
1,234,051
--------------
Canada (4.8%)
Bank of Nova Scotia (Banking)......................................................... 40,000 1,337,807
Bombardier, Inc. (Class B) (Manufacturing -
Diversified Inds.)................................................................... 80,000 1,476,403
Canadian Pacific Ltd. (Transportation)................................................ 27,500 723,156
*Future Shop Ltd., The (Retail)....................................................... 16,300 142,680
*Gulf Canada Resources Ltd. (Oil Exploration & Production)............................ 80,000 583,558
Northern Telecom Ltd. (Electronics)................................................... 22,000 1,367,277
Thomson Corp. (Publishing)............................................................ 16,000 353,053
--------------
5,983,934
--------------
Czech Republic (0.3%)
*Central European Media Enterprises Ltd. (Media)...................................... 11,300 358,775
--------------
Denmark (0.5%)
*Inwear Group AS (Retail)............................................................. 13,500 588,829
--------------
Finland (1.3%)
Finnlines Oy (Transportation)......................................................... 34,000 834,836
Rautaruukki Oy (Metals, Mining & Steel)............................................... 82,000 755,481
--------------
1,590,317
--------------
France (4.5%)
BIC SA (Consumer Products)............................................................ 3,000 449,538
Carrefour SA (Retail)................................................................. 1,200 780,277
Cie Financiere de Paribas SA (Financial Services)..................................... 6,600 446,059
Hermes International SA (Consumer Products)........................................... 1,200 332,820
L'Oreal SA (Consumer Products)........................................................ 1,300 489,253

<CAPTION>
Shares or
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
LVMH Moet Hennessy Louis Vuitton SA (Consumer Products)............................... 1,200 $ 334,900
Pinault-Printemps-Redoute SA (Retail)................................................. 1,400 554,931
Salomon SA (Entertainment & Leisure).................................................. 5,500 471,398
SEB SA (Consumer Products)............................................................ 4,000 783,513
Synthelabo SA (Pharmaceuticals)....................................................... 3,600 388,983
Total SA (Class B) (Oil Exploration & Production)..................................... 7,000 568,952
--------------
5,600,624
--------------
Germany (4.0%)
Bayer AG (Chemicals).................................................................. 50,000 2,040,286
Gehe AG (Wholesale Distributor)....................................................... 10,000 640,026
Mannesmann AG (Machinery & Capital Spending).......................................... 2,400 1,040,156
SGL Carbon AG (Metals, Mining & Steel)................................................ 10,000 1,260,559
--------------
4,981,027
--------------
Hong Kong (7.0%)
Cheung Kong Holdings Ltd. (Real Estate)............................................... 80,000 711,099
China Overseas Land & Investment Ltd. (Conglomerate).................................. 1,800,000 913,440
*China Resources Beijing Land Ltd. (Real Estate)...................................... 822,000 520,758
CITIC Pacific Ltd. (Conglomerate)..................................................... 146,000 847,553
COSCO Pacific Ltd. (Container Leasing)................................................ 920,000 1,070,528
Guangnan Holdings (Wholesale Distributor)............................................. 1,700,000 1,461,633
HSBC Holdings plc (Banking)........................................................... 96,000 2,054,173
Hutchison Whampoa Ltd. (Consumer Products)............................................ 160,000 1,256,707
--------------
8,835,891
--------------
India (2.3%)
Bajaj Auto Ltd., GDR (Motor Vehicles & Parts)......................................... 20,000 666,260
Indian Hotels Co., Ltd., The, GDR (Entertainment & Leisure)........................... 30,000 759,300
*Industrial Credit & Investment Corp. of India Ltd., The, GDR (Financial Services).... 42,500 403,750
Larsen & Toubro Ltd., GDR (Engineering & Construction)................................ 40,000 583,000
Tata Engineering & Locomotive Co., Ltd., GDS (Motor Vehicles & Parts)................. 50,000 534,400
--------------
2,946,710
--------------
Italy (3.0%)
Bulgari S.p.A., ADR (Consumer Products)............................................... 40,000 811,596
</TABLE>

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<TABLE>
<CAPTION>
Shares or
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
</TABLE>

Common Stocks (Continued)
<TABLE>
<S> <C> <C>
Ente Nazionale Idrocarburi S.p.A (Oil Exploration & Production)....................... 130,000 $ 668,241
Fiat S.p.A (Motor Vehicles & Parts)................................................... 350,000 1,053,920
Gucci Group NV (Consumer Products).................................................... 9,500 605,910
Telcom Italia S.p.A (Utilities - Communications)...................................... 265,000 687,813
--------------
3,827,480
--------------
Japan (21.1%)
Bellsystem 24, Inc. (Business Services)............................................... 3,000 395,656
BRIDGESTONE CORP. (Motor Vehicles &
Parts)............................................................................... 32,000 606,844
CANON, INC. (Electronics)............................................................. 28,000 617,878
DENSO CORP. (Motor Vehicles & Parts).................................................. 23,000 553,142
East Japan Railway Co. (Transportation)............................................... 74 332,333
Fuji Photo Film Co., Ltd. (Entertainment & Leisure)................................... 22,000 724,420
Hitachi Maxell Ltd. (Electronics)..................................................... 36,000 794,414
HOYA Corp. (Manufacturing)............................................................ 12,000 470,649
Isetan Co., Ltd. (Retail)............................................................. 38,000 491,337
JUSCO CO., LTD. (Retail).............................................................. 8,000 271,011
KAJIMA CORP. (Construction)........................................................... 32,000 228,394
Kao Corp. (Consumer Products)......................................................... 20,000 232,739
KEYENCE CORP. (Electronics)........................................................... 6,000 739,591
Kinki Nippon Railway Co., Ltd. (Transportation)....................................... 40,000 249,289
KOMATSU LTD. (Machinery & Capital Spending)........................................... 60,000 491,337
KUBOTA CORP. (Machinery & Capital Spending)........................................... 70,000 337,298
Laox Co., Ltd. (Retail)............................................................... 28,600 433,894
MABUCHI MOTOR CO., LTD. (Electrical Equipment)........................................ 8,000 402,034
Matsushita-Kotobuki Electronics Inds., Ltd. (Electronics)............................. 14,000 364,451
Mitsubishi Corp. (Wholesale Distributor).............................................. 65,000 672,356
Mitsubishi Estate Co., Ltd. (Real Estate)............................................. 140,000 1,436,083
Mitsubishi Heavy Inds., Ltd. (Machinery & Capital Spending)........................... 90,000 713,732
NEC Corp. (Electronics)............................................................... 40,000 482,717
Nintendo Co., Ltd. (Entertainment & Leisure).......................................... 9,000 640,031
NIPPON STEEL CORP. (Metals, Mining & Steel)........................................... 200,000 589,604
NIPPON TELEGRAPH & TELEPHONE CORP. (Utilities-Communication).......................... 100 756,831
<CAPTION>
Shares or
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
Nippon Television Network Corp. (Media)............................................... 1,700 $ 512,887
NTT Data Communications Systems Corp. (Business Services)............................. 35 1,022,757
ROHM CO., LTD. (Electronics).......................................................... 17,000 1,113,697
SANKYO CO., LTD. (Pharmaceuticals).................................................... 18,000 508,922
Sawako Corp. (Construction)........................................................... 15,600 309,284
Sharp Corp. (Electronics)............................................................. 48,000 682,700
Shiseido Co., Ltd. (Consumer Products)................................................ 90,000 1,039,566
SONY CORP. (Electronics).............................................................. 30,000 1,962,762
Takeda Chemical Inds., Ltd. (Pharmaceuticals)......................................... 41,000 858,805
TORAY INDUSTRIES, INC. (Chemicals).................................................... 75,000 462,245
TOYOTA MOTOR CORP. (Motor Vehicles & Parts)........................................... 105,000 3,013,964
TRANS COSMOS, INC. (Business Services)................................................ 6,000 189,294
USHIO, INC. (Electronics)............................................................. 30,000 325,834
YOKOGAWA ELECTRIC CORP. (Electronics)................................................. 50,000 430,997
--------------
26,461,779
--------------
Korea (1.2%)
*CITC Seoul Excel Trust, IDR (Investment Trust)....................................... 130,000 871,000
Daehan Blue-Chip Index Trust, IDR (Investment Trust).................................. 45,000 675,900
--------------
1,546,900
--------------
Malaysia (3.5%)
*Konsortium Perkapalan Berhad (Transportation)........................................ 115,000 774,257
Malayan Banking Berhad (Banking)...................................................... 116,000 1,286,337
Mancon Berhad (Engineering & Construction)............................................ 186,666 569,239
Tenaga Nasional Berhad (Utilities - Electric)......................................... 211,000 1,011,129
United Engineers of Malaysia Ltd., Berhad (Construction).............................. 80,000 722,376
--------------
4,363,338
--------------
Netherlands (4.2%)
Aegon NV (Insurance).................................................................. 25,490 1,623,914
Elsevier NV (Publishing).............................................................. 80,000 1,351,695
Koninklijke Ahold NV (Retail)......................................................... 8,080 504,942
NV Verenidge Bedrijven Nutricia (Certificates) (Food & Beverages)..................... 4,821 732,272
Royal Dutch Petroleum Co. (Oil Exploration & Production).............................. 2,600 455,700
</TABLE>

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<TABLE>
<CAPTION>
Shares or
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
</TABLE>

Common Stocks (Continued)
<TABLE>
<S> <C> <C>
Vendex International NV (Certificates) (Retail)....................................... 13,105 $ 560,386
--------------
5,228,909
--------------
Portugal (0.5%)
Telecel - Comunicacoes Pessoais, S.A. (Utilities - Communications).................... 10,000 637,887
--------------
Spain (1.1%)
Aguas de Barcelona SA (Utilities - Water)............................................. 20,000 830,897
Repsol SA, ADR (Oil Exploration & Production)......................................... 16,000 610,000
--------------
1,440,897
--------------
Sweden (1.7%)
Assa Abloy AB (Class B) (Manufacturing - Diversified Inds.)........................... 30,000 545,454
*Scandic Hotels AB (Entertainment & Leisure).......................................... 38,000 635,191
SSAB Svenskt Stal AB (Class B) (Metals, Mining & Steel)............................... 25,000 417,889
Telefonaktiebolaget LM Ericsson, ADR (Electronics).................................... 20,000 603,750
--------------
2,202,284
--------------
Switzerland (3.5%)
ABB AG (Bearer) (Electrical Equipment)................................................ 750 931,208
CS Holdings AG (Registered) (Financial Services)...................................... 6,500 666,480
*Novartis AG (Bearer) (Pharmaceuticals)............................................... 1,599 1,826,747
SGS Societe Generale De Surveillance Holding SA (Bearer) (Business Services).......... 375 920,022
--------------
4,344,457
--------------
Taiwan (0.7%)
Cathay Life Insurance Co. Ltd. (Insurance)............................................ 70,000 445,779
President Enterprises Corp. (Food & Beverages)........................................ 295,000 459,461
--------------
905,240
--------------
Thailand (1.7%)
Bank of Ayudhya Public Co., Ltd. (Banking)............................................ 116,000 273,820
PTT Exploration & Production Public Co., Ltd. (Oil Exploration & Production).......... 85,000 1,227,078
Siam Cement Public Co., Ltd., The (Building Materials)................................ 14,300 448,584
<CAPTION>
Shares or
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
Tipco Asphalt Public Co., Ltd. (Construction)......................................... 23,200 $ 141,209
--------------
2,090,691
--------------
United Kingdom (15.5%)
Associated British Foods plc (Food & Beverages)....................................... 62,000 514,328
Barclays plc (Banking)................................................................ 50,639 867,474
British Aerospace plc (Aircraft & Aerospace).......................................... 108,434 2,376,457
British Airways plc (Transportation).................................................. 35,000 362,858
British Petroleum Co., plc (Oil Exploration & Production)............................. 214,002 2,566,732
British Sky Broadcasting Group plc (Media)............................................ 30,000 268,131
Compass Group plc (Restaurants)....................................................... 78,000 824,681
Electrocomponents plc (Electronics)................................................... 86,469 684,001
Granada Group plc (Entertainment & Leisure)........................................... 60,000 885,036
Hays plc (Business Services).......................................................... 120,000 1,151,626
Next plc (Retail)..................................................................... 80,000 777,339
PizzaExpress plc (Restaurants)........................................................ 37,400 337,791
Provident Financial plc (Financial Services).......................................... 134,538 1,157,539
Prudential Corp. (Insurance).......................................................... 52,639 442,982
Rentokil Initial plc (Business Services).............................................. 90,000 676,490
Reuters Holdings plc (Business Services).............................................. 60,000 772,031
Sage Group plc (Business Services).................................................... 80,000 725,973
Siebe plc (Machinery & Capital Spending).............................................. 72,295 1,339,337
Smiths Industries plc (Manufacturing - Diversified Inds.)............................. 28,000 384,012
Wetherspoon, J.D. plc (Restaurants)................................................... 50,289 1,007,426
WPP Group plc (Business Services)..................................................... 160,000 695,838
Zeneca Group plc (Pharmaceuticals).................................................... 24,000 677,004
--------------
19,495,086
--------------
Total Common Stocks
(Cost $91,488,023) .................................................................. 108,026,414
--------------
Preferred Stocks (4.3%)
Brazil (4.3%)
Bardella Industrias Mecanicas SA (Manufacturing - Diversified Inds.).................. 4,000 381,134
Companhia Cervejaria Brahma SA (Food & Beverages)..................................... 2,140,000 1,170,007
Companhia Tecidos do Norte de Minas SA (Textiles)..................................... 1,195,000 381,436
DIXIE TOGA SA (Containers)............................................................ 437,500 332,684
Petroleo Brasileiro SA (Oil Exploration & Production)................................. 4,000,000 637,212
</TABLE>

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<TABLE>
<CAPTION>
Shares or
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
</TABLE>

Preferred Stocks (Continued)
<TABLE>
<S> <C> <C>
Telecommunicacoes Brasileiras SA (Utilities - Communication).......................... 30,000,000 $ 2,310,136
*Wentex Textil SA (Textiles).......................................................... 50,000 154,009
--------------
Total Preferred Stocks
(Cost $5,291,838) ................................................................... 5,366,618
--------------
Warrants (1.4%)
Germany (1.0%)
*Veba AG (04/06/1998) (Utilities - Electric).......................................... 4,000 1,281,351
--------------
Japan (0.4%)
*Kyocera Corp. #2 (01/23/1998) (Electronics).......................................... 865 562,250
*Mr. Max Corp. (02/17/1998) (Retail).................................................. 5,000 3,729
--------------
565,979
--------------
Total Warrants
(Cost $1,782,383) ................................................................... 1,847,330
--------------
Convertible Bond (1.6%)
Italy (1.6%)
I.N.A. S.p.A Privatisation Exchange Note (Insurance) 5.000% 06/28/2001 (Cost
$2,000,000).......................................................................... $ 2,000,000 1,965,000
--------------
Total investments, excluding temporary cash investments
(Cost $100,562,244) ................................................................. 117,205,362
--------------
Repurchase Agreements (8.4%)
Goldman Sachs Corp.
6.354% dated 12/31/1996,
due 01/02/1997 in the
amount of $6,469,988.
Collateralized by U.S. Treasury Bond
6.500% due 11/15/2026. .............................................................. 6,467,742 6,467,742
<CAPTION>
Shares or
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
J.P. Morgan Securities, Inc.
6.789% dated 12/31/1996,
due 01/02/1997 in the
amount of $4,051,502.
Collateralized by U.S. Treasury Bonds
6.000% to 14.000%
due 05/15/2005 to 11/15/2026,
U.S. Treasury Notes
5.625% to 8.750%
due 10/31/1997 to 02/15/2006. ....................................................... $ 4,050,000 $ 4,050,000
--------------
Total Repurchase Agreements
(Cost $10,517,742) .................................................................. 10,517,742
--------------
Total Investments (101.8%)
(Cost $111,079,986)...................................................................... 127,723,104
Cash and receivables less liabilities (-1.8%)............................................. (2,213,513)
--------------
Net Assets (100%)......................................................................... $ 125,509,591
--------------
--------------
</TABLE>

(1) See Note 1 of Notes to Financial Statements.
* Non-income producing

The accompanying notes are an integral part
of the financial statements.

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---------------------------------
<TABLE>
<CAPTION>
Shares or
Principal
December 31, 1996 Amount Value(1)
------------- --------------
<S> <C> <C>
Common Stocks (93.9%)
Banking & Finance (11.3%)
Aames Financial Corp. ................................................................ 300,000 $ 10,762,500
Alex. Brown, Inc. .................................................................... 150,000 10,875,000
*ContiFinancial Corp. ................................................................ 270,000 9,753,750
First Security Corp. ................................................................. 500,000 16,875,000
First USA, Inc. ...................................................................... 400,000 13,850,000
Firstar Corp. ........................................................................ 200,000 10,500,000
Great Western Financial Corp. ........................................................ 300,000 8,700,000
Green Tree Financial Corp. ........................................................... 400,000 15,450,000
GreenPoint Financial Corp. ........................................................... 240,000 11,370,000
Household International, Inc. ........................................................ 100,000 9,225,000
Sovereign Bancorp, Inc. .............................................................. 400,000 5,250,000
Standard Federal Bancorp.............................................................. 350,000 19,906,250
Summit Bancorp........................................................................ 250,000 10,937,500
U.S. Bancorp.......................................................................... 400,000 17,975,000
Washington Federal, Inc. ............................................................. 310,000 8,215,000
--------------
179,645,000
--------------
Building & Forestry Products (5.9%)
*BMC West Corp. ...................................................................... 500,000 6,125,000
Champion International Corp. ......................................................... 400,000 17,300,000
Georgia-Pacific Corp. ................................................................ 200,000 14,400,000
Lafarge Corp. ........................................................................ 250,000 5,031,250
Mosinee Paper Corp. .................................................................. 300,000 10,650,000
Stone Container Corp. ................................................................ 700,000 10,412,500
Temple-Inland, Inc. .................................................................. 190,000 10,283,750
Wausau Paper Mills Co. ............................................................... 302,000 5,587,000
Willamette Industries, Inc. .......................................................... 200,000 13,925,000
--------------
93,714,500
--------------
Business & Consumer Services (9.0%)
*AccuStaff, Inc. ..................................................................... 385,000 8,133,125
*American Management Systems, Inc. ................................................... 100,000 2,450,000
*CBT Group Public Ltd. ADR............................................................ 154,200 8,365,350
Danka Business Systems plc ADR........................................................ 455,000 16,095,625
DENTSPLY International, Inc. ......................................................... 350,000 16,625,000
*Diamond Home Services, Inc. ......................................................... 350,000 9,625,000
*Firearms Training Systems, Inc. (Class A)............................................ 245,000 2,878,750
*FIserv, Inc. ........................................................................ 375,000 13,781,250
*Ingram Micro, Inc. (Class A)......................................................... 325,000 7,475,000
*Prime Service, Inc. ................................................................. 333,800 9,179,500
*Renaissance Solutions, Inc. ......................................................... 208,500 9,330,375
*Romac International, Inc. ........................................................... 350,000 7,700,000
*United Dental Care, Inc. ............................................................ 487,500 14,807,812
Unitog Co. ........................................................................... 300,000 8,175,000

<CAPTION>
Shares or
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
Watsco, Inc. ......................................................................... 300,000 $ 8,662,500
--------------
143,284,287
--------------
Chemical (0.8%)
Potash Corp. of Saskatchewan, Inc. ................................................... 150,000 12,750,000
--------------
Consumer Non-Durable (10.5%)
Apple South, Inc. .................................................................... 618,200 8,345,700
*Borders Group, Inc. ................................................................. 550,000 19,731,250
*Eastbay, Inc. ....................................................................... 250,000 6,000,000
Gap, Inc. ............................................................................ 450,000 13,556,250
*General Nutrition Cos., Inc. ........................................................ 500,000 8,437,500
*Kohl's Corp. ........................................................................ 300,000 11,775,000
*Landry's Seafood Restaurants, Inc. .................................................. 200,000 4,275,000
*Logan's Roadhouse, Inc. ............................................................. 250,000 5,875,000
*Lone Star Steakhouse & Saloon, Inc. ................................................. 700,000 18,725,000
*Meyer (Fred), Inc. .................................................................. 300,000 10,650,000
*Mossimo, Inc. ....................................................................... 450,000 5,568,750
*Price/Costco, Inc. .................................................................. 600,000 15,075,000
*Quality Food Centers, Inc. .......................................................... 300,000 10,125,000
*Sports Authority, Inc. (The)......................................................... 600,000 13,050,000
Warnaco Group, Inc. (Class A)......................................................... 300,000 8,887,500
*Zale Corp. .......................................................................... 300,000 5,737,500
--------------
165,814,450
--------------
Energy (1.3%)
*Abacan Resource Corp. ............................................................... 650,000 5,646,875
YPF Sociedad Anonima ADR.............................................................. 600,000 15,150,000
--------------
20,796,875
--------------
Energy Services (6.1%)
*BJ Services Co. ..................................................................... 250,000 12,750,000
*GeoScience Corp. .................................................................... 400,000 5,200,000
*J. Ray McDermott, S.A. .............................................................. 250,000 5,500,000
*Nabors Industries, Inc. ............................................................. 700,000 13,475,000
*Noble Drilling Corp. ................................................................ 640,000 12,720,000
*Pride Petroleum Services, Inc. ...................................................... 700,000 16,275,000
*Smith International, Inc. ........................................................... 200,000 8,975,000
Transocean Offshore, Inc. ............................................................ 197,500 12,368,438
*Weatherford Enterra, Inc. ........................................................... 300,000 9,000,000
--------------
96,263,438
--------------
Entertainment & Media (4.3%)
*Clear Channel Communications, Inc. .................................................. 500,000 18,062,500
*Evergreen Media Corp. (Class A)...................................................... 500,000 12,500,000
*Regal Cinemas, Inc. ................................................................. 500,000 15,375,000
*SFX Broadcasting, Inc. (Class A)..................................................... 275,000 8,181,250
*Universal Outdoor Holdings, Inc. .................................................... 166,000 3,901,000
</TABLE>

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-- COLUMBIA SPECIAL FUND, INC. --
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<TABLE>
<CAPTION>
Shares or
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
</TABLE>

