SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant /x/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for use of the Commission Only (as permitted by Rule
14a-6(e) (2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Columbia U.S. Government Securities Fund, Inc.
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/x / No fee required
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of Schedule 14A
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1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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Important News for Shareholders of
Columbia US Government Securities Fund
Dear Columbia Funds Shareholder,
The Board of Directors for the Columbia Funds is asking that you consider and
approve a number of proposed changes to Columbia US Government Securities Fund.
These changes are intended to increase the Fund's overall investment flexibility
and performance potential.
Currently, the Fund's investment objective seeks preservation of capital and a
high level of income by investing at least 80% of its assets in direct
obligations of the U.S. Government. However, the Fund's management and the Board
of Directors believe shareholders would be better served if the investment
objective were changed to seek a high level of current income consistent with a
high degree of stability of principal by investing in a broader array of
short-term fixed income instruments.
Other recommendations, which are discussed in the enclosed Proxy Statement,
include changing the Fund's name and modifying the Fund's investment
restrictions. The intent of changing the investment restrictions is to further
improve the flexibility and performance potential of the Fund.
The attached Proxy Statement contains more complete information about this
proposal. For your convenience, a Question and Answer follows on the next page
and is designed to respond to questions you may have about the proposal. Please
read them both carefully and cast your vote on the enclosed ballot. You can
return your ballot in the postage-paid envelope or fax it to 1-503-226-4067. Of
course, you are also free to join us at the Special Meeting of Shareholders on
September 15, 2000, when the final votes are cast. If you have any questions
about the Proxy Statement, please don't hesitate to call us at 1-800-547-1707.
Remember, the Board recommends that you vote in favor of the proposal.
As always, we appreciate the opportunity to serve your investment needs.
Sincerely,
Jeff B. Curtis
President
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Columbia US Government Securities Fund Proxy Voting
Shareholder Q&A
We encourage you to read the full text of the attached Proxy Statement and cast
your vote as soon as possible. The following questions and answers are designed
to provide an overview of the proposal that will be voted upon at the Special
Meeting of Shareholders on September 15, 2000.
What is happening?
After careful consideration of shareholders' best interests, the Board of
Directors of Columbia U.S. Government Securities Fund is proposing that the
name, investment objective and strategy of the Fund be modified as follows:
Current Name, Objective and Strategy:
Columbia U.S. Government Securities Fund
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"...seeks preservation of capital and a high level of income.
The Fund invests in direct obligations of the U.S. Government,
namely Treasury bills, notes and bonds, all of which must have
a maturity of 3 years or less."
Proposed Name, Objective and Strategy:
Columbia Short Term Bond Fund
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"...seeks a high level of current income consistent with a
high degree of stability by investing primarily in high
quality, short-term fixed income securities."
Why is the Board recommending this change?
Changing the investment objective and strategy would allow the Fund's manager to
invest in a much wider array of short-term, high quality bonds, including debt
of federal agencies, investment-grade corporate bonds, asset-backed securities
and mortgage related securities. The intent is to generate substantially higher
income and potentially greater total return with only a small increase in risk,
thus attracting more investors to the Fund. As an added benefit, the greater the
number of shareholders, the lower the operating costs of the Fund. Lower
operating costs, of course, translate into better performance.
Why am I being asked to vote?
Because the investment objective and investment restrictions are considered
"fundamental policies" of a Fund, as defined under the Investment Company Act of
1940 , which regulates investment companies such as Columbia Funds, any change
to them requires shareholder approval. In addition, changing the Fund's name, to
make it consistent with the Fund's new investment strategy, requires an
amendment to the Fund's Articles of Incorporation, which also requires
shareholders' approval.
How will the change in investment objective affect me as a shareholder?
The ultimate goal of changing the investment objective and strategy of Columbia
U.S. Government Securities Fund is to improve performance while assuming little
or no additional risk.
What kind of improved performance could I expect?
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No one can predict or guarantee future performance, but we do believe that
changes to the Fund's investment objective and strategy will provide the Fund's
management with the flexibility to pursue higher returns by investing in a
broader array of short term, high quality instruments. In addition to the
opportunity to earn better investment returns, shareholders of the Fund would
also benefit from Columbia's 12 years of experience managing short-term bond
portfolios.
Will I lose the tax benefit associated with investing in a fund that invests
primarily in Government bonds? For taxable investors living in high income tax
states like Oregon, a fund investing primarily in government securities can
provide relief from state taxes. However, we believe the potential yield
advantage afforded by changing the Fund's investment objective and strategy
will, over the long-term, more than offset the reduced state tax benefit.
Furthermore, it is anticipated that the Fund, under the proposed change in
strategy, will continue to invest between 0 and 30% of its assets in Government
bonds, thus providing additional opportunity for state tax relief.
Will the investment fees be the same?
Absolutely. The investment advisory fee of 0.50% of net assets, which is paid by
Columbia U.S. Government Securities Fund to the Columbia Funds Management
Company, will remain the same. Moreover, Columbia Funds Management Company is
recommending that operating expenses, which were an additional 0.41% of net
assets in 1999, be capped at 0.25%. These overall lower fees -- 0.75% versus
0.91% -- would further enhance the return potential of the Fund.
