-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DqhV6LsKZGj+C5p+QTekjduJtZwbQt3lJEHOdU+x2XZVTaj4hZzu1vwKaPbOrVzX U9leOIXu9AnrxbQ0hvNIIQ== 0000950135-07-003423.txt : 20070530 0000950135-07-003423.hdr.sgml : 20070530 20070530120406 ACCESSION NUMBER: 0000950135-07-003423 CONFORMED SUBMISSION TYPE: 497 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20070530 DATE AS OF CHANGE: 20070530 EFFECTIVENESS DATE: 20070530 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COLUMBIA FUNDS SERIES TRUST CENTRAL INDEX KEY: 0001097519 IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 497 SEC ACT: 1933 Act SEC FILE NUMBER: 333-89661 FILM NUMBER: 07886224 BUSINESS ADDRESS: STREET 1: ONE FINANCIAL CENTER CITY: BOSTON STATE: MA ZIP: 02111 BUSINESS PHONE: 6174263750 MAIL ADDRESS: STREET 1: ONE FINANCIAL CENTER CITY: BOSTON STATE: MA ZIP: 02111 FORMER COMPANY: FORMER CONFORMED NAME: NATIONS FUNDS TRUST DATE OF NAME CHANGE: 19991022 0001097519 S000010816 Columbia New York Tax-Exempt Reserves C000030024 Market Class 497 1 b64537a1e497.txt COLUMBIA FUNDS SERIES TRUST COLUMBIA MANAGEMENT. MONEY MARKET FUNDS Prospectus -- Class A Shares August 1, 2006, as supplemented May 30, 2007 Columbia New York Tax-Exempt Reserves THE SECURITIES AND EXCHANGE COMMISSION (SEC) HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. NOT FDIC-INSURED NOT BANK ISSUED NO BANK GUARANTEE MAY LOSE VALUE AN OVERVIEW OF THE FUND - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TERMS USED IN THIS PROSPECTUS IN THIS PROSPECTUS, WE, US AND OUR REFER TO THE COLUMBIA FUNDS FAMILY (COLUMBIA FUNDS OR COLUMBIA FUNDS FAMILY). SOME OTHER IMPORTANT TERMS WE'VE USED MAY BE NEW TO YOU. THESE ARE PRINTED IN ITALICS WHERE THEY FIRST APPEAR IN A SECTION AND ARE DESCRIBED IN TERMS USED IN THIS PROSPECTUS. YOU'LL FIND TERMS USED IN THIS PROSPECTUS ON PAGE 30. YOUR INVESTMENT IN A FUND IS NOT A BANK DEPOSIT OR OTHER OBLIGATION OF, OR ISSUED OR ENDORSED OR GUARANTEED BY, BANK OF AMERICA, N.A. (BANK OF AMERICA) OR ANY OF ITS AFFILIATES. YOUR INVESTMENT IN A FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC) OR ANY OTHER GOVERNMENT AGENCY. AFFILIATES OF BANK OF AMERICA ARE PAID FOR THE SERVICES THEY PROVIDE TO THE FUND AND MAY BE COMPENSATED OR INCENTED IN CONNECTION WITH THE SALE OF THE FUND. YOUR INVESTMENT IS SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL INVESTED. YOUR INVESTMENT MAY LOSE MONEY. - -------------------------------------------------------------------------------- This booklet, which is called a prospectus, tells you about one of the Columbia Money Market Funds. Please read it carefully, because it contains information that's designed to help you make informed investment decisions. This prospectus offers Class A Shares of the Fund. This class of shares is designed primarily for financial institutions and intermediaries for their own accounts, and for certain of their client accounts. Please turn to BUYING, SELLING AND EXCHANGING SHARES for more information about who is eligible to buy this class of shares. ABOUT THE FUND The Fund seeks to provide income while protecting the principal of your original investment by investing in money market instruments. Money market instruments include short-term debt securities that are U.S. government issued or guaranteed or have relatively low risk. Your original investment and your return aren't guaranteed, however, and returns will vary as short-term interest rates change. Over time, the return on money market funds may be lower than the return on other kinds of mutual funds or investments. IS THIS FUND RIGHT FOR YOU? Not every Fund is right for every investor. When you're choosing a Fund to invest in, you should consider things like your investment goals, how much risk you can accept and how long you're planning to hold your investment. The Fund may be suitable for you if: - you're looking for a relatively low risk investment with stability of principal - you have short-term income needs It may not be suitable for you if: - you're looking for higher returns and are prepared to assume a higher level of investment risk - you're more comfortable with bank deposits that are FDIC-insured You'll find a discussion of the Fund's investment objective, principal investment strategies and principal risks in the Fund description that starts on page 4. FOR MORE INFORMATION If you have any questions about the Fund, please call us at 1.800.353.0828 if you're an institutional investor, or 1.800.345.6611 if you're an individual investor. You can also contact your investment professional. You'll find more information about the Fund in the Statement of Additional Information (SAI). The SAI includes more detailed information about the Fund's investments, policies, performance and management, among other things. Please turn to the back cover to find out how you can get a copy. 2 WHAT'S INSIDE - -------------------------------------------------------------------------------- About the Fund (FILE FOLDER GRAPHIC) - -------------------------------------------------------------------------------- COLUMBIA MANAGEMENT ADVISORS, LLC COLUMBIA MANAGEMENT ADVISORS, LLC (THE ADVISER) IS THE INVESTMENT ADVISER TO THE FUND. THE ADVISER IS RESPONSIBLE FOR THE OVERALL MANAGEMENT AND SUPERVISION OF THE INVESTMENT MANAGEMENT OF THE FUND. YOU'LL FIND MORE ABOUT THE ADVISER STARTING ON PAGE 10. - -------------------------------------------------------------------------------- - ------------------------------------------------------------------ COLUMBIA NEW YORK TAX-EXEMPT RESERVES 4 - ------------------------------------------------------------------ OTHER IMPORTANT INFORMATION 8 - ------------------------------------------------------------------ HOW THE FUND IS MANAGED 10
About your investment (DOLLAR SIGN GRAPHIC) INFORMATION FOR INVESTORS Buying, selling and exchanging shares 12 How orders are processed 15 How selling, servicing and administration agents 21 are paid Distributions and taxes 23 Legal matters 25 - ------------------------------------------------------------------ FINANCIAL HIGHLIGHTS 26 - ------------------------------------------------------------------ HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION 28 - ------------------------------------------------------------------ TERMS USED IN THIS PROSPECTUS 30 - ------------------------------------------------------------------ WHERE TO FIND MORE INFORMATION BACK COVER
3 COLUMBIA NEW YORK TAX-EXEMPT RESERVES - -------------------------------------------------------------------------------- ABOUT THE ADVISER THE ADVISER IS THE FUND'S ADVISER. YOU'LL FIND MORE ABOUT THE ADVISER ON PAGE 10. THIS FUND, LIKE ALL MONEY MARKET FUNDS, IS SUBJECT TO CERTAIN INVESTMENT LIMITATIONS. THESE ARE DESCRIBED IN OTHER IMPORTANT INFORMATION. - -------------------------------------------------------------------------------- (TARGET GRAPHIC) INVESTMENT OBJECTIVE The Fund seeks to preserve principal value and maintain a high degree of liquidity while providing current income exempt from New York state individual income tax and federal income taxes. (COMPASS GRAPHIC) PRINCIPAL INVESTMENT STRATEGIES The Fund pursues its objective by generally investing in a portfolio of high quality money market instruments that, at the time of investment, are considered to have remaining maturities of 397 days or less.
