<PAGE>
As filed with the Securities and Exchange Commission on November 16, 1995
File No.[_____]
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. _____ [ ]
Post-Effective Amendment No. _____ [ ]
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
(Check appropriate box or boxes.)
THE CRABBE HUSON MUTUAL FUNDS GROUP
(Exact Name of Registrant as Specified in Charter)
121 S.W. Morrison, Suite 1425
Portland, Oregon 97204
(Address, including Zip Code, of Principal Executive Offices)
(503) 295-0919
1-800-541-9732
(Registrant's Telephone Number, including Area Code)
Richard S. Huson
121 S.W. Morrison, Suite 1425
Portland, Oregon 97204
(Name and Address, including Zip Code, of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable after the
effectiveness of the registration under the Securities Act of 1933
It is proposed that this filing will become effective (check appropriate box)
____ immediately upon filing pursuant to paragraph (b)
____ on (date) pursuant to paragraph (b)
____ 75 days after filing pursuant to paragraph (a)
____ on (date) pursuant to paragraph (a) of Rule 485
<PAGE>
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay the effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to Section 8(a), may determine.
Please forward copies of communications to:
Mark A. Wentzien
Davis Wright Tremaine
2300 First Interstate Tower
1300 S.W. Fifth Avenue
Portland, Oregon 97201
__________________________
An indefinite number of shares of Common Stock have been registered by the
issuer pursuant to Rule 24f-2 of the Investment Company Act of 1940. The filing
fee of $500 is being paid herewith.
<PAGE>
CRABBE HUSON MUTUAL FUNDS GROUP
Cross-Reference Sheet Showing Location in Prospectus and
Statement of Additional Information of
Information Required by Items of the Registration Form
FORM N-1A ITEM NUMBER AND CAPTION LOCATION
PART A
1. Cover Page . . . . . . . . . . . . . . . . . . . . . . . . .Cover Page
2. Synopsis
2(a) Shareholder Transaction Expenses . . . . . . . . . . . . .Expense Data
2(b)+(c) Synopsis of Prospectus . . . . . . . . . . . . . . .Prospectus Summary
3. Condensed Financial Information
3(a) Per share Income & Capital Changes . . . . . . . . . . .Not Applicable
3(b) Debt History . . . . . . . . . . . . . . . . . . . . . .Not Applicable
3(c) Performance Data . . . . . . . . . . . .Performance Comparisons; Yield
4 General Description of Registrant
4(a)(i) Organization . . . . . . . . . . .Investment Objectives and Policies;
Fundamental Policies
4(a)(ii) Investment Objectives and Policies . . . . . Investment Objectives and
Policies; Fundamental Policies
4(b) Other Investments. . . . . . . . . . . . . . . . . . . .Not Applicable
4(c) Risk Factors . . . Risk Factors; Special Risk Factors to be Considered
5 Management of the Fund
5(a) Board of Directors . . . . . . . . . . . . . . .Management of the Fund
5(b)(i) Investment Advisor . . . . . . . . . . . . . . .Management of the Fund
5(b)(ii) Services of Investment Advisor . . . . . . . . .Management of the Fund
<PAGE>
FORM N-1A ITEM NUMBER AND CAPTION LOCATION
5(b)(iii) Compensation of Advisor. . . . . . . . . . . . .Management of the Fund
5(c) Portfolio Manager(s) . . . . . . . . . . . . . .Management of the Fund
5(d) Other Management Services. . . . . . . . . . . . . . . .Not Applicable
5(e) Transfer Agent, Dividend Paying Agent. . . . . .Management of the Fund
5(f) Expenses . . . . . . . . . . . . . . . . . . . .Management of the Fund
5(g)(i) Brokerage Commissions. . . . . . . . . . . . . Allocation of Brokerage
5(g)(ii) Allocation of Brokerage. . . . . . . . . . . . Allocation of Brokerage
5A Management's Discussion of Fund Performance. . . . . . .Not Applicable
6 Capital Stock and Other Securities
6(a) Rights and Restrictions. . . . . . . . . . . . . . . . . Capital Stock
6(b) Control Persons. . . . . . . . . . . . . . . . . . . . Control Persons
6(c) Changes in Rights of Holders . . . . . . . . . . . . . . Capital Stock
6(d) Other Classes of Securities. . . . . . . . . . . . . . .Not Applicable
