COLUMBIA INTERNATIONAL STOCK FUND INC, 485BPOS, 1998-02-23

COLUMBIA INTERNATIONAL STOCK FUND INC
485BPOS, 1998-02-23

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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. 6 [ X ]
-----

and/or

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

Amendment No. 8 [ 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

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

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

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

immediately upon filing pursuant to paragraph (b)
------
X on February 23, 1998 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

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

<PAGE>

Title of Securities Being Registered:
Common Stock

2
<PAGE>

COLUMBIA INTERNATIONAL STOCK FUND, INC.

CROSS-REFERENCE SHEET

ITEM
- ------------------------------------------------------------

LOCATION IN
PART A - INFORMATION REQUIRED IN A PROSPECTUS PROSPECTUS
----------
<S> <C>
Item 1. Cover Page. . . . . . . . . . . . . . . . . . . . Cover

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

Item 3. Condensed Financial Information . . . . . . . . . "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 Performance . . . Contained in the 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."

3
<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"

</TABLE>

4
<PAGE>

[LOGO]

COLUMBIA FUNDS
PROSPECTUS
February 23, 1998

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>
DEAR INVESTOR:

We are pleased to present the Columbia Funds prospectus for 1998. Inside, you
will find detailed descriptions of each of the 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. And we work hard to keep our
expenses low, enabling more of your money to work for you.

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

<TABLE>
<S> <C>
Sincerely,

[SIG] [SIG]
John A. Kemp Thomas L. Thomsen
CHAIRMAN AND CHIEF EXECUTIVE OFFICER PRESIDENT AND CHIEF INVESTMENT OFFICER
COLUMBIA FUNDS MANAGEMENT COMPANY COLUMBIA FUNDS MANAGEMENT COMPANY
</TABLE>
<PAGE>
COLUMBIA FUNDS PROSPECTUS
-----------------------------------------------------------------

FEBRUARY 23, 1998

C olumbia Funds is a family of 12 mutual funds
managed by Columbia Funds Management Company (the "Advisor"). Because the
Funds are no-load, you pay no sales charges to invest in them. 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 23, 1998
has been filed with the Securities and Exchange Commission and is available
along with other related materials on the SEC's Internet Web site (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.

Shares of the Funds are not bank deposits or obligations of, or guaranteed or
endorsed by, Fleet Financial Group, Inc. or any of its affiliates, the Advisor,
or any Fleet bank. Shares of the Funds are not federally insured by, guaranteed
by, obligations of or otherwise supported by the U.S. Government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other
governmental agency. Investment in the Funds involves investment risk, including
the possible loss of principal.

Like all mutual funds, these securities have not been approved or disapproved by
the Securities and Exchange Commission ("SEC"), nor has the SEC 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............................................................40

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

Other Information...........................................................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

IRAs and Retirement Plans...................................................47

Private Management Accounts.................................................47

DISTRIBUTIONS AND TAXES.......................................................48
ADDITIONAL INFORMATION........................................................51
<PAGE>
COLUMBIA FUNDS PROSPECTUS
-----------------------------------------------------------------

T HE DIFFERENT INVESTMENT OBJECTIVES OF THE 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 that
are considered more volatile 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 policies 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.
YOU MAY ALSO VISIT THE FUNDS' WEB SITE
AT WWW.COLUMBIAFUNDS.COM.

<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 1997. 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 0.60% 0.58% 1.00% 0.84% 1.00% 0.75% 0.50% 0.48%
12b-1 fees None None None None None None None None
Other expenses* 0.17% 0.13% 0.62% 0.14% 0.46% 0.27% 0.18% 0.15%
TOTAL OPERATING EXPENSES 0.77% 0.71% 1.62% 0.98% 1.46% 1.02% 0.68% 0.63%

<CAPTION>
GOVERNMENT HIGH
BOND MUNICIPAL YIELD
FUND BOND FUND BOND FUND FUND
----------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Management fees 0.50% 0.50% 0.50% 0.60%
12b-1 fees None None None None
Other expenses* 0.37% 0.16% 0.07% 0.40%
TOTAL OPERATING EXPENSES 0.87% 0.66% 0.57% 1.00%
</TABLE>

*The Advisor has voluntarily agreed to assume ordinary recurring expenses of the
High Yield Fund to the extent these expenses, together with the Fund's
Management Fee, exceed 1% of the Fund's average net assets. Without the expense
reimbursement, the "Total operating expenses" for the Fund for 1997 would have
been 1.02%.

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

Based on the expense ratios above, you would pay the following expenses on a
$1,000 investment (assuming a 5% annual return and redemption at the end of each
time period).

<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 $15 $10 $7 $6
3 years $25 $23 $51 $31 $46 $32 $22 $20
5 years $43 $40 $88 $54 $80 $56 $38 $35
10 years $95 $88 $192 $120 $175 $125 $85 $79

<CAPTION>
GOVERNMENT HIGH
BOND MUNICIPAL YIELD
FUND BOND FUND BOND FUND FUND
----------- --------- ---------- ---------
<S> <C> <C> <C> <C>
1 year $9 $7 $6 $10
3 years $28 $21 $18 $32
5 years $48 $37 $32 $55
10 years $107 $82 $71 $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 1997 Annual Report to
Shareholders, which is incorporated by reference into the Statement of
Additional Information. Additional information about the performance of the
Funds for 1997, including a discussion by the investment advisor to the Funds,
is contained in the 1997 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>
1997 1996 1995 1994 1993 1992 1991(1)
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $19.26 $18.59 $15.16 $15.29 $14.04 $13.15 $12.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................... .29 .25 .26 .27 .22 .24 .09
Net realized and unrealized gains on
investments.................................... 4.58 3.61 4.38 .04 2.08 1.06 1.17
- ----------------------------------------------------------------------------------------------------------------------------
Total from investment operations.............. 4.87 3.86 4.64 .31 2.30 1.30 1.26
- ----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends (from net investment income).......... (.27) (.23) (.26) (.25) (.21) (.24) (.10)
Distributions (from capital gains).............. (1.84) (2.96) (.95) (.19) (.84) (.17) (.01)
- ----------------------------------------------------------------------------------------------------------------------------
Total distributions........................... (2.11) (3.19) (1.21) (.44) (1.05) (.41) (.11)
NET ASSET VALUE, END OF PERIOD $22.02 $19.26 $18.59 $15.16 $15.29 $14.04 $13.15
TOTAL RETURN...................................... 25.37% 20.71% 30.84% 2.06% 16.44% 9.99% 10.25%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands).......... $783,906 $536,760 $358,523 $124,263 $100,715 $51,049 $20,457
Ratio of expenses to average net assets........... 0.77% 0.76% 0.80% 0.84% 0.84% 0.86% 0.86%
Ratio of net investment income to average net
assets........................................... 1.37% 1.32% 1.68% 1.82% 1.48% 1.97% 2.48%
Portfolio turnover rate........................... 90.23% 111.39% 75.36% 64.21% 90.90% 67.83% 12.08%
Average commission rate paid on portfolio
transactions (3)................................. $0.0601 $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>
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $30.74 $29.84 $24.84 $26.38 $26.18
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............ .19 .19 .31 .29 .16
Net realized and unrealized gains
(losses) on investments......... 7.90 6.04 7.86 (.46) 3.24
- ---------------------------------------------------------------------------------------------
Total from investment
operations.................... 8.09 6.23 8.17 (.17) 3.40
- ---------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends (from net investment
income)......................... (.17) (.17) (.29) (.26) (.18)
Distributions (from capital
gains).......................... (4.32) (5.14) (2.87) (1.11) (2.98)
Distributions (in excess of
capital gains).................. (.02) (.01) (.04)
- ---------------------------------------------------------------------------------------------
Total distributions............ (4.49) (5.33) (3.17) (1.37) (3.20)
NET ASSET VALUE, END OF PERIOD $34.34 $30.74 $29.84 $24.84 $26.38
TOTAL RETURN....................... 26.32% 20.80% 32.98% -0.63% 13.01%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)........................ $1,324,918 $1,064,100 $848,731 $591,694 $605,401
Ratio of expenses to average net
assets............................ 0.71% 0.71% 0.75% 0.81% 0.82%
Ratio of net investment income to
average net assets................ 0.55% 0.63% 1.14% 1.12% 0.66%
Portfolio turnover rate............ 95.67% 75.49% 94.73% 79.28% 105.64%
Average commission rate paid on
portfolio transactions (1)........ $0.0594 $0.0590

<CAPTION>
1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $26.26 $21.68 $23.40 $21.21 $20.19
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............ .17 .32 .45 .48 .52
Net realized and unrealized gains
(losses) on investments......... 2.93 7.09 (1.23) 5.65 1.66
- ----------------------------------- -----------------------------------------------------
Total from investment
operations.................... 3.10 7.41 (.78) 6.13 2.18
- ----------------------------------- -----------------------------------------------------
LESS DISTRIBUTIONS:
Dividends (from net investment
income)......................... (.20) (.39) (.48) (.54) (.52)
Distributions (from capital
gains).......................... (2.98) (2.44) (.46) (3.40) (.64)
Distributions (in excess of
capital gains)..................
- ----------------------------------- -----------------------------------------------------
Total distributions............ (3.18) (2.83) (.94) (3.94) (1.16)
NET ASSET VALUE, END OF PERIOD $26.18 $26.26 $21.68 $23.40 $21.21
TOTAL RETURN....................... 11.82% 34.26% -3.31% 29.09% 10.81%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)........................ $518,366 $431,460 $270,667 $266,925 $204,353
Ratio of expenses to average net
assets............................ 0.86% 0.90% 0.96% 0.96% 1.04%
Ratio of net investment income to
average net assets................ 0.77% 1.50% 2.08% 2.14% 2.33%
Portfolio turnover rate............ 116.38% 163.91% 171.80% 166.06% 179.08%
Average commission rate paid on
portfolio transactions (1)........
</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>
1997 1996 1995 1994 1993 1992(1)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $13.86 $13.07 $12.43 $12.96 $9.95 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)......................... .03 .03 .02 (.02) (.02) (.03)
Net realized and unrealized gains (losses) on
investments and foreign currency transactions....... 1.56 2.13 .62 (.30) 3.34 .11
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations................... 1.59 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)................... (1.75) (1.14) (.21) (.31) (.13)(2)
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions................................ (1.75) (1.37) -- (.21) (.31) (.13)
NET ASSET VALUE, END OF PERIOD $13.70 $13.86 $13.07 $12.43 $12.96 $9.95
TOTAL RETURN........................................... 11.47% 16.59% 5.15% -2.47% 33.37% 0.60%(3)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands)............... $146,281 $125,510 $100,873 $118,484 $73,047 $9,745
Ratio of expenses to average net assets................ 1.62% 1.54% 1.54% 1.52% 1.71% 2.22%
Ratio of net investment income (loss) to average net
assets................................................ 0.19% 0.22% 0.15% (0.21)% (0.62)% (1.28)%
Portfolio turnover rate................................ 121.53% 129.40% 156.09% 138.79% 144.78% 25.75%
Average commission rate paid on portfolio transactions
(4)................................................... $0.0039 $0.0011
</TABLE>

(1) From inception of operations on September 10, 1992. Ratios and portfolio
turnover rate 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>
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $19.85 $21.44 $18.69 $19.51 $18.79 $17.45 $12.12 $13.85 $11.32 $9.26
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income
(loss)................ .01 (.06) .03 .08 .01 (.03) (.01) .01 .07 .03
Net realized and
unrealized gains on
investments........... 2.50 2.85 5.45 .36 4.04 2.41 6.11 (1.72) 3.52 3.90
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment
operations.......... 2.51 2.79 5.48 .44 4.05 2.38 6.10 (1.71) 3.59 3.93
- ---------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends (from net
investment income).... (.02) (.07) (.02) (.01)
Dividends (in excess of
net investment
income)............... (.01)
Distributions (from
capital gains)........ (2.10) (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....... (2.10) (4.38) (2.73) (1.26) (3.33) (1.04) (.77) (.02) (1.06) (1.87)
NET ASSET VALUE, END OF
PERIOD $20.26 $19.85 $21.44 $18.69 $19.51 $18.79 $17.45 $12.12 $13.85 $11.32
TOTAL RETURN............. 12.64% 13.07% 29.53% 2.29% 21.68% 13.70% 50.46% -12.39% 31.92% 42.55%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in thousands).......... $1,249,718 $1,585,284 $1,384,415 $889,526 $772,741 $470,663 $264,358 $121,592 $95,939 $30,471
Ratio of expenses to
average net assets...... 0.98% 0.94% 0.98% 1.05% 1.12% 1.19% 1.22% 1.32% 1.35% 1.38%
Ratio of net investment
income (loss) to average
net assets.............. 0.04% (0.29)% 0.16% 0.40% 0.01% (0.25)% (0.16)% 0.05% 0.18% 0.06%
Portfolio turnover
rate.................... 166.46% 150.07% 182.99% 178.91% 154.68% 116.75% 114.53% 147.04% 124.29% 244.36%
Average commission rate
paid on portfolio
transactions (2)........ $0.0585 $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>
1997 1996(1)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.99 $12.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss................................................. (.08)
Net realized and unrealized gains on investments.................... 4.51 .99
- ------------------------------------------------------------------------------------------
Total from investment operations.................................. 4.43 .99
- ------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Distributions (from capital gains).................................. (.77)
- ------------------------------------------------------------------------------------------
Total distributions............................................... (.77) --
NET ASSET VALUE, END OF PERIOD $16.65 $12.99
TOTAL RETURN.......................................................... 34.10% 7.62% (2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands).............................. $96,431 $21,061
Ratio of expenses to average net assets............................... 1.46% 1.61%
Ratio of net investment income (loss) to average net assets........... (0.81)% 0.00%
Portfolio turnover rate............................................... 171.75% 32.57%
Average commission rate paid on portfolio transactions (3)............ $0.0564 $0.0546
</TABLE>

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

(2) Not annualized.

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

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

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

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

<TABLE>
<CAPTION>
1997 1996 1995 1994(1)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $16.16 $12.71 $11.72 $12.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............................................... .79 .77 .78 .49
Net realized and unrealized gains (losses) on investments........... 3.15 3.94 1.12 (.27)
- ---------------------------------------------------------------------------------------------------------------
Total from investment operations.................................. 3.94 4.71 1.90 .22
- ---------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends (from net investment income).............................. (.62) (.52) (.49) (.31)
Dividends (in excess of net investment income)...................... (.01)
Distributions (from capital gains).................................. (.48) (.41)
Distributions (in excess of capital gains).......................... (.03) (.12) (.14)
Tax return of capital............................................... (.17) (.21) (.28) (.18)
- ---------------------------------------------------------------------------------------------------------------
Total distributions............................................... (1.30) (1.26) (.91) (.50)
NET ASSET VALUE, END OF PERIOD $18.80 $16.16 $12.71 $11.72
TOTAL RETURN.......................................................... 24.74% 38.30% 16.86% 1.76%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands).............................. $151,554 $68,073 $21,587 $17,402
Ratio of expenses to average net assets............................... 1.02% 1.06% 1.18% 1.14%
Ratio of net investment income to average net assets.................. 4.87% 6.23% 6.71% 6.28%
Portfolio turnover rate............................................... 33.55% 45.82% 53.91% 7.61%
Average commission rate paid on portfolio transactions (3)............ $0.0588 $0.0594
</TABLE>

(1) From inception of operations on March 16, 1994. Ratios and portfolio
turnover rate are annualized.

(2) Not annualized.

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

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

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

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

<TABLE>
<CAPTION>
1997 1996 1995 1994 1993 1992 1991(1)
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $20.32 $20.08 $17.28 $17.91 $16.80 $16.05 $15.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................... .84 .76 .73 .65 .56 .58 .11
Net realized and unrealized gains (losses) on
investments.................................... 2.92 1.58 3.54 (.64) 1.71 .82 1.10
- ----------------------------------------------------------------------------------------------------------------------------
Total from investment operations.............. 3.76 2.34 4.27 .01 2.27 1.40 1.21
- ----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends (from net investment income).......... (.83) (.76) (.73) (.64) (.56) (.57) (.12)
Dividends (in excess of net investment
income)........................................ (.01)
Distributions (from capital gains).............. (1.83) (1.34) (.74) (.59) (.08) (.04)
- ----------------------------------------------------------------------------------------------------------------------------
Total distributions........................... (2.66) (2.10) (1.47) (.64) (1.16) (.65) (.16)
NET ASSET VALUE, END OF PERIOD $21.42 $20.32 $20.08 $17.28 $17.91 $16.80 $16.05
TOTAL RETURN...................................... 18.74% 11.78% 25.08% 0.10% 13.62% 8.89% 7.80%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands).......... $792,378 $672,593 $486,767 $249,670 $186,589 $90,230 $12,986
Ratio of expenses to average net assets........... 0.68% 0.66% 0.69% 0.72% 0.73% 0.81% 0.62%
Ratio of net investment income to average net
assets........................................... 3.83% 3.82% 4.05% 3.82% 3.32% 4.08% 3.41%
Portfolio turnover rate........................... 148.91% 133.21% 108.04% 98.48% 107.60% 138.08% 179.80%
Average commission rate paid on portfolio
transactions (3)................................. $0.0610 $0.0596
</TABLE>

(1) From inception of operations on September 12, 1991. Ratios and portfolio
turnover rate are annualized.

(2) Not annualized.

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

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

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

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

<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
<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.............. .050 .048 .053 .036 .025
- -----------------------------------------------------------------------------------------
Total from investment
operations...................... .050 .048 .053 .036 .025
- -----------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends (from net investment
income)........................... (.050) (.048) (.053) (.036) (.025)
- -----------------------------------------------------------------------------------------
Total distributions.............. (.050) (.048) (.053) (.036) (.025)
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURN......................... 5.11% 4.96% 5.49% 3.68% 2.51%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands).......................... $1,169,096 $889,800 $800,656 $730,067 $544,500
Ratio of expenses to average net
assets.............................. 0.63% 0.62% 0.64% 0.70% 0.75%
Ratio of net investment income to
average net assets.................. 4.99% 4.84% 5.34% 3.68% 2.49%

1992 1991 1990 1989 1988
<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.............. .032 .055 .075 .085 .068
- ------------------------------------- ------------------------------------------------
Total from investment
operations...................... .032 .055 .075 .085 .068
- ------------------------------------- ------------------------------------------------
LESS DISTRIBUTIONS:
Dividends (from net investment
income)........................... (.032) (.055) (.075) (.085) (.068)
- ------------------------------------- ------------------------------------------------
Total distributions.............. (.032) (.055) (.075) (.085) (.068)
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURN......................... 3.25% 5.66% 7.84% 8.89% 7.07%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands).......................... $591,186 $737,584 $819,926 $703,704 $546,634
Ratio of expenses to average net
assets.............................. 0.71% 0.69% 0.69% 0.73% 0.76%
Ratio of net investment income to
average net assets.................. 3.22% 5.53% 7.51% 8.49% 6.87%
</TABLE>

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

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

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

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

<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $8.24 $8.34 $7.99 $8.36 $8.35
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................ .41 .41 .45 .37 .32
Net realized and unrealized gains
(losses) on investments............. .05 (.10) .35 (.37) .17
- -------------------------------------------------------------------------------------------
Total from investment operations... .46 .31 .80 -- .49
- -------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends (from net investment
income)............................. (.41) (.41) (.45) (.37) (.32)
Distributions (from capital gains)... (.16)
- -------------------------------------------------------------------------------------------
Total distributions................ (.41) (.41) (.45) (.37) (.48)
NET ASSET VALUE, END OF PERIOD $8.29 $8.24 $8.34 $7.99 $8.36
TOTAL RETURN........................... 5.76% 3.85% 10.21% -0.03% 5.91%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in thousands)........................ $37,837 $40,776 $41,842 $33,512 $35,877
Ratio of expenses to average net
assets................................ 0.87% 0.80% 0.79% 0.81% 0.75%
Ratio of net investment income to
average net assets.................... 4.99% 4.99% 5.45% 4.51% 3.74%
Portfolio turnover rate................ 184.43% 179.38% 253.17% 253.80% 254.59%

1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $8.47 $8.43 $8.30 $8.17 $8.30
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................ .39 .53 .61 .63 .56
Net realized and unrealized gains
(losses) on investments............. .09 .50 .13 .13 (.13)
- --------------------------------------- ------------------------------------------------
Total from investment operations... .48 1.03 .74 .76 .43
- --------------------------------------- ------------------------------------------------
LESS DISTRIBUTIONS:
Dividends (from net investment
income)............................. (.39) (.53) (.61) (.63) (.56)
Distributions (from capital gains)... (.21) (.46)
- --------------------------------------- ------------------------------------------------
Total distributions................ (.60) (.99) (.61) (.63) (.56)
NET ASSET VALUE, END OF PERIOD $8.35 $8.47 $8.43 $8.30 $8.17
TOTAL RETURN........................... 5.81% 12.72% 9.29% 9.63% 5.34%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in thousands)........................ $35,479 $34,867 $22,628 $13,349 $9,112
Ratio of expenses to average net
assets................................ 0.76% 0.76% 0.85% 0.85% 0.85%
Ratio of net investment income to
average net assets.................... 4.60% 6.18% 7.33% 7.66% 6.88%
Portfolio turnover rate................ 289.05% 309.13% 221.86% 158.96% 393.59%
</TABLE>

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

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

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

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

<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $13.08 $13.51 $12.16 $13.44 $13.28
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................ .85 .85 .88 .83 .85
Net realized and unrealized gains
(losses) on investments............. .36 (.43) 1.35 (1.28) .52
- -------------------------------------------------------------------------------------------
Total from investment operations... 1.21 0.42 2.23 (.45) 1.37
- -------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends (from net investment
income)............................. (.85) (.85) (.88) (.83) (.85)
Distributions (from capital gains)... (.03) (.36)
- -------------------------------------------------------------------------------------------
Total distributions................ (.88) (.85) (.88) (.83) (1.21)
NET ASSET VALUE, END OF PERIOD $13.41 $13.08 $13.51 $12.16 $13.44
TOTAL RETURN........................... 9.56% 3.37% 18.91% -3.36% 10.47%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in thousands)........................ $381,333 $356,421 $316,259 $252,090 $300,532
Ratio of expenses to average net
assets................................ 0.66% 0.64% 0.65% 0.66% 0.66%
Ratio of net investment income to
average net assets.................... 6.43% 6.53% 6.80% 6.53% 6.14%
Portfolio turnover rate................ 196.28% 178.25% 137.41% 139.81% 118.80%

1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $13.59 $12.72 $12.75 $12.11 $12.23
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................ .95 1.00 1.03 1.04 1.04
Net realized and unrealized gains
(losses) on investments............. .09 1.05 (.03) .64 (.12)
- --------------------------------------- ------------------------------------------------
Total from investment operations... 1.04 2.05 1.00 1.68 .92
- --------------------------------------- ------------------------------------------------
LESS DISTRIBUTIONS:
Dividends (from net investment
income)............................. (.95) (1.00) (1.03) (1.04) (1.04)
Distributions (from capital gains)... (.40) (.18)
- --------------------------------------- ------------------------------------------------
Total distributions................ (1.35) (1.18) (1.03) (1.04) (1.04)
NET ASSET VALUE, END OF PERIOD $13.28 $13.59 $12.72 $12.75 $12.11
TOTAL RETURN........................... 7.99% 16.84% 8.30% 14.35% 7.72%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in thousands)........................ $262,647 $207,271 $133,875 $110,525 $102,604
Ratio of expenses to average net
assets................................ 0.66% 0.69% 0.73% 0.74% 0.77%
Ratio of net investment income to
average net assets.................... 7.03% 7.63% 8.20% 8.27% 8.44%
Portfolio turnover rate................ 195.67% 158.95% 131.81% 114.00% 133.20%
</TABLE>

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

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

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

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

<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.15 $12.37 $11.48 $12.71 $12.17
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................ .60 .61 .63 .64 .66
Net realized and unrealized gains
(losses) on investments............. .39 (.16) .96 (1.23) .62
- -------------------------------------------------------------------------------------------
Total from investment operations... .99 .45 1.59 (.59) 1.28
- -------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends (from net investment
income) (1)......................... (.60) (.61) (.63) (.64) (.66)
Distributions (from capital gains)... (.07) (.06) (.07) (.08)
- -------------------------------------------------------------------------------------------
Total distributions................ (.67) (.67) (.70) (.64) (.74)
NET ASSET VALUE, END OF PERIOD $12.47 $12.15 $12.37 $11.48 $12.71
TOTAL RETURN........................... 8.36% 3.77% 14.15% -4.68% 10.73%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in thousands)........................ $409,148 $375,667 $383,796 $339,817 $430,367
Ratio of expenses to average net
assets................................ 0.57% 0.56% 0.57% 0.57% 0.58%
Ratio of net investment income to
average net assets.................... 4.87% 5.00% 5.22% 5.36% 5.25%
Portfolio turnover rate................ 16.88% 19.03% 21.45% 19.40% 9.92%

1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.22 $11.65 $11.64 $11.42 $11.11
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................ .69 .72 .75 .76 .77
Net realized and unrealized gains
(losses) on investments............. .07 .60 .02 .23 .34
- --------------------------------------- ------------------------------------------------
Total from investment operations... .76 1.32 .77 .99 1.11
- --------------------------------------- ------------------------------------------------
LESS DISTRIBUTIONS:
Dividends (from net investment
income) (1)......................... (.69) (.72) (.75) (.76) (.77)
Distributions (from capital gains)... (.12) (.03) (.01) (.01) (.03)
- --------------------------------------- ------------------------------------------------
Total distributions................ (.81) (.75) (.76) (.77) (.80)
NET ASSET VALUE, END OF PERIOD $12.17 $12.22 $11.65 $11.64 $11.42
TOTAL RETURN........................... 6.46% 11.73% 6.89% 8.95% 10.19%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in thousands)........................ $341,924 $285,099 $207,690 $166,590 $140,842
Ratio of expenses to average net
assets................................ 0.59% 0.59% 0.60% 0.61% 0.63%
Ratio of net investment income to
average net assets.................... 5.69% 6.07% 6.50% 6.59% 6.71%
Portfolio turnover rate................ 17.82% 15.28% 6.57% 10.61% 10.04%
</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>
1997 1996 1995 1994 1993(1)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $9.94 $9.88 $9.04 $9.94 $10.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income........................ .81 .81 .82 .80 .18
Net realized and unrealized gains (losses) on
investments................................. .40 .07 .84 (.90) (.06)
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations........... 1.21 .88 1.66 (.10) .12
- ------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends (from net investment income)....... (.81) (.81) (.82) (.80) (.18)
Distributions (from capital gains) (.30) (.01)
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions........................ (1.11) (.82) (.82) (.80) (.18)
NET ASSET VALUE, END OF PERIOD $10.04 $9.94 $9.88 $9.04 $9.94
TOTAL RETURN................................... 12.70% 9.43% 19.12% -0.92% 1.12%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands)....... $39,278 $28,818 $23,471 $12,834 $5,940
Ratio of expenses to average net assets (3).... 1.00% 0.93% 1.00% 1.00% 1.00%
Ratio of net investment income to average net
assets........................................ 8.05% 8.29% 8.62% 8.69% 7.30%
Portfolio turnover rate........................ 124.23% 62.27% 51.60% 36.67% 0.00%
</TABLE>

(1) From inception of operations on September 15, 1993. Ratios and portfolio
turnover rate are annualized.

(2) Not annualized.

(3) The ratio was 1.02% in 1997, 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" 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 bottoms 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

- - 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 is intended to give the investment team a
better understanding of the long-term prospects of a particular security, based
on the characteristics of the existing economy and investor temperament. In this
way, Columbia's investment team

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is better able 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 using
fundamental analysis is also important to the process, especially 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% 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
the Advisor expects 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 a security
is purchased or sold and the date on which payment is made or received.

Hedging against adverse changes in exchange rates will not eliminate fluctuation
in the prices of the 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 considered
more volatile than the market as a whole (as measured

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by the S&P 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. Additionally, the Fund may 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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The Small Cap Fund may also invest in debt securities or preferred stock that
are 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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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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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
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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-- 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

-
26
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FUND DESCRIPTIONS
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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 intent 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 May 1997 (Measure 50) "rolls
back" ad valorem property taxes and generally limits future property tax
increases. As a result, there is expected to 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 50. 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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<PAGE>
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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 1997. These figures, expressed as a percentage of
total net assets, are dollar-weighted averages of month-end holdings for 1997.
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 1997.

-- 1997 HIGH YIELD FUND BOND RATINGS --

<TABLE>
<CAPTION>
MOODY'S STANDARD & POOR'S
- ----------------------- -----------------------
RATING AVERAGE RATING AVERAGE
- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
BAA 0.4% BBB 7.7%
BA 41.6% BB 43.8%
B 50.6% B 41.0%
</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

- - 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.

-- 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.

-
30
<PAGE>
RISK FACTORS
-----------------------------------------------------------------

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 eighteen months or less,
shareholders will be subject to taxes at ordinary income rates or at the higher
of the two capital gains rates. See "Distributions and Taxes." Historical
portfolio turnover rates for all Funds are shown in the "Financial Highlights"
section.

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.

-
31
<PAGE>
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 INVESTS 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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33
<PAGE>
RISK FACTORS
-----------------------------------------------------------------

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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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, 1997.

<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
-----------------------------------
CURRENT SINCE
YIELD 1 YEAR 5 YEAR 10 YEAR INCEPTION*
<S> <C> <C> <C> <C> <C>
Stock Funds
Common Stock Fund............................... 1.48% 25.37% 18.66% N/A 18.11%
Growth Fund..................................... N/A 26.32% 17.91% 16.81% 13.75%
International Stock Fund........................ N/A 11.47% 12.19% N/A 11.59%
Special Fund.................................... N/A 12.64% 15.48% 19.19% 18.38%
Small Cap Fund.................................. N/A 34.10% N/A N/A 35.76%
Real Estate Fund................................ 3.82%+ 24.74% N/A N/A 20.82%
Balanced Fund
Balanced Fund................................... 3.85% 18.74% 13.55% N/A 13.46%
Bond Funds
Government Bond Fund............................ 4.92% 5.76% 5.09% 6.79% 6.49%
Bond Fund....................................... 6.35% 9.56% 7.53% 9.24% 9.66%
Municipal Bond Fund............................. 4.17% 8.36% 6.26% 7.54% 9.04%
High Yield Fund................................. 7.57%++ 12.70% N/A N/A 9.40%
Money Market Fund
Money Market Fund............................... 5.21%** 5.11% 4.35% 5.43% 7.29%
Market Comparisons
S&P 500 Stock Index............................. 33.36% 20.27% 18.04% N/A
Russell 2000 Stock Index........................ 22.36% 16.40% 15.77% N/A
Lehman Agg. Bond Index.......................... 9.65% 7.48% 9.18% N/A

TOTAL RETURN
---------------------------------------------
1 YEAR 5 YEAR 10 YEAR SINCE INCEPTION*
<S> <C> <C> <C> <C>
Stock Funds
Common Stock Fund............................... 25.37% 135.28% N/A 185.31%
Growth Fund..................................... 26.32% 127.87% 373.12% 5051.86%
International Stock Fund........................ 11.47% 77.75% N/A 78.81%
Special Fund.................................... 12.64% 105.35% 478.79% 670.54%
Small Cap Fund.................................. 34.10% N/A N/A 44.32%
Real Estate Fund................................ 24.74% N/A N/A 105.15%
Balanced Fund
Balanced Fund................................... 18.74% 88.80% N/A 121.60%
Bond Funds
Government Bond Fund............................ 5.76% 28.17% 92.95% 102.32%
Bond Fund....................................... 9.56% 43.76% 141.96% 295.12%
Municipal Bond Fund............................. 8.36% 35.48% 106.80% 221.62%
High Yield Fund................................. 12.70% N/A N/A 47.17%
Money Market Fund
Money Market Fund............................... 5.11% 23.70% 69.67% 411.81%
Market Comparisons
S&P 500 Stock Index............................. 33.36% 151.67% 425.33% N/A
Russell 2000 Stock Index........................ 22.36% 113.71% 332.54% N/A
Lehman Agg. Bond Index.......................... 9.65% 43.42% 140.59% N/A
</TABLE>

* INCEPTION DATES: COMMON STOCK FUND 10/1/91; GROWTH FUND 6/16/67;
INTERNATIONAL STOCK FUND 10/1/92; SPECIAL FUND 11/20/85; SMALL CAP FUND
10/1/96; REAL ESTATE FUND 4/1/94; BALANCED FUND 10/1/91; GOVERNMENT BOND
FUND 11/6/86; BOND FUND 2/25/83; MUNICIPAL BOND FUND 7/2/84; HIGH YIELD
FUND 10/1/93; MONEY MARKET FUND 10/1/74.

** COMPOUND YIELD 5.35%.

+ 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 7.55%.

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<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 up to
$100,000. 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.

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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, subject to general
oversight responsibility of each Fund's Board of Directors, is responsible for
the overall management of the Fund's business affairs. The Advisor or its
predecessor has acted in this capacity since 1967. The Advisor is an indirect
wholly owned subsidiary of Fleet Financial Group, Inc. ("Fleet"), a publicly
owned multibank holding company registered under the Bank Holding Company Act of
1956 with total assets of approximately $85 billion at December 31, 1997. The
address of the Advisor is 1300 S.W. Sixth Avenue, P.O. Box 1350, Portland,
Oregon 97207-1350.

Under each investment advisory contract, 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
of each Fund (other than the expense of clerical services relating to the
administration of the Fund).

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)
- --------------------- -----------------------------
<S> <C>
BALANCED FUND 0.50% ON ALL ASSETS
GOVERNMENT BOND FUND
BOND FUND
MUNICIPAL BOND FUND
- ----------------------------------------------------
MONEY MARKET FUND 0.50% ON FIRST $500 MILLION
0.45% ON NEXT $500 MILLION
0.40% ON ASSETS OVER $1
BILLION
- ----------------------------------------------------
COMMON STOCK FUND 0.60% ON ALL ASSETS
HIGH YIELD FUND
- ----------------------------------------------------
GROWTH FUND 0.75% ON FIRST $200 MILLION
0.625% ON NEXT $300 MILLION
0.50% ON ASSETS OVER $500
MILLION
- ----------------------------------------------------
REAL ESTATE FUND 0.75% ON ALL ASSETS
- ----------------------------------------------------
SPECIAL FUND 1.00% ON FIRST $500 MILLION
0.75% 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, 1997, 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 0.58%
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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<PAGE>
FUND MANAGEMENT
-----------------------------------------------------------------

The Advisor has entered into an agreement with Columbia Management Co. ("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. CMC is an indirect
wholly owned subsidiary of Fleet.

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. Information on each Fund's expenses as a percentage of
its average net assets is located under "Fund Expenses" and "Financial
Highlights."

The Advisor may use its broker-dealer affiliates and other firms that sell Fund
shares to carry out a Fund's transactions, provided that the Fund receives
brokerage services and commission rates comparable to those of other
broker-dealers.

Third-party administrators of tax-qualified retirement plans and other financial
institutions ("Financial Intermediaries") 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 and the Advisor may pay the Financial
Intermediary a sub-transfer agent or recordkeeping fee. All Financial
Intermediaries enter into an agreement with the Funds that authorizes them to
accept purchase and redemption orders on behalf of the Funds. The Fund will be
deemed to have received a purchase or redemption order when an authorized
Financial Intermediary or its delegate accepts the order. The order will be
priced at the Fund's net asset value next computed after it is accepted by the
Financial Intermediary or its delegate.

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. Thomas L. Thomsen, President, Chief Investment Officer
and Director of the Advisor, supervises the Investment Team in establishing
these broad investment themes and strategies and determining portfolio
guidelines for each of the Funds. 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).

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. See "Fund
Descriptions -- A Team Approach to Investing." Investment decisions for a Fund
are then made by the Investment Team and, for most Funds, a portfolio manager
who is principally responsible for investment decisions on behalf of the Fund.

COMMON STOCK FUND. The Common Stock Fund is managed by the Columbia Investment
Team. Based

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

on an analysis of macro-economic factors and the investment environment, the
Asset Allocation Committee is responsible for determining the sector or industry
weightings within the Fund. Individual members of the Investment Team then
select securities within the sectors or asset classes over which they have
research and analytic responsibility. See "Fund Descriptions -- A Team Approach
to Investing."

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.

SMALL CAP FUND. Richard J. Johnson (since inception of the Fund in 1996), a
Vice President of the Advisor and a Chartered Financial Analyst. 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. The Balanced Fund is managed by the Columbia Investment Team.
The Asset Allocation Committee is responsible for determining the Fund's
portfolio weightings in stocks, bonds and cash investments based on an analysis
of macro-economic factors and the investment environment. That committee is also
responsible for deciding the sector or industry weightings of the equity portion
of the Fund. The Investment Team members responsible for the Columbia Bond Funds
determine the sector emphasis between different types of fixed income
securities. Individual members of the Investment Team select the securities
within the sector or asset classes over which they have research and analytic
responsibility. See "Fund Descriptions -- A Team Approach to Investing."

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. 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).

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

-- 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 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 transfer agent is an indirect wholly
owned subsidiary of Fleet.

DISTRIBUTOR. Provident Distributors, Inc. ("PDI") is the principal underwriter
of the Funds' shares. PDI's address is Four Falls Corporate Center, 6th Floor,
West Conshohocken, PA 19428-2961. Columbia Financial Center Incorporated
("Columbia Financial"), an indirect wholly owned subsidiary of Fleet, has
entered into a Broker-Dealer Agreement to sell shares of the Funds. You may
invest or redeem in a Fund through Columbia Financial. Its address is 1301 S.W.
Fifth Avenue, P.O. Box 1350, Portland, Oregon 97207-1350. PDI and Columbia
Financial do not charge any fees or commissions to investors of the Funds for
the sale of shares of a Fund.

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.

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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 (normally 4 p.m., New York time) 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 form. 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), FOR INDIVIDUAL
RETIREMENT PLANS 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

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41
<PAGE>
INVESTOR SERVICES
-----------------------------------------------------------------
Automated Clearing House Association may choose to have amounts of $50 or more
automatically transferred 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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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 the 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 Columbia Fund with an identical account number. 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 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 or the Advisor if so delegated, 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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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 visit or write the Funds at:

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

-- 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.

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."

The Funds also reserve the right to close a shareholder account if the
shareholder's actions are deemed to be detrimental to the Fund or its
shareholders. 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

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INVESTOR SERVICES
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application that the social security number or tax identification number
provided is correct and that you are not subject to 31% backup withholding for
previous underreporting of income to the Internal Revenue Service.

SHAREHOLDER STATEMENTS AND REPORTS. The 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 eliminate duplicate enclosures
for statements mailed to that address by filing a SAVMAIL form with the Funds.
For a SAVMAIL form or to receive additional copies of any 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 Traditional, Roth, Education, 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 Declared and
Real Estate Fund paid each paid in December
Balanced Fund calendar quarter
- --------------------------------------------------------------------
Money Market Fund Declared and Declared and
paid daily paid daily (if
any)
- --------------------------------------------------------------------
Bond Funds Declared daily Declared and
and paid monthly paid 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. If you elect to receive dividends and/or capital gains
distributions in cash and such dividend or capital gains distribution is
returned to the Fund as undeliverable to your address of record, your
distribution option shall be converted to having all dividends and capital gains
distributions reinvested in additional shares. No interest will accrue on any
dividend or capital gains distribution returned to the Fund as undeliverable.

-- 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 at the
applicable long-term capital gains rate, 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

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DISTRIBUTIONS AND TAXES
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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 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 at the applicable long-term capital gains rate,
regardless of the length of time the shareholder held the Fund's shares. 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

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DISTRIBUTIONS AND TAXES
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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.

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 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.

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-- REPURCHASE AGREEMENTS --

The Funds may use repurchase agreements to invest cash, generally on a
short-term basis. Repurchase agreements involve the purchase of a security by
the Fund and a simultaneous agreement by the seller (generally a bank or dealer)
to repurchase the security from the Fund at a specified date or upon demand.
These securities involve the risk that the seller will fail to repurchase the
security, as agreed. In that case, the Fund will bear the risk of market value
fluctuations until the security can be sold and may encounter delays and incur
costs in liquidating the security. 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

- - 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

- - 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.

-
51
<PAGE>
ADDITIONAL INFORMATION
-----------------------------------------------------------------

-- 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
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

-
52
<PAGE>
ADDITIONAL INFORMATION
-----------------------------------------------------------------
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

- - 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 --

When-issued, delayed delivery and forward transactions generally involve the
purchase of a security with payment and delivery at some time in the future
(i.e., beyond normal settlement). The Funds do not earn interest on such
securities until settlement and bear the risk of market value fluctuations in
between the purchase and settlement dates. New issues of stocks and bonds,
private placements and U.S. Government securities may be sold in this manner. To
the extent a Fund engages in when-issued and delayed-delivery transactions, it
will do so to acquire portfolio securities consistent with its investment
objectives and policies and not for investment leverage. 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.

-
53
<PAGE>
ADDITIONAL INFORMATION
-----------------------------------------------------------------

-- 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>
COLUMBIA FUNDS

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

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

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

-- LEGAL COUNSEL --
-------------------------------------------
STOEL RIVES L.L.P.
900 S.W. FIFTH AVENUE, SUITE 2300
PORTLAND, OREGON 97201

-- 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

THIS INFORMATION MUST BE PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS.
THE MANAGERS' VIEWS CONTAINED IN THIS REPORT ARE SUBJECT TO CHANGE AT ANY TIME,
BASED ON MARKET AND OTHER CONSIDERATIONS.
PORTFOLIO CHANGES SHOULD NOT BE CONSIDERED RECOMMENDATIONS FOR ACTION BY
INDIVIDUAL INVESTORS.
FUNDS DISTRIBUTED BY PROVIDENT DISTRIBUTORS, INC.

<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 23, 1998 (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 23, 1998

1
<PAGE>

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

TABLE OF CONTENTS

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

Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Investment Advisory and Other Fees Paid to Affiliates . . . . . . . . . . . . 4
Portfolio Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Redemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Custodians. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Accounting Services and Financial Statements. . . . . . . . . . . . . . . . . 9
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Yield and Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . .22
Additional Information Regarding Certain Investments by the Funds . . . . . .41

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

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

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

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

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

ROBERT J. MOORMAN*, Secretary of each Fund and CMC Trust (since January 1998);
Attorney with Stoel Rives LLP. Mr. Moorman's business address is
900 S.W. Fifth Avenue, Suite 2300, Portland, Oregon 97204-1268.

2
<PAGE>

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

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

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

The following table sets forth compensation received by the
disinterested directors for 1997. No officer of the Funds received any
compensation from the Funds in 1997.

COMPENSATION TABLE

Compensation
Aggregate Compensation From from Fund
Director Fund, per Director Complex
-------- --------------------------- -------------
Thomas R. James C. Common Stock Fund - $2,198 $ 20,000
Mackenzie, George Growth Fund - $3,928
International Stock Fund - $484
Special Fund - $4,844
Small Cap Fund- $166
Real Estate Fund - $364
Balanced Fund - $2,460
Money Market Fund - $2,862
Government Bond Fund - $128
Bond Fund - $1,184
Municipal Bond Fund - $1,268
High Yield Fund - $114

Richard L.
Woolworth* Common Stock Fund - $2,308 $ 29,000**
Growth Fund - $4,124
International Stock Fund - $508
Special Fund - $5,086
Small Cap Fund- $174
Real Estate Fund - $382
Balanced Fund - $2,583
Money Market Fund - $3,007
Government Bond Fund - $134
Bond Fund - $1,243
Municipal Bond Fund - $1,331
High Yield Fund - $120

* Includes compensation received by Mr. Woolworth for serving on each Fund's
Executive Committee.
** Includes compensation Mr. Woolworth received as a Trustee of CMC Trust.
The investment advisor for CMC Trust is Columbia Management Co., an
affiliate of the Advisor.

Provident Distributors, Inc. ("PDI"), 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 the Fund.
Columbia Financial has entered into a Broker-Dealer agreement with PDI to
distribute the Funds' shares. PDI and Columbia Financial do not charge any fees
or commissions to investors or the Funds for the sale of shares of a Fund.

At January 31, 1998, officers and directors of each of the respective Funds
owned of record or beneficially the aggregate number of shares of each of the
respective Funds as set forth below.

<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL SHARES
FUND SHARES* OUTSTANDING
---- ---------- -------------
<S> <C> <C>
Common Stock Fund 254,871 0.7%
Growth Fund 134,724 0.3%
International Stock Fund 81,993 0.8%
Special Fund 253,504 0.4%
Small Cap Fund 65,737 1.0%
Real Estate Fund 101,832 1.2%
Balanced Fund 267,948 0.7%
Money Market Fund 16,822,235 1.6%
Government Bond Fund 65,804 1.4%
Bond Fund 106,670 0.4%
Municipal Bond Fund 945,833 2.8%
High Yield Fund 102,931 2.3%
</TABLE>

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

At January 31, 1998, to the knowledge of the Funds, no person owned of
record or beneficially more than 5 percent of the outstanding shares of any
Fund except the following record owners: Charles Schwab & Co., Inc., 101
Montgomery Street, San Francisco, California 94104, which owned 2,309,990 shares
of the Bond Fund (7.97 percent of the total shares outstanding), 2,145,785
shares of the Growth Fund (5.49 percent of the total shares outstanding),
4,659,593 shares of the Special Fund (7.82 percent of the total shares
outstanding) and 2,380,179 shares of the Common Stock Fund (6.28 percent of
the total shares outstanding); Standard Insurance Co., P.O. Box 711, Portland,
Oregon 97207, which owned 519,198 shares of the Government Bond Fund (11.35
percent of the total shares outstanding) and 3,738,922 shares of the Special
Fund (6.27 percent of the total shares outstanding); Wells Fargo Bank, as
Trustee,

3
<PAGE>

P.O. Box 9800, Calabasas, CA 91302, which owned 2,484,158 shares of the Balanced
Fund (6.4 percent of the total shares outstanding); and Bankers Trust Co. of CA
as Trustee, 300 S. Grand Ave., Los Angeles, CA 90071, which owned 6,936,652
shares of the Common Stock Fund (18.29 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:

<TABLE>
<CAPTION>
FUND 1997 1996 1995
---- ---- ---- ----
<S> <C> <C> <C>
Common Stock Fund $4,158,273 $2,686,585 $1,453,843
Growth Fund $7,019,161 $5,711,080 $4,483,699
International Stock Fund $1,504,787 $1,157,227 $1,013,873
Special Fund $12,373,140 $12,880,541 $10,125,466
Small Cap Fund $547,892 $40,273* ---
Real Estate Fund $864,343 $232,413 $138,673
Balanced Fund $3,826,628 $2,935,512 $1,871,284
Money Market Fund $4,296,685 $4,009,904 $3,611,202
Government Bond Fund $194,230 $206,591 $187,343
Bond Fund $1,821,809 $1,668,004 $1,413,769
Municipal Bond Fund $1,952,213 $1,881,542 $1,840,676
High Yield Fund $211,632 $150,432 $109,022
</TABLE>

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

The Advisor is an indirect wholly owned subsidiary of Fleet Financial
Group, Inc., a publicly owned multibank holding company registered under the
Bank Holding Company Act of 1956 with assets of approximately $85 billion at
December 31, 1997. 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. Columbia Management Co. is an indirect wholly owned
subsidiary of Fleet Financial Group, Inc.

4
<PAGE>

The Trust Company, which is an indirect wholly owned subsidiary of Fleet,
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), a retirement plan setup fee
of $100 and an annual retirement plan fee of $50.

The Trust Company also acts as transfer agent and dividend crediting
agent for each of the Funds pursuant to a transfer agent agreement with each
Fund. 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. During 1997, each Fund paid the Trust
Company a per-account fee of $1.50 per month for each shareholder account
existing at any time during the month. In addition, each Fund pays the Trust
Company for extra administrative services performed at cost in accordance
with a schedule set forth in the agreements and reimburses the Trust Company
for certain out-of-pocket expenses incurred in carrying out its duties under
the agreements. Fees paid to the Trust Company for services performed in
1997 under the transfer agent agreements were $424,958 for the Common Stock
Fund, $857,591 for the Growth Fund, $313,943 for the International Stock
Fund, $979,562 for the Special Fund, $73,575 for the Small Cap Fund, $131,357
for the Real Estate Fund, $511,482 for the Balanced Fund, $648,992 for the
Money Market Fund, $45,009 for the Government Bond Fund, $249,777 for the
Bond Fund, $112,418 for the Municipal Bond Fund, and $38,316 for the High
Yield Fund. Effective January 1, 1998, each Fund pays the Trust Company a
per-account fee of $1.66 per month for each shareholder account existing at
any time during the month.

Many existing computer programs use only two digits to identify a year
in the date field. These programs do not take into effect the impact of the
upcoming change in the century. If not corrected, many computer applications
could fail or create erroneous results by or at the year 2000. This could
impact the ability of the Advisor and the service providers for the Funds to
provide services to the Funds. The Advisor has evaluated its systems and the
systems of service providers for the Funds to assess the effect of the year
2000 issue on the ability of the Advisor and these parties to provide
services to the Funds subsequent to year 2000. The Advisor has undertaken a
project to determine the corrective action necessary to ensure that the
technology systems will be ready for the year 2000 ("Year 2000 Ready
Project"). The Advisor has completed a substantial portion of its Year 2000
Ready Project and expects to complete the remainder by December 1998.
Testing of compliance with its Year 2000 Ready Project should be completed by
the end of the third quarter of 1999.

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

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 rate for each Fund is disclosed in the Prospectus under
"Financial Highlights."

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

5
<PAGE>

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:

<TABLE>
<CAPTION>
FUND 1997 1996 1995
---- ---- ---- ----
<S> <C> <C> <C>
Common Stock Fund $1,328,730 $1,266,686 $686,464
Growth Fund $2,168,003 $1,606,969 $1,718,227
International Stock Fund $864,293 $724,559 $925,886
Special Fund $6,140,893 $4,280,666 $5,161,705
Small Cap Fund $225,828 $19,164 * ---
Real Estate Fund $194,113 $114,020 $47,879
Balanced Fund $737,793 $572,539 $472,821
</TABLE>

--------
* 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. Of the commissions paid in the fiscal year ending in 1997,
the Common Stock Fund paid $18,636, the Growth Fund paid $35,592, the Special
Fund paid $114,259, the Small Cap Fund paid $21,457, the Real Estate
Fund paid $11,568 and the Balanced Fund paid $7,128 in commissions as a
result of research provided by brokerage firms.

Provided each Fund's Board of Directors is satisfied that the Fund is
receiving the most favorable price and execution available, the Advisor may
consider the sale of the Fund's shares as a factor in the selection of brokerage
firms to execute its portfolio transactions. The placement of portfolio
transactions with brokerage firms who sell shares of a Fund is subject to
rules adopted by the National Association of Securities Dealers. The Advisor
may use research services provided by and place agency transactions with
affiliated broker-dealers, if the commissions are fair and reasonable and
comparable to commissions charged by non-affiliated, qualified brokerage
firms.

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

6
<PAGE>

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 any affiliate of the Advisor. 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.

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

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

7
<PAGE>

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, Martin Luther
King, Jr.'s Birthday, 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.

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

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 or, in the case of foreign securities, by Morgan
Stanley, as a delegate of the Board of Directors, all in accordance with
regulations under the Investment Company Act of 1940.

The Advisor determines 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 ("Prevailing Market Risk"). The Board of Directors has
delegated to Morgan Stanley the responsibility to evaluate the foreign
sub-custodians

8
<PAGE>

in those countries. The review of Prevailing Market Risk includes an assessment
of the risk of holding a Fund's assets in a country, including risks of
expropriation or imposition of exchange controls. In evaluating the foreign
sub-custodians, Morgan Stanley will review the operational capability and
reliability of the foreign sub-custodian. With respect to foreign investments
and the selection of foreign sub-custodians, however, there 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 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, 1997,
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 1997 Annual Report to Shareholders of the Funds. A copy of the
1997 Annual Report to Shareholders accompanies this Statement of Additional
Information and is incorporated herein by reference. Coopers & Lybrand L.L.P.,
1300 S.W. 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"); and

9
<PAGE>

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

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

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

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

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

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

10
<PAGE>

Two possible exceptions to marking-to-market relate to hedging transactions
and mixed straddles. A hedging transaction is defined for purposes of Section
1256 as a transaction (1) that a Fund properly identifies as a hedging
transaction, (2) that is entered into in the normal course of business primarily
to reduce the risk of price changes or currency fluctuations with respect to the
Fund's investments, and (3) results in ordinary income or loss. A mixed
straddle is a straddle where (1) at least one (but not all) of the straddle
positions are Section 1256 contracts and (2) the Fund properly identifies each
position forming part of the straddle. A straddle for these purposes generally
is offsetting positions with respect to personal property. A Fund holds
offsetting positions generally if there is a substantial diminution of the
Fund's risk of loss from holding a position by reason of its holding one or more
other positions.

MUNICIPAL BOND FUND. 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 includable 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 includable by shareholders in gross income for
federal income tax purposes (except for shareholders who are, or are related to,
"substantial users," as discussed below). Distributions representing net
taxable interest received by the 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
six months or less from the date of purchase of the shares and following
receipt of an exempt-interest dividend will be disallowed to the extent of such
exempt-interest dividend. Section 852(b)(4) of the Code contains special rules
on the computation of a shareholder's holding period for this purpose.

Interest on indebtedness incurred or continued by shareholders to purchase
or carry shares of the Municipal Bond Fund 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.

11
<PAGE>

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.

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 includable 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

12
<PAGE>

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

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

Distributions of taxable net investment income and net realized capital
gains will be taxable as described above, whether paid in shares or in cash.
Each distribution is accompanied by a brief explanation of the form and
character of the distribution. Within 60 days after the close of each calendar
year, each Fund issues to each shareholder a statement of the federal income tax
status of all distributions, including a statement of the prior calendar year's
distributions which the Fund has designated to be

13
<PAGE>

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

14
<PAGE>

interest. Because a Fund must distribute 90 percent of its income to remain
qualified as a registered investment company, a Fund may be forced to liquidate
a portion of its portfolio to generate cash to distribute to its shareholders
with respect to original-issue-discount income from zero coupon bonds and
interest income from PIK bonds.