Under normal circumstances, the Fund will invest at least 80% of its assets in municipal securities that pay interest that is free from federal income tax and New York state individual income tax. These securities are issued by or on behalf of the State of New York, its political subdivisions, agencies, instrumentalities and authorities, and other qualified issuers. The Fund may invest up to 20% of its assets in municipal securities that finance private projects, called private activity bonds. The Fund may also invest in instruments issued by certain trusts or other special purpose issuers, including pass-through certificates representing participations in, or debt instruments backed by, the securities and other assets owned by these issuers. The Fund may invest in other money market funds, consistent with its investment objective and strategies. The portfolio management team tries to maintain a constant net asset value of $1.00 per share for the Fund. The portfolio management team uses extensive research, including economic, technical and security analysis to select individual investments. - Economic analysis includes evaluating local, national and global economic conditions, as well as interest rate movements. - Technical analysis includes identifying categories of money market instruments that offer the highest yields and assessing the market for potential investments. - Security analysis includes evaluating the credit quality of an instrument, and structural analysis, which includes evaluating the arrangements between the municipality and others involved in the issuance of an instrument. Securities are normally held to maturity, but the portfolio management team may sell a security before it matures to meet cash flow needs, to manage the portfolio's maturity, if the portfolio management team determines that the security is no longer a suitable investment, or for other reasons. 4 - -------------------------------------------------------------------------------- YOU'LL FIND MORE ABOUT OTHER RISKS OF INVESTING IN THE FUND IN OTHER IMPORTANT INFORMATION AND IN THE SAI. - -------------------------------------------------------------------------------- (LINE GRAPH PRINCIPAL RISKS AND OTHER THINGS TO CONSIDER GRAPHIC) Columbia New York Tax-Exempt Reserves has the following risks:
- INVESTMENT STRATEGY RISK -- The Fund is considered to be non-diversified because it invests most of its assets in securities that pay interest that is free from individual income tax in one state. The value of the Fund and the amount of interest it pays could also be affected by the financial conditions of the state, its public authorities and local governments. Although the Fund tries to maintain a share price of $1.00, an investment in the Fund could lose money. AN INVESTMENT IN THE FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY BANK OF AMERICA, THE FDIC OR ANY OTHER GOVERNMENT AGENCY. - INCOME/PRINCIPAL PAYMENT RISK -- The Fund's ability to pay distributions generally depends on the creditworthiness of the issuers of the securities the Fund holds. The Fund may not be able to pay distributions, or could lose money, if the issuer of a security is unable to pay interest or repay principal when it's due. - HOLDING CASH -- The Fund may hold cash while it's waiting to make an investment, as a temporary defensive strategy, or if the portfolio management team believes that attractive tax-exempt investments are not available. Any uninvested cash the Fund holds does not earn income. - TAX CONSIDERATIONS -- The distributions paid by the Fund come generally from interest on New York municipal obligations, which generally are free from federal income tax and New York State and New York City individual income tax, but may be subject to alternative minimum taxes and other state and local taxes. Any portion of a distribution that comes from income from non-exempt sources such as income from other kinds of securities or from realized capital gains generally is subject to federal, state and local taxes. Shares of the Fund would not be a suitable investment for tax-advantaged accounts or tax-exempt investors. We generally rely on opinions of the issuer's bond counsel that interest on a bond will be exempt from applicable taxes; however, such opinions are not binding on tax authorities. Tax authorities are paying increased attention to whether such interest is exempt, and we can't assure you that a tax authority will not successfully challenge the exemption of a bond held by the Fund. - STATE-SPECIFIC RISK -- State-specific risk is the chance that the Fund, because it invests primarily in securities issued by New York State, New York City and New York's other municipalities, is more vulnerable to unfavorable developments in New York than funds that invest in municipal bonds of many different states. Although New York's economy is diverse, with a comparatively large share of the nation's finance, insurance, transportation, communications and services employment and a very small share of the nation's farming and mining activity, adverse conditions affecting any one of these industries could have a negative impact on New York municipal securities. Travel and tourism also constitute an important part of the New York State and City economies. The September 11, 2001 terrorist attack on the World Trade Center in New York City had an adverse effect on all areas of the New York economy. In addition, State costs for employee pensions have increased dramatically, while costs associated with debt services, Medicaid, welfare and other entitlement programs have also risen. However, New York's economy has been growing since September 2003. 5 - -------------------------------------------------------------------------------- MANY THINGS AFFECT A FUND'S PERFORMANCE, INCLUDING MARKET CONDITIONS, THE COMPOSITION OF THE FUND'S HOLDINGS AND FUND EXPENSES. FOR THE FUND'S CURRENT 7-DAY YIELD, PLEASE CALL US AT 1.800.353.0828 IF YOU'RE AN INSTITUTIONAL INVESTOR, OR 1.800.345.6611 IF YOU'RE AN INDIVIDUAL INVESTOR. YOU CAN ALSO CONTACT YOUR INVESTMENT PROFESSIONAL. - -------------------------------------------------------------------------------- (BAR CHART A LOOK AT THE FUND'S PERFORMANCE GRAPHIC) The following bar chart and table show you how the Fund has performed in the past, and can help you understand the risks of investing in the Fund. A FUND'S PAST PERFORMANCE IS NO GUARANTEE OF HOW IT WILL PERFORM IN THE FUTURE.
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR* The bar chart shows you how the performance of the Fund's Class A Shares has varied from year to year.
2003 2004 2005 ---- ---- ---- n/a* 0.61% 1.77% *Year-to-date return as of June 30, 2006: 1.33%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD BEST: 4TH QUARTER 2005: 0.56% WORST: 1ST QUARTER 2004: 0.11%
AVERAGE ANNUAL RETURN AS OF DECEMBER 31, 2005
LIFE OF 1 YEAR FUND* CLASS A SHARES 1.77% 1.07%
*THE INCEPTION DATE OF THE FUND'S CLASS A SHARES IS FEBRUARY 15, 2002. EFFECTIVE MAY 30, 2007, THE FUND'S MARKET CLASS SHARES WERE REDESIGNATED AS CLASS A SHARES. FROM DECEMBER 22, 2002 TO AUGUST 25, 2003 PERFORMANCE COULD NOT BE CALCULATED FOR THIS SHARE CLASS DUE TO NOMINAL ASSET LEVELS. 6 - -------------------------------------------------------------------------------- THERE ARE TWO KINDS OF FEES -- SHAREHOLDER FEES THAT YOU PAY DIRECTLY AND ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S ASSETS. TOTAL NET EXPENSES ARE ACTUAL EXPENSES PAID BY THE FUND AFTER WAIVERS AND/OR REIMBURSEMENTS. OTHER EXPENSES GENERALLY INCLUDE, BUT ARE NOT LIMITED TO, TRANSFER AGENCY, CUSTODY AND LEGAL FEES AS WELL AS COSTS RELATED TO STATE REGISTRATION AND PRINTING OF FUND DOCUMENTS. THE SPECIFIC FEES AND EXPENSES THAT MAKE UP THE FUND'S OTHER EXPENSES WILL VARY FROM TIME-TO-TIME AND MAY INCLUDE FEES OR EXPENSES NOT DESCRIBED HERE. THE FUND WILL INCUR TRANSACTION COSTS THAT ARE IN ADDITION TO THE TOTAL ANNUAL FUND OPERATING EXPENSES DISCLOSED IN THE FEE TABLE. SEE OTHER IMPORTANT INFORMATION -- PORTFOLIO TRANSACTION COSTS FOR MORE INFORMATION ABOUT THESE COSTS. - -------------------------------------------------------------------------------- (PERCENT GRAPHIC) WHAT IT COSTS TO INVEST IN THE FUND This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund. Additional hypothetical fee and expense information relating to Class A Shares can be found in the section HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION.
SHAREHOLDER FEES Class A (Fees paid directly from your investment) Shares Maximum sales charge (load) imposed on purchases N/A Maximum deferred sales charge (load) N/A ANNUAL FUND OPERATING EXPENSES(1) (Expenses that are deducted from the Fund's assets) Management fees(2) 0.25% Distribution (12b-1), shareholder servicing and shareholder administration fees 0.45% Other expenses 0.09% ------- Total annual Fund operating expenses 0.79% Fee waivers and/or reimbursements (0.14)% ------- Total net expenses(3) 0.65% =======
(1)The figures contained in the table are based on amounts incurred during the Fund's most recent fiscal year and have been adjusted, as necessary, to reflect current service provider fees. (2)The Fund pays an investment advisory fee of 0.15% and an administration fee of 0.10%. (3)The Fund's investment adviser and/or some of its other service providers have agreed to waive fees and/or reimburse expenses until July 31, 2007. The figure shown here is after waivers and/or reimbursements. There is no guarantee that this limitation will continue after July 31, 2007. The Fund's investment adviser is entitled to recover from the Fund any fees waived or expenses reimbursed for a three year period following the date of such waiver or reimbursement under this arrangement if such recovery does not cause the Fund's expenses to exceed the expense limitation in effect at the time of recovery. - -------------------------------------------------------------------------------- THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S ACTUAL EXPENSES AND PERFORMANCE. - -------------------------------------------------------------------------------- EXAMPLE This example is intended to help you compare the cost of investing in this Fund with the cost of investing in other mutual funds. This example assumes: - you invest $10,000 in Class A Shares of the Fund for the time periods indicated and then sell all of your shares at the end of those periods - you reinvest all distributions in the Fund - your investment has a 5% return each year - the Fund's operating expenses remain the same as shown in the table above - the waivers and/or reimbursements shown above expire July 31, 2007 and are not reflected in the 3, 5 and 10 year examples Although your actual costs may be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS CLASS A SHARES $66 $238 $425 $965