Why is my vote important?
As part owner of the Fund, it is important that you have an opportunity to
approve any changes to the investment objective and investment restrictions. It
is also important that as many shareholders as possible are represented in the
voting process. To cast your vote, simply complete and return the enclosed
ballot in the postage-paid envelope. You may also fax your ballot to:
1-503-226-4067.
Who is paying for the proxy solicitation?
Columbia Funds Management Company will pay all costs of the proxy solicitation
and the Special Shareholder Meeting on September 15. None of the costs
associated with modifying the objective will be borne by Columbia U.S.
Government Securities Fund.
Whom do I call do I call for more information?
As always, if you have questions about the Columbia Funds, including this proxy
solicitation, please call us toll-free at 1-800-547-1707, and one of our
Investor Services Representatives will be happy to assist you.
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COLUMBIA U.S. GOVERNMENT SECURITIES FUND, INC.
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
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To the Shareholders:
Notice is hereby given that a Special Meeting of Shareholders (the
"Special Meeting") of Columbia U.S. Government Securities Fund, Inc. (the
"Fund") will be held at the offices of Columbia Funds Management Company, 1300
SW Sixth Avenue, 5th Floor, Portland, Oregon 97201 on September 15, 2000 at
10:00 a.m., Pacific Time, for the following purposes:
1. To (i) modify the Fund's investment objective, (ii) change
certain fundamental policies and investment restrictions of
the Fund, and (iii) change the name of the Fund.
2. To transact any other business that properly comes before the
Special Meeting or any adjournment or adjournments thereof.
Shareholders of record at the close of business on August 1, 2000 are
entitled to receive notice of and to vote at the Fund's Meeting and any
adjournment thereof.
By Order of the Board of Directors
Mark A. Wentzien
Secretary
August 15, 2000
Portland, Oregon
YOUR VOTE IS IMPORTANT
To vote your shares, please sign, date, complete and mail the enclosed proxy
card promptly in the enclosed return envelope. You may also choose to return
your proxy card(s) by fax to 1-503-226-4067.
1
COLUMBIA U.S. GOVERNMENT SECURITIES FUND, INC.
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PROXY STATEMENT
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SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 15, 2000
This proxy statement and form of proxy enclosed is furnished in
connection with a solicitation of proxies by the Board of Directors of Columbia
U.S. Government Securities Fund, Inc., an Oregon corporation (the "Fund"), to be
voted at the Special Meeting of Shareholders (the "Special Meeting") of the Fund
to be held on September 15, 2000 at 10:00 a.m., at the offices of Columbia Funds
Management Company, 1300 SW Sixth Avenue, 5th Floor, Portland, Oregon 97201, for
the purposes set forth in the accompanying Notice of Special Meeting of
Shareholders.
If the enclosed proxy card is properly executed and returned in time to
be voted at the Special Meeting, the proxies named in the proxy cards will vote
the shares represented by the proxy in accordance with the instructions marked
on the proxy cards. Executed proxies that are unmarked will be voted for
approval of the proposal described in this proxy statement. Any person giving a
proxy in the form accompanying this Proxy Statement has the power to revoke it
at any time before its exercise. The proxy may be revoked by filing with the
Fund, to the attention of Mark A. Wentzien, Secretary, an instrument of
revocation or a duly executed proxy card bearing a later date. The proxy may
also be revoked by voting in person at the Special Meeting. A shareholder who
attends the Special Meeting, however, is not required to revoke the proxy and
vote in person. Each valid, unrevoked proxy will be voted at the Special Meeting
in accordance with the instructions given in the proxy.
The first mailing of this Proxy Statement and the related Notice of
Special Meeting is expected to be mailed to shareholders of record on or about
August 15, 2000. The principal executive offices of the Fund are located at 1301
S.W. Fifth Avenue, Portland, Oregon 97201-5601. Copies of the Fund's most recent
Annual and Semi-Annual Reports are available upon request, without charge, by
(i) writing to the Fund at Columbia Financial Center, P.O. Box 1350, Portland,
Oregon 97207-1350, (ii) calling toll free 1-800-547-1707, or (iii) visiting the
Fund's Web site at www.columbiafunds.com or the Securities and Exchange
Commission's Web site at www.sec.gov.
1
SHARES ENTITLED TO VOTE AND QUORUM
The holders of record of shares (the "Shareholders") of the Fund as of
the close of business on August 1, 2000, the record date for the determination
of Shareholders entitled to notice of and to vote at the Special Meeting (the
"Record Date"), are entitled to one vote for each share held and a fractional
vote for a fractional share. As of the Record Date, there were 4,287,150 shares
of common stock of the Fund issued and outstanding.
A quorum for the conduct of business at the Special Meeting requires
the presence, in person or by proxy, of holders of a majority of the outstanding
shares of the Fund. If the necessary quorum to transact business or the vote
required to approve any proposal described in this proxy statement is not
obtained at the Special Meeting, the persons named as proxies may propose one or
more adjournments of the Special Meeting for a total of not more than 120 days
in the aggregate to obtain a quorum or to permit further solicitation of
proxies. Any adjournment with respect to any proposal may be approved by the
affirmative vote of the holders of a majority of the Fund's shares present in
person or by proxy at the Special Meeting, even though less than a quorum. The
persons named as proxies will vote in favor of an adjournment those proxies they
are entitled to vote in favor of such proposal, and will vote against any
adjournment those proxies to be voted against such proposal.