FOREIGN INCOME TAXES

The International Stock Fund invests in the securities of foreign
corporations and issuers. To a lesser extent, the Common Stock Fund, the Growth
Fund, the Special Fund, the 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.

15
<PAGE>

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 ("PFIC"),
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. Pursuant to the Taxpayer Relief Act of 1997, a Fund
could elect to "mark-to-market" stock in a PFIC. Pursuant to such an
election, the Fund would include in income each year an amount equal to the
excess, if any, of the fair market value of the PFIC stock as of the close of
the taxable year over the Fund's adjusted basis in the PFIC stock. The Fund
would be allowed a deduction for the excess, if any, of the adjusted basis of
the PFIC stock over the fair market value of the PFIC stock as of the close
of the taxable year, but only to the extent of any net mark-to-market gain
included by the Fund for prior taxable years. The Fund's adjusted basis in
the PFIC stock would be increased or decreased to reflect the amounts
included in, or deducted from, income pursuant to this election. Amounts
included in income pursuant to this election, as well as gain realized on the
sale or any other disposition of the PFIC stock, would be treated as ordinary
income. The deductible portion of any mark-to-market loss, as well as loss
realized on the sale or other disposition of PFIC stock to the extent that
such loss does not exceed the net mark-to-market gain previously included
by the Fund, would be treated as ordinary loss. A Fund generally would not
be subject to the deferred tax and interest charge provisions discussed above
with respect to PFIC stock for which a mark-to-market election has been
made.

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

16
<PAGE>

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 tax on dividends properly
designated by the Government Bond Fund as derived from interest on U.S.
government obligations. See ORS 316.683. If a shareholder pays deductible
interest on debt incurred to carry shares of the Government Bond Fund, the
amount of the tax-exempt dividends for state tax purposes will be reduced. If a
shareholder sells shares of the Government Bond Fund at a loss after holding
them for six months or less, the loss will be disallowed for state purposes to
the extent of any state tax-exempt dividend received by the shareholder. 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.

17
<PAGE>

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

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
- ------------------------------------------- ---
value of account at beginning of period 7 Yield

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

18
<PAGE>

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.

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.

19
<PAGE>

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.

The Government Bond Fund may publish a tax equivalent yield for Oregon
shareholders that represents the yield that an investor must receive on a fully
taxable investment to achieve the same after-tax results at the highest then
existing marginal Oregon income tax rate, calculated according to the following
formula:

Tax Equivalent Yield = a + c
---
1-b

Where: a = that portion of the current yield of the Fund that is exempt from
Oregon income tax.

b = highest then existing marginal Oregon income tax rate.

c = that portion of the current yield of the Fund that is not exempt
from Oregon income tax.

The Funds may also publish average annual total return quotations for
recent 1, 5, and 10-year periods (or a fractional portion thereof) computed by
finding the average annual compounded rates of return over the 1, 5, and 10-year
periods that would equate the initial amount invested to the ending redeemable
value, according to the following formula:

n
P(1+T) = ERV

20
<PAGE>

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.

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

21
<PAGE>

passbook savings accounts normally offer a fixed rate of interest, and their
principal and interest are also guaranteed and insured. Bank certificates of
deposit offer fixed or variable rates for a set term. Principal and fixed rates
are guaranteed and insured up to $100,000. There is no fluctuation in
principal value. Withdrawal of these deposits prior to maturity will normally
be subject to a penalty.

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

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).

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.

22
<PAGE>

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.

23
<PAGE>

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.)

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.

24
<PAGE>

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.

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-

25
<PAGE>

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.

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.

26
<PAGE>

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.

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.

27
<PAGE>

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).

28
<PAGE>

6. Purchase the securities of any issuer if the purchase, at the time
thereof, would cause more than 10 percent of the outstanding voting securities
of that issuer to be held in the 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 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. Other than
paragraph 14, the Fund did not engage in any of these permitted practices
during the last year. 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.

29
<PAGE>

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.

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.

30
<PAGE>

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.

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 paragraphs 11 and 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.

31
<PAGE>

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.

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 Balanced 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

<PAGE>

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 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.

<PAGE>

10. Write or purchase put or call options.

11. Purchase a security which is subject to legal or contractual
restrictions on resale or for which there is no readily available market, except
that 10 percent of the 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. Other
than paragraph 1, 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.

<PAGE>

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
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 and Moody's for its other short-term debt obligations as described in
paragraph 2 above, where such corporate debt securities are comparable in
priority and security to the rated short-term debt obligations or, if no ratings
are available, where such corporate debt securities are determined to be of
comparable quality under procedures approved by the Board of Directors of the
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.

<PAGE>

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 paragraphs 3 and 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.

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.

36
<PAGE>

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

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.

<PAGE>

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.

<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.

<PAGE>

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.

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.

<PAGE>

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 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 & 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

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<PAGE>

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 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

42
<PAGE>

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.

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.

43
<PAGE>

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.

44
<PAGE>

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 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 includable 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

45
<PAGE>

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
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

46
<PAGE>

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.

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.

47
<PAGE>

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.

48
<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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<PAGE>

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, 1997, the related Statement of Operations for the year
ended December 31, 1997, the Statements of Changes in Net Assets for
the years ended December 31, 1997 and 1996, 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,
1997, which is incorporated into the Statement of Additional
Information by reference.

(b) Exhibits:

(1) Registrant's Articles of Incorporation.

(2) Restated Bylaws.

(4A) Specimen Stock Certificate.

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

(5) Investment Advisory Contract.

(6) Distribution Agreement.

(8A) Custodian Contract with United States National Bank of
Oregon.

(8B) Custodian Agreement with Morgan Stanley Trust Company.

(9) 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

(27) Financial Data Schedule.

C-1
<PAGE>

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

The Registrant is controlled by its Board of Directors, whose members
also serve as members of the Boards of Directors or Trustees of the following
investment companies: Columbia Common Stock Fund, Inc., Columbia Balanced Fund
Inc., Columbia Special Fund, Inc., Columbia Growth Fund, Inc., Columbia Small
Cap Fund, Inc., Columbia Daily Income Company, Columbia Fixed Income Securities
Fund, Inc., Columbia Municipal Bond Fund, Inc., Columbia U.S. Government
Securities Fund, Inc., Columbia Real Estate Equity Fund, Inc., Columbia High
Yield Fund, Inc., and CMC Fund Trust, each of which, including the Registrant,
is organized under the laws of the State of Oregon.

Item 26. NUMBER OF HOLDERS OF SECURITIES

NUMBER OF RECORD HOLDERS
TITLE OF CLASS AT DECEMBER 31, 1997
--------------- --------------------------

Common Stock 17,453

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.

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, Provident Distributors, Inc. is authorized to sell
shares of each fund to the public. No commission or other compensation is
received by Provident Distributors, Inc. in connection with the sale of shares
of the

C-2
<PAGE>

Columbia Funds. Certain information on each director and officer of Provident
Distributors, Inc. is set forth below:

NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES
BUSINESS ADDRESS WITH PROVIDENT DISTRIBUTORS WITH REGISTRANT
- ------------------ --------------------------- ---------------------
<S> <C> <C>
Monroe J. Haegele CEO and Director None
Four Fails Corporate Center
6th Floor
West Conshohocken, PA 19428

Jane Haegele President None
Four Fails Corporate Center
6th Floor
West Conshohocken, PA 19428

Philip H. Rinnander Secretary None
Four Fails Corporate Center
6th Floor
West Conshohocken, PA 19428
</TABLE>

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.

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.

C-3
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment pursuant
to Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in this City of
Portland and State of Oregon on the 23rd day of February, 1998.

COLUMBIA INTERNATIONAL STOCK FUND, INC.

By J. JERRY INSKEEP, JR.
--------------------------------------
J. Jerry Inskeep, Jr.
President

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below
on the 23rd day of February, 1998 by the following persons in the capacities
indicated.

(i) Principal executive officer:

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

(ii) Principal accounting and
financial officer:

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

(iii) Directors:

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

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

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

* By J. JERRY INSKEEP, JR.
- --------------------------------------
J. Jerry Inskeep, Jr.
as Attorney-in-fact

C-4
<PAGE>
COLUMBIA INTERNATIONAL STOCK FUND, INC.

EXHIBIT INDEX

EXHIBIT NO. DESCRIPTION

(1) Registrant's Articles of Incorporation.

(2) Restated Bylaws.

(4A) Specimen Stock Certificate.

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

(5) Investment Advisory Contract.

(6) Distribution Agreement.

(8A) Custodian Contract with United States National
Bank of Oregon.

(8B) Custodian Agreement with Morgan Stanley Trust Company.

(9) 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

(27) Financial Data Schedule.

C-5

<PAGE>

EXHIBIT 1.
ARTICLES OF INCORPORATION

COLUMBIA INTERNATIONAL STOCK FUND, INC.

ARTICLE I

The name of the Corporation is Columbia International Stock Fund, Inc.

ARTICLE II

The purposes for which the Corporation is organized are:

A. To conduct and carry on the business of an open-end investment company
of the management type under the Investment Company Act of 1940;

B. To engage in any other lawful activity for which corporations may be
organized under the Oregon Business Corporation Act.

ARTICLE III
The Corporation is authorized to issue 100,000,000 shares.

ARTICLE IV

A. Except as otherwise provided in this Article, a shareholder may
require the Corporation to redeem all or any part of shares of the Corporation
upon deposit of the shares for redemption, in the manner and in accordance with
the conditions prescribed by the Board of Directors. Shares deposited for
redemption shall be redeemed by the Corporation at the redemption price for the
shares as determined in the manner set out in this Article.

1
<PAGE>

B. The redemption price per share shall be the net asset value per share
(the total value of the assets of the Corporation less, to the extent determined
pursuant to the direction of the Board of Directors, all debts, obligations, and
liabilities of the Corporation, divided by the number of shares outstanding), as
determined by the Board of Directors, less the redemption fee or other charge,
if any, fixed by the Board of Directors in accordance with the Investment
Company Act of 1940. The net asset value per share shall be determined on all
days on which the New York Stock Exchange is open for business and at such other
time or times as the Board of Directors designates, unless such determination is
suspended.

C. The Board of Directors shall, in its absolute discretion, establish
from time to time the method for determining the net asset value per share of
the Corporation's shares. The Board of Directors may suspend the determination
of net asset value for all or any part of any period (i) during which the New
York Stock Exchange is closed other than customary weekend and holiday closings,
(ii) during which trading on the New York Stock Exchange is restricted,
(iii) during which an emergency exists as a result of which (a) the disposal by
the Corporation of investments owned by it is not reasonably practicable or
(b) it is not reasonably practicable for the Corporation fairly to determine the
value of its assets, or (iv) as the federal Securities and Exchange Commission
or any successor governmental authority may by order permit for the protection
of shareholders of the Corporation. Whenever the Board of Directors, by
declaration or resolution, has suspended the determination of net asset value
pursuant to this Article, the right of any shareholder to require the
Corporation to redeem shares shall be likewise suspended, despite deposit before
suspension. When a suspension is in effect, any shareholder may withdraw
certificates from deposit or may leave

2
<PAGE>

them on deposit, in which case the redemption price shall be the net asset value
next determined after the suspension is terminated.

D. In determining for the purposes of this Article the total value of the
assets of the Corporation, investments and any other assets of the Corporation
shall be valued in the manner determined from time to time by the Board of
Directors.

E. The right of any holder of shares redeemed by the Corporation to
receive dividends or distributions thereon and all other rights of such holder
with respect to such shares shall terminate when the redemption price of the
shares is determined, except for the right of the holder to receive (i) the
redemption price of the shares from the Corporation in accordance with the
provisions hereof and (ii) any dividend or distribution to which the holder had
previously become entitled as the record holder of shares on the record date for
the dividend or distribution.

F. Payment of the redemption price by the Corporation may be made either
in cash or in securities or other assets at the time owned by the Corporation,
or partly in cash and partly in securities or other assets at the time owned by
the Corporation. Any payment to be made in securities or other assets of the
Corporation shall be the value used in determining the redemption price.

G. The obligation of the Corporation to redeem its shares hereunder is
conditional upon the ability of the Corporation to comply with the provisions of
the Oregon Business Corporation Act relating to distributions to shareholders by
means of share redemptions. The right to redeem shall terminate upon adoption
of a plan of liquidation or dissolution of the Corporation by the Board of
Directors.

3
<PAGE>

H. The Corporation, either directly or through an agent, may repurchase
its shares, out of funds legally available therefor, upon the terms and
conditions and for the consideration as the Board of Directors deems advisable,
by agreement with the owner at a price not exceeding the net asset value per
share as determined by the Board of Directors at the time or times as the Board
of Directors designates, and the Corporation may take all other steps deemed
necessary or advisable in connection therewith.

I. The Corporation, pursuant to resolution of the Board of Directors, may
cause the redemption, upon the terms set forth in the resolution and in this
Article, of shares owned by shareholders whose shares have an aggregate net
asset value of $500 or less. Notwithstanding any other provision of this
Article, if certificates representing such shares have been issued, the
redemption price need not be paid by the Corporation until the certificates are
presented in proper form for transfer to the Corporation or the agent of the
Corporation appointed for that purpose; however, the redemption shall be
effective, in accordance with the resolution of the Board of Directors,
regardless of whether or not such presentation has been made.

J. The Board of Directors may delegate any of its powers and duties under
this Article with respect to appraisal of assets and liabilities and
determination of net asset value or with respect to suspension of the
determination of net asset value to an officer of the Corporation, the custodian
or depository of the Corporation's assets, or to the investment adviser of the
Corporation.

K. The obligations set forth in this Article may be suspended or
postponed as permitted pursuant to the Investment Company Act of 1940.

4
<PAGE>

ARTICLE V

Any determination made in good faith and, so far as accounting
matters are involved, in accordance with generally accepted accounting
principles, by or pursuant to the direction of the Board of Directors, as to:
the amount and allocation of the assets, liabilities, income, expense, gain,
or loss of the Corporation; the amount of any reserves or charges set up and
the propriety thereof; the time of or purpose for creating such reserves or
charges; the use, alteration, or cancellation of any reserves or charges
(whether or not any debt, obligation, or liability for which such reserves or
charges shall have been created, shall have been paid or discharged, or shall
be then or thereafter required to be paid or discharged); the price or
closing bid or asked price of any investment owned or held by the
Corporation; the amortized or market value of any investment or fair value of
any other asset of the Corporation; the fair market value of assets accepted
as consideration for shares; the number of shares of the Corporation
outstanding; the estimated expense to the Corporation in connection with
purchases of its shares; the ability to liquidate investments in an orderly
fashion; the extent to which it is practicable to deliver a cross-section of
the securities held in any portfolio of the Corporation in payment for any
shares pertaining to that portfolio; or any other matters relating to the
issue, sale, purchase or other acquisition or disposition of investments or
shares of the Corporation shall be final and conclusive and shall be binding
upon the Corporation and all holders of its shares, past, present, and
future; and shares of the Corporation are issued and sold on the condition
and understanding that any and all such determinations shall be binding as
set forth above.

ARTICLE VI

5
<PAGE>

No director of the Corporation shall be personally liable to the
Corporation or its shareholders for monetary damages for conduct as a director,
provided that this Article shall not eliminate the liability of a director for
any act or omission for which such elimination of liability is not permitted
under the Oregon Business Corporation Act or the Investment Company Act of 1940.
No amendment to the Oregon Business Corporation Act that further limits the acts
or omissions for which elimination of liability is permitted shall affect the
liability of a director for any act or omission which occurs prior to the
effective date of the amendment.

ARTICLE VII

<PAGE>

agreement to repay all advances if it is ultimately determined that the person
is not entitled to indemnification under this Article. No amendment to this
Article that limits the Corporation's obligation to indemnify any person shall
have any effect on such obligation for any act or omission that occurs prior to
the later of the effective date of the amendment or the date notice of the
amendment is given to the person. This Article shall not be deemed exclusive of
any other provisions for indemnification or advancement of expenses of
directors, officers, employees, agents and fiduciaries that may be included in
any statute, bylaw, agreement, general or specific action of the Board of
Directors, vote of shareholders or other document or arrangement.

ARTICLE VIII

The Corporation shall not be required to hold an annual meeting of
shareholders.

7
<PAGE>
ARTICLE IX

The street address and the mailing address of the initial registered
office of the Corporation is 1301 SW Fifth Avenue, PO Box 1350, Portland, Oregon
97207 and the name of its initial registered agent at that address is John A.
Kemp.

ARTICLE X

The name of the incorporator is Jeff B. Curtis, and the address of the
incorporator is 900 SW Fifth, Suite 2300, Portland, Oregon 97204.

ARTICLE XI

The mailing address for the Corporation for notices is 1301 SW Fifth
Avenue, PO Box 1350, Portland, Oregon 97207.

Executed: June 29, 1992.

JEFF B. CURTIS
-----------------------------
Jeff B. Curtis, Incorporator

<PAGE>

Exhibit 2.

BYLAWS
OF
COLUMBIA INTERNATIONAL STOCK FUND, INC.

ARTICLE I

SHAREHOLDERS MEETINGS AND VOTING

1.1 ANNUAL MEETING. The Corporation shall not be required to hold an
annual meeting of the shareholders.

1.2 SPECIAL MEETINGS. Special meetings of the shareholders, for any
purposes, unless otherwise prescribed by statute, may be called by the President
or the Board of Directors and shall be called by the President upon the written
demand of the holders of not less than one-tenth of all the votes entitled to be
cast on any issue proposed to be considered at the meeting. The demand shall
describe the purposes for which the meeting is to be held and shall be signed,
dated and delivered to the Secretary.

1.3 PLACE OF MEETINGS. Meetings of the shareholders shall be held at
any place in or out of Oregon designated by the Board of Directors. If a
meeting place is not designated by the Board of Directors, the meeting shall be
held at the Corporation's principal office.

1.4 NOTICE OF MEETINGS. Written or printed notice stating the date,
time and place of the shareholders meeting and, in the case of a special meeting
or a meeting for which special notice is required by law, the purposes for which
the meeting is called shall be mailed by the Corporation to each shareholder
entitled to vote at the meeting and, if required by law, to any other
shareholders entitled to receive notice, at the shareholder's address shown in
the Corporation's record of shareholders, with postage prepaid, not earlier than
60 days nor less than 10 days before the meeting date.

1.5 WAIVER OF NOTICE. A shareholder may at any time waive any notice
required by law, these Bylaws or the Articles of Incorporation. The waiver
shall be in writing, be signed by the shareholder entitled to the notice and be
delivered to the Corporation for inclusion in the minutes for filing with the
corporate records. A shareholder's attendance at a meeting waives objection to
(i) lack of notice or defective notice of the meeting, unless the shareholder at
the beginning of the meeting objects to holding the meeting or transacting
business at the meeting, and (ii) consideration of a particular matter at the
meeting that is not within the purposes described in the meeting notice, unless
the shareholder objects to considering the matter when it is presented.

1.6 FIXING OF RECORD DATE. The Board of Directors may fix a future
date as the record date to determine the shareholders entitled to notice of a
shareholders meeting, demand

1
<PAGE>

a special meeting, vote, take any other action or receive payment of any share
or cash dividend or other distribution. This date shall not be earlier than 70
days or, in the case of a meeting, later than 10 days before the meeting or
action requiring a determination of shareholders. The record date for any
meeting, vote or other action of the shareholders shall be the same for all
voting groups. If not otherwise fixed by the Board of Directors, the record
date to determine shareholders entitled to notice of and to vote at an annual or
special shareholders meeting is the close of business on the day before the
notice is first mailed or delivered to shareholders. If not otherwise fixed by
the Board of Directors, the record date to determine shareholders entitled to
receive payment of any share or cash dividend or other distribution is the close
of business on the day the Board of Directors authorizes the share or cash
dividend or other distribution.

1.7 SHAREHOLDERS LIST FOR MEETING. After a record date for a meeting
is fixed, the Corporation shall prepare an alphabetical list of all shareholders
entitled to notice of the shareholders meeting. The list shall be arranged by
voting group and, within each voting group, by class or series of shares, and it
shall show the address of and number of shares held by each shareholder. The
shareholders list shall be available for inspection by any shareholder, upon
proper demand as may be required by law, beginning two business days after
notice of the meeting is given and continuing through the meeting, at the
Corporation's principal office or at a place identified in the meeting notice in
the city where the meeting will be held. The Corporation shall make the
shareholders list available at the meeting, and any shareholder or the
shareholder's agent or attorney shall be entitled to inspect the list at any
time during the meeting or any adjournment. Refusal or failure to prepare or
make available the shareholders list does not affect the validity of action
taken at the meeting.

1.8 QUORUM; ADJOURNMENT.

(1) Shares entitled to vote as a separate voting group may take
action on a matter at a meeting only if a quorum of those shares exists with
respect to that matter. A majority of the votes entitled to be cast on the
matter by the voting group constitutes a quorum of that voting group for action
on that matter.

(2) A majority of votes represented at the meeting, although
less than a quorum, may adjourn the meeting from time to time to a different
time and place without further notice to any shareholder of any adjournment. At
an adjourned meeting at which a quorum is present, any business may be
transacted that might have been transacted at the meeting originally held.

(3) Once a share is represented for any purpose at a meeting, it
shall be present for quorum purposes for the remainder of the meeting and for
any adjournment of that meeting unless a new record date is or must be set for
the adjourned meeting. A new record date must be set if the meeting is
adjourned to a date more than 120 days after the date fixed for the original
meeting.

2
<PAGE>

1.9 VOTING REQUIREMENTS; ACTION WITHOUT MEETING.

(1) If a quorum exists, action on a matter, other than the
election of directors, by a voting group is approved if the votes cast within
the voting group favoring the action exceed the votes cast opposing the action,
unless a greater number of affirmative votes is required by law or the Articles
of Incorporation. Unless otherwise provided in the Articles of Incorporation,
directors are elected by a plurality of the votes cast by the shares entitled to
vote in the election at a meeting at which a quorum is present.

(2) Action required or permitted by law to be taken at a
shareholders meeting may be taken without a meeting if the action is taken by
all the shareholders entitled to vote on the action. The action must be
evidenced by one or more written consents describing the action taken, signed by
all the shareholders entitled to vote on the action and delivered to the
Secretary for inclusion in the minutes for filing with the corporate records.
Shareholder action taken by written consent is effective when the last
shareholder signs the consent, unless the consent specifies an earlier or later
effective date.

1.10 PROXIES. A shareholder may vote shares in person or by proxy. A
shareholder may appoint a proxy by signing an appointment form either personally
or by the shareholder's attorney-in-fact. An appointment of a proxy is
effective when received by the Secretary or other officer of the Corporation
authorized to tabulate votes. An appointment is valid for 11 months unless a
different period is provided in the appointment form. An appointment is
revocable by the shareholder unless the appointment form conspicuously states
that it is irrevocable and the appointment is coupled with an interest that has
not been extinguished.

ARTICLE II

BOARD OF DIRECTORS

2.1 DUTIES OF BOARD OF DIRECTORS. All corporate powers of the
Corporation shall be exercised by or under the authority of its Board of
Directors; the business and affairs of the Corporation shall be managed under
the direction of its Board of Directors.

2.2 NUMBER, TERM AND QUALIFICATION. The number of directors of the
Corporation shall be at least 1 and no more than 7. Within this range, the
initial number of directors shall be 2, and the number of directors shall
otherwise be determined from time to time by the Board of Directors. The term
of a director shall expire at the next annual meeting of shareholders after his
or her election. No reduction in the number of directors shall shorten the term
of any incumbent director. Despite the expiration of a director's term, the
director shall continue to serve until the director's successor is elected and
qualified or the number of directors is decreased. Directors need not be
residents of Oregon or shareholders of the Corporation.

3
<PAGE>

2.3 REGULAR MEETINGS. If an annual meeting of shareholders is held,
a regular meeting of the Board of Directors shall be held without notice other
than this Bylaw immediately after, and at the same place as, the annual meeting
of shareholders. The Board of Directors may provide by resolution the time and
place for the holding of additional regular meetings in or out of Oregon without
notice other than the resolution.

2.4 SPECIAL MEETINGS. Special meetings of the Board of Directors may
be called by or at the request of the President or any two directors. The
person or persons authorized to call special meetings of the Board of Directors
may fix any place in or out of Oregon as the place for holding any special
meeting of the Board of Directors called by them.

2.5 NOTICE. Notice of the date, time and place of any special
meeting of the Board of Directors shall be given at least 24 hours prior to the
meeting by notice communicated in person, by telephone, telegraph, teletype,
other form of wire or wireless communication, mail or private carrier. If
written, notice shall be effective at the earliest of (a) when received, (b)
five days after its deposit in the United States mail, as evidenced by the
postmark, if mailed postpaid and correctly addressed, or (c) on the date shown
on the return receipt, if sent by registered or certified mail, return receipt
requested and the receipt is signed by or on behalf of the addressee. Notice by
all other means shall be deemed effective when received by or on behalf of the
director. Notice of any regular or special meeting need not describe the
purposes of the meeting unless required by law or the Articles of Incorporation.

2.6 WAIVER OF NOTICE. A director may at any time waive any notice
required by law, these Bylaws or the Articles of Incorporation. Except as set
forth below, the waiver must be in writing, be signed by the director entitled
to the notice, specify the meeting for which notice is waived and be filed with
the minutes or corporate records. A director's attendance at or participation
in a meeting waives any required notice to the director of the meeting unless
the director at the beginning of the meeting, or promptly upon the director's
arrival, objects to holding the meeting or transacting business at the meeting
and does not thereafter vote for or assent to action taken at the meeting.

2.7 QUORUM. A majority of the number of directors set forth in or
determined in accordance with Section 2.2 of these Bylaws shall constitute a
quorum for the transaction of business at any meeting of the Board of Directors.
If less than a quorum is present at a meeting, a majority of the directors
present may adjourn the meeting from time to time without further notice.

2.8 MANNER OF ACTING. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors, unless a different number is provided by law, the Articles of
Incorporation or these Bylaws.

2.9 MEETING BY TELEPHONE CONFERENCE; ACTION WITHOUT MEETING.

(1) Directors may participate in a regular or special meeting
by, or conduct the meeting through, use of any means of communications by which
all directors participating

4
<PAGE>

may simultaneously hear each other during the meeting. Participation in a
meeting by this means shall constitute presence in person at the meeting.

(2) Any action that is required or permitted to be taken at a
meeting of the Board of Directors may be taken without a meeting if one or more
written consents describing the action taken are signed by all of the directors
entitled to vote on the matter and included in the minutes or filed with the
corporate records reflecting the action taken. The action shall be effective
when the last director signs the consent, unless the consent specifies an
earlier or later effective date.

2.10 VACANCIES. Any vacancy on the Board of Directors, including a
vacancy resulting from an increase in the number of directors, may be filled by
the shareholders, the Board of Directors, the remaining directors if less than a
quorum (by the vote of a majority thereof) or by a sole remaining director. Any
vacancy not filled by the directors shall be filled by election at an annual
meeting or at a special meeting of shareholders called for that purpose. A
vacancy that will occur at a specified later date, by reason of a resignation or
otherwise, may be filled before the vacancy occurs, but the new director may not
take office until the vacancy occurs.

2.11 COMPENSATION. By resolution of the Board of Directors, the
directors may be paid reasonable compensation for services as directors and
their expenses of attending meetings of the Board of Directors.

2.12 PRESUMPTION OF ASSENT. A director who is present at a meeting of
the Board of Directors or a committee of the Board of Directors shall be deemed
to have assented to the action taken at the meeting unless (a) the director's
dissent or abstention from the action is entered in the minutes of the meeting,
(b) the director delivers a written notice of dissent or abstention to the
action to the presiding officer of the meeting before any adjournment or to the
Corporation immediately after the adjournment of the meeting or (c) the director
objects at the beginning of the meeting or promptly upon the director's arrival
to the holding of the meeting or transacting business at the meeting. The right
to dissent or abstain is not available to a director who voted in favor of the
action.

2.13 REMOVAL. The shareholders may remove one or more directors with
or without cause at a meeting called expressly for that purpose, unless the
Articles of Incorporation provide for removal for cause only.

2.14 RESIGNATION. Any director may resign by delivering written
notice to the Board of Directors, its chairperson or the Corporation. Unless
the notice specifies a later effective date, a resignation notice shall be
effective upon the earlier of (a) receipt, (b) five days after its deposit in
the United States mails, if mailed postpaid and correctly addressed, or (c) on
the date shown on the return receipt, if sent by registered or certified mail,
return receipt requested, and the receipt is signed by addressee. Once
delivered, a resignation notice is irrevocable unless revocation is permitted by
the Board of Directors.

5
<PAGE>

2.15 DIRECTORS EMERITUS. The Board of Directors may appoint one or
more former directors of the Corporation to serve as directors emeritus. A
director emeritus may be appointed to serve on a committee of the Board of
Directors. A director emeritus may resign at any time and may be removed by the
Board of Directors at any time with or without cause. The term of a director
emeritus shall commence upon appointment and continue for one year or until
resignation or removal of the director emeritus. The position of director
emeritus shall be advisory in nature only, and a director emeritus shall have no
vote or right to consent on any action taken by the Board of Directors. A
director emeritus shall have no duties or obligations to the Corporation or its
shareholders as a director of the Corporation, whether pursuant to the Oregon
Business Corporation Act or the Investment Company Act of 1940 or otherwise.
Subject to an express determination of the Board of Directors to the contrary,
whether generally or in a specific instance, a director emeritus shall have the
right to receive notice of and to attend all meetings of the Board of Directors
or of any committee to which the director emeritus has been appointed, provided
that the failure to provide notice of a meeting of the Board of Directors or of
a committee to a director emeritus pursuant to this Section shall not affect the
validity of any action taken at that meeting. Subject to an express
determination of the Board of Directors to the contrary, whether generally or in
a specific instance, a director emeritus shall have the same rights to inspect
the records of, or to request information about, the Corporation as any other
director of the Corporation acting in the capacity of a director. A director
emeritus shall not be counted for purposes of determining the number of
directors of the Corporation or the existence of a quorum for the transaction of
business at a meeting of the Board of Directors or any committee. By resolution
of the Board of Directors, a director emeritus may be paid reasonable
compensation for services on the Board of Directors or any committee and the
expenses of the director emeritus in attending meetings.

ARTICLE III

COMMITTEES OF THE BOARD

3.1 COMMITTEES. The Board of Directors may create one or more
committees and appoint the members thereof. Each committee shall have two or
more members. The creation of a committee and appointment of members to it must
be approved by a majority of all directors in office when the action is taken.
Subject to any limitation imposed by the Board of Directors or by law, each
committee may exercise all the authority of the Board of Directors in the
management of the Corporation. A committee may not take any action that a
committee is prohibited from taking by the Oregon Business Corporation Act.

3.2 CHANGES OF SIZE AND FUNCTION. Subject to the provisions of law,
the Board of Directors shall have the power at any time to change the number of
committee members, fill committee vacancies, change any committee members and
change the functions and terminate the existence of a committee.

3.3 CONDUCT OF MEETINGS. Each committee shall conduct its meetings
in accordance with the applicable provisions of these Bylaws relating to
meetings and action without

<PAGE>

meetings of the Board of Directors. Each committee shall adopt any further
rules regarding its conduct, keep minutes and other records and appoint
subcommittees and assistants as it deems appropriate.

3.4 COMPENSATION. By resolution of the Board of Directors, committee
members may be paid reasonable compensation for services on committees and their
expenses of attending committee meetings.

ARTICLE IV

OFFICERS

4.1 APPOINTMENT. The Board of Directors at its first meeting
following its election each year shall appoint a President and a Secretary. At
this meeting, or at any other time, the Board of Directors may appoint one of
its members as Chairman of the Board and may appoint any other officers,
assistant officers and agents. Any two or more offices may be held by the same
person.

4.2 COMPENSATION. The Corporation may pay its officers reasonable
compensation for their services as fixed from time to time by the Board of
Directors or by the President with respect to officers appointed by the
President.

4.3 TERM. The term of office of all officers commences upon their
appointment and continues until their successors are appointed or until their
resignation or removal.

4.4 REMOVAL. Any officer or agent appointed by the Board of
Directors or the President may be removed by the Board of Directors at any time
with or without cause. Any officer or agent appointed by the President may be
removed by the President at any time with or without cause.

4.5 CHAIRMAN OF THE BOARD. The Chairman of the Board, if that office
is filled, shall preside at all meetings of the Board of Directors and shall
perform any duties and responsibilities prescribed from time to time by the
Board of Directors.

4.6 CHIEF EXECUTIVE OFFICER. The Chief Executive Officer, if that
office is filled, shall, with the President and subject to the control of the
Board of Directors, be responsible for the general operation of the Corporation,
and shall perform any other duties and responsibilities prescribed from time to
time by the Board of Directors.

4.7 PRESIDENT. Unless otherwise determined by the Board of
Directors, the President, subject to the control of the Board of Directors,
shall be responsible for the general operation of the Corporation. He shall
have any other duties and responsibilities prescribed by the Board of Directors.
Unless otherwise determined by the Board of Directors, the President shall have
authority to vote any shares of stock owned by the Corporation and to delegate
this authority to any other officer.

7
<PAGE>

4.8 VICE PRESIDENTS. Each Vice President shall perform duties and
responsibilities prescribed by the Board of Directors or the President. The
Board of Directors or the President may confer a special title upon a Vice
President.

4.9 SECRETARY.

(1) The Secretary shall record and keep the minutes of all
meetings of the directors and shareholders in one or more books provided for
that purpose and perform any duties prescribed by the Board of Directors or the
President.

(2) Any assistant secretary shall have the duties prescribed
from time to time by the Board of Directors, the President or the Secretary. In
the absence or disability of the Secretary, the Secretary's duties shall be
performed by an assistant secretary.

4.10 TREASURER. The Treasurer shall have charge and custody and be
responsible for all funds and securities of the Corporation and shall have other
duties as prescribed from time to time by the Board of Directors or the
President.

ARTICLE V

INDEMNIFICATION

The Corporation shall indemnify to the fullest extent not
prohibited by law, including the Oregon Business Corporation Act and the
Investment Company Act of 1940, any person who is made, or threatened to be
made, a party to an action, suit or proceeding, whether civil, criminal,
administrative, investigative or otherwise (including an action, suit or
proceeding by or in the right of the Corporation) by reason of the fact that
such person is or was a director, director emeritus or officer of the
Corporation or a fiduciary within the meaning of the Employee Retirement Income
Security Act of 1974 with respect to any employee benefit plan of the
Corporation, or serves or served at the request of the Corporation as a director
or officer or as a fiduciary of an employee benefit plan, of another
corporation, partnership, joint venture, trust or other enterprise. The
Corporation shall pay for or reimburse the reasonable expenses incurred by any
such person in any such proceeding in advance of the final disposition of the
proceeding if the person sets forth in writing (i) the person's good faith
belief that the person is entitled to indemnification under this Article and
(ii) the person's agreement to repay all advances if it is ultimately determined
that the person is not entitled to indemnification under this Article. No
amendment to these Bylaws that limits the Corporation's obligation to indemnify
any person shall have any effect on such obligation for any act or omission that
occurs prior to the later to occur of the effective date of the amendment or the
date notice of the amendment is given to the person. This Article shall not be
deemed exclusive of any other provisions for indemnification or advancement of
expenses of directors, officers, employees, agents and fiduciaries that may be
included in the Articles of Incorporation or any statute, bylaw, agreement,
general or specific action of the Board of Directors, vote of shareholders or
other document or arrangement.

8
<PAGE>

ARTICLE VI

ISSUANCE OF SHARES

6.1 ADEQUACY OF CONSIDERATION. Before the Corporation issues shares,
the Board of Directors shall determine that the consideration received or to be
received for the shares to be issued is adequate. The authorization by the
Board of Directors of the issuance of shares for stated consideration shall
evidence a determination by the Board that such consideration is adequate.

6.2 CERTIFICATES FOR SHARES.

(1) Certificates representing shares of the Corporation shall be
in any form determined by the Board of Directors consistent with the
requirements of the Oregon Business Corporation Act and these Bylaws. The
certificates shall be signed, either manually or in facsimile, by two officers
of the Corporation, at least one of whom shall be the President or a Vice
President, and may be sealed with the seal of the Corporation, if any, or a
facsimile thereof. All certificates for shares shall be consecutively numbered
or otherwise identified. The signatures of officers upon a certificate may be
facsimiles if the certificate is countersigned by a transfer agent or any
assistant transfer agent or registered by a registrar, other than the
Corporation itself or an employee of the Corporation.

(2) Every certificate for shares of stock that are subject to
any restriction on transfer or registration of transfer pursuant to the Articles
of Incorporation, the Bylaws, securities laws, a shareholders agreement or any
agreement to which the Corporation is a party shall have conspicuously noted on
the face or back of the certificate either the full text of the restriction or a
statement of the existence of the restriction and that the Corporation retains a
copy of the full text. Every certificate issued when the Corporation is
authorized to issue more than one class or series within a class of shares shall
set forth on its face or back either (a) a summary of the designations, relative
rights, preferences and limitations of the shares of each class and the
variations in rights, preferences and limitations for each series authorized to
be issued and the authority of the Board of Directors to determine variations
for future series or (b) a statement of the existence of those designations,
relative rights, preferences and limitations and a statement that the
Corporation will furnish a copy thereof to the holder of the certificate upon
written request and without charge.

(3) All certificates surrendered to the Corporation for transfer
shall be canceled. The Corporation shall not issue a new certificate for
previously issued shares until the former certificate or certificates for those
shares are surrendered and canceled; except that in case of a lost, destroyed or
mutilated certificate, a new certificate may be issued on terms prescribed by
the Board of Directors.

6.3 TRANSFER AGENT AND REGISTRAR. The Board of Directors may from
time to time appoint one or more transfer agents and one or more registrars for
the shares of the Corporation, with powers and duties determined by the Board of
Directors.

9
<PAGE>

6.4 OFFICER CEASING TO ACT. If the person who signed a share
certificate, either manually or in facsimile, no longer holds office when the
certificate is issued, the certificate is nevertheless valid.

ARTICLE VII

CONTRACTS, LOANS, CHECKS AND OTHER INSTRUMENTS

7.1 CONTRACTS. Except as otherwise provided by law, the Board of
Directors may authorize any officers or agents to execute and deliver any
contract or other instrument in the name of and on behalf of the Corporation,
and this authority may be general or confined to specific instances.

7.2 LOANS. The Corporation shall not borrow money and no evidence of
indebtedness shall be issued in its name unless authorized by the Board of
Directors. This authority may be general or confined to specific instances.

7.3 CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the
payment of money and notes or other evidences of indebtedness issued in the name
of the Corporation shall be signed in the manner and by the officers or agents
of the Corporation designated by the Board of Directors.

7.4 DEPOSITS. All funds of the Corporation not otherwise employed
shall be deposited to the credit of the Corporation in those banks, trust
companies or other depositaries as the Board of Directors or officers of the
Corporation designated by the Board of Directors select, or be invested as
authorized by the Board of Directors.

ARTICLE VIII

MISCELLANEOUS PROVISIONS

8.1 SEVERABILITY. A determination that any provision of these Bylaws
is for any reason inapplicable, invalid, illegal or otherwise ineffective shall
not affect or invalidate any other provision of these Bylaws.

8.2 AMENDMENTS. These Bylaws may be amended or repealed and new
Bylaws may be adopted by the Board of Directors or the shareholders of the
Corporation.

Adopted: June 30, 1992

10
<PAGE>

AMENDMENT TO BYLAWS

On April 26, 1994, the Board of Directors of the Fund amended the Bylaws of
the Fund to add the following new Section 2.3:

2.3 REGULAR MEETINGS. The Board of Directors may provide by
resolution the time and place for the holding of regular meetings in or out of
Oregon without notice other than the resolution.

<PAGE>
Exhibit 4.A.

NUMBER [LOGO] SHARES

COLUMBIA INTERNATIONAL
STOCK FUND, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF OREGON

This Certifies that

*SEE REVERSE FOR
CERTAIN DEFINITIONS

is the owner of
fully paid and non-assessable Shares of the Columbia International Stock Fund,
Inc. transferable on the books of the Corporation by the holder thereof in
person or by duly authorized attorney upon surrender of this certificate
properly endorsed. This certificate is not valid unless countersigned by the
transfer agent.
Witness the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.

George L. Hanseth
SECRETARY

Columbia International Stock Fund, Inc.
CORPORATE
SEAL

OREGON

Dated:

J. Jerry Inskeep, Jr.
CHAIRMAN

COUNTERSIGNED:
BY TRANSFER AGENT

- -----------------------------------------------------------------
Authorized Officer
<PAGE>

REQUIREMENTS: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER.
THE SIGNATURE(S) MUST BE GUARANTEED BY A COMMERCIAL BANK OR BY A SECURITIES
FIRM HAVING MEMBERSHIP ON A RECOGNIZED NATIONAL SECURITIES EXCHANGE, WHOSE
SIGNATURE(S) IS KNOWN TO THE TRANSFER AGENT OF THE CORPORATION.

For value received, __________________hereby sell, assign and transfer unto

________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE)

________________________________________________________________________________

_________________________________________________________________________ Shares

of the Common Stock represented by the within Certificate and do hereby
irrevocably constitute and appoint ____________________________Attorney to
transfer the said stock on the books of the within-named Corporation with full
power of substitution in the premises.

Dated, __________________________ 19____

____________________________________________________________
Owner
____________________________________________________________
Signature of Co-Owner, if any

IMPORTANT: BEFORE SIGNING, READ AND COMPLY CAREFULLY
WITH REQUIREMENTS PRINTED ABOVE.

SIGNATURE(S) GUARANTEED BY:______________________________________

*The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:

TEN COM - as tenants in common UNIF GIFT MIN ACT-_____Custodian- ____
(Cust) (Minor)

TEN ENT - as tenants by the entireties under Uniform Gifts to Minors

JT TEN - as joint tenants with right of
survivorship and not as tenants
in common Act________________
(State)

Additional abbreviations may also be used though not in the above
list.

________________________________________________________________________
THIS SPACE MUST NOT BE COVERED IN ANY WAY

<PAGE>
EXHIBIT 5

COLUMBIA INTERNATIONAL STOCK FUND, INC.

INVESTMENT ADVISORY CONTRACT

This Agreement is made the 10th day of December, 1997 between COLUMBIA
INTERNATIONAL STOCK FUND, INC., an Oregon corporation, (the "Fund") and COLUMBIA
FUNDS MANAGEMENT COMPANY, an Oregon corporation having its principal place of
business in Portland, Oregon (the "Adviser"). The Fund is registered as an
open-end investment company pursuant to the Investment Company Act of 1940 (the
"Act"). The Adviser is registered as an investment adviser pursuant to the
Investment Advisers Act of 1940. This Agreement relates to services to be
performed by the Adviser with respect to the Fund.

The parties agree as follows:

1. DUTIES OF ADVISER. The Adviser shall regularly provide the Fund with
research, advice, and supervision with respect to investment matters and shall
furnish continuously an investment program, recommend what securities shall be
purchased or sold and what portion of the Fund's assets shall be held invested
or uninvested, subject always to the provisions of the Act and the Fund's
Articles of Incorporation and Bylaws, and amendments thereto, which amendments
shall be furnished to the Adviser by the Fund. The Adviser shall take any steps
necessary or appropriate to carry out its decisions in regard to the foregoing
matters and the general conduct of the business of the Fund. The Adviser may
take into consideration receipt of research and statistical information and
other services rendered to the Fund in the allocation of commissions from
portfolio brokerage business.

2. ALLOCATION OF CHARGES AND EXPENSES.

(a) The Adviser shall pay or reimburse the Fund for payments made by
the Fund for all executive salaries and executive expenses, office rent of the
Fund, ordinary office expenses (other than the expense of clerical services
relating to the administration of the Fund), and for any other expenses that, if
otherwise borne by the Fund, would cause the Fund to "be deemed to be acting as
a distributor of securities of which it is the issuer, other than through an
underwriter," pursuant to Rule 12b-1 under the Act. The Adviser shall provide
investment advisory, statistical, and research facilities and all clerical
services relating to research, statistical, and investment work with respect to
the Fund.

(b) The Adviser shall not be required to pay any expenses of the Fund
other than those enumerated in this Agreement. The Fund will assume all other
costs, including the cost of its custodian, legal, auditing, and accounting
expenses, disinterested directors' fees, taxes, and governmental fees, interest,
brokers' commissions, transaction expenses, cost of stock certificates, and any
other expenses (including clerical expenses) of issue, sale, repurchase, or
redemption of shares, expenses of registering or qualifying shares for sale,

1
<PAGE>

transfer taxes, and all expenses of preparing the Fund's registration statement
and prospectus, and the cost of printing and delivering to shareholders
prospectuses and reports.

(c) At the request of the Fund, the Adviser shall pay all or a
portion of the direct and indirect costs, charges and expenses of or related to
the Fund's business and operations. The Adviser will submit to the Fund on a
monthly basis a statement setting forth the cost, charges and expenses paid by
the Adviser for the previous month. Upon receipt of the statement, the Fund
shall promptly reimburse the Adviser for the costs, charges and expenses.

3. COMPENSATION OF THE ADVISER. For the services to be rendered, the
facilities to be furnished, and the payments to be made by the Adviser, as
provided in Sections 1 and 2 hereof, for each calendar month the Fund shall pay
to the Adviser a fee computed at the annual rate of 1 percent of daily net
assets. If the asset value is not required to be determined on any particular
business day, then for the purposes of this Section 3, the asset value of a
share as last determined shall be deemed to be the asset value of a share as of
the close of business on that day. If there is no business day in any calendar
month, the fee shall be computed on the basis of the asset value of a share as
last determined, multiplied by the average number of shares outstanding on the
last day of the month.

4. COVENANTS OF THE ADVISER. In connection with purchases or sales of
portfolio securities for the account of the Fund, neither the Adviser nor any
officer, director, or employee of the Adviser shall act as a principal. The
Adviser covenants that it and its employees will comply with investment
restrictions of the Fund's Bylaws applicable to them. If the Adviser or any of
its affiliates give any advice to clients concerning the shares of the Fund, it
will act solely as investment counsel for the clients and not on behalf of the
Fund.

5. LIMITATION ON LIABILITY OF ADVISER. The Adviser shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the Fund
in connection with the matters to which this agreement relates, except a loss
resulting from willful malfeasance, bad faith, or gross negligence on the part
of the Adviser in the performance of its duties or from reckless disregard by
the Adviser of its obligations and duties under this Agreement. The federal
securities laws impose liabilities under certain circumstances on persons who
act in good faith, and therefore nothing herein shall in any way constitute a
waiver or limitation of any rights which the Fund may have under any federal
securities laws.

6. DURATION AND TERMINATION OF THIS AGREEMENT.

(a) This Agreement shall remain in force for two years from the date
hereof, and it may be continued from year to year thereafter if approved
annually by a vote of a majority of the Fund's shareholders or by its Board of
Directors and in either case a vote of a majority of the Board of Directors who
are not parties to this Agreement or interested persons of any such party cast
in person at a meeting called for the purpose of voting on such approval.

2
<PAGE>

(b) This Agreement may be terminated at any time without the payment
of any penalty by vote of the Board of Directors of the Fund, by vote of a
majority of the outstanding shares of the Fund, or by the Adviser, on 60 days
written notice to the other party.

(c) This Agreement shall automatically terminate if it is assigned.
The Adviser shall notify the Fund of any change in the officers or directors of
the Adviser within a reasonable time after the change. The terms "assignment,"
"vote of a majority of the outstanding voting securities", and "interested
persons" shall have the meanings specified in the Act.

IN WITNESS WHEREOF the parties have caused this Agreement to be
executed as of the day and year first written above.

COLUMBIA INTERNATIONAL STOCK FUND, INC.

By J. JERRY INSKEEP, JR.
----------------------------------------
Title: President

COLUMBIA FUNDS MANAGEMENT COMPANY

By GEORGE L. HANSETH
----------------------------------------
Title: Vice President

<PAGE>
EXHIBIT 6

DISTRIBUTION AGREEMENT

DATED: December 10, 1997

BETWEEN: COLUMBIA INTERNATIONAL STOCK FUND, INC.
an Oregon corporation
1301 SW Fifth Avenue, Portland, Oregon 97207 the Fund

AND: PROVIDENT DISTRIBUTORS, INC., a Delaware corporation
Four Falls Corporate Center, 6th Floor
West Conshohocken, PA 19428-296197 the Distributor

The Fund is an open-end management investment company registered under
the Investment Company Act of 1940, as amended, (Investment Company Act). The
Distributor is engaged principally in the business of distributing shares of the
investment companies sponsored and managed by Columbia Funds Management Company
(the Adviser), is registered as a broker-dealer under the Securities Exchange
Act of 1934, as amended, (the Exchange Act), and is a member of the National
Association of Securities Dealers, Inc. (NASD). The Fund desires the
Distributor to act as a distributor in the public offering of its shares.

The parties agree as follows:

1. DELIVERY OF FUND DOCUMENTS. The Fund shall make available promptly to
the Distributor copies of any registration statements filed by it with the
Securities and Exchange Commission (SEC) under the Securities Act of 1933, as
amended, (Securities Act) or the Investment Company Act, together with any
financial statements and exhibits included therein, and all amendments or
supplements thereto.

2. SALE OF SHARES. Subject to the provisions of Sections 3, 4, and 6 and
to any minimum purchase requirements from time to time described in the Fund's
prospectus, the Distributor is authorized to sell, as agent on behalf of the
Fund, shares of the Fund's capital stock (Shares) authorized for issuance and
registered under the Securities Act. The Distributor may also sell Shares under
offers of exchange between and among the investment companies for which the
Adviser acts as investment adviser (Columbia Funds) in accordance with the terms
of the prospectus for the respective Columbia Funds. Sales will be made by the
Distributor on behalf of the Fund by accepting unconditional orders to purchase
Shares placed with the Distributor by investors, and purchases will be made by
the Distributor only after acceptance by the Distributor of orders. The sales
price to the public of Shares shall be the public offering price as defined in
Section 5.

1
<PAGE>

3. SALE OF SHARES BY THE FUND. The Fund reserves the right to sell
Shares to investors pursuant to applications received and accepted by the Fund
or its transfer agent or any other lawful method. The Fund also reserves the
right to issue Shares in connection with the merger or consolidation of any
other investment company, trust, or personal holding company with the Fund or
the Fund's acquisition by purchase or otherwise of all or substantially all of
the assets of an investment company, trust, or personal holding company. Any
right granted to the Distributor to accept orders for Shares, to make sales on
behalf of the Fund, or to purchase Shares for resale will not apply to Shares
issued in connection with the merger or consolidation of any other investment
company with the Fund or its acquisition by purchase or otherwise of all or
substantially all of the assets of any investment company, trust, or personal
holding company, or substantially all of the outstanding shares or interests of
any such entity, and this right shall not apply to shares that may be offered by
the Fund to shareholders by virtue of their being shareholders of the Fund.

4. SHARES COVERED BY THIS AGREEMENT. This Agreement relates to the
issuance and sale of Shares that are duly authorized, registered, and available
for sale by the Fund, including redeemed or repurchased Shares if and to the
extent they may be legally sold and if, but only if, the Fund authorizes the
Distributor to sell them.

5. PUBLIC OFFERING PRICE. All Shares sold by the Distributor pursuant to
this Agreement shall be sold at the public offering price. The public offering
price for all accepted subscriptions will be the net asset value per share, as
determined in the manner provided in the Fund's articles of incorporation or
bylaws, as now in effect or as later amended (and as reflected in the Fund's
then current prospectus), next after the order is accepted by the Distributor.
The Distributor will process orders submitted by brokers for the sale of Shares
at the public offering price exclusive of any commission charged by such broker
to the customer.

6. SUSPENSION OF SALES. If and whenever the determination of net asset
value is suspended and until the suspension is terminated, no further orders for
Shares shall be accepted by the Distributor except unconditional orders placed
with the Distributor before it had knowledge of the suspension. In addition, the
Fund reserves the right to suspend sales and the Distributor's authority to
accept orders for Shares on behalf of the Fund if, in the judgment of the board
of directors of the Fund, it is in the best interests of the Fund to do so. The
suspension will continue for the period determined by the Board of Directors of
the Fund. In that event, no orders to purchase Shares shall be processed or
accepted by the Distributor on behalf of the Fund while the suspension remains
in effect, except for Shares necessary to cover unconditional orders accepted by
the Distributor before it had knowledge of the suspension, unless otherwise
directed by the board of directors of the Fund.

7. SOLICITATION OF ORDERS. In consideration of the rights granted to the
Distributor under this Agreement, the Distributor will use its best efforts (but
only in jurisdictions in which the Distributor may lawfully do so) to obtain
from investors unconditional orders for Shares authorized for issuance by the
Fund and registered under the Securities Act, provided that the Distributor may
in its discretion reject any order to purchase Shares or cancel any sale if
payment for any purchase order is not received in accordance with

2
<PAGE>

the terms of the prospectus. This does not obligate the Distributor to register
or maintain its registration as a broker or dealer under the securities laws of
any jurisdiction if, in the discretion of the Distributor, registration is not
practical or feasible. The Fund shall make available to the Distributor at the
expense of the Distributor the number of copies of the Fund's then effective
prospectus as the Distributor reasonably requests. The Fund shall furnish to
the Distributor copies of all information, financial statements, statements of
additional information, and other papers the Distributor reasonably requests for
use in connection with the distribution of Shares.

8. AUTHORIZED REPRESENTATIONS.

(a) The Fund is not authorized by the Distributor to give on behalf
of the Distributor any information or to make any representations other than the
information and representations contained in a registration statement or
prospectus filed with the SEC under the Securities Act or the Investment Company
Act covering Shares, as the registration statement and prospectus is amended or
supplemented from time to time.

(b) The Distributor is not authorized by the Fund to give on behalf of the Fund
any information or to make any representations in connection with the sale of
Shares other than the information and representations contained in a
registration statement or prospectus filed with the SEC under the Securities Act
or the Investment Company Act covering Shares, as the registration statement and
prospectus is amended or supplemented from time to time, or contained in
shareholder reports or other material that may be prepared by or on behalf of
the Fund for the Distributor's use. This paragraph shall not be construed to
prevent the Distributor from preparing and distributing tombstone and sales
literature or other materials it deems appropriate. No person other than the
Distributor is authorized to act as principal underwriter (as defined in the
Investment Company Act) for the Fund.