7 Other important information (LINE GRAPH GRAPHIC) You'll find specific information about the Fund's investment objective, principal investment strategies and risks in the description that starts on page 4. The following are some other risks and information you should consider before you invest: - SPECIAL RULES FOR MONEY MARKET FUNDS -- Money market funds must comply with Rule 2a-7 under the Investment Company Act of 1940 (1940 Act). Rule 2a-7 sets out certain limits on investments, which are designed to help protect investors from risk of loss. These limits apply at the time an investment is made. The Fund, like all money market funds: - may only invest in securities with a remaining maturity of 397 days or less, or that have maturities longer than 397 days but have demand, interest rate reset features or guarantees that are 397 days or less - must maintain an average dollar-weighted maturity of 90 days or less Also, the Fund: - may normally invest no more than 5% of their total assets in securities of the same issuer, other than U.S. government securities; however, they may invest up to 25% of their total assets in first-tier securities of a single issuer for up to three business days - may generally only invest in U.S. dollar denominated instruments that are determined to have minimal credit risk and are first-tier securities - CHANGING INVESTMENT OBJECTIVES AND POLICIES -- The investment objective and certain investment policies of any Fund can be changed without shareholder approval. The 80% Policy of certain Funds may be changed without shareholder approval by giving shareholders at least 60 days' notice. The 80% Policy of certain other Funds and other investment policies of any Fund may be changed only with shareholder approval. - CHANGING TO A FEEDER FUND -- Unlike traditional mutual funds, which invest in individual securities, a "feeder fund" invests all of its assets in another fund, called a "master portfolio." Other feeder funds generally also invest in a master portfolio. The master portfolio invests in individual securities and has the same investment objective, investment strategies and principal risks as the feeder funds. This structure can help reduce a feeder fund's expenses because its assets are combined with those of other feeder funds. If a master portfolio doesn't attract other feeder funds, however, a feeder fund's expenses could be higher than those of a traditional mutual fund. The Fund may become a feeder fund if the Board decides this would be in the best interest of shareholders. We don't require shareholder approval to make the change, but we'll notify you if it happens. If the Fund becomes a feeder fund, it will have the additional risks of investing in a master portfolio. 8 - INVESTING DEFENSIVELY -- The Fund may temporarily hold investments that are not part of its investment objective or its principal investment strategies to try to protect it during a market or economic downturn or because of political or other conditions. The Fund may not achieve its investment objective while it is investing defensively. Any cash the Fund holds for defensive or other reasons may not earn income. - BANK OF AMERICA AND ITS AFFILIATES -- Bank of America and its affiliates currently provide services to the Fund, including investment advisory, distribution, administration, shareholder servicing, transfer agency and brokerage services, and are paid for providing these services. Bank of America and its affiliates also may, at times, provide other services and be compensated for them, including transfer agency, interfund lending and securities lending services, or make loans to the Fund. Finally, Bank of America or its affiliates may serve as counterparties in transactions with Columbia Funds where permitted by law or regulation, and may receive compensation in that capacity. - PORTFOLIO HOLDINGS DISCLOSURE -- A description of the Columbia Funds' policies and procedures with respect to the disclosure of Fund portfolio securities is available in the SAI. Each Fund's complete portfolio holdings as of a month-end are disclosed approximately five business days after such month-end on the Columbia Funds' website, www.columbiafunds.com and/or www.columbiamanagement.com, approximately five business days after such month-end. Once posted, the portfolio holdings information will remain available on the website until at least the date on which such Fund files a Form N-CSR or Form N-Q for the period that includes the date as of which the information is current. - HOUSEHOLDING -- In order to reduce shareholder expenses we may, if prior consent has been provided, mail only one copy of the Fund's prospectus and each annual and semi-annual report to those addresses shared by two or more accounts. If you wish to receive individual copies of these documents, please call us at 1.800.345.6611 or if your shares are held through a financial institution please contact them directly. We will begin sending your individual copies with the next scheduled mailing. - PORTFOLIO TRANSACTION COSTS -- The Fund may incur significant transaction costs that are in addition to the total annual Fund operating expenses disclosed in the fee tables. These transaction costs are made up of all the costs that are associated with trading securities for the Fund's portfolio and include, but are not limited to, brokerage commissions and market spreads, as well as potential changes to the price of a security due to the Fund's efforts to purchase or sell it. While certain elements of transaction costs are readily identifiable and quantifiable, other elements that can make up a significant amount of the Fund's transaction costs are not. 9 How the Fund is managed (PEOPLE GRAPHIC) - -------------------------------------------------------------------------------- COLUMBIA MANAGEMENT ADVISORS, LLC 100 FEDERAL STREET BOSTON, MA 02110 COLUMBIA MANAGEMENT GROUP (COLUMBIA MANAGEMENT) IS THE PRIMARY INVESTMENT MANAGEMENT DIVISION OF BANK OF AMERICA CORPORATION. THE ADVISER (COLUMBIA MANAGEMENT ADVISORS, LLC) AND COLUMBIA WANGER ASSET MANAGEMENT, L.P. ARE COLUMBIA MANAGEMENT ENTITIES THAT FURNISH INVESTMENT MANAGEMENT SERVICES AND ADVISE INSTITUTIONAL AND MUTUAL FUND PORTFOLIOS. - -------------------------------------------------------------------------------- INVESTMENT ADVISER The Adviser is the investment adviser to over 100 mutual fund portfolios in the Columbia Funds Family, including the Money Market Fund described in this prospectus. The Adviser is a registered investment adviser and a wholly-owned subsidiary of Bank of America. Its management expertise covers all major domestic asset classes, including equity and fixed income securities, and money market instruments. The Adviser acts as investment manager for individuals, corporations, private investment companies and financial institutions. Columbia Management currently has approximately $312 billion in assets under management, which consists of assets under the discretionary management of both the Adviser and Columbia Wanger Asset Management, L.P. Columbia Funds pays the Adviser an annual fee for its investment advisory services. The fee is calculated as a percentage of the average daily net assets of the Fund and is paid monthly. A discussion regarding the basis for the Board of Trustees approving the investment advisory agreement with the Adviser is available in the Fund's annual report to shareholders for the fiscal year ended March 31. The Adviser has agreed to waive fees and/or reimburse expenses for the Fund until July 31, 2007. You'll find a discussion of the waiver and/or reimbursement in the Fund description. There is no assurance that the Adviser will continue to waive and/or reimburse any fees and/or expenses after this date. The following chart shows the maximum advisory fees the Adviser can receive, along with the actual advisory fees the Adviser and/or an affiliate received during the Fund's last fiscal year, after waivers and/or reimbursements: ANNUAL INVESTMENT ADVISORY FEE, AS A % OF AVERAGE DAILY NET ASSETS
MAXIMUM ACTUAL FEE ADVISORY PAID LAST FEE FISCAL YEAR COLUMBIA NEW YORK TAX-EXEMPT RESERVES 0.15% 0.15%
10 INVESTMENT SUB-ADVISER Columbia Funds and the Adviser may engage one or more investment sub-advisers for the Fund to make day-to-day investment decisions for the Fund. The Adviser retains ultimate responsibility (subject to Board oversight) for overseeing the sub-advisers and evaluates the Fund's needs and available sub-advisers' skills and abilities on an ongoing basis. Based on its evaluations, the Adviser may at times recommend to the Board that the Fund: - change, add or terminate one or more sub-advisers; - continue to retain a sub-adviser even though the sub-adviser's ownership or corporate structure has changed; or - materially change a sub-advisory agreement with a sub-adviser. Applicable law requires the Fund to obtain shareholder approval in order to act on most of these types of recommendations, even if the Board has approved the proposed action and believes that the action is in shareholders' best interests. The Adviser and the Fund have applied for relief from the SEC to permit the Fund to act on many of the Adviser's recommendations with approval only by the Board and not by Fund shareholders. The Adviser or the Fund would inform the Fund's shareholders of any actions taken in reliance on this relief. Until the Adviser and the Fund obtain the relief, the Fund will continue to submit these matters to shareholders for their approval to the extent required by applicable law. A discussion regarding the basis for the Board of Trustees approving the investment sub-advisory agreement with each sub-adviser is available in the Fund's annual report to shareholders for the fiscal year ended March 31. OTHER SERVICE PROVIDERS - -------------------------------------------------------------------------------- COLUMBIA MANAGEMENT DISTRIBUTORS, INC. ONE FINANCIAL CENTER BOSTON, MA 02111-2621 - -------------------------------------------------------------------------------- The Fund is distributed by Columbia Management Distributors, Inc. (Distributor), a registered broker/dealer and an indirect, wholly-owned subsidiary of Bank of America Corporation. The Distributor may pay distribution (12b-1) and shareholder servicing fees and/or other compensation to companies for selling shares and providing services to investors. - -------------------------------------------------------------------------------- COLUMBIA MANAGEMENT ADVISORS, LLC 100 FEDERAL STREET BOSTON, MA 02110 - -------------------------------------------------------------------------------- Columbia Management Advisors, LLC is the administrator of the Fund (Administrator), and is responsible for overseeing the administrative operations of the Fund. The Fund pays the Administrator a fee of 0.10% for its services, plus certain out-of-pocket expenses. The fee is calculated as an annual percentage of the average daily net assets of the Fund, and is paid monthly. - -------------------------------------------------------------------------------- COLUMBIA MANAGEMENT SERVICES, INC. P.O. BOX 8081 BOSTON, MA 02266-8081 - -------------------------------------------------------------------------------- Columbia Management Services, Inc. is the transfer agent for the Fund's shares (Transfer Agent), and is an indirect, wholly-owned subsidiary of Bank of America Corporation. Its responsibilities include processing purchases, sales and exchanges, calculating and paying distributions, keeping shareholder records, preparing account statements and providing customer service. 