Common Stocks (Continued)
<TABLE>
<S> <C> <C>
*WMS Industries, Inc. ................................................................ 500,000 $ 10,000,000
--------------
68,019,750
--------------
Health (8.0%)
*Apria Healthcare Group, Inc. ........................................................ 830,000 15,562,500
*Dura Pharmaceuticals, Inc. .......................................................... 300,000 14,325,000
*Elan Corp. plc ADR................................................................... 300,000 9,975,000
*Enterprise Systems, Inc. ............................................................ 250,000 5,875,000
*ESC Medical Systems Ltd. ............................................................ 150,000 3,825,000
*Gilead Sciences, Inc. ............................................................... 275,000 6,875,000
HBO & Co. ............................................................................ 220,000 13,062,500
*IDX Systems Corp. ................................................................... 100,000 2,862,500
*IMNET Systems, Inc. ................................................................. 100,000 2,425,000
*Medic Computer Systems, Inc. ........................................................ 250,000 10,078,125
*Renal Treatment Centers, Inc. ....................................................... 600,000 15,300,000
*ResMed, Inc. ........................................................................ 605,000 13,310,000
*Vivra, Inc. ......................................................................... 450,000 12,431,250
--------------
125,906,875
--------------
Hotels & Gaming (1.6%)
*Circus Circus Enterprises, Inc. ..................................................... 450,000 15,468,750
*Station Casinos, Inc. ............................................................... 950,000 9,618,750
--------------
25,087,500
--------------
Insurance (1.2%)
CMAC Investment Corp. ................................................................ 141,600 5,203,800
Mutual Risk Management Ltd. .......................................................... 353,333 13,073,321
--------------
18,277,121
--------------
Machinery & Capital Spending (5.7%)
Albany International Corp. (Class A).................................................. 525,000 12,140,625
Applied Power, Inc. (Class A)......................................................... 330,000 13,076,250
*Avondale Industries, Inc. ........................................................... 450,000 9,675,000
Case Corp. ........................................................................... 165,000 8,992,500
Deere & Co. .......................................................................... 350,000 14,218,750
Fluor Corp. .......................................................................... 200,000 12,550,000
*Jacobs Engineering Group, Inc. ...................................................... 452,000 10,678,500
Measurex Corp. ....................................................................... 400,000 9,600,000
--------------
90,931,625
--------------
Metal Mining & Steel (7.0%)
Aluminum Company of America........................................................... 250,000 15,937,500
Barrick Gold Corp. ................................................................... 400,000 11,500,000
*Bethlehem Steel Corp. ............................................................... 1,200,000 10,800,000
Freeport-McMoRan Copper & Gold, Inc. (Class A)........................................ 500,000 14,062,500
Homestake Mining Co. ................................................................. 1,000,000 14,250,000
<CAPTION>
Shares or
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
Newmont Mining Corp. ................................................................. 500,000 $ 22,375,000
Schnitzer Steel Industries, Inc. (Class A)............................................ 500,000 12,812,500
*TVX Gold, Inc. ...................................................................... 1,250,000 9,687,500
--------------
111,425,000
--------------
Pollution Control (0.7%)
*Air & Water Technologies Corp. (Class A)............................................. 467,500 2,688,125
*Osmonics, Inc. ...................................................................... 400,000 8,800,000
--------------
11,488,125
--------------
Real Estate Securities (1.0%)
Simon Debartolo Group, Inc. .......................................................... 500,000 15,500,000
--------------
Technology (13.4%)
Adobe Systems, Inc. .................................................................. 400,000 14,950,000
*Adtran, Inc. ........................................................................ 180,000 7,470,000
*Allen Group, Inc. ................................................................... 550,000 12,237,500
*Analog Devices, Inc. ................................................................ 400,000 13,550,000
*Bay Networks, Inc. .................................................................. 400,000 8,350,000
*Brightpoint, Inc. ................................................................... 660,750 19,657,312
*Checkpoint Systems, Inc. ............................................................ 630,000 15,592,500
*Coherent Communications Systems
Corp. ............................................................................... 400,000 7,800,000
*General Instrument Corp. ............................................................ 500,000 10,812,500
*Harmonic Lightwaves, Inc. ........................................................... 540,000 8,302,500
*Hyperion Software Corp. ............................................................. 300,000 6,375,000
*Integrated Measurement Systems, Inc. ................................................ 170,000 2,953,750
*Loral Space & Communications Corp.................................................... 200,000 3,675,000
*Ortel Corp. ......................................................................... 385,000 9,240,000
*PairGain Technologies, Inc. ......................................................... 250,000 7,609,375
*Planning Sciences International plc ADR.............................................. 245,000 2,940,000
*Premisys Communications, Inc. ....................................................... 170,000 5,737,500
*Rational Software Corp. ............................................................. 145,000 5,736,563
*Sun Microsystems, Inc. .............................................................. 510,000 13,100,625
*Sync Research, Inc. ................................................................. 148,800 2,046,000
System Software Associates, Inc. ..................................................... 515,000 5,471,875
*VIASOFT, Inc. ....................................................................... 125,000 5,906,250
*Xilinx, Inc. ........................................................................ 385,000 14,172,813
*Xylan Corp. ......................................................................... 250,000 7,062,500
*3D Labs, Inc. Ltd. .................................................................. 73,500 1,690,500
--------------
212,440,063
--------------
Transportation (1.7%)
Airborne Freight Corp. ............................................................... 500,000 11,687,500
*Celadon Group, Inc. ................................................................. 580,000 6,380,000
Consolidated Freightways, Inc. ....................................................... 400,000 8,900,000
--------------
26,967,500
--------------
</TABLE>

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

-- COLUMBIA SPECIAL FUND, INC. --
---------------------------------
<TABLE>
<CAPTION>
Shares or
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
</TABLE>

Common Stocks (Continued)
<TABLE>
<S> <C> <C>
Utilities/Communications (4.4%)
*Arch Communications Group, Inc. ..................................................... 500,000 $ 4,687,500
*Cellular Communications International,
Inc. ................................................................................ 229,000 6,641,000
Cincinnati Bell, Inc. ................................................................ 175,000 10,784,375
*CommNet Cellular, Inc. .............................................................. 350,000 9,756,250
Frontier Corp. ....................................................................... 500,000 11,312,500
*Geotek Communications, Inc. ......................................................... 500,000 3,562,500
*NEXTEL Communications, Inc. (Class A)................................................ 750,000 9,796,875
*Paging Network, Inc. ................................................................ 850,000 12,962,500
--------------
69,503,500
--------------
Total Common Stocks
(Cost $1,399,532,531) ............................................................... 1,487,815,609
--------------
Repurchase Agreements (7.4%)
Goldman Sachs Corp.
6.354% dated 12/31/1996,
due 01/02/1997 in the
amount of $75,446,077.
Collateralized by U.S. Treasury Bond
6.500% due 11/15/2026 ............................................................... $ 75,419,890 75,419,890
<CAPTION>
Shares or
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>

J.P. Morgan Securities, Inc.
6.789% dated 12/31/1996,
due 01/02/1997 in the
amount of $42,015,581.
Collateralized by U.S. Treasury Bonds
6.000% to 14.000%
due 05/15/2005 to 11/15/2026,
U.S. Treasury Notes
5.625% to 8.750%
due 10/31/1997 to 02/15/2006. ....................................................... $ 42,000,000 $ 42,000,000
--------------
Total Repurchase Agreements
(Cost $117,419,890).................................................................. 117,419,890
--------------
Total Investments (101.3%)
(Cost $1,516,952,421).................................................................... 1,605,235,499
Receivables less liabilities (-1.3%)...................................................... (19,951,285)
--------------
Net Assets (100.0%)....................................................................... $1,585,284,214
--------------
--------------
</TABLE>

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

* Non-income producing.

The accompanying notes are an integral part
of the financial statements.

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

-- COLUMBIA SMALL CAP FUND, INC. --
-----------------------------------
<TABLE>
<CAPTION>
Shares or
Principal
December 31, 1996 Amount Value(1)
------------- --------------
<S> <C> <C>
Common Stocks (90.1%)
Aerospace (0.5%)
*Orbital Sciences Corp. .............................................................. 6,300 $ 108,675
--------------
Banking & Finance (6.5%)
ADVANTA Corp. (Class B)............................................................... 4,500 183,937
Bank United Corp. (Class A)........................................................... 4,000 107,000
Bay View Capital Corp. ............................................................... 5,000 211,875
*Credit Acceptance Corp. ............................................................. 4,600 108,100
*Glendale Federal Bank FSB............................................................ 9,000 209,250
*Leasing Solutions, Inc. ............................................................. 4,900 126,175
North Fork Bancorp, Inc. ............................................................. 3,300 117,563
*Oxford Resources Corp. (Class A)..................................................... 7,000 216,125
*Wilshire Financial Services Group, Inc. ............................................. 5,000 81,250
--------------
1,361,275
--------------
Business & Consumer Services (7.2%)
*Billing Information Concepts Corp. .................................................. 5,700 163,875
*CorVel Corp. ........................................................................ 2,000 58,000
Danka Business Systems plc ADR........................................................ 8,100 286,537
*Guest Supply, Inc. .................................................................. 5,300 93,412
Harland (John H.) Co. ................................................................ 3,900 128,700
+*Metzler Group, Inc. ................................................................ 10,000 317,500
*Protection One, Inc. ................................................................ 6,000 59,250
*Superior Consultant Holdings Corp. .................................................. 10,000 247,500
*U.S. Office Products Co. ............................................................ 3,500 119,438
*Walsh International, Inc. ........................................................... 5,300 46,375
--------------
1,520,587
--------------
Chemical (1.1%)
*TETRA Technologies, Inc. ............................................................ 9,000 227,250
--------------
Consumer Non-Durable (10.0%)
*American Pad & Paper Co. ............................................................ 4,200 95,025
*Bed, Bath & Beyond, Inc. ............................................................ 6,500 157,625
*Borders Group, Inc. ................................................................. 3,500 125,562
*Boston Chicken, Inc. ................................................................ 3,500 125,562
CKE Restaurants, Inc. ................................................................ 6,600 237,600
*Cost Plus, Inc. ..................................................................... 9,000 172,125
*Designer Holdings Ltd. .............................................................. 10,000 161,250
Harman International Industries, Inc. ................................................ 1,900 105,688
*HSN, Inc. ........................................................................... 1,260 29,925
K2, Inc. ............................................................................. 8,200 225,500
Pier 1 Imports, Inc. ................................................................. 18,000 317,250
+*PJ America, Inc. ................................................................... 10,000 180,000
*Sports & Recreation, Inc. ........................................................... 3,200 24,800
*Williams-Sonoma, Inc. ............................................................... 3,800 138,225
--------------
2,096,137
--------------

<CAPTION>
Shares or
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
Consumer Staples (0.5%)
*Mondavi (Robert) Corp. (Class A)..................................................... 3,000 $ 109,500
--------------
Energy (6.2%)
*Abacan Resource Corp. ............................................................... 20,000 173,750
*Barrett Resources Corp. ............................................................. 3,500 149,187
*Cairn Energy USA, Inc. .............................................................. 19,500 195,000
Enron Global Power & Pipelines L.L.C.................................................. 6,000 162,000
*Flores & Rucks, Inc. ................................................................ 1,700 90,525
*Gulf Canada Resources Ltd. .......................................................... 31,100 229,363
*Monterey Resources, Inc. ............................................................ 16,000 258,000
*Swift Energy Co. .................................................................... 1,800 53,775
--------------
1,311,600
--------------
Energy Services (8.7%)
*BJ Services Co. ..................................................................... 3,000 153,000
+*Dreco Energy Services Ltd. (Class A)................................................ 6,000 219,750
+*National-Oilwell, Inc. ............................................................. 9,000 276,750
*Petroleum Geo-Services ASA ADR....................................................... 3,000 117,000
Petrolite Corp. ...................................................................... 2,400 115,200
*Pinnacle Resources Ltd. ............................................................. 10,000 156,831
*Precision Drilling Corp. ............................................................ 10,000 347,500
*Pride Petroleum Services, Inc. ...................................................... 15,000 348,750
*Veritas DGC, Inc. ................................................................... 5,000 92,500
--------------
1,827,281
--------------
Entertainment & Media (0.7%)
*Golden Books Family Entertainment, Inc. ............................................. 2,600 28,925
*United International Holdings, Inc. (Class A)........................................ 3,700 45,325
*WMS Industries, Inc. ................................................................ 3,900 78,000
--------------
152,250
--------------
Health (12.7%)
*Agouron Pharmaceuticals, Inc. ....................................................... 2,000 135,500
*Allergan Ligand Retinoid Therapeutics, Inc. ......................................... 4,000 121,000
*Assisted Living Concepts, Inc. ...................................................... 4,900 74,725
*Axogen Ltd. - Units (each unit consists of 1 common share of Axogen and 1 warrant of
Elan)................................................................................ 4,500 105,750
*CardioThoracic Systems, Inc. ........................................................ 10,000 185,000
*Conceptus, Inc. ..................................................................... 5,200 53,300
*Dura Pharmaceuticals, Inc. .......................................................... 7,400 353,350
*Elan Corp. plc ADR................................................................... 5,100 169,575
*Health Management Associates, Inc. (Class A)......................................... 4,600 103,500
*HealthCare COMPARE Corp. ............................................................ 2,300 97,462
*ICOS Corp. .......................................................................... 5,500 41,938
*Ligand Pharmaceuticals, Inc. (Class B)............................................... 6,000 89,250
*NABI, Inc. .......................................................................... 12,300 107,625
</TABLE>

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

-- COLUMBIA SMALL CAP FUND, INC. --
-----------------------------------
<TABLE>
<CAPTION>
Shares or
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
</TABLE>

Common Stocks (Continued)
<TABLE>
<S> <C> <C>
*OccuSystems, Inc. ................................................................... 6,000 $ 162,000
*Protein Design Labs, Inc. ........................................................... 3,500 127,750
*Scherer (R.P.) Corp. ................................................................ 2,300 115,575
*Target Therapeutics, Inc. ........................................................... 6,000 252,000
*Texas Biotechnology Corp. ........................................................... 30,000 131,250
*Thermedics, Inc. .................................................................... 10,400 188,500
*Thermotrex Corp. .................................................................... 1,300 35,588
*UroMed Corp. ........................................................................ 3,100 30,225
--------------
2,680,863
--------------
Hotels & Gaming (0.5%)
*CapStar Hotel Co. ................................................................... 5,000 98,125
--------------
Insurance (1.2%)
PennCorp Financial Group, Inc. ....................................................... 3,300 118,800
Protective Life Corp. ................................................................ 3,300 131,588
--------------
250,388
--------------
Machinery & Capital Spending (0.8%)
*Cuno, Inc. .......................................................................... 6,500 96,688
*J. Ray McDermott, S.A. .............................................................. 3,300 72,600
--------------
169,288
--------------
Metal Mining & Steel (0.4%)
*Getchell Gold Corp. ................................................................. 2,000 76,750
--------------
Pollution Control (3.1%)
*U.S. Filter Corp. ................................................................... 6,000 190,500
*United Waste Systems, Inc. .......................................................... 7,000 240,625
*USA Waste Services, Inc. ............................................................ 6,800 216,750
--------------
647,875
--------------
Technology (26.7%)
*Actel Corp. ......................................................................... 5,100 121,125
+*Altera Corp. ....................................................................... 1,900 138,106
*American Management Systems, Inc. ................................................... 4,500 110,250
+*American Power Conversion Corp. .................................................... 7,300 198,925
+*ANADIGICS, Inc. .................................................................... 10,000 392,500
*AXENT Technologies, Inc. ............................................................ 11,000 165,000
*BA Merchant Services, Inc. (Class A)................................................. 20,000 357,500
*Boston Technology, Inc. ............................................................. 3,200 92,000
*Cognos, Inc. ........................................................................ 2,700 75,937
*Coherent Communications Systems Corp. ............................................... 4,200 81,900
*Computer Products, Inc. ............................................................. 5,900 115,050
*Control Data Systems, Inc. .......................................................... 3,000 66,000
*DSP Communications, Inc. ............................................................ 12,000 232,500
<CAPTION>
Shares or
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
*DST Systems, Inc. ................................................................... 4,000 $ 125,500
*Eltron International, Inc. .......................................................... 2,400 48,300
*Engineering Animation, Inc. ......................................................... 3,600 87,300
*Geoworks............................................................................. 4,400 107,800
*Integrated Systems, Inc. ............................................................ 4,500 117,000
*JDA Software Group, Inc. ............................................................ 6,000 171,000
*MDL Information Systems, Inc. ....................................................... 10,700 199,287
*MICROS Systems, Inc. ................................................................ 9,300 285,975
*Network Appliance, Inc. ............................................................. 7,400 376,475
*P-COM, Inc. ......................................................................... 7,700 228,113
*Proxim, Inc. ........................................................................ 9,000 207,000
*Rogue Wave Software, Inc. ........................................................... 4,000 63,000
*Saville Systems plc ADR.............................................................. 3,000 121,875
+*Shiva Corp. ........................................................................ 3,000 104,625
*Sierra Semiconductor Corp. .......................................................... 15,000 225,000
*SPSS, Inc. .......................................................................... 2,900 80,838
*Synopsys, Inc. ...................................................................... 1,900 87,875
*S3, Inc. ............................................................................ 15,100 245,375
*Teledata Communication Ltd. ......................................................... 8,000 184,000
*Transition Systems, Inc. ............................................................ 14,000 197,750
*Trident Microsystems, Inc. .......................................................... 13,000 219,375
--------------
5,630,256
--------------
Transportation (0.8%)
Consolidated Freightways, Inc. ....................................................... 3,800 84,550
Werner Enterprises, Inc. ............................................................. 5,200 94,250
--------------
178,800
--------------
Utilities/Communications (1.1%)
*Anicom, Inc. ........................................................................ 7,400 68,450
*Geotek Communications, Inc. ......................................................... 12,800 91,200
*Paging Network, Inc. ................................................................ 5,000 76,250
--------------
235,900
--------------
Utilities/Electric/Gas (1.4%)
*AES China Generating Co. (Class A)................................................... 15,000 191,250
*AES Corp. ........................................................................... 2,300 106,950
--------------
298,200
--------------
Total Common Stocks
(Cost $17,505,792) .................................................................. 18,981,000
--------------
Convertible Preferred Stock (0.2%)
Energy (0.2%)
Mesa, Inc. Series A 8.000% Cumulative
(Cost $25,926) ...................................................................... 4,692 29,912
--------------
</TABLE>

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

-- COLUMBIA SMALL CAP FUND, INC. --
-----------------------------------
<TABLE>
<CAPTION>
Shares or
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
Convertible Bond (0.9%)
Pollution Control (0.9%)
U.S. Filter Corp. 4.500% 12/15/2001
(Cost $190,000) ..................................................................... $ 190,000 $ 193,800
--------------
Total investments, excluding temporary cash investments
(Cost $17,721,718) .................................................................. 19,204,712
--------------
Repurchase Agreements (12.1%)
Goldman Sachs Corp.
6.354% dated 12/31/1996,
due 01/02/1997 in the
amount of $1,103,567.
Collateralized by U.S. Treasury Bond
6.500% due 11/15/2026. .............................................................. 1,103,184 1,103,184
J.P. Morgan Securities, Inc.
6.789% dated 12/31/1996,
due 01/02/1997 in the
amount of $1,000,371.
Collateralized by U.S. Treasury Bonds
6.000% to 14.000%
due 05/15/2005 to 11/15/2026,
U.S. Treasury Notes
5.625% to 8.750%
due 10/31/1997 to 02/15/2006. ....................................................... 1,000,000 1,000,000
<CAPTION>
Shares or
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
Merrill Lynch
6.354% dated 12/31/1996
due 01/02/1997 in the
amount of $450,156.
Collateralized by U.S. Treasury Strips
due 05/15/2018 to 02/15/2022. ....................................................... $ 450,000 $ 450,000
--------------
Total Repurchase Agreements
(Cost $2,553,184).................................................................... 2,553,184
--------------
Total Investments (103.3%)
(Cost $20,274,902)....................................................................... 21,757,896
Receivables less liabilities (-3.3%)...................................................... (696,526)
--------------
Net Assets (100.0%)....................................................................... $ 21,061,370
--------------
--------------
</TABLE>

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

* Non-income producing.

+ All or a portion of these investments are hedged by short sales against the
box (Note 1).

The accompanying notes are an integral part
of the financial statements.

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

-- COLUMBIA REAL ESTATE EQUITY FUND, INC. --
--------------------------------------------
<TABLE>
<CAPTION>
Shares or
Principal
December 31, 1996 Amount Value(1)
------------- --------------
<S> <C> <C>
Common Stocks (82.5%)
Real Estate
Apartments (19.5%)
Associated Estates Realty Corp. ...................................................... 87,600 $ 2,080,500
Camden Property Trust................................................................. 70,700 2,023,788
Colonial Properties Trust............................................................. 72,600 2,205,225
Equity Residential Properties Trust................................................... 41,300 1,703,625
Oasis Residential, Inc. .............................................................. 74,900 1,703,975
Security Capital Pacific Trust........................................................ 82,600 1,889,475
Wellsford Residential Property Trust.................................................. 70,025 1,698,106
--------------
13,304,694
--------------
Office (16.2%)
Arden Realty Group, Inc. ............................................................. 67,000 1,859,250
Beacon Properties Corp. .............................................................. 63,300 2,318,362
Cali Realty Corp. .................................................................... 69,700 2,151,988
Highwoods Properties, Inc. ........................................................... 74,800 2,524,500
Reckson Associates Realty Corp. ...................................................... 50,900 2,150,525
--------------
11,004,625
--------------
Industrial (20.6%)
First Industrial Realty Trust, Inc. .................................................. 68,800 2,089,800
Liberty Property Trust................................................................ 83,400 2,147,550
Public Storage, Inc. ................................................................. 75,800 2,349,800
Security Capital Industrial Trust..................................................... 89,300 1,908,787
Shurgard Storage Centers, Inc. (Class A).............................................. 71,300 2,112,263
Storage Trust Realty.................................................................. 50,500 1,363,500
TriNet Corporate Realty Trust, Inc. .................................................. 58,500 2,076,750
--------------
14,048,450
--------------
Community Centers (6.8%)
Excel Realty Trust, Inc. ............................................................. 83,400 2,116,275
Haagen (Alexander) Properties, Inc. .................................................. 44,600 657,850
JP Realty, Inc. ...................................................................... 71,900 1,860,412
--------------
4,634,537
--------------
Shopping Malls (9.8%)
Macerich Co. ......................................................................... 82,100 2,144,863
Rouse Co. ............................................................................ 72,600 2,305,050
Simon Debartolo Group, Inc. .......................................................... 71,256 2,208,936
--------------
6,658,849
--------------
Lodging (6.4%)
*Interstate Hotels Co. ............................................................... 49,000 1,384,250
Patriot American Hospitality, Inc. ................................................... 34,600 1,492,125

<CAPTION>
Shares or
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
Starwood Lodging Trust................................................................ 26,400 $ 1,455,300
--------------
4,331,675
--------------
Other (3.2%)
*Catellus Development Corp. .......................................................... 190,600 2,168,075
--------------
Total Common Stocks
(Cost $45,246,073) .................................................................. 56,150,905
--------------
Repurchase Agreements (17.7%)
Goldman Sachs Corp.
6.354% dated 12/31/1996,
due 01/02/1997 in the
amount of $5,534,112.
Collateralized by U.S. Treasury Bond
6.500% due 11/15/2026. .............................................................. $ 5,532,191 5,532,191
J.P. Morgan Securities, Inc.
6.789% dated 12/31/1996,
due 01/02/1997 in the
amount of $3,251,206.
Collateralized by U.S. Treasury Bonds
6.000% to 14.000%
due 05/15/2005 to 11/15/2026,
U.S. Treasury Notes
5.625% to 8.750%
due 10/31/1997 to 02/15/2006. ....................................................... 3,250,000 3,250,000
Merrill Lynch
6.354% dated 12/31/1996,
due 01/02/1997 in the
amount of $3,251,128.
Collateralized by U.S. Treasury Strips
due 05/15/2018 to 02/15/2022. ....................................................... 3,250,000 3,250,000
--------------
Total Repurchase Agreements
(Cost $12,032,191) .................................................................. 12,032,191
--------------
Total Investments (100.2%)
(Cost $57,278,264)....................................................................... 68,183,096
Receivables less liabilities (-0.2%)...................................................... (109,875)
--------------
Net Assets (100.0%)....................................................................... $ 68,073,221
--------------
--------------
</TABLE>

(1) See Note 1 of Notes to Financial Statements.
* Non-income producing.

The accompanying notes are an integral part
of the financial statements.