9. REGISTRATION AND SALE OF ADDITIONAL SHARES. The Fund agrees to
register with the SEC an indefinite number of Shares pursuant to Rule 24f-2
under the Investment Company Act. The Fund will, in cooperation with the
Distributor, take action necessary from time to time to qualify the Shares
(registered or otherwise qualified for sale under the Securities Act) in any
jurisdiction agreeable to the Distributor and Fund and to maintain such
qualification.

10. EXPENSES.

(a) This Agreement shall not be considered to constitute an exclusive
arrangement. The Distributor shall pay (or will enter into arrangements
providing that persons other than the Distributor shall pay) all fees and
expenses:

(i) incurred in connection with its registration as a broker or
dealer or the registration or qualification of its officers, directors, or
representatives under the laws of various jurisdictions; and

3
<PAGE>

(ii) that, if otherwise borne by the Fund, would cause the Fund
to "be deemed to be acting as a distributor of securities of which it is the
issuer, other than through an underwriter," pursuant to Rule 12b-1 under the
Investment Company Act.

(b) The Fund shall pay all other fees and expenses incurred by the
Fund and not allocated to the Distributor pursuant to 10(a) above.

11. CONFORMITY WITH LAW. The Distributor agrees that in selling Shares it
shall conform in all respects with the laws of the United States and any
jurisdiction in which the Shares are offered for sale by the Distributor
pursuant to this Agreement and the rules and regulations of the NASD. The Fund
agrees to notify Distributor of the issuance by the SEC of any stop order
suspending the effectiveness of any registration statements filed by it, or the
initiation of any proceedings for that purpose.

12. INDEPENDENT CONTRACTOR. The Distributor shall be an independent
contractor, and neither the Distributor nor any of its officers, directors,
employees, or representatives is or shall be an employee of the Fund in the
performance of the Distributor's duties hereunder. The Distributor shall be
responsible for its own conduct and the employment, control, and conduct of its
agents and employees and for injury to its agents or employees or to others
through its agents or employees. The Distributor assumes full responsibility
for its agents and employees, as such, under applicable statutes and agrees to
pay all employee taxes thereunder.

13. INDEMNIFICATION.

(a) The Distributor agrees to indemnify and hold harmless the Fund
and each of its directors, officers, employees, and representatives and each
person, if any, who controls the Fund within the meaning of Section 15 of the
Securities Act against any and all losses, liabilities, damages, claims, or
expenses (including the reasonable costs of investigating or defending any
alleged loss, liability, damage, claim, or expense and reasonable legal counsel
fees incurred in connection therewith) to which the Fund or such directors,
officers, employees, representatives, or controlling person may become subject
under the Securities Act, under any other statute, at common law, or otherwise,
arising out of the acquisition of any Shares by any person which (i) may be
based upon any wrongful act by the Distributor or any of Distributor's
directors, officers, employees, or representatives or (ii) may be based upon any
untrue statement or alleged untrue statement of a material fact contained in a
registration statement, prospectus, shareholder report, or other information
covering Shares filed or made public by the Fund or any amendment thereof or
supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading if such statement or omission was made in reliance upon
information furnished to the Fund by the Distributor. In no case (x) is the
Distributor's indemnity in favor of the Fund or any person indemnified to be
deemed to protect the Fund or such indemnified person against any liability to
which the Fund or such person would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of duties or by
reason of reckless disregard of obligations and duties under this Agreement or
(y) is the Distributor to be liable under its indemnity

4
<PAGE>

agreement contained in this paragraph with respect to any claim made against the
Fund or any person indemnified unless the Fund or such person, as the case may
be, shall have notified the Distributor in writing of the claim within a
reasonable time after the summons or other first written notification giving
information of the nature of the claim shall have been served upon the Fund or
upon such person (or after the Fund or such person shall have received notice of
such service on any designated agent). Failure to notify the Distributor of any
such claim, however, shall not relieve the Distributor from any liability the
Distributor may have to the Fund or any person against whom such action is
brought otherwise than on account of the Distributor's indemnity agreement
contained in this paragraph.

(b) The Distributor shall be entitled to participate, at its own
expense, in the defense, or, if the Distributor elects, to assume the defense,
of any suit brought to enforce any such claim, but, if the Distributor elects to
assume the defense, such defense shall be conducted by legal counsel chosen by
the Distributor and satisfactory to the Fund, to its directors, officers,
employees, or representatives, or to any controlling person or persons,
defendant or defendants, in the suit. If the Distributor elects to assume the
defense of any such suit and retain such legal counsel, the Fund, its directors,
officers, employees, representatives, or controlling person or persons,
defendant or defendants in the suit, shall bear the fees and expenses of any
additional legal counsel retained by them. If the Distributor does not elect to
assume the defense of any such suit, Distributor will reimburse the Fund, such
directors, officers, employees, representatives, or controlling person or
persons, defendant or defendants in such suit for the reasonable fees and
expenses of any legal counsel retained by them. The Distributor agrees to
notify promptly the Fund of the commencement of any litigation or proceedings
against it or any of its directors, officers, employees, or representatives in
connection with the issue or sale of any Shares.

(c) The Fund agrees to indemnify and hold harmless the Distributor
and each of its directors, officers, employees, and representatives and each
person, if any, who controls the Distributor within the meaning of Section 15 of
the Securities Act against any and all losses, liabilities, damages, claims, or
expenses (including the reasonable costs of investigating or defending any
alleged loss, liability, damage, claim, or expense and reasonable legal counsel
fees incurred in connection therewith) to which the Distributor or such
directors, officers, employees, representatives, or controlling person may
become subject under the Securities Act, under any other statute, at common law,
or otherwise, arising out of the acquisition of any Shares by any person which
(i) may be based upon any wrongful act by the Fund or any of Fund's directors,
officers, employees, or representatives or (ii) may be based upon any untrue
statement or alleged untrue statement of a material fact contained in a
registration statement, prospectus, shareholder report, or other information
covering Shares filed or made public by the Fund or any amendment thereof or
supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading if such statement or omission was made in reliance upon
information furnished to Distributor by the Fund. In no case (x) is the Fund's
indemnity in favor of the Distributor or any person indemnified to be deemed to
protect the Distributor or such indemnified person against any liability to
which the Distributor or such person would otherwise be subject by reason of
willful misfeasance, bad

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<PAGE>

faith, or gross negligence in the performance of duties or by reason of reckless
disregard of obligations and duties under this Agreement or (y) is the Fund to
be liable under its indemnity agreement contained in this paragraph with respect
to any claim made against the Distributor or person indemnified unless the
Distributor or such person, as the case may be, shall have notified the Fund in
writing of the claim within a reasonable time after the summons or other first
written notification giving information of the nature of the claim shall have
been served upon the Distributor or upon such person (or after the Distributor
or such person shall have received notice of such service on any designated
agent). Failure to notify the Fund of any such claim, however, shall not
relieve the Fund from any liability which the Fund may have to the Distributor
or any person against whom such action is brought otherwise than on account of
the Fund's indemnity agreement contained in this paragraph.

(d) The Fund shall be entitled to participate, at its own expense, in
the defense, or, if the Fund elects, to assume the defense, of any suit brought
to enforce any such claim, but, if the Fund elects to assume the defense, such
defense shall be conducted by legal counsel chosen by the Fund and satisfactory
to the Distributor, to its directors, officers, employees, or representatives,
or to any controlling person or persons, defendant or defendants, in the suit.
If the Fund elects to assume the defense of any such suit and retain such legal
counsel, the Distributor, its directors, officers, employees, representatives,
or controlling person or persons, defendant or defendants in the suit, shall
bear the fees and expenses of any additional legal counsel retained by them. If
the Fund does not elect to assume the defense of any such suit, the Fund will
reimburse the Distributor, such directors, officers, employees, representatives,
or controlling person or persons, defendant or defendants in such suit for the
reasonable fees and expenses of any legal counsel retained by them. The Fund
agrees to notify promptly the Distributor of the commencement of any litigation
or proceedings against it or any of its directors, officers, employees, or
representatives in connection with the issue or sale of any Shares.

14. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement shall
become effective upon its execution (effective date) and, unless terminated as
provided, shall remain in effect for two years from the date first set forth
above (the date of its execution) and from year to year thereafter, but only so
long as such continuance is specifically approved at least annually by the vote
of a majority of the directors of the Fund who are not interested persons of the
Distributor or of the Fund, cast in person at a meeting called for the purpose
of voting on such approval, and by vote of the directors of the Fund or of a
majority of the outstanding voting securities of the Fund. This Agreement may,
on 60 days written notice, be terminated at any time, without the payment of any
penalty, by the vote of a majority of the directors of the Fund who are not
interested persons of the Distributor or the Fund, by a vote of a majority of
the outstanding voting securities of the Fund, or by the Distributor. This
Agreement will automatically terminate in the event of its assignment. In
interpreting the provisions of this Section 14, the definitions contained in
Section 2(a) of the Investment Company Act (including the definitions of
"interested person," "assignment," and "majority of the outstanding securities")
shall be applied.

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<PAGE>

15. AMENDMENT OF THIS AGREEMENT. This Agreement may be amended, waived,
discharged, or terminated only by a written instrument signed by the party
against which enforcement of the amendment, waiver, discharge, or termination is
sought. If the Fund at any time deems it necessary or advisable in the best
interests of the Fund that any amendment of this Agreement be made to comply
with the recommendations or requirements of the SEC or other governmental
authority or to obtain any advantage under state or federal tax laws and
notifies the Distributor of the form of the amendment and the reasons therefor,
and if the Distributor declines to assent to the amendment, the Fund may
terminate this Agreement immediately without regard to the 60-day period
referred to in Section 14. If the Distributor at any time requests that a
change be made in the Fund's articles of incorporation or bylaws or in its
methods of doing business to comply with any requirements of federal law or
regulations of the SEC or of a national securities association of which the
Distributor is or may be a member relating to the sale of Shares, and the Fund
does not make such necessary change within a reasonable time, the Distributor
may terminate this Agreement immediately without regard to the 60-day period
referred to in Section 14.

16. MISCELLANEOUS. It is understood and expressly stipulated that neither
the shareholders of the Fund nor the directors of the Fund shall be personally
liable hereunder. The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement may be executed
in two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.

17. NOTICE. Any notice required or permitted to be given by either party
to the other shall be deemed sufficient if sent by registered or certified mail,
postage prepaid, addressed by the party giving notice to the other party at the
address set forth on the first page of this Agreement.

COLUMBIA INTERNATIONAL STOCK FUND, INC.

By J. JERRY INSKEEP, JR.
------------------------------------
Name: J. Jerry Inskeep, Jr.
Title: President

PROVIDENT DISTRIBUTORS, INC.

By MONROE HAEGELE
------------------------------------
Name: Monroe Haegele
Title: CEO

<PAGE>
Exhibit 8.A.
CUSTODIAN CONTRACT

COLUMBIA INTERNATIONAL STOCK FUND, INC.

This Custodian Contract made this 29th day of August, 1994, between
COLUMBIA INTERNATIONAL STOCK FUND, INC, an Oregon Corporation (hereinafter
called the "Company"), and UNITED STATES NATIONAL BANK OF OREGON, a national
banking association organized under the laws of the United States of America and
having its place of business in the City of Portland, Oregon, (hereinafter
called the "Custodian") is to become effective, except as otherwise provided
herein, on the effective date of the Registration Statement of the Company under
the Securities Act of 1933.

SECTION 1. The Company agrees to deliver to the Custodian all securities
and cash owned by it, and all dividend checks or other income, payments of
principal or capital distributions received by the Company with respect to all
securities owned by the Company from time to time and the cash consideration due
to the Company for such new stock of the Company as may be issued from time to
time.

SECTION 2. The Custodian is hereby authorized by the Company to receive,
hold and deal with, subject to the terms hereof, all securities, cash, whether
representing principal deposits or income, and property of any other nature
which will be, from time to time hereafter, delivered to it by or for the
account of the Company, or purchased with cash on deposit hereunder, exercising
the same care in the safekeeping thereof as it exercises with respect to other
accounts of similar character.

SECTION 3. The Custodian shall keep books and records of all cash
deposited hereunder, subdivided into principal and income accounts, and all
other property and securities deposited hereunder.

SECTION 4. The Custodian shall hold for the account of the Company
either in the name of the Company, the name of a nominee of the Company, the
name of the Custodian, the name of a nominee of the Custodian, in bearer
form, in a securities depository, or the Federal Reserve Book Entry System,
all securities or other property delivered to or received by it for the
account of the Company. All securities received by the Custodian may be in
"street" or other good delivery form.

SECTION 5. The Custodian shall receive and receipt for moneys due to the
Company. Funds held by the Custodian may be deposited by it to its credit as
Custodian in the Banking Department of the Custodian or in such other banks or
trust companies and in such amounts as it may in its discretion deem necessary
or desirable; provided, however, that every other bank or trust company and the
funds to be deposited with each shall be approved by vote of the Board of
Directors of the Company. Such funds shall be so deposited by the

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<PAGE>

Custodian in its capacity as Custodian and shall be withdrawable by the
Custodian only in such capacity.

SECTION 6. The Custodian is hereby appointed attorney-in-fact of the
Company to endorse for credit to the account of the Company when collected, all
checks, drafts or other orders for the payment of money drawn to, or to the
order of, the Company, or to the order of the Custodian for the account of the
Company. All cash, whether principal or income, and other assets held by the
Custodian shall be subject to written orders of the Company or its officers
and/or trustees for any of the following purposes:

a. For the purchase of securities or other property to be retained in the
custody of the Custodian, or of other property in which assets of the
Company are to be invested, provided that, in every case where payment
is made by the Custodian in advance of receipt of the securities
purchased, except as provided in Section 8 hereof or except where
authorized by resolution of the Company, the Custodian shall be
absolutely liable to the Company for such securities to the same
extent as if the securities had been received by the Custodian;

b. For the redemption of shares of capital stock of the Company;

c. For the payment of dividends or other cash distributions to
shareholders;

d. For payment of taxes, expenses, fees and other liabilities incurred in
connection with the operation of the Company including registration
and qualification costs and other expenses of issuing stock or
changing its capital structure, whether or not such expenses shall be
in whole or in part capitalized or treated as deferred expenses;

e. For the making of any disbursements authorized by the Board of
Directors pursuant to the By-Law's, copies of which shall be certified
to the Custodian by an officer of the Company, provided, however, the
Custodian shall have no duty or responsibility to determine whether
such disbursements are made in accordance with said By-Laws;

f. For the payment of any expense or liability incurred by the Company;

g. For any other purpose as herein specifically provided. All written
orders calling for the disbursement of cash shall specify the person,
firm, corporation or entity to whom payment is to be made and the
purpose for which such payment is made. The Custodian may in its
discretion without express authority from the Company make payments to
itself or others for minor expenses (defined as out of pocket expenses
for postage, insurance and similar expenses) of handling securities or
other similar items relating to

<PAGE>

its duties under this Contract, all such payments to be accounted for
to the Company.

SECTION 7. The Custodian shall collect all income and other payments with
respect to securities held hereunder as of the record date for such income or
other payments. The Custodian shall also execute ownership and other
certificates and affidavits for all Federal and State tax purposes in connection
therewith and in connection with transfers of securities. The Custodian shall
hold all such income collected by it hereunder. Without limiting the generality
of the foregoing, the Custodian shall detach and present for payment all coupons
and other income items requiring presentation as and when they become due and
shall collect dividends and interest when due on securities held hereunder.

SECTION 8. Upon receipt of an order, (to be confirmed in writing) of the
Company, or its officers and/or trustees stating that the Company has purchased
securities or other property in which assets of the Company are permitted to be
invested, specifying the securities or other transaction being consummated and
other information required by Section 6 hereof, and directing payment for such
securities or other property, the Custodian shall, insofar as it has available
funds, pay for and hold for the account of the Company any such securities or
other property described in the written order. The Custodian may not make
payments for securities or other property until receipt of such securities or
property by the Custodian except that such payments may be made in advance of
receipt of such securities or other property in connection with conversion,
exchange or surrender of securities owned or subscribed to, in connection with
subscriptions to underwritten offerings with respect to which an initial deposit
is required in order to participate in such offering, or where, as the result of
an adjudicatory proceeding advance payment is required to obtain the release of
such securities or other property. Whenever possible, confirmation of the
broker, dealer or other seller shall be furnished the Custodian.

SECTION 9. The Custodian shall release and deliver securities or other
property owned by the Company in the following cases only:

a. Upon sale of such securities for the account of the Company and
receipt of payment therefor, such delivery to be preceded by receipt
of a written order of the Company or its officers and/or trustees,
stating that the Company has sold securities or other property in
which assets of the Company are invested, specifying the securities or
property sold, the prices received therefore the broker or dealer
through whom the transaction is being consummated and other
information required by Section 6 thereof, and directing delivery of
the securities or other property on deposit with the Custodian;

b. To the issuer thereof or its agent when such securities are called,
redeemed, retired or otherwise become payable; provided that, in any
such case, the cash is to be delivered to the Custodian;

3
<PAGE>

c. To the issuer thereof or its agent for transfer in the name of the
Company or the Custodian or a nominee of either, or for exchange for a
different number of bonds or certificates representing the same
aggregate face amount or number of units; provided that, in any such
case, the new securities are to be delivered to the Custodian;

d. To the broker selling the same, for examination, in accordance with
the "street delivery" custom;

e. To a securities depository to be held for the account of the Custodian
or to a Federal Reserve Bank to be held for the Custodian in the
Federal Reserve Book Entry System;

f. Subject to receipt of a written order of the Company or its officers
and/or trustees, for exchange or conversion pursuant to any plan of
merger, consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such securities, or
pursuant to provisions for conversion contained in such securities, or
pursuant to any deposit agreement; provided that, in any such case,
the new securities and cash, if any, are to be delivered to the
Custodian;

g. Subject to receipt of a written order of the Company or its officers
and/or trustees, in the case of warrants, rights, or similar
securities, the surrender thereof in the exercise of such warrants,
rights or similar securities.

Whenever possible, confirmation of the broker or dealer shall be furnished
to the Custodian.

SECTION 10. Unless and until otherwise directed by a written order of the
Company or its officers and/or trustees, the Custodian shall:

a. Surrender securities in temporary form or interim receipts for
definitive securities;

b. Credit to the proper account of the Company all distributions received
with respect to the securities;

c. Make, execute, acknowledge and deliver any and all documents of
transfer and conveyance and any and all other instruments that may be
necessary or appropriate to carry out the powers herein granted;

d. Employ suitable agents or custodians;

4
<PAGE>

e. Notify the Company of matured and uncollected principal and interest.
Upon receipt of information with respect to investments held
hereunder, notify the Company: of securities called for redemption,
of sinking funds available for the redemption of securities, of the
expiration of conversion privileges, of the organization of protective
committees, of subscription or conversion rights, and of mergers,
consolidations, reorganizations, recapitalizations, or similar
proceedings; and

f. Do all acts, whether or not expressly authorized, which it may deem
necessary or proper for the protection of the property held hereunder.

SECTION 11. The Custodian may at any time or times in its discretion
appoint (and may at any time remove) any other bank or trust company as its
agent to carry out such of the provisions of section 6, 8, 9, and 10 of this
Contract as the Custodian may from time to time direct; provided, however, that
the appointment of such agent shall not relieve the Custodian of any of its
responsibilities hereunder.

SECTION 12. The Company shall make such arrangements with the Transfer
Agent of the Company as will enable the Custodian to receive the cash
consideration due to the Company for such new or previously issued stock as may
be issued or sold from time to time by the Company.

SECTION 13. The Company agrees to furnish the Custodian all instruments
necessary to enable the Custodian to carry out the foregoing instructions with
respect to collection of income on securities registered in the name of the
Company, or its nominee.

SECTION 14. The Custodian agrees to prepare and deliver to the Company
all such statements and reports with respect to income and principal of the
account as shall be reasonably required, but shall not be required to prepare
income or other tax returns with respect to the securities of the Company, or
the income received thereon, and agrees to use its best efforts to carry out the
written orders of the Company or its officers and/or trustees, but it shall have
no duty to take any action in any way relating to the account except as herein
provided or to determine the proper application of any disbursement of cash made
on receipt of a written order or resolution.

SECTION 15. When instructed by the Company or its officers and/or
trustees, the Custodian shall deliver to the Transfer Agent or the Company,
checks or funds in the amount of the redemption price which will be based on the
net asset value of the shares redeemed.

SECTION 16. Upon receipt of a written order of the Company specifying:

a. The amount of cash or securities or both, payable or distributable as
dividends or other distributions to the shareholders, and

5
<PAGE>

b. That all necessary action authorizing such payment or distribution has
been taken in accordance with the By-Laws of the Company;

accompanied by a certified copy of resolution of the company or the officers
and/or trustees authorizing such payment or distribution and establishing record
and payment dates, the Custodian shall pay and deliver to the Company, or the
dividend disbursing agent of the Company checks or funds for amounts so
certified to be payable and distributable as dividends or other distributions.

SECTION 17. As soon as possible after and as of the close of business
each day on which transactions in the custodian account occur, the Custodian
shall transmit to the Company advice's which shall show:

a. All cash received and disbursed;

b. All securities received and the prices paid therefor;

c. All securities sold and delivered and the prices received therefor;

d. All other transactions and the cash, securities and other property,
paid or delivered, received or credited, in connection therewith.

Additionally, the Custodian shall furnish a monthly statement reflecting all
transactions in the account to the Company.

SECTION 18. The Custodian shall have no duty or responsibility whatsoever
relating to moneys, securities or other property received by the Company and not
deposited with the Custodian.

The Custodian shall not be liable to anyone, except such liability as may
be expressly assumed under this Contract, for any act or omission of the
Company, or of any agent of the Company designated by two or more of its
officers and/or trustees, or for any decision or act or omission to act or
anything whatsoever in connection with this Contract, except its own willful
default or gross negligence.

The Custodian may at the expense of the Company consult with the legal
counsel representing the Company and shall not be liable for any action taken or
suffered in good faith in accordance with the opinion of such counsel.

Any of this Custodian Contract notwithstanding, the Custodian shall not be
required to take any action, even when so directed by the Company, or to do
anything which, in the opinion of the Custodian, shall be likely to involve it
in any liability, loss or expense, unless the Custodian shall first receive
security or indemnity in form and amount satisfactory to it against any and all
such liability, loss or expense.

6
<PAGE>

The Custodian shall not incur any personal liability of any nature in
connection with any act done or omitted to be done in good faith in the
administration of this account or in carrying out any directions of the Company
or its officers and/or trustees issued in accordance with this Contract, and the
Custodian shall be indemnified and saved harmless by the Company from and
against any and all such personal liability to which the Custodian may be
subjected by reason of any such act or conduct in its official capacity,
including all expenses reasonably incurred in its defense in case the Company
fails to provide such defense, unless such act or conduct is the result of the
Custodian's own negligence, willful misconduct or lack of good faith.

SECTION 19. The Custodian shall be entitled to compensation for its
services as agreed upon by the Company and the Custodian from time to time as
set forth in EXHIBIT A attached hereto.

SECTION 20. Upon receipt of notice from the Company or a shareholder that
a check issued by the Custodian pursuant to this Contract has not been received
by the payee thereof, or has been lost or misplaced by said payee, the Custodian
shall issue a new check on receipt of such indemnity as it may reasonably
require.

SECTION 21. From time to time special situations, not contemplated under
the terms of this Contract, may arise. An officer of the Company and the
Custodian will then negotiate as to the acts to be performed and the
compensation to be paid in such situations.

SECTION 22. This contract shall be effective as of its execution, and
shall continue in full force and effect until terminated as hereinafter
provided, may be amended at any time by mutual agreement of the parties hereto
and may be terminated by either party by an instrument in writing delivered or
mailed, postage prepaid, to the other party, such termination to take effect not
sooner than sixty (60) days after date of such delivery or mailing; provided,
however, that the Company shall not amend or terminate this Contract in
contravention of any applicable Federal or State regulations, or any provision
of the By-Laws of the Company as the same may from time to time be amended and
further provided that the Company may at any time by action of its Board of
Directors substitute another bank or trust company for the Custodian by giving
notice as above to the Custodian.

In connection with the operations of this Contract, the Custodian and the
Company may agree from time to time on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract, any such interpretive or
additional provisions to be signed by both parties and annexed hereto, provided
that the Company shall not agree to any such interpretive or additional
provisions which shall contravene any applicable Federal or State regulations,
or any provision of the By-Laws as the same may from time to time be amended.

7
<PAGE>

SECTION 23. Upon termination hereof the Company shall pay to the
Custodian such compensation as may be due as of the date of such termination and
shall likewise reimburse the Custodian for its costs, expenses and
disbursements.

If a successor Custodian is appointed by the Board of Directors, the
Custodian shall, upon termination, deliver to such successor Custodian at the
office of the Custodian, duly endorsed and in form for transfer, all securities
then held hereunder and all funds or other properties of the Company deposited
with or held by it hereunder.

If no such successor Custodian is appointed, the Custodian shall, in like
manner, at its office, upon receipt of a certified copy of a vote of the Board
of Trustees, deliver such securities, funds and other properties in accordance
with such vote.

In the event that no written order designating a successor Custodian or
certified copy of a vote of the Board of Directors shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company of its own selection, having an aggregate capital, surplus, and
undivided profits, as shown by its last published report of not less than
$2,000,000 all securities, funds and other properties held by the Custodian and
all instruments held by it relative thereto and all other property held by it
under this Contract.

In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Board of Trustees to procure the certified copy above referred
to, or to appoint a successor Custodian, the Custodian shall be entitled to fair
compensation for its services during such period and the provisions of this
Contract relating to the duties and obligations of the Custodian shall remain in
full force and effect.

SECTION 24. Any written order to be given to the Custodian by the Company
shall be signed by any two of its officers and/or trustees. The Company will
certify to the Custodian the names of the officers and trustees and any change
therein, and the Custodian shall not be charged with knowledge thereof until it
receives such certification. No written order of the Company shall direct
payment of any money or delivery of any securities to the Company, or shall
direct payment of money or delivery of securities for purposes not specifically
set forth in this Contract, unless accompanied by a copy of a resolution of the
Board of Directors, specifying the amount of such payment or the securities to
be delivered, the purpose for which the payment or delivery is made declaring
such purpose to be a proper company purpose and naming the person or persons to
whom such payment or delivery is to be made.

Custodian shall not be liable for any action taken by it when directed in
writing as herein provided and may rely on continuance in office of any person
until otherwise notified in writing.

8
<PAGE>

SECTION 25. Evidence required of anyone under this Contract may be by
certificate, affidavit, endorsement or any other written instrument which the
person acting in reliance thereon believes to be pertinent, reliable and
genuine, and to have been signed, made or presented by the proper and duly
authorized party or parties.

Whenever the Custodian shall deem it necessary that a matter be proved
prior to taking, suffering or omitting any action, such matter shall be deemed
to be conclusively proved by the certificate of any two officers or trustees
delivered to the Custodian, but the Custodian, in its discretion, may in lieu of
such certification accept, or may require such other or further evidence as it
may deem necessary or sufficient.

SECTION 26. This Contract shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the state of Oregon.

SECTION 27. Nothing contained in the By-Laws of the Company except as
specifically set forth in this Contract shall be deemed to impose any powers,
duties or responsibilities on the Custodian other than those set forth in this
Contract. The Company, by any one of its officers will certify to the Custodian
any changes in the By-Laws of the Company and the Custodian shall not be charged
with knowledge thereof until it receives such certification. The Company
warrants that no directions, orders, instructions, notices or certificates shall
be issued to the Custodian by an officer or trustee other than in accordance
with the terms and provisions of the By-Laws of the Company, and the Custodian
shall have no duty to question the authority for or the propriety of any such
directions, orders, instructions, notices or certificates.

Nothing herein contained, however, shall be construed to relieve the
Custodian from faithfully performing its duties under this Contract, and the
Custodian shall be responsible for any action taken by it not in accordance with
this Contract.

SECTION 28. All directions, orders, instructions, notices, accountings,
reports and other written communications required to be given under this
Contract shall be addressed to the parties at their respective addresses shown
below or such other addresses as each may hereafter designate in writing
delivered to the other:

IN WITNESS WHEREOF, the parties hereto have caused this Contract to be
signed by their duly authorized officers;

COLUMBIA INTERNATIONAL STOCK FUND, INC.

By: GEORGE L. HANSETH
-----------------------------
Senior Vice President
1300 S. W. Sixth Avenue
Portland, OR 97201

9
<PAGE>
UNITED STATES NATIONAL BANK OF OREGON

By: RUTH TAYLOR
-----------------
Vice President
555 S. W. Oak
Portland, OR 97204

10
<PAGE>
TRUST CUSTODY SERVICES
- --------------------------------------------------------------------------------
U.S. BANK

COLUMBIA INTERNATIONAL STOCK FUND, INC.

2417000

Annual Minimum Fee: $2,5000.00

Market Value: .00004

Security Transactions: $12.50

Miscellaneous Charges:

All out-of-pocket expenses including telephone, postage, express mail, Federal
Express, transfer fees, messenger services global settlement fees, global
holding charges by other banks, charges made by other banks or Federal Reserve
Bank.

Fees will be calculated monthly and charged against account assets. A summary
of fee's taken will also be provided to the Client for review.

The above fee schedule is guaranteed for a period of two years.

Effective December 1, 1995

#56889

<PAGE>
Exhibit 8.B.

MSTC
Custody Agreement
August 1992

CUSTODY AGREEMENT

Custody Agreement, dated August 6, 1992, between MORGAN STANLEY TRUST
COMPANY (the "Custodian") and Columbia International Stock Fund, Inc. (the
"Customer").

1. The Customer hereby appoints the Custodian as a custodian of Securities
(as hereinafter defined) owned or held by the Customer and instructs the
Custodian to establish an account identified as belonging to the Customer (the
"Account). The Custodian shall have general responsibility for the safekeeping
of such Securities and any and all monies and other property (collectively, the
"Property") received by the Custodian or any Subcustodian appointed as described
below for the account of the Customer. It is understood that the specific
procedures the Custodian will use in carrying out its responsibilities under
this Agreement are set forth in the procedures manual attached hereto as Exhibit
A (the "Procedures Manual"), as such Procedures Manual may be amended from time
to time by written agreement between the Custodian and the Customer. The
Customer acknowledges that the Procedures Manual constitutes an integral part of
this Agreement.

2. The Customer agrees that the Property held for the Customer's account
may be physically held outside the United States.

3. The Property held in the Account may be held in custody and deposit
accounts that have been established by the Custodian with one or more domestic
banks qualified under the Investment Act of 1940, as amended (the "Act"), to act
as a custodian, or foreign banks meeting the requirements of rule 17f-5 under
the Act or through the facilities of one or more clearing agencies or central
securities depositories, permitted by rule 17f-4 under the Act, in each case
approved by the Customer's Board of Directors, as listed on Exhibit C hereto
(the "Subcustodians"), as such Exhibit may be amended from time to time by
written agreement between the Custodian and the Customer. The Custodian may
hold Property for all of its customers with a Subcustodian in a single account
that is identified as belonging to the Custodian for the benefit of its
customers. Any Subcustodian may hold Property in a securities depository and
may utilize a clearing agency. The Custodian shall not be liable for any loss
resulting from the physical presence of any Property in a foreign country
including,

1
<PAGE>

but not limited to, losses resulting from nationalization, expropriation,
exchange controls or acts of war or terrorism. Except as provided in the
previous sentence, the liability of the Custodian for losses incurred by the
Customer in respect of Property held by the Custodian for the Customer's account
shall not be affected by the Custodian's use of Subcustodians.

4. With respect to Property held by a Subcustodian pursuant to Section 3:

(a) The Custodian will identify on its books as belonging to the Customer
any Property held by such Subcustodian for the Custodian's account;

(b) In the event that the Subcustodian holds Property in a securities
depository or clearing agency, such Subcustodian will be required by its
agreement with the Custodian to identify on its books such Property as being
held for the account of the Custodian as a custodian for its customers;

(c) The Custodian shall require that Property held by the Subcustodian for
the Custodian's account be identified on the Subcustodian's books as separate
from any property held by the Subcustodian and as held solely for the benefit of
customers of the Custodian; and

(d) The Custodian will hold Property through a Subcustodian only if (i)
such Subcustodian and any securities depository or clearing agency in which such
Subcustodian holds Property, or any of their creditors, may not assert any
right, charge, security interest, lien, encumbrance or other claim of any kind
to such Property except a claim of payment for its safe custody or
administration and (ii) beneficial ownership of such Property may be freely
transferred without the payment of money or value other than for safe custody or
administration.

5. The Custodian shall allow the Customer's accountants reasonable access
to the Custodian's records relating to the Property held by the Custodian as
such accountants may reasonably require in connection with their examination of
the Customer's affairs and/or confirmation of the contents of these records.
The Custodian shall also obtain from any Subcustodian (and will require each
Subcustodian to obtain from any securities depository or clearing agency in
which it deposits Property) an undertaking, to the extent consistent and the
laws of the jurisdiction or jurisdictions to which such Subcustodian, securities
depository or clearing agency is subject, to permit independent public
accountants such reasonable access to the records of such Subcustodian,
securities depository or clearing agency or confirmation of the contents thereof
as may be reasonably required in connection with the examination of the
Customer's affairs or to take such other action as the Custodian in its judgment
may deem sufficient to ensure such reasonable access.

6. The Custodian shall provide such reports and other information to the
Customer as the Custodian and the Customer may agree from time to time including
but not limited to an

2
<PAGE>

identification of entities having possession of Property of the Customer and
notification of any transfer to or from each account maintained by a foreign
Subcustodian for the Custodian on behalf of the Customer.

7. The Custodian shall make or cause any Subcustodian to make payments
from monies being held in the Customer's account, except as provided in Section
9 hereof, only

(a) upon the purchase of Eligible Securities for the account of the
Customer and then only upon the delivery of such Eligible Securities;

(b) for payments to be made in connection with the conversion, exchange or
surrender of Eligible Securities in the Customer's account;

(d) upon termination of this Custody Agreement as hereinafter set forth;
and;

(e) for any other purpose upon receipt of explicit instructions of the
Customer accompanied by evidence reasonably acceptable to the Custodian as to
the authorization of such payment.

Except as provided in the last sentence of this Section 7, all payments
pursuant to this Section 7 will be made only upon receipt by the Custodian of
Authorized Instructions (as hereinafter defined) of the Customer which shall
specify the purpose for which the payment is to be made. In the event that it
is not possible to make a payment in accordance with Authorized Instructions of
the Customer, the Custodian shall proceed in accordance with the procedures set
forth in the Procedures Manual. Any payment pursuant to subsection (d) of this
Section 7 will be made in accordance with Section 14.

8. Eligible Securities held for the Customer's account will be
transferred, exchanged or delivered by the Custodian or a Subcustodian, except
as provided in Section 9 hereof, only

(a) upon sale of such Eligible Securities for the account of the Customer
and then only upon receipt of payment therefor;

(b) upon exercise of conversion, subscription, purchase or other similar
rights represented by such Eligible Securities;

(c) in the case of warrants, rights or similar securities, upon the
surrender thereof in the exercise of such warrants, rights or similar
securities;

(d) for delivery in connection with any loans of securities made by the
Customer, but only against receipt of such collateral as agreed upon from time
to time by the Custodian and the Customer;

(e) upon the termination of this Custody Agreement as hereinafter set
forth; and

3
<PAGE>

(f) for any other purpose upon receipt of explicit instructions of the
Customer accompanied by evidence reasonably acceptable to the Custodian as to
the authorization of such transfer, exchange or delivery.

Except as provided in the last sentence of this Section 8, all transfers,
exchanges or deliveries of Eligible Securities in the Customer's account
pursuant to this Section 8 will be made only upon receipt by the Custodian of
Authorized Instructions of the Customer which shall specify the purpose for
which the transfer, exchange or delivery is to be made. In the event that it is
not possible to transfer Eligible Securities in accordance with Authorized
Instructions of the Customer, the Custodian shall proceed in accordance with the
procedures set forth in the Procedures Manual. Any transfer or delivery pursuant
to subsection (e) of this Section 8 will be made in accordance with Section 14.

9. In the absence of Authorized Instructions from the Customer to the
contrary, the Custodian may, and it may authorize any subcustodian to:

(a) make payments to itself or others for reasonable expenses of handling
Property or other similar items relating to its duties under this Agreement,
provided that all such payments shall be accounted for to the Customer;

(b) receive and collect all income and principal with respect to Eligible
Securities in the Customer's account and to credit cash receipts to the
Customer's account;

(c) exchange securities when the exchange is purely ministerial
(including, without limitation, the exchange of interim receipts or temporary
securities for securities in definitive form and the exchange of warrants, or
other documents of entitlement to securities, for the securities themselves);

(d) surrender Eligible Securities in the Customer's account at maturity or
when called for redemption upon receiving payment therefor;

(e) execute in the Customer's name such ownership and other certificates
as may be required to obtain the payment of income from Eligible Securities held
in the Customer's account;

(f) pay or cause to be paid, from the Customer's account, any and all
taxes and levies in the nature of taxes imposed on Property in the Customer's
account by any governmental authority in connection with transactions in such
Property;

(g) endorse for collection, in the name of the Customer, checks, drafts
and other negotiable instruments; and

(h) in general, attend to all nondiscretionary details in connection with
the sale, purchase, transfer and other dealings with the Property held for the
Customer's account by the Custodian or by a Subcustodian, except as otherwise
directed by the Customer.

4
<PAGE>

10. "Authorized Instructions" of the Customer shall mean instructions
received by tested telex or telecopy or by such other means as may be agreed in
writing between the Customer and the Custodian. Unless otherwise specified in
this Agreement, the Custodian shall be entitled to act, and shall have no
liability for acting upon any instructions, notice, request, consent,
certificate or other instrument or paper reasonably believed by it to be genuine
and to have been properly executed by or on behalf of the Customer.

11. Eligible Securities held for the Customer's account which must be held
in registered form may be registered in the name of the Custodian's nominee or,
in the case of Eligible Securities in the custody of an entity other than the
Custodian, in the name of such entity's nominee. The Customer agrees to hold
any such nominee harmless from any liability as a holder of record of such
Eligible Securities. The Custodian may without notice to the Customer cause any
such Eligible Securities to cease to be registered in the name of any such
nominee and to be registered in the name of the Customer.

12. The Custodian shall be responsible for the performance of only such
duties as are set forth in this Agreement or the Procedures Manual or contained
in Authorized Instructions given to the Custodian which are not contrary to the
provisions of any relevant law or regulation or of this Agreement or the
Procedures Manual. The Custodian shall hold harmless and indemnify the Customer
from and against any loss, damage, cost, expense, liability or claim arising out
of the Custodian's negligent or willful failure to comply with the terms of this
Agreement or arising out of the Customer's negligence or willful misconduct.

13. The Customer agrees to pay to the Custodian from time to time such
compensation for its services pursuant to this agreement as may be mutually
agreed upon from time to time and the Custodian's reasonable out-of-pocket or
incidental expenses. The Customer hereby agrees to hold the Custodian harmless
from any liability or loss resulting from any taxes or other governmental
charges, and any expenses related thereto, which may be imposed or assessed with
respect to the Customer's account or any Property held therein and also agrees
to hold the Custodian, any Subcustodians, and their respective nominees harmless
from any liability as a record holder of Eligible Securities in the Customer's
account. The Custodian is and any Subcustodians are authorized to charge any
account of the Customer for such items and the Custodian shall have a lien on
any and all Property in the Customer's account for any amount owing to the
Custodian for safe custody or administration from time to time under this
Agreement

14. This Agreement may be terminated by the Customer or the Custodian by
60 days written notice to the other, sent by registered mail. If notice of
termination is given, the Customer shall, within 15 days following the giving of
such notice, deliver to the Custodian a

5
<PAGE>

statement in writing specifying the successor custodian or other person to whom
the Custodian shall transfer the Property in the Customer's account. In either
event the Custodian, subject to the satisfaction of any lien it may have, will
transfer such Property to the person so specified. If the Custodian does not
receive such statement the Custodian, at its election, may transfer such
Property to a bank or trust company established under the laws of the United
States or any state thereof to be held and disposed of pursuant to the
provisions of this Agreement or may continue to hold such Property until such a
statement is delivered to the Custodian. In such event the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian remains in possession of any Property and the provisions of this
Agreement relating to the duties and obligations of the Custodian shall remain
in full force and effect; provided, however, that the Custodian shall no longer
settle any transactions in securities for the Customer's account.

15. The Custodian, its agents and employees will maintain the
confidentiality of information concerning the Property held in the Customer's
account, including in dealings with affiliates of the Custodian. In the event
the Custodian or any Subcustodian is requested or required to disclose any
confidential information concerning the Property, the Custodian shall promptly
notify the Customer of such request or requirement so that the Customer may seek
a protective order or waive the Custodian's or such Subcustodian's compliance
with this Section 15. In the absence of such a waiver, if the Custodian or such
Subcustodian is compelled, in the opinion of its counsel, to disclose any
confidential information, the Custodian or such Subcustodian may disclose such
information to such persons as, in the opinion of counsel, is so required.

16. Any notice or other communication from the Customer to the Custodian,
unless otherwise provided by this Agreement, shall be sent by certified or
registered mail to Morgan Stanley Trust Company, One Pierrepont Plaza, Brooklyn,
New York, 11201, Attention: Vice President, and any notice from the Custodian
to the Customer is to be mailed postage prepaid, addressed to the Customer at
the address appearing below, or as it may hereafter be changed on the
Custodian's records in accordance with notice from the Customer.

17. The Custodian may assign all of its rights and obligations hereunder
to any other entity which is qualified to act as custodian under the terms of
this Agreement and majority-owned, directly or indirectly, by Morgan Stanley
Group Inc., and upon the assumption of the rights and obligations hereunder by
such entity, such entity shall succeed to all of the rights and obligations of,
and be substituted for, the Custodian hereunder as if such entity had been

<PAGE>

originally named as custodian herein. The Custodian shall give prompt written
notice to the Customer upon the effectiveness of any such assignment.

This Agreement shall bind the successors and assigns of the Customer and
the Custodian and shall be governed by the laws of the State of New York.

COLUMBIA INTERNATIONAL STOCK FUND, INC.

By GEORGE L. HANSETH
--------------------------------
Name: George L. Hanseth
Title: Senior Vice President

1301 SW Fifth Ave
Address for record: Portland, Oregon
97207

Accepted:

MORGAN STANLEY TRUST COMPANY

By J. ROBERTS
-------------------------------
Authorized Signature

7
<PAGE>
PROPOSED FEE SCHEDULE - PAGE 1 OF 2

COLUMBIA INTERNATIONAL STOCK FUND, INC.

This letter describes Morgan Stanley Trust Company's ("Morgan Stanley")
compensation under this revised fee schedule dated April 1, 1992.

Morgan Stanley's compensation shall be as follows:

<TABLE>
<CAPTION>
Transaction BP Custody
County/ Fee Fee
Product US dollars Basis Points
- ------- ---------- ------------
<S> <C> <C>
Australia 75 14
Austria 50 11
Belgium 50 11
Canada 75 8
Denmark 35 14
Finland 35 20
France 75 15
Germany 35 8
Hong Kong 75 15
Ireland 80 12
Italy 80 12
Japan 30 6
Malaysia 100 15
Mexico 125 30
Netherlands 50 12
New Zealand 75 15
Norway 35 10
Singapore 80 12
South Africa 75 9
Spain 80 21
Sweden 50 11
Switzerland 35 12
United Kingdom 50 10
United States 35 4
Eurobonds 35 6
Euro CDs $120 per CD/month
</TABLE>

Transactions are defined in the Morgan Stanley Trust Company Billing Guide, as
is the method of calculating custody.

8
<PAGE>

PROPOSED FEE SCHEDULE - PAGE 2 OF 2

COLUMBIA INTERNATIONAL STOCK FUND, INC.

All new business will be separately negotiated. You are requested to contact
your client executive if you are trading in new countries or in new products.

In-Kind transactions will not be charged.

Cash movements will not be charged.

Registration/transfer fees will be charged where incurred by Morgan Stanley.

Stamp taxes/duties will be charged where incurred by Morgan Stanley.

All fees are calculated and billed monthly arrears. Payment terms are as
specified in your Billing Guide.

The fees are due for renegotiation two years from the date of the Agreement and
they will remain effective until renegotiation is complete.

MSTC agrees to limit the transaction fees charged to Columbia International
Stock Fund, Inc. (the Fund) to 100 per month for the first three months
following the launch date of the Fund. Beyond the third month MSTC will resume
charging for all transactions as described in your Billing Guide.

Signed on Behalf of Morgan Stanley J. ROBERTS
-------------------------

Signed on Behalf of Columbia International
Stock Fund, Inc. GEORGE L. HANSETH
-------------------------

9
<PAGE>
Appendix A

CURRENT FEE SCHEDULE FOR COLUMBIA INTERNATIONAL STOCK FUND, INC.

This letter describes Morgan Stanley Trust Company's ("Morgan Stanley")
compensation under this revised fee schedule dated June 7, 1993 with Columbia
International Stock Fund, Inc.

Morgan Stanley's compensation shall be as follows:

<TABLE>
<CAPTION>
Transaction Custody Rate
County/Product Rate (Basis Points)
- --------------- ---- --------------
<S> <C> <C>
Australia $75 14
Austria $50 11
Belgium $50 11
Canada $75 8
Denmark $35 14
Finland $35 20
France $75 15
Germany $35 8
Hong Kong $75 15
Ireland $80 12
Italy $80 12
Japan $30 6
Malaysia $100 15
Mexico $125 30
Netherlands $50 12
New Zealand $75 15
Norway $35 10
Singapore $80 12
South Africa $75 9
Spain $80 21
Sweden $50 11
Switzerland $35 12
United Kingdom $50 10
United States $35 4
Eurobonds $35 6
Euro CDs $120 per CD/month
</TABLE>

Transactions are defined in the Morgan Stanley Trust Company Billing Guide, as
is the method of calculating custody.

All new business will be separately negotiated. You are requested to contact
your client executive if you are trading in new countries or in new products.
If your customer executive is not notified ahead of time, you will charged at
the MSTC generic rates for each respective new country / new product.

In-Kind transactions will not be charged.

10
<PAGE>
Appendix A

COLUMBIA INTERNATIONAL STOCK FUND, INC.

Cash movements will not be charged.

Registration/transfer fees will be charged where incurred by Morgan Stanley.

Stamp taxes/duties will be charged where incurred by Morgan Stanley.

All fees are calculated and billed monthly in arrears.

The fees are due for renegotiation two years from the date of the Agreement, and
they will remain effective until renegotiation is complete.

For further assistance, please contact Lee William, your customer executive, at
(718) 754-2734, or Alice Malina, your billing representative, at (718) 754-2704.

11
<PAGE>

MORGAN STANLEY TRUST COMPANY
MARKET COVERAGE/CENTRAL DEPOSITORY LIST
APRIL 1993
<TABLE>
<CAPTION>

COUNTRY AGENT CENTRAL DEPOSITORY
- -------- ------ -------------------
<S> <C> <C>
Argentina Citibank N.A. Caja de Valores
Australia Australia and New Zealand CHESS**
Bank
Austria Euroclear OKB
Belgium Banque Bruxellas Lambert CIK
Brazil Banco de Boston BOVESPA
Rio de Janeiro Stock Exchange
Canada Toronta Dominion Bank CDS
Chile Citibank N.A. N/A
China Hongkong & Shanghai Bank.
Corp.
Shenzhen Exchange: Citibank, N.A.
Standard Chartered Bank
Hongkong & Shanghai Bank,
Corp.
Shanghia Exchange: Shanghai Exchange
Colombia Cititrust N/A
Denmark Euroclear VP
Finland Euroclear N/A
France Banque Indosuez SICOVAM
Germany BHF Bank DKV
Greece Citibank N.A. N/A
Hong Kong Hongkong & Shanghai Bank. CCASS
Corp.
Hungary Euroclear (see Austria) OKB
Citibank Budapest N/A
India* Hongkong & Shanghai Bank. N/A
Corp.
Indonesia Hongkong & Shanghai Bank. N/A
Corp.
Ireland Allied Irish Bank N/A
Israel Bank Hapoalim SECH
Italy Barclays Bank Monte Titoli S.p.A.
Japan Morgan Stanley JASDEC
International
Mutual Fund Clients: Mitsubishi Bank Ltd
Jordan Arab Bank N/A
Korea Standard Chartered Bank KCD
Malaysia Oversea Chinese Banking MCD**
Corp.
Mexico Citibank N.A. S.D. Indeval
Netherlands ABN Amro Bank NECIGEF
New Zealand Bank of New Zealand N/A
Norway Euroclear VPS
Registered Shares: Christiana Bank
</TABLE>

12
<PAGE>

COUNTRY AGENT CENTRAL DEPOSITORY
- -------- ------- -------------------
<S> <C> <C>
Pakistan Standard Chartered Bank SCD**
Peru Citibank N.A. N/A
Philippines Hongkong & Shanghai Bank. N/A
Corp.
Poland Bank Polska Kasa Opieki NDS
S.A.
Mutual Fund Clients: Citibank NDS
Portugal Banco Commercial Portugues N/A
Singapore Oversea Chinese Banking CDP
Corp.
Spain Banco Santander SCLV
Sri Lanka Hongkong & Shanghai Bank. CDS
Corp.
Sweden Euroclear VPC
Switzerland JP Morgan SEGA
Taiwan* Hongkong & Shanghai Bank. TSCD
Corp.
Thailand Standard Chartered Bank SDC
Turkey Citibank N.A. N/A
United Kingdom Barclays Bank PLC N/A
USA DTC DTC
National Westminster N/A
Uruguay Citibank N.A. N/A
Venezuela Citibank N.A. N/A
</TABLE>

*Not operational until sub-custody agreement is secured.
**These central depositories are not in operation as of yet.

13
<PAGE>

GUIDE TO CENTRAL DEPOSITORY ABBREVIATIONS

Country Mnemonic Central Depository
- --------- -------- ------------------
<S> <C> <C>
Australia** CHESS Clearing House Electronic Subregister System
Austria OKB OsterreicheKontrollbank
Belgium CIK Caisse Interprofesionelle de Depots et de
Virements de Tires
Brazil BOVESPA Sao Paulo Stock Exchange
Canada CDS The Canadian Depository for Securities
Denmark VP Vaerdipapircentralen
French SICOVAM Societe Interprofessionelle pour la Compensation
des Valeurs Mobillere
Germany DKV Deutscher Kassenverein AG
Hong Kong CCASS Central Clearing and Settlement System
Hungary OKB OsterreicheKontrollbank (of Austria)
Israel SECH Stock Exchange Clearing House
Japan JASDEC Japan Securities Depository Center
Korea KCD Korean Central Depository
Malaysia** MCD* Malaysian Central Depository
Netherlands NECIGEF Netherlands Central Institute for Giral
Effectenclearing
Norway VPS Verdipapirsentralen
Pakistan** SCD Securities Central Depository Co.
Poland NDS National Directory of Securities
Singapore CDP Central Depository Pte Ltd.
Spain SCLV Serviclo de Compensacion Liquidacion de Valores
Sri Lanka CDS Central Depository System Pvt Ltd
Sweden VPC Vardipapperscentralen
Switzerland SEGA Schweizerische EffektenGiro AG
Taiwan* TSCD Taiwan Securities Depository Co.
Thailand SCD Share Depository Center
</TABLE>

*Not operational until sub-custody agreement is secured.
**These central depositories are not in operation as of yet.

<PAGE>
EXHIBIT 9

COLUMBIA INTERNATIONAL STOCK FUND, INC.

TRANSFER AGENT AGREEMENT

December 10, 1997

This Agreement is made between COLUMBIA INTERNATIONAL STOCK FUND, INC.
("Fund"), an Oregon corporation, and COLUMBIA TRUST COMPANY ("Agent"), an Oregon
corporation.

Fund is an investment company registered under the Investment Company
Act of 1940, as amended (the "1940 Act"), whose shares are registered for sale
under the Securities Act of 1933, as amended (the "1933 Act"); and

Fund desires to have Agent serve as transfer agent and dividend
disbursing agent for Fund, and Agent is willing to serve as transfer agent and
dividend disbursing agent for Fund.

NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, Fund and Agent agree as follows:

1. APPOINTMENT. Fund hereby appoints Agent as transfer agent for the
shares of the Fund, as described in the Articles of Incorporation of the Fund,
(the "Stock") and dividend disbursing agent for Fund, and Agent agrees to serve
as transfer agent and dividend disbursing agent under the terms and conditions
hereinafter set forth.

2. DOCUMENTS. Fund has furnished Agent copies of Fund's Articles of
Incorporation, investment advisory contract, custodian contract, all account
application forms, and other documents relating to shareholders' accounts and a
certified copy of the resolutions of Fund's Board of Directors adopting Fund's
form of stock certificate and approving the appointment of Agent hereunder.
Fund shall furnish promptly to Agent a copy of any amendment or supplement to
the above-mentioned documents and any additional documents necessary for Agent
to perform its functions hereunder.

3. AUTHORIZED SHARES. Fund certifies to Agent that, as of the date
hereof, Fund is authorized to issue 100,000,000 shares.

4. SERVICES TO BE PERFORMED. Agent shall be responsible for performing
the duties of transfer agent and dividend disbursing agent for Fund, which
duties are more fully set forth in Schedule A to this Agreement. All computer
programs and procedures developed by Agent to perform services required under
this Agreement shall remain the exclusive property of Agent.

5. MAINTENANCE OF RECORDS; CONFIDENTIALITY. All records maintained by
Agent as required on Schedule A shall remain the exclusive property of Fund and
shall be preserved and retained by Agent while this Agreement remains in effect.
Agent shall make available

1
<PAGE>

during regular business hours all records and other data created and maintained
pursuant to this Agreement for reasonable audit and inspection by the Fund or
any person retained by Fund. Agent shall treat all records and other
information with respect to Fund with confidence.

6. COMPENSATION. As compensation for the performance of the services
described in parts I and II of Schedule A, Agent shall receive from Fund a per
account fee in the amount set forth in Schedule B. These fees will be charged
for any account in existence during any part of a month, and the fees will be
charged for any part of a month preceding termination of this Agreement. As
compensation for the performance of extra charge services described in part III
of Schedule A, Agent shall be paid by Fund at the rates listed on Schedule B.
Upon request of the Agent, the hourly rates listed on Schedule B may be
adjusted, subject to approval by the Fund's Board of Directors in accordance
with paragraph 17.