11 ABOUT YOUR INVESTMENT - -------------------------------------------------------------------------------- Buying, selling and exchanging shares (BUYING, SELLING AND EXCHANGING SHARES GRAPHIC) - -------------------------------------------------------------------------------- WHEN YOU SELL SHARES OF A MUTUAL FUND, THE FUND IS EFFECTIVELY "BUYING" THEM BACK FROM YOU. THIS IS CALLED A REDEMPTION. - -------------------------------------------------------------------------------- You can invest in the Fund through your selling agent or directly through Columbia Funds. You don't pay any sales charges when you buy, sell or exchange Class A shares of the Fund. We encourage you to consult with an investment professional who can open an account for you with a selling agent and help you with your investment decisions. Once you have an account, you can buy, sell and exchange shares by contacting your investment professional or selling agent. They will look after any paperwork that's needed to complete a transaction and send your order to us. You'll find more information about buying, selling and exchanging Class A Shares on the pages that follow. You should also ask your financial institution or intermediary about its limits, fees and policies for buying, selling and exchanging shares, which may be different from those described here, and about its related services and programs. The Fund also offers other classes of shares, with different features and expense levels, which you may be eligible to buy. If you have questions about buying, selling or exchanging, or you need help placing an order, please call us at 1.800.353.0828 if you're an institutional investor, or 1.800.345.6611 if you're an individual investor. You can also contact your investment professional. Federal law requires the Fund to obtain and record specific personal information to verify your identity when you open an account. This information may include your name, address, date of birth (for individuals), and taxpayer or other government issued identification. If you fail to provide the requested information, the Fund may need to delay the date of your purchase or may be unable to open your account which may result in a return of your investment monies. In addition, if the Fund is unable to verify your identity after your account is open, the Fund reserves the right to close your account or take other steps as deemed reasonable. The Fund shall not be held liable for any loss resulting from any purchase delay, application rejection, or account closure due to a failure to provide proper identifying information. Frequent purchases and sales of Fund shares can harm shareholders in various ways, including reducing the returns to long-term shareholders by increasing costs (such as spreads paid to dealers who trade money market instruments with the Fund) and disrupting portfolio management strategies. However, money market funds are designed to offer investors a liquid cash option that they may purchase and sell as often as they wish. Accordingly, Columbia Funds' Board has not adopted policies and procedures designed to discourage excessive or short-term trading of Fund shares and the Fund accommodates frequent trading. Except as expressly described in this prospectus (such as minimum purchase amounts), the Fund has no limits on purchase or exchange transactions. The Fund reserves the right, but have no obligation, to reject any purchase or exchange transaction at any time. In addition, Columbia Funds reserves the right to impose or modify restrictions on purchases, exchanges or trading of Fund shares at any time. 12
Ways to buy, sell or exchange How much you can buy, sell or exchange Other things to know ------------------- --------------------------------------- --------------------------------------- BUYING SHARES In a lump sum MINIMUM INITIAL INVESTMENT: There is no limit to the amount you can - $2,500 for regular accounts invest in Class A shares. - $1,000 for traditional and Roth IRAs, Coverdell Education Savings Accounts and retirement plan accounts - no minimum for omnibus, wrap and health savings accounts MINIMUM ADDITIONAL INVESTMENT: - $50 for all accounts Using our minimum initial investment: You can buy shares any day of the month Systematic - $50 on a monthly or quarterly schedule. Investment Plan minimum additional investment: - $50 By wire You may purchase shares of the Fund by wiring money from your bank account to your Fund account. To wire funds to your account, call 1.800.422.3737 for wiring instructions. By electronic funds You may purchase shares of the Fund by transfer electronically transferring money from your bank account to your Fund account by calling 1.800.422.3737. An electronic funds transfer may take up to two business days to settle and be considered in "good form." You must set up this feature prior to your request. SELLING SHARES In a lump sum - shares sold by check via the The Fund will generally send proceeds telephone or through the internet are from the sale to you as soon as limited to an aggregate of $100,000 practicable following the determination in a 30-day period of the Fund's net asset value - restrictions may apply to withdrawals applicable to your order. However, if from retirement plan accounts you purchased your shares by check, the Fund may delay sending the proceeds from the sale of your shares for up to 10 days after your purchase to protect against checks that are returned. Using our free - minimum $250 per check You can write checks for free. You can checkwriting only use checks to make partial service withdrawals from the Fund. You can't use a check to make a full withdrawal from the Fund. Using our Automatic - no minimum per withdrawal Your account balance must be at least Withdrawal Plan - $5,000 requirement waived for certain $5,000 to set up the plan. You can make fee based accounts withdrawals any day of the month on a monthly, quarterly or semi-annual basis. We'll send your money by check or deposit it directly to your bank account. By wire You may sell shares of the Fund and request that the proceeds be wired to your bank account. You must set up this feature prior to your request.
13
Ways to buy, sell or exchange How much you can buy, sell or exchange Other things to know ------------------- --------------------------------------- --------------------------------------- By electronic funds You may sell shares of the Fund and transfer request that the proceeds be electronically transferred to your bank account. Proceeds may take up to two business days to be received by your bank. You must set up this feature prior to your request. EXCHANGING In a lump sum - new account minimums apply to You can generally exchange Class A SHARES exchanges shares of a Money Market Fund for Class A shares of any other Fund distributed by the Distributor. Some exceptions apply. A sales charge may apply when exchanging from a Money Market Fund to Funds with front-end sales charges. Using our Automatic - minimum $100 per exchange You can make exchanges any day of the Exchange Feature month. By dividend You may automatically invest dividends diversification distributed by the Fund into the same class of shares (and, in some cases, certain other classes) of the Fund at no additional sales charge. Additional sales charges may apply if you are exchanging from a Money Market Fund. To reinvest your dividends, call 1.800.345.6611.
14 - -------------------------------------------------------------------------------- A BUSINESS DAY IS ANY DAY THAT THE FEDERAL RESERVE BANK OF NEW YORK AND THE NEW YORK STOCK EXCHANGE (NYSE) ARE OPEN. THE FUND RESERVES THE RIGHT TO CLOSE EARLY ON BUSINESS DAYS PRECEDING OR FOLLOWING NATIONAL HOLIDAYS, IF THE PRIMARY GOVERNMENT SECURITIES DEALERS HAVE CLOSED EARLY AND/OR IF THE BOND MARKET ASSOCIATION RECOMMENDS THAT THE SECURITIES MARKETS CLOSE EARLY. IN ADDITION TO WEEKENDS, EITHER THE FEDERAL RESERVE BANK OF NEW YORK OR THE NYSE IS CLOSED ON THE FOLLOWING NATIONAL HOLIDAYS: NEW YEAR'S DAY, MARTIN LUTHER KING, JR. DAY, PRESIDENTS' DAY, GOOD FRIDAY, MEMORIAL DAY, INDEPENDENCE DAY, LABOR DAY, COLUMBUS DAY, VETERANS DAY, THANKSGIVING DAY AND CHRISTMAS DAY. - -------------------------------------------------------------------------------- HOW SHARES ARE PRICED All transactions are based on the price of the Fund's shares -- or its net asset value per share. We calculate net asset value per share at 11:30 a.m. Eastern time each business day for each share class of Columbia New York Tax-Exempt Reserves (unless the Fund closes early). First, we calculate the net asset value for each class of the Fund by determining the value of the Fund's assets in the class and then subtracting its liabilities. Next, we divide this amount by the number of shares that investors are holding in the class. Although we try to maintain a net asset value per share of $1.00 for the Fund, we can't guarantee that we will be able to do so. VALUING SECURITIES IN THE FUND The value of the Fund's assets is based on the total market value of all of the securities it holds. We use the amortized cost method, which approximates market value, to value the assets in the Fund. HOW ORDERS ARE PROCESSED Orders to buy, sell or exchange shares are processed on business days. Orders to buy, sell or exchange shares may be delivered to the Transfer Agent by phone, in writing, or through the internet. For more information on account and trading restrictions and special sign-up procedures for internet transactions, please call us at 1.800.353.0828 for institutional investors or 1.800.345.6611 for individual investors. The Transfer Agent has procedures in place to authenticate electronic instructions. You will be asked to accept the terms of an online agreement(s) and utilize a password for internet services. Orders received in good form by the Fund, Distributor, Transfer Agent or their agents by the following times on a business day (unless the Fund closes early) will be processed as follows: - If your order for Columbia New York Tax-Exempt Reserves is received in good form by the Transfer Agent by 11:30 a.m. Eastern time, you will receive that day's net asset value per share (and in the case of purchases you'll receive that day's dividends). Investors are encouraged to place orders to sell as early in the day as possible. The business day that applies to an order is also called the trade date. We may refuse any order to buy or exchange shares. If this happens, we'll return any money we've received. TELEPHONE ORDERS You can place orders to buy, sell or exchange by telephone depending on how you complete the telephone authorization section of our account application and send it to us. Here's how telephone orders work: - If you sign up for telephone orders after you open your account, you must have your signature Medallion Guaranteed. - Telephone orders may not be as secure as written orders. We will not be liable for following telephone instructions that we reasonably believe are genuine. - We'll take reasonable steps to confirm that telephone instructions are genuine. For example, we require proof of your identification before we will act on instructions received by telephone and may record telephone conversations. - Telephone orders may be difficult to complete during periods of significant economic or market change. 15 - -------------------------------------------------------------------------------- THE NET ASSET VALUE PER SHARE IS THE PRICE OF A SHARE CALCULATED BY THE FUND EVERY BUSINESS DAY. - -------------------------------------------------------------------------------- (BUYING SHARES BUYING SHARES GRAPHIC)