6(e) Shareholder Inquiries . . . . . . . . . . Special Investor Services -
Shareholder Inquiries
6(f) Dividends and Distributions. . . . . . . . . . . . . . . Capital Stock
6(g) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Taxes
7 Purchase of Securities Being Offered
7(a) Underwriter. . . . . . . . . . . . . . . . .How to Invest in the Funds
7(b) Determination of Offering Price. . . . . . . . . . . . Net Asset Value
7(c) Special Plans. . . . . . . . . . . . . . . How to Invest in the Funds;
Redemption or Exchange by Telephone;
Special Investor Services;
Systematic Withdrawal Plan
<PAGE>
FORM N-1A ITEM NUMBER AND CAPTION LOCATION
7(d) Minimum Investment . . How to Invest in the Funds - Minimum Investment
7(e) Trail Fee. . . . . . . . . . . . . . . . . . . . . . . .Not Applicable
7(f) 12b-1 Fees . . .How to Invest in the Funds - Sales Load and 12b-1 Fees
8 Redemption or Repurchase
8(a) Redemption Procedures and Charges. . . . . . .How to Sell Your Shares;
How to Exchange Your Shares;
Redemption or Exchange by Telephone
8(b) Repurchase through Broker-Dealer . . . . . . .How to Sell Your Shares;
How to Exchange Your Shares;
Redemption or Exchange by Telephone
8(c) Involuntary Redemption . . . . . . How to Sell Your Shares -
Involuntary Redemption
8(d) Delay of Redemption. . . . . . . . . . . . . . How to Sell Your Shares
9 Pending Legal Proceeding . . . . . . . . . . . . . . . .Not Applicable
PART B
10 Cover Page . . . . . . . . . . . . . . . . . . . . . . . . .Cover Page
11 Table of Contents. . . . . . . . . . . . . . . . . . Table of Contents
12 General Information and History . . . . . .General Information and
History of the Fund
13 Investment Objectives and Policies
13(a) Description. . . . . .Prospectus - Investment Objectives and Policies;
Fundamental Policies
13(b) Fundamental Policies . . . . . . . . . . . . .Investment Restrictions;
Loans of Portfolio Securities
13(c) Significant Policies . . . . . . . .Prospectus - Investment Objectives
and Policies; Fundamental Policies
<PAGE>
FORM N-1A ITEM NUMBER AND CAPTION LOCATION
13(d) Portfolio Turnover . . . . Portfolio Transactions - Portfolio Turnover
14 Management of the Fund
14(a) Directors and Officers . . . . . . . . . . . . . . . . . . .Management
14(b) Positions with Affiliates. . . . . . . . . . . . . . . . . .Management
14(c) Compensation . . . . . . . . . . . . . . . . . . . . . . . .Management
15 Control Persons and Principal Holders of Securities
15(a) Names and Addresses of Control Persons . . . . . . Control Persons and
Principal Holders of Securities
15(b) Ownership of Fund. . . . . . . . . . . . . . . . . Control Persons and
Principal Holders of Securities
15(c) Stock Holdings of Officers and Directors . . . . . Control Persons and
Principal Holders of Securities
16 Investment Advisory and Other. . .Prospectus - Management of the Fund;
Services Services Provided by the Advisor
16(a)(i) Control Persons of the Advisor . .Prospectus - Management of the Fund;
Services Provided by the Advisor
16(a)(ii) Affiliates of Registrant and. . . Prospectus - Management of the Fund;
Advisor Services Provided by the Advisor
16(a)(iii) Advisory Fee. . . . . . . . . . .Prospectus - Management of the Fund;
Services Provided by the Advisor
16(b) Services of Advisor. . . . . . . . . .Services Provided by the Advisor
16(c) Fees and Expenses. . . . . . . . . . .Services Provided by the Advisor
16(d) Other Management-Related Contracts . . . . . . Administration Contract
16(e) Other Persons Furnishing Advice for Compensation . . . .Not Applicable
<PAGE>
FORM N-1A ITEM NUMBER AND CAPTION LOCATION
16(f) Expenses of Distribution of Shares
Borne by Registrant. . . . . . . . . Services Provided by the Advisor;
Distribution Plan
16(g) Nonbank or Nontrust Custodial Services . . . . . . . . .Not Applicable
16(h) Custodian; Independent Public Accountant;
Transfer Agent . . . . . . . . . .Auditors; Custodian, Transfer Agent,
and Dividend Disbursing Agent
17 Brokerage and other Allocations
17(a) Effecting Transactions in
Portfolio Securities . . . . . . . . . . . . . .Portfolio Transactions