7. EXPENSES. Fund agrees to pay directly or reimburse Agent for
postage and the procurement or printing of share certificates, statements,
envelopes, checks, reports, tax forms, proxies, or other forms of printed
material required in the performance of its services to Fund under this
Agreement, and Agent agrees that Fund may purchase these materials directly
for use by Agent, subject to prior approval by Agent as to the compatibility
of any materials with Agent's data processing equipment. Fund agrees to pay
directly or reimburse Agent for all freight and other delivery charges and
insurance or bonding charges incurred by Agent in delivering certificates to
shareholders and any and all other out-of-pocket expenses and charges
incurred by Agent in performing services under this Agreement.

8. MONTHLY STATEMENT. At the end of each month during the term of this
Agreement and upon termination of this Agreement, Agent will render an itemized
statement to Fund for its fees and expenses under this Agreement. Payment by
Fund is due 10 days from the date the statement is received.

9. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.

9.1 Agent represents that it is registered with the Securities and
Exchange Commission as a transfer agent under Section 17A of the Securities
Exchange Act of 1934, as amended, and will notify the Fund promptly if its
registration is revoked or if any proceeding is commenced before the Securities
and Exchange Commission which may lead to revocation. Agent shall be
responsible for compliance with all laws, rules, and regulations of governmental
authorities having jurisdiction over transfer agents and their activities.

9.2 Except for the accuracy of information furnished to Fund by
Agent, Fund assumes full responsibility for the preparation, contents, and
distribution of its prospectuses and for compliance with all applicable
requirements of the 1933 Act, the 1940 Act, and any other laws, rules, or
regulations of governmental authorities with jurisdiction over Fund.

2
<PAGE>

10. REFERENCES TO AGENT. Fund shall not circulate any printed matter
that contains any reference to Agent without the prior written approval of
Agent, except printed matter that identifies Agent as transfer agent and
dividend disbursing agent for Fund.

11. ACTS OF GOD, NATIONAL EMERGENCY, ETC. Agent shall not be liable for
loss of data, delays, or errors occurring by reason of circumstances beyond its
control, including but not limited to acts of civil or military authority,
national emergencies, fire, flood, catastrophe, acts of God, insurrection, war,
riot, failure of transportation, communication, or power supply, or machine
breakdown. Agent shall use its best efforts to minimize the likelihood of
damage, loss of data, delays, or errors resulting from such uncontrollable
events, and if damage, loss of data, delays, or errors occur, Agent shall use
its best efforts to mitigate the effects of the occurrence.

12. STANDARD OF CARE. Agent shall at all times act in good faith and use
its best efforts within reasonable limits to insure the accuracy of all services
performed under this Agreement and to absorb all costs for time, materials, or
other expenses necessary to correct any errors made by Agent. Agent shall not
be liable for any loss or damage due to its errors unless the errors are caused
by its gross negligence, bad faith, or willful misconduct or that of its
employees or agents. Fund agrees to pay Agent, at the rates set forth in
Schedule B, for any excess work required by Agent due to the errors of Fund's
employees or representatives or due to incorrect data furnished to Agent by
Fund, Fund's investment adviser, or Fund's custodian.

13. INSTRUCTIONS AND OPINION OF COUNSEL. At any time Agent may apply to
an officer of Fund for instructions and consult counsel for Fund or its own
counsel on any matter arising in connection with this Agreement. Agent shall
not be liable for any action taken or omitted by it in good faith in accordance
with such instructions or with the advice or opinion of such counsel.

14. INDEMNIFICATION. Fund shall indemnify and hold Agent harmless from
all loss, cost, damage, and expense, including reasonable expenses for counsel,
incurred by Agent resulting from any claim, demand, action, or suit in
connection with the performance of its duties hereunder or as the result of
acting upon any instruction, advice, or opinion obtained pursuant to
paragraph 13 hereof, upon any other instruction reasonably believed by Agent to
have been properly executed by a duly authorized officer of Fund, or upon any
information, data, records, or documents provided to Agent by Fund, Fund's
investment adviser, or Fund's custodian. This indemnification shall not apply
to actions or omissions constituting gross negligence, bad faith, or willful
misconduct of Agent, its employees, or agents. Prior to confessing any claim
against it which may be subject to this indemnification, Agent shall give Fund
reasonable opportunity to defend against that claim in its own name or in the
name of Agent.

15. FIDELITY BOND. Agent will maintain in force throughout the duration
of this Agreement a fidelity bond that complies with applicable regulatory
requirements, written by a reputable bonding company, covering theft,
embezzlement, forgery, and other acts of

3
<PAGE>

malfeasance by Agent, its employees, or agents in connection with services
performed for Fund.

16. DURATION AND TERMINATION.

16.1 This Agreement shall remain in force until two years from the
date hereof and may be continued from year to year thereafter if approved
annually by a vote of a majority of the Fund's shareholders (as determined in
accordance with the requirements of the 1940 Act) or by its Board of Directors
and in either case a vote of a majority of the directors who are not parties to
this Agreement or interested persons of any such party cast in person at a
meeting called for the purpose of voting on approval.

16.2 This Agreement may be terminated at any time without the payment
of any penalty by vote of the Trustees of Fund or by vote of a majority of the
outstanding shares of Fund on 60 days written notice to the other party. This
Agreement may be terminated by Agent upon 180 days written notice thereof to
Fund. Any termination in accordance with this Agreement shall not affect the
rights and obligations of the parties under paragraphs 11, 12, 13, and 14
hereof. Immediately upon termination of this Agreement, all records and other
data in the possession of Agent which are the property of Fund shall be
furnished to Fund in computer written data forms as requested by Fund.

16.3 This Agreement shall automatically terminate if it is assigned,
the term "assignment" for this purpose having the meaning defined in Section
2(a)(4) of the 1940 Act. Agent shall notify Fund of any change in the officers
or directors of Agent within a reasonable time after the change.

17. AMENDMENTS. This Agreement may be amended with the written consent
of Agent and Fund if the amendment has been approved by the Board of Directors
of Fund, including a majority of the disinterested directors.

18. NOTICES. Any notice shall be officially given when sent by
registered or certified mail by either party to the following addresses,
provided that either party may notify the other of any changed address to which
such notices should be mailed hereunder:

If to Fund: Columbia International Stock Fund, Inc.
1301 SW Fifth Avenue
PO Box 1350
Portland, Oregon 97207
Attention: President

If to Agent: Columbia Trust Company
1301 SW Fifth Avenue
PO Box 1350
Portland, Oregon 97207
Attention: President

4
<PAGE>

19. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Oregon.

20. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties, supersedes any agreements previously entered into by them,
and may be amended only by written amendment, duly executed on behalf of the
respective parties in accordance with paragraph 17.

IN WITNESS WHEREOF, the parties hereto cause this Agreement to be duly
executed and to become effective as of the date first written above.

COLUMBIA INTERNATIONAL STOCK FUND, INC.

By J. JERRY INSKEEP, JR
-------------------------------------
Title: President

COLUMBIA TRUST COMPANY

By GEORGE L. HANSETH
-------------------------------------
Title: Vice President

5
<PAGE>
SCHEDULE A

I. Shareholder Services

A. Maintain all shareholder records on electronic data processing
equipment, including:

1. Share balances
2. Account transaction history
3. Names and addresses
4. Certificate records
5. Distribution records
6. Transfer records
7. Over-all control records

B. New Accounts

1. Deposit all moneys received into transfer account maintained for
the Custodian

2. Set up account according to shareholders' instructions as to:

a. Amount of shares purchased

b. Whether to deliver stock certificates to shareholders

C. Additional Purchases

1. Deposit moneys received into a transfer account maintained for
the Custodian

2. Issue shareholder confirmations

D. Redemptions - Full and Partial

1. Redeem shares upon shareholder request

2. Issue checks for the amount of redemption

3. Issue and mail shareholder confirmations

E. Transfer shares as requested, which includes obtaining necessary
papers and documents to satisfy transfer requirements. On irregular
transfers requiring

6
<PAGE>

special legal opinions, such special legal fees, if any, are to be
paid for by the Fund.

F. Prepare and mail certificates as requested by shareholders

G. Process changes, corrections of addresses and registrations

H. Compute distributions, dividends and capital gains

1. Reinvest in additional shares as requested by shareholders

2. Issue checks as requested by shareholders

3. Advise each shareholder of amount of dividends received and tax
status annually

I. Handle replacement of lost certificates

J. Produce transcripts of shareholder account history as required

K. Maintain the controls associated with the computer programs and manual
systems to arrive at the Company's total shares outstanding

L. Receive mail and perform other administrative functions relating to
transfer agent work

II. Reports and Schedules

A. Daily

1. Name and address changes

2. Name and address additions and deletions

3. Transaction Register

a. Purchases

b. Redemptions

c. Transfer and adjustments

4. Cash reconciliation - Cash received for day

5. Check reconciliation - checks issued for day

7
<PAGE>

6. Transaction reconciliation

a. Amount received

b. Total shares purchased

c. Number of purchase transactions

d. Dollar amount redeemed

e. Shares redeemed

f. Number of accounts redeeming

g. Checks issued for redemptions

B. Monthly/Daily

1. Balance list of shareholders in account number sequence

a. Number of shares outstanding for which stock certificates
were issued

b. Number of shares outstanding for which stock certificates
were not issued

c. Total shares outstanding (a + b)

2. a. Purchases, sales and adjustments

b. Certificates issued

c. Certificates, redemptions and transfers

d. Certificates reconciliations by certificate number

C. Monthly

1. Sales by states for month

D. Periodically

1. Alphabetical account listing

8
<PAGE>

III. Extra Charge Services

A. Mailing labels or other mailing services to shareholders

B. Services in connection with any stock splits

C. The computer system is designed to produce almost any display of
statistical management or accounting data in almost any format desired
by the management, auditors or directors. The parameters of reporting
are only limited to the data contained on disc. With sufficient
notice this information is available to management in accordance with
charges as itemized in Schedule B.

9
<PAGE>
COLUMBIA INTERNATIONAL STOCK FUND, INC.

SCHEDULE B

BASIC FEE

$1.50 per account per month

TIME AND MATERIAL FOR EXTRA SERVICES

Computer . . . . . . . . . . . . . . . . . . . . . . . . . . . At Cost

Key punch. . . . . . . . . . . . . . . . . . . . . . . . . . . At Cost

Clerical . . . . . . . . . . . . . . . . . . . . . . . . . . . At Cost

Programming and Direct
Technical Management. . . . . . . . . . . . . . . . . . . . At Cost

Travel and per diem expenses
(Chargeable only when authorized
in advance by Fund) . . . . . . . . . . . . . . . . . . . . At Cost

Mailing Services . . . . . . . . . . . . . . . . . . . . . . . At Cost

Permanent file supplies, forms,
microfilm, microfiche . . . . . . . . . . . . . . . . . . . At Cost

Any of the above services when performed outside regular working hours of
Agent may be billed at 150 percent of the above.

<PAGE>

COOPERS Coopers & Lybrand L.L.P.
& LYBRAND
a professional services firm

Exhibit 11

CONSENT OF INDEPENDENT ACCOUNTANTS

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

We consent to the inclusion in Post-Effective Amendment No. 6 to the
Registration Statement of Columbia International Stock Fund, Inc. on Form
N-1A (File No. 33-48994) of our report, dated February 12, 1998 on our audits
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, 1997, 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 23, 1998

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

<PAGE>
[LOGO]

COLUMBIA FUNDS
1997 ANNUAL REPORT

We are pleased to present the 1997 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, compared to each Fund's industry benchmark.

The "Overview of the Markets" on page one summarizes stock and bond market
activity during 1997. In addition, Columbia's investment approach is described,
highlighting themes and strategies used during the year 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,

[SIG] [SIG]
John A. Kemp Thomas L. Thomsen
CHAIRMAN AND CHIEF EXECUTIVE OFFICER PRESIDENT AND CHIEF INVESTMENT OFFICER
COLUMBIA FUNDS MANAGEMENT COMPANY COLUMBIA FUNDS MANAGEMENT COMPANY
</TABLE>

FRONT COVER FEATURES A PHOTOGRAPH OF THE 80-YEAR-OLD VISTA HOUSE,
PERCHED ATOP CROWN POINT AT THE MOUTH OF THE COLUMBIA RIVER GORGE.
THE PHOTO WAS TAKEN IN
OREGON, LOOKING ACROSS TO WASHINGTON STATE.
<PAGE>
TABLE OF CONTENTS
-----------------------------------------------------------------

ANNUAL REPORT, DECEMBER 31, 1997

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.........................................61
Statement of Operations.....................................................64
Statements of Changes in Net Assets.........................................67
COLUMBIA GROWTH FUND
Investment Review............................................................4
Financial Highlights........................................................16
Schedule of Investments.....................................................29
Statement of Assets and Liabilities.........................................61
Statement of Operations.....................................................64
Statements of Changes in Net Assets.........................................67
COLUMBIA INTERNATIONAL STOCK FUND
Investment Review............................................................5
Financial Highlights........................................................17
Schedule of Investments.....................................................31
Statement of Assets and Liabilities.........................................61
Statement of Operations.....................................................64
Statements of Changes in Net Assets.........................................67
COLUMBIA SPECIAL FUND
Investment Review............................................................6
Financial Highlights........................................................18
Schedule of Investments.....................................................35
Statement of Assets and Liabilities.........................................61
Statement of Operations.....................................................64
Statements of Changes in Net Assets.........................................68
COLUMBIA SMALL CAP FUND
Investment Review............................................................7
Financial Highlights........................................................19
Schedule of Investments.....................................................37
Statement of Assets and Liabilities.........................................62
Statement of Operations.....................................................65
Statements of Changes in Net Assets.........................................68
COLUMBIA REAL ESTATE EQUITY FUND
Investment Review............................................................8
Financial Highlights........................................................20
Schedule of Investments.....................................................39
Statement of Assets and Liabilities.........................................62
Statement of Operations.....................................................65
Statements of Changes in Net Assets.........................................68
COLUMBIA BALANCED FUND
Investment Review............................................................9
Financial Highlights........................................................21
Schedule of Investments.....................................................40
Statement of Assets and Liabilities.........................................62
Statement of Operations.....................................................65
Statements of Changes in Net Assets.........................................69

COLUMBIA DAILY INCOME COMPANY
Investment Review...........................................................10
Financial Highlights........................................................22
Schedule of Investments.....................................................45
Statement of Assets and Liabilities.........................................62
Statement of Operations.....................................................65
Statements of Changes in Net Assets.........................................69
COLUMBIA U.S. GOVERNMENT SECURITIES FUND
Investment Review...........................................................11
Financial Highlights........................................................23
Schedule of Investments.....................................................48
Statement of Assets and Liabilities.........................................63
Statement of Operations.....................................................66
Statements of Changes in Net Assets.........................................69
COLUMBIA FIXED INCOME SECURITIES FUND
Investment Review...........................................................12
Financial Highlights........................................................24
Schedule of Investments.....................................................49
Statement of Assets and Liabilities.........................................63
Statement of Operations.....................................................66
Statements of Changes in Net Assets.........................................70
COLUMBIA MUNICIPAL BOND FUND
Investment Review...........................................................13
Financial Highlights........................................................25
Schedule of Investments.....................................................52
Statement of Assets and Liabilities.........................................63
Statement of Operations.....................................................66
Statements of Changes in Net Assets.........................................70
COLUMBIA HIGH YIELD FUND
Investment Review...........................................................14
Financial Highlights........................................................26
Schedule of Investments.....................................................58
Statement of Assets and Liabilities.........................................63
Statement of Operations.....................................................66
Statements of Changes in Net Assets.........................................70
NOTES TO FINANCIAL STATEMENTS.................................................71

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

A LOOK BACK AT 1997

The year was ushered in with favorable economic conditions. While the GDP
exceeded expectations in the first quarter, it was not accompanied by higher
inflation. The Fed, nevertheless, responded to the quickly growing economy by
raising short-term interest rates .25% at the end of March. This action set the
tone for a dramatic increase in stock market volatility in the second quarter
that continued throughout much of the year. Immediately after the rate hike,
both the S&P 500 and NASDAQ gave up most of their year-to-date gains, only to
have investors bid prices right back up. By the end of the second quarter, the
S&P 500 had gained 20.59%, led by a narrow group of large company stocks.

GROSS DOMESTIC PRODUCT
VS. INFLATION IN 1997

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
GROSS DOMESTIC PRODUST VS. INFLATION IN
1997
GDP INFLATION
(SEASONALLY ADJUSTED
ANNUAL RATE)
<S> <C> <C>
1QTR 4.90%
2QTR 3.30%
3QTR 3.10%
4QTR 4.30%
</TABLE>

In the third quarter, the market began to broaden as investors gained confidence
about continued moderate economic growth and low inflation. Investors moved away
from large capitalization stocks to seek values in smaller cap companies and
issues overseas. Meanwhile, continuing earnings growth, expanding profit
margins, subdued inflation and low interest rates all suggested that the stock
market would prolong its historic bull run for a 13th consecutive year. Although
it appeared that the economy was approaching full utilization, there were no
signs of excess or imbalance that suggested the Fed might tighten rates in the
near term.

30-YEAR TREASURY YIELDS
OVER THE LAST SIX YEARS

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

In the fourth quarter, currency devaluations in Southeast Asia rocked investment
communities worldwide and market volatility picked up dramatically in late
October. The financial crisis in Asian markets was aggravated by overlending and
the large amount of debt held by many private companies. At the same time,
Japan, which represents a significant percentage of the world markets, showed
renewed signs of a slowdown and this created little relief for international
investors.

As a result of this turbulence, a flight to safety prompted investors to migrate
back to more liquid, large capitalization stocks and to U.S. Treasuries, pushing
the yield of the long bond below 6% for the first time in almost two years.

MARKET OUTLOOK

The U.S. equity markets continue to trade at valuation levels that are
historically high, but many positive factors support these valuations. The Fed
remains vigilant, poised to tighten if economic growth or inflation heat up, but
ready to provide liquidity if the economy slows or international concerns
intensify. The current scenario -- expectations for modest increases in
corporate profits, low inflation and declining interest rates -- is generally
positive for the stock market.

1
<PAGE>
AN OVERVIEW OF THE MARKETS
- --------------------------------------------------------------------------------

At this point, however, we believe that some caution is warranted. Increased
risk in the equity markets is evidenced by continued higher volatility and a
preference for greater liquidity. Concerns are growing that 1998 earnings may
not rise sufficiently to justify current prices. The potential for much slower
growth in emerging countries (particularly in Southeast Asia and Latin America)
is dimming earnings prospects for many multinational companies.

INVESTMENT STRATEGY

We have positioned our equity portfolios to favor domestic growth over cyclical
issues. Areas that merit particular emphasis, we believe, include retail issues,
health care and consumer staple stocks. Continuing strength in consumer
confidence and the low level of inflation support an overweighting in these
issues in spite of somewhat high valuations. We have increased utility stock
holdings to take advantage of their stable relative earnings and high dividend
yields. Energy issues have been deemphasized because of slowing world growth and
falling commodity prices.

CONSUMER CONFIDENCE

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

REIT valuations remain attractive relative to the broader market, and
expectations for double-digit total returns are not unreasonable, with lower
volatility than the S&P.

As we look to the year ahead, we continue to believe that economic indicators
support prospects for a healthy economy. However, peaking profit margins and
slowing world growth should, we believe, lead to moderating corporate earnings
growth. We anticipate the recent high level of market volatility to continue, so
we remain focused on companies that are expected to maintain competitive
strength in their industries and deliver dependable earnings growth.

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 1997, 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.

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

THE INVESTMENT TEAM
COLUMBIA FUNDS MANAGEMENT COMPANY
FEBRUARY 1998

2
<PAGE>
INVESTMENT REVIEW
- --------------------------------------------------------------------------------

- ---- ----

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

For the third consecutive year, Columbia Common Stock Fund delivered gains in
excess of 20% by posting a total return of 25.37% for 1997. The strongest
performing sectors included banking and finance, consumer staples and retailers.
Sectors that did not perform as well included energy, REITs and cyclicals like
paper and metals.

After maintaining a steady weighting in cyclical stocks, we adopted a growth
strategy early in the fourth quarter, in anticipation of a slowing economy. To
that end, stocks in the building, forest product, metal and chemical sectors
were reduced from a total of 16% of the portfolio to 3%. We also reduced
positions in energy and technology stocks. Consumer staples, health care and
utilities, on the other hand, were increased.Our investment strategy assumes
that profit growth in 1998 will be more difficult for domestic companies to
attain. With low inflation and low interest rates, price earnings ratios will
most likely hold steady for companies delivering good earnings growth. We also
believe that market volatility, which has been below average over the last few
years, will likely increase to more normal historical levels, making it more
important to manage risk and to identify companies with the most reliable growth
prospects. With this in mind, we are focusing on areas that are expected to
benefit from steady earnings in a slow growth environment.

With a median market cap of $10.6 billion, Columbia Common Stock Fund is well
diversified with over 78 different issues at year-end. The Fund continues to
seek growth of capital and dividend income by using a top down, sector rotation
strategy to select stocks of large, well-established companies.
SECTORS OF EMPHASIS

<TABLE>
<CAPTION>
% of Net Assets
<S> <C>
Consumer Staples 16.8
Health Care 12.6
Consumer Non-Durables 11.5
Finance 10.0
Technology 8.6
Energy & Energy Services 7.9
</TABLE>

As of December 31, 1997

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>
10/1/91 $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 $22,760 $22,007
12/31/97 $28,531 $29,350
Average Annual Total Returns
As of December 31, 1997
CCSF S&P 500
1 Year 25.37% 33.36%
5 Years 18.66% 20.27%
Since Inception 18.11% 18.64%
Past Performance is not predictive of future
performance.
</TABLE>

3
<PAGE>
INVESTMENT REVIEW
- --------------------------------------------------------------------------------

- ---- ----

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

Columbia Growth Fund gained 26.32% for the year ended December 31, 1997. Drug,
bank, insurance and consumer growth stocks contributed to positive performance
during the year, while REITs, health care service, and most technology stock
returns lagged.

The Fund's overall positive performance was attributable to rising P/Es due to
lower inflation expectations and good corporate earnings growth. In 1997, the
Fund's return lagged the S&P 500 Stock Index where a relatively small number of
the largest capitalization stocks in the Index posted superior performance
compared to the broader market. Nevertheless, we remain confident that
fundamentals of the stocks in Columbia Growth Fund -- lower valuations and
superior earnings growth -- are more attractive than the larger company stocks
in the Index, and will reward shareholders of the Fund.

TOP TEN HOLDINGS

<TABLE>
<CAPTION>
% of Net Assets
<S> <C>
Cendant Corp. 3.2
Warnaco Group, Inc. (Class A) 3.1
Tyco International Ltd. 2.8
Cisco Systems, Inc. 2.5
Gillette Co. 2.4
Rite Aid Corp. 2.4
Philip Morris Cos., Inc. 2.1
Tandy Corp. 2.0
American General Corp. 2.0
Merck & Co., Inc. 2.0
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
<S> <C>
</TABLE>

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

We expect corporate earnings growth to slow as profit margins peak and as demand
slows due to economic and currency turmoil in Southeast Asia. Events in that
region have lowered inflation expectations even further, however. Therefore,
interest rates could stay at current low levels, helping to support the
relatively high valuations seen in the stock market.

With a view toward less earnings growth and lower interest rates, we are
emphasizing stocks from companies with relatively stable growth. With the Asian
situation negatively affecting exporters, as well as those companies that
compete with imports and that do business in Asia, we expect superior growth to
come from more domestically-oriented companies and those multinational companies
selling such nondurable items as drugs and various household items.

With a median market cap of $9.6 billion, Columbia Growth Fund continues to be
well diversified with 81 different holdings as of December 31, 1997.
SECTORS OF EMPHASIS

<TABLE>
<CAPTION>
% of Net Assets
<S> <C>
Finance 18.8
Consumer Non-Durables 16.7
Consumer Staples 14.8
Health 13.0
Technology 12.9
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
<S> <C>
</TABLE>

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

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>
12/31/77 $10,000 $10,000
12/31/78 $10,804 $10,643
12/31/79 $15,187 $12,596
12/31/80 $21,244 $16,671
12/31/81 $20,524 $15,846
12/31/82 $30,079 $19,252
12/31/83 $36,535 $23,569
12/31/84 $34,496 $25,021
12/31/85 $45,559 $32,917
12/31/86 $48,711 $39,053
12/31/87 $55,891 $41,111
12/31/88 $61,933 $47,915
12/31/89 $79,950 $63,061
12/31/90 $77,303 $61,137
12/31/91 $103,788 $79,766
12/31/92 $116,055 $85,844
12/31/93 $131,154 $94,497
12/31/94 $130,328 $95,744
12/31/95 $173,310 $131,725
12/31/96 $209,358 $161,969
12/31/97 $264,496 $215,955
Average Annual Total Returns
As of December 31, 1997
CGF S&P 500
1 Year 26.32% 33.36%
5 Years 17.91% 20.27%
10 Years 16.81% 18.04%
20 Years 17.79% 16.61%
Past Performance is not predictive of future
performance.
</TABLE>

4
<PAGE>
INVESTMENT REVIEW
- --------------------------------------------------------------------------------

- ---- ----

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

The Columbia International Stock Fund enjoyed strength in the first half of the
year, where gains were fueled by double-digit returns in Europe, Brazil, India,
Taiwan and Korea. The second half of the year grew turbulent, however, as a
result of volatile and weak Asian markets, and the Fund recorded a 1997 total
return of 11.47%.

On early signs of turmoil in Southeast Asia, we sold positions in Korea,
Malaysia, Hong Kong, and Taiwan in the third quarter, but the Fund was still
negatively impacted. By October, the Asian financial crisis had spread to Hong
Kong, and many major stock markets weakened, including Japan, which showed
further signs of economic malaise. Led by the United States, however, most of
these markets recovered to end the year on a more positive note.

Despite a weak international market, Columbia International Stock Fund
outperformed its benchmark for the period. Not only did the Fund underweight
Japan, but stock selection

TOP TEN HOLDINGS

<TABLE>
<CAPTION>
% of Net Assets
<S> <C>
Novartis, AG 2.3
Sony Corp. 1.7
Aegon NV 1.6
Tubos de Acero de Mexico SA 1.5
SmithKline Beecham plc 1.4
Glaxo Wellcome plc 1.4
Compass Group plc 1.3
Fuji Photo Film Co., Ltd. 1.3
NTT Data Communications System Corp. 1.3
Nintendo, Co., Ltd. 1.2
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
<S> <C>
</TABLE>

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

emphasized exporting companies such as electronics and autos, which enabled the
Fund's Japanese holdings to outperform the overall Japanese market. Also, above-
market weightings in several smaller European markets (Sweden, Norway, Spain and
Italy) helped performance. With the European Monetary Union underway (a movement
toward one currency), European markets remain attractive as bond yields converge
and many countries experience huge declines in interest rates.

We approach the new year with uncertainty about when the Asian financial crisis
will be resolved. Nevertheless, many global markets show promise. Europe's
recovery is gaining momentum and we look for more domestic policy change in
Japan that should aid the entire Asian region. The Fund will continue its
objective of seeking long-term capital appreciation by investing primarily in
stocks of companies based outside the U.S. with at least 75% of the portfolio
invested in companies with market valuations over $500 million.
TOP TEN
COUNTRY WEIGHTINGS

<TABLE>
<CAPTION>
% of Net Assets
<S> <C>
Japan 22.2
United Kingdom 16.4
France 8.0
Germany 6.2
Netherlands 4.2
Sweden 3.9
Mexico 3.8
Spain 3.6
Canada 3.3
India 3.1
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
<S> <C>
</TABLE>

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
GROWTH OF $10,000 SINCE INCEPTION

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
COLUMBIA
INTERNATIONAL FT/S&P
STOCK FUND EURO-PAC S&P 500
<S> <C> <C> <C>
10/1/92 $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 $16,042 $16,180 $19,817
12/31/97 $17,881 $16,144 $26,428
Average Annual Total Returns
As of December 31, 1997
CISF S&P 500 FT/S&P Euro-Pac
1 Year 11.47% 33.36% -0.22%
5 Years 12.19% 20.27% 10.89%
Since Inception 11.59% 20.13% 9.46%
Past Performance is not predictive of future
performance.
</TABLE>

5
<PAGE>
INVESTMENT REVIEW
- --------------------------------------------------------------------------------

- ---- ----

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

The Special Fund generated a total return of 12.64% for the 1997 year. During
the fourth quarter, small- and mid-cap stocks underperformed the large-cap S&P
500 Stock Index. This came after an unusually strong third quarter of
outperformance, which was fueled by a market rotation away from highly valued
large cap stocks.

The Fund's performance was adversely affected during the year by an early
emphasis in the paper and metal sectors. We believed that these economically
sensitive industries would offer value by benefiting from stronger than expected
economic growth. In addition, we chose to de-emphasize finance stocks throughout
the year in anticipation that these fully priced securities would disappoint if
interest rates increased due to the strong

TOP TEN HOLDINGS

<TABLE>
<CAPTION>
% of Net Assets
<S> <C>
American Stores Co. 3.3
Safeway, Inc. 3.0
Kroger, Co. 3.0
Meyer (Fred), Inc. 2.9
Nordstrom, Inc. 2.5
Service Corp, International 2.4
ESC Medical Systems Ltd. 2.2
FIserv, Inc. 2.2
Quality Food Centers, Inc. 2.1
Abercrombie & Fitch Co. (Class A) 2.0
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
<S> <C>
</TABLE>

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

world economic growth. The demand for basic materials was reduced by the
international slowdown, and this prompted a decline in domestic and foreign
interest rates. In turn, investors fled from companies with less predictable
earnings to those with more consistent growth.

As the year came to a close, we sharply reduced our weightings in paper, metals
and machinery from a total of 24% of the portfolio to 7%. We increased areas of
steady growth like business and consumer services, consumer staples and health
care from 30% of the portfolio to 46%. We also added to REITs and are currently
maintaining a below-market weighting in technology.

The long-term strategy of the Special Fund has always been to maintain a core of
growth stocks while anticipating and recognizing changes in the market. This has
enabled us to invest in sectors and themes that benefit from these changes. As
we begin 1998, we are emphasizing consistent growth stocks, domestic companies,
and risk management. This supports our outlook for low inflation, a reduced rate
of corporate profit growth and the likelihood of greater stock market
volatility.
SECTORS OF EMPHASIS

<TABLE>
<CAPTION>
% of Net Assets
<S> <C>
Consumer Non-Durables 25.0
Consumer Staples 16.3
Business & Consumer Services 15.7
Health Care 14.0
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
<S> <C>
</TABLE>

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
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>
12/31/87 $10,000 $10,000 $10,000
12/31/88 $14,255 $11,655 $12,502
12/31/89 $18,805 $15,339 $14,535
12/31/90 $16,475 $14,871 $11,699
12/31/91 $24,789 $19,403 $17,094
12/31/92 $28,185 $20,881 $20,240
12/31/93 $34,295 $22,986 $24,062
12/31/94 $35,080 $23,289 $23,624
12/31/95 $45,440 $32,041 $30,345
12/31/96 $51,379 $39,398 $35,349
12/31/97 $57,879 $52,533 $43,254
Average Annual Total Returns
As of December 31, 1997
CSF S&P 500 Russell 2000
1 Year 12.64% 33.36% 22.36%
5 Years 15.48% 20.27% 16.40%
Since Inception 19.19% 18.04% 15.77%
Past Performance is not predictive of future
performance.
</TABLE>

6
<PAGE>
INVESTMENT REVIEW
- --------------------------------------------------------------------------------

- ---- ----

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

For 1997, Columbia Small Cap Fund generated a total return of 34.10%,
outperforming both the S&P 500 and the Russell 2000. After particularly strong
performance in the second and third quarters, however, the Fund suffered in the
fourth quarter when small cap stocks sputtered in response to increased stock
market volatility.

Investment themes benefiting the portfolio during the year included a focus on
specialty retailers based on a high level of consumer confidence and spending.
We also emphasized the assisted living sector as part of our emphasis on the
aging of America. Another successful strategy was to invest in stocks of well-
drilling and oil equipment supply industries, which provided handsome returns.

TOP TEN HOLDINGS

<TABLE>
<CAPTION>
% of Net Assets
<S> <C>
CKE Restaurants, Inc. 2.3
Laser Industries Ltd. 2.1
North Fork Bancorp, Inc. 2.0
Tubos de Acero de Mexico SA ADR 2.0
CIBER, Inc. 1.9
Williams-Sonoma, Inc. 1.9
ATL Ultrasound, Inc. 1.8
Orbital Sciences Corp. 1.7
Engineering Animation, Inc. 1.7
Universal Health Services, Inc. (Class B) 1.6
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
<S> <C>
</TABLE>

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

During the fourth quarter, turmoil in Southeast Asian economies prompted
investors to seek a safe haven in larger, more liquid stocks.

The demand for liquidity depressed small cap valuations and thus stock prices.
We responded by selling stocks we believed were fully valued and susceptible to
correction, along with those we deemed most vulnerable to negative earnings
revisions from the Asian crisis. These areas included energy and certain
segments of the technology sector. Meanwhile, we increased our health care
exposure due to this sector's more stable domestic revenue base and insulation
from the economy.

Looking ahead, we believe that relative valuations and earnings growth prospects
in the small cap market are attractive based on historical ranges. In the
meantime, the Fund continues to employ fundamental research to identify
attractively valued, small companies with above average earnings potential.
Using a bottoms up approach to stock selection, the Fund had a diversified
portfolio of 101 issues at year-end and a median market capitalization of $551
million.
SECTORS OF EMPHASIS

<TABLE>
<CAPTION>
% of Net Assets
<S> <C>
Health Care 27.7
Technology 24.3
Consumer Non-Durables 10.2
Business & Consumer Services 8.0
Energy & Energy Services 6.1
Finance 6.1
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
<S> <C>
</TABLE>

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
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>
10/1/96 $10,000 $10,000
12/31/96 $10,762 $10,520
3/31/97 $10,224 $9,976
6/30/97 $12,245 $11,593
9/30/97 $15,021 $13,318
12/31/97 $14,432 $12,872
Average Annual Total Returns
As of December 31, 1997
CSCF Russell 2000
1 Year 34.10% 22.36%
Since Inception 35.76% 23.42%
Past Performance is not predictive of future
results.
</TABLE>

7
<PAGE>
INVESTMENT REVIEW
- --------------------------------------------------------------------------------

- ---- ----

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

Columbia Real Estate Equity Fund posted a total return of 24.74% for the year
ended December 31, 1997. Real estate investment trusts (REITs) corrected early
in the second quarter, along with the rest of the stock market, as investors
adjusted to the March 25th rate hike by the Federal Reserve Board. Second
quarter money flows into REITs subsequently slowed as investors turned their
attention to the rebounding S&P 500.

In the third quarter, momentum in the REIT sector resumed, and performance was
led by investments in the office, hotel and industrial sectors. We maintained an
overweighting in these areas as their internal and acquisition growth
fundamentals suggested positive future performance.
TOP TEN HOLDINGS

<TABLE>
<CAPTION>
% of Net Assets
<S> <C>
Equity Office Properties Trust 6.4
Mack-Cali Realty Corp. 5.1
Security Capital Group, Inc. (Class B) 4.4
Security Capital Pacific Trust 4.1
Vornado Realty Trust 4.1
First Industrial Realty Trust, Inc. 3.7
Apartment Investment & Mgmt Co. (Class
A) 3.7
Liberty Property Trust 3.5
Catellus Development Corp. 3.5
General Growth Properties, Inc. 3.4
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
<S> <C>
</TABLE>

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

A below-market weighting in health care and lagging performance in the office
sector penalized the portfolio in the fourth quarter.

Overall, investor interest in REITs grew significantly in 1997. Money flows into
REIT mutual funds were healthy, approaching $5 billion for the year. In
addition, market capitalization for the REIT sector jumped 60% to stand at $145
billion by year-end.

In an environment where the earnings growth of the broader market is coming into
question and S&P 500 dividend yields are at historic lows, we believe that REITs
offer attractive total return potential for investors looking to diversify their
portfolios.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
PORTFOLIO COMPOSITION
<S> <C>
Apartments 16.2%
Community Centers 11.9%
Industrial 25.6%
Lodging 2.9%
Manufactured Homes 3.0%
Office 17.2%
Shopping Malls 7.8%
Other 7.9%
Cash 7.5%
as of December 31, 1997
</TABLE>

GROWTH OF $10,000 SINCE INCEPTION

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
COLUMBIA NATIONAL ASSOCIATION
REAL ESTATE OF REAL ESTATE
EQUITY FUND INVESTMENT TRUSTS
<S> <C> <C>
4/1/94 $10,000 $10,000
12/31/94 $10,176 $9,978
12/31/95 $11,892 $11,502
12/31/96 $16,446 $15,558
12/31/97 $20,515 $18,710
Average Annual Total Returns
As of December 31, 1997
CREF NAREIT
1 Year 24.74% 20.26%
Since Inception 20.82% 17.92%
Past Performance is not predictive of future
performance.
</TABLE>

8
<PAGE>
INVESTMENT REVIEW
- --------------------------------------------------------------------------------

- ---- ----

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

Columbia Balanced Fund returned 18.74% for the 1997 year. While large company
stocks led the market in the first half, we maintained a market underweighting
in them because we believed much of their price appreciation was unrelated to
improving fundamentals. Not surprisingly, large company stocks corrected in the
third quarter, as investors questioned the continued earnings growth of this
richly valued sector. In the fourth quarter, however, market turmoil in
Southeast Asia prompted investors to migrate back to large company stocks in
search of greater liquidity.

Overall, the equity portion of the portfolio benefited from holdings in
financial services (Freddie Mac), diversified manufacturing (General Electric
and Tyco Intl.), and consumer goods and services (Mattel and Service Corp.
Intl.), due to their relative immunity to economic turmoil outside the U.S.
TOP TEN STOCK HOLDINGS

<TABLE>
<CAPTION>
% of Net Assets
<S> <C>
General Electric Co. 1.6
Merck & Co. 1.6
Freddie Mac 1.6
Mattel, Inc. 1.4
First Union Corp. 1.3
Tyco International Ltd. 1.3
Lilly (Eli) & Co. 1.3
Service Corp. International 1.2
Sunbeam Corp. 1.1
Bristol-Myers Squibb Co. 1.1
</TABLE>

As of December 31, 1997

Economically sensitive cyclical stocks were influenced by volatile activity
overseas, and portfolio holdings in these sectors suffered. Growth slowed
worldwide, particularly in a number of natural resource-hungry developing
countries.

Concern about lower commodity prices led the Fund to reduce exposure to energy,
forest products and chemical industries. In light of the rapid economic slowdown
in Southeast Asia, technology holdings were scaled back late in the year,
reflecting a growing concern about earnings expectations.

9
<PAGE>
INVESTMENT REVIEW
- --------------------------------------------------------------------------------

- ---- ----

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

Columbia Daily Income Company generated a total return of 5.11% for the twelve
months ended December 31, 1997. This rate of return compares favorably to the
rate of inflation as measured by the Consumer Price Index (1.7%).

During the year, the Fund's 7-day average yield rose from 4.87% in January to
5.21% at year-end. While long-term interest rates declined during the year,
money market rates rose slightly due to the Federal Reserve Board's .25%
increase in the Federal Funds rate in March. In addition, the supply of short-
term instruments later in the year was particularly strong, driving up the
yields on money market instruments in December.
PORTFOLIO HIGHLIGHTS

<TABLE>
<S> <C>
Current Yield 5.21%
Compound Yield 5.35%
</TABLE>

Based on the 7 days ended December 31, 1997

<TABLE>
<S> <C>
Weighted Average Maturity 31.4 days
</TABLE>

As of December 31, 1997

Because of the subdued rate of inflation, the Federal Reserve Board has left
short-term rates untouched since March 25, despite a steadily growing economy.
The outlook for short-term rates remains unchanged for the next few months.

As always, Columbia Daily Income Company invests only in high quality, short-
term debt instruments with an average maturity of 30 to 50 days, providing a
very liquid, low risk investment. The Fund seeks to provide the highest level of
income available that is consistent with the maintenance of liquidity and
preservation of capital by investing in various money market instruments. These
include commercial paper, U.S. Treasury Bills, U.S. Government agency discount
notes and certificates of deposit.
AT THIS TIME, MONEY MARKET YIELDS ARE VERY ATTRACTIVE RELATIVE
TO THE EXPECTED RATE OF INFLATION.

GROWTH OF $10,000 OVER 10 YEARS

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
COLUMBIA DAILY INCOME COMPANY CONSUMER PRICE INDEX (INFLATION)
<S> <C> <C>
12/31/87 $10,000 $10,000
12/31/88 $10,707 $10,407
12/31/89 $11,659 $10,922
12/31/90 $12,573 $11,630
12/31/91 $13,285 $11,960
12/31/92 $13,716 $12,358
12/31/93 $14,061 $12,648
12/31/94 $14,578 $12,981
12/31/95 $15,378 $13,323
12/31/96 $16,141 $13,770
12/31/97 $16,967 $13,957
Average Annual Total Returns as of December 31, 1997
CDIC CPI
1 Year 5.11% 1.70%
5 Years 4.35% 2.58%
10 Years 5.43% 3.39%
Past Performance is not predictive of future results.
</TABLE>

10
<PAGE>
INVESTMENT REVIEW
- --------------------------------------------------------------------------------

- ---- ----

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

For the year ended 1997, Columbia U.S. Government Securities Fund had a total
return of 5.76%. This rate of return compares very favorably to the rate of
inflation as measured by the Consumer Price Index, which has increased only 1.7%
for the twelve months ended December 31, 1997.

Investors' interest in fixed income securities was renewed during the year, as
it became

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
PORTFOLIO COMPOSITION
<S> <C>
Treasury/Agency Obligations 98.1%
Cash 1.9%
as of December 31, 1997
</TABLE>

clear that the stock market was growing increasingly volatile and that a
modestly growing economy was not being accompanied by a strong threat of
inflation.

Continued economic growth combined with low inflation has caused the Federal
Reserve Board to keep interest rates unchanged since March 25th. With market
turmoil in Southeast Asia, short-term Treasuries, such as those held by the
Fund, are often viewed as a safe haven for investors.
PORTFOLIO HIGHLIGHTS

<TABLE>
<S> <C>
Current Yield 4.92%
</TABLE>

Based on the 30 days ended December 31, 1997

<TABLE>
<S> <C>
Weighted Averages
Duration 1.76
years
Maturity 1.9
years
</TABLE>

As of December 31, 1997

GROWTH OF $10,000 OVER 10 YEARS

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
COLUMBIA MERRILL
U.S. LYNCH CONSUMER
GOVERNMENT 1-3 PRICE
SECURITIES TREASURY INDEX
FUND INDEX (INFLATION)
<S> <C> <C> <C>
12/31/87 $10,000 $10,000 $10,000
12/31/88 $10,534 $10,623 $10,407
12/31/89 $11,548 $11,778 $10,922
12/31/90 $12,621 $12,924 $11,630
12/31/91 $14,227 $14,433 $11,960
12/31/92 $15,053 $15,342 $12,324
12/31/93 $15,943 $16,172 $12,648
12/31/94 $15,938 $16,265 $12,981
12/31/95 $17,565 $18,054 $13,323
12/31/96 $18,242 $18,953 $13,770
12/31/97 $19,295 $20,211 $13,957
Average Annual Total Returns as of December 31, 1997
CUSG Merrill 1-3
1 Year 5.76% 6.66%
5 Years 5.09% 5.67%
10 Years 6.79% 7.29%
Past Performance is not predictive of future results.
</TABLE>

11
<PAGE>
INVESTMENT REVIEW
- --------------------------------------------------------------------------------

- ---- ----

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

For 1997, Columbia Fixed Income Securities Fund posted a total return of 9.56%.
Although bonds suffered early in the year under pressures of a rapidly growing
economy and rising interest rates, the bond market closed the year with a
powerful rally triggered by market turmoil in Southeast Asia.

After a volatile first quarter, bonds responded positively in the second and
third quarters to a moderately growing economy with little sign of inflation. As
worldwide stock market volatility intensified in the fourth quarter, investors
sought refuge in fixed income. To take advantage of the changing dynamics in
this arena, we initiated several shifts in asset allocation. For instance, the
yield differential between mortgages and Treasuries fluctuated periodically
throughout the year, providing us with opportunities to increase mortgage
weightings when prices were low, and decrease mortgage weightings (take profits)
when prices crept up. As interest rates dropped in the fourth quarter, we
reduced the average coupon (fixed interest rate paid on bonds) of mortgage
securities in order to stave off any price deterioration resulting from
homeowners refinancing their mortgages (prepayment risk).

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
PORTFOLIO COMPOSITION
<S> <C>
Collateralized Mortgage Obligations 47.5%
Corporate Bonds 25.9%
Treasury/Agency Obligations 14.2%
Mortgage Pass-Throughs 4.3%
Asset Backed Securities 3.0%
Cash 5.1%
as of December 31, 1997
</TABLE>

The corporate bond sector became attractive when their prices declined relative
to Treasuries. We then increased the corporate bond weighting by approximately
3% in the fourth quarter, mostly in the finance sector. Short-term asset-backed
securities, such as home equity loans, performed quite well in the fourth
quarter, and we took profits in this sector.

The Fund invests in a broad range of fixed income securities. At least 95% of
assets are invested in debt securities rated Baa or higher, although the vast
majority is usually invested in securities rated A or higher. The average target
maturity and duration of the Fund are approximately 5.5 years and 4.6 years,
respectively, which is slightly longer than the Fund's benchmark, the Lehman
Aggregate Bond Index.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
PORTFOLIO QUALITY
<S> <C>
Treasury/Agency Obligations 58.8%
Aaa 14.9%
Aa 3.3%
A 9.2%
Baa 10.8%
Other 3.0%
as of December 31, 1997
as rated by Moody's Investor Services,
Inc.
</TABLE>

GROWTH OF $10,000 OVER 10 YEARS

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
COLUMBIA CONSUMER
FIXED INCOME LEHMAN PRICE INDEX
SECURITIES FUND AGGREGATE (INFLATION)
<S> <C> <C> <C>
12/31/87 $10,000 $10,000 $10,000
12/31/88 $10,772 $10,789 $10,407
12/31/89 $12,318 $12,357 $10,922
12/31/90 $13,340 $13,464 $11,630
12/31/91 $15,587 $15,618 $11,960
12/31/92 $16,832 $16,774 $12,324
12/31/93 $18,594 $18,409 $12,648
12/31/94 $17,970 $17,872 $12,981
12/31/95 $21,368 $21,173 $13,323
12/31/96 $22,088 $21,941 $13,770
12/31/97 $24,196 $24,059 $13,957
Average Annual Total Returns
As of December 31, 1997
CFIS Lehman Aggregate
1 Year 9.56% 9.65%
5 Years 7.53% 7.48%
10 Years 9.24% 9.18%
Past Performance is not predictive of future
performance.
</TABLE>

12
<PAGE>
INVESTMENT REVIEW
- --------------------------------------------------------------------------------

- ---- ----

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

Columbia Municipal Bond Fund returned 8.36% for the twelve months ended December
31, 1997. During the first half of the year, fixed income securities experienced
price volatility as first quarter economic growth exceeded expectations and the
Federal Reserve Board hiked short-term interest rates by .25% to ward off
inflation. Bonds recovered from this volatility in the second quarter, and
continued to appreciate in the third quarter as moderate growth persisted with
little sign of inflation. As a result, interest rates on long-term municipal
securities fell approximately .20% by September 30.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
PORTFOLIO COMPOSITION
<S> <C>
State of Oregon General Obligations 8.5%
Oregon General Obligation Bonds 19.6%
Oregon Revenue Bonds 14.7%
Oregon Other Bonds 2.6%
Other Bonds 7.2%
Oregon Insured Bonds 35.4%
Oregon Pre-Refunded Bonds 9.1%
Cash 2.9%
as of December 31, 1997
</TABLE>

In the fourth quarter, volatility in the international markets prompted a flight
to high quality U.S. Treasuries, further driving bond prices up and yields down.
With concern about a delayed recovery in Southeast Asia, investors have lowered
their expectations for corporate earnings growth in 1998. These concerns,
combined with low reported inflation and a reduced federal budget deficit (which
will

lower the supply of Treasuries going forward), sent Treasury and municipal
yields to lower levels by year-end. Yields on municipal securities fell another
.20% during the fourth quarter, pushing down 30-year municipal bonds to their
lowest yields in 10 years.

The supply of new Oregon bonds remains low, as voters hesitate to approve new
taxes. With low interest rates, however, we anticipate that the supply of new
Oregon bonds will increase as older issues are refunded and issuers take
advantage of lower rates.

In trading activity during the year, we endeavored to replace short-term, pre-
refunded bonds with longer term, higher yielding bonds to lock in higher rates
in a declining interest rate environment. At year-end, the average maturity of
the Fund's portfolio was intermediate term, at 11 to 12 years, and its duration
was approximately 6.5 years. As always, the Fund maintains a high average credit
quality and is broadly diversified within the State. We remain committed to
providing shareholders with high, after tax returns combined with a low level of
credit risk and low volatility.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
PORTFOLIO QUALITY
<S> <C>
Aaa 55.3%
Aa 24.4%
A 14.0%
Baa 1.0%
Not Rated 5.3%
as of December 31, 1997
as rated by Moody's Investor Services,
Inc.
</TABLE>

GROWTH OF $10,000 OVER 10 YEARS

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
COLUMBIA LEHMAN GENERAL CONSUMER
MUNICIPAL OBLIGATION PRICE INDEX
BOND FUND INDEX (INFLATION)
<S> <C> <C> <C>
12/31/87 $10,000 $10,000 $10,000
12/31/88 $11,019 $10,767 $10,407
12/31/89 $12,005 $11,856 $10,922
12/31/90 $12,832 $12,658 $11,630
12/31/91 $14,338 $14,101 $11,960
12/31/92 $15,264 $15,338 $12,324
12/31/93 $16,902 $17,137 $12,648
12/31/94 $16,111 $16,335 $12,981
12/31/95 $18,390 $18,975 $13,323
12/31/96 $19,084 $19,874 $13,770
12/31/97 $20,680 $21,629 $13,957
Average Annual Total Returns
As of December 31, 1997
CMBF Lehman G.O.
1 Year 8.36% 8.80%
5 Years 6.26% 7.11%
Since Inception 7.54% 8.02%
Past Performance is not predictive of future
performance.
</TABLE>

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

- ---- ----

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

[LOGO]

The Fund posted a total return of 12.70% for the twelve months ended December
31, 1997. Early in the year, the fixed income market suffered from a rapidly
expanding economy and rising interest rates. But as bond investors began to
realize that growth would not be accompanied by higher inflation, bond prices
appreciated throughout the year. As in 1996, the high yield sector of the bond
market again outperformed investment-grade bonds in 1997. This caps off several
consecutive years of solid performance by high yield bonds, thanks to positive
fundamentals and growing investor interest. In 1997, for example, the high yield
market grew by over 26% with $135 billion in new issues coming to market from
over 700 issuers. Flow of money into high yield funds rose by 42% during the
year to $22 billion, as investors continued to view high yield bonds as
excellent tools for diversification.

In trading activity, positive fundamentals led us to emphasize the media sector
throughout much of the
SECTORS OF EMPHASIS

<TABLE>
<CAPTION>
% of Net Assets
<S> <C>
Business Services 3.9
Chemicals 2.0
Metals/Mining 2.0
Hotels/Gaming 4.8
Health Care 7.0
</TABLE>

As of December 31, 1997

year with particular emphasis in broadcasting. We also favored specialty
retailing and entertainment, both of which contributed positively to Fund
performance. As commodity prices came under pressure in the fourth quarter
because of the currency crisis in Southeast Asia, bonds in the energy sector
were pared back. To reduce exposure to economically sensitive issues on the
chance that economic growth will moderate, we also reduced bonds issued by
companies in cyclical industries like paper and chemical.

For the coming year, favorable conditions such as continuing economic growth,
low inflation, and positive cash flows into high yield mutual funds should
continue to make this market attractive for the near term.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
PORTFOLIO QUALITY
<S> <C>
Ba 41.0%
B 59.0%
as of December 31, 1997
as rated by Moody's Investor Services,
Inc.
</TABLE>

GROWTH OF $10,000 SINCE INCEPTION
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
COLUMBIA HIGH YIELD FUND SALOMON BB
<S> <C> <C>
10/1/93 $10,000 $10,000
12/31/93 $10,112 $10,185
12/31/94 $10,019 $10,048
12/31/95 $11,935 $12,321
12/31/96 $13,060 $13,429
12/31/97 $14,717 $15,142
Average Annual Total Returns as of December 31, 1997
CHYF Salomon BB
1 Year 12.70% 12.76%
3 Years 13.68% 14.65%
Since Inception 9.40% 10.13%
Past Performance is not predictive of future
performance.

<CAPTION>
LIPPER HIGH YIELD BOND FUND INDEX
<S> <C>
10/1/93 $10,000
12/31/93 $10,498
12/31/94 $10,113
12/31/95 $11,870
12/31/96 $13,373
12/31/97 $15,100
Average Annual Total Returns as of December 31, 1997
Lipper HYBF
1 Year 12.91%
3 Years 14.30%
Since Inception 10.06%
Past Performance is not predictive of future
performance.
</TABLE>

14
<PAGE>
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------

FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD

- ---- ----

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

[LOGO]

<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $19.26 $18.59 $15.16 $15.29 $14.04
- ---------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................. .29 .25 .26 .27 .22
Net realized and unrealized gains on
investments......................... 4.58 3.61 4.38 .04 2.08
- ---------------------------------------------------------------------------------------------------
Total from investment operations.... 4.87 3.86 4.64 .31 2.30
- ---------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends (from net investment
income)............................. (.27) (.23) (.26) (.25) (.21)
Distributions (from capital gains).... (1.84) (2.96) (.95) (.19) (.84)
- ---------------------------------------------------------------------------------------------------
Total distributions................. (2.11) (3.19) (1.21) (.44) (1.05)
- ---------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $22.02 $19.26 $18.59 $15.16 $15.29
- ---------------------------------------------------------------------------------------------------
TOTAL RETURN............................ 25.37% 20.71% 30.84% 2.06% 16.44%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)............................ $783,906 $536,760 $358,523 $124,263 $100,715
Ratio of expenses to average net
assets................................ 0.77% 0.76% 0.80% 0.84% 0.84%
Ratio of net investment income to
average net assets.................... 1.37% 1.32% 1.68% 1.82% 1.48%
Portfolio turnover rate................. 90.23% 111.39% 75.36% 64.21% 90.90%
Average commission rate paid on
portfolio transactions (1)............ $0.0601 $0.0601
</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.