If a proxy is properly executed and returned accompanied by
instructions to withhold authority to vote, represents a broker "non-vote" (that
is, a proxy from a broker or nominee indicating that such person has not
received instructions from the beneficial owner or other person entitled to vote
Fund shares on a particular matter with respect to which the broker or nominee
does not have a discretionary power) or is marked with an abstention
(collectively, "abstentions"), the Fund shares represented thereby will be
considered to be present at the Special Meeting for purposes of determining the
existence of a quorum for the transaction of business. Abstentions will not
constitute a vote "for" or "against" any proposal or adjournment to permit
further solicitation of proxies, and will be disregarded in determining the
"votes cast" on any proposal. Accordingly, abstentions effectively will be a
vote against the proposal described in this proxy statement because the required
vote is a certain percentage of the Fund's shares present or outstanding.
SOLICITATION OF PROXIES
All costs of soliciting proxies for the Special Meeting, including
printing and mailing expenses, will be borne by Columbia Funds Management
Company, the Fund's investment adviser (the "Adviser"). Proxies will be
solicited by use of the mails, and officers of the Fund, as well as employees of
the Adviser and its affiliates, without additional compensation, may also
solicit proxies by telephone or personal contact. Copies of solicitation
materials will be furnished to fiduciaries, custodians, and brokerage houses for
forwarding to beneficial owners of the stock held in their names.
2
PROPOSAL 1: MODIFICATION OF THE FUND'S INVESTMENT OBJECTIVE AND
CHANGES TO THE FUND'S INVESTMENT RESTRICTIONS AND NAME
INTRODUCTION
The Fund's Board of Directors (the "Board") has determined that it is
in the best interests of the Fund to broaden its investment flexibility in order
to maximize the performance potential of the Fund by modifying the Fund's
investment objective, investment strategy and certain of its investment
restrictions. In addition, the Board has recommended changing the name of the
Fund to the "Columbia Short Term Bond Fund, Inc." to more accurately reflect the
proposed modified investment objective and investment strategy. Because the
Fund's investment objective and investment restrictions discussed in this proxy
statement are "fundamental policies" of the Fund, as defined under the
Investment Company Act of 1940 (the "1940 Act"), changing them requires
shareholder approval. Additionally, changing the name of the Fund requires
amending the Fund's Articles of Incorporation, which requires shareholder
approval. At a Board meeting of the Fund held on July 28, 2000, the Board
approved the proposed changes and directed that a proposal be submitted to
shareholders for approval.
Accordingly, with this proxy statement, the Fund requests that
shareholders vote to approve a proposal (the "Proposal") to
o modify the Fund's investment objective and strategy,
o modify the Fund's investment restrictions, and
o change the name of the Fund.
The Proposal is discussed below in more detail.
Reasons for the Proposal
The assets in the Fund peaked in 1995 at approximately $41.8 million
and have declined since then to $35.5 million as of June 30, 2000--approximately
the same amount of assets in the Fund in 1992. The Fund's Board of Directors
believes the primary reason the Fund has not grown larger is because investors
generally find other short term, fixed income securities more attractive than
short term U.S. Treasury securities, primarily due to higher returns offered by
these other short term, fixed income securities with only a very small increase
in investment risk. The Fund's Board and management believe that by modifying
the Fund's investment objective and investment strategy to allow the Fund to
invest in all types of short term, fixed income securities--and not just
obligations of the U.S. Government--total income to investors can be increased
without materially increasing the risks of investing in the Fund.
If the new investment objective and strategy result in an increase in
Fund assets, the Fund's total expenses as a percentage of revenue will be
reduced. The Fund's expense ratio in 1999 was 0.91%, composed of a 0.50%
management fee and 0.41% in other expenses. As assets in the Fund grow this
number should decrease. Until that occurs, if the Proposal is approved by
shareholders, the Adviser has agreed to contractually limit the Fund's expense
ratio to 0.75% of
3
Fund assets. The management fee would remain at 0.50%, but other expenses would
be limited to 0.25% of Fund assets.
The Fund's Adviser and its affiliates have a demonstrated ability to
manage short term, fixed income securities. As of June 30, 2000, the Adviser and
its affiliates managed portfolios of short term, fixed income securities for
institutional clients worth approximately $500 million.
Modification of the Fund's Investment Objective and Strategy
The Fund's current investment objective is to seek preservation of
capital and a high level of income. To achieve this objective, the Fund invests
at least 80% of its assets in direct obligations of the U.S.
Government--Treasury bills, notes, and bonds, each with a maximum maturity of
three years. The Fund's Board has approved, subject to shareholder approval, a
modification to this investment objective and the investment strategy used by
the Fund to achieve its investment objective to broaden the range of short term
securities in which the Fund may invest.
