Investment Commentary

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Market Environment

The third quarter was a fascinating display in which global equities, commodities and Treasuries all rallied, while the dollar continued its downward trend and credit spreads plummeted. In the United States, equities produced robust gains, buoyed overall by a variety of improving economic data, particularly with respect to housing, manufacturing and employment. These conditions suggested that the recession may be easing and were supported by an uptick in consumer spending (driven in large part by the government’s successful “Cash for Clunkers” automobile incentive program), and better-than-expected corporate earnings reports. The Russell 3000 Index, a proxy for the performance of the entire publicly traded U.S. equity market, gained 16.31%. The S&P 500 Index recorded its seventh consecutive monthly advance in September, registered its biggest back-to-back quarterly rally since 1975 and finished the period a lofty 56% above its March 9 low.

There was abundant evidence that the U.S. economy may have moved closer to turning a corner and establishing itself more definitively on a track to recovery. The Department of Commerce reported that gross domestic product (GDP) contracted by a relatively modest annualized rate of 0.7%, a marked improvement to the steep declines that characterized the previous six months. This gave a strong indication that the economy could return to a positive trajectory — perhaps substantially so. Stabilizing home prices, record-high home affordability, an upturn in the leading economic indicators, low interest rates, quiescent inflation, massive fiscal and monetary policy stimulus programs, a revived corporate profit outlook and perked-up merger and acquisition activity were among the factors that helped provide a constructive backdrop for stock prices. In addition, credit and liquidity spreads continued to improve.

That said, the pace of the equity market’s torrid advance cooled somewhat during September for two apparent reasons. The Federal Reserve’s exit strategy, in terms of it backing away from its ultra-stimulative monetary policy, moved to investors’ front burners, based on more sanguine economic growth prospects. This exit strategy included an exceptionally low federal funds and discount rate, the unprecedented use of its balance sheet and emergency lending facilities. Meanwhile, however, a number of newly released economic data, including home sales, foreclosure activity, capital goods shipments, inventory levels, employment statistics, consumer confidence, vehicle production and manufacturing activity, were softer in nature. Those factors resurrected the twin concerns as to whether the recession was truly in the rearview mirror and if the U.S. economy could indeed transition successfully in the near term from “less bad” to “better” or even “good.”

Commodity prices rose during the quarter. The Reuters/Jefferies CRB Index (a basket of commodities made up of 19 energy, metal and agricultural prices) gained about 4%. Crude oil finished the quarter trading at about $71 a barrel, virtually unchanged from the second quarter. Natural gas, however, surged 26% after a nosedive earlier in the year. The dollar sank by 4%. Treasuries rallied across the entire yield curve; the 10-year note’s yield fell by 21 bp and closed the quarter trading at 3.31%.

Product Performance

For the third quarter of 2009, Columbia Marsico 21st Century Fund outperformed its primary benchmark, the Russell 3000 Index, which posted a 16.31% return.

Sector Performance

Using the Russell 3000 Index as a point of reference, equities demonstrated considerable strength during the quarter. All 10 GICS sectors in the index were well into positive territory, led by financials and materials. At an industry level, performance was also very solid across the board. Every GICS industry group gained at least 9%, and all but one produced double-digit returns. Eleven industries, encompassing multiple aspects of the economy, rose 20% or more.

In terms of equity market characteristics, everything (small/medium/large; growth/value/core) was up substantially during the quarter; it was just a matter of degree. All 26 U.S. equity indices maintained by Russell Investments had positive returns, advancing by a low-to-high range of 13% (Russell Top 200 Growth Index) to 24% (Russell Midcap Value Index). Based on Russell 1000 Index and Russell 2000 Index performance, small-cap companies outperformed their large-cap peers by a wide margin. Across the entire equity market spectrum, value enjoyed a sizeable edge over growth, boosted by the resurgent financials sector. The Russell 3000 Value Index and Russell 3000 Growth Index posted total quarterly returns of 18.59% and 14.12%, respectively. Year to date through September 30, growth continued to lead value by a substantial margin (12.30%), bolstered by consistently strong technology sector performance and by rallies in industrials and consumer discretionary.