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

15
<PAGE>
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------

FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD

- ---- ----

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

[LOGO]

<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $30.74 $29.84 $24.84 $26.38 $26.18
- -------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................. .19 .19 .31 .29 .16
Net realized and unrealized gains
(losses) on investments............. 7.90 6.04 7.86 (.46) 3.24
- -------------------------------------------------------------------------------------------------------
Total from investment operations.... 8.09 6.23 8.17 (.17) 3.40
- -------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends (from net investment
income)............................. (.17) (.17) (.29) (.26) (.18)
Distributions (from capital gains).... (4.32) (5.14) (2.87) (1.11) (2.98)
Distributions (in excess of capital
gains).............................. (.02) (.01) (.04)
- -------------------------------------------------------------------------------------------------------
Total distributions................. (4.49) (5.33) (3.17) (1.37) (3.20)
- -------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $34.34 $30.74 $29.84 $24.84 $26.38
- -------------------------------------------------------------------------------------------------------
TOTAL RETURN............................ 26.32% 20.80% 32.98% -0.63% 13.01%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)............................ $1,324,918 $1,064,100 $848,731 $591,694 $605,401
Ratio of expenses to average net
assets................................ 0.71% 0.71% 0.75% 0.81% 0.82%
Ratio of net investment income to
average net assets.................... 0.55% 0.63% 1.14% 1.12% 0.66%
Portfolio turnover rate................. 95.67% 75.49% 94.73% 79.28% 105.64%
Average commission rate paid on
portfolio transactions (1)............ $0.0594 $0.0590
</TABLE>

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

16
<PAGE>
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------

FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD

- ---- ----

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

[LOGO]

<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD $13.86 $13.07 $12.43 $12.96 $9.95
- ----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)..... .03 .03 .02 (.02) (.02)
Net realized and unrealized gains
(losses) on investments and
foreign currency
transactions................... 1.56 2.13 .62 (.30) 3.34
- ----------------------------------------------------------------------------------------------
Total from investment
operations................... 1.59 2.16 .64 (.32) 3.32
- ----------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends (from net investment
income)........................ (.03)
Dividends (in excess of net
investment income)............. (.20)
Distributions (from capital
gains)......................... (1.75) (1.14) (.21) (.31)
- ----------------------------------------------------------------------------------------------
Total distributions............ (1.75) (1.37) -- (.21) (.31)
- ----------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $13.70 $13.86 $13.07 $12.43 $12.96
- ----------------------------------------------------------------------------------------------
TOTAL RETURN....................... 11.47% 16.59% 5.15% -2.47% 33.37%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)....................... $146,281 $125,510 $100,873 $118,484 $73,047
Ratio of expenses to average net
assets........................... 1.62% 1.54% 1.54% 1.52% 1.71%
Ratio of net investment income
(loss) to average net assets..... 0.19% 0.22% 0.15% (0.21)% (0.62)%
Portfolio turnover rate............ 121.53% 129.40% 156.09% 138.79% 144.78%
Average commission rate paid on
portfolio transactions (1)....... $0.0039 $0.0011
</TABLE>

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

17
<PAGE>
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------

FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD

- ---- ----

-- COLUMBIA SPECIAL FUND, INC. --
---------------------------------

[LOGO]

<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $19.85 $21.44 $18.69 $19.51 $18.79
- ---------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).......... .01 (.06) .03 .08 .01
Net realized and unrealized gains on
investments......................... 2.50 2.85 5.45 .36 4.04
- ---------------------------------------------------------------------------------------------------------
Total from investment operations.... 2.51 2.79 5.48 .44 4.05
- ---------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends (from net investment
income)............................. (.02) (.07)
Dividends (in excess of net investment
income)............................. (.01)
Distributions (from capital gains).... (2.10) (4.38) (2.68) (1.16) (3.32)
Distributions (in excess of captial
gains).............................. (.03) (.03)
- ---------------------------------------------------------------------------------------------------------
Total distributions................. (2.10) (4.38) (2.73) (1.26) (3.33)
- ---------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $20.26 $19.85 $21.44 $18.69 $19.51
- ---------------------------------------------------------------------------------------------------------
TOTAL RETURN............................ 12.64% 13.07% 29.53% 2.29% 21.68%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)............................ $1,249,718 $1,585,284 $1,384,415 $889,526 $772,741
Ratio of expenses to average net
assets................................ 0.98% 0.94% 0.98% 1.05% 1.12%
Ratio of net investment income (loss) to
average net assets.................... 0.04% (0.29)% 0.16% 0.40% 0.01%
Portfolio turnover rate................. 166.46% 150.07% 182.99% 178.91% 154.68%
Average commission rate paid on
portfolio transactions (1)............ $0.0585 $0.0553
</TABLE>

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

18
<PAGE>
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------

FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD

- ---- ----

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

[LOGO]

<TABLE>
<CAPTION>
1997 1996(1)
----- -------
<S> <C> <C>
- -------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $12.99 $12.00
- -------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss............................. (.08)
Net realized and unrealized gains on
investments................................... 4.51 .99
- -------------------------------------------------------------------------
Total from investment operations.............. 4.43 .99
- -------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Distributions (from capital gains).............. (.77)
- -------------------------------------------------------------------------
Total distributions........................... (.77) --
- -------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $16.65 $12.99
- -------------------------------------------------------------------------
TOTAL RETURN...................................... 34.10% 7.62%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands).......... $96,431 $21,061
Ratio of expenses to average net assets........... 1.46% 1.61%
Ratio of net investment income (loss) to average
net assets...................................... (0.81)% 0.00%
Portfolio turnover rate........................... 171.75% 32.57%
Average commission rate paid on portfolio
transactions (3)................................ $0.0564 $0.0546
</TABLE>

(1) From inception of operations on September 11, 1996. 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.

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

19
<PAGE>
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------

FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD

- ---- ----

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

[LOGO]

<TABLE>
<CAPTION>
1997 1996 1995 1994(1)
----- ----- ----- -------
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $16.16 $12.71 $11.72 $12.00
- -------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................. .79 .77 .78 .49
Net realized and unrealized gains
(losses) on investments............. 3.15 3.94 1.12 (.27)
- -------------------------------------------------------------------------------------
Total from investment operations.... 3.94 4.71 1.90 .22
- -------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends (from net investment
income)............................. (.62) (.52) (.49) (.31)
Dividends (in excess of net investment
income)............................. (.01)
Distributions (from capital gains).... (.48) (.41)
Distributions (in excess of capital
gains).............................. (.03) (.12) (.14)
Tax return of capital................. (.17) (.21) (.28) (.18)
- -------------------------------------------------------------------------------------
Total distributions................. (1.30) (1.26) (.91) (.50)
- -------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $18.80 $16.16 $12.71 $11.72
- -------------------------------------------------------------------------------------
TOTAL RETURN............................ 24.74% 38.30% 16.86% 1.76%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)............................ $151,554 $68,073 $21,587 $17,402
Ratio of expenses to average net
assets................................ 1.02% 1.06% 1.18% 1.14%
Ratio of net investment income to
average net assets.................... 4.87% 6.23% 6.71% 6.28%
Portfolio turnover rate................. 33.55% 45.82% 53.91% 7.61%
Average commission rate paid on
portfolio transactions (3)............ $0.0588 $0.0594
</TABLE>

(1) From inception of operations on March 16, 1994. 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.

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

20
<PAGE>
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------

FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD

- ---- ----

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

[LOGO]

<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $20.32 $20.08 $17.28 $17.91 $16.80
- ---------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................. .84 .76 .73 .65 .56
Net realized and unrealized gains
(losses) on investments............. 2.92 1.58 3.54 (.64) 1.71
- ---------------------------------------------------------------------------------------------------
Total from investment operations.... 3.76 2.34 4.27 .01 2.27
- ---------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends (from net investment
income)............................. (.83) (.76) (.73) (.64) (.56)
Dividends (in excess of net investment
income)............................. (.01)
Distributions (from capital gains).... (1.83) (1.34) (.74) (.59)
- ---------------------------------------------------------------------------------------------------
Total distributions................. (2.66) (2.10) (1.47) (.64) (1.16)
- ---------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $21.42 $20.32 $20.08 $17.28 $17.91
- ---------------------------------------------------------------------------------------------------
TOTAL RETURN............................ 18.74% 11.78% 25.08% 0.10% 13.62%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)............................ $792,378 $672,593 $486,767 $249,670 $186,589
Ratio of expenses to average net
assets................................ 0.68% 0.66% 0.69% 0.72% 0.73%
Ratio of net investment income to
average net assets.................... 3.83% 3.82% 4.05% 3.82% 3.32%
Portfolio turnover rate................. 148.91% 133.21% 108.04% 98.48% 107.60%
Average commission rate paid on
portfolio transactions (1)............ $0.0610 $0.0596
</TABLE>

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

21
<PAGE>
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------

FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD

- ---- ----

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

[LOGO]

<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
----- ----- ----- ----- -----
<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................. .050 .048 .053 .036 .025
- -----------------------------------------------------------------------------------------------------
Total from investment operations.... .050 .048 .053 .036 .025
- -----------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends (from net investment
income)............................. (.050) (.048) (.053) (.036) (.025)
- -----------------------------------------------------------------------------------------------------
Total distributions................. (.050) (.048) (.053) (.036) (.025)
- -----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------------------------------------------------------------
TOTAL RETURN............................ 5.11% 4.96% 5.49% 3.68% 2.51%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)............................ $1,169,096 $889,800 $800,656 $730,067 $544,500
Ratio of expenses to average net
assets................................ 0.63% 0.62% 0.64% 0.70% 0.75%
Ratio of net investment income to
average net assets.................... 4.99% 4.84% 5.34% 3.68% 2.49%
</TABLE>

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

22
<PAGE>
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------

FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD

- ---- ----

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

[LOGO]

<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $8.24 $8.34 $7.99 $8.36 $8.35
- ---------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................. .41 .41 .45 .37 .32
Net realized and unrealized gains
(losses) on investments............. .05 (.10) .35 (.37) .17
- ---------------------------------------------------------------------------------------------------
Total from investment operations.... .46 .31 .80 -- .49
- ---------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends (from net investment
income)............................. (.41) (.41) (.45) (.37) (.32)
Distributions (from capital gains).... (.16)
- ---------------------------------------------------------------------------------------------------
Total distributions................. (.41) (.41) (.45) (.37) (.48)
- ---------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $8.29 $8.24 $8.34 $7.99 $8.36
- ---------------------------------------------------------------------------------------------------
TOTAL RETURN............................ 5.76% 3.85% 10.21% -0.03% 5.91%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)............................ $37,837 $40,776 $41,842 $33,512 $35,877
Ratio of expenses to average net
assets................................ 0.87% 0.80% 0.79% 0.81% 0.75%
Ratio of net investment income to
average net assets.................... 4.99% 4.99% 5.45% 4.51% 3.74%
Portfolio turnover rate................. 184.43% 179.38% 253.17% 253.80% 254.59%
</TABLE>

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

23
<PAGE>
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------

FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD

- ---- ----

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

[LOGO]

<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $13.08 $13.51 $12.16 $13.44 $13.28
- ---------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................. .85 .85 .88 .83 .85
Net realized and unrealized gains
(losses) on investments............. .36 (.43) 1.35 (1.28) .52
- ---------------------------------------------------------------------------------------------------
Total from investment operations.... 1.21 .42 2.23 (.45) 1.37
- ---------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends (from net investment
income)............................. (.85) (.85) (.88) (.83) (.85)
Distributions (from capital gains).... (.03) (.36)
- ---------------------------------------------------------------------------------------------------
Total distributions................. (.88) (.85) (.88) (.83) (1.21)
- ---------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $13.41 $13.08 $13.51 $12.16 $13.44
- ---------------------------------------------------------------------------------------------------
TOTAL RETURN............................ 9.56% 3.37% 18.91% -3.36% 10.47%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)............................ $381,333 $356,421 $316,259 $252,090 $300,532
Ratio of expenses to average net
assets................................ 0.66% 0.64% 0.65% 0.66% 0.66%
Ratio of net investment income to
average net assets.................... 6.43% 6.53% 6.80% 6.53% 6.14%
Portfolio turnover rate................. 196.28% 178.25% 137.41% 139.81% 118.80%
</TABLE>

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

24
<PAGE>
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------

FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD

- ---- ----

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

[LOGO]

<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $12.15 $12.37 $11.48 $12.71 $12.17
- ---------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................. .60 .61 .63 .64 .66
Net realized and unrealized gains
(losses) on investments............. .39 (.16) .96 (1.23) .62
- ---------------------------------------------------------------------------------------------------
Total from investment operations.... .99 .45 1.59 (.59) 1.28
- ---------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends (from net investment income)
(1)................................. (.60) (.61) (.63) (.64) (.66)
Distributions (from capital gains).... (.07) (.06) (.07) (.08)
- ---------------------------------------------------------------------------------------------------
Total distributions................. (.67) (.67) (.70) (.64) (.74)
- ---------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $12.47 $12.15 $12.37 $11.48 $12.71
- ---------------------------------------------------------------------------------------------------
TOTAL RETURN............................ 8.36% 3.77% 14.15% -4.68% 10.73%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)............................ $409,148 $375,667 $383,796 $339,817 $430,367
Ratio of expenses to average net
assets................................ 0.57% 0.56% 0.57% 0.57% 0.58%
Ratio of net investment income to
average net assets.................... 4.87% 5.00% 5.22% 5.36% 5.25%
Portfolio turnover rate................. 16.88% 19.03% 21.45% 19.40% 9.92%
</TABLE>

(1) 100% exempt from federal taxation.

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

25
<PAGE>
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------

FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD

- ---- ----

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

[LOGO]

<TABLE>
<CAPTION>
1997 1996 1995 1994 1993(1)
----- ----- ----- ----- -------
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $9.94 $9.88 $9.04 $9.94 $10.00
- -----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................. .81 .81 .82 .80 .18
Net realized and unrealized gains
(losses) on investments............. .40 .07 .84 (.90) (.06)
- -----------------------------------------------------------------------------------------------------------
Total from investment operations.... 1.21 .88 1.66 (.10) .12
- -----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
Dividends (from net investment
income)............................. (.81) (.81) (.82) (.80) (.18)
Distributions (from capital gains).... (.30) (.01)
- -----------------------------------------------------------------------------------------------------------
Total distributions................. (1.11) (.82) (.82) (.80) (.18)
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.04 $9.94 $9.88 $9.04 $9.94
- -----------------------------------------------------------------------------------------------------------
TOTAL RETURN............................ 12.70% 9.43% 19.12% -0.92% 1.12%(2)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)............................ $39,278 $28,818 $23,471 $12,834 $5,940
Ratio of expenses to average net assets
(3)................................... 1.00% 0.93% 1.00% 1.00% 1.00%
Ratio of net investment income to
average net assets.................... 8.05% 8.29% 8.62% 8.69% 7.30%
Portfolio turnover rate................. 124.23% 62.27% 51.60% 36.67% 0.00%
</TABLE>

(1) From inception of operations on September 15, 1993. Ratios and portfolio
turnover rate are annualized.
(2) Not annualized.
(3) The ratio was 1.02% in 1997, 1.00% in 1996, 1.06% in 1995, 1.19% in 1994
and 2.03% in 1993, before voluntary reimbursement.

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

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<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
December 31, 1997 AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
COMMON STOCKS (93.0%)
FINANCE (10.0%)
American Express Co. ................................................................. 100,900 $ 9,005,325
American General Corp. ............................................................... 209,600 11,331,500
BankAmerica Corp. .................................................................... 99,600 7,270,800
Berkley (W.R.) Corp. ................................................................. 150,000 6,581,250
*CIT Group, Inc. (Class A)............................................................ 200,000 6,450,000
First Union Corp. .................................................................... 261,300 13,391,625
NationsBank Corp. .................................................................... 126,000 7,662,375
PNC Bank Corp. ....................................................................... 140,900 8,040,106
U.S. Bancorp.......................................................................... 74,044 8,288,300
--------------
78,021,281
--------------
BUILDING & FORESTRY PRODUCTS (1.4%)
Willamette Industries, Inc. .......................................................... 334,400 10,763,500
--------------
BUSINESS & CONSUMER SERVICES (1.7%)
Service Corporation Int'l. ........................................................... 367,500 13,574,531
--------------
CHEMICAL (1.0%)
IMC Global, Inc. ..................................................................... 242,000 7,925,500
--------------
CONSUMER NON-DURABLE (11.5%)
*Costco Cos., Inc. ................................................................... 200,000 8,925,000
*Federated Department Stores, Inc. ................................................... 254,500 10,959,406
Home Depot, Inc. ..................................................................... 140,500 8,271,937
Liz Claiborne, Inc. .................................................................. 223,000 9,324,188
Mattel, Inc. ......................................................................... 259,250 9,657,063
*Meyer (Fred), Inc. .................................................................. 600,000 21,825,000
Nordstrom, Inc. ...................................................................... 225,000 13,584,375
Wal-Mart Stores, Inc. ................................................................ 192,500 7,591,719
--------------
90,138,688
--------------
CONSUMER STAPLES (16.8%)
American Stores Co. .................................................................. 860,000 17,683,750
Avon Products, Inc. .................................................................. 128,300 7,874,412
ConAgra, Inc. ........................................................................ 70,000 2,296,875
Gillette Co. ......................................................................... 145,000 14,563,438
Heinz (H.J.) Co. ..................................................................... 154,000 7,825,125
Kellogg Co. .......................................................................... 400,000 19,850,000
*Kroger Co. .......................................................................... 300,000 11,081,250
PepsiCo, Inc. ........................................................................ 200,000 7,287,500
Rite Aid Corp. ....................................................................... 147,200 8,638,800
*Safeway, Inc. ....................................................................... 156,000 9,867,000
Sunbeam Corp. ........................................................................ 379,400 15,982,225
Sysco Corp. .......................................................................... 200,000 9,112,500
--------------
132,062,875
--------------

<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
ENERGY (6.8%)
Burlington Resources, Inc. ........................................................... 181,017 $ 8,111,824
Exxon Corp. .......................................................................... 160,800 9,838,950
Mobil Corp. .......................................................................... 141,600 10,221,750
Royal Dutch Petroleum Co. ............................................................ 249,600 13,525,200
Texaco, Inc. ......................................................................... 212,000 11,527,500
--------------
53,225,224
--------------
ENERGY SERVICES (1.1%)
Schlumberger Ltd. .................................................................... 105,000 8,452,500
--------------
ENTERTAINMENT & MEDIA (1.2%)
*Viacom, Inc. (Class B)............................................................... 235,500 9,758,531
--------------
HEALTH (12.6%)
American Home Products Corp. ......................................................... 134,000 10,251,000
Bristol-Myers Squibb Co. ............................................................. 175,000 16,559,375
Lilly (Eli) & Co. .................................................................... 242,000 16,849,250
Merck & Co., Inc. .................................................................... 155,000 16,468,750
Pfizer, Inc. ......................................................................... 169,000 12,601,062
Schering-Plough Corp. ................................................................ 154,000 9,567,250
*Tenet Healthcare Corp. .............................................................. 249,300 8,258,063
Warner-Lambert Co. ................................................................... 66,000 8,184,000
--------------
98,738,750
--------------
MACHINERY & CAPITAL SPENDING (5.4%)
Case Corp. ........................................................................... 133,000 8,038,187
Deere & Co. .......................................................................... 144,700 8,437,819
Emerson Electric Co. ................................................................. 213,000 12,021,188
Tyco International Ltd. .............................................................. 303,308 13,667,817
--------------
42,165,011
--------------
METAL MINING & STEEL (1.0%)
*Getchell Gold Corp. ................................................................. 310,000 7,440,000
--------------
REAL ESTATE SECURITIES (5.8%)
American Health Properties, Inc. ..................................................... 120,000 3,307,500
Equity Office Properties Trust........................................................ 174,521 5,508,319
Equity Residential Properties Trust................................................... 125,000 6,320,312
First Industrial Realty Trust, Inc. .................................................. 150,000 5,418,750
JP Realty, Inc. ...................................................................... 106,500 2,762,344
Liberty Property Trust................................................................ 120,000 3,427,500
Mack-Cali Realty Corp. ............................................................... 94,000 3,854,000
Manufactured Home Communities, Inc. .................................................. 49,000 1,323,000
Security Capital Pacific Trust........................................................ 165,500 4,013,375
Simon DeBartolo Group, Inc. .......................................................... 190,400 6,223,700
Spieker Properties, Inc. ............................................................. 79,000 3,387,125
--------------
45,545,925
--------------
</TABLE>

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<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
</TABLE>

COMMON STOCKS (CONTINUED)
<TABLE>
<S> <C> <C>
TECHNOLOGY (8.6%)
Autodesk, Inc. ....................................................................... 115,300 $ 4,266,100
Automatic Data Processing, Inc. ...................................................... 232,000 14,239,000
*Cadence Design Systems, Inc. ........................................................ 270,000 6,615,000
*Computer Sciences Corp. ............................................................. 190,200 15,881,700
*EMC Corp. ........................................................................... 260,200 7,139,238
Ericsson (L.M.) Telephone Co. (Class B) ADR........................................... 112,000 4,179,000
Hewlett-Packard Co. .................................................................. 122,400 7,650,000
Lucent Technologies, Inc. ............................................................ 94,800 7,572,150
--------------
67,542,188
--------------
UTILITIES/COMMUNICATIONS (2.7%)
AT&T Corp. ........................................................................... 124,000 7,595,000
Frontier Corp. ....................................................................... 244,300 5,878,469
SBC Communications, Inc. ............................................................. 102,400 7,500,800
--------------
20,974,269
--------------
UTILITIES/ELECTRIC/GAS (5.4%)
Cinergy Corp. ........................................................................ 237,000 9,080,063
Edison International.................................................................. 264,300 7,185,656
Idaho Power Co. ...................................................................... 236,600 8,902,075
Texas Utilities Co. .................................................................. 420,000 17,456,250
--------------
42,624,044
--------------
Total Common Stocks
(Cost $591,083,706) ................................................................. 728,952,817
--------------
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
REPURCHASE AGREEMENTS (12.1%)
Goldman Sachs Corp.
6.337% dated 12/31/1997,
due 01/02/1998 in the
amount of $39,316,709.
Collateralized by U.S. Treasury Notes
5.875% due 08/31/1999................................................................ $ 39,303,062 $ 39,303,062
J.P. Morgan Securities, Inc.
6.521% dated 12/31/1997,
due 01/02/1998 in the
amount of $38,613,793.
Collateralized by U.S. Treasury Notes
3.625% to 7.500%
due 08/31/2000 to 02/15/2005......................................................... 38,600,000 38,600,000
Merrill Lynch
6.388% dated 12/31/1997,
due 01/02/1998 in the
amount of $16,705,845.
Collateralized by U.S. Treasury Bonds
6.250% to 7.625% due
02/15/2023 to 08/15/2025............................................................. 16,700,000 16,700,000
--------------
Total Repurchase Agreements
(Cost $94,603,062) .................................................................. 94,603,062
--------------
TOTAL INVESTMENTS (105.1%)
(Cost $685,686,768)...................................................................... 823,555,879
RECEIVABLES LESS LIABILITIES (-5.1%)...................................................... (39,650,060)
--------------
NET ASSETS (100.0%)....................................................................... $ 783,905,819
--------------
--------------
</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, 1997 AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
COMMON STOCKS (98.3%)
FINANCE (18.8%)
Allstate Corp. ....................................................................... 271,600 $ 24,681,650
American General Corp. ............................................................... 488,600 26,414,937
American International Group, Inc. ................................................... 199,225 21,665,719
Banc One Corp. ....................................................................... 300,000 16,293,750
BankAmerica Corp. .................................................................... 200,000 14,600,000
BankBoston Corp. ..................................................................... 150,000 14,090,625
Barnett Banks, Inc. .................................................................. 239,000 17,178,125
*CIT Group, Inc. (Class A)............................................................ 600,000 19,350,000
Fannie Mae............................................................................ 456,800 26,066,150
First Union Corp. .................................................................... 198,000 10,147,500
Freddie Mac........................................................................... 500,700 20,998,106
Morgan Stanley, Dean Witter, Discover & Co. .......................................... 405,080 23,950,355
NationsBank Corp. .................................................................... 232,000 14,108,500
--------------
249,545,417
--------------
BUILDING & FORESTRY PRODUCTS (1.2%)
*Crown Vantage, Inc. ................................................................. 195,100 1,365,700
Mead Corp. ........................................................................... 500,000 14,000,000
--------------
15,365,700
--------------
BUSINESS & CONSUMER SERVICES (7.9%)
*Cendant Corp. ....................................................................... 1,231,550 42,334,531
*Corrections Corporation of America................................................... 400,000 14,825,000
*FIserv, Inc. ........................................................................ 300,500 14,762,063
McKesson Corp. ....................................................................... 148,900 16,109,119
Service Corporation Int'l. ........................................................... 448,300 16,559,081
--------------
104,589,794
--------------
CONSUMER DURABLE (0.1%)
*Sonic Automotive, Inc. .............................................................. 132,500 1,275,312
--------------
CONSUMER NON-DURABLE (16.7%)
*Consolidated Stores Corp. ........................................................... 491,200 21,582,100
*Federated Department Stores, Inc. ................................................... 402,800 17,345,575
Home Depot, Inc. ..................................................................... 135,100 7,954,012
Liz Claiborne, Inc. .................................................................. 290,000 12,125,625
Mattel, Inc. ......................................................................... 643,400 23,966,650
*Neiman-Marcus Group, Inc. ........................................................... 240,400 7,272,100
*Office Depot, Inc. .................................................................. 596,800 14,285,900
*Payless ShoeSource, Inc. ............................................................ 380,200 25,520,925
Royal Caribbean Cruises Ltd. ......................................................... 300,000 15,993,750
Tandy Corp. .......................................................................... 697,600 26,901,200
Unifi, Inc. .......................................................................... 200,000 8,137,500

<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
Warnaco Group, Inc. (Class A)......................................................... 1,290,300 $ 40,483,163
--------------
221,568,500
--------------
CONSUMER STAPLES (14.8%)
Avon Products, Inc. .................................................................. 215,100 13,201,762
CVS Corp. ............................................................................ 190,000 12,171,875
Gillette Co. ......................................................................... 312,100 31,346,544
Kellogg Co. .......................................................................... 106,000 5,260,250
Libbey, Inc. ......................................................................... 390,500 14,790,188
Philip Morris Cos., Inc. ............................................................. 600,000 27,187,500
Rite Aid Corp. ....................................................................... 533,925 31,334,723
*Safeway, Inc. ....................................................................... 327,700 20,727,025
Sunbeam Corp. ........................................................................ 600,000 25,275,000
Sysco Corp. .......................................................................... 328,400 14,962,725
--------------
196,257,592
--------------
ENERGY (1.4%)
Anadarko Petroleum Corp. ............................................................. 177,000 10,741,688
Apache Corp. ......................................................................... 203,700 7,142,231
--------------
17,883,919
--------------
ENERGY SERVICES (0.9%)
Schlumberger Ltd. .................................................................... 150,000 12,075,000
--------------
HEALTH (13.0%)
American Home Products Corp. ......................................................... 180,000 13,770,000
*Apria Healthcare Group, Inc. ........................................................ 901,720 12,116,862
Bristol-Myers Squibb Co. ............................................................. 244,500 23,135,812
*Ethical Holdings Ltd. ADR............................................................ 283,000 884,375
Lilly (Eli) & Co. .................................................................... 322,100 22,426,213
Merck & Co., Inc. .................................................................... 246,200 26,158,750
Pfizer, Inc. ......................................................................... 327,300 24,404,306
Schering-Plough Corp. ................................................................ 217,600 13,518,400
*Tenet Healthcare Corp. .............................................................. 745,900 24,707,938
Warner-Lambert Co. ................................................................... 83,800 10,391,200
--------------
171,513,856
--------------
HOTELS & GAMING (1.4%)
*Host Marriott Corp. ................................................................. 390,000 7,653,750
*Station Casinos, Inc. ............................................................... 1,076,600 10,967,863
--------------
18,621,613
--------------
MACHINERY & CAPITAL SPENDING (5.2%)
Emerson Electric Co. ................................................................. 361,000 20,373,938
General Electric Co. ................................................................. 150,000 11,006,250
Tyco International Ltd. .............................................................. 830,354 37,417,827
--------------
68,798,015
--------------
</TABLE>

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<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
</TABLE>

COMMON STOCKS (CONTINUED)
<TABLE>
<S> <C> <C>
REAL ESTATE SECURITIES (4.0%)
Duke Realty Investments, Inc. ........................................................ 168,200 $ 4,078,850
Equity Office Properties Trust........................................................ 111,800 3,528,688
Equity Residential Properties Trust................................................... 219,900 11,118,694
JP Realty, Inc. ...................................................................... 350,000 9,078,125
Public Storage, Inc. ................................................................. 50,000 1,468,750
Simon DeBartolo Group, Inc. .......................................................... 144,300 4,716,806
TriNet Corporate Realty Trust, Inc. .................................................. 146,000 5,648,375
Vornado Realty Trust.................................................................. 294,800 13,837,175
--------------
53,475,463
--------------
TECHNOLOGY (12.9%)
Autodesk, Inc. ....................................................................... 114,700 4,243,900
*Cadence Design Systems, Inc. ........................................................ 543,000 13,303,500
*Cisco Systems, Inc. ................................................................. 590,700 32,931,525
Computer Associates International, Inc. .............................................. 158,250 8,367,469
*Computer Sciences Corp. ............................................................. 289,500 24,173,250
*EMC Corp. ........................................................................... 379,600 10,415,275
Ericsson (L.M.) Telephone Co. (Class B) ADR........................................... 171,400 6,395,362
Hewlett-Packard Co. .................................................................. 202,900 12,681,250
Intel Corp. .......................................................................... 200,800 14,106,200
Lucent Technologies, Inc. ............................................................ 159,800 12,764,025
*Microsoft Corp. ..................................................................... 151,500 19,581,375
*Tellabs, Inc. ....................................................................... 225,000 11,896,875
--------------
170,860,006
--------------
Total Common Stocks
(Cost $998,562,165) ................................................................. 1,301,830,187
--------------
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
REPURCHASE AGREEMENT (2.1%)
Goldman Sachs Corp.
6.337% dated 12/31/1997,
due 01/02/1998 in the
amount of $27,758,843
Collateralized by U.S. Treasury Notes
5.875% due 08/31/1999
(Cost $27,749,208)................................................................... $ 27,749,208 $ 27,749,208
--------------
TOTAL INVESTMENTS (100.4%)
(Cost $1,026,311,373).................................................................... 1,329,579,395
RECEIVABLES LESS LIABILITIES (-0.4%)...................................................... (4,661,706)
--------------
NET ASSETS (100.0%)....................................................................... $1,324,917,689
--------------
--------------
</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, 1997 AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
COMMON STOCKS (86.2%)
ARGENTINA (1.1%)
Banco de Galicia y Buenos Aires SA de CV, ADR (Banking)............................... 16,300 $ 419,725
*Disco SA, ADR (Retail)............................................................... 26,000 1,157,000
--------------
1,576,725
--------------
BELGIUM (0.6%)
*Lernout & Hauspie Speech Products NV (Business Services)............................. 20,000 930,000
--------------
BRAZIL (0.5%)
Cia Tecidos do Norte de Minas SA (Textiles)........................................... 1,973,067 707,192
--------------
CANADA (3.3%)
Bombardier, Inc. (Class B)
(Manufacturing - Diversified Inds.).................................................. 25,000 513,735
Canadian National Railway Co. (Transportation)........................................ 8,500 399,839
*Cognicase, Inc. (Business Services).................................................. 30,500 369,813
Magna International, Inc. (Class A)
(Motor Vehicles & Parts)............................................................. 12,000 751,520
*Newbridge Networks Corp. (Electronics)............................................... 15,000 524,743
Northern Telecom Ltd. (Electronics)................................................... 11,000 977,598
Royal Bank of Canada (Banking)........................................................ 17,000 898,302
Thomson Corp. (Media)................................................................. 16,000 438,946
--------------
4,874,496
--------------
CHILE (0.6%)
*Distribucion y Servicio D&S SA, ADR (Retail)......................................... 50,000 928,125
--------------
FINLAND (2.6%)
Finnlines Oyj (Transportation)........................................................ 34,000 1,354,880
Merita plc. (Class A) (Banking)....................................................... 280,000 1,532,274
Metsa Serla Oyj (Series B) (Paper & Forest Products).................................. 114,000 889,725
--------------
3,776,879
--------------
FRANCE (7.9%)
Alcatel Alsthom SA (Electronics)...................................................... 10,000 1,271,715
BIC SA (Consumer Products)............................................................ 10,000 730,280
Carrefour SA (Retail)................................................................. 1,200 626,382
Cie de Saint Gobain SA (Building Materials)........................................... 6,084 864,736
Cie Francaise d'Etudes et de Construction Technip (Construction)...................... 3,700 390,574
Cipe France SA (Business Services).................................................... 5,400 182,588
Elf-Aquitaine SA (Oil Exploration & Production)....................................... 11,000 1,280,027

<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
*France Telecom SA, ADR (Utilities - Communication)................................... 39,000 $ 1,404,000
Lafarge SA (Building Materials)....................................................... 7,200 472,659
L'Oreal SA (Consumer Products)........................................................ 2,500 978,722
*Renault SA (Motor Vehicles & Parts).................................................. 60,000 1,688,638
Schneider SA (Electrical Equipment)................................................... 13,000 706,242
Sodexho Alliance SA (Food & Beverages)................................................ 1,000 535,783
Synthelabo SA (Pharmaceuticals)....................................................... 3,600 450,037
--------------
11,582,383
--------------
GERMANY (4.9%)
Allianz AG (Insurance)................................................................ 3,000 777,401
Deutsche Bank AG (Banking)............................................................ 12,500 882,778
Gehe AG (Wholesale Distributor)....................................................... 20,000 1,000,945
Heidelberger Zement AG (Building Materials)........................................... 3,850 274,037
Mannesmann AG (Machinery & Capital Spending).......................................... 3,400 1,718,623
Siemens AG (Electrical Equipment)..................................................... 7,500 444,169
Thyssen AG (Steel).................................................................... 6,000 1,284,547
Volkswagen AG (Motor Vehicles & Parts)................................................ 1,500 844,131
--------------
7,226,631
--------------
HUNGARY (0.4%)
*Gedeon Richter Ltd., GDS (Pharmaceuticals)........................................... 5,400 627,750
--------------
INDIA (3.1%)
Bajaj Auto Ltd., GDR (Motor Vehicles & Parts)......................................... 30,000 607,500
Bank of Baroda Ltd. (Banking)......................................................... 271,000 783,197
Indian Hotels Co., Ltd., The, GDR (Entertainment & Leisure)........................... 37,000 696,063
Industrial Credit & Investment Corp. of India Ltd., The, GDR (Financial Services)..... 30,000 387,750
Infosys Technologies Ltd. (Business Services)......................................... 16,000 506,803
Mahindra & Mahindra Ltd. (Motor Vehicles & Parts)..................................... 70,000 581,841
Tata Engineering & Locomotive Co., Ltd., GDS (Motor Vehicles & Parts)................. 50,000 416,750
Videsh Sanchar Nigam Ltd., GDR (Utilities - Communication)............................ 40,000 557,000
--------------
4,536,904
--------------
INDONESIA (0.5%)
*Gulf Indonesia Resources Ltd. (Oil Exploration & Production)......................... 36,000 792,000
--------------
ITALY (2.1%)
Credito Italiano S.p.A (Banking)...................................................... 338,500 1,047,606
ENI S.p.A (Oil Exploration & Production).............................................. 132,000 754,179
</TABLE>

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<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
</TABLE>

COMMON STOCKS (CONTINUED)
<TABLE>
<S> <C> <C>
Fiat S.p.A (Motor Vehicles & Parts)................................................... 266,000 $ 771,928
Gewiss S.p.A (Electrical Equipment)................................................... 24,800 469,883
--------------
3,043,596
--------------
JAPAN (22.2%)
Banyu Pharmaceutical Co., Ltd. (Pharmaceuticals)...................................... 22,000 243,599
Bellsystem 24, Inc. (Business Services)............................................... 6,000 788,927
BRIDGESTONE CORP. (Motor Vehicles & Parts)............................................ 32,000 696,348
DENSO CORP. (Motor Vehicles & Parts).................................................. 23,000 415,609
East Japan Railway Co. (Transportation)............................................... 148 670,296
Fuji Heavy Inds., Ltd. (Machinery & Capital Spending)................................. 91,000 246,305
Fuji Photo Film Co., Ltd. (Entertainment & Leisure)................................... 50,000 1,922,338
FUJITSU LTD. (Electronics)............................................................ 47,000 505,959
Hitachi Maxell Ltd. (Electronics)..................................................... 36,000 636,678
Ishikawajima-Harima Heavy Industries Co., Ltd. (Machinery & Capital Spending)......... 310,000 464,821
ITO-YOKADO CO., LTD. (Retail)......................................................... 31,000 1,585,160
KEYENCE CORP. (Electronics)........................................................... 6,600 979,469
KOMATSU LTD. (Machinery & Capital Spending)........................................... 143,000 720,223
MABUCHI MOTOR CO., LTD. (Electrical Equipment)........................................ 16,000 815,686
Mitsubishi Estate Co., Ltd. (Real Estate)............................................. 70,000 764,321
Mitsubishi Trust & Banking Corp., The (Banking)....................................... 55,000 554,018
MITSUI & CO., LTD. (Wholesale Distributor)............................................ 90,000 534,256
Mitsui Fudosan Co., Ltd. (Real Estate)................................................ 72,000 697,578
MYCAL CORP. (Retail).................................................................. 95,000 796,232
Nintendo Co., Ltd. (Entertainment & Leisure).......................................... 18,000 1,785,467
NIPPON STEEL CORP. (Metals, Mining & Steel)........................................... 300,000 445,213
NIPPON TELEGRAPH & TELEPHONE CORP. (Utilities - Communication)........................ 1,000 861,207
Nomura Securities Co., Ltd., The (Financial Services)................................. 76,000 1,016,840
NTT Data Communications Systems Corp. (Business Services)............................. 35 1,891,965
ROHM CO., LTD. (Electronics).......................................................... 17,000 1,738,562
SANKYO CO., LTD. (Pharmaceuticals).................................................... 36,000 816,609
Sekisui House, Ltd. (Construction).................................................... 112,000 722,553
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
Shiseido Co., Ltd. (Consumer Products)................................................ 110,000 $ 1,505,575
SONY CORP. (Electronics).............................................................. 28,000 2,497,501
Sumitomo Bank Ltd., The (Banking)..................................................... 58,000 664,514
Takeda Chemical Inds., Ltd. (Pharmaceuticals)......................................... 41,000 1,172,780
Tokio Marine & Fire Insurance Co., Ltd., The (Insurance).............................. 130,000 1,479,431
TOYOTA MOTOR CORP. (Motor Vehicles
& Parts)............................................................................. 50,000 1,437,909
TRANS COSMOS, INC. (Business Services)................................................ 18,000 316,955
--------------
32,390,904
--------------
MEXICO (3.8%)
Fomento Economico Mexicano SA de CV (Series B) (Food & Beverages)..................... 100,000 800,546
*Industrias CH SA (Series B) (Steel).................................................. 280,000 1,682,016
Panamerican Beverages, Inc. (Class A) (Food & Beverages).............................. 26,000 848,250
*Tubos de Acero de Mexico SA, ADR (Steel)............................................. 102,000 2,205,750
--------------
5,536,562
--------------
NETHERLANDS (4.2%)
ABN Amro Holding NV (Banking)......................................................... 32,524 633,480
Aegon NV (Insurance).................................................................. 25,992 2,313,391
Akzo Nobel NV (Chemicals)............................................................. 4,800 827,456
Koninklijke Pakhoed NV (Certificates)
(Oil Equipment & Services)........................................................... 16,484 475,500
Philips Electronics NV (Electronics).................................................. 20,000 1,199,211
Vendex International NV (Certificates) (Retail)....................................... 13,178 727,129
--------------
6,176,167
--------------
NORWAY (1.5%)
*Fred Olsen Energy ASA (Oil Exploration & Production)................................. 20,000 415,902
Smedvig ASA (Class A) (Oil Equipment & Services)...................................... 32,000 674,142
Tomra Systems ASA (Machinery & Capital Spending)...................................... 49,000 1,098,879
--------------
2,188,923
--------------
SPAIN (3.6%)
Banco Bilbao Vizcaya SA (Banking)..................................................... 48,000 1,552,960
Dragados & Construcciones SA (Construction)........................................... 39,000 830,522
Inmobiliaria Metropolitana Vasco Central SA (Real Estate)............................. 17,500 788,982
*Tele Pizza SA (Restaurants).......................................................... 6,500 524,675
</TABLE>

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<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
</TABLE>

COMMON STOCKS (CONTINUED)
<TABLE>
<S> <C> <C>
Telefonica de Espana SA, ADR (Utilities - Communication).............................. 10,000 $ 910,625
Vallehermoso SA (Real Estate)......................................................... 20,000 612,941
--------------
5,220,705
--------------
SWEDEN (3.9%)
*Argonaut AB (Class B) (Transportation)............................................... 515,000 882,894
Assa Abloy AB (Class B) (Manufacturing - Diversified Inds.)........................... 33,000 873,566
ICB Shipping AB (Class B) (Transportation)............................................ 140,000 1,764,780
*Munters AB (Manufacturer - Consumer Products)........................................ 110,000 949,830
SSAB Svenskt Stal AB (Class B) (Metals, Mining & Steel)............................... 25,000 412,833
Telefonaktiebolaget LM Ericsson, ADR (Electronics).................................... 20,000 746,250
--------------
5,630,153
--------------
SWITZERLAND (3.0%)
Credit Suisse Group (Registered) (Financial Services)................................. 6,500 1,006,509
Novartis AG (Bearer) (Pharmaceuticals)................................................ 2,100 3,417,266
--------------
4,423,775
--------------
UNITED KINGDOM (16.4%)
Associated British Foods plc (Food & Beverages)....................................... 62,000 540,646
Bank of Scotland (Banking)............................................................ 86,000 792,376
Barclays plc (Banking)................................................................ 50,639 1,348,058
British Aerospace plc (Aircraft & Aerospace).......................................... 38,000 1,084,746
British Petroleum Co. plc (Oil Exploration & Production).............................. 56,561 744,478
British Sky Broadcasting Group plc (Media)............................................ 105,000 787,770
British Telecommunications plc (Utilities - Communication)............................ 110,000 866,004
Compass Group plc (Restaurants)....................................................... 160,000 1,971,728
Electrocomponents plc (Electronics)................................................... 86,469 643,049
Glaxo Wellcome plc (Pharmaceuticals).................................................. 86,000 2,037,540
Granada Group plc (Entertainment & Leisure)........................................... 60,975 932,996
Hays plc (Business Services).......................................................... 120,000 1,603,180
National Westminster Bank plc (Banking)............................................... 93,000 1,548,491
Next plc (Retail)..................................................................... 80,000 910,838
Railtrack Group plc (Transportation).................................................. 100,000 1,591,005
Reuters Holdings plc (Media).......................................................... 69,000 754,946
Siebe plc (Machinery & Capital Spending).............................................. 72,295 1,421,416
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
*Smallworldwide plc, ADR (Business Services).......................................... 19,000 $ 415,625
SmithKline Beecham plc (Pharmaceuticals).............................................. 200,682 2,057,034
Smiths Industries plc (Manufacturing - Diversified Inds.)............................. 28,000 390,660
Wetherspoon, J.D. plc (Restaurants)................................................... 140,000 771,646
WPP Group plc (Media)................................................................. 160,000 709,453
--------------
23,923,685
--------------
Total Common Stocks
(Cost $111,122,019).................................................................. 126,093,555
--------------
PREFERRED STOCKS (2.2%)
BRAZIL (1.4%)
Bardella Industrias Mecanicas SA (Manufacturing - Diversified Inds.).................. 4,000 430,108
Cia Cervejaria Brahma SA (Food & Beverages)........................................... 1,195,000 803,091
Cia Paranaense de Energi SA (Class B) (Utilities - Electric).......................... 48,000,000 653,763
DIXIE TOGA SA (Containers)............................................................ 437,500 223,454
*Empresa Nacional de Comercio Redito e Participacoes SA (Textiles).................... 1,195,000 857
--------------
2,111,273
GERMANY (0.8%)
Porsche AG (Motor Vehicles & Parts)................................................... 700 1,167,770
--------------
Total Preferred Stocks
(Cost $2,718,459) ................................................................... 3,279,043
--------------
WARRANTS (0.1%)
FRANCE (0.1%)
*Cie Generale des Eaux (05/02/2001) (Utilities)....................................... 220,000 149,580
JAPAN (0.0%)
*Mr. Max Corp. (02/17/1998) (Retail).................................................. 5,000 0
--------------
Total Warrants
(Cost $692,496) ..................................................................... 149,580
--------------
CONVERTIBLE NOTE (0.5%)
GERMANY (0.5%)
Daimler-Benz AG, GDR (Motor Vehicles & Parts) 5.750% 06/14/2002
(Cost $819,929)...................................................................... 9,838 737,850
--------------
Total investments, excluding temporary cash investments
(Cost $115,352,903) ................................................................. 130,260,028
--------------
</TABLE>

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<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
REPURCHASE AGREEMENTS (11.7%)
Goldman Sachs Corp.
6.337% dated 12/31/1997,
due 01/02/1998 in the
amount of $7,418,693.
Collateralized by U.S. Treasury Notes
5.875% due 08/31/1999................................................................ $ 7,416,118 $ 7,416,118
J.P. Morgan Securities, Inc.
6.521% dated 12/31/1997,
due 01/02/1998 in the
amount of $7,352,626.
Collateralized by U.S. Treasury Notes
3.625% to 7.500%
due 08/31/2000 to 02/15/2005......................................................... 7,350,000 7,350,000
Merrill Lynch
6.388% dated 12/31/1997,
due 01/02/1998 in the
amount of $2,300,805.
Collateralized by U.S. Treasury Bonds
6.250% to 7.625%
due 02/15/2023 to 08/15/2025......................................................... 2,300,000 2,300,000
--------------
Total Repurchase Agreements
(Cost $17,066,118) .................................................................. 17,066,118
--------------
TOTAL INVESTMENTS (100.7%)
(Cost $132,419,021)...................................................................... 147,326,146
CASH AND RECEIVABLES LESS LIABILITIES (-0.7%)............................................. (1,045,611)
--------------
NET ASSETS (100%)......................................................................... $ 146,280,535
--------------
--------------
</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, 1997 AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
COMMON STOCKS (97.5%)
BUILDING & FORESTRY PRODUCTS (2.1%)
Longview Fibre Co. ................................................................... 815,000 $ 12,377,812
Willamette Industries, Inc. .......................................................... 420,500 13,534,844
--------------
25,912,656
--------------
BUSINESS & CONSUMER SERVICES (15.7%)
*AccuStaff, Inc. ..................................................................... 400,000 9,200,000
*Corrections Corporation of America................................................... 450,000 16,678,125
DENTSPLY International, Inc. ......................................................... 550,000 16,775,000
*Dollar Thrifty Automotive Group, Inc. ............................................... 500,000 10,250,000
*FIserv, Inc. ........................................................................ 555,000 27,264,375
Hertz Corp. (Class A)................................................................. 484,000 19,481,000
McKesson Corp. ....................................................................... 174,100 18,835,444
*NovaCare Employee Services, Inc. .................................................... 450,000 3,600,000
*Romac International, Inc. ........................................................... 465,000 11,363,437
Service Corporation Int'l. ........................................................... 800,000 29,550,000
ServiceMaster Co. .................................................................... 450,000 13,162,500
*StaffMark, Inc. ..................................................................... 337,500 10,673,438
Unitog Co. ........................................................................... 415,000 9,233,750
--------------
196,067,069
--------------
CHEMICAL (0.8%)
IMC Global, Inc. ..................................................................... 300,000 9,825,000
--------------
CONSUMER DURABLE (1.4%)
*Furniture Brands International, Inc. ................................................ 850,000 17,425,000
--------------
CONSUMER NON-DURABLE (25.0%)
+*Abercrombie & Fitch Co. (Class A)................................................... 800,000 25,000,000
*AnnTaylor Stores Corp. .............................................................. 1,240,000 16,585,000
*Consolidated Stores Corp. ........................................................... 450,000 19,771,875
+*Gadzooks, Inc. ..................................................................... 700,000 14,700,000
*Helen of Troy Ltd. .................................................................. 1,010,000 16,286,250
*Landry's Seafood Restaurants, Inc. .................................................. 1,000,000 24,000,000
Liz Claiborne, Inc. .................................................................. 450,000 18,815,625
*Meyer (Fred), Inc. .................................................................. 1,000,000 36,375,000
Nordstrom, Inc. ...................................................................... 525,000 31,696,875
*Papa John's International, Inc. ..................................................... 600,000 20,925,000
*Planet Hollywood International, Inc. (Class A)....................................... 1,375,000 18,218,750
*Polo Ralph Lauren Corp. (Class A).................................................... 600,000 14,587,500
St. John Knits, Inc. ................................................................. 600,000 24,000,000
+*Vans, Inc. ......................................................................... 860,000 13,007,500
*Zale Corp. .......................................................................... 790,000 18,170,000
--------------
312,139,375
--------------
CONSUMER STAPLES (16.3%)
American Stores Co. .................................................................. 2,015,000 41,433,437

<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
Hannaford Brothers Co. ............................................................... 200,000 $ 8,687,500
*Kroger Co. .......................................................................... 1,000,000 36,937,500
Libbey, Inc. ......................................................................... 350,000 13,256,250
Newell Co. ........................................................................... 400,000 17,000,000
*Quality Food Centers, Inc. .......................................................... 400,000 26,800,000
*Safeway, Inc. ....................................................................... 600,000 37,950,000
Sunbeam Corp. ........................................................................ 400,000 16,850,000
*Whole Foods Market, Inc. ............................................................ 100,000 5,112,500
--------------
204,027,187
--------------
HEALTH (14.0%)
*American Oncology Resources, Inc. ................................................... 600,000 9,600,000
*ATL Ultrasound, Inc. ................................................................ 100,000 4,600,000
*Dura Pharmaceuticals, Inc. .......................................................... 213,000 9,771,375
*Elan Corp. plc ADR................................................................... 150,000 7,678,125
*ESC Medical Systems Ltd. ............................................................ 706,500 27,376,875
*Inhale Therapeutic Systems........................................................... 100,000 2,600,000
*MedPartners, Inc. ................................................................... 50,000 1,118,750
Mentor Corp. ......................................................................... 600,000 21,900,000
Omnicare, Inc. ....................................................................... 300,000 9,300,000
*PAREXEL International Corp. ......................................................... 230,000 8,510,000
*PhyCor, Inc. ........................................................................ 300,000 8,100,000
+*ResMed, Inc. ....................................................................... 500,000 14,062,500
*Serologicals Corp. .................................................................. 500,000 13,000,000
*Sofamor Danek Group, Inc. ........................................................... 200,000 13,012,500
*Transkaryotic Therapies, Inc. ....................................................... 155,000 5,444,375
*Watson Pharmaceuticals, Inc. ........................................................ 600,000 19,462,500
--------------
175,537,000
--------------
MACHINERY & CAPITAL SPENDING (1.9%)
Applied Power, Inc. (Class A)......................................................... 134,500 9,280,500
General Cable Corp. .................................................................. 100,000 3,618,750
Parker-Hannifin Corp. ................................................................ 250,000 11,468,750
--------------
24,368,000
--------------
METAL MINING & STEEL (2.8%)
*Getchell Gold Corp. ................................................................. 800,000 19,200,000
+Schnitzer Steel Industries, Inc. (Class A)........................................... 550,000 15,434,375
--------------
34,634,375
--------------
POLLUTION CONTROL (3.9%)
*Air & Water Technologies Corp. (Class A)............................................. 1,200,100 1,350,112
*Culligan Water Technologies, Inc. ................................................... 400,000 20,100,000
*Ionics, Inc. ........................................................................ 343,000 13,419,875
+*Osmonics, Inc. ..................................................................... 869,000 13,741,063
--------------
48,611,050
--------------
</TABLE>

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PRINCIPAL
AMOUNT VALUE(1)
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<S> <C> <C>
</TABLE>

COMMON STOCKS (CONTINUED)
<TABLE>
<S> <C> <C>
REAL ESTATE SECURITIES (6.5%)
Apartment Investment & Management Co. (Class A)....................................... 114,000 $ 4,189,500
Colonial Properties Trust............................................................. 135,000 4,066,875
Equity Office Properties Trust........................................................ 123,000 3,882,187
Equity Residential Properties Trust................................................... 80,000 4,045,000
First Industrial Realty Trust, Inc. .................................................. 115,000 4,154,375
General Growth Properties, Inc. ...................................................... 111,000 4,009,875
Liberty Property Trust................................................................ 153,000 4,370,063
Macerich Co. ......................................................................... 150,000 4,275,000
Mack-Cali Realty Corp. ............................................................... 101,000 4,141,000
Manufactured Home Communities, Inc. .................................................. 150,000 4,050,000
Public Storage, Inc. ................................................................. 145,000 4,259,375
*Security Capital Group, Inc. (Class B)............................................... 350,000 11,375,000
Security Capital Industrial Trust..................................................... 163,000 4,054,625
Security Capital Pacific Trust........................................................ 160,000 3,880,000
Simon DeBartolo Group, Inc. .......................................................... 122,000 3,987,875
Spieker Properties, Inc. ............................................................. 100,000 4,287,500
*Trammell Crow Co. ................................................................... 24,000 618,000
TriNet Corporate Realty Trust, Inc. .................................................. 105,000 4,062,188
Vornado Realty Trust.................................................................. 90,000 4,224,375
--------------
81,932,813
--------------
TECHNOLOGY (4.6%)
*Apple Computer, Inc. ................................................................ 1,000,000 13,125,000
*FlexiInternational Software, Inc. ................................................... 25,000 387,500
*FORE Systems, Inc. .................................................................. 600,000 9,150,000
+*Integrated Measurement Systems, Inc. ............................................... 300,000 5,137,500
*Loral Space & Communications Corp. .................................................. 650,000 13,934,375
*VIASOFT, Inc. ....................................................................... 360,000 15,210,000
--------------
56,944,375
--------------
TRANSPORTATION (1.6%)
+*Celadon Group, Inc. ................................................................ 500,000 6,750,000
*Trans World Airlines, Inc. .......................................................... 1,300,000 13,162,500
--------------
19,912,500
--------------
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
UTILITIES/ELECTRIC/GAS (0.9%)
United Water Resources, Inc. ......................................................... 575,000 $ 11,248,438
--------------
Total Common Stocks
(Cost $1,080,385,133) ............................................................... 1,218,584,838
--------------
REPURCHASE AGREEMENTS (7.4%)
Goldman Sachs Corp.
6.337% dated 12/31/1997,
due 01/02/1998 in the
amount of $65,646,574.
Collateralized by U.S. Treasury Notes
5.875% due 08/31/1999................................................................ $ 65,623,788 65,623,788
J.P. Morgan Securities, Inc.
6.521% dated 12/31/1997,
due 01/02/1998 in the
amount of $27,009,648.
Collateralized by U.S. Treasury Notes
3.625% to 7.500%
due 08/31/2000 to 02/15/2005......................................................... 27,000,000 27,000,000
--------------
Total Repurchase Agreements
(Cost $92,623,788) .................................................................. 92,623,788
--------------
TOTAL INVESTMENTS (104.9%)
(Cost $1,173,008,921).................................................................... 1,311,208,626
RECEIVABLES LESS LIABILITIES (-4.9%)...................................................... (61,490,829)
--------------
NET ASSETS (100.0%)....................................................................... $1,249,717,797
--------------
--------------
</TABLE>

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

* Non-income producing.