Here are some general rules for buying shares: - You buy Class A Shares at net asset value per share. - For purchases via Fedwire, we must receive payment by the close of the Federal Reserve wire transfer system (typically 6:00 p.m. Eastern time) on the business day the Fund, Distributor, Transfer Agent or their agents receive the order (unless the Fund closes early). If we receive payment after this time, we'll cancel the order. We'll return any payment received for orders that we cancel. We can change this time under certain circumstances, for example, when there's more wiring activity than normal. - If we do not receive payment in cleared funds before this time, you will be liable for the costs incurred as a result of late or non- payment. In general, these will be overdraft charges calculated at the current federal fund rate. We have the right to redeem all or part of your holding of shares in any Fund in order to meet these costs. - Selling agents are responsible for sending orders to us and for ensuring that we receive your money on time. - Shares purchased are recorded on the books of the Fund. We don't issue certificates. - You may purchase shares of the Fund by electronically transferring money from your bank account to your Fund account by calling 1.800.422.3737. An electronic funds transfer may take up to two business days to settle and be considered in "good form." You must set up this feature prior to your request. MINIMUM INITIAL INVESTMENT The minimum initial investment for Class A shares is $2,500 for regular accounts and $1,000 for individual retirement plans (including traditional IRAs, Roth IRAs and Coverdell Education Savings Accounts) and non-omnibus group retirement plans. For investors establishing a Systematic Investment Plan, the minimum initial investment is $50. There is no minimum initial investment for omnibus accounts, wrap accounts or health savings accounts. For group retirement plans, the minimum initial investment and minimum additional investment are determined based on the plan's investment rather than that of its individual participants. MINIMUM ADDITIONAL INVESTMENT The minimum investment amount for additional purchases of Class A shares is $50. SYSTEMATIC INVESTMENT PLAN You can make regular purchases of $50 or more using automatic transfers from your bank account to the Funds you choose. You can contact your investment professional or us to set up the plan. Here's how the plan works: - You can buy shares any day of the month on a monthly or quarterly basis. - Some exceptions may apply to employees of Bank of America and its affiliates. For details, please contact your investment professional. 16 - -------------------------------------------------------------------------------- "GOOD FORM" MEANS THAT THE MONEY USED TO PURCHASE YOUR SHARES IS FULLY COLLECTED. WHEN SELLING SHARES BY LETTER OF INSTRUCTION, "GOOD FORM" ALSO MEANS (I) YOUR LETTER HAS COMPLETE INSTRUCTIONS, THE PROPER SIGNATURES AND MEDALLION SIGNATURE GUARANTEES IF NECESSARY AND (II) ANY OTHER REQUIRED DOCUMENTS ARE ATTACHED. SIGNATURES MUST BE GUARANTEED BY EITHER A BANK, A MEMBER FIRM OF A NATIONAL STOCK EXCHANGE OR ANOTHER ELIGIBLE GUARANTOR THAT PARTICIPATES IN THE MEDALLION SIGNATURE GUARANTEE PROGRAM FOR REDEMPTIONS OVER $100,000, ALTERNATE PAYEE OR MAILING INSTRUCTIONS. FOR ADDITIONAL DOCUMENTS REQUIRED FOR SALES BY CORPORATIONS, AGENTS, FIDUCIARIES, SURVIVING JOINT OWNERS AND OTHER LEGAL ENTITIES PLEASE CALL 1.800.353.0828 (INSTITUTIONAL INVESTORS) OR 1.800.345.6611 (INDIVIDUAL INVESTORS). NO INTEREST WILL BE PAID ON UNCASHED REDEMPTION CHECKS. FOR MORE INFORMATION ABOUT TELEPHONE ORDERS, SEE HOW ORDERS ARE PROCESSED. - -------------------------------------------------------------------------------- (SELLING SHARES SELLING SHARES GRAPHIC)
Here are some general rules for selling shares: - For redemptions via Fedwire, we normally send the sale proceeds by Fedwire as soon as practicable following the determination time applicable to your order. For more information please refer to HOW ORDERS ARE PROCESSED or contact the Transfer Agent. - You can sell up to an aggregate of $100,000 of shares by check via the telephone or through the internet to the address of record or via ACH to your bank in a 30-day period if you qualify for telephone orders. - If you paid for your shares by check, we'll hold the sale proceeds when you sell those shares for at least 10 days after the trade date of the purchase. - If you hold any shares in certificate form, you will not be able to sell those shares until you return the certificates to the Transfer Agent. - You may sell shares of the Fund and request that the proceeds be electronically transferred to your bank account. Proceeds may take up to two business days to be received by your bank. You must set up this feature prior to your request. - Under certain circumstances allowed under the 1940 Act, we can pay you in securities or other property when you sell your shares (except shares of Columbia Treasury Reserves). - We can delay payment of the sale proceeds of Columbia New York Tax-Exempt Reserves for up to seven days. - Other restrictions may apply to retirement plan accounts. For more information about these restrictions, please contact your retirement plan administrator. - If you're selling your shares through a selling agent, we'll normally send the sale proceeds by Fedwire within three business days after the Distributor, Transfer Agent or their agents receive your order in good form. Your selling agent is responsible for depositing the sale proceeds to your account on time. - If you're selling your shares directly through us, we'll normally send the sale proceeds by mail or electronically transfer them to your bank account within three business days after the Fund receives your order in good form. - ACCOUNTS BELOW $250 -- We will automatically sell your shares if the value of your account (treating each account of the Fund you own separately from any other account of the Fund you may own) falls below $250. If your shares are sold, the Transfer Agent will remit the balance of your account to you. Any otherwise applicable CDSC will not be imposed on such automatic sale of your shares. The Transfer Agent will send you written notification at least 30 days in advance of any automatic sale, which will provide details on how you may avoid such automatic sale. Generally, you may avoid such automatic sale by raising your account balance, consolidating your accounts through an exchange of shares of 17 another Columbia Fund in which you hold shares, or setting up a Systematic Investment Plan. Please contact the Transfer Agent, review our website at www.columbiafunds.com, call 1.800.345.6611 or contact your investment professional for more information. The automatic sale of shares of accounts valued at less than $250 is expected to take place in the second quarter of each calendar year. We may also sell your shares if a financial institution or intermediary tells us to sell your shares pursuant to arrangements made with you, and under certain other circumstances allowed under the 1940 Act. - MINIMUM BALANCE FEE -- Beginning in the second quarter of 2007, if the value of your account (treating each account of the Fund you own separately from any other account of the Fund you may own) falls below the minimum initial investment requirement applicable to you, your account will be subject to a $20 annual fee. This fee will be assessed through the automatic sale of shares in your account. Any otherwise applicable CDSC will not be imposed on such automatic sale of your shares. The Transfer Agent will reduce the expenses paid by the Fund by any amounts it collects from the assessment of this fee. For Funds that do not have transfer agency expenses against which to offset the amount collected through assessment of this fee, the fee will be paid directly to the Fund. The Transfer Agent will send you written notification at least 30 days in advance of assessing any fee, which will provide details on how you can add money to your account in order to avoid the imposition of such fee. Generally, you may avoid the imposition of such fee by raising your account balance, consolidating your accounts through an exchange of shares of another Fund in which you hold shares, or setting up a Systematic Investment Plan. Please contact the Transfer Agent, review our website at www.columbiafunds.com, call 1.800.345.6611 or contact your investment professional for more information. We reserve the right to change the minimum investment requirements for any Fund. We also reserve the right to lower the account size trigger point for the minimum balance fee in any year or for any class of shares when we believe it is appropriate to do so in light of declines in the market value of Fund shares or sales loads applicable to a particular class of shares, or for other reasons. - EXCEPTIONS TO THE POLICY -- The automatic sale of shares of accounts under $250 and the annual minimum balance fee described above do not apply to shareholders holding their shares through broker-dealer networked accounts; wrap fee and omnibus accounts; accounts with active Systematic Investment Plans or payroll deduction plans; accounts that were created by the automatic conversion of Class B shares to Class A shares; and certain qualified retirement plans. The automatic sale of shares of accounts under $250 does not apply to individual retirement plans. 18 CHECKWRITING SERVICE You can withdraw money from the Fund using our free checkwriting service. You can contact your investment professional or us to set up the service. Here's how the service works: - Each check you write must be for a minimum of $250. - You can only use checks to make partial withdrawals. You can't use a check to make a full withdrawal of the shares you hold in the Fund. - Shares you sell by writing a check are eligible to receive distributions up to the day our custodian receives the check for payment. - We can change or cancel the service by giving you 30 days notice in writing. AUTOMATIC WITHDRAWAL PLAN The Automatic Withdrawal Plan lets you withdraw funds any day of the month on a monthly, quarterly or semi-annual basis. You can contact your investment professional or us to set up the plan. Here's how the plan works: - Your account balance must be at least $5,000 to set up the plan. Certain fee based accounts are not subject to the $5,000 requirement. - If you set up the plan after you've opened your account, your signature must be Medallion Guaranteed. - We'll send you a check or deposit the money directly to your bank account. - You can cancel the plan by giving your selling agent or us 30 days notice in writing. It's important to remember that if you withdraw more than your investment in the Fund is earning, you'll eventually use up your original investment. - -------------------------------------------------------------------------------- YOU SHOULD MAKE SURE YOU UNDERSTAND THE INVESTMENT OBJECTIVE AND POLICIES OF THE FUND YOU'RE EXCHANGING INTO. PLEASE READ ITS PROSPECTUS CAREFULLY. - -------------------------------------------------------------------------------- (EXCHANGING SHARES EXCHANGING SHARES GRAPHIC)
