Columbia Mutual Funds Investors File Case

In late 2003, a number of putative securities class action complaints were filed against Columbia Management Advisors, Inc. and related Columbia entities in various United States District Courts. Those actions alleged market-timing and late trading in the Columbia family of mutual funds (as well as fund families acquired by Columbia during the Class Period) in violation of the federal securities laws. Market-timing is an investment technique involving short-term, “in and out” trading of mutual fund shares, designed to exploit inefficiencies in the way mutual fund companies price their shares. Late trading is an investment practice whereby investors are permitted to place orders to buy, sell or exchange mutual fund shares using the day’s net asset value (“NAV”) after the 4:00 p.m. eastern time cut-off, capitalizing on post-4:00 p.m. information.

On March 16, 2004, the first derivative action resulting from the same alleged market-timing and late trading practices was filed in the United States District Court for the District of Massachusetts. In the weeks that followed, numerous additional suits were filed throughout the country against the Columbia Defendants as well as various other mutual fund families identified as being involved in regulatory market-timing and late trading investigations. On February 20, 2004, the Judicial Panel on Multi-District Litigation issued an order, followed on March 3, 2004 and April 5, 2004, with the Judicial Panel’s Conditional Transfer Orders Nos. 1 & 2, respectively, centralizing all of these actions in one multi-district docket in the United States District Court for the District of Maryland under the caption MDL-1586 - In re Mutual Funds Investment Litigation (the “MDL Actions”).

On September 29, 2004, consolidated amended complaints were filed in the Actions. Claims were asserted in the Actions against persons and entities affiliated with the Columbia Mutual Funds, including the investment advisor to the Columbia Mutual Funds and its affiliates, as well as unaffiliated entities, including alleged market-timers and other parties that were alleged to have participated in or facilitated the market timers’ trading of the Columbia Mutual Funds. Defendants moved to dismiss the consolidated amended complaints on February 25, 2005.

After certain claims were sustained by the District Court, the plaintiffs and the Columbia Defendants engaged in informal discovery related to merits and damages, and entered into settlement discussions soon thereafter that led to this settlement. At the same time, the plaintiffs in the MDL Actions entered into settlement discussions with the Security Brokerage Defendants and the Bear Stearns Defendants on a coordinated basis that led to MDL-wide settlements with these defendants. Plaintiffs had agreed to settle their claims with the Canary Defendants before the consolidated amended complaints were filed because they believed that information provided by Canary (in return for the agreed settlement) would be useful in developing their cases.