+ Affiliated issuers (Note 1)

The accompanying notes are an integral part
of the financial statements.

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<CAPTION>
SHARES OR
PRINCIPAL
December 31, 1997 AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
COMMON STOCKS (96.7%)
AEROSPACE (1.7%)
*Orbital Sciences Corp. .............................................................. 55,000 $ 1,636,250
--------------
FINANCE (6.1%)
*Golden State Bancorp, Inc. .......................................................... 17,000 635,375
*Insignia Financial Group, Inc. (Class A)............................................. 50,000 1,150,000
North Fork Bancorp, Inc. ............................................................. 58,600 1,966,763
*Stirling Cooke Brown Holdings Ltd. .................................................. 20,400 499,800
TCF Financial Corp. .................................................................. 37,100 1,259,081
*Wilshire Financial Services Group, Inc. ............................................. 15,000 397,500
--------------
5,908,519
--------------
BUILDING & FORESTRY PRODUCTS (1.1%)
Martin Marietta Materials, Inc. ...................................................... 30,000 1,096,875
--------------
BUSINESS & CONSUMER SERVICES (8.0%)
*AccuStaff, Inc. ..................................................................... 36,000 828,000
*Billing Information Concepts Corp. .................................................. 17,000 816,000
*Family Golf Centers, Inc. ........................................................... 45,000 1,411,875
G & K Services, Inc. (Class A)........................................................ 27,800 1,167,600
*Hagler Bailly, Inc. ................................................................. 20,000 450,000
*Hall, Kinion & Associates, Inc. ..................................................... 40,000 875,000
*Lamalie Associates, Inc. ............................................................ 3,000 60,000
*Seattle FilmWorks, Inc. ............................................................. 92,000 1,023,500
Select Appointments Holdings plc ADR.................................................. 38,000 693,500
*Walsh International, Inc. ........................................................... 40,300 423,150
--------------
7,748,625
--------------
CONSUMER DURABLE (4.0%)
Clayton Homes, Inc. .................................................................. 54,900 988,200
*Coastcast Corp. ..................................................................... 90,000 1,248,750
Exide Corp. .......................................................................... 14,300 370,012
*Tower Automotive, Inc. .............................................................. 30,000 1,261,875
--------------
3,868,837
--------------
CONSUMER NON-DURABLE (10.2%)
*ACX Technologies, Inc. .............................................................. 24,000 586,500
*Bed, Bath & Beyond, Inc. ............................................................ 26,700 1,027,950
*Bon-Ton Stores, Inc. ................................................................ 63,500 952,500
*Borders Group, Inc. ................................................................. 24,500 767,156
CKE Restaurants, Inc. ................................................................ 51,800 2,182,075
*Cost Plus, Inc. ..................................................................... 51,000 1,479,000
*Day Runner, Inc. .................................................................... 20,000 810,000
*Star Buffet, Inc. ................................................................... 19,000 218,500
*Williams-Sonoma, Inc. ............................................................... 44,200 1,850,875
--------------
9,874,556
--------------

<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
CONSUMER STAPLES (0.3%)
*Beringer Wine Estates Holdings, Inc. (Class B)....................................... 8,500 $ 323,000
--------------
ENERGY (2.9%)
*Meridian Resource Corp. ............................................................. 75,000 717,187
*Ocean Energy, Inc. .................................................................. 16,000 789,000
*Patterson Energy, Inc. .............................................................. 5,600 216,650
*Seagull Energy Corp. ................................................................ 53,000 1,093,125
--------------
2,815,962
--------------
ENERGY SERVICES (3.2%)
*Hanover Compressor Co. .............................................................. 7,000 143,062
*Tubos de Acero de Mexico SA ADR...................................................... 90,000 1,946,250
*Willbros Group, Inc. ................................................................ 65,000 975,000
--------------
3,064,312
--------------
ENTERTAINMENT & MEDIA (3.8%)
*Golden Books Family Entertainment, Inc. ............................................. 17,600 181,500
Nelson (Thomas), Inc. ................................................................ 51,000 589,687
*Regal Cinemas, Inc. ................................................................. 50,000 1,393,750
*WMS Industries, Inc. ................................................................ 68,400 1,444,950
--------------
3,609,887
--------------
HEALTH (27.6%)
*Alternative Living Services, Inc. ................................................... 44,300 1,309,619
*American Oncology Resources, Inc. ................................................... 55,500 888,000
*Assisted Living Concepts, Inc. ...................................................... 57,000 1,125,750
*ATL Ultrasound, Inc. ................................................................ 38,000 1,748,000
*Atria Communities, Inc. ............................................................. 63,000 1,078,875
*Cardiac Pathways Corp. .............................................................. 65,000 455,000
*Concentra Managed Care, Inc. ........................................................ 13,000 438,750
*ESC Medical Systems Ltd. ............................................................ 25,000 968,750
*HealthCare COMPARE Corp. ............................................................ 19,300 986,712
*FPA Medical Management, Inc. ........................................................ 54,600 1,016,925
*Health Management Systems, Inc. ..................................................... 50,000 296,875
*IDEXX Laboratories, Inc. ............................................................ 20,000 318,750
*Immunex Corp. ....................................................................... 15,000 810,000
Jones Medical Industries, Inc. ....................................................... 37,500 1,434,375
*Laser Industries Ltd. ............................................................... 75,000 2,053,125
*Ligand Pharmaceuticals, Inc. (Class B)............................................... 73,897 951,424
*MedPartners, Inc. ................................................................... 51,000 1,141,125
*MedQuist, Inc. ...................................................................... 23,450 814,887
*Protein Design Labs, Inc. ........................................................... 20,000 800,000
*Quorum Health Group, Inc. ........................................................... 50,000 1,306,250
*Somnus Medical Technologies, Inc. ................................................... 100,000 1,275,000
*Spiros Development Corp. II (Units-1 callable Common Share of Spiros & 1 Warrant of
Durable Pharmaceuticals)............................................................. 30,000 513,750
</TABLE>

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<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
</TABLE>

COMMON STOCKS (CONTINUED)
<TABLE>
<S> <C> <C>
*Thermo Cardiosystems, Inc. .......................................................... 50,000 $ 1,337,500
*Transkaryotic Therapies, Inc. ....................................................... 35,100 1,232,888
*Universal Health Services, Inc. (Class B)............................................ 30,000 1,511,250
*Watson Pharmaceuticals, Inc. ........................................................ 25,400 823,913
--------------
26,637,493
--------------
MACHINERY & CAPITAL SPENDING (1.3%)
Robbins & Myers, Inc. ................................................................ 32,000 1,268,000
--------------
METAL MINING & STEEL (0.1%)
Oregon Steel Mills, Inc. ............................................................. 3,000 63,938
--------------
POLLUTION CONTROL (1.4%)
*Allied Waste Industries, Inc. ....................................................... 55,500 1,293,844
--------------
TECHNOLOGY (24.3%)
*ADC Telecommunications, Inc. ........................................................ 13,000 542,750
*Aspect Telecommunications Corp. ..................................................... 52,000 1,085,500
*Avant! Corp. ........................................................................ 21,000 351,750
*AXENT Technologies, Inc. ............................................................ 76,800 1,324,800
*CHS Electronics, Inc. ............................................................... 30,000 513,750
*CIBER, Inc. ......................................................................... 32,000 1,856,000
*Computer Products, Inc. ............................................................. 33,800 764,725
*Davox Corp. ......................................................................... 26,900 877,613
*Eltron International, Inc. .......................................................... 41,400 1,252,350
*Engineering Animation, Inc. ......................................................... 35,100 1,614,600
*HNC Software, Inc. .................................................................. 32,000 1,376,000
*Hyperion Software Corp. ............................................................. 5,300 189,475
*Infinium Software, Inc. ............................................................. 50,000 812,500
*Intelligent Polymers, Ltd. (Units-1 Common share & 1 Warrant)........................ 22,000 486,750
*JDA Software Group, Inc. ............................................................ 3,000 105,000
*Metro Information Services, Inc. .................................................... 43,000 1,193,250
*MICROS Systems, Inc. ................................................................ 30,600 1,377,000
*Molecular Dynamics, Inc. ............................................................ 29,000 471,250
*New Era of Networks, Inc. ........................................................... 39,000 438,750
*P-COM, Inc. ......................................................................... 57,000 983,250
*Peerless Systems Corp. .............................................................. 74,000 952,750
*Platinum Software Corp. ............................................................. 80,000 940,000
*RadiSys Corp. ....................................................................... 22,000 819,500
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
*Security Dynamics Technologies, Inc. ................................................ 26,000 $ 929,500
*Transition Systems, Inc. ............................................................ 60,000 1,327,500
*World Access, Inc. .................................................................. 36,400 869,050
--------------
23,455,363
--------------
TRANSPORTATION (0.1%)
*Ryanair Holdings plc ADR............................................................. 3,000 75,375
--------------
UTILITIES/COMMUNICATIONS (0.6%)
*Anicom, Inc. ........................................................................ 33,400 530,225
--------------
Total Common Stocks
(Cost $83,909,185) .................................................................. 93,271,061
--------------
WARRANT (0.1%)
HEALTH (0.1%)
*Ligand Pharmaceuticals, Inc. (06/03/2000)
(Cost $44,517)....................................................................... 8,000 67,000
--------------
Total investments, excluding temporary cash
investment (Cost $83,953,702)........................................................ 93,338,061
--------------
REPURCHASE AGREEMENT (3.7%)
Goldman Sachs Corp.
6.337% dated 12/31/1997,
due 01/02/1998 in the
amount of $3,623,531.
Collateralized by U.S. Treasury Notes
5.875% due 08/31/1999
(Cost $3,622,273) ................................................................... $ 3,622,273 3,622,273
--------------
TOTAL INVESTMENTS (100.5%)
(Cost $87,575,975)....................................................................... 96,960,334
RECEIVABLES LESS LIABILITIES (-0.5%)...................................................... (529,025)
--------------
NET ASSETS (100.0%)....................................................................... $ 96,431,309
--------------
--------------
</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 REAL ESTATE EQUITY FUND, INC. --
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<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
December 31, 1997 AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
COMMON STOCKS (92.4%)
REAL ESTATE
APARTMENTS (16.2%)
Apartment Investment & Management Co. (Class A)....................................... 152,200 $ 5,593,350
Associated Estates Realty Corp. ...................................................... 148,800 3,524,700
Colonial Properties Trust............................................................. 156,100 4,702,512
Equity Residential Properties Trust................................................... 91,003 4,601,339
Security Capital Pacific Trust........................................................ 256,171 6,212,147
--------------
24,634,048
--------------
OFFICE (17.2%)
Boston Properties, Inc. .............................................................. 137,000 4,529,563
Equity Office Properties Trust........................................................ 308,418 9,734,443
Mack-Cali Realty Corp. ............................................................... 189,400 7,765,400
Reckson Associates Realty Corp. ...................................................... 156,800 3,978,800
--------------
26,008,206
--------------
INDUSTRIAL (25.6%)
Alexandria Real Estate Equities, Inc. ................................................ 149,500 4,718,594
First Industrial Realty Trust, Inc. .................................................. 155,500 5,617,437
Liberty Property Trust................................................................ 186,700 5,332,619
Public Storage, Inc. ................................................................. 130,700 3,839,312
Security Capital Industrial Trust..................................................... 194,145 4,829,357
Shurgard Storage Centers, Inc. (Class A).............................................. 123,900 3,593,100
Spieker Properties, Inc. ............................................................. 103,500 4,437,562
Storage Trust Realty.................................................................. 51,200 1,347,200
TriNet Corporate Realty Trust, Inc. .................................................. 131,000 5,068,063
--------------
38,783,244
--------------
MANUFACTURED HOMES (3.0%)
Manufactured Home Communities, Inc. .................................................. 170,400 4,600,800
--------------
COMMUNITY CENTERS (11.9%)
Excel Realty Trust, Inc. ............................................................. 142,100 4,476,150
JP Realty, Inc. ...................................................................... 158,000 4,098,125
Pan Pacific Retail Properties, Inc. .................................................. 152,200 3,253,275
Vornado Realty Trust.................................................................. 131,900 6,191,056
--------------
18,018,606
--------------
SHOPPING MALLS (7.8%)
General Growth Properties, Inc. ...................................................... 143,000 5,165,875
Macerich Co. ......................................................................... 83,300 2,374,050
Simon DeBartolo Group, Inc. .......................................................... 130,856 4,277,356
--------------
11,817,281
--------------

<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
LODGING (2.9%)
Patriot American Hospitality, Inc. ................................................... 70,200 $ 2,022,638
Starwood Lodging Trust................................................................ 40,200 2,326,575
--------------
4,349,213
--------------
OTHER (7.8%)
*Catellus Development Corp. .......................................................... 261,900 5,238,000
*Security Capital Group, Inc. (Class B)............................................... 202,900 6,594,250
--------------
11,832,250
--------------
Total Common Stocks
(Cost $112,868,719) ................................................................. 140,043,648
--------------
WARRANT (0.1%)
OTHER (0.1%)
*Security Capital Group 09/18/1997-09/18/1998
(Cost $176,224)...................................................................... 22,497 118,109
--------------
Total investments, excluding temporary cash investment
(Cost $113,044,943) ................................................................. 140,161,757
--------------
REPURCHASE AGREEMENT (7.3%)
Goldman Sachs Corp.
6.337% dated 12/31/1997,
due 01/02/1998 in the
amount of $11,044,700.
Collateralized by U.S. Treasury Notes
5.875% due 08/31/1999
(Cost $11,040,866)................................................................... $ 11,040,866 11,040,866
--------------
TOTAL INVESTMENTS (99.8%)
(Cost $124,085,809)...................................................................... 151,202,623
RECEIVABLES LESS LIABILITIES (0.2%)....................................................... 351,817
--------------
NET ASSETS (100.0%)....................................................................... $ 151,554,440
--------------
--------------
</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, 1997 AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
COMMON STOCKS (52.3%)
FINANCE (9.3%)
Allstate Corp. ....................................................................... 84,600 $ 7,688,025
American General Corp. ............................................................... 129,100 6,979,469
Banc One Corp. ....................................................................... 100,000 5,431,250
BankAmerica Corp. .................................................................... 99,800 7,285,400
Chase Manhattan Corp. ................................................................ 60,000 6,570,000
First Union Corp. .................................................................... 206,900 10,603,625
Freddie Mac........................................................................... 301,000 12,623,187
Morgan Stanley, Dean Witter, Discover & Co. .......................................... 89,100 5,268,038
NationsBank Corp. .................................................................... 110,900 6,744,106
Travelers Property Casualty Corp. (Class A)........................................... 97,400 4,285,600
--------------
73,478,700
--------------
BUILDING & FORESTRY PRODUCTS (0.2%)
Weyerhaeuser Co. ..................................................................... 39,400 1,933,062
--------------
BUSINESS & CONSUMER SERVICES (1.9%)
*Corrections Corporation of America................................................... 124,600 4,617,987
McKesson Corp. ....................................................................... 10,000 1,081,875
Service Corporation Int'l. ........................................................... 256,400 9,470,775
--------------
15,170,637
--------------
CHEMICAL (0.5%)
du Pont (E.I.) de Nemours & Co. ...................................................... 64,000 3,844,000
--------------
CONSUMER NON-DURABLE (5.1%)
*Consolidated Stores Corp. ........................................................... 63,100 2,772,456
*Federated Department Stores, Inc. ................................................... 187,300 8,065,606
Home Depot, Inc. ..................................................................... 86,700 5,104,462
Mattel, Inc. ......................................................................... 292,350 10,890,038
*Office Depot, Inc. .................................................................. 108,100 2,587,644
Tandy Corp. .......................................................................... 166,600 6,424,513
Wal-Mart Stores, Inc. ................................................................ 123,900 4,886,306
--------------
40,731,025
--------------
CONSUMER STAPLES (6.6%)
American Stores Co. .................................................................. 168,800 3,470,950
Avon Products, Inc. .................................................................. 50,200 3,081,025
Gillette Co. ......................................................................... 49,000 4,921,437
Nabisco Holdings Corp. (Class A)...................................................... 90,100 4,364,219
PepsiCo, Inc. ........................................................................ 134,200 4,889,913
Philip Morris Cos., Inc. ............................................................. 180,100 8,160,781
Rite Aid Corp. ....................................................................... 90,000 5,281,875
*Safeway, Inc. ....................................................................... 99,400 6,287,050
Sunbeam Corp. ........................................................................ 212,000 8,930,500

<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
Sysco Corp. .......................................................................... 67,900 $ 3,093,694
--------------
52,481,444
--------------
ENERGY (3.2%)
Burlington Resources, Inc. ........................................................... 87,535 3,922,662
Exxon Corp. .......................................................................... 98,600 6,033,088
Mobil Corp. .......................................................................... 84,400 6,092,625
Royal Dutch Petroleum Co. ............................................................ 100,700 5,456,681
Texaco, Inc. ......................................................................... 64,400 3,501,750
--------------
25,006,806
--------------
ENERGY SERVICES (0.4%)
Schlumberger Ltd. .................................................................... 34,000 2,737,000
--------------
ENTERTAINMENT & MEDIA (0.5%)
Disney (Walt) Co. .................................................................... 38,000 3,764,375
--------------
HEALTH (7.8%)
Aetna, Inc. .......................................................................... 55,500 3,916,219
American Home Products Corp. ......................................................... 102,300 7,825,950
Bristol-Myers Squibb Co. ............................................................. 89,200 8,440,550
Lilly (Eli) & Co. .................................................................... 143,800 10,012,075
Merck & Co., Inc. .................................................................... 120,300 12,781,875
Pfizer, Inc. ......................................................................... 80,000 5,965,000
Schering-Plough Corp. ................................................................ 72,800 4,522,700
*Tenet Healthcare Corp. .............................................................. 132,200 4,379,125
Warner-Lambert Co. ................................................................... 31,400 3,893,600
--------------
61,737,094
--------------
MACHINERY & CAPITAL SPENDING (4.0%)
Case Corp. ........................................................................... 40,000 2,417,500
Emerson Electric Co. ................................................................. 105,600 5,959,800
General Electric Co. ................................................................. 176,000 12,914,000
Tyco International Ltd. .............................................................. 227,626 10,257,397
--------------
31,548,697
--------------
REAL ESTATE SECURITIES (2.7%)
American Health Properties, Inc. ..................................................... 73,600 2,028,600
Equity Office Properties Trust........................................................ 63,283 1,997,370
Equity Residential Properties Trust................................................... 48,500 2,452,281
JP Realty, Inc. ...................................................................... 97,500 2,528,906
Manufactured Home Communities, Inc. .................................................. 78,000 2,106,000
Security Capital Pacific Trust........................................................ 91,800 2,226,150
Simon DeBartolo Group, Inc. .......................................................... 52,500 1,716,094
Spieker Properties, Inc. ............................................................. 53,000 2,272,375
Vornado Realty Trust.................................................................. 92,800 4,355,800
--------------
21,683,576
--------------
</TABLE>

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<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
</TABLE>

COMMON STOCKS (CONTINUED)
<TABLE>
<S> <C> <C>
TECHNOLOGY (6.2%)
Autodesk, Inc. ....................................................................... 69,100 $ 2,556,700
*Cadence Design Systems, Inc. ........................................................ 170,600 4,179,700
*Cisco Systems, Inc. ................................................................. 110,650 6,168,737
*Computer Sciences Corp. ............................................................. 75,000 6,262,500
*EMC Corp. ........................................................................... 75,000 2,057,812
Ericsson (L.M.) Telephone Co. (Class B) ADR........................................... 89,200 3,328,275
Hewlett-Packard Co. .................................................................. 76,000 4,750,000
Intel Corp. .......................................................................... 110,800 7,783,700
International Business Machines Corp. ................................................ 76,600 8,009,488
Lucent Technologies, Inc. ............................................................ 52,500 4,193,438
--------------
49,290,350
--------------
UTILITIES/COMMUNICATIONS (2.2%)
AT&T Corp. ........................................................................... 80,200 4,912,250
Bell Atlantic Corp. .................................................................. 48,100 4,377,100
MCI Communications Corp. ............................................................. 47,800 2,046,437
SBC Communications, Inc. ............................................................. 85,000 6,226,250
--------------
17,562,037
--------------
UTILITIES/ELECTRIC/GAS (1.7%)
Cinergy Corp. ........................................................................ 116,800 4,474,900
Houston Industries, Inc. ............................................................. 177,200 4,729,025
Texas Utilities Co. .................................................................. 108,300 4,501,219
--------------
13,705,144
--------------
Total Common Stocks
(Cost $415,436,102) ................................................................. 414,673,947
--------------
U.S. GOVERNMENT, FEDERAL AGENCY OBLIGATIONS (26.6%)
U.S. TREASURY BONDS & NOTES (7.3%)
U.S. Treasury Bonds
12.000% 05/15/2005................................................................... $ 4,005,000 5,476,837
8.875% 08/15/2017................................................................... 8,970,000 11,903,468
8.125% 08/15/2019................................................................... 2,350,000 2,941,173
U.S. Treasury Notes
6.125% 08/31/1998................................................................... 7,640,000 7,665,067
8.875% 02/15/1999................................................................... 28,675,000 29,651,757
--------------
57,638,302
--------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) (0.2%)
7.500% 08/15/2027 - 10/15/2027...................................................... 1,534,643 1,572,042
--------------
FEDERAL HOUSING ADMINISTRATION (FHA) (0.6%)
FHA Insured Project Pool #23-11059
7.700% 08/01/2028................................................................... 1,609,689 1,643,186
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
FHA Insured Project Pool #55
7.430% 04/01/2022................................................................... $ 1,898,328 $ 1,984,949
FHA Insured Project Pool #53-43077
9.125% 07/25/2033................................................................... 1,098,642 1,178,898
--------------
4,807,033
--------------
AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS (18.5%)
FHLMC Multiclass Mtg. Partn. Ctfs.
Gtd. Series 1233 Cl. H
7.000% 04/15/2007................................................................... 600,000 618,000
FHLMC Multiclass Mtg. Partn. Ctfs.
Gtd. Series 1543 Cl. XN
7.000% 07/15/2023................................................................... 5,617,000 5,804,538
FHLMC Multiclass Mtg. Partn. Ctfs.
Gtd. Series 1627 Cl. EA
6.000% 05/15/2023................................................................... 1,817,000 1,678,561
FHLMC Multiclass Mtg. Partn. Ctfs.
Gtd. Series 1763 Cl. H
8.250% 07/15/2023................................................................... 130,000 139,275
FHLMC Multiclass Mtg. Partn. Ctfs.
Gtd. Series 1895 Cl. B
7.500% 12/15/2023................................................................... 3,940,000 4,044,646
FHLMC Multiclass Mtg. Partn. Ctfs.
Gtd. Series 1904 Cl. C
7.250% 08/15/2024................................................................... 3,490,000 3,543,432
FHLMC Multiclass Mtg. Partn. Ctfs.
Gtd. Series 1910 Cl. D
8.000% 11/15/2024................................................................... 1,883,000 1,979,752
FHLMC Multiclass Mtg. Partn. Ctfs.
Gtd. Series 1933 Cl. C
7.000% 03/15/2025................................................................... 2,440,000 2,462,043
FHLMC Multiclass Mtg. Partn. Ctfs.
Gtd. Series 1933 Cl. AE
7.000% 03/15/2025................................................................... 2,060,000 2,076,987
FHLMC Multiclass Mtg. Partn. Ctfs.
Gtd. Series 1933 Cl. VC
7.550% 03/15/2012................................................................... 2,950,000 3,123,148
FHLMC Multiclass Mtg. Partn. Ctfs.
Gtd. Series 1941 Cl. C
6.750% 06/15/2022................................................................... 2,690,000 2,690,834
FHLMC Multiclass Mtg. Partn. Ctfs.
Gtd. Series 1971 Cl. A
7.500% 07/15/2027................................................................... 3,000,000 3,114,001
FHLMC Multiclass Mtg. Partn. Ctfs.
Gtd. Series 1971 Cl. E
7.500% 01/20/2024................................................................... 16,580,000 17,035,535
</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 1995 Cl. A
7.500% 08/20/2027................................................................... $ 7,200,000 $ 7,460,732
FHLMC Multiclass Mtg. Partn. Ctfs.
Gtd. Series 1995 Cl. D
7.500% 08/20/2012................................................................... 5,150,000 5,244,264
FHLMC GNMA Multiclass Mtg. Partn. Ctfs.
Gtd. Series 40 Cl. N
6.500% 05/17/2021................................................................... 7,180,000 7,039,523
FHLMC GNMA Multiclass Mtg. Partn. Ctfs.
Gtd. Series 62 Cl. B
7.500% 05/20/2024................................................................... 3,756,000 3,870,075
FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1994-10 Cl. UU
6.500% 01/25/2024................................................................... 857,000 829,368
FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1997-G1 Cl. B
7.500% 06/20/2024................................................................... 3,910,000 4,044,387
FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1997-G4 Cl. C
7.500% 06/17/2024................................................................... 6,650,000 6,848,514
FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1997-G5 Cl. VA
7.500% 07/17/2012................................................................... 5,700,000 6,007,780
FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1997-27 Cl. B
7.000% 02/18/2025................................................................... 3,020,000 3,034,710
FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1997-38 Cl. L
7.500% 02/17/2012................................................................... 1,760,000 1,774,087
FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1997-39 Cl. B
7.500% 05/17/2027................................................................... 1,530,000 1,603,606
FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1997-46 Cl. B
7.500% 03/17/2025................................................................... 3,900,000 4,003,252
FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1997-63 Cl. PH
7.000% 07/18/2026................................................................... 6,510,000 6,673,970
FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1997-74 Cl. D
7.500% 09/20/2023................................................................... 9,775,000 10,042,634
GNMA Gtd. REMIC Pass Thru Secs. REMIC Tr. 1996-15 Cl. B
7.500% 08/20/2020................................................................... 8,493,000 8,703,975
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
GNMA Gtd. REMIC Pass Thru Secs. REMIC Tr. 1997-4 Cl. B
7.000% 08/16/2026................................................................... $ 4,214,914 $ 4,262,908
GNMA Gtd. REMIC Pass Thru Secs. REMIC Tr. 1997-4 Cl. C
7.000% 03/20/2027................................................................... 3,877,000 3,913,037
GNMA Gtd. REMIC Pass Thru Secs. REMIC Tr. 1997-4 Cl. M
7.500% 02/16/2012................................................................... 3,530,000 3,620,439
GNMA Gtd. REMIC Pass Thru Secs. REMIC Tr. 1997-4 Cl. N
7.500% 02/16/2027................................................................... 3,372,500 3,492,629
GNMA Gtd. REMIC Pass Thru Secs. REMIC Tr. 1997-11 Cl. M
8.000% 05/16/2024................................................................... 4,890,000 5,128,768
Puerto Rico Housing Finance Corp.
Series A Cl. 4
9.000% 07/20/2017................................................................... 477,433 477,433
--------------
146,386,843
--------------
Total U.S. Government,
Federal Agency Obligations
(Cost $205,197,469) ................................................................. 210,404,220
--------------
OTHER SECURITIZED LOANS (7.0%)
COLLATERALIZED MORTGAGE OBLIGATIONS (5.3%)
BA Mortgage Securities, Inc.
Series 1997-2 Cl. 1A-3
7.400% 10/25/2027................................................................... 2,952,561 2,978,004
Bear Stearns Mortgage Securities, Inc.
Series 1996-2 Cl. A1
6.758% 01/25/2025................................................................... 4,522,414 4,506,779
Bear Stearns Mortgage Securities, Inc.
Series 1996-8 Cl. A9
7.600% 11/25/2027................................................................... 4,607,000 4,711,413
Bear Stearns Structured Securities, Inc. (144A)
Series 1995-1 Cl. A
6.727% 09/25/2024................................................................... 3,138,131 3,041,811
CWHL, Inc. Mtg. Pass Thru Ctf.
Series 1997-3 Cl. A10
7.500% 06/25/2027................................................................... 4,569,141 4,635,487
GE Capital Mortgage Services, Inc.
Series 1997-8 Cl. A6
7.250% 10/25/2027................................................................... 2,460,000 2,518,579
Headlands Mortgage Securities, Inc.
Series 1997-3 Cl. A-1-6
7.000% 07/25/2027................................................................... 4,810,000 4,828,890
</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>
Mortgage Obligation Structured Trust (144A)
Series 1993-1 Cl. B1
10.668% 10/25/2018................................................................... $ 3,616,915 $ 3,785,897
Norwest Asset Securities Corp.
Series 1997-16 Cl. A2
6.750% 10/25/2027................................................................... 5,385,900 5,345,609
PNC Mortgage Securities Corp.
Series 1997-4 Cl. 2PP2
7.500% 07/25/2027................................................................... 2,750,000 2,798,242
Residential Funding Mortgage Securities I, Inc.
Series 1997-S7 Cl. A-3
7.500% 05/25/2027................................................................... 3,051,000 3,143,418
--------------
42,294,129
--------------
ASSET BACKED SECURITIES (1.7%)
Green Tree Financial Corp.
Series 1995-8 Cl. A2
6.150% 12/15/2026................................................................... 2,620,024 2,620,024
Green Tree Financial Corp.
Series 1996-7 Cl. A2
6.300% 10/15/2027................................................................... 3,320,000 3,321,029
Lehman FHA Title I Loan Trust
Series 1995-6 Cl. A-2
6.630% 05/25/2007................................................................... 5,422,573 5,409,384
The Money Store Residential Trust
Series 1997-II Cl. A4
7.385% 01/15/2029................................................................... 1,982,000 2,009,867
--------------
13,360,304
--------------
Total Other Securitized Loans
(Cost $54,776,885) .................................................................. 55,654,433
--------------
CORPORATE BONDS (12.7%)
INDUSTRIAL (5.9%)
Allied Holdings, Inc. Series B
8.625% 10/01/2007................................................................... 500,000 507,500
American Home Products Corp.
7.700% 02/15/2000................................................................... 4,600,000 4,735,102
Amgen, Inc.
8.125% 04/01/2097................................................................... 2,425,000 2,674,193
Cinemark USA, Inc. Series B
9.625% 08/01/2008................................................................... 350,000 361,375
Coca-Cola Enterprises, Inc.
6.375% 08/01/2001................................................................... 4,000,000 4,028,440
Eckerd Corp.
9.250% 02/15/2004................................................................... 4,000,000 4,396,680
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
Ethan Allen, Inc.
8.750% 03/15/2001................................................................... $ 3,450,000 $ 3,527,625
Federal Express Corp. Pass Thru Trust
Series 1997-1C
7.650% 01/15/2014................................................................... 2,200,000 2,350,854
Georgia-Pacific Corp.
9.950% 06/15/2002................................................................... 3,061,000 3,464,287
Hilton Hotels Corp.
7.375% 06/01/2002................................................................... 3,500,000 3,593,520
Johns Manville International Grp.
10.875% 12/15/2004................................................................... 1,500,000 1,665,000
Jones Intercable, Inc.
8.875% 04/01/2007................................................................... 300,000 313,500
Lenfest Communications, Inc.
8.375% 11/01/2005................................................................... 650,000 667,875
Nabisco, Inc.
6.700% 06/15/2002................................................................... 2,000,000 2,025,680
Santa Fe Pacific Gold Corp.
8.375% 07/01/2005................................................................... 5,100,000 5,493,720
Teekay Shipping Corp. Guaranteed First Preferred Shipping Mtg. Notes
8.320% 02/01/2008................................................................... 1,000,000 1,020,000
Tenet Healthcare Corp.
10.125% 03/01/2005................................................................... 900,000 983,250
Time Warner Entertainment Co. L.P.
9.625% 05/01/2002................................................................... 1,900,000 2,122,737
8.375% 03/15/2023................................................................... 1,320,000 1,506,357
UCAR Global Enterprises Series B
12.000% 01/15/2005................................................................... 1,000,000 1,120,000
--------------
46,557,695
--------------
FINANCIAL (5.8%)
Abn Amro Bank N. V. Chicago
7.550% 06/28/2006................................................................... 3,575,000 3,825,393
Bankamerica Corp.
5.938% 02/20/2002................................................................... 3,800,000 3,788,030
Aetna Services, Inc.
7.625% 08/15/2026................................................................... 3,500,000 3,683,295
Bear Stearns Cos., Inc.
Series B Medium Term Notes
5.779% 10/10/2000................................................................... 7,825,000 7,802,777
Caterpillar Financial Services Corp.
Medium Term Notes
6.350% 12/01/1998................................................................... 1,590,000 1,592,179
Commercial Credit Group, Inc.
6.625% 06/01/2015................................................................... 1,250,000 1,291,325
</TABLE>

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<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
</TABLE>

CORPORATE BONDS (CONTINUED)
<TABLE>
<S> <C> <C>
ERP Operating Limited Partnership (144A)
8.500% 05/15/1999................................................................... $ 2,700,000 $ 2,775,681
First Security Corp.
7.875% 10/15/1999................................................................... 1,325,000 1,361,000
+Fleet Mortgage Group, Inc.
6.500% 09/15/1999................................................................... 550,000 552,937
Goldman Sachs Group L.P. (144A)
Medium Term Notes
7.200% 03/01/2007................................................................... 2,800,000 2,905,224
Hartford Life, Inc.
7.650% 06/15/2027................................................................... 2,555,000 2,702,398
Liberty Property L.P.
7.100% 08/15/2004................................................................... 3,525,000 3,605,934
Morgan Stanley Group, Inc.
Medium Term Notes
5.750% 02/15/2001................................................................... 2,100,000 2,070,978
Security Capital Industrial
Medium Term Notes
7.810% 02/01/2015................................................................... 3,250,000 3,403,725
Simon DeBartolo Group, L.P.
7.125% 09/20/2007................................................................... 2,300,000 2,360,076
Spieker Properties L.P.
6.900% 01/15/2004................................................................... 2,450,000 2,477,538
--------------
46,198,490
--------------
UTILITY (0.5%)
GTE North, Inc.
5.500% 02/15/1999................................................................... 2,905,000 2,886,030
Worldcom, Inc.
8.875% 01/15/2006................................................................... 1,000,000 1,075,920
--------------
3,961,950
--------------
YANKEE (0.5%)
Hydro-Quebec
8.400% 01/15/2022................................................................... 2,155,000 2,538,418
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
Ontario Province CDA
6.000% 02/21/2006................................................................... $ 1,725,000 $ 1,698,383
--------------
4,236,801
--------------
Total Corporate Bonds
(Cost $99,154,016) .................................................................. 100,954,936
--------------
Total investments, excluding temporary
cash investments
(Cost $687,367,178) ................................................................. 781,687,536
--------------
REPURCHASE AGREEMENT (2.4%)
Goldman Sachs Corp.
6.337% dated 12/31/1997,
due 01/02/1998 in the
amount of $18,645,686.
Collateralized by U.S. Treasury Notes
5.875% due 08/31/1999
(Cost $18,639,214)................................................................... 18,639,214 18,639,214
--------------
TOTAL INVESTMENTS (101.0%)
(Cost $706,006,392)...................................................................... 800,326,750
--------------
RECEIVABLES LESS LIABILITIES (-1.0%)...................................................... (7,948,494)
--------------
NET ASSETS (100.0%)....................................................................... $ 792,378,256
--------------
--------------
</TABLE>

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

* Non-income producing.

+ Affiliated issuers. (Note 1)

The accompanying notes are an integral part
of the financial statements.

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-- COLUMBIA DAILY INCOME COMPANY --
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<TABLE>
<CAPTION>
PRINCIPAL
December 31, 1997 AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
COMMERCIAL PAPER (90.1%)
A. I. Credit Corp.
6.080% 01/06/1998................................................................... $ 4,510,000 $ 4,505,430
Air Products & Chemicals, Inc.
5.950% 01/07/1998................................................................... 5,000,000 4,994,215
Alabama Power Co.
5.910% 01/05/1998................................................................... 3,325,000 3,322,271
5.860% 01/06/1998................................................................... 5,000,000 4,995,117
6.000% 01/06/1998................................................................... 10,000,000 9,990,000
American General Finance Corp.
5.550% 01/28/1998................................................................... 5,000,000 4,978,417
5.500% 02/02/1998................................................................... 7,000,000 6,964,708
5.500% 02/11/1998................................................................... 5,000,000 4,967,917
5.720% 02/27/1998................................................................... 10,000,000 9,907,845
Ameritech Capital Funding Corp.
5.570% 01/29/1998................................................................... 5,000,000 4,977,565
Archer-Daniels-Midland Co.
6.200% 01/06/1998................................................................... 5,000,000 4,994,833
5.570% 01/21/1998................................................................... 6,000,000 5,980,505
5.530% 01/22/1998................................................................... 10,000,000 9,966,206
5.670% 02/11/1998................................................................... 5,000,000 4,966,925
5.700% 03/05/1998................................................................... 6,000,000 5,939,200
Associates Corp. of North America
6.740% 01/02/1998................................................................... 21,100,000 21,092,099
Atlantic Richfield Co.
5.580% 01/22/1998................................................................... 3,000,000 2,989,770
Avco Financial Services, Inc.
5.690% 03/02/1998................................................................... 5,000,000 4,951,794
5.680% 03/04/1998................................................................... 6,000,000 5,940,360
5.690% 03/04/1998................................................................... 6,000,000 5,940,255
5.690% 03/05/1998................................................................... 10,000,000 9,898,845
B.P. America, Inc.
6.100% 01/05/1998................................................................... 5,000,000 4,995,764
6.300% 01/05/1998................................................................... 5,000,000 4,995,625
6.000% 01/20/1998................................................................... 2,500,000 2,491,667
Bank of America, FSB
5.800% 01/12/1998................................................................... 5,000,000 4,990,333
5.570% 01/26/1998................................................................... 10,000,000 9,959,772
BankAmerica Corp.
5.530% 01/28/1998................................................................... 10,000,000 9,956,989
Barclays U.S. Funding Corp.
8.250% 01/02/1998................................................................... 10,000,000 9,995,417
8.500% 01/02/1998................................................................... 10,000,000 9,995,278
5.590% 01/27/1998................................................................... 7,000,000 6,970,653
Becton, Dickinson & Co.
6.150% 01/09/1998................................................................... 2,633,000 2,628,952

<CAPTION>
PRINCIPAL
AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
Bell Atlantic Financial Services, Inc.
5.800% 01/09/1998................................................................... $ 10,000,000 $ 9,985,500
5.820% 01/13/1998................................................................... 19,000,000 18,960,068
Beneficial Corp.
5.630% 01/20/1998................................................................... 6,000,000 5,981,233
Brown-Forman Corp.
6.250% 01/06/1998................................................................... 4,755,000 4,750,047
CIT Group Holdings, Inc.
5.500% 02/02/1998................................................................... 5,000,000 4,974,792
5.500% 02/05/1998................................................................... 5,000,000 4,972,500
5.560% 02/09/1998................................................................... 7,000,000 6,956,756
5.720% 03/10/1998................................................................... 10,000,000 9,890,367
Cargill, Inc.
5.620% 03/03/1998................................................................... 15,000,000 14,854,817
Cargill Financial Services Corp.
5.640% 02/26/1998................................................................... 10,000,000 9,910,700
Chevron Transport Co.
5.550% 02/10/1998................................................................... 7,000,000 6,955,754
5.680% 03/06/1998................................................................... 5,000,000 4,948,723
5.700% 04/15/1998................................................................... 10,000,000 9,833,750
5.720% 04/17/1998................................................................... 6,000,000 5,897,994
Clorox Co.
5.680% 01/16/1998................................................................... 5,000,000 4,987,378
5.730% 02/23/1998................................................................... 5,000,000 4,957,025
5.730% 02/24/1998................................................................... 10,000,000 9,912,459
Commercial Credit Co.
5.500% 02/04/1998................................................................... 10,000,000 9,946,528
5.530% 02/04/1998................................................................... 5,000,000 4,973,118
5.600% 02/04/1998................................................................... 3,000,000 2,983,667
5.530% 02/05/1998................................................................... 10,000,000 9,944,700
Deere (John) Credit Co.
5.590% 01/20/1998................................................................... 5,000,000 4,984,472
Deere (John) Capital Corp.
5.560% 01/30/1998................................................................... 7,000,000 6,967,567
Disney (Walt) Co.
5.580% 02/23/1998................................................................... 10,000,000 9,916,300
5.600% 02/24/1998................................................................... 5,000,000 4,957,223
5.650% 03/27/1998................................................................... 7,000,000 6,905,520
Dow Jones & Co., Inc.
5.950% 01/14/1998................................................................... 1,900,000 1,895,604
duPont (E.I.) de Nemours & Co.
5.600% 01/20/1998................................................................... 1,600,000 1,595,022
5.520% 01/22/1998................................................................... 5,000,000 4,983,133
5.490% 02/03/1998................................................................... 5,000,000 4,974,075
5.670% 02/25/1998................................................................... 5,000,000 4,955,900
Florida Power Corp.
5.900% 01/12/1998................................................................... 10,000,000 9,980,333
5.880% 02/10/1998................................................................... 3,000,000 2,979,910
</TABLE>

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<CAPTION>
PRINCIPAL
AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
</TABLE>

COMMERCIAL PAPER (CONTINUED)
<TABLE>
<S> <C> <C>
Ford Motor Credit Co.
6.170% 01/05/1998................................................................... $ 5,000,000 $ 4,995,715
5.920% 01/06/1998................................................................... 4,800,000 4,795,264
5.570% 01/21/1998................................................................... 8,000,000 7,974,007
5.570% 01/26/1998................................................................... 5,000,000 4,979,886
5.570% 02/03/1998................................................................... 15,000,000 14,921,092
General Electric Capital Corp.
5.830% 01/07/1998................................................................... 10,000,000 9,988,664
5.550% 02/06/1998................................................................... 15,000,000 14,914,437
5.580% 02/13/1998................................................................... 8,000,000 7,945,440
5.680% 03/11/1998................................................................... 5,000,000 4,944,778
Glaxo Wellcome plc
5.570% 01/21/1998................................................................... 5,000,000 4,983,754
5.670% 03/02/1998................................................................... 5,000,000 4,951,962
5.700% 03/10/1998................................................................... 7,000,000 6,923,525
5.670% 03/16/1998................................................................... 5,000,000 4,940,938
Goldman Sachs Group L.P.
5.870% 01/09/1998................................................................... 10,000,000 9,985,325
5.800% 01/15/1998................................................................... 5,000,000 4,987,917
5.650% 02/20/1998................................................................... 2,000,000 1,983,992
Hewlett-Packard Co.
6.200% 01/08/1998................................................................... 1,000,000 998,622
5.950% 01/21/1998................................................................... 5,376,000 5,357,341
Household Finance Corp.
5.700% 01/16/1998................................................................... 5,000,000 4,987,333
5.550% 02/09/1998................................................................... 8,000,000 7,950,667
5.670% 02/17/1998................................................................... 5,000,000 4,962,200
5.580% 02/20/1998................................................................... 10,000,000 9,920,950
Idaho Power Co.
5.860% 01/13/1998................................................................... 5,000,000 4,989,420
McGraw-Hill Companies, Inc.
5.580% 01/29/1998................................................................... 6,000,000 5,973,030
5.670% 03/19/1998................................................................... 4,600,000 4,543,489
Merrill Lynch & Co., Inc.
5.850% 01/15/1998................................................................... 10,000,000 9,975,625
5.640% 01/20/1998................................................................... 2,800,000 2,791,227
5.560% 02/11/1998................................................................... 10,000,000 9,935,134
5.610% 02/25/1998................................................................... 10,000,000 9,912,734
5.680% 02/27/1998................................................................... 2,500,000 2,477,122
5.690% 02/27/1998................................................................... 2,500,000 2,477,082
MetLife Funding, Inc.
5.700% 01/16/1998................................................................... 10,000,000 9,974,667
5.680% 01/22/1998................................................................... 2,000,000 1,993,058
5.660% 02/12/1998................................................................... 5,000,000 4,966,197
5.660% 02/17/1998................................................................... 5,000,000 4,962,267
5.660% 02/19/1998................................................................... 5,000,000 4,960,695
<CAPTION>
PRINCIPAL
AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
Minnesota Mining & Manufacturing Co.
5.580% 02/18/1998................................................................... $ 5,000,000 $ 4,962,025
5.580% 02/19/1998................................................................... 15,000,000 14,883,750
Monsanto Co.
6.300% 01/05/1998................................................................... 5,000,000 4,995,625
5.820% 01/08/1998................................................................... 10,000,000 9,987,066
6.250% 01/08/1998................................................................... 10,000,000 9,986,111
5.950% 01/15/1998................................................................... 3,843,000 3,833,473
6.020% 01/16/1998................................................................... 5,000,000 4,986,622
Morgan Stanley Group, Inc.
5.800% 01/15/1998................................................................... 2,000,000 1,995,167
5.530% 01/27/1998................................................................... 5,000,000 4,979,263
5.530% 01/30/1998................................................................... 10,000,000 9,953,917
5.590% 02/17/1998................................................................... 10,000,000 9,925,467
Nalco Chemical Co.
5.700% 03/09/1998................................................................... 10,000,000 9,892,334
5.710% 03/20/1998................................................................... 10,000,000 9,874,697
5.700% 03/23/1998................................................................... 10,000,000 9,870,167
National Rural Utilities Cooperative Finance Corp.
6.150% 01/09/1998................................................................... 2,800,000 2,795,695
5.670% 03/09/1998................................................................... 5,000,000 4,946,450
5.690% 03/09/1998................................................................... 5,000,000 4,946,262
5.650% 03/12/1998................................................................... 10,000,000 9,888,570
5.690% 03/23/1998................................................................... 6,000,000 5,922,237
Norwest Financial, Inc.
5.820% 01/13/1998................................................................... 5,000,000 4,989,492
5.820% 01/14/1998................................................................... 10,000,000 9,977,367
5.790% 01/27/1998................................................................... 4,000,000 3,982,630
5.790% 01/30/1998................................................................... 3,000,000 2,985,525
5.700% 02/24/1998................................................................... 5,000,000 4,956,459
PacifiCorp
5.750% 01/23/1998................................................................... 2,000,000 1,992,653
5.770% 02/02/1998................................................................... 2,963,000 2,947,328
5.720% 02/26/1998................................................................... 10,000,000 9,909,434
Procter & Gamble Co.
5.570% 02/18/1998................................................................... 3,000,000 2,977,256
Prudential Funding Corp.
5.510% 01/23/1998................................................................... 5,000,000 4,982,399
5.520% 01/26/1998................................................................... 5,000,000 4,980,067
5.570% 01/28/1998................................................................... 5,000,000 4,978,339
5.510% 01/29/1998................................................................... 13,000,000 12,942,298
SBC Communications, Inc.
5.760% 01/20/1998................................................................... 5,000,000 4,984,000
St. Paul Cos., Inc.
5.580% 02/05/1998................................................................... 5,000,000 4,972,100
5.580% 02/09/1998................................................................... 5,000,000 4,969,000
5.580% 02/13/1998................................................................... 2,000,000 1,986,360
</TABLE>

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<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
</TABLE>

COMMERCIAL PAPER (CONTINUED)
<TABLE>
<S> <C> <C>
Sonoco Products Co.
6.800% 01/02/1998................................................................... $ 16,933,000 $ 16,926,603
Southern California Gas Co.
5.550% 01/23/1998................................................................... 3,000,000 2,989,363
5.580% 01/23/1998................................................................... 8,000,000 7,971,480
Southern New England Telecom
5.850% 01/05/1998................................................................... 2,221,000 2,219,195
Texaco, Inc.
5.880% 01/09/1998................................................................... 10,000,000 9,985,300
5.730% 03/06/1998................................................................... 10,000,000 9,896,542
USAA Capital Corp.
5.570% 02/12/1998................................................................... 15,000,000 14,900,204
5.570% 02/13/1998................................................................... 6,400,000 6,356,430
5.680% 04/07/1998................................................................... 5,000,000 4,923,479
Washington Gas Light Co.
5.570% 02/02/1998................................................................... 8,000,000 7,959,154
5.700% 02/18/1998................................................................... 6,800,000 6,747,244
Washington Post Co.
6.080% 01/07/1998................................................................... 10,000,000 9,988,178
Weyerhaeuser Real Estate Co.
5.820% 01/06/1998................................................................... 5,000,000 4,995,150
5.820% 01/07/1998................................................................... 5,000,000 4,994,342
5.820% 01/08/1998................................................................... 10,000,000 9,987,067
5.800% 01/12/1998................................................................... 10,000,000 9,980,667
Xerox Credit Corp.
5.530% 01/27/1998................................................................... 4,000,000 3,983,410
5.540% 02/10/1998................................................................... 10,000,000 9,936,906
5.650% 02/20/1998................................................................... 6,000,000 5,951,975
5.650% 03/24/1998................................................................... 5,000,000 4,934,868
--------------
Total Commercial Paper
(Cost $1,053,008,380) ............................................................... 1,053,008,380
--------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>

REPURCHASE AGREEMENTS (10.3%)
Goldman Sachs Corp.
6.337% dated 12/31/1997,
due 01/02/1998 in the
amount of $649,533.
Collateralized by U.S. Treasury Notes
5.875% due 08/31/1999................................................................ $ 649,308 $ 649,308
J.P. Morgan Securities, Inc.
6.521% dated 12/31/1997,
due 01/02/1998 in the
amount of $60,021,440.
Collateralized by U.S. Treasury Notes
3.625% to 7.500%
due 08/31/2000 to 02/15/2005......................................................... 60,000,000 60,000,000
Merrill Lynch
6.388% dated 12/31/1997,
due 01/02/1998 in the
amount of $60,021,000.
Collateralized by U.S. Treasury Bonds
6.250% to 7.625%
due 02/15/2023 to 08/15/2025......................................................... 60,000,000 60,000,000
--------------
Total Repurchase Agreements
(Cost $120,649,308) ................................................................. 120,649,308
--------------
TOTAL INVESTMENTS (100.4%)
(Cost $1,173,657,688, including $6,537,187 accrued interest receivable).................. 1,173,657,688
CASH AND RECEIVABLES LESS LIABILITIES (-0.4%)............................................. (4,562,120)
--------------
NET ASSETS (100.0%)....................................................................... $1,169,095,568
--------------
--------------
</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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----------------------------------------------------

<TABLE>
<CAPTION>
PRINCIPAL
December 31, 1997 AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
U.S. TREASURY NOTES (98.1%)
6.875% 08/31/1999................................................................... $ 7,675,000 $ 7,818,906
5.875% 11/15/1999................................................................... 16,225,000 16,280,782
5.875% 02/15/2000................................................................... 9,750,000 9,786,562
6.000% 08/15/2000................................................................... 3,200,000 3,224,000
--------------
Total U.S. Treasury Notes
(Cost $37,019,300) .................................................................. 37,110,250
REPURCHASE AGREEMENT (1.3%)
Goldman Sachs Corp.
6.337% dated 12/31/1997,
due 01/02/1998 in the
amount of $489,830.
Collateralized by U.S. Treasury Notes
5.875% due 08/31/1999.
(Cost $489,660) ..................................................................... 489,660 489,660
--------------
TOTAL INVESTMENTS (99.4%)
(Cost $37,508,960)....................................................................... 37,599,910
RECEIVABLES LESS LIABILITIES (0.6%)....................................................... 236,765
--------------
NET ASSETS (100.0%)....................................................................... $ 37,836,675
--------------
--------------
</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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<TABLE>
<CAPTION>
PRINCIPAL
December 31, 1997 AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
U.S. GOVERNMENT, FEDERAL AGENCY OBLIGATIONS (55.8%)
U.S. TREASURY BONDS & NOTES (12.8%)
U.S. Treasury Bonds
8.875% 08/15/2017................................................................... $ 14,630,000 $ 19,414,464
8.125% 08/15/2019................................................................... 5,000,000 6,257,815
U.S. Treasury Notes
6.125% 08/31/1998................................................................... 23,054,000 23,129,640
--------------
48,801,919
--------------
OTHER GOVERNMENT AGENCY OBLIGATIONS (1.4%)
Farm Credit Systems Financial Assistance Corp. Series A
9.375% 07/21/2003................................................................... 4,660,000 5,408,489
--------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) (2.9%)
7.500% 10/15/2026 - 10/15/2027...................................................... 10,640,503 10,899,812
--------------
FEDERAL HOUSING ADMINISTRATION (FHA) (1.4%)
FHA Insured Project Pool #2022
7.430% 12/01/2020................................................................... 1,720,239 1,729,649
FHA Insured Project Pool #1984-D
9.680% 02/01/2024................................................................... 268,635 280,807
FHA Insured Project Pool #051-11078
8.350% 04/01/2030................................................................... 2,217,205 2,323,077
FHA Insured Project Pool #092-35499
8.450% 11/15/2031................................................................... 789,545 829,519
--------------
5,163,052
--------------
AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS (37.3%)
FHLMC Multiclass Mtg. Partn. Ctfs. Gtd.
Series 1558 Cl. C
6.500% 07/15/2023................................................................... 2,084,000 2,058,835
FHLMC Multiclass Mtg. Partn. Ctfs. Gtd.
Series 1971 Cl. A
7.500% 07/15/2027................................................................... 4,041,000 4,194,560
FHLMC Multiclass Mtg. Partn. Ctfs. Gtd.
Series 1971 Cl. E
7.500% 01/20/2024................................................................... 16,646,000 17,103,349
FHLMC Multiclass Mtg. Partn. Ctfs. Gtd.
Series 1995 Cl. A
7.500% 08/20/2027................................................................... 1,750,000 1,813,372
FHLMC Multiclass Mtg. Partn. Ctfs. Gtd.
Series 1995 Cl. D
7.500% 08/20/2012................................................................... 9,155,000 9,322,569
FHLMC GNMA Multiclass Mtg. Partn. Ctfs. Gtd. Series 40 Cl. N
6.500% 05/17/2021................................................................... 4,700,000 4,608,044