You can generally sell shares of the Fund to buy shares of another Fund distributed by the Distributor. This is called an exchange. You might want to do this if your investment goals or tolerance for risk change. Here's how exchanges work: - You can generally exchange Class A Shares of the Fund for Class A Shares of any other Fund distributed by the Distributor. Some exceptions apply. - The rules for buying shares of a Fund, including any minimum investment requirements, apply to exchanges into that Fund. - You may only make exchanges into a Fund that is legally sold in your state of residence. - You generally may only make an exchange into a Fund that is accepting investments. - We may limit the number of exchanges you can make within a specified period of time. 19 - We may change or cancel your right to make an exchange by giving the amount of notice required by regulatory authorities (generally 60 days for a material change or cancellation). - You cannot exchange any shares you own in certificate form until the Transfer Agent has received the certificate and deposited the shares to your account. You may exchange your shares for shares of the same share class (and in some cases, certain other classes) of another Fund distributed by the Distributor, at net asset value. If your shares are subject to a CDSC, you will not be charged a CDSC upon the exchange. However, when you sell the shares acquired through the exchange, the shares sold may be subject to a CDSC, depending upon when you originally purchased the shares you are exchanging. For purposes of computing the CDSC, the length of time you have owned your shares will be computed from the date of your original purchase and the applicable CDSC will be the CDSC of the original Fund. Unless your account is part of a tax-deferred retirement plan, an exchange is a taxable event, and you may realize a gain or loss for tax purposes. The Fund may terminate your exchange privilege if the Advisor determines that your exchange activity is likely to adversely impact its ability to manage the Fund. Please have your account and taxpayer identification numbers available when calling. For example, if you exchange into Class A shares of the Money Market Funds by exchanging Class A shares that were bought without an initial sales charge, in certain circumstances a CDSC may apply. Class A shares bought without an initial sales charge in accounts aggregating $1 million to $25 million at the time of purchase are subject to a 1% CDSC if the shares are sold within 12 months of the time of purchase. Subsequent Class A share purchases that bring your account value above $1 million (but less than $25 million) are subject to a CDSC if redeemed within 12 months of the date of purchase. The 12 months begins on the first day of the month in which the purchase was made. The CDSC does not apply to retirement plans purchasing through a fee based program. AUTOMATIC EXCHANGE FEATURE The Automatic Exchange Feature lets you exchange $100 or more of Class A shares any day of the month. You can contact your investment professional or us to set up the plan. Here's how automatic exchanges work: - Send your request to the Transfer Agent in writing or call 1.800.345.6611. - If you set up your plan to exchange more than $100,000 you must have your signature Medallion Guaranteed. - You can choose to have us transfer your money on any day of the month. - The rules for making exchanges apply to automatic exchanges. 20 How selling, servicing and administration agents are paid (PERCENT GRAPHIC) - -------------------------------------------------------------------------------- THE FINANCIAL INSTITUTION OR INTERMEDIARY THAT BUYS SHARES FOR YOU IS ALSO SOMETIMES REFERRED TO AS A SELLING AGENT. THE DISTRIBUTION FEE IS OFTEN REFERRED TO AS A "12B-1" FEE BECAUSE IT'S PAID THROUGH A PLAN APPROVED UNDER RULE 12B-1 OF THE 1940 ACT. THE SELLING AGENT MAY CHARGE OTHER FEES FOR SERVICES PROVIDED TO YOUR ACCOUNT. - -------------------------------------------------------------------------------- Selling and servicing agents usually receive compensation based on your investment in the Fund. The kind and amount of the compensation depends on the share class in which you invest. Selling agents typically pay a portion of the compensation they receive to their investment professionals. DISTRIBUTION (12B-1), SHAREHOLDER SERVICING AND ADMINISTRATION FEES The Distributor, Adviser and selling and servicing agents are compensated for selling shares and providing services to investors under distribution, shareholder servicing and shareholder administration plans. The Distributor may receive a maximum annual distribution (12b-1) fee of 0.10% of the average daily net assets of Class A shares of the Fund, some or all of which may be paid to selling agents. Servicing agents may receive a maximum annual shareholder servicing fee of up to 0.25% of the average daily net assets of Class A shares of the Fund. The Adviser, its affiliates and/or other financial institutions and intermediaries may receive a maximum annual shareholder administration fee of up to 0.10% of the average daily net assets of the Fund. Fees are calculated daily and paid to the Distributor periodically. Because these fees are paid out of the Fund's assets on an ongoing basis, over time they will increase the cost of your investment, and may cost you more than any sales charges you may pay. The Fund pays these fees to the Distributor and/or to eligible selling and servicing agents and financial institutions, including the Adviser or other affiliates, for as long as the plans continue. We may reduce or discontinue payments at any time. OTHER COMPENSATION -- FINANCIAL INTERMEDIARY PAYMENTS In addition, the Distributor or its affiliates may make payments, from their own resources, to certain financial intermediaries, including other Bank of America affiliates, for marketing support services. For purposes of this section the term "financial intermediary" includes any broker, dealer, bank, bank trust department, registered investment advisor, financial planner, retirement plan or other third party administrator and any other institution having a selling, services or any similar agreement with the Distributor or one of its affiliates. These payments are generally based upon one or more of the following factors: average net assets of the mutual funds distributed by the Distributor attributable to that financial intermediary, gross sales of the mutual funds distributed by the Distributor attributable to that financial intermediary, reimbursement of ticket charges (fees that a financial intermediary firm charges its representatives for effecting transactions in fund shares) or a negotiated lump sum payment. While the financial arrangements may vary for each financial intermediary, the support payments to any one financial intermediary are generally expected to be between 0.02% and 0.10% (between 0.03% and 0.12% in the case of the Columbia Money Market Funds) on an annual basis for payments based on average net assets of the Funds attributable to the financial intermediary, and between 0.10% and 0.25% on an annual basis for firms receiving a payment based on gross sales of the Funds (other than the Columbia Money Market Funds) attributable to the financial intermediary. The Distributor or its affiliates may make payments in materially larger amounts or on a basis materially 21 different from those described above when dealing with other affiliates of Bank of America. Such increased payments to the other Bank of America affiliate may enable the other Bank of America affiliate to offset credits that it may provide to its customers in order to avoid having such customers pay fees to multiple Bank of America entities in connection with the customer's investment in the Fund. Payments may also be made to certain financial intermediaries, including other Bank of America affiliates, that provide investor services to retirement plans and other investment programs to compensate financial intermediaries for services they provide to such programs, including, but not limited to, sub- accounting, sub-transfer agency, similar shareholder or participant recordkeeping, shareholder or participant reporting, or shareholder or participant transaction processing. These payments for investor servicing support vary by financial intermediary but generally are not expected, with certain limited exceptions, to exceed 0.30% of the total Fund assets in the program on an annual basis. The Board has authorized the Fund to reimburse the Transfer Agent for amounts paid to financial intermediaries that maintain assets in omnibus accounts, subject to an annual cap of 0.11% of net assets maintained in such accounts. The amounts in excess of that reimbursed by the Fund will be borne by the Distributor or its affiliates. The Distributor or its affiliates may make other payments or allow promotional incentives to financial intermediaries to the extent permitted by SEC and NASD rules and by other applicable laws and regulations. Amounts paid by the Distributor or its affiliates are paid out of the Distributor's or its affiliates' own revenue and do not increase the amount paid by you or your Fund. You can find further details about the payments made by the Distributor or its affiliates and the services provided by financial intermediaries as well as a list of the financial intermediaries to which the Distributor or its affiliates has agreed to make marketing support payments in the SAI, which can be obtained at www.columbiafunds.com or by calling 1.800.345.6611. Your financial intermediary may charge you fees or commissions in addition to those disclosed in this prospectus. You can ask your financial intermediary for information about any payments it receives from the Distributor and its affiliates and any services it provides, as well as fees and/or commissions it charges. In addition, depending on the financial arrangement in place at any particular time, a financial intermediary and its financial consultants also may have a financial incentive for recommending a particular Fund or share class over others. You should consult with your financial advisor and review carefully any disclosure by the financial intermediary as to compensation received by your financial advisor. 22 Distributions and taxes ($-HAT GRAPHIC) - -------------------------------------------------------------------------------- THE POWER OF COMPOUNDING REINVESTING YOUR DISTRIBUTIONS BUYS YOU MORE SHARES OF A FUND -- WHICH LETS YOU TAKE ADVANTAGE OF THE POTENTIAL FOR COMPOUND GROWTH. PUTTING THE MONEY YOU EARN BACK INTO YOUR INVESTMENT MEANS IT, IN TURN, MAY EARN EVEN MORE MONEY. OVER TIME, THE POWER OF COMPOUNDING HAS THE POTENTIAL TO SIGNIFICANTLY INCREASE THE VALUE OF YOUR INVESTMENT. THERE IS NO ASSURANCE, HOWEVER, THAT YOU'LL EARN MORE MONEY IF YOU REINVEST YOUR DISTRIBUTIONS. - -------------------------------------------------------------------------------- ABOUT DISTRIBUTIONS A mutual fund can make money two ways: - It can earn income. Examples are interest paid on bonds and dividends paid on common stocks. - A fund can also have capital gain if the value of its investments increases. If a fund sells an investment at a gain, the gain is realized. If a fund continues to hold the investment, the gain is unrealized. A mutual fund is not subject to federal income tax as long as it distributes all of its net investment income and net realized capital gain, if any, to its shareholders. The Fund intends to pay out a sufficient amount of its income and capital gain to its shareholders so the Fund won't have to pay any federal income tax. When the Fund makes this kind of a payment, it's split among all shares and is called a distribution. Although the Fund does not expect to realize any capital gain, any capital gain realized by the Fund will be distributed at least once a year. The Fund declares distributions of net investment income each business day, and pays them on the first business day of each month. Normally, the Fund will declare and pay distributions of net investment income as indicated above. The Fund may, however, declare and pay distributions of net investment income more frequently. Any distribution you receive is paid based on the number of shares you hold on the record date, which is usually the day the distribution is declared (daily distribution Funds) or the day before the distribution is declared (all other Funds). Shares are eligible to receive net investment income distributions from the settlement date (daily distribution Funds) or trade date (all other Funds), and realized net capital gain from the trade date of the purchase up to and including the day before the shares are sold. Different share classes of the Fund usually pay different net investment