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

-- COLUMBIA BALANCED FUND, INC. --
----------------------------------
<TABLE>
<CAPTION>
Shares or
Principal
December 31, 1996 Amount Value(1)
------------- --------------
<S> <C> <C>
Common Stocks (48.3%)
Banking & Finance (6.1%)
American Express Co. ................................................................. 100,200 $ 5,661,300
BankAmerica Corp. .................................................................... 49,900 4,977,525
Federal Home Loan Mortgage Corp. ..................................................... 62,000 6,827,750
Great Western Financial Corp. ........................................................ 153,300 4,445,700
Morgan (J.P.) & Co., Inc. ............................................................ 68,200 6,658,025
NationsBank Corp. .................................................................... 17,100 1,671,525
PNC Bank Corp. ....................................................................... 143,700 5,406,712
U.S. Bancorp.......................................................................... 119,000 5,347,563
--------------
40,996,100
--------------
Building & Forestry Products (1.8%)
Champion International Corp. ......................................................... 115,000 4,973,750
Weyerhaeuser Co. ..................................................................... 70,000 3,316,250
Willamette Industries, Inc. .......................................................... 53,000 3,690,125
--------------
11,980,125
--------------
Business & Consumer Services (2.3%)
*ADT Ltd. ............................................................................ 211,400 4,835,775
Electronic Data Systems Corp. ........................................................ 100,000 4,325,000
Service Corp. Int'l. ................................................................. 223,300 6,252,400
--------------
15,413,175
--------------
Chemical (2.3%)
Grace (W.R.) & Co. ................................................................... 68,200 3,529,350
Hercules, Inc. ....................................................................... 119,100 5,151,075
IMC Global, Inc. ..................................................................... 82,100 3,212,162
Monsanto Co. ......................................................................... 84,300 3,277,163
--------------
15,169,750
--------------
Consumer Durable (0.9%)
Ford Motor Co. ....................................................................... 83,200 2,652,000
General Motors Corp. ................................................................. 66,000 3,679,500
--------------
6,331,500
--------------
Consumer Non-Durable (5.2%)
*Circus Circus Enterprises, Inc. ..................................................... 67,600 2,323,750
*Federated Department Stores, Inc. ................................................... 96,900 3,306,712
Marriott International, Inc. ......................................................... 69,700 3,850,925
Mattel, Inc. ......................................................................... 225,350 6,253,462
*Meyer (Fred), Inc. .................................................................. 80,000 2,840,000
Penney (J.C.), Inc. .................................................................. 63,400 3,090,750
*Price/Costco, Inc. .................................................................. 200,000 5,025,000
Rite Aid Corp. ....................................................................... 90,000 3,577,500
Rykoff-Sexton, Inc. .................................................................. 81,000 1,285,875

<CAPTION>
Shares or
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
Sears, Roebuck & Co. ................................................................. 76,900 $ 3,547,013
--------------
35,100,987
--------------
Consumer Staples (3.7%)
Gillette Co. ......................................................................... 49,000 3,809,750
McDonald's Corp. ..................................................................... 103,800 4,696,950
Nabisco Holdings Corp. (Class A)...................................................... 96,900 3,766,987
PepsiCo, Inc. ........................................................................ 201,000 5,879,250
Procter & Gamble Co. ................................................................. 32,300 3,472,250
Sunbeam Corp. ........................................................................ 119,600 3,079,700
--------------
24,704,887
--------------
Energy (3.8%)
Amoco Corp. .......................................................................... 84,800 6,826,400
Louisiana Land & Exploration Co. ..................................................... 54,000 2,895,750
Mobil Corp. .......................................................................... 54,700 6,687,075
Royal Dutch Petroleum Co. ADR......................................................... 43,450 7,419,087
Union Pacific Resources Group, Inc. .................................................. 59,800 1,749,150
--------------
25,577,462
--------------
Entertainment & Media (1.8%)
Gannett Co., Inc. .................................................................... 45,000 3,369,375
Time Warner, Inc. .................................................................... 128,800 4,830,000
*Viacom, Inc. (Class B)............................................................... 106,600 3,717,675
--------------
11,917,050
--------------
Health (5.5%)
American Home Products Corp. ......................................................... 162,600 9,532,425
Bausch & Lomb, Inc. .................................................................. 99,600 3,486,000
Baxter International, Inc. ........................................................... 84,400 3,460,400
Johnson & Johnson..................................................................... 116,000 5,771,000
Merck & Co., Inc. .................................................................... 45,700 3,621,725
Pfizer, Inc. ......................................................................... 40,000 3,315,000
Pharmacia & Upjohn, Inc. ............................................................. 111,800 4,430,075
Warner-Lambert Co. ................................................................... 47,500 3,562,500
--------------
37,179,125
--------------
Insurance (2.2%)
Berkley (W.R.) Corp. ................................................................. 71,000 3,603,250
General Re Corp. ..................................................................... 20,400 3,218,100
NAC Re Corp. ......................................................................... 39,400 1,334,675
TIG Holdings, Inc. ................................................................... 204,800 6,937,600
--------------
15,093,625
--------------
Machinery & Capital Spending (3.6%)
Case Corp. ........................................................................... 58,000 3,161,000
Caterpillar, Inc. .................................................................... 17,000 1,279,250
Deere & Co. .......................................................................... 111,300 4,521,563
</TABLE>

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<TABLE>
<CAPTION>
Shares or
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
</TABLE>

Common Stocks (Continued)
<TABLE>
<S> <C> <C>
Emerson Electric Co. ................................................................. 52,800 $ 5,108,400
General Electric Co. ................................................................. 68,000 6,723,500
Honeywell, Inc. ...................................................................... 55,100 3,622,825
--------------
24,416,538
--------------
Metal Mining & Steel (1.2%)
Aluminum Company of America........................................................... 86,400 5,508,000
Worthington Industries, Inc. ......................................................... 123,000 2,229,375
--------------
7,737,375
--------------
Real Estate Securities (2.9%)
American Health Properties, Inc. ..................................................... 73,600 1,757,200
Associated Estates Realty Corp. ...................................................... 76,200 1,809,750
Beacon Properties Corp. .............................................................. 45,000 1,648,125
Equity Residential Properties Trust................................................... 48,500 2,000,625
JP Realty, Inc. ...................................................................... 97,500 2,522,813
Manufactured Home Communities, Inc. .................................................. 78,000 1,813,500
National Health Investors, Inc. ...................................................... 72,000 2,727,000
Simon Debartolo Group, Inc. .......................................................... 52,500 1,627,500
Spieker Properties, Inc. ............................................................. 53,000 1,908,000
Sun Communities, Inc. ................................................................ 54,700 1,887,150
--------------
19,701,663
--------------
Technology (4.1%)
Adobe Systems, Inc. .................................................................. 155,000 5,793,125
Ericsson (L.M.) Telephone Co. (Class B) ADR........................................... 135,900 4,102,481
Hewlett-Packard Co. .................................................................. 76,000 3,819,000
Intel Corp. .......................................................................... 36,700 4,805,406
International Business Machines Corp. ................................................ 23,900 3,608,900
Motorola, Inc. ....................................................................... 91,300 5,603,538
--------------
27,732,450
--------------
Utilities/Communications (0.4%)
Frontier Corp. ....................................................................... 122,100 2,762,513
--------------
Utilities/Electric/Gas (0.5%)
Idaho Power Co. ...................................................................... 99,300 3,090,713
--------------
Total Common Stocks
(Cost $270,169,730) ................................................................. 324,905,038
--------------
U.S. Government, Federal Agency Obligations (31.6%)
U.S. Treasury Bonds And Notes (13.6%)
U.S. Treasury Bonds
12.000% 05/15/2005................................................................... $ 3,430,000 4,662,193
12.000% 08/15/2013................................................................... 9,385,000 13,432,469
8.875% 08/15/2017................................................................... 1,925,000 2,381,591
8.125% 08/15/2019................................................................... 13,580,000 15,728,356
<CAPTION>
Shares or
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
U.S. Treasury Notes
8.750% 10/15/1997................................................................... $ 16,255,000 $ 16,657,636
5.750% 10/31/1997................................................................... 13,190,000 13,208,598
8.875% 02/15/1999................................................................... 6,210,000 6,569,000
6.875% 08/31/1999................................................................... 18,565,000 18,950,781
--------------
91,590,624
--------------
Government National Mortgage Association (GNMA) (4.3%)
8.000% 08/20/2026 - 12/20/2026 (GNMA II)............................................ 26,895,216 27,319,622
8.000% 09/15/2025 - 10/15/2025...................................................... 1,227,515 1,252,262
--------------
28,571,884
--------------
Federal Housing Administration (FHA) (0.8%)
FHA Insured Project Pool #23-11059
7.700% 08/01/2028................................................................... 1,620,497 1,617,807
FHA Insured Project Pool #53
7.430% 02/01/2022................................................................... 924,614 944,262
FHA Insured Project Pool #55
7.430% 04/01/2022................................................................... 1,929,472 1,904,447
FHA Insured Project Pool #53-43077
9.125% 07/25/2033................................................................... 1,102,400 1,172,072
--------------
5,638,588
--------------
Federal Home Loan Mortgage Corporation (FHLMC) (1.5%)
7.500% 07/01/2011 - 11/01/2011...................................................... 8,593,663 8,717,240
8.500% 10/01/2024 - 03/01/2025...................................................... 1,334,032 1,383,645
--------------
10,100,885
--------------
Agency Collateralized Mortgage Obligations (11.4%)
FHLMC Multiclass Mtg. Partn. Ctfs. Gtd. Series 1203 Cl. F
6.750% 07/15/2003................................................................... 54,493 54,390
FHLMC Multiclass Mtg. Partn. Ctfs. Gtd. Series 1233 Cl. H
7.000% 04/15/2007................................................................... 600,000 602,058
FHLMC Multiclass Mtg. Partn. Ctfs. Gtd. Series 1627 Cl. E
6.000% 02/15/2023................................................................... 2,256,000 1,939,100
FHLMC Multiclass Mtg. Partn. Ctfs. Gtd. Series 1627 Cl. EA
6.000% 05/15/2023................................................................... 1,817,000 1,527,970
FHLMC Multiclass Mtg. Partn. Ctfs. Gtd. Series 1632 Cl. B
6.000% 11/15/2023................................................................... 1,780,000 1,620,921
FHLMC Multiclass Mtg. Partn. Ctfs. Gtd. Series 1763 Cl. H
8.250% 07/15/2023................................................................... 130,000 136,255
</TABLE>

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<TABLE>
<CAPTION>
Shares or
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
</TABLE>

U.S. Government, Federal Agency Obligations (Continued)
<TABLE>
<S> <C> <C>
FHLMC Multiclass Mtg. Partn. Ctfs. Gtd. Series 1795 Cl. A
7.000% 11/15/2022................................................................... $ 8,541,223 $ 8,541,223
FHLMC Multiclass Mtg. Partn. Ctfs. Gtd. Series 1895 Cl. B
7.500% 12/15/2023................................................................... 2,360,000 2,345,981
FHLMC Multiclass Mtg. Partn. Ctfs. Gtd. Series 1890 Cl. K
7.000% 03/15/2022................................................................... 4,380,000 4,309,526
FHLMC Multiclass Mtg. Partn. Ctfs. Gtd. Series 1902 Cl. B
7.000% 11/15/2023................................................................... 2,800,000 2,717,764
FHLMC Multiclass Mtg. Partn. Ctfs. Gtd. Series 1904 Cl. AB
7.000% 07/15/2022................................................................... 3,193,647 3,194,637
FHLMC Multiclass Mtg. Partn. Ctfs. Gtd. Series 1904 Cl. B
7.000% 07/15/2022................................................................... 1,520,000 1,495,300
FHLMC Multiclass Mtg. Partn. Ctfs. Gtd. Series 1904 Cl. C
7.250% 08/15/2024................................................................... 3,490,000 3,416,919
FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1993-235 Cl. C
0.000% 10/25/1997................................................................... 1,013,549 986,943
FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1996-G1 Cl. PG
7.500% 06/17/2022................................................................... 3,580,000 3,656,075
FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1996-G1 Cl. PJ
7.500% 11/17/2025................................................................... 480,000 486,077
FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1996-G1 Cl. PK
7.500% 06/17/2026................................................................... 706,000 712,290
FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1996-G3 Cl. C
7.500% 03/20/2024................................................................... 2,070,000 2,058,367
FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1996-W2 Cl. A5
7.550% 06/25/2026................................................................... 945,000 963,749
FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1996-W3 Cl. A6
7.800% 08/25/2026................................................................... 760,000 776,804
FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1996-28 Cl. AB
7.000% 09/25/2023................................................................... 1,070,000 1,024,525
<CAPTION>
Shares or
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1996-31 Cl. E
7.500% 10/25/2025................................................................... $ 5,900,000 $ 6,014,460
FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1996-46 Cl. G
7.500% 06/25/2024................................................................... 6,580,000 6,549,140
FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1996-48 Cl. B
7.500% 12/25/2024................................................................... 7,060,000 7,114,080
FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1996-51 Cl. J
7.000% 05/18/2024................................................................... 9,158,397 9,165,541
GNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1996-5 Cl. DB
7.000% 11/16/2020................................................................... 4,700,000 4,591,289
Puerto Rico Housing Finance Corp. Series A Cl. 4
9.000% 07/20/2017................................................................... 577,476 577,476
--------------
76,578,860
--------------
Total U.S. Government,
Federal Agency Obligations
(Cost $211,382,824) ................................................................. 212,480,841
--------------
Other Securitized Loans (3.4%)
Collateralized Mortgage Obligations (2.6%)
Bear Stearns Mortgage Securities, Inc.
Series 1996-2 Cl. A1
6.910% 01/25/2025................................................................... 955,908 921,256
Bear Stearns Mortgage Securities, Inc.
Series 1996-8 Cl. A9
7.600% 11/25/2027................................................................... 4,337,000 4,311,238
Residential Asset Securitization Trust
Series 1996-A7 Cl. A3
9.500% 10/25/2026................................................................... 2,251,697 2,332,623
Residential Accredit Loans, Inc.
Series 1996-QS4 Cl. AI6
8.000% 08/25/2026................................................................... 1,780,000 1,807,252
Residential Accredit Loans, Inc.
Series 1996-QS4 Cl. AI7
8.000% 08/25/2026................................................................... 4,033,000 4,094,140
Residential Accredit Loans, Inc.
Series 1996-QS7 Cl. AI9
8.000% 11/25/2026................................................................... 1,708,000 1,734,696
</TABLE>

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<TABLE>
<CAPTION>
Shares or
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
</TABLE>

Other Securitized Loans (Continued)
<TABLE>
<S> <C> <C>
Structured Asset Securities Corp.
Series 1996-6 Cl. 1A2
7.500% 08/25/2026................................................................... $ 2,567,000 $ 2,528,495
--------------
17,729,700
--------------
Asset Backed Securities (0.8%)
Prudential Securities Financial Asset Funding Corp. Mtg. Pass Thru Ctf. 1994-2 Cl. A
6.350% 11/15/2014................................................................... 4,152,874 4,058,147
Prudential Securities Secured Financing Corp. Mtg. Pass Thru Ctf.
Series 1996-1 Cl. A3
7.175% 08/15/2026................................................................... 929,385 933,158
--------------
4,991,305
--------------
Total Other Securitized Loans
(Cost $22,550,694) .................................................................. 22,721,005
--------------
Corporate Bonds (10.8%)
Industrial (4.7%)
Emerson Electric Co. Euro
7.875% 06/05/1998................................................................... 380,000 389,375
Ethan Allen, Inc.
8.750% 03/15/2001................................................................... 1,800,000 1,865,250
Federated Department Stores, Inc.
10.000% 02/15/2001................................................................... 1,000,000 1,086,230
Freeport-McMoRan Resource Partners L.P.
8.750% 02/15/2004................................................................... 900,000 933,750
Lenfest Communications, Inc.
8.375% 11/01/2005................................................................... 1,400,000 1,352,750
Lockheed Martin Corp.
6.625% 06/15/1998................................................................... 5,000,000 5,038,550
Louis Dreyfus Natural Gas Corp.
9.250% 06/15/2004................................................................... 600,000 639,390
Nabisco, Inc.
6.700% 06/15/2002................................................................... 2,000,000 1,980,120
News America Holdings, Inc.
7.600% 10/11/2015................................................................... 3,900,000 3,722,472
7.430% 10/01/2026................................................................... 1,630,000 1,646,333
Norfolk Southern Corp.
Medium Term Note
7.400% 09/15/2006................................................................... 4,200,000 4,265,394
Royal Caribbean Cruises Ltd.
11.375% 05/15/2002................................................................... 1,300,000 1,384,500
<CAPTION>
Shares or
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
Sears, Roebuck Acceptance Corp.
Medium Term Notes
6.510% 02/03/1999................................................................... $ 2,450,000 $ 2,463,058
Stop & Shop Cos., Inc.
9.750% 02/01/2002................................................................... 215,000 240,800
Temple Inland, Inc. Medium Term Note
9.000% 04/20/1998................................................................... 200,000 207,564
Time Warner Entertainment Co. L.P.
9.625% 05/01/2002................................................................... 1,900,000 2,119,697
8.375% 03/15/2023................................................................... 1,320,000 1,338,308
Viacom, Inc.
8.000% 07/07/2006................................................................... 1,100,000 1,064,250
--------------
31,737,791
--------------
Financial (5.0%)
Aetna Services, Inc.
7.625% 08/15/2026................................................................... 3,500,000 3,529,190
Associates Corp. N.A.
6.750% 10/15/1999................................................................... 450,000 455,125
Bankers Trust NY Corp.
6.750% 10/03/2001................................................................... 2,325,000 2,336,299
Beneficial Corp. Medium Term Note
8.170% 11/09/1999................................................................... 4,120,000 4,307,831
CP Limited Partnership
8.750% 03/02/2000................................................................... 1,450,000 1,517,671
California Hotel Finance Corp.
11.000% 12/01/2002................................................................... 650,000 679,250
Commercial Credit Group, Inc.
6.625% 06/01/2015................................................................... 1,250,000 1,256,862
ERP Operating Limited Partnership (144A)
8.500% 05/15/1999................................................................... 2,700,000 2,796,093
First Security Corp. (Del.)
7.875% 10/15/1999................................................................... 1,325,000 1,370,236
Fleet Mortgage Group, Inc.
6.500% 09/15/1999................................................................... 550,000 551,485
General Electric Capital Corp.
Medium Term Note
7.875% 11/15/1997................................................................... 1,500,000 1,527,645
Goldman Sachs Group L.P. (144A)
6.750% 02/15/2006................................................................... 2,525,000 2,464,451
Morgan Stanley Group, Inc.
Medium Term Note
5.750% 02/15/2001................................................................... 2,100,000 2,035,278
Spieker Properties L.P.
6.900% 01/15/2004................................................................... 2,450,000 2,416,460
</TABLE>

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<TABLE>
<CAPTION>
Shares or
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
</TABLE>

Corporate Bonds (Continued)
<TABLE>
<S> <C> <C>
United Dominion Realty Trust
Series A Medium Term Note
7.020% 11/15/2005................................................................... $ 5,050,000 $ 4,977,937
Wachovia Bank
Medium Term Note
6.000% 03/15/1999................................................................... 1,425,000 1,421,010
--------------
33,642,823
--------------
Utility (0.5%)
GTE Corp.
8.850% 03/01/1998................................................................... 750,000 773,265
GTE North, Inc.
5.500% 02/15/1999................................................................... 2,905,000 2,866,625
--------------
3,639,890
--------------
Yankee (0.6%)
Hydro-Quebec
8.000% 02/01/2013................................................................... 1,520,000 1,614,651
Manitoba Province
7.750% 02/01/2002................................................................... 700,000 735,049
Ontario Province CDA
6.000% 02/21/2006................................................................... 1,725,000 1,640,906
--------------
3,990,606
--------------
Total Corporate Bonds
(Cost $72,965,378) .................................................................. 73,011,110
--------------
Total investments, excluding temporary
cash investments
(Cost $577,068,626) ................................................................. 633,117,994
--------------
<CAPTION>
Shares or
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
Repurchase Agreements (5.5%)
Goldman Sachs Corp.
6.354% dated 12/31/1996,
due 01/02/1997 in the
amount of $32,739,073.
Collateralized by U.S. Treasury Bond
6.500% due 11/15/2026. .............................................................. $ 32,727,709 $ 32,727,709
J.P. Morgan Securities, Inc.
6.789% dated 12/31/1996,
due 01/02/1997 in the
amount of $4,001,484.
Collateralized by U.S. Treasury Bonds
6.000% to 14.000%
due 05/15/2005 to 11/15/2026,
U.S. Treasury Notes
5.625% to 8.750%
due 10/31/1997 to 02/15/2006. ....................................................... 4,000,000 4,000,000
--------------
Total Repurchase Agreements
(Cost $36,727,709) .................................................................. 36,727,709
--------------
Total Investments (99.6%)
(Cost $613,796,335)...................................................................... 669,845,703
Receivables less liabilities (0.4%)....................................................... 2,747,217
--------------
Net Assets (100.0%)....................................................................... $ 672,592,920
--------------
--------------
</TABLE>

(1) See Note 1 of Notes to Financial Statements.
* Non-income producing

The accompanying notes are an integral part
of the financial statements.

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<TABLE>
<CAPTION>
Principal
December 31, 1996 Amount Value(1)
------------- --------------
<S> <C> <C>
Commercial Paper (99.8%)
A. I. Credit Corp.
5.270% 02/20/1997................................................................... $ 10,000,000 $ 9,925,342
Air Products & Chemicals, Inc.
5.310% 01/21/1997................................................................... 5,000,000 4,984,512
5.280% 02/24/1997................................................................... 9,000,000 8,927,400
5.400% 03/28/1997................................................................... 7,000,000 6,908,650
American Express Credit Corp.
5.320% 01/31/1997................................................................... 5,000,000 4,977,095
5.300% 02/27/1997................................................................... 10,000,000 9,914,611
5.300% 03/13/1997................................................................... 10,000,000 9,894,000
American General Finance Corp.
5.310% 01/23/1997................................................................... 5,000,000 4,983,038
5.280% 02/11/1997................................................................... 10,000,000 9,938,400
Ameritech Capital Funding Corp.
5.300% 02/06/1997................................................................... 11,900,000 11,835,178
Associates Corp. of North America
6.750% 01/02/1997................................................................... 23,000,000 22,991,375
Atlantic Richfield Co.
5.290% 01/17/1997................................................................... 10,000,000 9,975,020
5.320% 01/27/1997................................................................... 15,000,000 14,940,150
Avco Financial Services, Inc.
5.305% 01/31/1997................................................................... 5,000,000 4,977,159
5.300% 02/04/1997................................................................... 10,000,000 9,948,472
5.310% 02/05/1997................................................................... 10,000,000 9,946,900
BP America, Inc.
6.750% 01/02/1997................................................................... 18,000,000 17,993,250
Bank of America, FSB
5.290% 03/07/1997................................................................... 10,000,000 9,903,017
5.370% 03/18/1997................................................................... 10,000,000 9,885,142
Barclays U.S. Funding Corp.
5.600% 01/08/1997................................................................... 10,000,000 9,987,556
5.430% 01/29/1997................................................................... 5,000,000 4,978,129
5.280% 02/11/1997................................................................... 10,000,000 9,938,400
BellSouth Capital Funding Corp.
5.300% 01/22/1997................................................................... 5,000,000 4,983,806
5.300% 02/03/1997................................................................... 10,000,000 9,949,945
Beneficial Corp.
5.310% 01/21/1997................................................................... 5,000,000 4,984,513
5.290% 02/10/1997................................................................... 10,000,000 9,939,753
5.280% 03/06/1997................................................................... 10,000,000 9,904,667
Brown-Forman Corp.
5.440% 01/13/1997................................................................... 10,263,000 10,242,839
5.310% 02/25/1997................................................................... 10,043,000 9,960,045
5.310% 03/03/1997................................................................... 5,000,000 4,954,275
CIT Group Holdings, Inc.
5.600% 01/07/1997................................................................... 15,000,000 14,983,667
5.410% 03/17/1997................................................................... 5,000,000 4,942,895