<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 $ 741,370
FHLMC Multiclass Mtg. Partn. Ctfs. Gtd.
Series 1910 Cl. D
8.000% 11/15/2024................................................................... 1,850,000 1,945,057
FHLMC Multiclass Mtg. Partn. Ctfs. Gtd.
Series 1920 Cl. N
7.000% 02/15/2026................................................................... 3,110,000 3,110,000
FHLMC Multiclass Mtg. Partn. Ctfs. Gtd.
Series 1941 Cl. C
6.750% 06/15/2022................................................................... 2,980,000 2,980,924
FHLMC Multiclass Mtg. Partn. Ctfs. Gtd.
Series 1933 Cl. AE
7.000% 03/15/2025................................................................... 5,156,300 5,198,820
FHLMC Multiclass Mtg. Partn. Ctfs. Gtd.
Series 1933 Cl. C
7.000% 03/15/2025................................................................... 3,316,818 3,346,782
FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1991-94 Cl. C
0.000% 01/25/1999................................................................... 1,654,184 1,609,719
FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1997-G1 Cl. B
7.500% 06/20/2024................................................................... 7,760,000 8,026,711
FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1997-G4 Cl. C
7.500% 06/17/2024................................................................... 7,223,000 7,438,620
FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1997-G5 Cl. VD
7.250% 04/17/2010................................................................... 3,600,000 3,737,611
FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1997-24 Cl. YL
7.000% 04/18/2027................................................................... 3,166,000 3,199,890
FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1997-38 Cl. G
7.500% 05/17/2026................................................................... 1,843,511 1,884,476
FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1997-38 Cl. H
7.500% 05/17/2027................................................................... 1,766,000 1,842,838
FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1997-38 Cl. L
7.500% 02/17/2012................................................................... 4,100,000 4,132,816
FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1997-39 Cl. B
7.500% 05/17/2027................................................................... 2,673,000 2,801,594
FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1997-43 Cl. B
7.500% 08/18/2025................................................................... 9,700,000 9,991,569
</TABLE>

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<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. 1997-44 Cl. PG
7.000% 02/18/2024................................................................... $ 3,920,000 $ 4,024,673
FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1997-63 Cl. PH
7.000% 07/18/2026................................................................... 7,230,000 7,412,105
FNMA Gtd. REMIC Pass Thru Ctf. REMIC Tr. 1997-74 Cl. D
7.500% 09/20/2023................................................................... 10,600,000 10,890,222
GNMA Gtd. REMIC Pass Thru Secs. REMIC Tr. 1996-23 Cl. C
7.500% 12/20/2022................................................................... 3,607,000 3,721,955
GNMA Gtd. REMIC Pass Thru Secs. REMIC Tr. 1997-11 Cl. M
8.000% 05/16/2024................................................................... 1,190,000 1,248,105
GNMA Gtd. REMIC Pass Thru Secs. REMIC Tr. 1997-2 Cl. K
7.500% 01/20/2024................................................................... 2,410,000 2,489,819
GNMA Gtd. REMIC Pass Thru Secs. REMIC Tr. 1997-4 Cl. M
7.500% 02/16/2012................................................................... 4,357,000 4,468,626
GNMA Gtd. REMIC Pass Thru Secs. REMIC Tr. 1997-4 Cl. N
7.500% 02/16/2027................................................................... 4,165,468 4,313,842
GNMA Gtd. REMIC Pass Thru Secs. REMIC Tr. 1998-1 Cl. A
7.000% 01/15/2028................................................................... 1,890,000 1,878,773
Puerto Rico Housing Finance Corp.
Series A Cl. 4
9.000% 07/20/2017................................................................... 864,542 864,542
--------------
142,402,188
--------------
Total U.S. Government,
Federal Agency Obligations
(Cost $206,029,797) ................................................................. 212,675,460
--------------
OTHER SECURITIZED LOANS (13.2%)
COLLATERALIZED MORTGAGE OBLIGATIONS (10.2%)
BA Mortgage Securities, Inc.
Series 1997-2 Cl. 1A-3
7.400% 10/25/2027................................................................... 2,913,413 2,938,518
Bear Stearns Mortgage Securities, Inc.
Series 1996-2 Cl. A1
6.758% 01/25/2025................................................................... 4,298,842 4,283,979
GE Capital Mortgage Services, Inc.
Series 1997-8 Cl. A6
7.250% 10/25/2027................................................................... 2,480,000 2,539,056
<CAPTION>
PRINCIPAL
AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
GE Capital Mortgage Services, Inc.
Series 1997-8 Cl. A7
7.250% 10/25/2027................................................................... $ 6,232,714 $ 6,273,296
Mortgage Obligation Structured Trust (144A)
Series 1993-1 Cl. B1
10.668% 10/25/2018................................................................... 2,837,841 2,970,425
Norwest Asset Securities Corp.
Series 1997-16 Cl. A2
6.750% 10/25/2027................................................................... 13,470,000 13,369,234
PNC Mortgage Securities Corp.
Series 1997-4 Cl. 2PP2
7.500% 07/25/2027................................................................... 2,895,000 2,945,786
Residential Funding Morgage Securities, Inc.
Series 1993-S45 Cl. A-10
8.000% 12/25/2023................................................................... 1,250,000 1,286,756
Structured Asset Securities Corp.
Series 1997-4 Cl. 2A2
7.000% 12/25/2027................................................................... 2,500,000 2,525,440
--------------
39,132,490
--------------
ASSET BACKED SECURITIES (3.0%)
Empire Funding Home Loan Owner Trust
Series 1997-1 Cl. A-2
7.060% 03/25/2023................................................................... 2,890,000 2,903,901
Empire Funding Home Loan Owner Trust
Series 1997-2 Cl. A-1
8.850% 09/25/2023................................................................... 1,896,251 1,895,984
Saxon Asset Securities Co.
Series 1996-1 Cl. A2
8.060% 09/25/2027................................................................... 6,265,000 6,546,925
--------------
11,346,810
--------------
Total Other Securitized Loans
(Cost $49,626,860) .................................................................. 50,479,300
--------------
CORPORATE BONDS (25.9%)
INDUSTRIAL (11.0%)
Ethan Allen, Inc.
8.750% 03/15/2001................................................................... 1,975,000 2,019,437
Federal Express Corp. Pass Thru Trust
Series 1997-1C
7.650% 01/15/2014................................................................... 2,300,000 2,457,711
Foster Wheeler Corp.
6.750% 11/15/2005................................................................... 2,925,000 2,943,486
Georgia-Pacific Corp.
9.950% 06/15/2002................................................................... 3,250,000 3,678,187
Gulf Canada Resources Ltd.
9.625% 07/01/2005................................................................... 1,250,000 1,359,375
</TABLE>

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<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
</TABLE>

CORPORATE BONDS (CONTINUED)
<TABLE>
<S> <C> <C>
Heritage Media Corp.
8.750% 02/15/2006................................................................... $ 1,250,000 $ 1,329,687
Hilton Hotels Corp.
7.375% 06/01/2002................................................................... 4,000,000 4,106,880
Hollinger International Publishing, Inc.
8.625% 03/15/2005................................................................... 300,000 310,500
ICI Wilmington, Inc.
7.050% 09/15/2007................................................................... 3,805,000 3,949,476
Johns Manville International Grp.
10.875% 12/15/2004................................................................... 1,500,000 1,665,000
Lenfest Communications, Inc.
8.375% 11/01/2005................................................................... 1,350,000 1,387,125
Marriott International, Inc.
6.750% 12/01/2009................................................................... 2,750,000 2,807,613
Nabisco, Inc.
6.700% 06/15/2002................................................................... 3,750,000 3,798,150
Precision Castparts Corp.
6.750% 12/15/2007................................................................... 1,650,000 1,653,482
Sears, Roebuck Acceptance Corp.
6.400% 10/11/2000................................................................... 4,525,000 4,552,060
Tenet Healthcare Corp.
8.625% 12/01/2003................................................................... 750,000 781,875
Time Warner Entertainment Co. L.P.
8.375% 03/15/2023................................................................... 2,600,000 2,967,068
--------------
41,767,112
--------------
FINANCIAL (13.4%)
Aetna Services, Inc.
7.625% 08/15/2026................................................................... 5,000,000 5,261,850
American Health Properties, Inc.
7.500% 01/15/2007................................................................... 650,000 677,469
Bankamerica Corp.
5.938% 02/20/2002................................................................... 3,500,000 3,488,975
Deutsche Bank Financial, Inc.
7.500% 04/25/2009................................................................... 2,700,000 2,908,116
Equitable Cos., Inc.
9.000% 12/15/2004................................................................... 855,000 969,630
First Bank System, Inc.
6.188% 11/26/2010................................................................... 7,230,000 7,222,770
Ford Motor Credit Co.
6.500% 02/28/2002................................................................... 4,135,000 4,175,978
General Electric Capital Corp.
Medium Term Notes
6.350% 09/15/2001................................................................... 3,200,000 3,252,224
Goldman Sachs Group L.P. (144A)
Medium Term Notes
7.200% 03/01/2007................................................................... 3,700,000 3,839,046
<CAPTION>
PRINCIPAL
AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
Health Care Properties, Inc.
6.500% 02/15/2006................................................................... $ 6,400,000 $ 6,362,304
Liberty Property L.P.
7.100% 08/15/2004................................................................... 3,725,000 3,810,526
Merrill Lynch & Co., Inc.
Medium Term Notes
6.450% 06/20/2000................................................................... 3,650,000 3,680,441
Swiss Bank Corp. N.Y.
7.250% 09/01/2006................................................................... 1,825,000 1,923,714
USL Capital Corp.
6.500% 12/01/2003................................................................... 3,350,000 3,358,475
--------------
50,931,518
--------------
UTILITY (1.5%)
California Energy Co., Inc.
9.875% 06/30/2003................................................................... 1,000,000 1,084,570
Northern Indiana Public Service Co.
Medium Term Notes
6.900% 06/01/2000................................................................... 1,250,000 1,269,538
6.750% 06/01/2000................................................................... 2,500,000 2,530,800
Worldcom, Inc.
8.875% 01/15/2006................................................................... 900,000 968,328
--------------
5,853,236
--------------
Total Corporate Bonds
(Cost $96,450,075) .................................................................. 98,551,866
--------------
Total investments, excluding temporary cash investment
(Cost $352,106,732) ................................................................. 361,706,626
--------------
REPURCHASE AGREEMENT (4.4%)
Goldman Sachs Corp.
6.337% dated 12/31/1997,
due 01/02/1998 in the
amount of $16,762,082
Collateralized by U.S. Treasury Notes
5.875% due 08/31/1999
(Cost $16,756,264)................................................................... 16,756,264 16,756,264
--------------
TOTAL INVESTMENTS (99.3%)
(Cost $368,862,996)...................................................................... 378,462,890
RECEIVABLES LESS LIABILITIES (0.7%)....................................................... 2,869,864
--------------
NET ASSETS (100.0%)....................................................................... $ 381,332,754
--------------
--------------
</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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<TABLE>
<CAPTION>
PRINCIPAL
December 31, 1997 AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
STATE OF OREGON GENERAL OBLIGATION BONDS (8.5%)
Board of Higher Education Series A
0.000% 08/01/2014................................................................... $ 450,000 $ 196,312
5.900% 08/01/2018................................................................... 1,000,000 1,072,500
Board of Higher Education Refunding
Series B
6.250% 10/15/2012................................................................... 740,000 799,200
Elderly & Disabled Housing Refunding
Series B
6.250% 08/01/2013................................................................... 1,000,000 1,090,000
Pollution Control Series C
5.625% 06/01/2013................................................................... 2,830,000 2,875,987
5.900% 06/01/2014................................................................... 3,670,000 3,747,987
Veterans' Welfare
11.000% 06/01/1999................................................................... 865,000 947,175
7.000% 07/01/2000................................................................... 1,350,000 1,449,563
9.000% 10/01/2000................................................................... 1,010,000 1,140,038
11.000% 12/01/2000................................................................... 865,000 1,029,350
0.000% 07/01/2001................................................................... 1,200,000 1,041,000
6.000% 08/01/2002................................................................... 2,000,000 2,157,500
6.000% 02/01/2004................................................................... 695,000 761,025
9.000% 04/01/2004................................................................... 280,000 352,100
9.000% 04/01/2005................................................................... 1,010,000 1,302,900
8.250% 07/01/2005................................................................... 500,000 625,625
9.000% 10/01/2005................................................................... 1,640,000 2,142,250
7.250% 01/01/2007................................................................... 1,485,000 1,798,706
9.200% 04/01/2007................................................................... 2,345,000 3,183,338
8.250% 07/01/2007................................................................... 540,000 697,950
9.200% 10/01/2007................................................................... 1,250,000 1,717,188
8.000% 01/01/2008................................................................... 1,220,000 1,557,025
7.300% 07/01/2008................................................................... 1,125,000 1,387,969
8.000% 07/01/2008................................................................... 480,000 617,400
5.850% 10/01/2015................................................................... 1,075,000 1,158,312
--------------
Total State of Oregon General Obligation Bonds
(Cost $32,697,391) .................................................................. 34,848,400
--------------
OREGON GENERAL OBLIGATION BONDS (19.6%)
Clackamas & Washington Counties School District #3JT
West Linn-Wilsonville
5.875% 10/01/2009................................................................... 2,550,000 2,750,812
Clackamas County School District #7J
Lake Oswego Series A
5.300% 06/15/2005................................................................... 1,000,000 1,061,250
5.500% 06/15/2006................................................................... 1,000,000 1,066,250
5.700% 06/15/2010................................................................... 2,735,000 2,888,844
Clackamas Community College District
5.250% 12/01/2009................................................................... 1,270,000 1,346,200

<CAPTION>
PRINCIPAL
AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
Deschutes County Administrative School District #1 Bend-Lapine
0.000% 02/01/2000................................................................... $ 1,175,000 $ 1,082,469
0.000% 02/01/2001................................................................... 1,135,000 1,003,056
0.000% 02/01/2002................................................................... 1,445,000 1,221,025
5.800% 02/01/2004................................................................... 780,000 828,750
5.900% 02/01/2005................................................................... 980,000 1,042,475
Eugene Public Safety
6.000% 06/01/2005................................................................... 850,000 939,250
Eugene Public Safety Facilities
5.625% 06/01/2013................................................................... 1,295,000 1,366,225
Jackson County School District #549C Medford
5.375% 06/01/2012................................................................... 1,200,000 1,233,000
Lane County Area Education District
Lane Community College
5.300% 06/01/2007................................................................... 1,000,000 1,063,750
4.850% 06/01/2008................................................................... 4,080,000 4,192,200
5.000% 06/01/2009................................................................... 1,000,000 1,042,500
Lane County School District #1
Pleasant Hill
5.350% 12/01/2012................................................................... 650,000 673,562
5.450% 12/01/2013................................................................... 725,000 754,000
Lane County School District #4J Eugene
0.000% 01/01/2003................................................................... 1,345,000 1,087,769
0.000% 01/01/2005................................................................... 1,395,000 1,027,069
Lane County School District #4J Eugene Refunding Series A
0.000% 07/01/2001................................................................... 2,015,000 1,745,494
0.000% 07/01/2003................................................................... 1,480,000 1,171,050
0.000% 07/01/2005................................................................... 2,325,000 1,674,000
5.250% 07/01/2008................................................................... 590,000 609,912
Lane County School District #19
Springfield Refunding
0.000% 02/01/1999................................................................... 470,000 450,697
Metro Open Spaces Program Series C
5.100% 09/01/2009................................................................... 2,375,000 2,443,281
Metro Washington Park Zoo Series A
5.250% 01/15/2009................................................................... 1,040,000 1,090,700
5.300% 01/15/2011................................................................... 1,000,000 1,040,000
Milwaukie, Or
4.650% 06/01/2009................................................................... 405,000 410,062
4.750% 06/01/2010................................................................... 425,000 430,844
4.850% 06/01/2011................................................................... 340,000 343,400
Multnomah-Clackamas Counties
School District No. 10JT Gresham
5.250% 06/01/2017................................................................... 1,620,000 1,634,175
</TABLE>

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<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
</TABLE>

OREGON GENERAL OBLIGATION BONDS (CONTINUED)
<TABLE>
<S> <C> <C>
Multnomah-Clackamas Counties
School District #51JT Riverdale
5.750% 06/01/2016................................................................... $ 2,270,000 $ 2,394,850
Multnomah County Public Improvements
5.250% 10/01/2013................................................................... 1,800,000 1,842,750
Multnomah County School District #4 Gresham
6.100% 01/01/2008................................................................... 3,000,000 3,198,750
6.100% 01/01/2009................................................................... 200,000 212,500
Multnomah County School District #7 Reynolds
5.250% 06/01/2011................................................................... 1,500,000 1,545,000
Multnomah County School District #40
David Douglas
7.100% 06/01/2002................................................................... 880,000 985,600
Port of Portland Series A
0.000% 03/01/2007................................................................... 3,000,000 1,980,000
Portland Public Improvements Series A
5.750% 06/01/2014................................................................... 2,400,000 2,463,000
Portland Public Improvements Series B
4.625% 12/01/2010................................................................... 300,000 301,125
Portland Recreational Facilities Improvements
Series A
5.750% 06/01/2012................................................................... 1,370,000 1,462,475
5.750% 06/01/2013................................................................... 1,345,000 1,430,744
5.750% 06/01/2015................................................................... 1,155,000 1,225,744
Portland Recreational Facilities Improvements
Series B
5.500% 06/01/2009................................................................... 2,115,000 2,231,325
5.750% 06/01/2014................................................................... 1,750,000 1,861,563
5.750% 06/01/2015................................................................... 2,955,000 3,128,606
Portland Community College District
0.000% 07/01/2007................................................................... 2,025,000 1,326,375
Tri-County Metropolitan Transportation District Light Rail Extension Series A
6.000% 07/01/2012................................................................... 3,495,000 3,717,806
Tualatin Hills Park & Recreation District
5.700% 03/01/2009................................................................... 1,340,000 1,428,775
5.750% 03/01/2010................................................................... 730,000 775,625
Washington County Refunding
6.200% 12/01/2007................................................................... 1,500,000 1,605,000
Washington & Clackamas Counties
School District #23J
Tigard Refunding
5.400% 01/01/2010................................................................... 1,720,000 1,784,500
Washington County School District #48J Beaverton Series B
6.150% 06/01/2008................................................................... 1,010,000 1,057,975
<CAPTION>
PRINCIPAL
AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
Washington County School District #48J Beaverton Series C
7.800% 06/01/2003................................................................... $ 1,200,000 $ 1,404,000
--------------
Total Oregon General Obligation Bonds
(Cost $75,734,827) .................................................................. 80,078,159
--------------
OREGON REVENUE BONDS (14.7%)
Albany Hospital Facility Authority
Mennonite Home
5.625% 10/01/2017................................................................... 375,000 381,094
Clackamas County Hospital Facility Authority
Robison Jewish Home Project
6.250% 10/01/2021................................................................... 2,000,000 2,046,400
Clackamas County Hospital Facility Authority GNMA Collateral Jennings Lodge
7.500% 10/20/2031................................................................... 1,030,000 1,113,687
Clackamas County Housing Authority Multifamily Housing Easton Ridge Series A
5.800% 12/01/2016................................................................... 2,255,000 2,342,381
Deschutes County Hospital Facility Authority
5.750% 01/01/2009................................................................... 1,670,000 1,763,937
Deschutes Valley Water District
5.875% 09/01/2005................................................................... 3,420,000 3,685,050
Eugene Electric Utility Refunding
5.800% 08/01/2008................................................................... 1,435,000 1,508,544
5.800% 08/01/2009................................................................... 1,300,000 1,361,750
6.000% 08/01/2011................................................................... 1,375,000 1,450,625
Eugene Electric Utility
5.000% 08/01/2017................................................................... 1,480,000 1,467,050
Eugene Electric Utility Series C
5.750% 08/01/2011................................................................... 715,000 757,006
5.750% 08/01/2016................................................................... 1,055,000 1,105,113
Gresham Sewer
5.350% 06/01/2006................................................................... 860,000 909,450
Gresham Stormwater
6.100% 10/01/2009................................................................... 1,115,000 1,220,925
Hillsboro Hospital Facility Authority
Tuality Healthcare
5.750% 10/01/2012................................................................... 2,395,000 2,484,813
Lebanon Wastewater Refunding
5.750% 06/01/2011................................................................... 1,225,000 1,278,594
North Clackamas Parks & Recreation District Recreational Facilities
5.700% 04/01/2013................................................................... 2,840,000 2,953,600
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<CAPTION>
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AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
</TABLE>

OREGON REVENUE BONDS (CONTINUED)
<TABLE>
<S> <C> <C>
Northern Wasco County People's Utility District Electric
0.000% 02/01/2006................................................................... $ 610,000 $ 408,700
0.000% 02/01/2007................................................................... 585,000 364,163
0.000% 02/01/2008................................................................... 610,000 352,275
0.000% 02/01/2011................................................................... 500,000 233,125
Oregon Health, Housing, Educational & Cultural Facilities
Authority Reed College Project Series A
5.300% 07/01/2011................................................................... 500,000 513,750
Oregon Housing Financial
5.800% 07/01/2009................................................................... 420,000 421,646
Oregon Housing & Community Services Department Housing Finance Assisted Insured
Multi-Unit B
6.800% 07/01/2013................................................................... 8,270,000 8,786,875
Oregon Housing & Community Services Department Mortgage Single-Family Mortgage Program
Series A
6.800% 07/01/2016................................................................... 2,125,000 2,279,063
Oregon Housing & Community Services Department Mortgage Single-Family Mortgage Program
Series D
6.700% 07/01/2013................................................................... 1,000,000 1,058,750
Oregon Housing & Community Services Department Mortgage Single-Family Mortgage Program
Series E
6.750% 07/01/2016................................................................... 2,705,000 2,863,919
Portland Hydroelectric Power
6.800% 10/01/2004................................................................... 465,000 469,338
Portland Parking Refunding
6.375% 10/01/2012................................................................... 1,700,000 1,782,875
Portland Water System
5.250% 08/01/2013................................................................... 2,000,000 2,042,500
5.000% 08/01/2017................................................................... 3,685,000 3,666,575
Prineville Sewer First Lien
6.500% 07/01/2004................................................................... 500,000 537,500
6.800% 07/01/2012................................................................... 1,050,000 1,168,125
Reedsport Water
7.000% 10/01/2014................................................................... 520,000 590,850
South Fork Water Board First Lien
5.450% 02/01/2014................................................................... 1,300,000 1,321,125
Tri-County Metropolitan Transportation District Refunding Series A
5.700% 08/01/2013................................................................... 3,000,000 3,097,500
<CAPTION>
PRINCIPAL
AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
Washington County
Unified Sewer Agency
Unrefunded Series A
6.200% 10/01/2010................................................................... $ 420,520 $ 462,046
--------------
Total Oregon Revenue Bonds
(Cost $56,794,517) .................................................................. 60,250,719
--------------
OREGON INSURED BONDS (35.4%)
Central Oregon Community College District
5.800% 06/01/2007................................................................... 760,000 818,900
Chemeketa Community College District
5.950% 06/01/2016................................................................... 1,600,000 1,742,000
Chemeketa Community College District
Series B
5.600% 06/01/2014................................................................... 1,105,000 1,182,350
Clackamas & Washington Counties School District #3JT
5.750% 06/01/2010................................................................... 590,000 649,737
Clackamas County Health Facility Authority Revenue Refunding Adventist Health A
6.350% 03/01/2009................................................................... 1,500,000 1,635,000
Clackamas County School District #115 Gladstone
6.150% 06/01/2014................................................................... 1,200,000 1,317,000
Clatsop County Administrative School District #10
5.875% 07/01/2012................................................................... 630,000 657,562
Crook County School District
4.900% 02/01/2009................................................................... 1,165,000 1,181,019
Deschutes & Jefferson Counties School District #2J Redmond Refunding
5.600% 06/01/2009................................................................... 1,000,000 1,051,250
Emerald Peoples Utilities District
7.200% 11/01/2006................................................................... 480,000 575,405
7.350% 11/01/2011................................................................... 2,000,000 2,527,500
Eugene Electric Utility Revenue Refunding
4.700% 08/01/2008................................................................... 1,225,000 1,251,031
Hood River County School District
5.650% 06/01/2008................................................................... 1,020,000 1,086,300
Josephine County School District #7
Grants Pass
5.700% 06/01/2013................................................................... 2,000,000 2,132,500
Klamath County
5.100% 06/01/2008................................................................... 1,015,000 1,083,512
5.150% 06/01/2009................................................................... 700,000 747,250
Lane County School District #19 Springfield
6.000% 10/15/2012................................................................... 740,000 838,050
6.000% 10/15/2014................................................................... 1,310,000 1,483,575
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AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
</TABLE>

OREGON INSURED BONDS (CONTINUED)
<TABLE>
<S> <C> <C>
Lane County School District #52 Bethel
6.250% 12/01/2007................................................................... $ 580,000 $ 665,550
6.400% 12/01/2009................................................................... 750,000 856,875
Lincoln County School District
6.000% 06/15/2006................................................................... 900,000 1,009,125
6.000% 06/15/2007................................................................... 1,855,000 2,091,512
6.000% 06/15/2008................................................................... 1,150,000 1,299,500
6.000% 06/15/2009................................................................... 2,465,000 2,785,450
5.600% 06/15/2010................................................................... 2,480,000 2,693,900
5.250% 06/15/2012................................................................... 3,815,000 3,972,369
Malheur County School District #26 Nyssa
5.750% 06/01/2015................................................................... 1,910,000 2,026,987
Marion & Linn County Elementary School District #77J Stayton
6.250% 07/01/2013................................................................... 1,260,000 1,404,900
Marion County School District #103C Woodburn Series B
0.000% 11/01/2006................................................................... 2,000,000 1,365,000
0.000% 11/01/2007................................................................... 2,000,000 1,300,000
0.000% 11/01/2009................................................................... 2,500,000 1,465,625
0.000% 11/01/2011................................................................... 2,010,000 1,037,662
Medford Hospital Facility Authority Revenue Gross-Rogue Valley Health Services
6.800% 12/01/2011................................................................... 1,820,000 1,983,800
Morrow County School District #1
6.000% 06/01/2006................................................................... 880,000 981,200
Multnomah County Educational Facilities University of Portland Project
5.000% 04/01/2018................................................................... 1,500,000 1,492,500
Multnomah County School District #3 Parkrose
5.400% 12/01/2005................................................................... 1,010,000 1,084,487
5.700% 12/01/2008................................................................... 1,330,000 1,436,400
5.700% 12/01/2009................................................................... 1,970,000 2,115,288
5.500% 12/01/2010................................................................... 895,000 947,581
5.500% 12/01/2011................................................................... 1,000,000 1,052,500
Northern Oregon Corrections
5.250% 09/15/2012................................................................... 1,000,000 1,037,500
5.300% 09/15/2013................................................................... 1,000,000 1,035,000
Ontario Oregon Catholic Health
Holy Rosary Medical Center
5.500% 11/15/2012................................................................... 1,500,000 1,573,125
Oregon Health Sciences University Revenue
Series A
0.000% 07/01/2009................................................................... 1,530,000 906,525
0.000% 07/01/2012................................................................... 1,315,000 642,706
0.000% 07/01/2014................................................................... 2,495,000 1,094,681
0.000% 07/01/2015................................................................... 4,325,000 1,789,469
<CAPTION>
PRINCIPAL
AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
Oregon Health Sciences University Revenue
Series B
4.875% 07/01/2007................................................................... $ 1,695,000 $ 1,767,038
Oregon Department of General Services Certificates Participation Series C
5.800% 03/01/2015................................................................... 840,000 875,700
Oregon Department of Administrative Services Certificates Participation Series A
5.375% 11/01/2004................................................................... 1,500,000 1,601,250
5.250% 05/01/2008................................................................... 4,950,000 5,240,813
5.300% 05/01/2008................................................................... 750,000 800,625
5.250% 11/01/2009................................................................... 2,460,000 2,579,925
5.700% 05/01/2015................................................................... 1,000,000 1,062,500
5.375% 11/01/2016................................................................... 4,360,000 4,474,450
Oregon Department of Administrative Services Certificates Participation Series B
5.500% 11/01/2011................................................................... 1,635,000 1,733,100
5.000% 11/01/2013................................................................... 1,000,000 1,000,000
5.000% 11/01/2014................................................................... 500,000 498,750
Oregon Department of Administrative Services Certificates Participation Series C
5.500% 05/01/2011................................................................... 2,000,000 2,115,000
5.750% 05/01/2017................................................................... 2,000,000 2,140,000
Oregon Health, Housing, Educational & Cultural Facilities Authority
Lewis & Clark College
6.000% 10/01/2013................................................................... 965,000 1,054,263
Port of Portland Airport Revenue Portland International Airport Series 7-A
6.500% 07/01/2004................................................................... 500,000 541,875
6.750% 07/01/2015................................................................... 2,895,000 3,155,550
Port of Portland Airport Revenue Series 9-A
5.500% 07/01/2006................................................................... 500,000 527,500
Portland Arena Gas Tax Revenue
0.000% 06/01/2016................................................................... 1,100,000 385,000
0.000% 06/01/2017................................................................... 1,420,000 465,050
Portland Community College District
5.000% 07/01/2011................................................................... 2,000,000 2,030,000
Portland Gas Tax Revenue Series A
5.800% 06/01/2016................................................................... 1,625,000 1,720,469
Portland Sewer System Revenue Series A
5.000% 06/01/2009................................................................... 1,000,000 1,036,250
5.000% 06/01/2015................................................................... 5,500,000 5,520,625
Salem-Keizer School District #24J
5.400% 06/01/2006................................................................... 1,000,000 1,063,750
Salem Pedestrian Safety Improvements
5.400% 05/01/2009................................................................... 1,000,000 1,057,500
Salem Water & Sewer
6.000% 06/01/2005................................................................... 1,080,000 1,200,150
</TABLE>

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AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
</TABLE>

OREGON INSURED BONDS (CONTINUED)
<TABLE>
<S> <C> <C>
Tillamook County
6.250% 01/01/2014................................................................... $ 960,000 $ 1,064,400
5.700% 01/15/2016................................................................... 700,000 744,625
Umatilla County School District #6R Umatilla
5.080% 06/15/2018................................................................... 1,455,000 1,453,181
Umatilla County School District #8R Hermiston
6.000% 12/01/2010................................................................... 695,000 758,419
Union Health District
5.750% 02/01/2010................................................................... 1,070,000 1,112,800
Washington County School District #13
5.350% 06/01/2011................................................................... 355,000 371,863
5.350% 06/01/2012................................................................... 440,000 459,250
5.400% 06/01/2013................................................................... 485,000 506,219
Washington County School District #48J Beaverton Series A
5.200% 12/01/2009................................................................... 1,740,000 1,827,000
Washington County School District #88J Sherwood
6.100% 06/01/2012................................................................... 1,000,000 1,101,250
Washington County Unified Sewer Agency Revenue
5.500% 10/01/2016................................................................... 1,500,000 1,569,375
Washington County Unified Sewer Agency Revenue Series A
0.000% 10/01/2003................................................................... 1,975,000 1,550,375
0.000% 10/01/2005................................................................... 5,230,000 3,745,988
0.000% 10/01/2007................................................................... 4,835,000 3,148,794
5.750% 10/01/2009................................................................... 3,350,000 3,752,000
5.400% 10/01/2012................................................................... 520,000 546,650
Washington County Unified Sewer Agency Unrefunded Series A
5.900% 10/01/2006................................................................... 1,050,913 1,149,436
Western Lane Hospital District Facility Authority Revenue Refunding
Sisters St. Joseph Peace
5.625% 08/01/2007................................................................... 2,080,000 2,264,600
Yamhill County School District #29J Newberg
5.500% 06/01/2010................................................................... 1,405,000 1,477,006
6.100% 06/01/2011................................................................... 3,355,000 3,677,919
Yamhill County School District #40
6.000% 06/01/2009................................................................... 500,000 567,500
5.350% 06/01/2010................................................................... 500,000 529,375
5.600% 06/01/2016................................................................... 500,000 526,250
--------------
Total Oregon Insured Bonds
(Cost $136,123,662) ................................................................. 144,658,566
--------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
OREGON PRE-REFUNDED BONDS (9.1%)
Clackamas & Washington Counties School District #3JT West Linn-Wilsonville
5.875% 08/01/2009................................................................... $ 1,000,000 $ 1,066,250
Clackamas County Hospital Facility Authority Elderly Housing Willamette View Income
Project
7.000% 11/15/2011................................................................... 470,000 525,225
Clackamas County School District #1
6.250% 07/01/2002................................................................... 925,000 987,437
6.300% 07/01/2003................................................................... 700,000 748,125
6.500% 07/01/2004................................................................... 1,235,000 1,327,625
6.500% 07/01/2005................................................................... 1,355,000 1,456,625
6.500% 07/01/2006................................................................... 1,485,000 1,596,375
Lane County School District #19 Springfield
6.150% 10/15/2009................................................................... 1,500,000 1,672,500
Multnomah County Educational Facilities University Portland Project
6.000% 04/01/2014................................................................... 1,375,000 1,507,344
Oregon City Sewer
6.500% 10/01/2007................................................................... 500,000 561,250
Oregon Board of Higher Education Series A
6.350% 08/01/2014................................................................... 1,535,000 1,724,956
Oregon Housing, Educational & Cultural Facilities Authority Reed College Project
Series A
6.350% 07/01/2002................................................................... 320,000 348,000
6.400% 07/01/2003................................................................... 280,000 305,200
Portland Airport Way Urban Renewal & Redevelopment Tax Increment Series A
7.300% 06/01/2010................................................................... 1,400,000 1,505,000
Portland Community College District Series A
6.000% 07/01/2012................................................................... 1,500,000 1,606,875
Portland Sewer System Revenue Series A
6.050% 06/01/2009................................................................... 535,000 589,169
6.200% 06/01/2012................................................................... 5,540,000 6,149,400
6.250% 06/01/2015................................................................... 2,000,000 2,225,000
Washington County Unified Sewer Agency Series A
5.900% 10/01/2006................................................................... 2,679,087 2,926,903
Washington County Unified Sewer Agency Revenue Series A
6.125% 10/01/2012................................................................... 4,510,000 4,989,187
Washington County Unified Sewer Agency Series A
6.200% 10/01/2010................................................................... 3,064,480 3,393,912
--------------
Total Oregon Pre-Refunded Bonds
(Cost $34,060,410) .................................................................. 37,212,358
--------------
</TABLE>

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<CAPTION>
PRINCIPAL
AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
OREGON OTHER BONDS (2.6%)
Grants Pass Urban Renewal Agency Tax Increment
6.125% 08/01/2012................................................................... $ 755,000 $ 781,425
Hood River Urban Renewal Agency Revenue
6.250% 12/15/2011................................................................... 1,250,000 1,360,937
Lane County School District #4J Eugene Certificates Participation
6.900% 10/01/2000................................................................... 500,000 536,250
Lebanon Special Obligation Revenue Refunding Lease Water
5.400% 10/01/2013................................................................... 755,000 770,100
Medford Urban Renewal Agency Tax Revenue
5.875% 09/01/2010................................................................... 500,000 527,500
Newberg Certificates Participation
5.900% 12/01/1998................................................................... 365,000 370,876
6.000% 12/01/1999................................................................... 390,000 403,163
6.100% 12/01/2000................................................................... 410,000 430,500
6.200% 12/01/2001................................................................... 410,000 436,650
Portland Building Refunding Series A
4.750% 04/01/2007................................................................... 2,000,000 2,030,000
Portland Airport Way Urban Renewal & Redevelopment Tax Increment Series C
5.900% 06/01/2006................................................................... 860,000 921,275
Portland Urban Renewal & Redevelopment Refunding, Downtown Waterfront Series L
6.400% 06/01/2008................................................................... 2,085,000 2,257,013
--------------
Oregon Other Bonds (2.6%)
(Cost $10,109,353) .................................................................. 10,825,689
--------------
OTHER BONDS (7.2%)
Puerto Rico Commonwealth
6.250% 07/01/2008................................................................... 1,000,000 1,155,000
Puerto Rico Commonwealth Public Improvements
6.250% 07/01/2009................................................................... 3,000,000 3,453,750
6.250% 07/01/2013................................................................... 1,000,000 1,170,000
Puerto Rico Commonwealth Aqueduct & Sewer Authority
5.200% 07/01/2008................................................................... 1,000,000 1,066,250
Puerto Rico Commonwealth Aqueduct & Sewer Authority Revenue Series A
9.000% 07/01/2009................................................................... 5,830,000 7,447,825
Puerto Rico Commonwealth Infrastructure Financing Authority
5.000% 07/01/2013................................................................... 1,750,000 1,760,937
Puerto Rico Commonwealth Public Buildings Authority
5.000% 07/01/2013................................................................... 3,130,000 3,157,387
<CAPTION>
PRINCIPAL
AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
Puerto Rico Electric Power Authority
5.000% 07/01/2010................................................................... $ 2,425,000 $ 2,494,719
Puerto Rico Housing Finance Corp. Single Family Mortgage Revenue Portfolio 1 Series B
7.500% 10/15/2012................................................................... 1,040,000 1,098,500
Puerto Rico Housing Finance Corp. Single Family Mortgage Revenue Portfolio 1 Series C
6.750% 10/15/2013................................................................... 710,000 757,925
Puerto Rico Housing Finance Corp. Multi Family Mortgage Revenue Portfolio A-1
7.500% 04/01/2022................................................................... 1,680,000 1,772,400
Puerto Rico Industrial, Medical & Environmental Pollution Control Facilities Financing
Authority Revenue FHA Insured Mortgage Dr. Pila Hospital Project-A
7.700% 08/01/2008................................................................... 1,975,000 2,051,294
Puerto Rico Housing Bank & Finance Agency Single Family Mortgage Revenue FHA
Homeownership 5th Portfolio
7.500% 12/01/2015................................................................... 610,000 658,038
Virgin Islands Public Finance Authority Revenue Unrefunded Balance Series A
7.300% 10/01/2018................................................................... 1,185,000 1,531,613
--------------
Total Other Bonds
(Cost $27,865,999) .................................................................. 29,575,638
--------------
Total investments, excluding temporary cash investment
(Cost $373,386,159) ................................................................. 397,449,529
--------------
TAX-EXEMPT MONEY MARKET INVESTMENT (2.3%)
SEI Tax Exempt Trust
(Cost $9,250,961) ................................................................... 9,250,961 9,250,961
--------------
TOTAL INVESTMENTS (99.4%)
(Cost $382,637,120)...................................................................... 406,700,490
RECEIVABLE LESS LIABILITIES (0.6%)........................................................ 2,447,685
--------------
NET ASSETS (100.0%)....................................................................... $ 409,148,175
--------------
--------------
</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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<CAPTION>
PRINCIPAL
December 31, 1997 AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
CORPORATE BONDS (89.5%)
INDUSTRIAL (3.9%)
BUSINESS SERVICES (3.9%)
Iron Mountain, Inc.
Senior Subordinated Notes
10.125% 10/01/2006................................................................. $ 750,000 $ 825,000
Pierce Leahy Corp.
Senior Subordinated Notes
11.125% 07/15/2006................................................................. 625,000 706,250
--------------
Total Industrial ..................................................................... 1,531,250
--------------
BASIC INDUSTRY (4.0%)
CHEMICALS (2.0%)
ICO, Inc.
Series B Senior Notes
10.375% 06/01/2007................................................................. 750,000 804,375
METALS/MINING (2.0%)
Ryerson Tull, Inc.
Notes
8.500% 07/15/2001................................................................. 750,000 776,250
--------------
Total Basic Industry ................................................................. 1,580,625
--------------
CONSUMER RELATED (17.5%)
HOTEL/GAMING (4.8%)
HMH Properties, Inc.
Series B Senior Secured Notes
9.500% 05/15/2005................................................................. 600,000 639,000
Rio Hotel & Casino, Inc.
Senior Subordinated Notes
9.500% 04/15/2007................................................................. 450,000 477,000
Station Casinos, Inc.
Senior Subordinated Notes
9.625% 06/01/2003................................................................. 740,000 764,050
--------------
1,880,050
--------------
HEALTHCARE (7.0%)
Abbey Healthcare Group, Inc.
Senior Subordinated Notes
9.500% 11/01/2002................................................................. 850,000 892,500
Healthsouth Corp.
Senior Subordinated Notes
9.500% 04/01/2001................................................................. 300,000 315,975
Quorum Health Group, Inc.
Senior Subordinated Notes
8.750% 11/01/2005................................................................. 750,000 774,375

<CAPTION>
PRINCIPAL
AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
Tenet Healthcare Corp.
Senior Subordinated Notes
10.125% 03/01/2005................................................................. $ 700,000 $ 764,750
--------------
2,747,600
--------------
OTHER (5.7%)
Maxim Group, Inc. (144A)
Senior Subordinated Notes
9.250% 10/15/2007................................................................. 900,000 891,000
Westpoint Stevens, Inc.
Senior Subordinated Debentures
9.375% 12/15/2005................................................................. 800,000 840,000
Worldtex, Inc. (144A)
Senior Notes
9.625% 12/15/2007................................................................. 500,000 512,500
--------------
2,243,500
--------------
Total Consumer Related ............................................................... 6,871,150
--------------
ENERGY (7.2%)
Gulf Canada Resources Ltd.
Subordinated Debentures
9.625% 07/01/2005................................................................. 750,000 815,625
Kelley Oil & Gas Corp.
Series B Senior Subordinated Notes
10.375% 10/15/2006................................................................. 600,000 640,500
Nuevo Energy Co.
Senior Subordinated Notes
9.500% 04/15/2006................................................................. 900,000 951,750
Santa Fe Energy Resource, Inc.
Senior Subordinated Debentures
11.000% 05/15/2004................................................................. 400,000 434,000
--------------
Total Energy ......................................................................... 2,841,875
--------------
HOUSING RELATED (3.4%)
USG Corp.
Series B Senior Notes
9.250% 09/15/2001................................................................. 500,000 535,000
Webb (Del E.) Corp.
Senior Subordinated Notes
9.750% 01/15/2008................................................................. 750,000 780,000
--------------
Total Housing Related ................................................................ 1,315,000
--------------
MANUFACTURING (9.5%)
Hayes Wheels International, Inc.
Series B Senior Subordinated Notes
9.125% 07/15/2007................................................................. 800,000 828,000
Polymer Group, Inc.
Series B Senior Subordinated Notes
9.000% 07/01/2007................................................................. 500,000 500,000
</TABLE>

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<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
</TABLE>

CORPORATE BONDS (CONTINUED)
<TABLE>
<S> <C> <C>
Silgan Holdings, Inc.
Senior Subordinated Debentures
9.000% 06/01/2009................................................................. $ 750,000 $ 766,875
Titan Wheel International, Inc.
Senior Subordinated Notes
8.750% 04/01/2007................................................................. 800,000 836,000
Tracor, Inc.
Senior Subordinated Notes
8.500% 03/01/2007................................................................. 800,000 808,000
--------------
Total Manufacturing .................................................................. 3,738,875
--------------
MEDIA (21.7%)
Cinemark USA, Inc.
Series B Senior Subordinated Notes
9.625% 08/01/2008................................................................. 750,000 774,375
Heritage Media Corp.
Senior Subordinated Notes
8.750% 02/15/2006................................................................. 750,000 797,812
Hollinger International Publishing, Inc.
Senior Notes
8.625% 03/15/2005................................................................. 800,000 828,000
Jacor Communications Co. (144A)
Senior Subordinated Notes
8.750% 06/15/2007................................................................. 750,000 768,750
Jones Intercable, Inc.
Senior Notes
8.875% 04/01/2007................................................................. 700,000 731,500
Lamar Advertising Co.
Senior Subordinated Notes
9.625% 12/01/2006................................................................. 900,000 969,750
Lenfest Communications, Inc.
Senior Secured Notes
8.375% 11/01/2005................................................................. 750,000 770,625
Regal Cinemas, Inc. (144A)
Senior Subordinated Notes
8.500% 10/01/2007................................................................. 750,000 755,625
SFX Broadcasting, Inc.
Series B Senior Subordinated Notes
10.750% 05/15/2006................................................................. 750,000 823,125
Sinclair Broadcast Group, Inc.
Senior Subordinated Notes
8.750% 12/15/2007................................................................. 750,000 748,125
Young Broadcasting, Inc.
Gtd. Senior Subordinated Notes
11.750% 11/15/2004................................................................. 500,000 556,250
--------------
Total Media .......................................................................... 8,523,937
--------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
<S> <C> <C>
RETAIL (5.8%)
OTHER (5.8%)
Ethan Allen, Inc.
Senior Notes
8.750% 03/15/2001................................................................. $ 750,000 $ 766,875
Specialty Retailers, Inc.
Series B Senior Notes
8.500% 07/15/2005................................................................. 750,000 761,250
Zale Corp. (144A)
Senior Notes
8.500% 10/01/2007................................................................. 750,000 746,250
--------------
Total Retail ......................................................................... 2,274,375
--------------
TRANSPORTATION (3.5%)
OTHER (3.5%)
Allied Holdings, Inc.
Series B Senior Notes
8.625% 10/01/2007................................................................. 500,000 507,500
Teekay Shipping Corp.
Gtd. 1st Pfd. Ship. Mtg. Notes
8.320% 02/01/2008................................................................. 850,000 867,000
--------------
Total Transportation ................................................................. 1,374,500
--------------
UTILITY (8.7%)
ELECTRICS (4.5%)
AES Corp.
Senior Subordinated Notes
10.250% 07/15/2006................................................................. 800,000 864,000
California Energy Co., Inc.
Senior Secured Notes
9.875% 06/30/2003................................................................. 850,000 921,885
--------------
1,785,885
--------------
TELECOMMUNICATIONS (4.2%)
Paging Network, Inc.
Senior Subordinated Notes
10.000% 10/15/2008................................................................. 750,000 780,000
Worldcom, Inc.
Senior Notes
8.875% 01/15/2006................................................................. 799,910 860,639
--------------
1,640,639
--------------
Total Utilities ...................................................................... 3,426,524
--------------
YANKEE (4.3%)
Argentina Republic
Unsubordinated Global Bonds
11.000% 10/09/2006................................................................. 750,000 807,150
</TABLE>

59
<PAGE>
SCHEDULE OF INVESTMENTS
-----------------------------------------------------------------

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

-- COLUMBIA HIGH YIELD FUND, INC. --
------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE(1)
------------- --------------
<S> <C> <C>
</TABLE>

CORPORATE BONDS (CONTINUED)
<TABLE>
<S> <C> <C>
Mexico-United Mexican States
Global Bonds
11.375% 09/15/2016................................................................. $ 750,000 $ 862,500
--------------
Total Yankee ......................................................................... 1,669,650
--------------
Total Corporate Bonds
(Cost $34,017,097) .................................................................. 35,147,761
--------------
REPURCHASE AGREEMENTS (8.9%)
Goldman Sachs Corp.
6.337% dated 12/31/1997,
due 01/02/1998 in the
amount of $2,760,481.
Collateralized by U.S. Treasury Notes
5.875% due 08/31/1999................................................................ 2,759,523 2,759,523
J.P. Morgan Securities, Inc.
6.521% dated 12/31/1997,
due 01/02/1998 in the
amount of $750,268.
Collateralized by U.S. Treasury Notes
3.625% to 7.500%
due 08/31/2000 to 02/15/2005......................................................... 750,000 750,000
--------------
Total Repurchase Agreements
(Cost $3,509,523) ................................................................... 3,509,523
--------------
TOTAL INVESTMENTS (98.4%)
(Cost $37,526,620)....................................................................... 38,657,284
RECEIVABLES LESS LIABILITIES (1.6%)....................................................... 621,125
--------------
NET ASSETS (100.0%)....................................................................... $ 39,278,409
--------------
--------------
</TABLE>

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

The accompanying notes are an integral part
of the financial statements.

60
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
-----------------------------------------------------------------

<TABLE>
<CAPTION>
COLUMBIA COLUMBIA COLUMBIA COLUMBIA
COMMON STOCK GROWTH INTERNATIONAL STOCK SPECIAL
December 31, 1997 FUND, INC. FUND, INC. FUND, INC. FUND, INC.
------------- --------------- ------------------- ---------------
<S> <C> <C> <C> <C>
ASSETS:
Investments at identified cost............. $591,083,706 $ 998,562,165 $115,352,903 $ 1,080,385,133
- --------------------------------------------- ------------- --------------- ------------------- ---------------
Investments at value (Notes 1 and 2)....... $728,952,817 $ 1,301,830,187 $130,260,028 $ 1,218,584,838
Temporary cash investments, at cost (Note
1)........................................ 94,603,062 27,749,208 17,066,118 92,623,788
Cash....................................... 49,992
Cash denominated in foreign currencies
(cost $30,118) (Note 1)................... 28,481
Receivable for:
Interest................................. 380,104 95,041 71,382 539,653
Dividends................................ 991,982 1,157,953 148,571 812,476
Investments sold......................... 179,769 4,642,953 140,743
Capital stock sold....................... 12,830,283 1,098,716 109,439 1,600,359
Forward foreign currency exchange
contract held, at market (Note 1)....... 26,154,849
------------- --------------- ------------------- ---------------
Total assets............................... 837,938,017 1,336,574,058 173,888,860 1,314,301,857
------------- --------------- ------------------- ---------------
LIABILITIES:
Payable for:
Capital stock redeemed................... 21,686,397 1,612,360 345,451 54,827,406
Dividends and distributions.............. 2,537,818 9,010,622 985,568 5,565,501
Investments purchased.................... 29,137,562 2,906,000
Investment management fee (Note 4)....... 399,727 638,746 125,499 954,989
Accrued expenses......................... 270,694 394,641 126,631 330,164
Forward foreign currency exchange
contracts held (Note 1)................. 26,025,176
------------- --------------- ------------------- ---------------
Total liabilities.......................... 54,032,198 11,656,369 27,608,325 64,584,060
------------- --------------- ------------------- ---------------
NET ASSETS APPLICABLE TO OUTSTANDING
SHARES...................................... $783,905,819 $ 1,324,917,689 $146,280,535 $ 1,249,717,797
------------- --------------- ------------------- ---------------
------------- --------------- ------------------- ---------------
Net assets consist of:
Undistributed net investment income........ $ 1,537,363 $ 1,999,579 $ 360,073
Unrealized appreciation on:
Investments.............................. 137,869,111 303,268,022 $ 14,907,125 138,199,705
Translation of assets and liabilities in
foreign currencies...................... 124,446
Undistributed net realized gain (loss)
from:
Investments.............................. 798,088 1,714,128 (30,287) (812,034)
Foreign currency transactions............ (129,673)
Capital shares (Note 3).................... 385,808 616,718
Capital paid in (Note 3)................... 643,701,257 1,017,550,152 131,408,924 1,111,353,335
------------- --------------- ------------------- ---------------
$783,905,819 $ 1,324,917,689 $146,280,535 $ 1,249,717,797
------------- --------------- ------------------- ---------------
------------- --------------- ------------------- ---------------
SHARES OF CAPITAL STOCK OUTSTANDING (NOTE
3).......................................... 35,603,323 38,580,838 10,674,460 61,671,768
------------- --------------- ------------------- ---------------
------------- --------------- ------------------- ---------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE (1)......................... $ 22.02 $ 34.34 $ 13.70 $ 20.26
------------- --------------- ------------------- ---------------
------------- --------------- ------------------- ---------------
</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.

61
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
-----------------------------------------------------------------

<TABLE>
<CAPTION>
COLUMBIA COLUMBIA REAL COLUMBIA COLUMBIA
SMALL CAP ESTATE EQUITY BALANCED DAILY INCOME
December 31, 1997 FUND, INC. FUND, INC. FUND, INC. COMPANY
------------ ------------- ------------- ---------------
<S> <C> <C> <C> <C>
ASSETS:
Investments at identified cost............. $ 83,953,702 $113,044,943 $ 687,367,178 $ 1,173,657,688
- --------------------------------------------- ------------ ------------- ------------- ---------------
Investments at value (Notes 1 and 2)....... $ 93,338,061 $140,161,757 $ 781,687,536 $ 1,173,657,688
Temporary cash investments, at cost (Note
1)........................................ 3,622,273 11,040,866 18,639,214
Cash....................................... 300,000
Receivable for:
Interest................................. 34,328 33,119 4,943,205 370,359
Dividends................................ 5,387 735,392 473,178
Investments sold......................... 1,824,671 8,078,540
Capital stock sold....................... 570,168 1,532,140 7,114,096 12,123,502
------------ ------------- ------------- ---------------
Total assets............................... 97,570,217 155,327,945 820,935,769 1,186,451,549
------------ ------------- ------------- ---------------
LIABILITIES:
Payable for:
Capital stock redeemed................... 231,990 931,665 1,852,679 16,588,968
Dividends and distributions.............. 442,455 663,247 361,650
Investments purchased.................... 321,655 2,016,928 25,767,691
Investment management fee (Note 4)....... 80,499 91,680 333,276 445,481
Accrued expenses......................... 62,309 69,985 242,217 321,532
------------ ------------- ------------- ---------------
Total liabilities.......................... 1,138,908 3,773,505 28,557,513 17,355,981
------------ ------------- ------------- ---------------
NET ASSETS APPLICABLE TO OUTSTANDING
SHARES...................................... $ 96,431,309 $151,554,440 $ 792,378,256 $ 1,169,095,568
------------ ------------- ------------- ---------------
------------ ------------- ------------- ---------------
Net assets consist of:
Undistributed net investment income........ $ 758,037
Unrealized appreciation on investments..... $ 9,384,359 $ 27,116,814 94,320,358
Undistributed net realized gain (loss) from
investments............................... (47,218) (1,863) 902,790
Capital shares (Note 3).................... $ 1,169,096
Capital paid in (Note 3)................... 87,094,168 124,439,489 696,397,071 1,167,926,472
------------ ------------- ------------- ---------------
$ 96,431,309 $151,554,440 $ 792,378,256 $ 1,169,095,568
------------ ------------- ------------- ---------------
------------ ------------- ------------- ---------------
SHARES OF CAPITAL STOCK OUTSTANDING (NOTE
3).......................................... 5,792,970 8,062,906 36,999,621 1,169,095,568
------------ ------------- ------------- ---------------
------------ ------------- ------------- ---------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE (1)......................... $ 16.65 $ 18.80 $ 21.42 $ 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.