Under the proposed new investment objective, the Fund would seek to
provide shareholders with a high level of current income consistent with a high
degree of principal stability. The Fund will achieve this investment objective
by investing primarily in high quality, short term fixed income securities of
all types. The Fund's average portfolio duration will not exceed three years.
Under normal conditions, the Fund will invest in:
o obligations of the U.S. Government, its agencies and
instrumentalities;
o debt securities rated either AAA, AA, A or BBB by Standard
and Poor's, Inc. ("S&P") or Aaa, Aa, A, or Baa by Moody's
Investor Services, Inc. ("Moody's"); and
o securities, if unrated, that are judged to be of comparable
quality to the securities listed above.
To achieve its investment objective, the Fund expects to invest, under normal
market conditions, at least 50 percent of the Fund's assets in
o direct and indirect obligations of the U.S. Government, its
agencies and instrumentalities; and
o corporate debt securities rated in the two highest
categories by S&P (AAA or AA) or Moody's (Aaa or Aa).
Securities held by the Fund will include a variety of fixed income
securities, such as bonds, debentures, notes, equipment trust certificates,
short term obligations (those with maturities of 12 months or less), such as
prime commercial paper and banker's acceptances, domestic certificates of
deposit, obligations of, or guaranteed by, the U.S. Government and its agencies
and instrumentalities, Government National Mortgage Association, mortgage-backed
certificates and other similar securities representing ownership in a pool of
loans, and repurchase agreements with banks or securities dealers relating to
these securities.
4
Under the Fund's proposed modified investment objective, the Fund would
be permitted to invest the remaining 50% of its net assets in fixed income
securities rated BBB by S&P or Baa by Moody's (or, if unrated, deemed to be of
comparable quality). Although, under the proposed new investment objective, the
Fund intends to invest primarily in high quality fixed income securities, the
ability to purchase corporate debt securities rated BBB by S&P or Baa by Moody's
will subject the Fund to a higher degree of credit risk than investing primarily
in U.S. Government obligations. Securities rated BBB by S&P or Baa by Moody's
are considered investment grade but are neither highly protected nor poorly
secured. While these securities normally pay higher yields, they carry a greater
degree of credit risk than higher quality securities because they involve
potentially greater price variability. These securities are regarded as having
adequate capacity to repay principal and pay interest. However, adverse economic
conditions could lead to a weakened capacity to do so. In addition, up to 10% of
the Fund's assets may be invested in lower grade debt securities rated BB or B
by Moody's or Ba or B by S&P--commonly referred to as "junk bonds"--when the
Adviser believes these securities present attractive investment opportunities
despite their speculative characteristics.
This modification to the Fund's investment objective and investment
strategy would allow the Fund's portfolio manager to pursue a greater range of
investment opportunities on behalf of shareholders. Management believes the
proposed change will provide the Fund with more flexibility to pursue a higher
level of current income consistent with a high degree of stability of principal.
Impact on Income Taxes
Individuals, trusts, and estates who hold shares of the Fund are not
subject to Oregon personal income tax on dividends properly designated by the
Fund as derived from interest on U.S. government obligations. Other states that
impose a personal income tax may also exempt certain taxpayers from tax on
income derived from U.S. Government obligations. Under the proposed modified
investment objective, dividends declared by the Fund and derived from interest
on debt securities, other than direct obligations of the U.S. Government, will
generally be subject to Oregon and, if applicable, other states' personal income
tax. Under the new strategy, the Fund expects it will hold between zero to 30
percent U.S. Government obligations as opposed to the minimum of 80 percent now
maintained by the Fund. Although there is no guarantee of investment
performance, the Adviser believes the additional income the Fund can achieve by
diversifying its investment objective and investment strategy will compensate
investors who have, in the past, benefited from this tax advantage.
If this proposal is approved by shareholders, it is anticipated that
the Adviser will immediately begin to reposition the Fund's portfolio to take
advantage of the increased flexibility in the Fund's investment strategy. In
order to accomplish this, the Fund will be required to sell securities currently
held in its portfolio. To the extent that there is a difference between the
prices at which the Fund purchased securities and the prices at which the Fund
sells securities to reposition the Fund's portfolio, the Fund will recognize
capital gains, which will be passed along to shareholders. As of the date of
this Proxy Statement, the amount of capital gains that would be recognized by
the Fund as a result of repositioning its portfolio is very small, but
5
such amount could increase if a dramatic or unforeseen change in interest rates
were to occur before the Fund sells any portfolio securities.
Change to the Fund's Investment Restrictions
Based upon the above changes, management believes it is desirable to
add to, to delete, and to modify certain of the Fund's investment restrictions,
which are fundamental policies. A list of the Fund's current investment
restrictions is attached as Exhibit A, and a list of the proposed investment
restrictions is attached as Exhibit B. These changes are being proposed to
further enhance the Fund's investment flexibility in implementing its proposed
modified investment objective. Management has compared the Fund's performance to
other mutual funds that do not restrict investments to U.S. Treasury investments
and believes that broadening the scope of permissible investments will enable
the Fund to maximize its returns and to minimize volatility.