<CAPTION>
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
Cargill Global Funding
5.300% 03/10/1997................................................................... $ 5,000,000 $ 4,949,208
5.300% 03/10/1997................................................................... 5,000,000 4,949,208
5.310% 03/10/1997................................................................... 7,000,000 6,928,758
Chevron Transport Co.
5.300% 02/10/1997................................................................... 5,000,000 4,969,819
5.340% 03/17/1997................................................................... 13,000,000 12,853,447
Clorox Co.
5.320% 02/28/1997................................................................... 5,000,000 4,956,406
5.320% 03/11/1997................................................................... 10,000,000 9,896,556
5.320% 03/14/1997................................................................... 10,000,000 9,892,123
Colgate-Palmolive Co.
5.300% 02/03/1997................................................................... 5,000,000 4,974,972
Deere (John) Capital Corp.
5.300% 02/05/1997................................................................... 5,000,000 4,973,500
5.370% 02/07/1997................................................................... 10,000,000 9,943,317
5.300% 02/26/1997................................................................... 10,000,000 9,916,083
Disney (Walt) Co.
5.290% 01/23/1997................................................................... 5,000,000 4,983,101
5.400% 01/24/1997................................................................... 10,000,000 9,964,000
5.290% 02/03/1997................................................................... 10,000,000 9,950,039
DuPont (E.I.) de Nemours & Co.
5.260% 02/20/1997................................................................... 22,000,000 21,836,064
Ford Motor Credit Co.
5.880% 01/03/1997................................................................... 10,000,000 9,995,100
5.900% 01/03/1997................................................................... 1,052,000 1,051,483
5.550% 01/09/1997................................................................... 5,000,000 4,993,063
5.300% 01/14/1997................................................................... 10,000,000 9,979,389
General Electric Capital Corp.
5.310% 01/21/1997................................................................... 10,000,000 9,969,025
5.310% 02/05/1997................................................................... 5,000,000 4,973,450
5.290% 02/14/1997................................................................... 5,000,000 4,966,938
General Electric Capital Services, Inc.
5.310% 02/10/1997................................................................... 5,000,000 4,969,763
Gillette Co., The
5.280% 03/05/1997................................................................... 5,000,000 4,953,067
Glaxo Wellcome plc
6.050% 01/03/1997................................................................... 5,646,000 5,643,153
5.320% 01/17/1997................................................................... 10,000,000 9,974,878
5.320% 03/07/1997................................................................... 5,000,000 4,951,234
Goldman Sachs Group L.P.
5.420% 02/04/1997................................................................... 5,000,000 4,973,653
5.300% 03/04/1997................................................................... 20,000,000 19,814,500
Heinz, (H.J.) Co.
5.530% 01/10/1997................................................................... 8,400,000 8,387,097
</TABLE>

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

-- COLUMBIA DAILY INCOME COMPANY --
-----------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
</TABLE>

Commercial Paper (Continued)
<TABLE>
<S> <C> <C>
Household Finance Corp.
5.310% 01/28/1997................................................................... $ 5,000,000 $ 4,979,350
5.330% 01/30/1997................................................................... 10,000,000 9,955,584
5.300% 02/13/1997................................................................... 10,000,000 9,935,222
Idaho Power Co.
5.500% 01/10/1997................................................................... 2,150,000 2,146,715
Knight-Ridder, Inc.
5.280% 01/15/1997................................................................... 15,000,000 14,967,000
Lincoln National Corp.
5.280% 02/19/1997................................................................... 10,000,000 9,926,667
Lubrizol Corp.
5.650% 01/06/1997................................................................... 1,531,000 1,529,558
Merrill Lynch & Co., Inc.
5.330% 01/23/1997................................................................... 5,000,000 4,982,974
5.330% 01/30/1997................................................................... 5,000,000 4,977,792
5.340% 02/11/1997................................................................... 5,000,000 4,968,850
5.300% 02/12/1997................................................................... 10,000,000 9,936,695
MetLife Funding, Inc.
5.280% 02/18/1997................................................................... 15,000,000 14,892,200
5.270% 02/21/1997................................................................... 10,000,000 9,923,878
Monsanto Co.
5.280% 02/12/1997................................................................... 5,000,000 4,968,467
5.600% 02/19/1997................................................................... 1,500,000 1,488,334
5.380% 03/19/1997................................................................... 8,310,000 8,213,133
Morgan (J.P.) & Co., Inc.
5.300% 03/03/1997................................................................... 20,000,000 19,817,445
5.370% 03/20/1997................................................................... 5,000,000 4,941,079
Morgan Stanley Group, Inc.
5.370% 02/14/1997................................................................... 10,000,000 9,932,875
5.310% 02/19/1997................................................................... 10,000,000 9,926,250
5.340% 03/14/1997................................................................... 5,000,000 4,945,859
National Rural Utilities Cooperative Finance Corp.
5.310% 01/30/1997................................................................... 5,000,000 4,977,875
5.280% 02/04/1997................................................................... 11,900,000 11,838,913
5.290% 02/13/1997................................................................... 2,000,000 1,987,069
Norwest Corp.
5.310% 01/29/1997................................................................... 5,000,000 4,978,613
Norwest Financial, Inc.
5.320% 02/12/1997................................................................... 5,000,000 4,968,228
5.280% 02/25/1997................................................................... 13,000,000 12,893,227
PacifiCorp
5.310% 01/22/1997................................................................... 10,000,000 9,967,550
Pfizer, Inc.
5.300% 03/12/1997................................................................... 10,000,000 9,895,472
<CAPTION>
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
Procter & Gamble Co.
5.280% 01/16/1997................................................................... $ 10,000,000 $ 9,976,533
Prudential Funding Corp.
5.620% 01/06/1997................................................................... 10,000,000 9,990,633
5.620% 01/09/1997................................................................... 5,000,000 4,992,975
5.420% 01/22/1997................................................................... 10,000,000 9,966,878
Sara Lee Corp.
6.250% 01/07/1997................................................................... 10,000,000 9,987,847
Siemens Corp.
5.310% 01/23/1997................................................................... 7,000,000 6,976,253
Sonoco Products Co.
5.300% 02/18/1997................................................................... 5,000,000 4,963,931
5.290% 02/21/1997................................................................... 7,000,000 6,946,512
Southern California Gas Co.
5.300% 01/28/1997................................................................... 10,000,000 9,958,778
Southern New England Telecom
5.430% 01/13/1997................................................................... 15,000,000 14,970,588
USAA Capital Corp.
5.300% 01/29/1997................................................................... 5,000,000 4,978,653
Weyerhaeuser Co.
5.280% 01/16/1997................................................................... 3,700,000 3,691,317
5.280% 01/16/1997................................................................... 3,000,000 2,992,960
5.290% 01/16/1997................................................................... 11,000,000 10,974,138
--------------
Total Commercial Paper
(Cost $888,362,465) ................................................................. 888,362,465
--------------
Repurchase Agreement (1.6%)
Goldman Sachs Corp.
6.354% dated 12/31/1996,
due 01/02/1997 in the
amount of $13,701,038.
Collateralized by U.S. Treasury Bond
6.500% due 11/15/2026
(Cost $13,696,282) .................................................................. 13,696,282 13,696,282
--------------
Total Investments (101.4%)
(Cost $902,058,747, including $5,630,973 accrued interest receivable).................... 902,058,747
Cash and receivables less liabilities (-1.4%)............................................. (12,258,778)
--------------
Net Assets (100.0%)....................................................................... $ 889,799,969
--------------
--------------
</TABLE>

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

The accompanying notes are an integral part
of the financial statements.

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

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

<TABLE>
<CAPTION>
Principal
December 31, 1996 Amount Value(1)
------------- --------------
<S> <C> <C>
U.S. Treasury Notes (99.4%)
5.750% 10/31/1997................................................................... $ 16,500,000 $ 16,523,265
8.875% 02/15/1999................................................................... 2,800,000 2,961,868
6.875% 08/31/1999................................................................... 10,875,000 11,100,983
5.875% 11/15/1999................................................................... 10,000,000 9,960,900
--------------
Total U.S. Treasury Notes
(Cost $40,519,829) .................................................................. 40,547,016
Repurchase Agreement (0.9%)
Goldman Sachs Corp.
6.354% dated 12/31/1996,
due 01/02/1997 in the
amount of $351,192.
Collateralized by U.S. Treasury Bond
6.5000% due 11/15/2026
(Cost $351,070) ..................................................................... 351,070 351,070
--------------
Total Investments (100.3%)
(Cost $40,870,899)....................................................................... 40,898,086
Receivables less liabilities (-0.3%)...................................................... (121,745)
--------------
Net Assets (100.0%)....................................................................... $ 40,776,341
--------------
--------------
</TABLE>

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

The accompanying notes are an integral part
of the financial statements.

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

-- COLUMBIA FIXED INCOME SECURITIES FUND, INC. --
-------------------------------------------------
<TABLE>
<CAPTION>
Principal
December 31, 1996 Amount Value(1)
------------- --------------
<S> <C> <C>
U.S. Government, Federal Agency Obligations (61.6%)
U.S. Treasury Bonds & Notes (22.9%)
U.S. Treasury Bonds
12.000% 05/15/2005................................................................... $ 2,900,000 $ 3,941,796
12.000% 08/15/2013................................................................... 14,220,000 20,352,659
8.125% 08/15/2019................................................................... 12,830,000 14,859,706
U.S. Treasury Notes
8.750% 10/15/1997................................................................... 21,140,000 21,663,638
5.750% 10/31/1997................................................................... 20,905,000 20,934,476
--------------
81,752,275
--------------
Other Government Agency Obligation (1.5%)
Farm Credit Systems Financial Assistance Corp. Series A
9.375% 07/21/2003................................................................... 4,660,000 5,363,380
--------------
Government National Mortgage Association (GNMA) (8.8%)
8.000% 07/20/2026 - 11/20/2026
(GNMA II).......................................................................... 29,384,675 29,848,365
8.000% 10/15/2025 - 11/15/2026...................................................... 1,314,444 1,340,943
--------------
31,189,308
--------------
Government National Mortgage Association
Graduated Payment Mortgage (GNMA GPM) (0.2%)
9.000% 05/15/2009................................................................... 540,084 566,414
--------------
Federal Housing Administration (FHA) (2.3%)
FHA Norwest Insured Project Pool #40
7.430% 08/01/2021................................................................... 2,704,079 2,759,865
FHA Insured Project Pool #2022
7.430% 12/01/2020................................................................... 1,414,976 1,435,316
FHA Insured Project Pool #1984-D
9.680% 02/01/2024................................................................... 825,790 864,239
FHA Insured Project Pool #051-11078
8.350% 04/01/2030................................................................... 2,228,569 2,293,509
FHA Insured Project Pool #092-35499
8.450% 11/15/2031................................................................... 793,388 820,411
--------------
8,173,340
--------------
Federal Home Loan Mortgage Corporation (FHLMC) (2.5%)
7.500% 06/01/2010 - 11/01/2011...................................................... 8,669,531 8,794,199
--------------
Agency Collateralized Mortgage Obligations (23.4%)
American Southwest Financial Corp.
Series 64 Cl. E
8.500% 06/17/2019................................................................... 905,463 903,200
FHLMC Multiclass Mtg. Partn. Ctfs.
Gtd. Series 1547 Cl. C
5.750% 04/15/2023................................................................... 350,905 318,667
FHLMC Multiclass Mtg. Partn. Ctfs.
Gtd. Series 1632 Cl. B
6.000% 11/15/2023................................................................... 2,687,704 2,447,504

<CAPTION>
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
FHLMC Multiclass Mtg. Partn. Ctfs.
Gtd. Series 1763 Cl. H
8.250% 07/15/2023................................................................... $ 692,000 $ 725,299
FHLMC Multiclass Mtg. Partn. Ctfs.
Gtd. Series 1779 Cl. G
9.500% 12/15/2023................................................................... 1,000,000 1,083,750
FHLMC Multiclass Mtg. Partn. Ctfs.
Gtd. Series 1795 Cl. A
7.000% 11/15/2022................................................................... 1,331,330 1,331,330
FHLMC Multiclass Mtg. Partn. Ctfs.
Gtd. Series 1895 Cl. B
7.500% 12/15/2023................................................................... 3,200,000 3,180,992
FHLMC Multiclass Mtg. Partn. Ctfs.
Gtd. Series 1897 Cl. E
7.000% 07/15/2024................................................................... 6,000,000 5,769,360
FHLMC Multiclass Mtg. Partn. Ctfs.
Gtd. Series 1890 Cl. K
7.000% 03/15/2022................................................................... 1,280,000 1,259,405
FHLMC Multiclass Mtg. Partn. Ctfs.
Gtd. Series 1904 Cl. AB
7.000% 07/15/2022................................................................... 5,803,934 5,805,733
FHLMC Multiclass Mtg. Partn. Ctfs.
Gtd. Series 1904 Cl. B
7.000% 07/15/2022................................................................... 2,567,000 2,525,286
FHLMC Multiclass Mtg. Partn. Ctfs.
Gtd. Series 1920 Cl. D
7.000% 01/15/2009................................................................... 2,080,000 2,068,310
FHLMC GNMA Multiclass Mtg. Partn. Ctfs.
Gtd. Series 31 Cl. D
0.000% 01/25/2006................................................................... 3,618,977 2,456,381
FHLMC GNMA Multiclass Mtg. Partn. Ctfs.
Gtd. Series 35 Cl. PH
7.750% 03/17/2023................................................................... 1,580,000 1,633,815
FNMA Gtd. REMIC Pass Thru Ctf.
REMIC Tr. 1991-94 Cl. C
0.000% 01/25/1999................................................................... 2,969,467 2,768,107
FNMA Gtd. REMIC Pass Thru Ctf.
REMIC Tr. 1992-214 Cl. PL
7.500% 05/25/2021................................................................... 1,700,000 1,746,206
FNMA Gtd. REMIC Pass Thru Ctf.
REMIC Tr. 1994-20 Cl. PJ
5.800% 05/25/2004................................................................... 410,000 408,331
FNMA Gtd. REMIC Pass Thru Ctf.
REMIC Tr. 1996-G1 Cl. PG
7.500% 06/17/2022................................................................... 3,500,000 3,574,375
FNMA Gtd. REMIC Pass Thru Ctf.
REMIC Tr. 1996-G3 Cl. C
7.500% 03/20/2024................................................................... 2,400,000 2,386,512
</TABLE>

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

-- COLUMBIA FIXED INCOME SECURITIES FUND, INC. --
-------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
</TABLE>

U.S. Government, Federal Agency Obligations (Continued)
<TABLE>
<S> <C> <C>
FNMA Gtd. REMIC Pass Thru Ctf.
REMIC Tr. 1996-W2 Cl. A5
7.550% 06/25/2026................................................................... $ 2,770,000 $ 2,824,957
FNMA Gtd. REMIC Pass Thru Ctf.
REMIC Tr. 1996-W3 Cl. A5
7.550% 08/25/2026................................................................... 1,914,000 1,952,586
FNMA Gtd. REMIC Pass Thru Ctf.
REMIC Tr. 1996-28 Cl. AB
7.000% 09/25/2023................................................................... 3,010,000 2,882,075
FNMA Gtd. REMIC Pass Thru Ctf.
REMIC Tr. 1996-46 Cl. G
7.500% 06/25/2024................................................................... 8,212,400 8,173,884
FNMA Gtd. REMIC Pass Thru Ctf.
REMIC Tr. 1996-48 Cl. B
7.500% 12/25/2024................................................................... 8,717,000 8,783,772
FNMA Gtd. REMIC Pass Thru Ctf.
REMIC Tr. 1996-51 Cl. AL
7.000% 12/18/2024................................................................... 3,620,000 3,496,703
FNMA Gtd. REMIC Pass Thru Ctf.
REMIC Tr. 1996-51 Cl. AT
7.000% 12/18/2023................................................................... 5,190,000 5,025,373
FNMA Gtd. REMIC Pass Thru Ctf.
REMIC Tr. 1996-51 Cl. J
7.000% 05/18/2024................................................................... 6,037,795 6,042,504
Puerto Rico Housing Finance Corp.
Series A Cl. 4
9.000% 07/20/2017................................................................... 1,045,699 1,045,699
U.S. VA Vendee Mtg. Gtd. REMIC
Pass Thru Ctf. 1995-1C Cl. 3E
8.000% 07/15/2018................................................................... 870,000 903,852
--------------
83,523,968
--------------
Total U.S. Government,
Federal Agency Obligations
(Cost $217,124,849) ................................................................. 219,362,884
--------------
Other Securitized Loans (8.8%)
Collateralized Mortgage Obligations (8.8%)
Bear Stearns Mortgage Securities, Inc. Series 1996-2 Cl. A1
6.910% 01/25/2025................................................................... 2,867,109 2,763,177
Bear Stearns Mortgage Securities, Inc. Series 1996-4 Cl. AI7
8.125% 09/25/2027................................................................... 5,486,000 5,601,700
Bear Stearns Mortgage Securities, Inc. Series 1996-5 Cl. A7
8.125% 09/25/2027................................................................... 3,712,000 3,792,031
<CAPTION>
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
Residential Asset Securitization Trust
Series 1996-A7 Cl. A3
9.500% 10/25/2026................................................................... $ 2,056,584 $ 2,130,497
Residential Funding Mtg. Sec., Inc.
Series 1993-S45 Cl. A10
8.000% 12/25/2023................................................................... 1,250,000 1,285,162
Residential Accredit Loans, Inc.
Series 1996-QS4 Cl. AI6
8.000% 08/25/2026................................................................... 3,500,000 3,553,585
Residential Accredit Loans, Inc.
Series 1996-QS5 Class AI8
8.000% 09/25/2026................................................................... 1,440,000 1,461,931
Salomon Brothers Mortgage
Securities VII, Inc.
Series 1993-3 Cl. A4
7.200% 08/25/2023................................................................... 4,509,000 4,478,700
Saxon Asset Securities Co.
Series 1996-1 Cl. A2
8.060% 09/25/2027................................................................... 6,265,000 6,352,146
--------------
Total Other Securitized Loans
(Cost $30,980,581) .................................................................. 31,418,929
--------------
Corporate Bonds (24.9%)
Industrial (12.1%)
American Standard, Inc. Step-Up Coupon
0.000% to 06/01/1998, then 10.500% to 06/01/2005.................................... 500,000 465,000
Ethan Allen, Inc.
8.750% 03/15/2001................................................................... 975,000 1,010,344
Federated Department Stores, Inc.
10.000% 02/15/2001................................................................... 600,000 651,738
Foster Wheeler Corp.
6.750% 11/15/2005................................................................... 2,925,000 2,826,193
Freeport-McMoRan Resource Partners L.P.
8.750% 02/15/2004................................................................... 500,000 518,750
Harrahs Operating, Inc.
10.875% 04/15/2002................................................................... 1,250,000 1,318,750
Hospital Corp. America
0.000% 06/01/1997................................................................... 1,750,000 1,711,132
La Quinta Inns, Inc.
9.250% 05/15/2003................................................................... 375,000 391,875
Lenfest Communications, Inc.
8.375% 11/01/2005................................................................... 2,100,000 2,029,125
Lockheed Martin Corp.
6.625% 06/15/1998................................................................... 6,400,000 6,449,344
Louis Dreyfus Natural Gas Corp.
9.250% 06/15/2004................................................................... 650,000 692,673
Marriott International, Inc.
6.750% 12/01/2009................................................................... 3,000,000 2,810,550
</TABLE>

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

-- COLUMBIA FIXED INCOME SECURITIES FUND, INC. --
-------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
</TABLE>

Corporate Bonds (Continued)
<TABLE>
<S> <C> <C>
Nabisco, Inc.
6.700% 06/15/2002................................................................... $ 3,750,000 $ 3,712,725
News America Holdings, Inc.
7.600% 10/11/2015................................................................... 6,250,000 5,965,500
Occidental Petroleum Corp.
10.125% 11/15/2001................................................................... 1,285,000 1,463,654
Royal Caribbean Cruises Ltd.
11.375% 05/15/2002................................................................... 2,900,000 3,088,500
Sears, Roebuck Acceptance Corp.
Medium Term Notes
6.400% 10/11/2000................................................................... 4,525,000 4,504,683
Time Warner Entertainment Co. L.P.
8.375% 03/15/2023................................................................... 2,600,000 2,636,062
Time Warner, Inc.
9.125% 01/15/2013................................................................... 800,000 873,360
--------------
43,119,958
--------------
Financial (8.8%)
Aetna Services, Inc.
7.625% 08/15/2026................................................................... 5,000,000 5,041,700
California Hotel Finance Corp.
11.000% 12/01/2002................................................................... 350,000 365,750
Ford Motor Credit Co.
6.850% 08/15/2000................................................................... 4,000,000 4,036,760
Goldman Sachs Group L.P. (144A)
6.750% 02/15/2006................................................................... 3,700,000 3,611,274
Health Care Properties, Inc.
6.500% 02/15/2006................................................................... 6,400,000 6,074,368
Mellon Financial Co.
7.625% 11/15/1999................................................................... 5,200,000 5,366,920
USL Capital Corp.
6.500% 12/01/2003................................................................... 3,350,000 3,281,627
United Dominion Realty Trust
Series A Medium Term Note
7.020% 11/15/2005................................................................... 3,725,000 3,671,844
--------------
31,450,243
--------------
Utility (1.6%)
California Energy, Inc.
9.875% 06/30/2003................................................................... 350,000 367,500
<CAPTION>
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
Northern Indiana Public Service Co. Medium Term Note
6.900% 06/01/2000................................................................... $ 1,250,000 $ 1,265,000
6.750% 06/01/2000................................................................... 2,500,000 2,518,675
Pacificorp
Medium Term Note
6.120% 01/15/2006................................................................... 1,825,000 1,728,019
--------------
5,879,194
--------------
Yankee (2.4%)
Manitoba Province
7.750% 02/01/2002................................................................... 2,685,000 2,819,438
Ontario Province CDA
6.000% 02/21/2006................................................................... 6,000,000 5,707,500
--------------
8,526,938
--------------
Total Corporate Bonds
(Cost $89,647,272) .................................................................. 88,976,333
--------------
Total investments, excluding temporary cash investment
(Cost $337,752,702) ................................................................. 339,758,146
--------------
Repurchase Agreement (3.7%)
Goldman Sachs Corp.
6.354% dated 12/31/1996,
due 01/02/1997 in the
amount of $13,101,923.
Collateralized by U.S. Treasury Bond
6.500% due 11/15/2026
(Cost $13,097,375) .................................................................. 13,097,375 13,097,375
--------------
Total Investments (99.0%)
(Cost $350,850,077)...................................................................... 352,855,521
Receivables less liabilities (1.0%)....................................................... 3,565,375
--------------
Net Assets (100.0%)....................................................................... $ 356,420,896
--------------
--------------
</TABLE>

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

The accompanying notes are an integral part
of the financial statements.