17(b) Payments of Commissions to Affiliates. . . . . . . . . .Not Applicable
17(c) Selection of Brokers . . . . . . . . . . . . . .Portfolio Transactions
17(d) Allocation . . . . . . . . . . . . . . . . . . . . . . .Not Applicable
17(e) Acquisition of Broker's Securities . . . . . . . . . . .Not Applicable
18 Capital Stock and Other Securities
18(a) Right of Each Class of Stock . . . . . . . . . . . General Information
18(b) Securities Other than Capital Stock. . . . . . . . . . .Not Applicable
18(f) Exemption. . . . . . . . . . . . . . . . . . . . . . . .Not Applicable
19 Purchase, Redemption and Pricing of Securities Being Offered
19(a) Manner of Offering . . . . . . .Purchase and Redemption of Fund Shares
19(b) Valuation of Securities and Assets . . . . . . . Pricing of Securities
Being Offered
19(c)
20 Tax Status . . . . . . . . . . . . .Dividends, Distributions and Taxes
21 Underwriters
<PAGE>
FORM N-1A ITEM NUMBER AND CAPTION LOCATION
21(a)(i) Nature of Underwriting. . . . .Prospectus - How to Invest in the Funds
Obligation
21(a)(ii) Continuous Offering. . . . . . Prospectus - How to Invest in the Funds
21(a)(iii) Prior Compensation of Underwriter . . . . . . . . . . .Not Applicable
21(b) Compensation to Affiliated Underwriters. . . . . . . . .Not Applicable
21(c) Other Payments to Underwriters and Dealers . . . . . . .Not Applicable
22 Calculation of Performance Data
22(a) Money Market Funds . . . . . . . . . . . . . . . . . . .Not Applicable
22(b)(i) Total Return . . . . . . . . . . . . . Calculation of Performance Data
22(b)(ii) Yield. . . . . . . . . . . . . . . . . Calculation of Performance Data
22(b)(iii) Tax Equivalent Yield. . . . . . . . . Calculation of Performance Data
23 Financial Statements . . . . . . . . . . . . . . .Financial Statements
<PAGE>
---------------------
THE CRABBE HUSON
MUTUAL FUNDS GROUP
---------------------
ADVISER
The Crabbe Huson Group, Inc.
Portland, Oregon
ADMINISTRATOR
State Street Bank and Trust Company
Boston, Massachusetts
TRANSFER AGENT
State Street Bank and Trust Company
Boston, Massachusetts
DISTRIBUTOR
Crabbe Huson Securities, Inc.
Portland, Oregon
CUSTODIAN
First Interstate Bank of Oregon
Portland, Oregon
COUNSEL
Davis Wright Tremaine
Portland, Oregon
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
Portland, Oregon
PROSPECTUS
, 1995
[LOGO]
<PAGE>
A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION BUT HAS NOT YET BECOME EFFECTIVE. INFORMATION
CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. THESE SECURITIES MAY NOT
BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. NEITHER THIS PROSPECTUS NOR THE STATEMENT OF
ADDITIONAL INFORMATION SHALL CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF
AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE OR
JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE OR
JURISDICTION.
<PAGE>
THE CRABBE HUSON MUTUAL FUNDS GROUP
PROSPECTUS
, 1995
THE CRABBE HUSON SMALL CAP FUND (the "Fund") is a series of the Crabbe
Huson Mutual Funds Group, a Delaware business trust operating as an open-end
management investment company (the "Trust"). The Trust is a "series company,"
meaning that its shares are divided into series, each representing an interest
in a distinct portfolio of investments with different objectives.
The Fund, which is currently the only series of the Trust selling shares,
seeks to provide to shareholders long-term capital appreciation. The Fund
operates as a diversified, open-end management company and is treated as a
regulated investment company for federal income tax purposes.
This Prospectus concisely sets forth information about the Trust and the
Fund that an investor ought to know, and should be retained for future
reference. A Statement of Additional Information dated , 1995 has
been filed with the Securities and Exchange Commission (the "SEC"). It may be
obtained free of charge by calling (800) 541-9732. The Statement of Additional
Information, as it may be supplemented from time to time, is incorporated by
reference in this Prospectus.