The accompanying notes are an integral part of the financial statements.

62
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
-----------------------------------------------------------------

<TABLE>
<CAPTION>
COLUMBIA U.S. COLUMBIA FIXED COLUMBIA COLUMBIA
GOVERNMENT SECURITIES INCOME SECURITIES MUNICIPAL BOND HIGH YIELD
December 31, 1997 FUND, INC. FUND, INC. FUND, INC. FUND, INC.
--------------------- ----------------- -------------- ------------
<S> <C> <C> <C> <C>
ASSETS:
Investments at identified cost............. $37,019,300 $352,106,732 $373,386,159 $ 34,017,097
- --------------------------------------------- --------------------- ----------------- -------------- ------------
Investments at value (Notes 1 and 2)....... $37,110,250 $361,706,626 $397,449,529 $ 35,147,761
Temporary cash investments, at cost (Note
1)........................................ 489,660 16,756,264 9,250,961 3,509,523
Receivable for:
Interest................................. 594,173 4,146,142 5,150,997 845,880
Investments sold......................... 1,734,615
Capital stock sold....................... 2,744 587,519 711,513 52,553
--------------------- ----------------- -------------- ------------
Total assets............................... 38,196,827 384,931,166 412,563,000 39,555,717
--------------------- ----------------- -------------- ------------
LIABILITIES:
Payable for:
Capital stock redeemed................... 296,055 258,822 194,689 25,561
Dividends and distributions.............. 13,147 678,152 942,554 203,813
Investments purchased.................... 2,065,838 2,037,575
Investment management fee (Note 4)....... 16,372 161,421 172,765 3,517
Accrued expenses......................... 34,578 434,179 67,242 44,417
--------------------- ----------------- -------------- ------------
Total liabilities.......................... 360,152 3,598,412 3,414,825 277,308
--------------------- ----------------- -------------- ------------
NET ASSETS APPLICABLE TO OUTSTANDING
SHARES...................................... $37,836,675 $381,332,754 $409,148,175 $ 39,278,409
--------------------- ----------------- -------------- ------------
--------------------- ----------------- -------------- ------------
Net assets consist of:
Unrealized appreciation on investments..... $ 90,950 $ 9,599,894 $ 24,063,370 $ 1,130,664
Undistributed net realized gain (loss) from
investments............................... (249,278) 8,080 301,769 30,713
Capital shares (Note 3).................... 45,619 284,274 328,202
Capital paid in (Note 3)................... 37,949,384 371,440,506 384,454,834 38,117,032
--------------------- ----------------- -------------- ------------
$37,836,675 $381,332,754 $409,148,175 $ 39,278,409
--------------------- ----------------- -------------- ------------
--------------------- ----------------- -------------- ------------
SHARES OF CAPITAL STOCK OUTSTANDING (NOTE
3).......................................... 4,561,855 28,427,440 32,820,166 3,913,232
--------------------- ----------------- -------------- ------------
--------------------- ----------------- -------------- ------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE (1)......................... $ 8.29 $ 13.41 $ 12.47 $ 10.04
--------------------- ----------------- -------------- ------------
--------------------- ----------------- -------------- ------------
</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.

63
<PAGE>
STATEMENTS OF OPERATIONS
-----------------------------------------------------------------

<TABLE>
<CAPTION>
COLUMBIA COLUMBIA COLUMBIA COLUMBIA
COMMON STOCK GROWTH INTERNATIONAL STOCK SPECIAL
Year Ended December 31, 1997 FUND, INC. FUND, INC. FUND, INC. FUND, INC.
------------- ------------- ------------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Income:
Interest................................. $ 3,048,343 $ 1,820,088 $ 633,045 $ 5,470,977
Dividends................................ 11,603,708 13,482,283 2,328,263 9,434,285
Foreign taxes withheld (net of
reclaims)............................... (276,894)
------------- ------------- ------------------- -------------
Total income........................... 14,652,051 15,302,371 2,684,414 14,905,262
------------- ------------- ------------------- -------------
Expenses:
Investment management fees (Note 4)...... 4,158,273 7,019,161 1,504,787 12,373,140
Shareholder servicing costs (Note 4)..... 802,650 1,036,576 401,177 1,402,637
Reports to shareholders.................. 121,540 273,690 89,060 297,099
Accounting expense....................... 35,794 38,348 89,372 45,504
Financial information and
subscriptions........................... 9,802 18,422 19,979 26,041
Custodian fees........................... 27,901 49,225 147,332 58,659
Bank transaction and checking fees....... 20,985 33,934 47,326 50,531
Registration fees........................ 80,003 84,219 38,396 55,075
Legal, insurance and auditing fees....... 36,992 47,281 34,161 54,489
Other.................................... 3,228 8,839 35,838 10,314
------------- ------------- ------------------- -------------
Total expenses......................... 5,297,168 8,609,695 2,407,428 14,373,489
------------- ------------- ------------------- -------------
Net investment income (Note 1)............. 9,354,883 6,692,676 276,986 531,773
------------- ------------- ------------------- -------------
REALIZED GAIN (LOSS) AND UNREALIZED
APPRECIATION (DEPRECIATION) FROM INVESTMENT
AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) from:
Investments (Note 2)(1).................. 61,630,849 150,238,079 17,347,526 122,678,842
Foreign currency transactions (Note 1)... (286,335)
------------- ------------- ------------------- -------------
Net realized gain...................... 61,630,849 150,238,079 17,061,191 122,678,842
------------- ------------- ------------------- -------------
Net unrealized appreciation (depreciation)
on:
Investments (Note 1)..................... 76,981,002 122,000,869 (1,735,993) 49,916,627
Translation of assets and liabilities in
foreign currencies (Note 1)............. (67,221)
------------- ------------- ------------------- -------------
Net unrealized appreciation
(depreciation) during the period...... 76,981,002 122,000,869 (1,803,214) 49,916,627
------------- ------------- ------------------- -------------
Net gain on investment and foreign currency
transactions (Note 1)..................... 138,611,851 272,238,948 15,257,977 172,595,469
------------- ------------- ------------------- -------------
Net increase in net assets resulting from
operations................................ $147,966,734 $ 278,931,624 $15,534,963 $ 173,127,242
------------- ------------- ------------------- -------------
------------- ------------- ------------------- -------------
</TABLE>

(1) The net realized gain for CSF includes $7,023,101 loss from affiliated
issuers. (Note 1)

The accompanying notes are an integral part of the financial statements.

64
<PAGE>
STATEMENTS OF OPERATIONS
-----------------------------------------------------------------

<TABLE>
<CAPTION>
COLUMBIA COLUMBIA COLUMBIA COLUMBIA
SMALL CAP REAL ESTATE EQUITY BALANCED DAILY INCOME
Year Ended December 31, 1997 FUND, INC. FUND, INC. FUND, INC. COMPANY
-------------- ------------------ ------------- ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Income:
Interest................................. $ 267,417 $ 522,739 $ 27,456,656 $50,578,946
Dividends................................ 87,990 6,230,108 6,696,506
-------------- ------------------ ------------- ------------
Total income........................... 355,407 6,752,847 34,153,162 50,578,946
-------------- ------------------ ------------- ------------
Expenses:
Investment management fees (Note 4)...... 547,892 864,343 3,826,628 4,296,685
Shareholder servicing costs (Note 4)..... 84,315 147,702 908,682 785,663
Reports to shareholders.................. 22,892 36,581 158,095 194,528
Accounting expense....................... 30,148 28,628 43,071 44,583
Financial information and
subscriptions........................... 981 2,444 22,155 13,392
Custodian fees........................... 2,305 4,733 30,526 35,947
Bank transaction and checking fees....... 19,580 10,591 32,640 100,680
Registration fees........................ 48,501 57,476 53,865 138,174
Legal, insurance and auditing fees....... 19,033 20,368 40,600 41,730
Other.................................... 23,345 1,603 14,547 12,298
-------------- ------------------ ------------- ------------
Total expenses......................... 798,992 1,174,469 5,130,809 5,663,680
-------------- ------------------ ------------- ------------
Net investment income (loss) (Note 1)...... (443,585) 5,578,378 29,022,353 44,915,266
-------------- ------------------ ------------- ------------
REALIZED GAIN AND UNREALIZED APPRECIATION
FROM INVESTMENT TRANSACTIONS:
Net realized gain from investments (Note
2)........................................ 4,931,098 3,597,873 62,144,958
Net unrealized appreciation on investments
during the period (Note 1)................ 7,895,606 16,211,982 38,270,990
-------------- ------------------ -------------
Net gain on investments (Note 1)........... 12,826,704 19,809,855 100,415,948
-------------- ------------------ ------------- ------------
Net increase in net assets resulting from
operations................................ $12,383,119 $25,388,233 $ 129,438,301 $44,915,266
-------------- ------------------ ------------- ------------
-------------- ------------------ ------------- ------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

65
<PAGE>
STATEMENTS OF OPERATIONS
-----------------------------------------------------------------

<TABLE>
<CAPTION>
COLUMBIA U.S. COLUMBIA FIXED COLUMBIA COLUMBIA
GOVERNMENT SECURITIES INCOME SECURITIES MUNICIPAL BOND HIGH YIELD
Year Ended December 31, 1997 FUND, INC. FUND, INC. FUND, INC. FUND, INC.
--------------------- ----------------- -------------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Income:
Interest................................. $2,284,819 $25,828,885 $21,295,777 $3,184,666
----------- ----------------- -------------- -----------
Total income........................... 2,284,819 25,828,885 21,295,777 3,184,666
----------- ----------------- -------------- -----------
Expenses:
Investment management fees (Note 4)...... 194,230 1,821,809 1,952,213 211,632
Shareholder servicing costs (Note 4)..... 59,553 315,560 124,730 43,233
Reports to shareholders.................. 12,689 80,510 25,942 11,708
Accounting expense....................... 28,508 37,923 29,953 34,145
Financial information and
subscriptions........................... 1,051 15,912 37,910 3,564
Custodian fees........................... 1,530 14,491 15,412 1,388
Bank transaction and checking fees....... 2,345 24,208 4,572 3,740
Registration fees........................ 16,104 38,435 15,190 27,510
Legal, insurance and auditing fees....... 22,084 37,787 34,199 20,525
Other.................................... 673 4,224 8,930 358
----------- ----------------- -------------- -----------
338,767 2,390,859 2,249,051 357,803
Expenses reimbursed by investment advisor
(1)..................................... (5,959)
----------- ----------------- -------------- -----------
Total expenses......................... 338,767 2,390,859 2,249,051 351,844
----------- ----------------- -------------- -----------
Net investment income (Note 1)............. 1,946,052 23,438,026 19,046,726 2,832,822
----------- ----------------- -------------- -----------
REALIZED GAIN AND UNREALIZED APPRECIATION
FROM INVESTMENT TRANSACTIONS:
Net realized gain from investments (Note
2)........................................ 147,024 2,758,117 2,429,586 1,148,575
Net unrealized appreciation on investments
during the period (Note 1)................ 63,763 7,594,450 10,155,954 279,884
----------- ----------------- -------------- -----------
Net gain on investments (Note 1)........... 210,787 10,352,567 12,585,540 1,428,459
----------- ----------------- -------------- -----------
Net increase in net assets resulting from
operations................................ $2,156,839 $33,790,593 $31,632,266 $4,261,281
----------- ----------------- -------------- -----------
----------- ----------------- -------------- -----------
(1) The Advisor has voluntarily agreed to assume the ordinary expenses of the Fund to the extent that these expenses,
together with the Fund's advisory fee, exceed 1% of the Fund's average net assets.
</TABLE>

The accompanying notes are an integral part of the financial statements.

66
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
-----------------------------------------------------------------

<TABLE>
<CAPTION>
COLUMBIA COLUMBIA COLUMBIA
COMMON STOCK GROWTH INTERNATIONAL STOCK
Years Ended December 31, FUND, INC. FUND, INC. FUND, INC.
--------------------------- ------------------------------- ---------------------------
1997 1996 1997 1996 1997 1996
------------ ------------ -------------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income........ $ 9,354,883 $ 5,885,201 $ 6,692,676 $ 6,027,740 $ 276,986 $ 254,666
Net realized gain (loss)
from:
Investments (Note 2)....... 61,630,849 70,666,274 150,238,079 154,006,111 17,347,526 9,808,805
Foreign currency
transactions (Note 1)..... (286,335) 1,454,573
Change in net unrealized
appreciation (depreciation)
on:
Investments................ 76,981,002 8,532,253 122,000,869 21,295,845 (1,735,993) 5,676,201
Translation of assets and
liabilities in foreign
currencies (Note 1)....... (67,221) 185,947
------------ ------------ -------------- -------------- ------------ ------------
Net increase in net assets
resulting from operations... 147,966,734 85,083,728 278,931,624 181,329,696 15,534,963 17,380,192
Distributions to shareholders:
From net investment income... (8,468,207) (5,169,680) (5,838,423) (5,089,302) (254,666)
In excess of net investment
income...................... (24,695)* (1,646,464)*
From net realized gain from
investment and foreign
currency transactions....... (61,141,619) (70,666,274) (148,364,649) (154,006,111) (16,691,558) (9,422,995)
In excess of net realized
gain from investment
transactions................ (97,665)* (469,156)*
Capital share transactions, net
(Note 3)...................... 168,789,109 169,111,664 136,089,618 193,603,540 21,927,539 18,580,064
------------ ------------ -------------- -------------- ------------ ------------
Net increase in net assets... 247,146,017 178,237,078 260,818,170 215,368,667 20,770,944 24,636,131

NET ASSETS:
Beginning of period............ 536,759,802 358,522,724 1,064,099,519 848,730,852 125,509,591 100,873,460
------------ ------------ -------------- -------------- ------------ ------------
End of period (1).............. $783,905,819 $536,759,802 $1,324,917,689 $1,064,099,519 $146,280,535 $125,509,591
------------ ------------ -------------- -------------- ------------ ------------
------------ ------------ -------------- -------------- ------------ ------------
- ---------------------------------
------------ ------------ -------------- -------------- ------------ ------------
</TABLE>

<TABLE>
<S> <C> <C> <C> <C> <C> <C>
(1) Includes undistributed net
investment income of: $ 1,537,363 $ 901,158 $ 1,999,579 $ 1,931,709 $ -- $ 3,885
* On a tax basis, there was no return of capital.
</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
SPECIAL SMALL CAP REAL ESTATE EQUITY
Years Ended December 31, FUND, INC. FUND, INC. FUND, INC.
--------------------------------- --------------------------- ----------------------------
1997 1996 1997 1996 (2) 1997 1996
--------------- --------------- ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS:
Operations:
Net investment income
(loss)................... $ 531,773 $ (4,487,503) $ (443,585) $ (126) $ 5,578,378 $ 1,994,016
Net realized gain (loss)
from investments (Note
2)....................... 122,678,842 295,204,950 4,931,098 (275,796) 3,597,873 1,627,328
Change in net unrealized
appreciation
(depreciation) on
investments.............. 49,916,627 (112,950,905) 7,895,606 1,488,753 16,211,982 9,368,906
--------------- --------------- ------------ ------------ ------------- ------------
Net increase in net assets
resulting from
operations............... 173,127,242 177,766,542 12,383,119 1,212,831 25,388,233 12,990,250
Distributions to
shareholders:
From net investment
income................... (4,230,674) (1,370,203)
From net realized gain
from investment
transactions............. (122,678,842) (289,460,071) (4,258,935) (3,597,873) (1,627,328)
In excess of net realized
gain from investment
transactions............. (154,157)* (243,742)* (349,207)*
From tax return of
capital.................. (1,252,467) (657,602)
Capital share transactions,
net (Note 3)............... (385,860,660) 312,562,708 67,245,755 19,848,539 67,417,742 37,500,111
--------------- --------------- ------------ ------------ ------------- ------------
Net increase (decrease) in
net assets............... (335,566,417) 200,869,179 75,369,939 21,061,370 83,481,219 46,486,021

NET ASSETS:
Beginning of period......... 1,585,284,214 1,384,415,035 21,061,370 68,073,221 21,587,200
--------------- --------------- ------------ ------------ ------------- ------------
End of period (1)........... $ 1,249,717,797 $ 1,585,284,214 $ 96,431,309 $ 21,061,370 $ 151,554,440 $ 68,073,221
--------------- --------------- ------------ ------------ ------------- ------------
--------------- --------------- ------------ ------------ ------------- ------------
- ------------------------------
--------------- --------------- ------------ ------------ ------------- ------------
</TABLE>

<TABLE>
<S> <C> <C> <C> <C> <C> <C>
(1) Includes undistributed net
investment income (loss)
of:.......................... $ 360,073 $ -- $ -- $ (126) $ -- $ --
(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.

68
<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.
----------------------------- ------------------------------- ---------------------------
1997 1996 1997 1996 1997 1996
------------- ------------- --------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income.......... $ 29,022,353 $ 22,231,964 $ 44,915,266 $ 40,303,114 $ 1,946,052 $ 2,058,101
Net realized gain from
investments (Note 2).......... 62,144,958 41,189,499 147,024 83,457
Change in net unrealized
appreciation (depreciation) on
investments................... 38,270,990 4,167,518 63,763 (584,568)
------------- ------------- --------------- ------------- ------------ ------------
Net increase in net assets
resulting from operations..... 129,438,301 67,588,981 44,915,266 40,303,114 2,156,839 1,556,990
Distributions to shareholders:
From net investment income..... (28,593,156) (21,892,044) (44,915,266) (40,303,114) (1,946,052) (2,058,101)
In excess of net investment
income........................ (124,615)*
From net realized gain from
investment transactions....... (61,376,451) (41,189,499)
In excess of net realized gain
from investment transaction... (97,205)*
Capital share transactions, net
(Note 3)........................ 80,316,642 181,539,809 279,295,599 89,144,447 (3,150,453) (564,932)
------------- ------------- --------------- ------------- ------------ ------------
Net increase (decrease) in net
assets........................ 119,785,336 185,825,427 279,295,599 89,144,447 (2,939,666) (1,066,043)

NET ASSETS:
Beginning of period.............. 672,592,920 486,767,493 889,799,969 800,655,522 40,776,341 41,842,384
------------- ------------- --------------- ------------- ------------ ------------
End of period.................... $ 792,378,256 $ 672,592,920 $ 1,169,095,568 $ 889,799,969 $ 37,836,675 $ 40,776,341
------------- ------------- --------------- ------------- ------------ ------------
------------- ------------- --------------- ------------- ------------ ------------
- -----------------------------------
------------- ------------- --------------- ------------- ------------ ------------
</TABLE>

<TABLE>
<S> <C> <C> <C> <C> <C> <C>
(1) Includes undistributed net
investment income of: $ 758,037 $ 540,163
* 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
FIXED INCOME SECURITIES MUNICIPAL BOND HIGH YIELD
Years Ended December 31, FUND, INC. FUND, INC. FUND, INC.
-------------------------- ---------------------------- --------------------------
1997 1996 1997 1996 1997 1996
------------ ------------ ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income................... $ 23,438,026 $ 21,823,484 $ 19,046,726 $ 18,837,582 $ 2,832,822 $ 2,084,562
Net realized gain from investments (Note
2)..................................... 2,758,117 1,600,093 2,429,586 1,991,804 1,148,575 237,862
Change in net unrealized appreciation
(depreciation) on investments.......... 7,594,450 (11,107,884) 10,155,954 (7,232,960) 279,884 (1,892)
------------ ------------ ------------- ------------ ------------ ------------
Net increase in net assets resulting
from operations........................ 33,790,593 12,315,693 31,632,266 13,596,426 4,261,281 2,320,532
Distributions to shareholders:
From net investment income.............. (23,438,026) (21,823,484) (19,046,726) (18,837,582) (2,832,822) (2,084,562)
In excess of net investment income...... (4,724)*
From net realized gain from investment
transactions........................... (847,470) (2,276,966) (1,842,655) (1,136,542) (28,544)
Capital share transactions, net (Note
3)....................................... 15,406,761 49,669,884 23,176,895 (1,044,677) 10,168,259 5,139,840
------------ ------------ ------------- ------------ ------------ ------------
Net increase (decrease) in net assets... 24,911,858 40,162,093 33,480,745 (8,128,488) 10,460,176 5,347,266

NET ASSETS:
Beginning of period....................... 356,420,896 316,258,803 375,667,430 383,795,918 28,818,233 23,470,967
------------ ------------ ------------- ------------ ------------ ------------
End of period............................. $381,332,754 $356,420,896 $ 409,148,175 $375,667,430 $ 39,278,409 $ 28,818,233
------------ ------------ ------------- ------------ ------------ ------------
------------ ------------ ------------- ------------ ------------ ------------
* On a tax basis, there was no return of capital.
</TABLE>

The accompanying notes are an integral part of the financial statements.

70
<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
under consistently applied procedures by or under the supervision of officers of
the investment advisor to those Funds 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.

71
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

-- 1. SIGNIFICANT ACCOUNTING POLICIES, CONTINUED --

AFFILIATED ISSUERS. Under the Investment Company Act of 1940, as amended, an
issuer is an "affiliated issuer" of a Fund if the Fund holds 5% or more of that
issuer's outstanding voting securities or is held under common control. CSF and
CBF had investments in such affiliated issuers at December 31, 1997 as follows:

<TABLE>
<CAPTION>
DIVIDEND AND
BALANCE OF BALANCE OF INTEREST INCOME
SHARES/PRINCIPAL SHARES/PRINCIPAL JANUARY 1,
HELD GROSS GROSS HELD VALUE 1997-
DECEMBER 31, PURCHASES & SALES & DECEMBER 31, DECEMBER 31, DECEMBER 31,
NAME OF ISSUER 1996 ADDITIONS REDUCTIONS 1997 1997 1997
- ------------------------------ ---------------- ----------- ---------- ---------------- ------------- ---------------
Columbia Special Fund (a)
<S> <C> <C> <C> <C> <C> <C>
Abercrombie & Fitch Co........ -- 800,000 800,000 $ 25,000,000
Celadon Group, Inc............ 580,000 80,000 500,000 6,750,000
Gadzooks, Inc................. -- 700,000 700,000 14,700,000
Harmonic Lightwaves, Inc...... 540,000 540,000 -- --
Integrated Measurement
Syst......................... 170,000 290,000 160,000 300,000 5,137,500
Osmonics, Inc................. 400,000 469,000 869,000 13,741,063
Resmed, Inc................... 605,000 105,000 500,000 14,062,500
Schnitzer Steel Industries.... 500,000 50,000 550,000 15,434,375 $107,500
United Dental Care............ 487,500 487,500 -- --
Vans, Inc..................... -- 860,000 860,000 13,007,500
------------- ---------------
107,832,938 107,500
Columbia Balanced Fund (b)
Fleet Mortgage Group, Inc..... 550,000 550,000 552,937 35,750
------------- ---------------
Total affiliated issuers.................................................................. $ 108,385,875 $143,250
------------- ---------------
------------- ---------------
</TABLE>

(a) Fund holds 5% or more of that issuer's outstanding shares.

(b) Fund holds an investment under common control. (Note 4)

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. CISF enters into forward foreign
currency exchange contracts to hedge certain portfolio securities denominated in
foreign currencies. Forward contracts are recorded at market value. CISF could
be exposed to risks if counterparties to the forward 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 forward contracts amounted to $241,528 and are included in
net realized gain from foreign currency transactions. As of December 31, 1997,
CISF had entered into the following forward contract resulting in net unrealized
appreciation of $129,673.

72
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

-- 1. SIGNIFICANT ACCOUNTING POLICIES, --
CONTINUED

<TABLE>
<CAPTION>
JAPANESE YEN U.S. DOLLARS NET
TO TO SETTLEMENT UNREALIZED
BE DELIVERED BE RECEIVED DATE APPRECIATION
- -------------- -------------- ---------- -------------
<S> <C> <C> <C>
Y3,370,000,000 $ 26,154,849 01/28/1998 $ 129,673
</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 on the valuation date, 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 changes are
included with the net realized and unrealized gain or loss from investments.

Reported net realized foreign currency gains or losses arise from 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.

INTEREST AND DIVIDEND INCOME. Interest income is recorded on the accrual basis
and dividend income is recorded on the ex-dividend date. Amortization of
discount or premium is recorded over the life of the respective instrument. 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 ex-dividend date.

Income and capital gain distributions are determined in accordance with
income tax regulations, which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
foreign currency transactions, net operating losses, deferral of losses from
wash sales, passive foreign investment company income and return of capital
received from REITS.

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.

73
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

-- 1. SIGNIFICANT ACCOUNTING POLICIES, --
CONTINUED

As of December 31, 1997, CUSG has $242,419 in capital loss carryovers
available to offset future capital gains which expire in 2002.

To the extent that the capital loss carryovers are used to offset any
capital gains, it is unlikely that the gains so offset will be distributed to
shareholders.

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.

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, 1997, 41% of the Fund's debt securities were rated Ba
and 59% were rated B by Moody's Investor Services, Inc.

74
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

-- 2. INVESTMENT TRANSACTIONS --

Aggregate purchases, sales and maturities, net realized gain 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, 1997, were as follows:

<TABLE>
<CAPTION>
COLUMBIA COLUMBIA COLUMBIA COLUMBIA
COMMON STOCK GROWTH INTERNATIONAL STOCK SPECIAL
FUND, INC. (CCSF) FUND, INC. (CGF) FUND, INC. (CISF) FUND, INC. (CSF)
----------------- ---------------- ------------------- ----------------
PURCHASES:
<S> <C> <C> <C> <C>
Investment securities other than
U.S. Government obligations..... $649,705,323 $1,132,681,444 $166,070,521 $2,285,721,068
----------------- ---------------- ------------------- ----------------
----------------- ---------------- ------------------- ----------------
SALES AND MATURITIES:
Investment securities other than
U.S. Government obligations..... $569,259,757 $1,154,366,139 $168,627,388 $2,727,547,308
----------------- ---------------- ------------------- ----------------
----------------- ---------------- ------------------- ----------------
NET REALIZED GAIN:
Investment securities other than
U.S. Government obligations..... $ 61,630,849 $ 150,238,079 $ 17,347,526 $ 122,678,842
----------------- ---------------- ------------------- ----------------
----------------- ---------------- ------------------- ----------------
UNREALIZED APPRECIATION
(DEPRECIATION) AS OF DECEMBER 31,
1997:
Appreciation..................... $148,390,643 $ 327,736,887 $ 23,089,195 $ 199,310,779
Depreciation..................... (10,521,532) (24,468,865) (8,182,034) (61,111,074)
----------------- ---------------- ------------------- ----------------
Net unrealized appreciation.... $137,869,111 $ 303,268,022 $ 14,907,125 $ 138,199,705
----------------- ---------------- ------------------- ----------------
----------------- ---------------- ------------------- ----------------
UNREALIZED APPRECIATION
(DEPRECIATION) FOR FEDERAL INCOME
TAX PURPOSES AS OF DECEMBER 31,
1997:
Appreciation..................... $149,383,139 $ 329,136,822 $ 23,079,940 $ 199,396,129
Depreciation..................... (10,521,532) (24,763,294) (8,267,962) (62,132,757)
----------------- ---------------- ------------------- ----------------
Net unrealized appreciation.... $138,861,607 $ 304,373,528 $ 14,811,978 $ 137,263,372
----------------- ---------------- ------------------- ----------------
----------------- ---------------- ------------------- ----------------
For federal income tax purposes,
the cost of investments owned at
December 31, 1997................. $590,091,210 $ 997,456,659 $115,448,050 $1,081,321,466
----------------- ---------------- ------------------- ----------------
----------------- ---------------- ------------------- ----------------
</TABLE>

The net realized gain for CCSF, CGF, & CSF includes proceeds of $2,242,
$361,277, & $672,539, 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 COLUMBIA
SMALL CAP EQUITY FUND, INC. BALANCED DAILY INCOME
FUND, INC. (CSCF) (CREF) FUND, INC. (CBF) COMPANY (CDIC)
----------------- ----------------- ---------------- ---------------
<S> <C> <C> <C> <C>
PURCHASES:
Investment securities other than U.S.
Government obligations............... $147,752,870 $ 99,553,326 $ 565,825,789 $9,939,776,531
U.S. Government obligations........... 604,980,516 33,659,217
----------------- ----------------- ---------------- ---------------
Total purchases..................... $147,752,870 $ 99,553,326 $1,170,806,305 $9,973,435,748
----------------- ----------------- ---------------- ---------------
----------------- ----------------- ---------------- ---------------
SALES AND MATURITIES:
Investment securities other than U.S.
Government obligations............... $ 86,451,984 $ 35,352,329 $ 509,635,998 $9,669,083,804
U.S. Government obligations........... 613,086,023 33,659,217
----------------- ----------------- ---------------- ---------------
Total sales and maturities.......... $ 86,451,984 $ 35,352,329 $1,122,722,021 $9,702,743,021
----------------- ----------------- ---------------- ---------------
----------------- ----------------- ---------------- ---------------
NET REALIZED GAIN:
Investment securities other than U.S.
Government obligations............... $ 4,931,098 $ 3,597,873 $ 60,242,570
U.S. Government obligations........... 1,902,388
----------------- ----------------- ----------------
Total net realized gain............. $ 4,931,098 $ 3,597,873 $ 62,144,958
----------------- ----------------- ----------------
----------------- ----------------- ----------------
UNREALIZED APPRECIATION (DEPRECIATION)
AS OF DECEMBER 31, 1997:...............
Appreciation.......................... $ 12,040,728 $ 27,174,929 $ 98,838,009
Depreciation.......................... (2,656,369) (58,115) (4,517,651)
----------------- ----------------- ----------------
Net unrealized appreciation......... $ 9,384,359 $ 27,116,814 $ 94,320,358
----------------- ----------------- ----------------
----------------- ----------------- ----------------
UNREALIZED APPRECIATION (DEPRECIATION)
FOR FEDERAL INCOME TAX PURPOSES AS OF
DECEMBER 31, 1997:
Appreciation.......................... $ 12,028,865 $ 29,011,667 $ 99,512,204
Depreciation.......................... (2,704,005) (58,115) (4,608,500)
----------------- ----------------- ----------------
Net unrealized appreciation......... $ 9,324,860 $ 28,953,552 $ 94,903,704
----------------- ----------------- ----------------
----------------- ----------------- ----------------
For federal income tax purposes, the
cost of investments owned at December
31, 1997............................... $ 84,013,201 $111,208,205 $ 686,783,832 $1,173,657,688
----------------- ----------------- ---------------- ---------------
----------------- ----------------- ---------------- ---------------
</TABLE>

The net realized gain for CBF includes proceeds of $2,236 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 COLUMBIA
GOVERNMENT SECURITIES INCOME SECURITIES MUNICIPAL BOND HIGH YIELD
FUND, INC. (CUSG) FUND, INC. (CFIS) FUND, INC. (CMBF) FUND, INC. (CHYF)
--------------------- ----------------- ----------------- -----------------
PURCHASES:
<S> <C> <C> <C> <C>
Investment securities other than U.S.
Government obligations............... $205,016,907 $ 81,001,133 $46,508,531
U.S. Government obligations........... $77,834,027 514,542,364 747,187
--------------------- ----------------- ----------------- -----------------
Total purchases..................... $77,834,027 $719,559,271 $ 81,001,133 $47,255,718
--------------------- ----------------- ----------------- -----------------
--------------------- ----------------- ----------------- -----------------
SALES AND MATURITIES:
Investment securities other than U.S.
Government obligations............... $179,565,984 $ 64,319,420 $39,446,080
U.S. Government obligations........... $81,184,234 528,675,378 1,240,234
--------------------- ----------------- ----------------- -----------------
Total sales and maturities.......... $81,184,234 $708,241,362 $ 64,319,420 $40,686,314
--------------------- ----------------- ----------------- -----------------
--------------------- ----------------- ----------------- -----------------
NET REALIZED GAIN (LOSS):
Investment securities other than U.S.
Government obligations............... $ (80,814) $ 2,429,586 $ 1,165,879
U.S. Government obligations........... $ 147,024 2,838,931 (17,304)
--------------------- ----------------- ----------------- -----------------
Total net realized gain............. $ 147,024 $ 2,758,117 $ 2,429,586 $ 1,148,575
--------------------- ----------------- ----------------- -----------------
--------------------- ----------------- ----------------- -----------------
UNREALIZED APPRECIATION (DEPRECIATION)
AS OF DECEMBER 31, 1997:
Appreciation.......................... $ 103,729 $ 9,785,428 $ 24,070,747 $ 1,157,854
Depreciation.......................... (12,779) (185,534) (7,377) (27,190)
--------------------- ----------------- ----------------- -----------------
Net unrealized appreciation......... $ 90,950 $ 9,599,894 $ 24,063,370 $ 1,130,664
--------------------- ----------------- ----------------- -----------------
--------------------- ----------------- ----------------- -----------------
UNREALIZED APPRECIATION (DEPRECIATION)
FOR FEDERAL INCOME TAX PURPOSES AS OF
DECEMBER 31, 1997:
Appreciation.......................... $ 96,870 $ 9,785,428 $ 24,061,804 $ 1,157,854
Depreciation.......................... (12,779) (186,732) (7,377) (27,190)
--------------------- ----------------- ----------------- -----------------
Net unrealized appreciation......... $ 84,091 $ 9,598,696 $ 24,054,427 $ 1,130,664
--------------------- ----------------- ----------------- -----------------
--------------------- ----------------- ----------------- -----------------
For federal income tax purposes, the
cost of investments owned at December
31, 1997............................... $37,026,159 $352,107,930 $373,395,102 $34,017,097
--------------------- ----------------- ----------------- -----------------
--------------------- ----------------- ----------------- -----------------
</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)
----------------------------- ------------------------------- -----------------------------
1997 1996 1997 1996 1997 1996
------------- ------------- -------------- -------------- ------------- -------------
SHARES:
<S> <C> <C> <C> <C> <C> <C>
Shares sold................... 12,609,458 9,187,403 9,453,209 9,588,118 6,414,910 4,458,919
Shares issued for reinvestment
of dividends................. 3,039,307 3,836,536 4,230,608 4,993,329 1,146,267 808,789
------------- ------------- -------------- -------------- ------------- -------------
15,648,765 13,023,939 13,683,817 14,581,447 7,561,177 5,267,708
Less shares redeemed.......... (7,908,821) (4,449,235) (9,715,431) (8,408,189) (5,939,634) (3,930,959)
------------- ------------- -------------- -------------- ------------- -------------
Net increase in shares........ 7,739,944 8,574,704 3,968,386 6,173,258 1,621,543 1,336,749
------------- ------------- -------------- -------------- ------------- -------------
------------- ------------- -------------- -------------- ------------- -------------
AMOUNTS:
Sales......................... $ 277,332,028 $ 183,843,205 $ 329,861,186 $ 309,798,468 $ 98,515,375 $ 62,941,735
Reinvestment of dividends..... 66,961,124 74,699,264 145,279,077 154,190,774 15,703,862 11,145,109
------------- ------------- -------------- -------------- ------------- -------------
344,293,152 258,542,469 475,140,263 463,989,242 114,219,237 74,086,844
Less redemptions.............. (175,504,043) (89,430,805) (339,050,645) (270,385,702) (92,291,698) (55,506,780)
------------- ------------- -------------- -------------- ------------- -------------
Net increase.................. $ 168,789,109 $ 169,111,664 $ 136,089,618 $ 193,603,540 $ 21,927,539 $ 18,580,064
------------- ------------- -------------- -------------- ------------- -------------
------------- ------------- -------------- -------------- ------------- -------------
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 COLUMBIA
SPECIAL SMALL CAP REAL ESTATE EQUITY
FUND, INC. (CSF) FUND, INC. (CSCF) FUND, INC. (CREF)
------------------------------- ---------------------------- -----------------------------
1997 1996 1997 1996 (1) 1997 1996
-------------- -------------- ------------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
SHARES:
Shares sold...................... 17,301,738 25,624,116 6,092,245 1,756,650 9,713,082 4,543,366
Shares issued for reinvestment of
dividends....................... 5,787,116 13,826,136 229,093 444,904 226,545
-------------- -------------- ------------- ------------ ------------- -------------
23,088,854 39,450,252 6,321,338 1,756,650 10,157,986 4,769,911
Less shares redeemed............. (41,278,382) (24,162,690) (2,149,149) (135,869) (6,308,136) (2,255,778)
-------------- -------------- ------------- ------------ ------------- -------------
Net increase (decrease) in
shares.......................... (18,189,528) 15,287,562 4,172,189 1,620,781 3,849,850 2,514,133
-------------- -------------- ------------- ------------ ------------- -------------
-------------- -------------- ------------- ------------ ------------- -------------
AMOUNTS:
Sales............................ $ 365,659,534 $ 593,195,434 $ 97,707,061 $ 21,545,009 $ 168,764,062 $ 65,389,802
Reinvestment of dividends........ 117,246,979 273,619,242 3,814,406 8,209,513 3,428,343
-------------- -------------- ------------- ------------ ------------- -------------
482,906,513 866,814,676 101,521,467 21,545,009 176,973,575 68,818,145
Less redemptions................. (868,767,173) (554,251,968) (34,275,712) (1,696,470) (109,555,833) (31,318,034)
-------------- -------------- ------------- ------------ ------------- -------------
Net increase (decrease).......... $ (385,860,660) $ 312,562,708 $ 67,245,755 $ 19,848,539 $ 67,417,742 $ 37,500,111
-------------- -------------- ------------- ------------ ------------- -------------
-------------- -------------- ------------- ------------ ------------- -------------
Capital stock authorized
(shares)........................ 100,000,000 100,000,000 100,000,000
Par Value........................ $ .01 no par no par
</TABLE>

<TABLE>
<S> <C> <C> <C> <C> <C> <C>
(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)
----------------------------- --------------------------------- ---------------------------
1997 1996 1997 1996 1997 1996
------------- ------------- --------------- --------------- ------------ ------------
SHARES:
<S> <C> <C> <C> <C> <C> <C>
Shares sold................... 11,631,390 12,203,107 1,948,660,105 1,425,767,034 1,678,641 1,751,071
Shares issued for reinvestment
of dividends................. 4,143,787 3,066,051 44,892,534 40,287,100 214,917 230,872
------------- ------------- --------------- --------------- ------------ ------------
15,775,177 15,269,158 1,993,552,639 1,466,054,134 1,893,558 1,981,943
Less shares redeemed.......... (11,880,698) (6,405,495) (1,714,257,040) (1,376,909,687) (2,278,311) (2,051,336)
------------- ------------- --------------- --------------- ------------ ------------
Net increase (decrease) in
shares....................... 3,894,479 8,863,663 279,295,599 89,144,447 (384,753) (69,393)
------------- ------------- --------------- --------------- ------------ ------------
------------- ------------- --------------- --------------- ------------ ------------
AMOUNTS:
Sales......................... $ 255,961,711 $ 251,516,248 $ 1,948,660,105 $ 1,425,767,034 $ 13,843,228 $ 14,407,264
Reinvestment of dividends..... 89,309,106 62,884,919 44,892,534 40,287,100 1,771,509 1,898,935
------------- ------------- --------------- --------------- ------------ ------------
345,270,817 314,401,167 1,993,552,639 1,466,054,134 15,614,737 16,306,199
Less redemptions.............. (264,954,175) (132,861,358) (1,714,257,040) (1,376,909,687) (18,765,190) (16,871,131)
------------- ------------- --------------- --------------- ------------ ------------
Net increase (decrease)....... $ 80,316,642 $ 181,539,809 $ 279,295,599 $ 89,144,447 $ (3,150,453) $ (564,932)
------------- ------------- --------------- --------------- ------------ ------------
------------- ------------- --------------- --------------- ------------ ------------
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)
----------------------------- ----------------------------- -----------------------------
1997 1996 1997 1996 1997 1996
------------- ------------- ------------- ------------- ------------- -------------
SHARES:
<S> <C> <C> <C> <C> <C> <C>
Shares sold...................... 8,909,289 9,571,457 6,372,612 4,732,337 2,127,208 1,058,203
Shares issued for reinvestment of
dividends....................... 1,456,925 1,427,852 1,369,697 1,395,611 342,994 197,255
------------- ------------- ------------- ------------- ------------- -------------
10,366,214 10,999,309 7,742,309 6,127,948 2,470,202 1,255,458
Less shares redeemed............. (9,188,186) (7,165,704) (5,853,872) (6,210,439) (1,457,004) (730,964)
------------- ------------- ------------- ------------- ------------- -------------
Net increase (decrease) in
shares.......................... 1,178,028 3,833,605 1,888,437 (82,491) 1,013,198 524,494
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
AMOUNTS:
Sales............................ $ 117,209,758 $ 124,564,521 $ 77,959,329 $ 57,398,891 $ 21,499,878 $ 10,345,832
Reinvestment of dividends........ 19,185,059 18,580,087 16,813,005 16,930,817 3,460,890 1,925,766
------------- ------------- ------------- ------------- ------------- -------------
136,394,817 143,144,608 94,772,334 74,329,708 24,960,768 12,271,598
Less redemptions................. (120,988,056) (93,474,724) (71,595,439) (75,374,385) (14,792,509) (7,131,758)
------------- ------------- ------------- ------------- ------------- -------------
Net increase (decrease).......... $ 15,406,761 $ 49,669,884 $ 23,176,895 $ (1,044,677) $ 10,168,259 $ 5,139,840
------------- ------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- ------------- -------------
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..... $4,158,273 $7,019,161 $1,504,787 $12,373,140
Investment management fee computation
basis (percentage of daily net assets
per annum)............................. 0.60 of 1% 0.75 of 1% to 1% 1% to
$200,000,000 daily $500,000,000
net assets; 0.625 of daily net
1% between assets;
$200,000,000 and 0.75 of 1%
$500,000,000; and in excess
0.50 of 1% of
in excess of $500,000,000
$500,000,000

Transfer agent fee (included in
shareholder servicing costs)........... $424,958 $857,591 $313,943 $979,562
Fees earned by directors not affiliated
with each Fund's investment advisor,
transfer agent, or Columbia Management
Co..................................... $6,704 $11,980 $1,476 $14,774
Value of investments held at December
31, 1997 by:
Columbia Management Co................ $457,230 $94,101 $62,437 $2,232,560
Columbia Funds Management Company..... $93,330 $44,502 $16,810 $769,764
</TABLE>

<TABLE>
<CAPTION>
COLUMBIA COLUMBIA COLUMBIA COLUMBIA
SMALL CAP REAL ESTATE EQUITY BALANCED DAILY INCOME
FUND, INC. (CSCF) FUND, INC. (CREF) FUND, INC. (CBF) COMPANY (CDIC)
----------------- ------------------ ---------------- ------------------
<S> <C> <C> <C> <C>
Investment management fees incurred..... $547,892 $864,343 $3,826,628 $4,296,685
Investment management fee computation
basis (percentage of daily net assets
per annum)............................. 1% 0.75 of 1% 0.50 of 1% 0.50 of 1% to
$500,000,000 daily
net assets; 0.45
of 1% between
$500,000,000 and
$1,000,000,000;
and 0.40 of 1% in
excess of
$1,000,000,000
Transfer agent fee (included in
shareholder servicing costs)........... $73,575 $131,357 $511,482 $648,992
Fees earned by directors not affiliated
with each Fund's investment advisor,
transfer agent, or Columbia Management
Co..................................... $506 $1,110 $7,503 $8,731
Value of investments held at December
31, 1997 by:
Columbia Management Co................ $139,668 $2,604,160
Columbia Funds Management Company..... $11,827 $24,472 $3,356,624
</TABLE>

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

80
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

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

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

On December 10, 1997, CFMC, CTC and Columbia Management Company (CMC), an
affiliated company, became
- --------------------------------------------------------------------------------
indirect subsidiaries of Fleet Financial Group, Inc. (Fleet), a publicly owned
multi-bank holding company registered under the Bank Holding Company Act of
1956. Prior to that date, certain officers and directors of the Funds were also
officers and directors of CFMC, CTC and CMC. Those individuals did not receive
any compensation or other payment from the Funds. As a result of federal banking
regulations, no officers or directors of the Funds are officers or directors of
CFMC, CTC or CMC following the transaction with Fleet. J. Jerry Inskeep, Jr., an
officer and director of the Funds, is affiliated with Fleet, but receives no
compensation or other payment from the Funds.

As a result of the transaction with Fleet, directors of the Funds were required
to approve new contracts for investment advisory and transfer agent services
between the Funds and CFMC and CTC, respectively. These new contracts are the
same in all material respects to the corresponding previous contracts.
Shareholders of the Funds were required to approve the new investment advisory
contracts. The proxy voting results of the approval by shareholders of the Funds
of those contracts is set forth at the end of this 1997 Annual Report.

81
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
-----------------------------------------------------------------

TO THE SHAREHOLDERS AND BOARD OF DIRECTORS,
Columbia Common Stock Fund, Inc. (CCSF)
Columbia Growth Fund, Inc. (CGF)
Columbia International Stock Fund, Inc. (CISF)
Columbia Small Cap Fund, Inc. (CSCF)
Columbia Special Fund, Inc. (CSF)
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 (the "Funds"), as of December 31, 1997, the related statements of
operations for the year then ended, 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 for the year
ended December 31, 1997 and the financial highlights for each of 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, 1997, by correspondence with the custodians and brokers. 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 enumerated above as of December 31, 1997,
the results of their operations for the year then ended, 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 for the year ended December 31, 1997 and the financial highlights for each
of the periods indicated therein, in conformity with generally accepted
accounting principles.

COOPERS & LYBRAND L.L.P.
Portland, Oregon
February 12, 1998

82
<PAGE>
PROXY VOTING RESULTS
-----------------------------------------------------------------

On December 4, 1997, the Funds held a Special Meeting of Shareholders to
approve new investment advisory contracts with the Advisor. The need to approve
a new investment advisory contract was caused by the change in control of the
Advisor resulting from the acquisition of the Advisor by Fleet Financial Group,
Inc. A new investment advisory contract was approved by each Fund as shown
below:

TOTAL
FUND OUTSTANDING FOR AGAINST ABSTENTION
- ----------------------------------- ------------ --------- ---------- -----------
<S> <C> <C> <C> <C>
Columbia Common Stock Fund......... 33,424,104 23,503,684 92,486 125,914
Columbia Growth Fund............... 34,932,310 18,670,005 323,723 442,534
Columbia International Stock
Fund.............................. 10,136,429 6,162,186 75,846 128,929
Columbia Special Fund.............. 66,728,987 35,764,587 603,044 1,097,275
Columbia Small Cap Fund............ 4,439,465 2,766,574 45,914 34,298
Columbia Real Estate Equity Fund... 7,395,725 4,826,934 70,141 52,743
Columbia Balanced Fund............. 36,136,805 19,709,041 97,202 240,899
Columbia Daily Income Company...... 875,748,841 464,677,559 11,346,679 10,251,952
Columbia U.S. Government Securities
Fund.............................. 4,525,865 3,140,210 15,454 39,456
Columbia Fixed Income Securities
Fund.............................. 27,941,833 15,526,380 226,012 255,217
Columbia Municipal Bond Fund....... 32,247,512 20,286,357 523,472 551,537
Columbia High Yield Fund........... 3,715,453 2,400,164 12,704 54,931
</TABLE>
<PAGE>
SHARES OF THE FUNDS ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, FLEET FINANCIAL GROUP, INC. OR ANY OF ITS AFFILIATES, THE ADVISOR,
OR ANY FLEET BANK. SHARES OF THE FUNDS ARE NOT FEDERALLY INSURED BY, GUARANTEED
BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENTAL AGENCY. INVESTMENT IN THE FUNDS INVOLVES INVESTMENT RISK, INCLUDING
THE POSSIBLE LOSS OF PRINCIPAL.

<PAGE>
Exhibit 17

POWER OF ATTORNEY

KNOW ALL BY THESE PRESENTS, that the undersigned constitutes and appoints
each of J. Jerry Inskeep, Jr., James F. Rippey, John A. Kemp and George L.
Hanseth as the undersigned's true and lawful attorney and agent, with full power
of substitution and resubstitution for and in the name, place and stead of the
undersigned, in any and all capacities, to sign the Registration Statement on
Form N-1A for the registration of shares of each of Columbia Common Stock Fund,
Inc., Columbia Growth Fund, Inc., Columbia International Stock Fund, Inc.,
Columbia Special 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., and Columbia High Yield Fund, Inc., and any and all
amendments (including post-effective amendments) thereto, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto each attorney and agent full
power and authority to do any and all acts and things necessary or advisable to
be done, as fully and to all intents and purposes as the undersigned might or
could do in person, hereby ratifying and confirming all that the attorney and
agent, or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.

Dated: January 27, 1995

JAMES C. GEORGE
-------------------------------
James C. George

<PAGE>

POWER OF ATTORNEY

KNOW ALL BY THESE PRESENTS, that the undersigned constitutes and appoints
each of J. Jerry Inskeep, Jr., James F. Rippey, John A. Kemp and George L.
Hanseth as the undersigned's true and lawful attorney and agent, with full power
of substitution and resubstitution for and in the name, place and stead of the
undersigned, in any and all capacities, to sign the Registration Statement on
Form N-1A for the registration of shares of Columbia International Stock Fund,
Inc., and any and all amendments (including post-effective amendments) thereto,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
each attorney and agent full power and authority to do any and all acts and
things necessary or advisable to be done, as fully and to all intents and
purposes as the undersigned might or could do in person, hereby ratifying and
confirming all that the attorney and agent, or his substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.

Dated: July 21, 1992
RICHARD L. WOOLWORTH
-------------------------------
Richard L. Woolworth
<PAGE>

POWER OF ATTORNEY

KNOW ALL BY THESE PRESENTS, that the undersigned constitutes and appoints
each of J. Jerry Inskeep, Jr., James F. Rippey, John A. Kemp and George L.
Hanseth as the undersigned's true and lawful attorney and agent, with full power
of substitution and resubstitution for and in the name, place and stead of the
undersigned, in any and all capacities, to sign the Registration Statement on
Form N-1A for the registration of shares of Columbia International Stock Fund,
Inc., and any and all amendments (including post-effective amendments) thereto,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
each attorney and agent full power and authority to do any and all acts and
things necessary or advisable to be done, as fully and to all intents and
purposes as the undersigned might or could do in person, hereby ratifying and
confirming all that the attorney and agent, or his substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.

Dated: July 21, 1992
J. JERRY INSKEEP
-------------------------------
J. Jerry Inskeep
<PAGE>

POWER OF ATTORNEY

KNOW ALL BY THESE PRESENTS, that the undersigned constitutes and appoints
each of J. Jerry Inskeep, Jr., James F. Rippey, John A. Kemp and George L.
Hanseth as the undersigned's true and lawful attorney and agent, with full power
of substitution and resubstitution for and in the name, place and stead of the
undersigned, in any and all capacities, to sign the Registration Statement on
Form N-1A for the registration of shares of Columbia International Stock Fund,
Inc., and any and all amendments (including post-effective amendments) thereto,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
each attorney and agent full power and authority to do any and all acts and
things necessary or advisable to be done, as fully and to all intents and
purposes as the undersigned might or could do in person, hereby ratifying and
confirming all that the attorney and agent, or his substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.

Dated: July 21, 1992
THOMAS R. MACKENZIE
-------------------------------
Thomas R. Mackenzie

<PAGE>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
ANNUAL REPORT OF THE COLUMBIA FUNDS DATED DECEMBER 31, 1997, AND THE AUDITED
ANNUAL REPORT OF THE COLUMBIA FUNDS DATED DECEMBER 31, 1996, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000889421
<NAME> COLUMBIA INTERNATIONAL STOCK FUND, INC.

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 115,352,903
<INVESTMENTS-AT-VALUE> 130,260,028
<RECEIVABLES> 329,392
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 43,299,440
<TOTAL-ASSETS> 173,888,860
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 27,608,325
<TOTAL-LIABILITIES> 27,608,325
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 131,408,924
<SHARES-COMMON-STOCK> 10,674,460
<SHARES-COMMON-PRIOR> 9,052,917
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (159,960)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 15,031,571
<NET-ASSETS> 146,280,535
<DIVIDEND-INCOME> 2,051,369
<INTEREST-INCOME> 633,045
<OTHER-INCOME> 0
<EXPENSES-NET> 2,407,428
<NET-INVESTMENT-INCOME> 276,986
<REALIZED-GAINS-CURRENT> 17,061,191
<APPREC-INCREASE-CURRENT> (1,803,214)
<NET-CHANGE-FROM-OPS> 15,534,963
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 16,691,558
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,414,910
<NUMBER-OF-SHARES-REDEEMED> 5,939,634
<SHARES-REINVESTED> 1,146,267
<NET-CHANGE-IN-ASSETS> 20,770,944
<ACCUMULATED-NII-PRIOR> 3,885
<ACCUMULATED-GAINS-PRIOR> (810,464)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,504,787
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,407,428
<AVERAGE-NET-ASSETS> 148,672,424
<PER-SHARE-NAV-BEGIN> 13.86
<PER-SHARE-NII> .03
<PER-SHARE-GAIN-APPREC> 1.56
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 1.75
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.70
<EXPENSE-RATIO> 1.62
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>