In summary:
o Investment restriction numbers 1 and 9 would not be changed.
o Investment restrictions numbers 6, 7, and 10 would be eliminated.
o Investment restriction numbers 2, 3, 4, 5, 8, 11, and 12 would be
revised.
o New investment restrictions proposed to be numbered 4, 6, 7, 10,
13, 14, 15, and 16 would be added.
A summary of the proposed changes to the Fund's investment restrictions
follows:
Investment restriction No. 1, which prohibits the Fund from issuing
senior securities, bonds, or debentures, would remain in place.
Investment restriction No. 2, which prohibits the Fund from buying
securities on margin, making short sales, and writing put or call options, would
be revised to (a) allow the purchase of securities on margin only for use of
short-term credit necessary for clearances of purchases and sales of portfolio
securities, (b) allow margin deposits in connection with transactions in
options, futures and options on futures, (c) permit the Fund to purchase or sell
puts and calls, (d) delete the reference to short sales (which is included in
proposed new investment restriction No. 16) and (e) prohibit purchases of
certain property.
6
Investment restriction No. 3, which prohibits the Fund from borrowing
money in excess of 5 percent of its net asset value, would be revised to (a)
allow borrowing from banks provided there is asset coverage of 300 percent after
each borrowing, (b) permit transactions in options, futures, options on futures
and other derivative instruments as described in the Fund's Statement of
Additional Information, (c) permit the Fund to enter into repurchase agreements,
dollar roll transactions and other economically similar transactions, (d) borrow
money as a temporary measure for extraordinary or emergency purposes provided
that such borrowings do not exceed 5 percent of the gross assets of the Fund,
and (e) partially incorporate investment restriction No. 4.
Investment restriction No. 4, which prohibits the Fund from pledging,
hypothecating, or transferring, as security for indebtedness, any securities
owned by the Fund except as in current investment restriction No. 3, would be
(a) revised to limit such transfer to 10 percent of the gross assets of the Fund
valued at cost and (b) moved to investment restriction No. 3.
Investment restriction No. 5, which prohibits the Fund from
underwriting securities of other issuers that must be registered under the
Securities Act of 1933 ("Securities Act") before they are sold to the public,
would be revised to allow the Fund to acquire certain securities in those
circumstances where, if the securities are later sold to the public, the Fund
might be deemed an underwriter for purposes of the Securities Act.
Investment restriction No. 6, which prohibits the Fund from purchasing
securities other than direct obligations of the U.S. Government, would be
deleted.
Investment restriction No. 7, which prohibits the Fund from investing
more than 10 percent of its total assets in repurchase agreements, would be
deleted.
Investment restriction No. 8, which prohibits the Fund from purchasing
or selling real estate or real estate contracts, would be revised to (a)
prohibit the Fund from purchasing or selling real estate, but (b) allow the Fund
to purchase securities issues by companies that deal in real estate, mortgages
or any interests therein.
Investment restriction No. 9, which prohibits the Fund from purchasing
or selling commodities or commodities contracts, would remain in place, but
would be revised to allow the Fund to (a) purchase, sell or enter into financial
futures contracts and options on futures contracts, (b) foreign currency forward
contracts and options, and (c) any interest rate, securities-related or foreign
currency hedging instruments and other derivative instruments, subject to
compliance with any applicable provisions of federal securities and commodities
laws.
Investment restriction No. 10, which prohibits the Fund from purchasing
securities with maturities in excess of three years from the date of purchase,
would be deleted. The Fund will not have a restriction on the maturity of
securities it purchases. However, the Fund's average portfolio duration will not
exceed 3 years.
Investment restriction No. 11, which prohibits the Fund from making
loans to persons except in certain limited circumstances, would be revised to
(a) prohibit the Fund from making loans to persons (except by purchase of
short-term commercial paper, bonds, debentures,
7
repurchase agreements or other debt securities constituting part of an issue),
but (b) allow the Fund to lend portfolio securities to broker-dealers or other
institutional investors so long as the aggregate value of such loans does not
exceed 33 1/3 percent of the Fund's total assets.
Investment restriction No. 12, which prohibits the Fund from purchasing
securities of other investment companies, would be revised to (a) limit such
prohibition to open-end investment companies, and (b) specifically allow such
purchases if permitted under Section 12(d)(1)(A) of the 1940 Act.
New investment restriction No. 4 would prohibit the Fund from, with
exception, concentrating investments in any industry.
New investment restriction No. 6 would prohibit the Fund from
purchasing illiquid securities if, at the time of purchase, more than 10% of the
value of the Fund's net assets consist of such illiquid securities. Illiquid
securities are securities that may not be sold or disposed of in the ordinary
course of business within seven days at approximately the price used to
determine a Fund's net asset value. Under current interpretations of the Staff
of the Securities and Exchange Commission, the following instruments in which
the Fund may invest will be considered illiquid: (1) repurchase agreements
maturing in more than seven days; (2) restricted securities (securities whose
public resale is subject to legal restrictions); (3) options, with respect to
specific securities, not traded on a national securities exchange that are not
readily marketable; and (4) any other securities in which the Fund may invest
that are not readily marketable.