THE FUND CHARGES NO SALES LOAD. SHARES OF THE FUND ARE SOLD AND REDEEMED
AT THEIR NET ASSET VALUE.
THE FUND CAN LEVERAGE FOR FUND ACTIVITY. THIS ACTIVITY COULD BE
CONSIDERED SPECULATIVE AND COULD RESULT IN GREATER COST TO THE FUND. SEE PAGE
.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION, PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
- --------------------------------------------------------------------------------
A COPY OF THIS PROSPECTUS MUST BE DELIVERED TO RESIDENTS OF CERTAIN
STATES PRIOR TO CONSUMMATION OF A SALE OF SHARES IN THE FUND.
- --------------------------------------------------------------------------------
1
<PAGE>
----------------
EXPENSE DATA
----------------
The following table sets forth certain information about the expenses
that a shareholder of the Fund will incur, directly or indirectly, when you
invest in the Fund:
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES: (as a percentage of offering price)
Maximum Sales Load on Purchases............................................................ 0%
Maximum Sales Load Imposed on Reinvested Dividends......................................... 0%
Deferred Sales Load........................................................................ 0%
Redemption Fees............................................................................ 0%
Exchange Fees.............................................................................. 0%
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
Management Fees (after waiver)(1).......................................................... .75%(1)
12b(1) Fees(2)............................................................................. .25%(2)
Other Expenses (after reimbursement)....................................................... .50%
Total Fund Operating Expenses (after reimbursement or waiver).............................. 1.50%
</TABLE>
EXAMPLE: You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return, (2) redemption at the end of each period and (3)
reinvestment of dividends and distributions and that the percentage
amounts listed under "Total Fund Operating Expenses" remain the same
each year.(3)
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS
- ------------------------------------------------------------ ------------------------------------------------------------
<S> <C>
$18.00 $56.00
</TABLE>
The purpose of the above table is to assist the investor in understanding
the various costs and expenses that an investor in the Fund will bear directly
or indirectly. Such costs and expenses include investment advisory fees and
administration costs. Additionally, a long-term shareholder should consider that
the fees and costs it will incur under the 12b-1 plan may result in the
shareholder paying more than the economic equivalent of the maximum front-end
sales charge permitted by the rules and regulations of the National Association
of Securities Dealers. See "Management of the Funds" and "Purchase of Shares."
The Fund is newly organized and has no operating history. The percentages
set forth in the table above under the caption "Other Expenses" have been
estimated based on the expected asset levels and the amount of expenses expected
to be incurred during the current fiscal period ending October 31, 1996.
- ------------------------
(1) For the fiscal year ending October 31, 1996, the Adviser has agreed to
reimburse the Fund to the extent that Total Fund Operating Expenses exceed
1.5%. Under this arrangement, the Adviser will not impose any management fee
or will reimburse the Fund for expenses incurred by the Fund in order to
limit Total Fund Operating Expenses to 1.5% of the Fund's average daily net
assets. If the Adviser did not agree to limit its fee or to reimburse Fund
expenses, the Total Fund Operating Expenses would be 1.75%, of which the
management fee would be 1.00%.
(2) The maximum 12b-1 distribution fee that can be charged is .25% of a Fund's
average annual net assets and assumes that the 12b-1 Plan of the Fund is in
effect for an entire year.
(3) THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
FUND EXPENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN
THOSE SHOWN. MOREOVER, WHILE THE TABLE ASSUMES A 5% ANNUAL RETURN, THE
FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL RETURN
GREATER OR LESSER THAN 5%.
2
<PAGE>
--------------------------
PROSPECTUS SUMMARY
--------------------------
The information below is qualified in its entirety by the detailed
information appearing elsewhere in this Prospectus and in the Trust's Statement
of Additional Information.
The Fund seeks to provide long-term capital appreciation. It pursues this
objective through a flexible policy of investing in a diversified portfolio of
carefully selected stocks that have small market capitalization.
The Fund is a separate series of the Trust, which is an open-end
management company. Currently, the Trust has only one series of shares (this
Fund), no par value, but it is anticipated that the Trust will add additional
series. Each series shall have, however, its own investment objective(s) and
policies designed to meet specific investment goals.