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

-- COLUMBIA MUNICIPAL BOND FUND, INC. --
----------------------------------------
<TABLE>
<CAPTION>
Principal
December 31, 1996 Amount Value(1)
------------- --------------
<S> <C> <C>
State of Oregon General Obligation Bonds (13.3%)
Board of Higher Education Series A
6.350% 08/01/2014................................................................... $ 1,535,000 $ 1,642,450
0.000% 08/01/2014................................................................... 450,000 168,750
5.900% 08/01/2018................................................................... 1,000,000 1,025,000
Board of Higher Education Refunding Series B
6.250% 10/15/2012................................................................... 1,015,000 1,064,481
Elderly & Disabled Housing Refunding Series B
6.250% 08/01/2013................................................................... 1,000,000 1,057,500
Pollution Control Series C
5.625% 06/01/2013................................................................... 3,495,000 3,495,000
5.900% 06/01/2014................................................................... 4,705,000 4,716,762
Veterans' Welfare
11.250% 10/01/1998................................................................... 2,885,000 3,231,200
9.000% 04/01/1999................................................................... 1,800,000 1,982,250
11.000% 06/01/1999................................................................... 865,000 997,994
7.000% 07/01/2000................................................................... 1,350,000 1,471,500
9.000% 10/01/2000................................................................... 1,010,000 1,172,862
11.000% 12/01/2000................................................................... 780,000 966,225
0.000% 07/01/2001................................................................... 1,200,000 979,500
6.000% 08/01/2002................................................................... 2,000,000 2,147,500
6.000% 02/01/2004................................................................... 695,000 749,731
9.000% 04/01/2004................................................................... 260,000 326,625
9.000% 04/01/2005................................................................... 960,000 1,231,200
6.750% 05/01/2005................................................................... 2,080,000 2,360,800
9.000% 10/01/2005................................................................... 1,585,000 2,054,556
7.250% 01/01/2007................................................................... 1,365,000 1,614,112
9.200% 04/01/2007................................................................... 1,095,000 1,464,563
8.250% 07/01/2007................................................................... 510,000 645,788
9.200% 10/01/2007................................................................... 1,200,000 1,620,000
8.000% 01/01/2008................................................................... 1,160,000 1,445,650
7.300% 07/01/2008................................................................... 630,000 755,213
8.000% 07/01/2008................................................................... 480,000 601,800
6.875% 12/01/2013................................................................... 3,370,000 3,589,050
5.850% 10/01/2015................................................................... 1,105,000 1,132,625
7.000% 12/01/2015................................................................... 2,125,000 2,271,094
0.000% 12/01/2017................................................................... 2,000,000 2,000,000
--------------
Total State of Oregon General
Obligation Bonds
(Cost $47,693,355) .................................................................. 49,981,781
--------------

<CAPTION>
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
Oregon General Obligation Bonds (24.9%)
Clackamas & Washington Counties
School District #3JT
West Linn-Wilsonville
5.875% 08/01/2009................................................................... $ 1,000,000 $ 1,037,500
5.875% 10/01/2009................................................................... 2,550,000 2,667,937
Clackamas County School District #1
6.250% 07/01/2002................................................................... 925,000 972,406
6.300% 07/01/2003................................................................... 700,000 735,875
6.500% 07/01/2004................................................................... 1,235,000 1,306,012
6.500% 07/01/2005................................................................... 1,355,000 1,429,525
6.500% 07/01/2006................................................................... 1,485,000 1,562,962
Clackamas County School District #7J
Lake Oswego Series A
5.300% 06/15/2005................................................................... 1,000,000 1,036,250
5.500% 06/15/2006................................................................... 1,000,000 1,042,500
5.700% 06/15/2010................................................................... 2,735,000 2,806,794
Clackamas County School District #12 North Clackamas
4.650% 06/01/2004................................................................... 750,000 742,500
Clackamas Community College District
5.250% 12/01/2009................................................................... 1,270,000 1,274,762
Deschutes County Administrative School District #1 Bend-Lapine
0.000% 02/01/2000................................................................... 1,175,000 1,026,656
0.000% 02/01/2001................................................................... 1,135,000 950,562
0.000% 02/01/2002................................................................... 1,445,000 1,150,581
5.800% 02/01/2004................................................................... 780,000 821,925
5.900% 02/01/2005................................................................... 980,000 1,031,450
Eugene Public Safety Facilities
6.000% 06/01/2005................................................................... 850,000 925,437
5.625% 06/01/2013................................................................... 1,295,000 1,307,950
Jackson County School District #549C Medford
5.375% 06/01/2012................................................................... 1,200,000 1,177,500
Lane County Area Education District
Lane Community College
5.300% 06/01/2007................................................................... 1,000,000 1,036,250
4.850% 06/01/2008................................................................... 4,080,000 4,029,000
5.000% 06/01/2009................................................................... 1,000,000 991,250
Lane County School District #1
Pleasant Hill
5.350% 12/01/2012................................................................... 650,000 638,625
5.450% 12/01/2013................................................................... 725,000 719,563
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Amount Value(1)
------------- --------------
<S> <C> <C>
</TABLE>

Oregon General Obligation Bonds (Continued)
<TABLE>
<S> <C> <C>
Lane County School District #4J Eugene
0.000% 07/01/2001................................................................... $ 2,015,000 $ 1,647,263
0.000% 01/01/2003................................................................... 1,345,000 1,017,156
0.000% 07/01/2003................................................................... 1,480,000 1,093,350
0.000% 01/01/2005................................................................... 1,395,000 948,600
0.000% 07/01/2005................................................................... 2,325,000 1,543,219
5.250% 07/01/2008................................................................... 590,000 595,900
Lane County School District #19
Springfield Refunding
0.000% 02/01/1999................................................................... 470,000 430,050
Metro Open Spaces Program Series C
5.100% 09/01/2009................................................................... 2,375,000 2,327,500
Metro Washington Park Zoo Series A
5.250% 01/15/2009................................................................... 1,040,000 1,043,900
Multnomah-Clackamas Counties
School District #10JT Gresham
5.250% 06/01/2017................................................................... 1,620,000 1,534,950
Multnomah-Clackamas Counties
School District #51JT Riverdale
5.750% 06/01/2016................................................................... 2,270,000 2,309,725
Multnomah County Public Improvements
5.250% 10/01/2013................................................................... 1,800,000 1,759,500
Multnomah County School District #1J Portland
4.250% 06/01/2003................................................................... 5,000,000 4,900,000
5.000% 06/01/2004................................................................... 1,000,000 1,017,500
Multnomah County School District #4 Gresham
6.100% 01/01/2008................................................................... 3,000,000 3,157,500
6.100% 01/01/2009................................................................... 200,000 209,750
Multnomah County School District #7 Reynolds
5.250% 06/01/2011................................................................... 1,500,000 1,481,250
Multnomah County School District #40 David Douglas
7.100% 06/01/2002................................................................... 880,000 984,500
Port of Portland Series A
4.500% 03/01/2006................................................................... 2,000,000 1,932,500
0.000% 03/01/2007................................................................... 3,000,000 1,785,000
Portland Public Improvements Series A
5.750% 06/01/2014................................................................... 2,560,000 2,585,600
Portland Public Improvements Series B
4.625% 12/01/2010................................................................... 1,680,000 1,677,900
<CAPTION>
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
Portland Recreational Facilities Improvements Series A
5.750% 06/01/2012................................................................... $ 1,370,000 $ 1,414,525
5.750% 06/01/2013................................................................... 1,345,000 1,383,669
5.750% 06/01/2015................................................................... 1,155,000 1,183,875
Portland Recreational Facilities Improvements Series B
5.500% 06/01/2009................................................................... 2,115,000 2,146,725
5.750% 06/01/2014................................................................... 1,750,000 1,800,313
5.750% 06/01/2015................................................................... 2,955,000 3,021,488
Portland Community College District
0.000% 07/01/2007................................................................... 2,025,000 1,184,625
6.000% 07/01/2012................................................................... 1,500,000 1,554,375
Tri-County Metropolitan Transportation District Light Rail Extension Series A
6.000% 07/01/2012................................................................... 3,495,000 3,630,431
Tualatin Hills Park & Recreation District
5.700% 03/01/2009................................................................... 1,340,000 1,363,450
5.750% 03/01/2010................................................................... 730,000 740,038
Washington County Refunding
6.200% 12/01/2007................................................................... 1,500,000 1,590,000
Washington & Clackamas Counties
School District #23J
Tigard Refunding
5.400% 01/01/2010................................................................... 1,720,000 1,722,150
Washington County School District #48J Beaverton Series B
6.150% 06/01/2008................................................................... 1,010,000 1,056,713
Washington County School District #48J Beaverton Series C
7.800% 06/01/2003................................................................... 1,200,000 1,405,500
--------------
Total Oregon General Obligation Bonds
(Cost $91,259,282) .................................................................. 93,602,262
--------------
Oregon Revenue Bonds (19.5%)
Clackamas County Hospital Facility
Authority Elderly Housing
Willamette View Income Project
7.000% 11/15/2011................................................................... 1,445,000 1,551,569
Clackamas County Hospital Facility Authority Robison Jewish Home Project
6.250% 10/01/2021................................................................... 2,000,000 2,000,000
Clackamas County Hospital Facility Authority GNMA Collateral Jennings Lodge
7.500% 10/20/2031................................................................... 1,030,000 1,114,975
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Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
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Oregon Revenue Bonds (Continued)
<TABLE>
<S> <C> <C>
Clackamas County Housing Authority Multifamily Housing Easton Ridge Series A
5.800% 12/01/2016................................................................... $ 1,755,000 $ 1,737,450
Deschutes County Hospital Facility Authority
5.750% 01/01/2009................................................................... 1,670,000 1,703,400
Deschutes Valley Water District
5.875% 09/01/2005................................................................... 3,200,000 3,340,000
Eugene Electric Utility
5.800% 08/01/2008................................................................... 1,435,000 1,485,225
5.800% 08/01/2009................................................................... 1,300,000 1,339,000
5.750% 08/01/2011................................................................... 715,000 730,194
5.000% 08/01/2017................................................................... 1,480,000 1,370,850
Eugene Trojan Nuclear Project
5.750% 09/01/1997................................................................... 1,500,000 1,504,545
5.750% 09/01/1998................................................................... 1,500,000 1,503,615
Gresham Sewer
5.350% 06/01/2006................................................................... 860,000 883,650
Gresham Stormwater
6.100% 10/01/2009................................................................... 1,115,000 1,186,081
Lebanon Wastewater Refunding
5.750% 06/01/2011................................................................... 1,225,000 1,228,062
Metropolitan Service District
Metro Central Transfer Station A
5.125% 07/01/2009................................................................... 2,360,000 2,357,050
Multnomah County Educational Facilities University Portland Project
6.000% 04/01/2014................................................................... 1,225,000 1,257,156
North Clackamas Parks & Recreation
District Recreational Facilities
5.700% 04/01/2013................................................................... 2,840,000 2,847,100
Northern Wasco County
People's Utility District Electric
0.000% 02/01/2006................................................................... 610,000 373,625
0.000% 02/01/2007................................................................... 585,000 332,719
0.000% 02/01/2008................................................................... 610,000 321,775
0.000% 02/01/2011................................................................... 500,000 213,125
Oregon City Sewer
6.500% 10/01/2007................................................................... 500,000 541,250
Oregon Health, Housing, Educational & Cultural Facilities Authority
Reed College Project Series A
5.300% 07/01/2011................................................................... 500,000 490,000
Oregon Housing Agency Mortgage
Single-Family Mortgage Program Series A
7.375% 07/01/2010................................................................... 60,000 61,725
<CAPTION>
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
Oregon Housing & Community Services Department Housing Finance Assisted Insured
Multi-Unit B
6.800% 07/01/2013................................................................... $ 8,270,000 $ 8,642,150
Oregon Housing & Community Services Department Mortgage
Single-Family Mortgage Program Series A
6.800% 07/01/2016................................................................... 2,305,000 2,423,131
Oregon Housing & Community Services Department Mortgage Single-Family Mortgage Program
Series D
6.700% 07/01/2013................................................................... 1,000,000 1,038,750
Oregon Housing & Community Services Department Mortgage Single-Family Mortgage Program
Series E
6.750% 07/01/2016................................................................... 3,585,000 3,692,550
Portland Hydroelectric Power
6.800% 10/01/2004................................................................... 465,000 468,790
Portland Parking Refunding
6.375% 10/01/2012................................................................... 1,700,000 1,776,500
Portland Sewer System Refunding Series A
5.000% 03/01/2006................................................................... 1,175,000 1,180,875
6.200% 06/01/2012................................................................... 5,540,000 5,830,850
6.250% 06/01/2015................................................................... 3,730,000 3,916,500
Portland Water System
5.250% 08/01/2013................................................................... 2,615,000 2,575,775
Prineville Sewer First Lien
6.500% 07/01/2004................................................................... 500,000 537,500
6.800% 07/01/2012................................................................... 1,050,000 1,151,063
Reedsport Water
7.000% 10/01/2014................................................................... 520,000 577,850
South Fork Water Board First Lien
5.450% 02/01/2014................................................................... 1,300,000 1,256,125
Tri-County Metropolitan Transportation District Refunding Series A
5.700% 08/01/2013................................................................... 3,000,000 3,033,750
Washington County
Unified Sewer Agency Revenue Series A
6.200% 10/01/2010................................................................... 3,460,000 3,680,575
--------------
Total Oregon Revenue Bonds
(Cost $70,506,772) .................................................................. 73,256,875
--------------
Oregon Insured Bonds (27.8%)
Central Oregon Community College District
5.800% 06/01/2007................................................................... 760,000 794,200
Chemeketa Community College District
5.950% 06/01/2016................................................................... 1,600,000 1,646,000
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Amount Value(1)
------------- --------------
<S> <C> <C>
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Oregon Insured Bonds (Continued)
<TABLE>
<S> <C> <C>
Clackamas County Health Facility Authority Revenue Refunding Adventist Health A
6.350% 03/01/2009................................................................... $ 1,500,000 $ 1,603,125
Clackamas County School District #115 Gladstone
6.150% 06/01/2014................................................................... 1,000,000 1,061,250
Clatsop County Administrative School District #10
5.875% 07/01/2012................................................................... 630,000 643,387
Crook County School District
4.900% 02/01/2009................................................................... 1,165,000 1,116,944
Deschutes & Jefferson Counties School District #2J Redmond Refunding
5.600% 06/01/2009................................................................... 1,000,000 1,021,250
Hood River County School District
5.650% 06/01/2008................................................................... 1,020,000 1,060,800
Jefferson County School District #509J
5.500% 06/15/2013................................................................... 1,400,000 1,410,500
Josephine County School District #7
Grants Pass
5.700% 06/01/2013................................................................... 2,000,000 2,032,500
Lane County School District #19 Springfield
6.150% 10/15/2009................................................................... 1,500,000 1,616,250
Lane County School District #52 Bethel
6.250% 12/01/2007................................................................... 580,000 642,350
6.400% 12/01/2009................................................................... 750,000 823,125
Lincoln County School District
6.000% 06/15/2006................................................................... 900,000 982,125
6.000% 06/15/2007................................................................... 1,855,000 2,005,719
6.000% 06/15/2008................................................................... 1,150,000 1,243,437
6.000% 06/15/2009................................................................... 2,465,000 2,659,119
5.600% 06/15/2010................................................................... 2,480,000 2,560,600
5.250% 06/15/2012................................................................... 2,900,000 2,863,750
Malheur County School District #26 Nyssa
5.750% 06/01/2015................................................................... 1,910,000 1,948,200
Marion & Linn County Elementary School District #77J Stayton
6.250% 07/01/2013................................................................... 1,260,000 1,354,500
Marion County School District #103C Woodburn Series B
0.000% 11/01/2006................................................................... 2,000,000 1,235,000
0.000% 11/01/2007................................................................... 2,000,000 1,165,000
0.000% 11/01/2009................................................................... 2,500,000 1,293,750
0.000% 11/01/2011................................................................... 1,710,000 780,187
Medford Hospital Facility Authority Revenue Gross-Rogue Valley Health Services
6.800% 12/01/2011................................................................... 1,320,000 1,430,550
<CAPTION>
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
Morrow County School District #1
6.000% 06/01/2006................................................................... $ 880,000 $ 946,000
Multnomah County School District #3 Parkrose
5.400% 12/01/2005................................................................... 1,010,000 1,060,500
5.700% 12/01/2008................................................................... 1,330,000 1,394,837
5.700% 12/01/2009................................................................... 1,085,000 1,131,112
5.500% 12/01/2011................................................................... 1,000,000 1,012,500
Ontario Oregon Catholic Health
Holy Rosary Medical Center
5.500% 11/15/2012................................................................... 1,500,000 1,503,750
Oregon Health Sciences University Revenue Series A
0.000% 07/01/2009................................................................... 1,530,000 784,125
0.000% 07/01/2012................................................................... 1,315,000 557,231
0.000% 07/01/2014................................................................... 2,495,000 935,625
0.000% 07/01/2015................................................................... 4,325,000 1,524,562
Oregon Health Sciences University Revenue Series B
4.875% 07/01/2007................................................................... 1,695,000 1,654,744
Oregon Department of General Services Certificates Participation Series C
5.800% 03/01/2015................................................................... 840,000 845,250
Oregon Department of Administrative Services Certificates Participation Series A
5.375% 11/01/2004................................................................... 1,500,000 1,546,875
5.250% 05/01/2008................................................................... 950,000 958,312
5.250% 11/01/2009................................................................... 2,460,000 2,460,000
5.700% 05/01/2015................................................................... 1,000,000 1,006,250
5.375% 11/01/2016................................................................... 4,260,000 4,137,525
Oregon Department of Administrative Services Certificates Participation Series C
5.500% 05/01/2011................................................................... 2,000,000 2,002,500
Oregon Health, Housing, Educational & Cultural Facilities Authority
Lewis & Clark College
6.000% 10/01/2013................................................................... 965,000 1,008,425
Port of Portland Airport Revenue Portland International Airport Series 7-A
6.500% 07/01/2004................................................................... 500,000 538,125
6.750% 07/01/2015................................................................... 2,795,000 3,039,562
Port of Portland Airport Revenue Series 9-A
5.500% 07/01/2006................................................................... 500,000 515,625
Portland Arena Gas Tax Revenue
0.000% 06/01/2016................................................................... 1,100,000 343,750
0.000% 06/01/2017................................................................... 1,420,000 415,350
Portland Gas Tax Revenue Series A
5.800% 06/01/2016................................................................... 1,625,000 1,657,500
</TABLE>

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Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
</TABLE>

Oregon Insured Bonds (Continued)
<TABLE>
<S> <C> <C>
Portland Sewer System Revenue Series A
6.000% 10/01/2012................................................................... $ 2,110,000 $ 2,207,588
Salem-Keizer School District #24J
5.400% 06/01/2006................................................................... 1,000,000 1,031,250
Tillamook County
6.250% 01/01/2014................................................................... 960,000 1,028,400
Umatilla County School District #8R Hermiston
6.000% 12/01/2010................................................................... 695,000 730,619
Union Health District
5.750% 02/01/2010................................................................... 1,070,000 1,087,388
Washington County School District #88J Sherwood
6.100% 06/01/2012................................................................... 1,000,000 1,061,250
Washington County Unified Sewer Agency Revenue Series A
0.000% 10/01/2003................................................................... 1,000,000 727,500
0.000% 10/01/2005................................................................... 5,230,000 3,406,038
5.900% 10/01/2006................................................................... 3,730,000 3,963,125
0.000% 10/01/2007................................................................... 4,835,000 2,786,169
5.400% 10/01/2012................................................................... 770,000 774,813
6.125% 10/01/2012................................................................... 8,010,000 8,460,563
Western Lane Hospital District Facility Authority Revenue Refunding
Sisters St. Joseph Peace
5.625% 08/01/2007................................................................... 2,080,000 2,163,200
Yamhill County School District #29J Newberg
5.500% 06/01/2010................................................................... 1,405,000 1,426,075
6.100% 06/01/2011................................................................... 3,355,000 3,560,494
--------------
Total Oregon Insured Bonds
(Cost $100,738,594) ................................................................. 104,388,125
--------------
Oregon Pre-Refunded Bonds (4.4%)
Beaverton Water Revenue Series A
7.150% 06/01/2004................................................................... 455,000 495,381
Clackamas County School District #7J
Lake Oswego Series A
7.000% 06/15/2008................................................................... 1,250,000 1,359,375
7.100% 06/15/2010................................................................... 750,000 817,500
Clackamas County School District #12 North Clackamas
6.500% 06/01/2005................................................................... 1,000,000 1,070,000
6.500% 06/01/2007................................................................... 1,455,000 1,556,850
6.500% 06/01/2009................................................................... 1,655,000 1,770,850
<CAPTION>
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
Metropolitan Service District General Revenue Metro Headquarters Building Project A
6.600% 07/01/2011................................................................... $ 785,000 $ 844,856
Metropolitan Service District Metro East Transfer Station A
7.000% 01/01/2001................................................................... 500,000 546,250
Oregon Department of General Services Certificates Participation Series A
7.200% 01/15/2015................................................................... 1,100,000 1,210,000
Oregon Department of General Services Certificates Participation Series B
7.200% 01/15/2015................................................................... 670,000 737,000
Oregon Department of General Services Certificates Participation Series F
7.500% 09/01/2015................................................................... 2,330,000 2,624,163
Oregon Housing, Educational & Cultural Facilities Authority Reed College Project
Series A
6.350% 07/01/2002................................................................... 320,000 349,200
6.400% 07/01/2003................................................................... 280,000 305,900
Oregon Housing, Educational & Cultural Facilities Authority Revenue
Lewis & Clark College Project A
7.000% 07/01/2010................................................................... 1,100,000 1,215,500
Portland Airport Way Urban Renewal & Redevelopment Tax Increment Series A
7.300% 06/01/2010................................................................... 1,400,000 1,533,000
--------------
Total Oregon Pre-Refunded Bonds
(Cost $15,040,288) .................................................................. 16,435,825
--------------
Oregon Other Bonds (2.8%)
Grants Pass Urban Renewal Agency Tax Increment
6.125% 08/01/2012................................................................... 750,000 762,187
Hood River Urban Renewal Agency Revenue
6.250% 12/15/2011................................................................... 1,250,000 1,310,937
Lane County School District #4J Eugene Certificates Participation
6.900% 10/01/2000................................................................... 500,000 544,375
Lebanon Special Obligation Revenue Refunding Lease Water
5.400% 10/01/2013................................................................... 755,000 737,069
Medford Urban Renewal Agency Tax Revenue
5.875% 09/01/2010................................................................... 500,000 503,125
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<CAPTION>
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
</TABLE>

Oregon Other Bonds (Continued)
<TABLE>
<S> <C> <C>
Newberg Certificates Participation
5.900% 12/01/1998................................................................... $ 365,000 $ 373,669
6.000% 12/01/1999................................................................... 390,000 403,162
6.100% 12/01/2000................................................................... 410,000 427,938
6.200% 12/01/2001................................................................... 410,000 432,038
Portland Building Refunding Series A
4.750% 04/01/2007................................................................... 2,000,000 1,965,000
Portland Airport Way Urban Renewal & Redevelopment Tax Increment Series C
5.900% 06/01/2006................................................................... 860,000 903,000
Portland Urban Renewal & Redevelopment Refunding, Downtown Waterfront Series L
6.400% 06/01/2008................................................................... 2,085,000 2,225,738
--------------
Total Oregon Other Bonds
(Cost $10,107,456) .................................................................. 10,588,238
--------------
Other Bonds (5.1%)
Puerto Rico Commonwealth Public Improvements
6.250% 07/01/2009................................................................... 3,000,000 3,330,000
6.250% 07/01/2013................................................................... 1,000,000 1,105,000
Puerto Rico Commonwealth Aquaduct & Sewer Authority Revenue Series A
9.000% 07/01/2009................................................................... 5,325,000 6,756,094
Puerto Rico Housing Finance Corp. Single Family Mortgage Revenue Portfolio 1 Series B
7.500% 10/15/2012................................................................... 1,040,000 1,090,700
Puerto Rico Housing Finance Corp. Single Family Mortgage Revenue Portfolio 1 Series C
6.750% 10/15/2013................................................................... 710,000 744,612
Puerto Rico Housing Finance Corp. Multi Family Mortgage Revenue Portfolio A-1
7.500% 04/01/2022................................................................... 1,680,000 1,768,200
<CAPTION>
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
Puerto Rico Industrial, Medical & Environmental Pollution Control Facilities Financing
Authority Revenue FHA Insured Mortgage Dr. Pila Hospital Project-A
7.700% 08/01/2008................................................................... $ 2,000,000 $ 2,155,000
Puerto Rico Housing Bank & Finance Agency Single Family Mortgage Revenue FHA
Homeownership 5th Portfolio
7.500% 12/01/2015................................................................... 610,000 670,237
Virgin Islands Public Finance Authority Revenue Unrefunded Balance Series A
7.300% 10/01/2018................................................................... 1,170,000 1,417,163
--------------
Total Other Bonds
(Cost $18,036,949) .................................................................. 19,037,006
--------------
Total investments, excluding temporary cash investment
(Cost $353,382,696) ................................................................. 367,290,112
--------------
Tax-Exempt Money Market Investment (1.2%)
SEI Tax Exempt Trust
(Cost $4,438,727) ................................................................... 4,438,727 4,438,727
--------------
Total Investments (99.0%)
(Cost $357,821,423)...................................................................... 371,728,839
Receivables less liabilities (1.0%)....................................................... 3,938,591
--------------
Net Assets (100.0%)....................................................................... $ 375,667,430
--------------
--------------
</TABLE>

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

The accompanying notes are an integral part
of the financial statements.