Performance Contributors¹

Portfolio Holdings	GICS Industry Group	Average Portfolio Weight%
JPMorgan Chase	Diversified financials	5.90%
Wells Fargo	Banks	5.35%
Crown Castle	Telecommunication services	3.95%
Apple	Technology hardware and equipment	3.39%
Wynn Resorts	Consumer services	1.19%

Performance Detractors¹

Performance data quoted represents past performance, and current performance may be lower or higher. Past performance is no guarantee of future results.

Please read and consider the investment objectives, risks, charges and expenses for any fund carefully before investing. For a prospectus, which contains this and other important information about the fund, contact your Columbia Management representative or financial advisor or go to www.columbiamanagement.com

The Russell 3000 Index is an unmanaged index that tracks the performance of 3,000 of the largest U.S. companies, based on market capitalization.

The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index.

The Russell 1000 Index is an unmanaged index that tracks the performance of 1,000 of the largest U.S. companies based on market capitalization.

The Russell 3000 Value Index measures the performance of those Russell 3000 Index companies with lower price-to-book ratios and lower forecasted growth values. The stocks in this index are also members of either the Russell 1000 Value or the Russell 2000 Value indices.

The Russell 3000 Growth Index is an unmanaged index that measures the performance of those Russell 3000 Index companies with higher price-to-book ratios and higher forecasted growth values. The stocks in this index are also members of either the Russell 1000 Growth or the Russell 2000 Growth indices.

The Standard & Poor’s (S&P) 500 Index is an unmanaged index that tracks the performance of 500 widely held, large-capitalization U.S. stocks.

Reuters/Jefferies CRB Index is designed to provide timely and accurate representation of a long-only, broadly diversified investment in commodities.

The Russell Top 200 Growth Index measures the performance of the especially large-cap segment of the U.S. equity universe represented by stocks in the largest 200 by market cap that exhibit growth characteristics.

The Russell Midcap Value Index measures the performance of the mid-cap value segment of the U.S. equity universe. It includes those Russell Midcap Index companies with lower price-to-book ratios and lower forecasted growth values.

Unlike mutual funds, indices are not managed and do not incur fees or expenses. It is not possible to invest directly in an index.

Since economic and market conditions change frequently, there can be no assurance that the trends described here will continue or that the forecasts will come to pass. The views and opinions expressed are those of the portfolio managers and analysts of the affiliated advisors of Columbia Management Group, are subject to change without notice at any time, may not come to pass and may differ from views expressed by other Columbia Management associates or other divisions of Bank of America. These materials are provided for informational purposes only and should not be used or construed as a recommendation of any security or sector.

There is no assurance that any securities discussed herein will remain in an account’s portfolio at the time you receive this report or that securities sold have not been repurchased. It should not be assumed that any securities transactions or holdings discussed were or will prove to be profitable, or that the investment recommendations or decisions made in the future will be profitable or will equal the investment performance of the securities discussed herein.

Columbia Management Group, LLC (“Columbia Management”) is the investment management division of Bank of America Corporation. Columbia Management entities furnish investment management services and products for institutional and individual investors. Columbia Funds are distributed by Columbia Management Distributors, Inc., member FINRA and SIPC. Columbia Management Distributors, Inc. is part of Columbia Management and an affiliate of Bank of America Corporation.

Columbia Management Advisors, LLC (“CMA”) has retained Marsico Capital Management, LLC (“MCM”) to serve as investment subadviser to the Columbia Marsico 21st Century Fund. As the investment subadviser, MCM makes the investment decisions and manages all or a portion of the fund or strategy. MCM is an investment adviser registered with the Securities and Exchange Commission. MCM is not affiliated with Bank of America.