The Fund will operate as a diversified, open-end investment management
company. The Fund is managed by The Crabbe Huson Group, Inc. (the "Adviser").
State Street Bank and Trust Company ("State Street") provides administrative
services to the Fund. State Street is also the Fund's transfer agent (the
"Transfer Agent").
Shares of the Fund are distributed by Crabbe Huson Securities, Inc. (the
"Distributor"), an affiliate of the Adviser. There is no sales load payable in
connection with the sale of shares of the Fund. For information about how to
purchase shares of the Fund, see "HOW TO INVEST IN THE FUND." For information
about redemption and repurchase of shares, see "HOW TO SELL YOUR SHARES."
-------------------------------
SUMMARY OF RISK FACTORS
-------------------------------
The Fund is subject to the risks of investments in common stock,
principally that the prices of stocks can fluctuate dramatically in response to
company, market, or economic news. In addition, the Fund may invest up to 35% of
its total assets in securities issued by foreign issuers. The Fund commenced
operations and has a limited operating history. The Fund
may, from time to time, leverage the assets it has by using borrowed money to
increase its portfolio positions. For additional information about specific risk
factors associated with an investment in the Fund, see "FUNDAMENTAL POLICIES,"
and "SPECIAL RISK FACTORS TO BE CONSIDERED" in this Prospectus.
-------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES
-------------------------------------------
The Trust is a Delaware business trust operating as an open-end
management company. The Trust was formed October 13, 1995. The Trust has been
formed as a "series company." Each series operated by the Trust will have its
own investment objectives and policies. Currently, the Trust is only offering
for sale shares in the Fund. The investment objective of the Fund is set forth
below. There is no assurance that the Fund will achieve its investment objective
and the Fund's investment objective may be changed without a shareholder vote.
The Fund operates as an open-end, diversified, regulated investment
company. It commenced operations on . The Fund's primary
objective is long-term growth of capital through a flexible policy of investing
in a diversified portfolio of selected domestic and foreign securities
representing "special" situations, as described below (principally, common
stocks and, secondarily, preferred stocks and bonds). The production of
3
<PAGE>
current income is secondary to the primary objective. The Fund seeks to invest
up to 100%, and under normal conditions at least 65%, of its assets in
securities of companies that have small market capitalization (under
$1,000,000,000).
The Fund uses a basic value, contrarian approach in selecting its
investments. In its selection process, the Fund puts primary emphasis on balance
sheet and cash flow analysis and on the relationship between the market price of
a security and its value as a share of an ongoing business. These investments
represent "special" situations or opportunities that arise when companies, whose
long-term financial structure is intact, run into short-term difficulties that
present an opportunity to buy these companies' stocks at substantial discounts.
The Fund's basic value approach is based on the Adviser's belief that the
securities of many companies often sell at a discount from the securities'
estimated theoretical (intrinsic) value. The Fund attempts to identify and
invest in such undervalued securities, anticipating that capital appreciation
will be realized as the securities' prices rise to their estimated intrinsic
value. This approach, while not unique, contrasts with certain other methods of
investment analysis, which rely upon market timing, technical analysis, earnings
forecasts, or economic predictions.
The Adviser believes that common stock will generally, over the
long-term, offer the greatest potential for capital appreciation and
preservation of purchasing power, and common stocks will usually constitute at
least 65% of the Fund's investment portfolio. However, for temporary defensive
purposes, the Fund may reduce its ownership of common stock if, in the opinion
of the Fund, it would be assuming undue risk in its ownership of common stock.
In such a situation, the Fund could invest up to 100% of its assets in fixed
income securities, cash and cash equivalents. The fixed income securities in
which the Fund will invest in such a situation shall consist of any of the
following: corporate debt securities (bonds, debentures and notes), asset-backed
securities, bank obligations, collateralized bonds, loan and mortgage
obligations, commercial paper, preferred stocks, repurchase agreements, savings
and loan obligations and U.S. Government and agency obligations. At no time will
the Fund have in excess of 20% of its total assets invested in fixed income
securities rated below investment grade (BBB by Standard and Poor's ("S&P") and
Baa by Moody's Investors Service ("Moody's")) or in excess of 5% of its total
assets invested in fixed income securities that are unrated. The maturities of
the fixed income securities shall be three years or less.