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

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

-- COLUMBIA HIGH YIELD FUND, INC. --
------------------------------------
<TABLE>
<CAPTION>
Principal
December 31,1996 Amount Value(1)
------------- --------------
<S> <C> <C>
U.S. Treasury Note (1.7%)
6.500% 10/15/2006
(Cost $510,351).................................................................. $ 500,000 $ 503,170
--------------
Corporate Bonds (92.2%)
Basic Industry (7.2%)
Chemicals (2.5%)
Freeport-McMoRan Resource Partners L.P. Senior Subordinated Notes
8.750% 02/15/2004................................................................. 700,000 726,250
--------------
Forest Products (2.0%)
Stone Consolidated Corp.
Senior Secured Note
10.250% 12/15/2000................................................................. 550,000 585,750
--------------
Metals/Mining (2.7%)
Ryerson Tull, Inc.
Notes
8.500% 07/15/2001................................................................. 750,000 768,750
--------------
Total Basic Industry ................................................................. 2,080,750
--------------
Consumer Related (21.4%)
Hotel/Gaming (12.1%)
California Hotel Finance Corp.
Guaranteed Senior Subordinated Notes
11.000% 12/01/2002................................................................. 750,000 783,750
HMH Properties, Inc.
Senior Secured Note
9.500% 05/15/2005................................................................. 600,000 624,000
Harrahs Operating, Inc.
Senior Subordinated Notes
10.875% 04/15/2002................................................................. 500,000 527,500
La Quinta Inns, Inc.
Senior Subordinated Notes
9.250% 05/15/2003................................................................. 900,000 940,500
Station Casinos, Inc.
Senior Subordinated Notes
9.625% 06/01/2003................................................................. 615,000 605,775
--------------
3,481,525
--------------
Healthcare (7.0%)
Abbey Healthcare Group, Inc.
Senior Subordinated Notes
9.500% 11/01/2002................................................................. 500,000 522,500
HEALTHSOUTH Rehabilitation Corp.
Senior Subordinated Notes
9.500% 04/01/2001................................................................. 300,000 318,000
Quorum Health Group, Inc.
Senior Subordinated Notes
8.750% 11/01/2005................................................................. 500,000 512,500

<CAPTION>
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>

Tenet Healthcare Corp.
Senior Subordinated Notes
10.125% 03/01/2005................................................................. $ 600,000 $ 664,500
--------------
2,017,500
--------------
Other (2.3%)
Westpoint Stevens, Inc.
Senior Subordinated Debenture
9.375% 12/15/2005................................................................. 650,000 669,500
--------------
Total Consumer Related ............................................................... 6,168,525
--------------
Energy (15.1%)
Global Marine, Inc.
Notes
12.750% 12/15/1999................................................................. 285,000 306,019
Gulf Canada Resources Ltd.
Subordinated Debentures
9.625% 07/01/2005................................................................. 500,000 541,250
Kelley Oil & Gas Corp. (144A)
Senior Subordinated Notes
10.375% 10/15/2006................................................................. 600,000 625,500
Louis Dreyfus Natural Gas Corp.
Senior Subordinated Notes
9.250% 06/15/2004................................................................. 500,000 532,825
Maxus Energy Corp.
Notes
9.875% 10/15/2002................................................................. 750,000 772,500
Noble Drilling Corp.
Senior Notes
9.250% 10/01/2003................................................................. 250,000 266,562
9.125% 07/01/2006................................................................. 300,000 322,500
Nuevo Energy Co.
Senior Subordinated Notes
9.500% 04/15/2006................................................................. 500,000 531,250
Santa Fe Energy Resource, Inc.
Senior Subordinated Debentures
11.000% 05/15/2004................................................................. 400,000 440,000
--------------
Total Energy ......................................................................... 4,338,406
--------------
Housing Related (1.9%)
USG Corp.
Series B Senior Notes
9.250% 09/15/2001................................................................. 500,000 532,500
--------------
Manufacturing (15.9%)
American Standard, Inc.
Senior Subordinated Discount
Debenture Step-Up Coupon
0.000% to 06/01/1998, then 10.500% to 06/01/2005.................................. 750,000 697,500
</TABLE>

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

-- COLUMBIA HIGH YIELD FUND, INC. --
------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
</TABLE>

Corporate Bonds (Continued)
<TABLE>
<S> <C> <C>
Exide Corp.
Senior Notes
10.000% 04/15/2005................................................................. $ 350,000 $ 363,125
Mark IV Industries, Inc.
Senior Subordinated Notes
7.750% 04/01/2006................................................................. 500,000 486,765
Owens-Illinois, Inc.
Senior Subordinated Notes
10.000% 08/01/2002................................................................. 400,000 418,000
Rohr, Inc.
Senior Note
11.625% 05/15/2003................................................................. 600,000 661,500
SPX Corp.
Senior Subordinated Notes
11.750% 06/01/2002................................................................. 500,000 558,750
U.S. Can Corp. (144A)
Senior Subordinated Notes
10.125% 10/15/2006................................................................. 700,000 735,875
Wolverine Tube, Inc.
Senior Subordinated Notes
10.125% 09/01/2002................................................................. 625,000 662,500
--------------
Total Manufacturing .................................................................. 4,584,015
--------------
Media (19.6%)
American Radio Systems Corp.
Senior Subordinated Notes
9.000% 02/01/2006................................................................. 500,000 490,000
Heritage Media Corp.
Senior Subordinated Notes
8.750% 02/15/2006................................................................. 500,000 480,000
Jones Intercable, Inc.
Senior Notes
9.625% 03/15/2002................................................................. 350,000 367,500
Lenfest Communications, Inc.
Senior Secured Notes
8.375% 11/01/2005................................................................. 500,000 483,125
Rogers Communications, Inc.
Debenture
10.875% 04/15/2004................................................................. 450,000 472,500
SFX Broadcasting, Inc.
Series B Senior Subordinated Notes
10.750% 05/15/2006................................................................. 500,000 527,500
Time Warner, Inc.
Debentures
9.125% 01/15/2013................................................................. 900,000 982,530
<CAPTION>
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
United International Holdings, Inc.
Senior Note with Warrants
0.000% 11/15/1999................................................................. $ 650,000 $ 481,000
United International Holdings, Inc.
Senior Secured Discount Notes
0.000% 11/15/1999................................................................. 250,000 178,750
Viacom, Inc.
Subordinated Debenture
8.000% 07/07/2006................................................................. 650,000 628,875
Young Broadcasting, Inc.
Guaranteed Senior Subordinated Notes
11.750% 11/15/2004................................................................. 500,000 545,000
--------------
Total Media .......................................................................... 5,636,780
--------------
Retail (5.0%)
Supermarkets (1.0%)
Stop & Shop Cos., Inc.
Senior Subordinated Notes
9.750% 02/01/2002................................................................. 250,000 280,000
--------------
Other (4.0%)
Ethan Allen, Inc.
Senior Notes
8.750% 03/15/2001................................................................. 600,000 621,750
Federated Department Stores, Inc.
Senior Notes
10.000% 02/15/2001................................................................. 500,000 543,115
--------------
1,164,865
--------------
Total Retail ......................................................................... 1,444,865
--------------
Transportation ( 1.8%)
Air (1.8%)
Greenwich Air Services
Senior Notes
10.500% 06/01/2006................................................................. 500,000 532,500
--------------
Utility (4.3%)
Electrics (1.8%)
California Energy, Inc.
Senior Secured Note
9.875% 06/30/2003................................................................. 500,000 525,000
--------------
Telecommunications (2.5%)
MFS Communications, Inc.
Senior Discount Notes
Step-up Coupon
0.000% to 01/15/2001, then 8.875% to 01/15/2006................................... 1,000,000 727,500
--------------
</TABLE>

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60
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-----------------------------------------------------------------

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

-- COLUMBIA HIGH YIELD FUND, INC. --
------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value(1)
------------- --------------
<S> <C> <C>
</TABLE>

Corporate Bonds (Continued)
<TABLE>
<S> <C> <C>
Total Utilities ...................................................................... $ 1,252,500
--------------
Total Corporate Bonds
(Cost $25,712,880) .................................................................. 26,570,841
--------------
Total investments, excluding temporary cash investment
(Cost $26,223,231) .................................................................. 27,074,011
Repurchase Agreement (3.6%)
Goldman Sachs Corp.
6.354% dated 12/31/1996,
due 01/02/1997 in the
amount of $1,021,979.
Collateralized by U.S. Treasury Bond
6.500% due 11/15/2026
(Cost $1,021,624) ................................................................... $ 1,021,624 1,021,624
--------------
Total Investments (97.5%)
(Cost $27,244,855)....................................................................... 28,095,635
Receivables less liabilities (2.5%)....................................................... 722,598
--------------
Net Assets (100.0%)....................................................................... $ 28,818,233
--------------
--------------
</TABLE>

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

The accompanying notes are an integral part
of the financial statements.

-
61
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
-----------------------------------------------------------------

<TABLE>
<CAPTION>
Columbia Columbia Columbia Columbia
Common Stock Growth International Stock Special
December 31, 1996 Fund, Inc. Fund, Inc. Fund, Inc. Fund, Inc.
------------ -------------- ------------------- --------------
<S> <C> <C> <C> <C>
ASSETS:
Investments at identified cost............................ $449,007,291 $ 870,008,781 $100,562,244 $1,399,532,531
- ------------------------------------------------------------ ------------ -------------- ------------------- --------------
Investments at value (Notes 1 and 2)...................... $509,895,400 $1,051,275,934 $117,205,362 $1,487,815,609
Temporary cash investments, at cost (Note 1).............. 22,288,098 8,042,960 10,517,742 117,419,890
Cash...................................................... 750,237
Cash denominated in foreign currencies (cost $343,300)
(Note 1)................................................. 343,352
Receivable for:
Interest................................................ 106,580 102,531 52,532 505,183
Dividends............................................... 897,108 1,429,875 72,160 534,852
Investments sold........................................ 20,147,541 740,686 7,884,279
Capital stock sold...................................... 6,085,300 1,491,367 148,913 2,043,165
Forward foreign currency exchange contract held, at
market (Note 1)........................................ 12,388,363
------------ -------------- ------------------- --------------
Total assets.............................................. 539,272,486 1,082,490,208 142,219,347 1,616,202,978
------------ -------------- ------------------- --------------
LIABILITIES:
Payable for:
Capital stock redeemed.................................. 907,454 12,227,741 612,343 9,522,737
Dividends and distributions............................. 1,178,012 5,283,449 175,591 4,080,533
Investments purchased................................... 3,540,999 15,781,001
Investment management fee (Note 4)...................... 269,939 535,125 104,360 1,132,655
Accrued expenses........................................ 157,279 344,374 93,148 401,838
Forward foreign currency exchange contract held (Note
1)..................................................... 12,183,315
------------ -------------- ------------------- --------------
Total liabilities......................................... 2,512,684 18,390,689 16,709,756 30,918,764
------------ -------------- ------------------- --------------
Net assets applicable to outstanding shares................. $536,759,802 $1,064,099,519 $125,509,591 $1,585,284,214
------------ -------------- ------------------- --------------
------------ -------------- ------------------- --------------
Net assets consist of:
Undistributed net investment income....................... $ 901,158 $ 1,931,709 $ 3,885
Unrealized appreciation on:
Investments............................................. 60,888,109 181,267,153 16,643,118 $ 88,283,078
Translation of assets and liabilities in foreign
currencies............................................. 191,667
Undistributed net realized gain (loss) from:
Investments............................................. 58,387 (945,685) (605,416) (829,577)
Foreign currency transactions........................... (205,048)
Capital shares (Note 3)................................... 346,125 798,613
Capital paid in (Note 3).................................. 474,912,148 881,500,217 109,481,385 1,497,032,100
------------ -------------- ------------------- --------------
$536,759,802 $1,064,099,519 $125,509,591 $1,585,284,214
------------ -------------- ------------------- --------------
------------ -------------- ------------------- --------------
Shares of capital stock outstanding (Note 3)................ 27,863,379 34,612,452 9,052,917 79,861,296
------------ -------------- ------------------- --------------
------------ -------------- ------------------- --------------
Net asset value, offering and redemption price per share
(1)........................................................ $ 19.26 $ 30.74 $ 13.86 $ 19.85
------------ -------------- ------------------- --------------
------------ -------------- ------------------- --------------
</TABLE>

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

The accompanying notes are an integral part of the financial statements.

-
62
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
-----------------------------------------------------------------

<TABLE>
<CAPTION>
Columbia Columbia Real Columbia Columbia
Small Cap Estate Equity Balanced Daily Income
December 31, 1996 Fund, Inc. Fund, Inc. Fund, Inc. Company
------------ -------------- -------------- -------------------
<S> <C> <C> <C> <C>
ASSETS:
Investments at identified cost............................ $ 17,721,718 $ 45,246,073 $ 577,068,626 $902,058,747
- ------------------------------------------------------------ ------------ -------------- -------------- -------------------
Investments at value (Notes 1 and 2)...................... $ 19,204,712 $ 56,150,905 $ 633,117,994 $902,058,747
Temporary cash investments, at cost (Note 1).............. 2,553,184 12,032,191 36,727,709
Cash...................................................... 1,050,000
Receivable for:
Interest................................................ 9,869 28,888 4,321,207 10,546
Dividends............................................... 2,326 403,359 543,981
Investments sold........................................ 233,580(2) 250,664 925
Capital stock sold...................................... 638,824 1,070,020 1,058,658 2,784,548
------------ -------------- -------------- -------------------
Total assets.............................................. 22,642,495 69,936,027 675,770,474 905,903,841
------------ -------------- -------------- -------------------
LIABILITIES:
Payable for:
Capital stock redeemed.................................. 6,852 1,283,594 2,487,194 15,334,999
Dividends and distributions............................. 510,674 187,575
Investments purchased................................... 7,425
Securities sold short against the box, at market
(Proceeds $1,542,415) (Note 1)......................... 1,536,656
Investment management fee (Note 4)...................... 16,013 38,155 285,975 357,309
Accrued expenses........................................ 14,179 30,383 216,810 411,564
------------ -------------- -------------- -------------------
Total liabilities......................................... 1,581,125 1,862,806 3,177,554 16,103,872
------------ -------------- -------------- -------------------
Net assets applicable to outstanding shares................. $ 21,061,370 $ 68,073,221 $ 672,592,920 $889,799,969
------------ -------------- -------------- -------------------
------------ -------------- -------------- -------------------
Net assets consist of:
Undistributed net investment income (loss)................ $ (126) $ 540,163
Unrealized appreciation on investments.................... 1,488,753 $ 10,904,832 56,049,368
Undistributed net realized loss from investments.......... (275,796) (40,917 ) (76,478)
Capital shares (Note 3)................................... $ 889,800
Capital paid in (Note 3).................................. 19,848,539 57,209,306 616,079,867 888,910,169
------------ -------------- -------------- -------------------
$ 21,061,370 $ 68,073,221 $ 672,592,920 $889,799,969
------------ -------------- -------------- -------------------
------------ -------------- -------------- -------------------
Shares of capital stock outstanding (Note 3)................ 1,620,781 4,213,056 33,105,142 889,799,969
------------ -------------- -------------- -------------------
------------ -------------- -------------- -------------------
Net asset value, offering and redemption price per share
(1)........................................................ $ 12.99 $ 16.16 $ 20.32 $ 1.00
------------ -------------- -------------- -------------------
------------ -------------- -------------- -------------------
</TABLE>

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

(2) Receivable from broker for securites sold short against the box.

The accompanying notes are an integral part of the financial statements.

-
63
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
-----------------------------------------------------------------

<TABLE>
<CAPTION>
Columbia
U.S. Columbia Fixed
Government Income Columbia Columbia
Securities Securities Municipal Bond High Yield
December 31, 1996 Fund, Inc. Fund, Inc. Fund, Inc. Fund, Inc.
------------ -------------- -------------- -------------------
<S> <C> <C> <C> <C>
ASSETS:
Investments at identified cost............................ $40,519,829 $337,752,702 $ 353,382,696 $ 26,223,231
- ------------------------------------------------------------ ------------ -------------- -------------- -------------------
Investments at value (Notes 1 and 2)...................... $40,547,016 $339,758,146 $ 367,290,112 $ 27,074,011
Temporary cash investments, at cost (Note 1).............. 351,070 13,097,375 4,438,727 1,021,624
Receivable for:
Interest................................................ 589,129 4,364,313 5,036,835 536,459
Investments sold........................................ 2,034,745
Capital stock sold...................................... 95,205 457,658 18,962 255,748
------------ -------------- -------------- -------------------
Total assets.............................................. 41,582,420 359,712,237 376,784,636 28,887,842
------------ -------------- -------------- -------------------
LIABILITIES:
Payable for:
Capital stock redeemed.................................. 743,115 526,128 466,486 27,676
Dividends and distributions............................. 13,145 358,353 438,413 18,099
Investments purchased................................... 2,081,329
Investment management fee (Note 4)...................... 17,575 151,721 159,580 14,468
Accrued expenses........................................ 32,244 173,810 52,727 9,366
------------ -------------- -------------- -------------------
Total liabilities......................................... 806,079 3,291,341 1,117,206 69,609
------------ -------------- -------------- -------------------
Net assets applicable to outstanding shares................. $40,776,341 $356,420,896 $ 375,667,430 $ 28,818,233
------------ -------------- -------------- -------------------
------------ -------------- -------------- -------------------
Net assets consist of:
Unrealized appreciation on investments.................... $ 27,187 $ 2,005,444 $ 13,907,416 $ 850,780
Undistributed net realized gain (loss) from investments... (396,302 ) (1,902,567 ) 149,182 18,680
Capital shares (Note 3)................................... 49,466 272,494 309,317
Capital paid in (Note 3).................................. 41,095,990 356,045,525 361,301,515 27,948,773
------------ -------------- -------------- -------------------
$40,776,341 $356,420,896 $ 375,667,430 $ 28,818,233
------------ -------------- -------------- -------------------
------------ -------------- -------------- -------------------
Shares of capital stock outstanding (Note 3)................ 4,946,608 27,249,412 30,931,729 2,900,034
------------ -------------- -------------- -------------------
------------ -------------- -------------- -------------------
Net asset value, offering and redemption price per share
(1)........................................................ $ 8.24 $ 13.08 $ 12.15 $ 9.94(2)
------------ -------------- -------------- -------------------
------------ -------------- -------------- -------------------
</TABLE>

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

(2) Shares of Columbia High Yield Fund held less than one year, other than
shares acquired through the reinvestment of dividends and capital gains,
were redeemed at 99% of the net asset value.

The accompanying notes are an integral part of the financial statements.

-
64
<PAGE>
STATEMENTS OF OPERATIONS
-----------------------------------------------------------------

<TABLE>
<CAPTION>
Columbia
Columbia Columbia International Columbia
Common Stock Growth Fund, Stock Fund, Special
Year Ended December 31, 1996 Fund, Inc. Inc. Inc. Fund, Inc.
------------ ------------ --------------- ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Income:
Interest........................................... $ 468,218 $ 1,098,763 $ 376,245 $ 4,581,166
Dividends.......................................... 8,813,867 11,761,529 1,888,543 5,440,648
Foreign taxes withheld (net of reclaims)........... (237,521)
------------ ------------ --------------- ------------
Total income..................................... 9,282,085 12,860,292 2,027,267 10,021,814
------------ ------------ --------------- ------------
Expenses:
Investment management fees (Note 4)................ 2,686,585 5,711,080 1,157,227 12,880,541
Shareholder servicing costs (Note 4)............... 416,842 596,257 213,139 879,795
Reports to shareholders............................ 88,004 252,822 74,386 310,019
Accounting expense................................. 40,694 36,657 90,928 53,873
Financial information and subscriptions............ 6,112 16,742 11,137 25,173
Custodian fees..................................... 18,098 38,896 115,353 62,191
Bank transaction and checking fees................. 20,361 29,732 45,242 83,129
Registration fees.................................. 80,780 90,437 27,836 139,998
Legal, insurance and auditing fees................. 33,401 44,704 32,225 55,194
Other.............................................. 6,007 15,225 5,128 19,404
------------ ------------ --------------- ------------
Total expenses................................... 3,396,884 6,832,552 1,772,601 14,509,317
------------ ------------ --------------- ------------
Net investment income (loss) (Note 1)................ 5,885,201 6,027,740 254,666 (4,487,503)
------------ ------------ --------------- ------------
Realized gain and unrealized appreciation
(depreciation) from investment and foreign currency
transactions:
Net realized gain from:
Investments (Note 2)............................... 70,666,274 154,006,111 9,808,805 295,204,950
Foreign currency transactions (Note 1)............. 1,454,573
------------ ------------ --------------- ------------
Net realized gain................................ 70,666,274 154,006,111 11,263,378 295,204,950
------------ ------------ --------------- ------------
Net unrealized appreciation (depreciation) on:
Investments (Note 1)............................... 8,532,253 21,295,845 5,676,201 (112,950,905)
Translation of assets and liabilities in foreign
currencies (Note 1)............................... 185,947
------------ ------------ --------------- ------------
Net unrealized appreciation (depreciation) during
the period...................................... 8,532,253 21,295,845 5,862,148 (112,950,905)
------------ ------------ --------------- ------------
Net gain on investment and foreign currency
transactions (Note 1)............................... 79,198,527 175,301,956 17,125,526 182,254,045
------------ ------------ --------------- ------------
Net increase in net assets resulting from
operations.......................................... $85,083,728 $181,329,696 $17,380,192 $177,766,542
------------ ------------ --------------- ------------
------------ ------------ --------------- ------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

-
65
<PAGE>
STATEMENTS OF OPERATIONS
-----------------------------------------------------------------

<TABLE>
<CAPTION>
Columbia Columbia
Small Cap Real Estate Columbia Columbia
Fund, Inc. Equity Fund, Balanced Daily Income
Year Ended December 31, 1996 (1) Inc. Fund, Inc. Company
------------- ---------------- ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Income:
Interest................................................ $ 59,758 $ 169,463 $ 20,230,059 $45,503,712
Dividends............................................... 6,758 2,162,179 5,822,671
------------- ---------------- ------------ ------------
Total income.......................................... 66,516 2,331,642 26,052,730 45,503,712
------------- ---------------- ------------ ------------
Expenses:
Investment management fees (Note 4)..................... 40,273 232,413 2,935,512 4,009,904
Shareholder servicing costs (Note 4).................... 3,760 24,340 504,889 698,755
Reports to shareholders................................. 3,185 11,782 120,872 175,053
Accounting expense...................................... 3,847 20,447 51,793 59,611
Financial information and subscriptions................. 1,447 17,266 16,110
Custodian fees.......................................... 181 1,619 23,447 33,210
Bank transaction and checking fees...................... 4,669 4,225 34,050 90,461
Registration fees....................................... 6,914 22,872 85,660 64,379
Legal, insurance and auditing fees...................... 426 17,002 38,374 41,972
Other................................................... 3,387 1,479 8,903 11,143
------------- ---------------- ------------ ------------
Total expenses........................................ 66,642 337,626 3,820,766 5,200,598
------------- ---------------- ------------ ------------
Net investment income (loss) (Note 1)..................... (126) 1,994,016 22,231,964 40,303,114
------------- ---------------- ------------ ------------
Realized gain (loss) and unrealized appreciation from
investment transactions:
Net realized gain (loss) from investments (Note 2)........ (275,796) 1,627,328 41,189,499
Net unrealized appreciation on investments during the
period (Note 1).......................................... 1,488,753 9,368,906 4,167,518
------------- ---------------- ------------
Net gain on investments (Note 1).......................... 1,212,957 10,996,234 45,357,017
------------- ---------------- ------------ ------------
Net increase in net assets resulting from operations...... $ 1,212,831 $ 12,990,250 $ 67,588,981 $40,303,114
------------- ---------------- ------------ ------------
------------- ---------------- ------------ ------------
</TABLE>

(1) From inception of operations on September 11, 1996.

The accompanying notes are an integral part of the financial statements.