income distribution amounts because each class has different expenses. We'll automatically reinvest distributions in additional shares of the same Fund unless you tell us you want to receive your distributions in cash. You can do this by writing to us at the address on the back cover, or by calling us at 1.800.353.0828 if you're an institutional investor, or 1.800.345.6611 if you're an individual investor. Distributions of $10 or less will automatically be reinvested in additional Fund shares only. If you elect to receive distributions by check and the check is returned as undeliverable, all subsequent distributions will be reinvested in additional shares of the same Fund. 23 - -------------------------------------------------------------------------------- THIS INFORMATION IS A SUMMARY OF HOW FEDERAL INCOME TAXES MAY AFFECT YOUR INVESTMENT IN THE FUND. IT DOES NOT APPLY TO FOREIGN OR TAX-EXEMPT INVESTORS OR THOSE HOLDING FUND SHARES THROUGH A TAX-ADVANTAGED ACCOUNT, SUCH AS A 401(K) PLAN OR IRA. THIS INFORMATION IS NOT INTENDED AS A SUBSTITUTE FOR CAREFUL TAX PLANNING. YOU SHOULD CONSULT WITH YOUR TAX ADVISER ABOUT YOUR SITUATION, INCLUDING ANY FOREIGN, STATE AND LOCAL TAXES THAT MAY APPLY. FOR MORE INFORMATION ABOUT TAXES, PLEASE SEE THE SAI. - -------------------------------------------------------------------------------- HOW TAXES AFFECT YOUR INVESTMENT Distributions of the Fund's ordinary income and any net realized short-term capital gain, if any, generally are taxable to you as ordinary income. Although the Fund does not expect to realize significant capital gain, any distributions of net realized long-term capital gain, if any, generally are taxable to you as long-term capital gain. In general, corporate shareholders will not be able to deduct any distributions when determining their taxable income. Fund distributions also will not qualify for reductions in federal income taxation of dividends payable to individuals from certain domestic and foreign corporations. In general, all distributions are taxable to you when paid, whether they are paid in cash or automatically reinvested in additional shares of the Fund. Following the end of each year, we'll send you a notice that tells you how much you've received in distributions during the year and their federal tax status. State and local taxes may also apply to distributions. COLUMBIA NEW YORK TAX-EXEMPT RESERVES In general, you will not be subject to federal income tax on distributions from the Fund of its net tax-exempt interest income. Distributions from the Fund of its net interest income from New York municipal securities will not be subject to New York State and New York City individual income tax. Distributions from the Fund, however, may be subject to state, local and other taxes, including corporate taxes. A portion of the distributions from the Fund may also be subject to alternative minimum taxes. U.S. GOVERNMENT OBLIGATIONS If you invest in U.S. government obligations directly, interest on those obligations is exempt from state and local individual income taxes. Distributions you receive that come from interest the Fund earns from U.S. government obligations may not be exempt from these taxes. Please consult your tax adviser about your specific tax situation. WITHHOLDING TAX We're required by federal law to withhold tax on any distributions and redemption proceeds paid to you (including amounts paid in securities and exchanges) if: - you haven't given us a correct Taxpayer Identification Number (TIN), usually your social security or employer identification number, and haven't certified that the TIN is correct and withholding doesn't apply - the Internal Revenue Service (IRS) has notified us that the TIN listed on your account is incorrect according to its records - the IRS informs us that you are otherwise subject to backup withholding The IRS may also impose penalties against you if you don't give us a correct TIN. Amounts we withhold are applied as a credit against your federal income tax liability. You may receive a refund from the IRS if the withholding tax results in an overpayment of taxes. TAXATION OF REDEMPTIONS AND EXCHANGES As long as the Fund continually maintains a $1.00 net asset value per share, you ordinarily will not recognize a taxable gain or loss on the redemption or exchange of your shares of the Fund. 24 Legal matters On February 9, 2005, the Adviser and Distributor entered into an Assurance of Discontinuance with the New York Attorney General (the "NYAG Settlement") and consented to the entry of a cease-and-desist order by the SEC (the "SEC Order"). A copy of the NYAG Settlement is available as part of the Bank of America Corporation Form 8-K filing on February 10, 2005 and a copy of the SEC Order is available on the SEC's website. Under the terms of the NYAG Settlement and SEC Order, the Adviser and Distributor have agreed, among other things, to pay disgorgement and civil money penalties, to undertake various remedial measures to ensure compliance with the federal securities laws related to certain mutual fund trading practices, to retain an independent consultant to review their applicable supervisory, compliance, control and other policies and procedures and to reduce management fees for five years. The Adviser and Distributor are currently in the process of implementing the various terms of the NYAG Settlement and SEC Order. In connection with the events that resulted in the NYAG Settlement and SEC Order, various parties filed suits against Columbia Funds Series Trust (formerly known as Nations Funds Trust), its Board of Trustees, Bank of America Corporation and certain of its affiliates, including the Adviser and Distributor (collectively "BAC"). On February 20, 2004, the Judicial Panel on Multidistrict Litigation transferred these cases and other cases against several other mutual fund companies based on similar allegations to the United States District Court in Maryland for consolidated or coordinated pretrial proceedings (the "MDL"). Subsequently, additional related cases were transferred to the MDL. On September 29, 2004, the plaintiffs in the MDL filed amended and consolidated complaints. One of these amended complaints is a putative class action that includes claims under the federal securities laws and state common law, and that names Columbia Funds Series Trust, its Trustees, BAC and others as defendants. Another of the amended complaints is a derivative action purportedly on behalf of the Columbia Funds Series Trust against BAC and others that asserts claims under the federal securities laws and state common law. Columbia Funds Series Trust is a nominal defendant in this action. On December 15, 2005, BAC and others entered into a Stipulation of Settlement of these actions. Among other contingencies, the settlement is contingent upon a minimum threshold amount being received by the Columbia Funds shareholders and/or the Columbia Funds mutual funds from the previously established regulatory settlement fund. The settlement is subject to court approval. If the settlement is approved, BAC would pay settlement administration costs and fees to plaintiffs' counsel as approved by the court. The stipulation has not yet been presented to the court for preliminary approval. Separately, several putative class actions have been filed against Columbia Funds Series Trust, Bank of America Corporation and certain of its affiliates, and others, in various federal courts relating to the conversion of common trust funds and the investment of assets held in fiduciary accounts in the Funds. (George Siepel, et al. v. Bank of America, Columbia Funds Series Trust, et al., instituted December 28, 2005, U.S. District Court, E.D. Mo.; Luleff v. Bank of America, Columbia Funds Series Trust, William Carmichael, et al., instituted February 22, 2006, U.S. District Court, S.D. NY.) The suits allege various claims including state law claims for breach of fiduciary duty, breach of contract, unjust enrichment and violations of federal securities laws and seek damages and other remedies. 25 Financial highlights (DOLLAR SIGN GRAPHIC) The financial highlights table is designed to help you understand how the Fund has performed for the past five years or, if shorter, the period of operations. Certain information reflects financial results for a single Fund share. The total investment return line indicates how much an investment in the Fund would have earned, assuming all dividends and distributions had been reinvested. This information has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm whose report, along with the Fund's financial statements, is included in the Fund's annual report. The independent registered public accounting firm's report and the Fund's financial statements are incorporated by reference into the SAI. Please see the back cover of this prospectus to find out how you can get a copy of the SAI. 26 COLUMBIA NEW YORK FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD TAX-EXEMPT RESERVES
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED CLASS A SHARES 03/31/06 03/31/05 03/31/04*** 12/22/02** Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income/(loss) 0.0206 0.0080 0.0025 0.0068 LESS DISTRIBUTIONS: Dividends from net investment income (0.0206) (0.0080) (0.0025) (0.0068) Net asset value, end of period $1.00 $1.00 $1.00 $1.00 TOTAL RETURN+++ 2.07% 0.80% 0.25%++ 0.68%++ RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $29,726 $11,469 $12,970 $-- Ratio of operating expenses to average net assets 0.65%(a) 0.65% 0.65%+ 0.58%+ Ratio of net investment income/(loss) to average net assets 2.07% 0.82% 0.48%+ 0.82%+ Ratio of operating expenses to average net assets without waivers and/or expense reimbursements 0.79%(a) 0.98% 0.78%+ 1.23%+ PERIOD ENDED CLASS A SHARES 03/31/02* Net asset value, beginning of period $1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income/(loss) 0.0008 LESS DISTRIBUTIONS: Dividends from net investment income (0.0008) Net asset value, end of period $1.00 TOTAL RETURN+++ 0.08% ++ RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $1 Ratio of operating expenses to average net assets 0.65%+ Ratio of net investment income/(loss) to average net assets 0.58%+ Ratio of operating expenses to average net assets without waivers and/or expense reimbursements 4.96%+
* Columbia New York Tax-Exempt Reserves Market Class Shares commenced operations on February 15, 2002. Effective May 30, 2007, the Fund's Market Class Shares were redesignated as Class A Shares. ** Columbia New York Tax-Exempt Reserves Market Class Shares were fully redeemed on December 22, 2002. *** Columbia New York Tax-Exempt Reserves Market Class re-commenced operations on August 25, 2003. + Annualized. ++ Not annualized +++ Total return represents aggregate total return for the period indicated, assumes reinvestment of all distributions, and does not reflect the deduction of any applicable sales charges. (a) The effect of the custodial expense offset on the operating expense ratio, with and without waivers and/or expense reimbursements was less than 0.01%. 27 Hypothetical investment and expense information The following supplemental hypothetical investment information provides additional information about the effect of the expenses of the Fund, including investment advisory fees and other Fund costs, on the Fund's returns over a 10-year period. The chart shows the estimated expenses that would be charged on a hypothetical investment of $10,000 in each class of the Fund assuming a 5% return each year, the cumulative return after fees and expenses, and the hypothetical year-end balance after fees and expenses. The chart also assumes that all dividends and distributions are reinvested. The annual expense ratios used for the Fund, which is the same as those stated in the Annual Fund Operating Expenses table, is presented in the charts, and is net of any contractual fee waivers or expense reimbursements for the period of the contractual commitment. Your actual costs may be higher or lower. The table shown below reflects the maximum initial sales charge, if any, but does not reflect any contingent deferred sales charges, if any, which may be payable on redemption. If contingent deferred sales charges were reflected, the "Hypothetical Year-End Balance After Fees and Expenses" amounts shown would be lower and the "Annual Fees and Expenses" amounts shown would be higher. 28 COLUMBIA NEW YORK TAX-EXEMPT RESERVES -- CLASS A SHARES