Under interpretations issued by the Securities and Exchange Commission,
the determination of the liquidity of restricted securities that can be resold
to qualifying institutions pursuant to Rule 144A of the Securities Act ("Rule
144A securities") is a question of fact for the Fund's Board or Adviser. Under
the supervision of, and according to guidelines established by, the Board, the
Fund's Adviser will determine the liquidity of Rule 144A securities.
Accordingly, any Rule 144A securities purchased by the Fund and determined by
the Adviser to be liquid will not be subject to the Fund's 10 percent limitation
on the investment in restricted or other illiquid securities.
New investment restriction No. 7 would prohibit the Fund from
purchasing the securities of any issuer if the purchase would cause the Fund to
have more than 5 percent of its assets at market value invested in that issuer,
with reference to 75 percent of the assets of the Fund. This restriction does
not apply to obligations of the U.S. Government and its instrumentalities
purchased by the Fund.
New investment restriction No. 10 would prohibit the Fund from
purchasing the securities of any issuer if such purchase would cause more than
10 percent of the outstanding voting securities of that issuer to be held in the
Fund.
New investment restriction No. 13 would prohibit the Fund from
investing more than 5 percent of its total assets to be invested in companies
that have a record of less than three years of continuous operation.
8
New investment restriction No. 14 would prohibit the Fund from
investing in companies to exercise control or management.
New investment restriction No. 15 would prohibit the Fund from
purchasing or retaining the securities of an issuer if (a) any of that issuer's
officers or directors is an officer or director of the Fund or of the Fund's
Adviser or (b) the Fund's officers, directors, and Adviser together beneficially
own more than 5 percent of any class of securities of that issuer.
New investment restriction No. 16 would generally prohibit the Fund
from engaging in the short sale of securities except to the extent that the Fund
owns other securities convertible into an equivalent amount of such securities.
If the Proposal is approved, investment restrictions Nos. 1 through 16,
set forth in their entirety on Exhibit B to this proxy statement, would be
fundamental policies of the Fund which cannot be changed without a vote of the
holders of a majority (as defined in the 1940 Act) of the Fund's outstanding
shares.
Change of the Fund's Name
The Board also has approved a change in the Fund's name to "Columbia
Short Term Bond Fund, Inc." which is more descriptive of the Fund's proposed
modified investment objective and management policies. Under Section 35 of the
1940 Act, an investment company is prohibited from using a name or title for its
fund that is deceptive or misleading. Therefore, consistent with the provisions
of Section 35 of the 1940 Act, if the shareholders approve the Proposal, the
Fund's Articles of Incorporation would be amended to reflect the change of name
from "Columbia U.S. Government Securities Fund, Inc." to "Columbia Short Term
Bond Fund, Inc." which more accurately describes the Fund's modified investment
objective.
The Board Unanimously Recommends That You Vote "For" The Proposal To
Modify The Fund's Investment Objective And Change To The Fund's Investment
Restrictions And Name
REQUIRED VOTE
Approval of the Proposal described herein requires the affirmative vote
of the lesser of:
o 67% of the Fund's voting securities present at the Special
Meeting, if the holders of more than 50% of the Fund's
outstanding voting securities are present or represented by
proxy, or
o more than 50% of the Fund's outstanding voting securities.
If the Proposal is approved by shareholders of the Fund at the Special Meeting,
it will be effective upon appropriate disclosure being made in the Fund's
prospectus and statement of additional information.
9
ADDITIONAL INFORMATION
Columbia Funds Management Company, located at 1301 S.W. Fifth Avenue,
Portland, Oregon 97201, serves as the Fund's investment adviser.
Provident Distributors, Inc. ("PDI") is the principal underwriter for
the Fund. Columbia Financial Center Incorporated, with principal offices at 1301
S.W. Fifth Avenue, Portland, Oregon 97201, has entered into a broker dealer
agreement with PDI to distribute the Fund's shares.
Columbia Trust Company at 1301 S.W. Fifth Avenue, Portland, Oregon
97201 is the Fund's transfer and dividend crediting agent.
U.S. Bank, N.A., located at 321 S.W. Sixth Avenue, Portland, Oregon
97208, acts as custodian of the Fund's investments.
PRINCIPAL SHAREHOLDERS AND SHARES HELD BY MANAGEMENT
As of August 1, 2000, the Company's directors and officers, as a group,
beneficially owned less than 1% of the Fund's outstanding shares. To the
knowledge of the Fund, as of the Record Date, there were no owners of 5% or more
of the outstanding shares of the Fund.
OTHER MATTERS TO COME BEFORE THE SPECIAL MEETING
AND SHAREHOLDER PROPOSALS
Although the Notice of Special Meeting of Shareholders provides for
transaction of any other business that properly comes before the meeting, the
Board of Directors has no knowledge of any matters to be presented at the
meeting other than the matters described in this proxy statement. The enclosed
proxy, however, gives discretionary authority to the proxy holders to vote in
accordance with their judgment if any other matters are presented.
The Fund's Bylaws do not require that the Fund hold an annual meeting
of shareholders. The Fund will be required, however, to call special meetings of
shareholders in accordance with the requirements of the 1940 Act to seek
approval of, among other matters, new investment advisory contracts or a change
in the Fund's fundamental policies, such as its investment objective or
investment restrictions.