-
66
<PAGE>
STATEMENTS OF OPERATIONS
-----------------------------------------------------------------
<TABLE>
<CAPTION>
Columbia U.S.
Government Columbia Fixed Columbia
Securities Income Securities Municipal Bond
Year Ended December 31, 1996 Fund, Inc. Fund, Inc. Fund, Inc.
----------------- ----------------- --------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Income:
Interest..................................................... $ 2,388,412 $ 23,974,914 $ 20,956,147
----------------- ----------------- --------------
Total income............................................... 2,388,412 23,974,914 20,956,147
----------------- ----------------- --------------
Expenses:
Investment management fees (Note 4).......................... 206,591 1,668,004 1,881,542
Shareholder servicing costs (Note 4)......................... 49,592 217,935 83,089
Reports to shareholders...................................... 13,406 84,134 26,442
Accounting expense........................................... 20,814 44,826 22,214
Financial information and subscriptions...................... 1,230 14,585 41,426
Custodian fees............................................... 1,961 13,248 14,803
Bank transaction and checking fees........................... 2,177 24,984 4,694
Registration fees............................................ 12,741 42,303 6,336
Legal, insurance and auditing fees........................... 21,173 36,708 33,351
Other........................................................ 626 4,703 4,668
----------------- ----------------- --------------
330,311 2,151,430 2,118,565
Expenses reimbursed by investment advisor....................
----------------- ----------------- --------------
Total expenses............................................. 330,311 2,151,430 2,118,565
----------------- ----------------- --------------
Net investment income (Note 1)................................. 2,058,101 21,823,484 18,837,582
----------------- ----------------- --------------
Realized gain and unrealized depreciation from investment
transactions:
Net realized gain from investments (Note 2).................... 83,457 1,600,093 1,991,804
Net unrealized depreciation on investments during the period
(Note 1)...................................................... (584,568) (11,107,884) (7,232,960)
----------------- ----------------- --------------
Net gain (loss) on investments (Note 1)........................ (501,111) (9,507,791) (5,241,156)
----------------- ----------------- --------------
Net increase in net assets resulting from operations........... $ 1,556,990 $ 12,315,693 $ 13,596,426
----------------- ----------------- --------------
----------------- ----------------- --------------

Columbia
High Yield
Year Ended December 31, 1996 Fund, Inc.
----------
<S> <C>
INVESTMENT INCOME:
Income:
Interest..................................................... $2,319,495
----------
Total income............................................... 2,319,495
----------
Expenses:
Investment management fees (Note 4).......................... 150,432
Shareholder servicing costs (Note 4)......................... 21,639
Reports to shareholders...................................... 9,355
Accounting expense........................................... 30,477
Financial information and subscriptions...................... 3,651
Custodian fees............................................... 969
Bank transaction and checking fees........................... 1,971
Registration fees............................................ 12,976
Legal, insurance and auditing fees........................... 18,564
Other........................................................ 375
----------
250,409
Expenses reimbursed by investment advisor.................... (15,476 )
----------
Total expenses............................................. 234,933
----------
Net investment income (Note 1)................................. 2,084,562
----------
Realized gain and unrealized depreciation from investment
transactions:
Net realized gain from investments (Note 2).................... 237,862
Net unrealized depreciation on investments during the period
(Note 1)...................................................... (1,892 )
----------
Net gain (loss) on investments (Note 1)........................ 235,970
----------
Net increase in net assets resulting from operations........... $2,320,532
----------
----------
</TABLE>

The accompanying notes are an integral part of the financial statements.

-
67
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
-----------------------------------------------------------------

<TABLE>
<CAPTION>
Columbia Columbia Columbia
Common Stock Fund, Inc. Growth International Stock Fund,
Years Ended December 31, Fund, Inc. Inc.
-------------------------- ---------------------------- --------------------------
1996 1995 1996 1995 1996 1995
------------ ------------ ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income................... $ 5,885,201 $ 3,997,419 $ 6,027,740 $ 8,173,000 $ 254,666 $ 155,031
Net realized gain (loss) from:
Investments (Note 2).................. 70,666,274 17,260,066 154,006,111 73,961,335 9,808,805 (286,889)
Foreign currency transactions (Note
1)................................... 1,454,573 (1,246,443)
Change in net unrealized appreciation
on:
Investments........................... 8,532,253 44,119,110 21,295,845 120,496,613 5,676,201 5,614,702
Translation of assets and liabilities
in foreign currencies (Note 1)....... 185,947 92
------------ ------------ ------------- ------------ ------------ ------------
Net increase in net assets resulting
from operations........................ 85,083,728 65,376,595 181,329,696 202,630,948 17,380,192 4,236,493
Distributions to shareholders:
From net investment income.............. (5,169,680) (3,764,094) (5,089,302) (7,437,014) (254,666)
In excess of net investment income...... (24,695)* (31,322)* (1,646,464)*
From net realized gain from investment
transactions........................... (70,666,274) (17,260,066) (154,006,111) (73,961,335) (9,422,995)
In excess of net realized gain from
investment transactions................ (97,665)* (17,932)* (469,156)* (206,957)*
Capital share transactions, net (Note
3)....................................... 169,111,664 189,924,932 193,603,540 136,042,951 18,580,064 (21,847,478)
------------ ------------ ------------- ------------ ------------ ------------
Net increase (decrease) in net assets... 178,237,078 234,259,435 215,368,667 257,037,271 24,636,131 (17,610,985)

NET ASSETS:
Beginning of period....................... 358,522,724 124,263,289 848,730,852 591,693,581 100,873,460 118,484,445
------------ ------------ ------------- ------------ ------------ ------------
End of period (1)......................... $536,759,802 $358,522,724 $1,064,099,519 $848,730,852 $125,509,591 $100,873,460
------------ ------------ ------------- ------------ ------------ ------------
------------ ------------ ------------- ------------ ------------ ------------
- --------------------------------------------
------------ ------------ ------------- ------------ ------------ ------------
</TABLE>

<TABLE>
<S> <C> <C> <C> <C> <C> <C>
(1) Includes undistributed net investment
income of: $ 901,158 $ 395,967 $ 1,931,709 $ 1,523,877 $ 3,885 $ --
* On a tax basis, there was no return of capital.
</TABLE>

The accompanying notes are an integral part of the financial statements.

-
68
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
-----------------------------------------------------------------

<TABLE>
<CAPTION>
Columbia Columbia Columbia
Special Small Cap Real Estate Equity
Years Ended December 31, Fund, Inc. Fund, Inc. Fund, Inc.
-------------------------- ------------- --------------------------
1996 1995 1996 (2) 1996 1995
------------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income (loss)............ $ (4,487,503) $ 1,828,234 $ (126) $ 1,994,016 $ 1,240,072
Net realized gain (loss) from
investments (Note 2)................... 295,204,950 154,437,430 (275,796) 1,627,328 (132)
Change in net unrealized appreciation
(depreciation) on investments.......... (112,950,905) 148,707,165 1,488,753 9,368,906 1,834,154
------------ ------------ ------------- ------------ ------------
Net increase in net assets resulting
from operations........................ 177,766,542 304,972,829 1,212,831 12,990,250 3,074,094
Distributions to shareholders:
From net investment income.............. (1,151,123) (1,370,203) (774,447)
From net realized gain from investment
transactions........................... (289,460,071) (154,437,430) (1,627,328)
In excess of net realized gain from
investment transactions................ (1,539,578)* (349,207)* (235,252)*
From tax return of capital.............. (657,602) (451,668)
Capital share transactions, net (Note
3)....................................... 312,562,708 347,044,146 19,848,539 37,500,111 2,572,289
------------ ------------ ------------- ------------ ------------
Net increase in net assets.............. 200,869,179 494,888,844 21,061,370 46,486,021 4,185,016

NET ASSETS:
Beginning of period....................... 1,384,415,035 889,526,191 21,587,200 17,402,184
------------ ------------ ------------- ------------ ------------
End of period (1)......................... $1,585,284,214 $1,384,415,035 $ 21,061,370 $ 68,073,221 $ 21,587,200
------------ ------------ ------------- ------------ ------------
------------ ------------ ------------- ------------ ------------
- --------------------------------------------
------------ ------------ ------------- ------------ ------------
</TABLE>

<TABLE>
<S> <C> <C> <C> <C> <C>
(1) Includes undistributed net investment
income (loss) of: $ -- $ (51,817) $ (126) $ -- $ 2,476
(2) From inception of operations on
September 11, 1996.
* On a tax basis, there was no return of capital.
</TABLE>

The accompanying notes are an integral part of the financial statements.

-
69
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
-----------------------------------------------------------------

<TABLE>
<CAPTION>
Columbia Columbia Columbia
Balanced Daily Income U.S. Government
Years Ended December 31, Fund, Inc. Company Securities Fund, Inc.
-------------------------- ---------------------------- --------------------------
1996 1995 1996 1995 1996 1995
------------ ------------ ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income................... $ 22,231,964 $ 15,015,481 $ 40,303,114 $ 39,894,755 $ 2,058,101 $ 2,036,453
Net realized gain from investments (Note
2)..................................... 41,189,499 20,555,403 83,457 571,638
Change in net unrealized appreciation
(depreciation) on investments.......... 4,167,518 47,270,141 (584,568) 1,000,875
------------ ------------ ------------- ------------ ------------ ------------
Net increase in net assets resulting
from operations........................ 67,588,981 82,841,025 40,303,114 39,894,755 1,556,990 3,608,966
Distributions to shareholders:
From net investment income.............. (21,892,044) (14,812,967) (40,303,114) (39,894,755) (2,058,101) (2,036,453)
In excess of net investment income...... (124,615)* (46,117)*
From net realized gain from investment
transactions........................... (41,189,499) (17,052,999)
In excess of net realized gain from
investment transaction................. (97,205)*
Capital share transactions, net (Note
3)....................................... 181,539,809 186,168,310 89,144,447 70,588,520 (564,932) 6,758,002
------------ ------------ ------------- ------------ ------------ ------------
Net increase (decrease) in net assets... 185,825,427 237,097,252 89,144,447 70,588,520 (1,066,043) 8,330,515

NET ASSETS:
Beginning of period....................... 486,767,493 249,670,241 800,655,522 730,067,002 41,842,384 33,511,869
------------ ------------ ------------- ------------ ------------ ------------
End of period (1)......................... $672,592,920 $486,767,493 $ 889,799,969 $800,655,522 $ 40,776,341 $ 41,842,384
------------ ------------ ------------- ------------ ------------ ------------
------------ ------------ ------------- ------------ ------------ ------------
- --------------------------------------------
------------ ------------ ------------- ------------ ------------ ------------
</TABLE>

<TABLE>
<S> <C> <C> <C> <C> <C> <C>
(1) Includes undistributed net investment
income of: $ 540,163 $ 211,082
* On a tax basis, there was no return of capital.
</TABLE>

The accompanying notes are an integral part of the financial statements.

-
70
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
-----------------------------------------------------------------

<TABLE>
<CAPTION>
Columbia Columbia Columbia
Fixed Income Securities Municipal Bond High Yield
Years Ended December 31, Fund, Inc. Fund, Inc. Fund, Inc.
-------------------------- ---------------------------- --------------------------
1996 1995 1996 1995 1996 1995
------------ ------------ ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income................... $ 21,823,484 $ 19,285,757 $ 18,837,582 $ 19,222,924 $ 2,084,562 $ 1,561,271
Net realized gain (loss) from
investments (Note 2)................... 1,600,093 7,333,401 1,991,804 2,099,378 237,862 (31,194)
Change in net unrealized appreciation
(depreciation) on investments.......... (11,107,884) 22,005,760 (7,232,960) 27,002,836 (1,892) 1,544,937
------------ ------------ ------------- ------------ ------------ ------------
Net increase in net assets resulting
from operations........................ 12,315,693 48,624,918 13,596,426 48,325,138 2,320,532 3,075,014
Distributions to shareholders:
From net investment income.............. (21,823,484) (19,285,757) (18,837,582) (19,222,924) (2,084,562) (1,561,271)
From net realized gain from investment
transactions........................... (1,842,655) (2,099,378) (28,544)
In excess of net realized gain from
investment transactions................ (52,790)*
Capital share transactions, net (Note
3)....................................... 49,669,884 34,830,059 (1,044,677) 17,029,241 5,139,840 9,123,656
------------ ------------ ------------- ------------ ------------ ------------
Net increase (decrease) in net assets... 40,162,093 64,169,220 (8,128,488) 43,979,287 5,347,266 10,637,399

NET ASSETS:
Beginning of period....................... 316,258,803 252,089,583 383,795,918 339,816,631 23,470,967 12,833,568
------------ ------------ ------------- ------------ ------------ ------------
End of period............................. $356,420,896 $316,258,803 $ 375,667,430 $383,795,918 $ 28,818,233 $ 23,470,967
------------ ------------ ------------- ------------ ------------ ------------
------------ ------------ ------------- ------------ ------------ ------------
* On a tax basis, there was no return of capital.
</TABLE>

The accompanying notes are an integral part of the financial statements.

-
71
<PAGE>
NOTES TO FINANCIAL STATEMENTS
-----------------------------------------------------------------

-- 1. SIGNIFICANT ACCOUNTING POLICIES --

The Columbia Funds (the Funds) consist of Columbia Common Stock Fund, Inc.
(CCSF), Columbia Growth Fund, Inc. (CGF), Columbia International Stock Fund,
Inc. (CISF), Columbia Special Fund, Inc. (CSF), Columbia Small Cap Fund, Inc.
(CSCF), Columbia Real Estate Equity Fund, Inc. (CREF), Columbia Balanced Fund,
Inc. (CBF), Columbia Daily Income Company (CDIC), Columbia U.S. Government
Securities Fund, Inc. (CUSG), Columbia Fixed Income Securities Fund, Inc.
(CFIS), Columbia Municipal Bond Fund, Inc. (CMBF), and Columbia High Yield Fund,
Inc. (CHYF). All Funds are open-end investment companies registered under the
Investment Company Act of 1940, as amended, and are diversified except CMBF,
which is non-diversified. The policies described below are consistently followed
by the Funds in the preparation of their financial statements in conformity with
generally accepted accounting principles.

Investment valuation. The values of CCSF, CGF, CISF, CSF, CSCF, CREF and CBF
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. Temporary cash investments in short-term securities (principally
repurchase agreements) are valued at cost, which approximates market.

CDIC investments are carried at values deemed best to reflect their fair values
as determined in good faith by or under the supervision of officers of CDIC
specifically so authorized by its 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 considered.

CBF, CUSG, CFIS, CMBF and CHYF fixed income investments are carried at values
deemed best to reflect their fair values as determined in good faith by or under
the supervision of officers of CBF, CUSG, CFIS, CMBF and CHYF, specifically so
authorized by their Directors. These values are based on market value as quoted
by dealers who are market makers in these securities or by an independent
pricing service unless unusual circumstances indicate that another method of
determining fair value should be considered. Market values for CBF, CUSG, CFIS
and CHYF fixed income investments are based on the average of bid and ask prices
and market value for CMBF is based on bid prices, or by reference to other
securities with comparable ratings, interest rates and maturities. Temporary
cash investments in short-term securities (principally repurchase agreements)
are valued at cost, which approximates market.

Short sales against the box. Certain funds may hedge their investments against
changes in value by engaging in short sales against the box. In a short sale
against the box, the Fund sells a borrowed security that it also owns or has a
right to own without additional cash consideration. The Fund covers its
obligation to pay back the borrowed shares by depositing the identical
securities sold short in a segregated account at the Fund's custodian bank until
the short sale transaction is closed and the borrowed shares repaid. A short
sale against the box is not a speculative transaction and does not involve the
use of leverage. This type of short sale may be used by a Fund when it desires
to protect a profit or prevent a loss in a security position without selling the
security directly. CSCF sold certain securities short against the box in the
fourth quarter of 1996 because it was undesirable under provisions of the
Internal Revenue Code that apply to investment companies to sell those
securities directly and realize a taxable gain during the quarter. The market
value of segregated securities to cover short positions was $1,536,656 at
December 31, 1996. As of December 31, 1996, CSCF had entered into the following
short sales which resulted in net unrealized appreciation of $5,759.

-
72
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

-- 1. SIGNIFICANT ACCOUNTING POLICIES, CONTINUED --

<TABLE>
<CAPTION>
Issuer Shares Value
- ------------------------------ --------- ---------
Altera Corp. 1,900 $ 138,106
<S> <C> <C>
American Power Conversion
Corp. 7,300 198,925
ANADIGICS, Inc. 5,000 196,250
Dreco Energy Services Ltd.
(Class A) 6,000 219,750
Metzler Group, Inc. 7,000 222,250
National-Oilwell, Inc. 9,000 276,750
P J America, Inc. 10,000 180,000
Shiva Corp. 3,000 104,625
---------
Total securities sold
short $1,536,656
---------
---------
</TABLE>

Forward foreign currency exchange contracts. In connection with portfolio
purchases and sales of securities denominated in a foreign currency, CISF enters
into foreign currency exchange contracts (contracts). Additionally, CISF enters
into forward contracts to hedge certain other foreign currency denominated
assets. Contracts are recorded at market value. CISF could be exposed to risks
if counterparties to the contracts are unable to meet the terms of their
contracts or if the value of the foreign currency changes unfavorably. The
effect of any change in the value of a hedged foreign currency would be offset
by the increase (resulting from a change in exchange rates) in value of the
securities denominated in that currency. Net realized gains arising from such
transactions amounted to $1,393,253 and are included in net realized gain from
foreign currency transactions. As of December 31, 1996, CISF had entered into
the following forward contract resulting in net unrealized appreciation of
$205,048.

<TABLE>
<CAPTION>
Net
Unrealized
Currency to Currency to Settlement Appreciation
be Delivered be Received Date (U.S. $)
- ------------------------- --------------------- ---------- -----------
Japanese U.S.
1,401,000,000 Yen 12,388,363 Dollars 02/28/1997 $ 205,048
<C> <S> <C> <C> <C> <C>
</TABLE>

Foreign currency translations. The books and records of CISF are maintained in
U.S. dollars. Foreign currency transactions are translated into U.S. dollars on
the following basis:

(i) market value of investment securities, other assets, and liabilities at
the daily rates of exchange, and

(ii) purchases and sales of investment securities, dividend and interest
income and certain expenses at the rates of exchange prevailing on the
respective dates of such transactions.

CISF does not isolate that portion of the results of operations resulting from
changes in foreign exchange rates on investments from the fluctuations arising
from changes in market prices of securities held. Such fluctuations are included
with the net realized and unrealized gain or loss from investments.

Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of foreign currencies, currency gains
or losses realized between the trade and settlement dates on securities
transactions, and the difference between the amounts of dividends, interest, and
foreign withholding taxes recorded on CISF's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in the value of assets and
liabilities, other than investments in securities, resulting from changes in the
exchange rates.

-
73
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

-- 1. SIGNIFICANT ACCOUNTING POLICIES, --
CONTINUED

Interest and dividend income. Interest income is recorded on the accrual basis
and dividend income is recorded on the ex-dividend date. The majority of
dividend income recorded by CREF is from Real Estate Investment Trusts (REITs).
For tax purposes, a portion of these dividends consist of capital gains and
return of capital. For financial reporting purposes, these dividends are
recorded as dividend income.

Shareholder distributions. CCSF, CREF and CBF distribute net investment income
quarterly and any net realized gains from investment transactions annually. CGF,
CISF, CSF and CSCF distribute net investment income and any net realized gains
annually. CDIC distributes its net investment income daily -- including any
realized investment gains or losses. CUSG, CFIS, CMBF and CHYF distribute their
net investment income monthly and any net realized gains annually. Distributions
to shareholders are recorded on the record 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 foreign currency
transactions, 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. The Funds have made no provision for federal income taxes
on net investment income or net realized gains from sales of securities, since
it is the intention of the Funds 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 them from
substantially all federal income taxes.

As of December 31, 1996, certain Funds have capital loss carryovers available to
offset future capital gains as follows:

<TABLE>
<CAPTION>
Year Carryover Expires CSCF CUSG CFIS
- -------------------------- ----------- ----------- -------------
<S> <C> <C> <C>
2002...................... $396,302 $ 466,587
2003...................... 1,218,113
2004...................... $253,562
----------- ----------- -------------
$253,562 $396,302 $ 1,684,700
----------- ----------- -------------
----------- ----------- -------------
</TABLE>

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. The Funds, through their custodians, receive 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. The Funds' investment
advisor 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.

-
74
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

-- 1. SIGNIFICANT ACCOUNTING POLICIES, CONTINUED --

CHYF invests in lower rated debt securities, which may be more susceptible to
adverse economic conditions than investment grade holdings. These securities are
often subordinated to the prior claims of other senior lenders, and
uncertainties exist as to an issuer's ability to meet principal and interest
payments. At December 31, 1996, 98% of the Fund's portfolio was invested in
securities rated Ba (49%) or B (49%) by Moody's Investor Services, Inc; the
remaining 2% of the portfolio was invested in a U.S. Treasury Note.

-- 2. INVESTMENT TRANSACTIONS --

Aggregate purchases, sales and maturities, net realized gain (loss) and
unrealized appreciation (depreciation) of investments, including temporary cash
investments for CDIC and excluding temporary cash investments for all other
Funds, as of and for the period ended December 31, 1996, were as follows:

<TABLE>
<CAPTION>
Columbia Common Columbia Columbia Columbia
Stock Fund, Inc. Growth International Stock Special Fund,
(CCSF) Fund, Inc. (CGF) Fund, Inc. (CISF) Inc. (CSF)
----------------- ---------------- ------------------- --------------
Purchases:
<S> <C> <C> <C> <C>
Investment securities other than U.S.
Government obligations.................... $563,762,616 $747,342,380 $143,417,703 $2,199,694,465
----------------- ---------------- ------------------- --------------
----------------- ---------------- ------------------- --------------
Sales and Maturities:
Investment securities other than U.S.
Government obligations.................... $486,671,781 $712,192,795 $139,433,310 $2,249,631,026
----------------- ---------------- ------------------- --------------
----------------- ---------------- ------------------- --------------
Net Realized Gain:
Investment securities other than U.S.
Government obligations.................... $ 70,666,274 $154,006,111 $ 9,808,805 $ 295,204,950
----------------- ---------------- ------------------- --------------
----------------- ---------------- ------------------- --------------
Unrealized Appreciation (Depreciation) as of
December 31, 1996:
Appreciation............................... $ 72,793,189 $219,974,948 $20,703,260 $ 192,223,656
Depreciation............................... (11,905,080) (38,707,795) (4,060,142) (103,940,578)
----------------- ---------------- ------------------- --------------
Net unrealized appreciation.............. $ 60,888,109 $181,267,153 $16,643,118 $ 88,283,078
----------------- ---------------- ------------------- --------------
----------------- ---------------- ------------------- --------------
Unrealized Appreciation (Depreciation) for
federal income tax purposes as of December
31, 1996:
Appreciation............................... $ 73,719,042 $220,991,033 $20,497,064 $ 191,811,939
Depreciation............................... (11,971,825) (39,023,528) (4,533,770) (104,657,499)
----------------- ---------------- ------------------- --------------
Net unrealized appreciation.............. $ 61,747,217 $181,967,505 $15,963,294 $ 87,154,440
----------------- ---------------- ------------------- --------------
----------------- ---------------- ------------------- --------------
For federal income tax purposes, the cost of
investments owned at December 31, 1996...... $448,148,183 $869,308,429 $101,242,068 $1,400,661,169
----------------- ---------------- ------------------- --------------
----------------- ---------------- ------------------- --------------
</TABLE>

The net realized gain for CCSF, CGF, and CSF includes proceeds of approximately
$28,000, $174,000, and $239,000, respectively, from shareholder class action
suits related to securities held by those Funds.

