SEC Division of Investment Management staff letter: Columbia Funds Series Trust - Columbia Money Market Reserves

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

DIVISION OF
INVESTMENT MANAGEMENT
March 2, 2009
Stephen A. Keen
Reed Smith LLP
435 Sixth Avenue
Pittsburgh, PA 15219-1886
Re: Columbia Funds Series Trust - Columbia Money Market Reserves (File No. 811-09645) Dear Mr. Keen:
Your letter ofDecember 11, 2008 requests our assurance that we would not recommend that the Commission take any enforcement action under Sections 17(a)(1)1, 17(di and 12(d)(3)3 ofthe Investment Company Act of 1940 (the "Act"), and the rules thereunder, if Columbia Money Market Reserves (the "Fund"), a series ofColumbia Funds Series Trust (the "Trust), and NB Funding Company LLC ("Affiliate"), enter into the arrangement summarized below and more fully described in the letter. The Affiliate is a subsidiary ofBank ofAmerica Corporation (the "Parent"), which is the parent ofColumbia Management Advisors, LLC, the Fund's investment adviser (the "Adviser"). Therefore, the Affiliate is an affiliated person ofthe Fund as defined in Section 2(a)(3) ofthe Act. The Fund is an open-end management investment company that is registered with the Commission under the Act. The Fund is a money market fund that seeks to maintain a stable net
Section 17(a)(1) generally makes it unlawful for any affiliated person of a registered investment
company, or an affiliated person of such person, acting as principal, to knowingly sell any security or other property to the registered investment company. 2 Section 17(d) generally makes it unlawful for any affiliated person of a registered investment company, or any affiliated person of such a person, acting as principal, to effect any transaction in which the registered investment company is a joint or joint and several participant with such person in contravention ofrules and regulations adopted by the Commission.
Section 12(d)(3) generally makes it unlawful for any registered investment company to acquire
any security issued by, or any interest in tire business of, any broker-dealer, any person engaged in the business ofunderwriting, or an investment adviser of an investment company, or an investment adviser registered under the Investment Advisers Act of 1940.

asset value per share of$1.00 and uses the amortized cost method ofvaluation in valuing its portfolio securities as pennitted by rule 2a-7 under the Act. In November 2007 and October 2008, the Trust and the Affiliate entered into and amended, respectively, a capital support agreement (as amended, the "Original Agreement") for the benefit ofthe Fund, a fonn ofwhich was provided to the staff The Original Agreement obligates the Affiliate to make a cash contribution (up to a specified maximum amount) to the Fund sufficient to restore the Fund's net asset value (''NAV'') per share to the minimum permissible NAV specified in the Original Agreement if certain triggering events occurred. The Original Agreement was intended to limit the potential losses that the Fund may incur upon the ultimate disposition of a Covered Security. The capital support agreement was amended and restated in October 2008 (a) to reflect that the support under the agreement was limited to the Fund, (b) to modify the definition of a Covered Security, and (c) to increase the contributions payable to the Fund and the maximum contribution amount specified in the Original Agreement. You state that the Fund holds in its portfolio securities that are subject to the events specified in Rule 2a-7(c)(6)(ii)(A)-(D) and may hold securities that become subject to such events in the future (any security held by the Fund that is or becomes subject to any such event is referred to as a "Covered Security.") You state further that the Fund's Board ofTrustees (the "Board,"), none ofwhom are interested persons as that term is defined in Section 2(a)(19) ofthe Act, have determined with respect to each Covered Security currently held by the Fund that, due to unfavorable general market conditions, it would not be in the interests ofthe Fund to sell the Covered Securities at this time. The Original Agreement was entered into and amended and restated after the staffofthe Division ofInvestment Management infonned the Trust and the Affiliate on November 14,2007 and October 3, 2008, respectively, that it would not recommend enforcement action to the Commission ifthe arrangement was effected.4 The Trust and the Affiliate now seek to amend the Original Agreement (the "Amended Agreement"). The principal changes you propose to make to the Original Agreement are to extend the tennination date from December 13,2008 to November 6,2009 (''New Termination Date") and to include an additional Contribution Event, as defined in the Amended Agreement. You represent the following with respect to the Amended Agreement and the extension:
(i) The process ofrestructuring the Covered Securities is unlikely to be completed before the scheduled tennination date ofthe Original Agreement on December 13, 2008; (ii) The Adviser has infonned the Board ofits beliefthat greater value could be realized on the Covered Securities ifthe Original Agreement was extended until . See Columbia Funds Series Trust- Columbia Money Market Reserves, SEC StaffNo-Action Letter (Oct. 22, 2008). 2 4

the restructuring was completed and the government's efforts to improve market conditions took full effect; (iii) The Amended Agreement includes as a Contribution Event the Fund receiving Replacement Securities (as defined in the Amended Agreement) having a value less than the then-current amortized cost value ofthe Covered Securities in connection with any restructuring ofthe issuer ofthe Covered Securities occurring on or after April 1, 2009, unless the Board determines that no option other than receipt ofsuch Replacement Securities would be in the best interests ofthe Fund, in light ofthe Board's fiduciary duties to the Fund under applicable law; (iv) The Amended Agreement permits the Board to cause the Fund to sell the Covered Securities and obligate the Affiliate to make a cash contribution to the Fund ifthe Board determines that the maximum contribution amount under the Amended Agreement would not be sufficient to support the Fund's minimum permissible NAV;and (v) The Board, none ofwhom are "interested persons" as that term is defined in
section 2(a)(19) ofthe Act, has approved the Amended Agreement and has
determined that it would be in the best interests ofthe Fund and its shareholders to continue to hold the Covered Securities and has approved the New Termination Date. On the basis ofthe facts and representations above, we will not recommend enforcement action under Sections 12(d)(3), 17(a)(1) or 17(d) ofthe Act ifthe Trust and the Affiliate enter into the Amended Agreement.5 You should note that any different facts or representations might require a different conclusion. Moreover, this response expresses the Division's position on enforcement action only and does not express any legal conclusions on the issues presented.6 Very truly yours, Sarah ~~~f G. ten Siethoff Senior Counsel This letter confIrms the position of the staffthat was provided orally by Fran Pollack-Matz to Stephen A. Keen on December 11, 2008. The Division ofInvestment Management generally permits third parties to rely on no-action or interpretive letters to the extent that the third party's facts and circumstances are substantially similar to those described in the underlying request for a no-action or interpretive letter. Investment Company Act Release No. 22587 (Mar. 27, 1997), n.20. In light ofthe very fact￾specific nature ofthe Trust's request, howl:?ver, the position expressed in this letter applies only to the entities seeking relief, and no other entity may rely on this position. Other funds facing similar legal issues should contact the staffofthe Division about the availability of no-action relief. 3 6