MAXIMUM SALES CHARGE INITIAL HYPOTHETICAL INVESTMENT AMOUNT ASSUMED RATE OF RETURN 0.00% $10,000.00 5% CUMULATIVE RETURN CUMULATIVE RETURN HYPOTHETICAL YEAR- ANNUAL BEFORE FEES & ANNUAL EXPENSE AFTER FEES & END BALANCE AFTER FEES & YEAR EXPENSES RATIO EXPENSES FEES & EXPENSES EXPENSES 1 5.00% 0.65% 4.35% $10,435.00 $66.41 2 10.25% 0.79% 8.74% $10,874.31 $84.17 3 15.76% 0.79% 13.32% $11,332.12 $87.72 4 21.55% 0.79% 18.09% $11,809.20 $91.41 5 27.63% 0.79% 23.06% $12,306.37 $95.26 6 34.01% 0.79% 28.24% $12,824.47 $99.27 7 40.71% 0.79% 33.64% $13,364.38 $103.45 8 47.75% 0.79% 39.27% $13,927.02 $107.80 9 55.13% 0.79% 45.13% $14,513.35 $112.34 10 62.89% 0.79% 51.24% $15,124.36 $117.07 TOTAL GAIN AFTER FEES & EXPENSES $5,124.36 TOTAL ANNUAL FEES & EXPENSES PAID $964.89
29 - -------------------------------------------------------------------------------- THIS GLOSSARY INCLUDES EXPLANATIONS OF IMPORTANT TERMS THAT MAY BE USED IN THIS PROSPECTUS. SOME OF THE TERMS EXPLAINED MAY APPLY TO COLUMBIA FUNDS NOT INCLUDED IN THIS PROSPECTUS. - -------------------------------------------------------------------------------- Terms used in this prospectus (BOOK GRAPHIC) 80% POLICY -- Rule 35d-1 under the 1940 Act (the "Names Rule"), requires certain Funds to adopt an investment policy requiring that, under normal circumstances, at least 80% of the Fund's assets will be invested in the type of investment suggested by its name. In most cases, the Names Rule gives affected Funds the option to either (i) declare the 80% Policy a fundamental policy, which means it can only be changed by shareholder approval, or (ii) commit to provide notice to shareholders before changing the 80% Policy. In some cases, the Names Rule requires affected Funds to declare their 80% Policy a fundamental policy. The SAI identifies each Fund that has adopted an 80% Policy as a fundamental policy as well as each Fund that has committed to provide notice to shareholders before changing its 80% Policy. AMORTIZED COST METHOD -- under Rule 2a-7 under the 1940 Act, the method of calculating an investment company's net asset value whereby portfolio securities are valued at the Fund's acquisition cost as adjusted for amortization of premium or accretion of discount rather than at their value based on current market factors. AVERAGE DOLLAR-WEIGHTED MATURITY -- the average length of time until the debt securities held by a Fund reach maturity. In general, the longer the average dollar-weighted maturity, the more a Fund's share price will fluctuate in response to changes in interest rates. BANK OBLIGATION -- a money market instrument issued by a bank, including certificates of deposit, time deposits and bankers' acceptances. CAPITAL GAIN OR LOSS -- the difference between the purchase price of a security and its selling price. You realize a capital gain when you sell a security for more than you paid for it. You realize a capital loss when you sell a security for less than you paid for it. COMMERCIAL PAPER -- a short-term debt security issued by banks, corporations, municipalities and other borrowers. DEBT SECURITY -- when you invest in a debt security, you are typically lending your money to a governmental body or company (the issuer) to help fund their operations or major projects. The issuer pays interest at a specified rate on a specified date or dates, and repays the principal when the security matures. Short-term debt securities include money market instruments such as U.S. Treasury obligations and commercial paper. Long-term debt securities include fixed income securities such as government and corporate bonds, and mortgage- backed and asset-backed securities. FIRST-TIER SECURITY -- under Rule 2a-7 under the 1940 Act, a debt security that is an eligible investment for money market funds and has received a rating in the highest short-term rating category from two, or in some circumstances one, nationally recognized statistical rating organization (NRSRO) or if unrated, is determined by the fund's portfolio management team to be of comparable quality, or is a money market fund issued by a registered investment company, or is a government security. FIXED INCOME SECURITY -- an intermediate to long-term debt security that matures in more than one year. GUARANTEED INVESTMENT CONTRACT -- an investment instrument issued by a rated insurance company in return for a payment by an investor. 30 HIGH QUALITY -- includes municipal securities that are rated in the top two highest short-term debt categories according to an NRSRO such as Standard & Poor's Corporation or Moody's Investors Service, Inc. The portfolio management team may consider an unrated municipal security if it is determined to be of comparable quality, based upon guidelines approved by the Fund's Board. Please see the SAI for more information about credit ratings. INSTRUMENTALITY -- an instrumentality of the U.S. government is a government agency organized under federal charter with government supervision. LIQUIDITY -- a measurement of how easily a security can be bought or sold at a price that is close to its market value. MONEY MARKET INSTRUMENT -- a high quality, short-term debt security that pays interest based on a fixed, variable or floating rate and is considered to mature in 13 months or less. Money market instruments include, but are not limited to, U.S. Treasury obligations, U.S. government obligations, certificates of deposit and time deposits, bankers' acceptances, commercial paper, corporate bonds, extendible commercial notes, asset backed securities, funding agreements, repurchase agreements and certain municipal securities. MUNICIPAL SECURITY (OBLIGATION) -- a debt security issued by state or local governments or governmental authorities to pay for public projects and services. "General obligations" are typically backed by the issuer's full taxing and revenue-raising powers. "Revenue securities" depend on the income earned by a specific project or authority, like road or bridge tolls, user fees for water or revenues from a utility. Interest income from these securities is exempt from federal income taxes and is generally exempt from state taxes if you live in the state that issued the security. If you live in the municipality that issued the security, interest income may also be exempt from local taxes. NON-DIVERSIFIED -- a fund that holds securities of fewer issuers or kinds of issuers than other kinds of funds. Non-diversified funds tend to have greater price swings than more diversified funds because events affecting one or more of its securities may have a disproportionately large effect on the fund. PARTICIPATION -- a pass-through certificate representing a share in a pool of debt obligations or other instruments. PASS-THROUGH CERTIFICATE -- securitized mortgages or other debt securities with interest and principal paid by a servicing intermediary shortly after interest payments are received from borrowers. PRIVATE ACTIVITY BOND -- a municipal security that is used to finance private projects or other projects that aren't qualified for tax purposes. Interest on private activity bonds is generally taxable, unless it is specifically exempted, or may be treated as a tax preference item for federal alternative minimum tax purposes. REPURCHASE AGREEMENT -- a short-term (often overnight) investment arrangement. The investor agrees to buy certain securities from the borrower and the borrower promises to buy them back at a specified date and price. The difference between the purchase price paid by the investor and the repurchase price paid by the borrower represents the investor's return. REVERSE REPURCHASE AGREEMENT -- a repurchase agreement in which an investor sells a security to another party, like a bank or dealer, in return for cash, and agrees to buy the security back at a specified date and price. 31 SECOND-TIER SECURITY -- under Rule 2a-7 under the 1940 Act, a debt security that is an eligible investment for money market funds, but is not a first-tier security. SETTLEMENT DATE -- the date on which an order is settled either by payment or delivery of securities. SPECIAL PURPOSE ISSUER -- an entity organized solely to issue asset-backed securities on a pool of assets it owns. TRADE DATE -- the effective date of a purchase, sale or exchange transaction, or other instructions sent to us. The trade date is determined by the day and time we receive the order or instructions in a form that's acceptable to us. U.S. GOVERNMENT OBLIGATIONS -- a wide range of debt securities that include U.S. Treasury obligations, securities issued or guaranteed by various agencies of the U.S. government, or by various instrumentalities which have been established or sponsored by the U.S. government. Securities issued or guaranteed by federal agencies and U.S. government sponsored instrumentalities may or may not be backed by the full faith and credit of the U.S. government. U.S. TREASURY OBLIGATION -- a debt security issued or guaranteed by the U.S. Treasury. U.S. Treasury obligations are backed by the "full faith and credit" of the U.S. government. 32 (THIS PAGE INTENTIONALLY LEFT BLANK) (THIS PAGE INTENTIONALLY LEFT BLANK) (THIS PAGE INTENTIONALLY LEFT BLANK) COLUMBIA MANAGEMENT. WHERE TO FIND MORE INFORMATION You'll find more information about the Fund in the following documents: ANNUAL AND SEMI-ANNUAL REPORTS The annual and semi-annual reports contain information about Fund investments and performance, the financial statements and the independent registered public accounting firm's reports. The annual report also includes a discussion about the market conditions and investment strategies that had a significant effect on the Fund's performance during the period covered. STATEMENT OF ADDITIONAL INFORMATION The SAI contains additional information about the Fund and its policies. The SAI is legally part of this prospectus (it's incorporated by reference). A copy has been filed with the SEC. You can obtain a free copy of these documents, request other information about the Fund and make shareholder inquiries by contacting Columbia Funds: By telephone: 1.800.353.0828 (Institutional Investors) 1.800.345.6611 (Individual Investors) By mail: COLUMBIA FUNDS C/O COLUMBIA FUNDS SERVICES P.O. BOX 8081 BOSTON, MA 02266-8081 On the Internet: WWW.COLUMBIAFUNDS.COM Information about the Fund can be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-202-942-8090. The reports and other information about the Fund is available on the EDGAR Database on the SEC's Internet site at http://www.sec.gov, and copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing the SEC's Public Reference Section, Washington, D.C. 20549-0102. SEC file number: 811-09645 Columbia Funds Series Trust INT-36/131107-0507 -----END PRIVACY-ENHANCED MESSAGE-----