-
75
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

-- 2. INVESTMENT TRANSACTIONS, CONTINUED --
<TABLE>
<CAPTION>
Columbia
Columbia Real Estate Columbia
Small Cap Equity Balanced
Fund, Inc. (CSCF) Fund, Inc. (CREF) Fund, Inc. (CBF)
----------------- ----------------- ----------------
Purchases:
<S> <C> <C> <C>
Investment securities other than U.S. Government
obligations............................................... $19,101,824 $37,952,071 $388,776,058
U.S. Government obligations................................ 490,505,021
----------------- ----------------- ----------------
Total purchases.......................................... $19,101,824 $37,952,071 $879,281,079
----------------- ----------------- ----------------
----------------- ----------------- ----------------
Sales and Maturities:
Investment securities other than U.S. Government
obligations............................................... $ 1,104,310 $13,104,563 $355,321,321
U.S. Government obligations................................ 396,201,789
----------------- ----------------- ----------------
Total sales and maturities............................... $ 1,104,310 $13,104,563 $751,523,110
----------------- ----------------- ----------------
----------------- ----------------- ----------------
Net Realized Gain (Loss):
Investment securities other than U.S. Government
obligations............................................... $ (275,796) $ 1,627,328 $ 41,598,285
U.S. Government obligations................................ (408,786)
----------------- ----------------- ----------------
Total net realized gain (loss)........................... $ (275,796) $ 1,627,328 $ 41,189,499
----------------- ----------------- ----------------
----------------- ----------------- ----------------
Unrealized Appreciation (Depreciation) as of December 31,
1996:
Appreciation............................................... $ 2,120,026 $10,904,832 $ 62,499,171
Depreciation............................................... (631,273) (6,449,803)
----------------- ----------------- ----------------
Net unrealized appreciation.............................. $ 1,488,753 $10,904,832 $ 56,049,368
----------------- ----------------- ----------------
----------------- ----------------- ----------------
Unrealized Appreciation (Depreciation) for federal income tax
purposes as of December 31, 1996:
Appreciation............................................... $ 2,120,026 $11,637,608 $ 62,947,102
Depreciation............................................... (653,507) (6,462,594)
----------------- ----------------- ----------------
Net unrealized appreciation.............................. $ 1,466,519 $11,637,608 $ 56,484,508
----------------- ----------------- ----------------
----------------- ----------------- ----------------
For federal income tax purposes, the cost of investments
owned at December 31, 1996.................................. $17,743,952 $44,513,297 $576,633,486
----------------- ----------------- ----------------
----------------- ----------------- ----------------

<CAPTION>
Columbia
Daily Income
Company (CDIC)
--------------
Purchases:
<S> <C>
Investment securities other than U.S. Government
obligations............................................... $8,687,738,846
U.S. Government obligations................................ 120,383,333
--------------
Total purchases.......................................... $8,808,122,179
--------------
--------------
Sales and Maturities:
Investment securities other than U.S. Government
obligations............................................... $8,558,183,209
U.S. Government obligations................................ 154,900,694
--------------
Total sales and maturities............................... $8,713,083,903
--------------
--------------
Net Realized Gain (Loss):
Investment securities other than U.S. Government
obligations...............................................
U.S. Government obligations................................
Total net realized gain (loss)...........................
Unrealized Appreciation (Depreciation) as of December 31,
1996:
Appreciation...............................................
Depreciation...............................................
Net unrealized appreciation..............................
Unrealized Appreciation (Depreciation) for federal income tax
purposes as of December 31, 1996:
Appreciation...............................................
Depreciation...............................................
Net unrealized appreciation..............................
For federal income tax purposes, the cost of investments
owned at December 31, 1996.................................. $ 902,058,747
--------------
--------------
</TABLE>

The net realized gain for CBF includes proceeds of approximately $28,000, from
shareholder class action suits related to securities held by the Fund.

-
76
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

-- 2. INVESTMENT TRANSACTIONS, CONTINUED --
<TABLE>
<CAPTION>
Columbia U.S. Columbia Fixed Columbia
Government Securities Income Securities Municipal Bond
Fund, Inc. (CUSG) Fund, Inc. (CFIS) Fund, Inc. (CMBF)
--------------------- ----------------- -----------------
Purchases:
<S> <C> <C> <C>
Investment securities other than U.S. Government
obligations.......................................... $179,548,635 $ 70,008,274
U.S. Government obligations........................... $83,867,145 423,507,872
--------------------- ----------------- -----------------
Total purchases..................................... $83,867,145 $603,056,507 $ 70,008,274
--------------------- ----------------- -----------------
--------------------- ----------------- -----------------
Sales and Maturities:
Investment securities other than U.S. Government
obligations.......................................... $174,785,396 $ 72,420,445
U.S. Government obligations........................... $83,294,611 386,930,828
--------------------- ----------------- -----------------
Total sales and maturities.......................... $83,294,611 $561,716,224 $ 72,420,445
--------------------- ----------------- -----------------
--------------------- ----------------- -----------------
Net Realized Gain (loss):
Investment securities other than U.S. Government
obligations.......................................... $ 768,118 $ 1,991,804
U.S. Government obligations........................... $ 83,457 831,975
--------------------- ----------------- -----------------
Total net realized gain............................. $ 83,457 $ 1,600,093 $ 1,991,804
--------------------- ----------------- -----------------
--------------------- ----------------- -----------------
Unrealized Appreciation (Depreciation) as of December
31, 1996:
Appreciation.......................................... $ 110,221 $ 4,056,785 $ 14,276,596
Depreciation.......................................... (83,034) (2,051,341) (369,180)
--------------------- ----------------- -----------------
Net unrealized appreciation......................... $ 27,187 $ 2,005,444 $ 13,907,416
--------------------- ----------------- -----------------
--------------------- ----------------- -----------------
Unrealized Appreciation (Depreciation) for federal
income tax purposes as of December 31, 1996:
Appreciation.......................................... $ 110,221 $ 3,838,918 $ 14,273,646
Depreciation.......................................... (83,034) (2,051,341) (375,173)
--------------------- ----------------- -----------------
Net unrealized appreciation......................... $ 27,187 $ 1,787,577 $ 13,898,473
--------------------- ----------------- -----------------
--------------------- ----------------- -----------------
For federal income tax purposes, the cost of investments
owned at December 31, 1996............................. $40,519,829 $337,970,569 $353,391,639
--------------------- ----------------- -----------------
--------------------- ----------------- -----------------

<CAPTION>
Columbia
High Yield
Fund, Inc. (CHYF)
-----------------
Purchases:
<S> <C>
Investment securities other than U.S. Government
obligations.......................................... $17,722,125
U.S. Government obligations........................... 1,357,219
-----------------
Total purchases..................................... $19,079,344
-----------------
-----------------
Sales and Maturities:
Investment securities other than U.S. Government
obligations.......................................... $12,915,245
U.S. Government obligations........................... 1,844,602
-----------------
Total sales and maturities.......................... $14,759,847
-----------------
-----------------
Net Realized Gain (loss):
Investment securities other than U.S. Government
obligations.......................................... $ 245,768
U.S. Government obligations........................... (7,906)
-----------------
Total net realized gain............................. $ 237,862
-----------------
-----------------
Unrealized Appreciation (Depreciation) as of December
31, 1996:
Appreciation.......................................... $ 955,549
Depreciation.......................................... (104,769)
-----------------
Net unrealized appreciation......................... $ 850,780
-----------------
-----------------
Unrealized Appreciation (Depreciation) for federal
income tax purposes as of December 31, 1996:
Appreciation.......................................... $ 955,549
Depreciation.......................................... (104,769)
-----------------
Net unrealized appreciation......................... $ 850,780
-----------------
-----------------
For federal income tax purposes, the cost of investments
owned at December 31, 1996............................. $26,223,231
-----------------
-----------------
</TABLE>

-
77
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

-- 3. CAPITAL STOCK --

<TABLE>
<CAPTION>
Columbia Columbia Columbia
Common Stock Growth International Stock
Fund, Inc. (CCSF) Fund, Inc. (CGF) Fund, Inc. (CISF)
------------------------- ---------------------------- --------------------------
1996 1995 1996 1995 1996 1995
----------- ------------ ------------- ------------- ------------ ------------
Shares:
<S> <C> <C> <C> <C> <C> <C>
Shares sold...................... 9,187,403 12,907,792 9,588,118 6,481,595 4,458,919 3,176,713
Shares issued for reinvestment of
dividends....................... 3,836,536 1,137,709 4,993,329 2,636,586 808,789
----------- ------------ ------------- ------------- ------------ ------------
13,023,939 14,045,501 14,581,447 9,118,181 5,267,708 3,176,713
Less shares redeemed............. (4,449,235) (2,953,090) (8,408,189) (4,495,529) (3,930,959) (4,992,567)
----------- ------------ ------------- ------------- ------------ ------------
Net increase (decrease) in
shares.......................... 8,574,704 11,092,411 6,173,258 4,622,652 1,336,749 (1,815,854)
----------- ------------ ------------- ------------- ------------ ------------
----------- ------------ ------------- ------------- ------------ ------------
Amounts:
Sales............................ $183,843,205 $221,012,822 $ 309,798,468 $ 187,801,317 $ 62,941,735 $ 38,698,162
Reinvestment of dividends........ 74,699,264 20,863,972 154,190,774 78,122,044 11,145,109
----------- ------------ ------------- ------------- ------------ ------------
258,542,469 241,876,794 463,989,242 265,923,361 74,086,844 38,698,162
Less redemptions................. (89,430,805) (51,951,862) (270,385,702) (129,880,410) (55,506,780) (60,545,640)
----------- ------------ ------------- ------------- ------------ ------------
Net increase (decrease).......... $169,111,664 $189,924,932 $ 193,603,540 $ 136,042,951 $ 18,580,064 $(21,847,478)
----------- ------------ ------------- ------------- ------------ ------------
----------- ------------ ------------- ------------- ------------ ------------
Capital stock authorized
(shares)........................ 100,000,000 100,000,000 100,000,000
Par Value........................ no par $.01 no par
</TABLE>

<TABLE>
<CAPTION>
Columbia
Columbia Small Cap Columbia
Special Fund, Inc. Real Estate Equity
Fund, Inc. (CSF) (CSCF) Fund, Inc. (CREF)
---------------------------- ----------- --------------------------
1996 1995 1996 (1) 1996 1995
------------- ------------- ----------- ------------ ------------
Shares:
<S> <C> <C> <C> <C> <C>
Shares sold............................. 25,624,116 24,380,701 1,756,650 4,543,366 745,236
Shares issued for reinvestment of
dividends.............................. 13,826,136 7,030,821 226,545 116,209
------------- ------------- ----------- ------------ ------------
39,450,252 31,411,522 1,756,650 4,769,911 861,445
Less shares redeemed.................... (24,162,690) (14,439,180) (135,869 ) (2,255,778) (647,683)
------------- ------------- ----------- ------------ ------------
Net increase in shares.................. 15,287,562 16,972,342 1,620,781 2,514,133 213,762
------------- ------------- ----------- ------------ ------------
------------- ------------- ----------- ------------ ------------
Amounts:
Sales................................... $ 593,195,434 $ 507,005,537 $21,545,009 $ 65,389,802 $ 8,920,599
Reinvestment of dividends............... 273,619,242 148,631,551 3,428,343 1,402,375
------------- ------------- ----------- ------------ ------------
866,814,676 655,637,088 21,545,009 68,818,145 10,322,974
Less redemptions........................ (554,251,968) (308,592,942) (1,696,470 ) (31,318,034) (7,750,685)
------------- ------------- ----------- ------------ ------------
Net increase............................ $ 312,562,708 $ 347,044,146 $19,848,539 $ 37,500,111 $ 2,572,289
------------- ------------- ----------- ------------ ------------
------------- ------------- ----------- ------------ ------------
Capital stock authorized (shares)....... 100,000,000 100,000,000 100,000,000
Par Value............................... $.01 no par no par
(1) From inception of operations on
September 11, 1996.
</TABLE>

-
78
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

-- 3. CAPITAL STOCK, CONTINUED --

<TABLE>
<CAPTION>
Columbia Columbia Columbia U.S.
Balanced Daily Income Government Securities
Fund, Inc. (CBF) Company (CDIC) Fund, Inc. (CUSG)
---------------------------- ------------------------- --------------------------
1996 1995 1996 1995 1996 1995
------------- ------------- ------------ ----------- ------------ ------------
Shares:
<S> <C> <C> <C> <C> <C> <C>
Shares sold.................... 12,203,107 12,164,908 1,425,767,034 1,191,109,050 1,751,071 2,438,332
Shares issued for reinvestment
of dividends.................. 3,066,051 1,603,299 40,287,100 39,866,838 230,872 229,910
------------- ------------- ------------ ----------- ------------ ------------
15,269,158 13,768,207 1,466,054,134 1,230,975,888 1,981,943 2,668,242
Less shares redeemed........... (6,405,495) (3,974,088) (1,376,909,687) (1,160,387,368) (2,051,336) (1,843,924)
------------- ------------- ------------ ----------- ------------ ------------
Net increase (decrease) in
shares........................ 8,863,663 9,794,119 89,144,447 70,588,520 (69,393) 824,318
------------- ------------- ------------ ----------- ------------ ------------
------------- ------------- ------------ ----------- ------------ ------------
Amounts:
Sales.......................... $ 251,516,248 $ 230,627,211 $1,425,767,034 $1,191,109,050 $ 14,407,264 $ 19,955,069
Reinvestment of dividends...... 62,884,919 31,608,126 40,287,100 39,866,838 1,898,935 1,885,143
------------- ------------- ------------ ----------- ------------ ------------
314,401,167 262,235,337 1,466,054,134 1,230,975,888 16,306,199 21,840,212
Less redemptions............... (132,861,358) (76,067,027) (1,376,909,687) (1,160,387,368) (16,871,131) (15,082,210)
------------- ------------- ------------ ----------- ------------ ------------
Net increase (decrease)........ $ 181,539,809 $ 186,168,310 $ 89,144,447 $70,588,520 $ (564,932) $ 6,758,002
------------- ------------- ------------ ----------- ------------ ------------
------------- ------------- ------------ ----------- ------------ ------------
Capital stock authorized
(shares)...................... 100,000,000 2,000,000,000 100,000,000
Par Value...................... no par $.001 $.01
</TABLE>

<TABLE>
<CAPTION>
Columbia Fixed Columbia Columbia
Income Securities Municipal Bond High Yield
Fund, Inc. (CFIS) Fund, Inc. (CMBF) Fund, Inc. (CHYF)
------------------------- ------------------------ --------------------------------
1996 1995 1996 1995 1996 1995
----------- ------------ ----------- ----------- --------------- ---------------
Shares:
<S> <C> <C> <C> <C> <C> <C>
Shares sold........................ 9,571,457 6,735,955 4,732,337 5,057,133 1,058,203 1,176,046
Shares issued for reinvestment of
dividends......................... 1,427,852 1,319,739 1,395,611 1,460,826 197,255 146,858
----------- ------------ ----------- ----------- --------------- ---------------
10,999,309 8,055,694 6,127,948 6,517,959 1,255,458 1,322,904
Less shares redeemed............... (7,165,704) (5,373,406) (6,210,439) (5,096,815) (730,964) (367,495)
----------- ------------ ----------- ----------- --------------- ---------------
Net increase (decrease) in
shares............................ 3,833,605 2,682,288 (82,491) 1,421,144 524,494 955,409
----------- ------------ ----------- ----------- --------------- ---------------
----------- ------------ ----------- ----------- --------------- ---------------
Amounts:
Sales.............................. $124,564,521 $ 86,697,840 $57,398,891 $60,766,673 $ 10,345,832 $ 11,217,136
Reinvestment of dividends.......... 18,580,087 17,119,289 16,930,817 17,726,251 1,925,766 1,406,479
----------- ------------ ----------- ----------- --------------- ---------------
143,144,608 103,817,129 74,329,708 78,492,924 12,271,598 12,623,615
Less redemptions................... (93,474,724) (68,987,070) (75,374,385) (61,463,683) (7,131,758) (3,499,959)
----------- ------------ ----------- ----------- --------------- ---------------
Net increase (decrease)............ $49,669,884 $ 34,830,059 $(1,044,677) $17,029,241 $ 5,139,840 $ 9,123,656
----------- ------------ ----------- ----------- --------------- ---------------
----------- ------------ ----------- ----------- --------------- ---------------
Capital stock authorized
(shares).......................... 200,000,000 100,000,000 100,000,000
Par Value.......................... $.01 $.01 no par
</TABLE>

-
79
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

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

<TABLE>
<CAPTION>
Columbia
Columbia Columbia Columbia Special
Common Stock Growth International Stock Fund, Inc.
Fund, Inc. (CCSF) Fund, Inc. (CGF) Fund, Inc. (CISF) (CSF)
----------------- --------------------- ------------------- ----------
<S> <C> <C> <C> <C>
Investment management fees incurred............... $2,686,585 $5,711,080 $1,157,227 $12,880,541
Investment management fee computation basis
(percentage of daily net assets per annum)....... .60 of 1% .75 of 1% to 1% 1% to
$200,000,000 daily $500,000,000
net assets; .625 of daily net
1% between assets;
$200,000,000 and .75 of 1%
$500,000,000; and .50 in excess
of 1% in excess of of
$500,000,000 $500,000,000

Transfer agent fee (included in shareholder
servicing costs)................................. $218,624 $510,664 $181,749 $663,083
Fees earned by directors not affiliated with each
Fund's invest-
ment advisor, transfer agent, or Columbia
Management Co.................................... $5,081 $11,090 $1,330 $17,855
Value of investments held at December 31, 1996 by:
Columbia Management Co.......................... $421,467 $96,325 $64,146 $1,981,946
Columbia Funds Management Company............... $81,036 $38,970 $16,126 $751,876
</TABLE>

<TABLE>
<CAPTION>
Columbia Columbia Columbia Columbia
Small Cap Real Estate Equity Balanced Fund, Daily Income
Fund, Inc. (CSCF) Fund, Inc. (CREF) Inc. (CBF) Company (CDIC)
----------------- ------------------ ---------------- ------------------
Investment management fees incurred............... $40,273 $232,413 $2,935,512 $4,009,904
<S> <C> <C> <C> <C>
Investment management fee computation basis
(percentage of daily net assets per annum)....... 1% .75 of 1% .50 of 1% .50 of 1% to
$500,000,000 daily
net assets; .45 of
1% between
$500,000,000 and
$1,000,000,000;
and .40 of 1% in
excess of
$1,000,000,000

Transfer agent fee (included in shareholder
servicing costs)................................. $3,700 $24,214 $301,673 $578,095
Fees earned by directors not affiliated with each
Fund's invest-
ment advisor, transfer agent, or Columbia
Management Co.................................... $336 $6,680 $9,624
Value of investments held at December 31, 1996 by:
Columbia Management Co.......................... $108,520 $8,466,518
Columbia Funds Management Company............... $8,023 $20,066 $6,687,297
</TABLE>

-
80
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

-- 4. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES, CONTINUED --
<TABLE>
<CAPTION>
Columbia Fixed
Columbia U.S. Income
Government Securities Columbia
Securities Fund, Inc. Municipal Bond
Fund, Inc. (CUSG) (CFIS) Fund, Inc. (CMBF)
-------------------- ---------------- -----------------
<S> <C> <C> <C>
Investment management fees incurred..................... $206,591 $1,668,004 $1,881,542
Investment management fee computation basis (percentage
of daily net assets per annum)......................... .50 of 1% .50 of 1% .50 of 1%
Transfer agent fee (included in shareholder servicing
costs)................................................. $33,282 $172,277 $79,716
Fees earned by directors not affiliated with each Fund's
investment advisor, transfer agent, or Columbia
Management Co.......................................... $482 $3,861 $4,374
Value of investments held at December 31, 1996 by:
Columbia Management Co................................ $440,260 $927,013 $1,801,085
Columbia Funds Management Company..................... $68,454 $278,421 $255,320

<CAPTION>
Columbia
High Yield
Fund, Inc. (CHYF)
-----------------
<S> <C>
Investment management fees incurred..................... $150,432
Investment management fee computation basis (percentage
of daily net assets per annum)......................... .60 of 1%
Transfer agent fee (included in shareholder servicing
costs)................................................. $19,989
Fees earned by directors not affiliated with each Fund's
investment advisor, transfer agent, or Columbia
Management Co.......................................... $287
Value of investments held at December 31, 1996 by:
Columbia Management Co................................ $326,480
Columbia Funds Management Company..................... $289,209
</TABLE>

The investment advisor of the Funds is Columbia Funds Management Company. The
transfer agent for the Funds is Columbia Trust Company, a subsidiary of Columbia
Funds Management Company. The transfer agent is compensated based on a per
account fee. The contracts for investment advisory and transfer agent services
for the Funds must be renewed annually by a majority vote of the Funds'
shareholders or by the directors of the Funds. Certain officers and directors of
the Funds are also officers and directors of Columbia Funds Management Company,
Columbia Trust Company and Columbia Management Co. They did not receive any
direct payments from the Funds. At December 31, 1996, CCSF, CSF, and CBF had
investments in securities of U.S. Bancorp, which provides custodial services for
these funds.

-
81
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
-----------------------------------------------------------------

To the Directors and Shareholders,
Columbia Common Stock Fund, Inc. (CCSF)
Columbia Growth Fund, Inc. (CGF)
Columbia International Stock Fund, Inc. (CISF)
Columbia Special Fund, Inc. (CSF)
Columbia Small Cap Fund, Inc. (CSCF)
Columbia Real Estate Equity Fund, Inc. (CREF)
Columbia Balanced Fund, Inc. (CBF)
Columbia Daily Income Company (CDIC)
Columbia U.S. Government Securities Fund, Inc. (CUSG)
Columbia Fixed Income Securities Fund, Inc. (CFIS)
Columbia Municipal Bond Fund, Inc. (CMBF)
Columbia High Yield Fund, Inc. (CHYF)

We have audited the accompanying statements of assets and liabilities,
including the schedules of investments for each of the twelve funds comprising
Columbia Funds, as of December 31, 1996, the related statements of operations
for the year then ended, except for CSCF which is for the period from inception,
September 11, 1996, to December 31, 1996, the statements of changes in net
assets for each of the two years in the period then ended, except for CSCF which
is for the period from inception, September 11, 1996, to December 31, 1996 and
the financial highlights for the periods indicated therein. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996, by correspondence with the custodian, and confirmation by
correspondence with brokers as to securities purchased but not received at that
date or other auditing procedures where confirmations from brokers were not
received. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
twelve funds comprising Columbia Funds as of December 31, 1996, the results of
their operations for the year then ended, except for CSCF which is for the
period from inception, September 11, 1996, to December 31, 1996, the changes in
their net assets for each of the two years in the period then ended, except for
CSCF which is for the period from inception, September 11, 1996, to December 31,
1996, and the financial highlights for the periods indicated therein, in
conformity with generally accepted accounting principles.

COOPERS & LYBRAND L.L.P.
Portland, Oregon
January 31, 1997

-
82
<PAGE>
NOTES

<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
AUDITED ANNUAL REPORT OF THE COLUMBIA FUNDS DATED DECEMBER 31, 1996, AND
THE AUDITED ANNUAL REPORT OF THE COLUMBIA FUNDS DATED DECEMBER 31, 1995,
AND IS QUALIFIED IN TIS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000889421
<NAME> COLUMBIA INTERNATIONAL STOCK FUND

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 100,562,244
<INVESTMENTS-AT-VALUE> 117,205,362
<RECEIVABLES> 13,402,654
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 11,611,331
<TOTAL-ASSETS> 142,219,347
<PAYABLE-FOR-SECURITIES> 3,540,999
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 13,168,757
<TOTAL-LIABILITIES> 16,709,576
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 109,481,385
<SHARES-COMMON-STOCK> 9,052,917
<SHARES-COMMON-PRIOR> 7,716,168
<ACCUMULATED-NII-CURRENT> 3,885
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (810,464)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 16,834,785
<NET-ASSETS> 125,509,591
<DIVIDEND-INCOME> 1,657,272
<INTEREST-INCOME> 369,995
<OTHER-INCOME> 0
<EXPENSES-NET> (1,772,601)
<NET-INVESTMENT-INCOME> 254,666
<REALIZED-GAINS-CURRENT> 11,263,378
<APPREC-INCREASE-CURRENT> 5,862,148
<NET-CHANGE-FROM-OPS> 17,380,192
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,901,130)
<DISTRIBUTIONS-OF-GAINS> (9,422,995)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,458,919
<NUMBER-OF-SHARES-REDEEMED> (3,930,959)
<SHARES-REINVESTED> 808,789
<NET-CHANGE-IN-ASSETS> 24,636,131
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1,055,061
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,157,227
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,772,601
<AVERAGE-NET-ASSETS> 115,252,828
<PER-SHARE-NAV-BEGIN> 13.07
<PER-SHARE-NII> .03
<PER-SHARE-GAIN-APPREC> 2.13
<PER-SHARE-DIVIDEND> .23
<PER-SHARE-DISTRIBUTIONS> 1.14
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.86
<EXPENSE-RATIO> 1.54
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>