497 1 supp.txt BOSTON FUNDS SEC SUPPLEMENT COLUMBIA FUNDS TRUST I Columbia High Yield Opportunity Fund Columbia Strategic Income Fund Columbia Tax-Managed Growth Fund Columbia Tax-Managed Growth Fund II Columbia Tax-Managed Value Fund COLUMBIA FUNDS TRUST II Columbia Newport Greater China Fund Columbia Money Market Fund COLUMBIA FUNDS TRUST III Columbia Mid Cap Value Fund Columbia Liberty Fund Columbia Global Equity Fund Columbia Contrarian Income Fund Columbia Intermediate Government Income Fund Columbia Quality Plus Bond Fund Columbia Corporate Bond Fund Columbia Federal Securities Fund COLUMBIA FUNDS TRUST IV Columbia Tax-Exempt Fund Columbia Tax-Exempt Insured Fund Columbia Utilities Fund Columbia Municipal Money Market Fund COLUMBIA FUNDS TRUST V Columbia California Tax-Exempt Fund Columbia Connecticut Tax-Exempt Fund Columbia Massachusetts Tax-Exempt Fund Columbia New York Tax-Exempt Fund Columbia Large Company Index Fund Columbia U.S. Treasury Index Fund Columbia Small Company Index Fund Columbia Intermediate Tax-Exempt Bond Fund Columbia Massachusetts Intermediate Municipal Bond Fund Columbia Connecticut Intermediate Municipal Bond Fund Columbia New Jersey Intermediate Municipal Bond Fund Columbia New York Intermediate Municipal Bond Fund Columbia Rhode Island Intermediate Municipal Bond Fund Columbia Florida Intermediate Municipal Bond Fund Columbia Pennsylvania Intermediate Municipal Bond Fund COLUMBIA FUNDS TRUST VI Columbia Growth & Income Fund Columbia Small Cap Value Fund COLUMBIA FUNDS TRUST VII Columbia Newport Tiger Fund COLUMBIA FUNDS TRUST VIII Columbia Income Fund Columbia Intermediate Bond Fund COLUMBIA FUNDS TRUST IX Columbia High Yield Municipal Fund Columbia Managed Municipals Fund COLUMBIA FUNDS TRUST XI Columbia Young Investor Fund Columbia Growth Stock Fund Columbia Asset Allocation Fund Columbia Dividend Income Fund Columbia Large Cap Core Fund Columbia International Equity Fund Columbia Large Cap Growth Fund Columbia Disciplined Value Fund Columbia Small Cap Fund Columbia Small Company Equity Fund The Funds listed above are referred to collectively as the "Funds" and the Trusts listed above are referred to collectively as "Trusts." SUPPLEMENT TO THE PROSPECTUSES (Replacing All Outstanding Legal Proceeding Supplements) As discussed in greater detail in earlier supplements, on March 15, 2004, Columbia Management Advisors, Inc. ("Columbia Management"), the Fund's adviser, and Columbia Funds Distributor, Inc. ("CFD") the distributor of the Fund's shares (collectively, "Columbia"), entered into agreements in principle with the staff of the U.S. Securities and Exchange Commission ("SEC") and the Office of the New York Attorney General ("NYAG") to resolve the proceedings brought in connection with the SEC's and NYAG's investigations of frequent trading and market timing in certain Columbia mutual funds. On February 9, 2005, Columbia entered into an Assurance of Discontinuance with the NYAG (the "NYAG Settlement") and consented to the entry of a cease-and-desist order by the SEC (the "SEC Order" and together, the "Settlements"). The Settlements contain substantially the same terms and conditions as outlined in the agreements in principle. Under the terms of the SEC Order, Columbia has agreed, among other things, to: pay $70 million in disgorgement and $70 million in civil money penalties; cease and desist from violations of the antifraud provisions and certain other provisions of the federal securities laws; maintain certain compliance and ethics oversight structures; retain an independent consultant to review Columbia's applicable supervisory, compliance, control and other policies and procedures; and retain an independent distribution consultant (see below). The Funds have also voluntarily undertaken to implement certain governance measures designed to maintain the independence of their boards of trustees. The NYAG Settlement also, among other things, requires Columbia and its affiliates, Banc of America Capital Management, LLC and BACAP Distributors, LLC to reduce Columbia Funds, Nations Funds and other mutual fund management fees collectively by $32 million per year for five years, for a projected total of $160 million in management fee reductions. Pursuant to the procedures set forth in the SEC Order, the settlement amounts will be distributed in accordance with a distribution plan to be developed by an independent distribution consultant who is acceptable to the SEC staff and the Columbia Funds' independent trustees. The distribution plan must be based on a methodology developed in consultation with Columbia and the Fund's independent trustees and not unacceptable to the staff of the SEC. More specific information on the distribution plan will be communicated at a later date. As a result of these matters or any adverse publicity or other developments resulting from them, including lawsuits brought by shareholders of the affected Columbia Funds, there may be increased redemptions or reduced sales of Fund shares, which could increase transaction costs or operating expenses, or have other adverse consequences for the Columbia Funds. A copy of the SEC Order will be available on the SEC's website at http://www.sec.gov. A copy of the NYAG Settlement will be available as part of the Bank of America Corporation Form 8-K filing on or about February 10, 2005. G-36/803T-1204 February 9, 2005