Since the Fund does not hold regular meetings of shareholders, the
anticipated date of the next shareholders meeting cannot be provided.
Shareholders who wish to submit a proposal for consideration at a meeting of
shareholders must deliver notice of the proposal within a reasonable time before
the Fund mails its proxy materials. As of August 1, 2000, the Fund had not
received any shareholder proposals and, thus, none is included in these proxy
materials.
10
It is important that proxies be returned promptly. Therefore,
shareholders who do not expect to attend the Special Meeting in person are urged
to complete, sign, date and return his or her proxy card in the enclosed stamped
envelope, or by fax to 1-503-226-4067.
By Order of the Board of Directors,
Mark A. Wentzien
Secretary
Portland, Oregon
August 15, 2000
11
EXHIBIT A
CURRENT INVESTMENT RESTRICTIONS
The Columbia U.S. Government Fund's current investment restrictions
read as follows:
The U.S. Government Securities Fund may not:
1. Issue senior securities, bonds, or debentures.
2. Buy securities on margin, make short sales, or write put or call
options.
3. Borrow money in excess of 5 percent of its net asset value. Any
borrowing must only be temporarily from banks or other lending institutions for
extraordinary or emergency purposes.
4. Pledge, hypothecate, or transfer in any manner, as security for
indebtedness, any securities owned by the Fund, except as necessary in
connection with borrowings described in subparagraph 3 above. Any such pledge,
hypothecation, or transfer may not exceed 10 percent of the Fund's total assets,
at the lesser of cost or market value.
5. Underwrite securities of other issuers or acquire securities that
must be registered under the Securities Act of 1933, as amended, before they may
be sold to the public.
6. Purchase securities that are other than direct obligations of the
U.S. Government and repurchase agreements with respect to those obligations.
7. Invest more than 10 percent of total assets in repurchase
agreements.
8. Purchase or sell real estate or real estate contracts, including
futures contracts.
9. Purchase or sell commodities or commodities contracts, including
futures contracts.
10. Purchase securities with maturities in excess of three years from
the date of purchase.
11. Make loans to other persons except by purchase of debt obligations
in which the Fund may invest and repurchase agreements with respect to those
obligations.
12. Purchase securities of other investment companies.
A-1
EXHIBIT B
PROPOSED INVESTMENT RESTRICTIONS
If approved by shareholders, the investment restrictions of the
Columbia Short Term Bond Fund (formerly known as the U.S. Government Securities
Fund) would read as follows:
The Prospectus sets forth the investment objective and principal
investment strategy applicable to the Fund. The following is a list of
investment restrictions applicable to the Fund. If a percentage limitation is
adhered to at the time of the investment, a later increase or decrease in
percentage resulting from any change in value or net assets will not result in a
violation of such restriction, provided, however, at no time will the Fund's
investment in illiquid securities exceed 15% of its net assets. The Fund may not
change these restrictions without a majority vote of the outstanding securities
of the Fund of (i) 67 percent or more of the shares present or represented by
proxy at the meeting (if the holders of more than 50 percent of the outstanding
shares are present or represented by proxy) or (ii) more than 50 percent of the
outstanding shares, whichever is less.
The Fund may not:
1. Issue senior securities, bonds, or debentures.
2. Buy any securities or other property on margin except for use of
short-term credit necessary for clearance of purchases and sales of portfolio
securities, but it may make margin deposits in connection with transactions in
options, futures, and options on futures or purchase or sell puts or calls, or
confirmations thereof.
3. Borrow money, issue senior securities, or pledge, mortgage or
hypothecate its assets, except that the Fund may (i) borrow from banks, but only
if immediately after each borrowing there is asset coverage of 300 percent, (ii)
enter into transactions in options futures, options on futures, and other
derivative instruments as described in the Prospectus and this Statement of
Additional Information (the deposit of assets in escrow in connection with the
writing of covered put and call options and the purchase of securities on a
when-issued or delayed delivery basis, collateral arrangements with respect to
initial or variation margin deposit for futures contracts and commitments
entered into under swap agreements or other derivative instruments, will not be
deemed to be pledges of the Fund's assets), (iii) enter into reverse repurchase
agreements, dollar roll transactions or economically similar transactions to the
extent its commitment under such transaction is covered by the segregation of
assets, and (iv) borrow money as a temporary measure for extraordinary or
emergency purposes provided that such borrowings do not exceed 5 percent of the
gross assets of the Fund valued at the lesser of cost or market value, and the
Fund does not pledge, mortgage, or hypothecate assets valued at market to an
extent greater than 10 percent of the gross assets valued at cost of the Fund.
4. Concentrate investments in any industry. However, it may (a)
invest up to 25 percent of the value of its total assets in any one industry,
(b) invest up to 100 percent of the value of its total assets in securities
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, and (c) invest for temporary defensive purposes up to 80% of
the value of its total assets in certificates of deposit (C/D's) and banker's
acceptances with maturities not greater
B-1
than one year. C/D's and banker's acceptances will be limited to domestic banks
that have total assets in excess of $1 billion and are subject to regulatory
supervision by the U.S. Government or state governments. Commitments to purchase
securities issue or guaranteed by the U.S. Government or its agencies or
instrumentalities on a "when-issued" basis may not exceed 20 percent of the
total assets of the Fund. Emphasis on investments in securities of a particular
industry will be shifted whenever the adviser determines that such action is
desirable for investment reasons. The Trustees will periodically review these
decisions of the adviser.
5. Underwrite securities of other issuers, except the Fund may
acquire portfolio securities in circumstances where, if the securities are later
publicly offered or sold by the Fund, it might be deemed to be an underwriter
for purposes of the Securities Act of 1933, as amended (the "1933 Act").
6. Purchase illiquid securities, if upon the purchase more than 10%
of the value of the Fund's net assets would consist of such illiquid securities.
7. Purchase the securities of any issuer if the purchase, at the time
thereof, would cause more than 5 percent of the value of its total assets at
market value to be invested in the securities of that issuer (other than
obligations of the U.S. Government and its instrumentalities), with reference to
75 percent of the assets of the Fund.
8. Buy or sell real estate. However, the Fund may purchase or hold
securities issued by companies, such as real estate investment trusts, that deal
in real estate or interests therein, and participation interests in pool of real
estate mortgage loans.
9. Buy or sell commodities or commodities contracts or oil, gas or
mineral programs, except that the Fund may purchase, sell or enter into
financial futures contracts and options on future contracts, foreign currency
forward contracts, foreign currency options, or any interest rate,
securities-related or foreign currency related hedging instrument, including
swap agreements and other derivative instruments, subject to compliance with any
applicable provisions of the federal securities or commodities laws.
10. Purchase the securities of any issuer if the purchase, at the time
thereof, would cause more than 10 percent of the outstanding voting securities
of that issuer to be held in the Fund.
11. Make loans to other persons (except by purchase of short-term
commercial paper, bonds, debentures, repurchase agreements or other debt
securities constituting part of an issue). The Fund may lend portfolio
securities to broker-dealers or other institutional investors if, as a result
thereof, the aggregate value of all securities loaned does not exceed 33 1/3
percent of its total assets.
12. Purchase securities of other open-end investment companies, except
as permitted by Section 12(d)(1)(A) of the 1940 Act.
B-2
13. Invest in the securities of any company if the purchase, at the
time thereof, would cause more than 5 percent of the value of the Fund's total
assets to be invested in companies which, including predecessors and parents,
have a record of less than three years of continuous operation.
14. Invest in companies to exercise control or management.
15. Purchase or retain securities of an issuer, any of whose officers
or directors of security holders is an officer or director of the Fund or of its
adviser if, or so long as, the officers and directors of the Fund and of its
adviser together own beneficially more than 5 percent of any class of securities
of the issuer.
16. Engage in short sale of securities except to the extent that it
owns other securities convertible into an equivalent amount of such securities.
These short sales may only be made to protect a profit in or to attempt to
minimize a loss with respect to convertible securities. In any event no more
than 10 percent of the Fund's net assets valued at market may, at any time, be
held as collateral for such sales.
B-3
This is your ballot Your vote is important
Columbia U.S. Government Securities Fund
Proxy for Special Meeting of Shareholders to be held September 15, 2000
Please use this ballot to vote on the proposed changes to Columbia U.S.
Government Securities Fund, as described in the attached proxy statement. In
signing below, you appoint either Jeff Curtis or Mark Wentzien as proxies, with
power of substitution, to represent and to vote, at the Special Meeting of
Shareholders of the Columbia Funds, on September 15, 2000 at 10:00 a.m., and at
any adjournments thereof, all shares you own of Columbia U.S. Government
Securities Fund, which you would be entitled to vote if you were represented in
person. If you have questions, please call us toll-free at 1-800-547-1707.
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned shareholder(s). If no direction is made, the proxy will be
voted for the proposal.
Please vote!
[Registration here]
Please sign exactly as your name appears on this card.
If you are a joint owner, please ensure that each owner signs this ballot. When
signing as executor, administrator, attorney, trustee, or guardian, or as
custodian for a minor, please give your full title as such. If you are signing
for a corporation, please sign the full corporate name and indicate the signer's
office. If the shareholder is a partner, please sign in the partnership's name.
- -------------------------------------
Signature
- -------------------------------------
Signature, if held jointly
- -------------------------------------
Date
This proxy is solicited on behalf of the Board of Directors of the Columbia U.S.
Government Securities Fund. The Fund's Board of Directors recommends that you
vote IN FAVOR of the proposal.
Proposals:
1. Approve the Proposal to modify the investment objective of the Fund, change
the fundamental investment restrictions of the Fund and change the name of the
Fund.
To vote mark the box below in blue or black ink (Example: |)
For Against Abstain
--- ------- -------
[ ] [ ] [ ]
2. In the discretion of such proxies, upon such other business as may
properly come before the Special Meeting , or any adjournment(s) thereof.
Please mail or fax your ballot to 1-503-226-4067
Thank you for your vote!
Columbia Funds
PO Box 1350
Portland, OR 97207-1350