By itself, investment in the Fund does not constitute a balanced
investment approach. Securities that the Adviser believes have the greatest
growth potential may be regarded as speculative, and an investment in the Fund
may involve greater risk than is inherent in other mutual funds. The Fund's
focus on small market capitalization stocks may cause its net asset value to be
more volatile than other funds with different strategies. Because the Fund
invests primarily in common stocks, it may be appropriate only for investors who
can afford a longer term investment horizon or perspective. For a further
description of the risks associated with an investment in the Fund, see "SPECIAL
RISK FACTORS TO BE CONSIDERED."
INVESTMENT RESTRICTIONS
The Fund's investment restrictions prohibit, among other things, the
investment of more than 5% of the Fund's total assets in the securities of any
one issuer, and prohibit the investment of more than 25% of the Fund's total
assets in any one industry (except U.S. Government securities). In addition to
common stock, the assets of the Fund will sometimes be invested in convertible
and nonconvertible preferred stocks and bonds, which may or may not be rated.
However, no more than 20% of the Fund's total assets may be invested in fixed
income or convertible securities which are rated below the fourth highest grade
by Moody's and S&P (Baa by Moody's or BBB by S&P) and no more than 5% of the
Fund's total assets may be invested in unrated fixed income or convertible
securities. Obligations rated below the fourth highest grade are considered to
have speculative characteristics. See "SPECIAL RISK FACTORS TO BE CONSIDERED."
The Fund's investment restrictions and policies are more fully described
4
<PAGE>
under "FUNDAMENTAL POLICIES" and in the Statement of Additional Information. All
policies of the Fund may be changed without a shareholder vote unless the change
would affect the Fund's Fundamental Policies as set forth in this Prospectus or
the Investment Restrictions set forth in the Statement of Additional
Information.
DIVIDENDS AND DISTRIBUTIONS
The Fund expects to declare and distribute to shareholders once a year,
usually in December, substantially all of its net investment income and net
realized capital gains, if any. The amount distributed will vary according to
the income received from securities held by the Fund and capital gains realized
from the sale of securities.
All distributions are paid and reinvested in additional shares of the
Fund at net asset value at the close of business on the record date, unless the
shareholder has elected to receive payments in cash.
---------------------------
FUNDAMENTAL POLICIES
---------------------------
The Fund has adopted a number of fundamental investment policies and
restrictions which may not be changed without a vote of the holders of "a
majority of the outstanding voting securities" of the Fund, as such term is
defined in the 1940 Act. For a listing of additional policies, see "INVESTMENT
RESTRICTIONS" in the Statement of Additional Information.
ISSUER AND INDUSTRY RESTRICTIONS The Fund's investment restrictions include a
prohibition on investing more than 5% of its total assets (at the time of the
purchase) in the securities of any one issuer. This policy however, does not
include investments in U.S. Government securities. The Fund is also prohibited
from investing more than 25% of its total assets in any one industry.
BORROWING RESTRICTIONS The Fund may from time to time increase its assets for
investment through bank borrowing. Such bank borrowing may be collateralized by
pledging the Fund's portfolio securities to the lending bank. In no case will
such borrowings exceed one-third of the value of the Fund's total assets
immediately after any such borrowing. If, for any reason, the current value of
the Fund's total assets falls below an amount equal to three times the amount of
its indebtedness from money borrowed, the Fund will, within three days (not
including Saturdays, Sundays and holidays), reduce its indebtedness to the
extent necessary to satisfy the one-third test.
Using borrowed funds to increase the amount of securities that may be
purchased is known as leverage. Investment gains realized with borrowed funds
that exceed the cost of such borrowings (including interest costs) will cause
the net asset value of Fund shares to increase more dramatically than would
otherwise be the case. On the other hand, leverage can cause the net asset value
of Fund shares to decrease more rapidly than normal if the securities purchased
with borrowed money decline in value or if the investment performance of such
securities does not cover the cost of borrowing.
FIXED INCOME SECURITIES The Fund may invest up to 20% of its total assets in
fixed income securities, including convertible stock, that are either unrated or
are rated less than Baa by Moody's or BBB by S&P, or in commercial paper that is
rated less than B-1 by Moody's or A- by S&P, although not more than 5% of the
Fund's total assets may be invested in fixed income securities that are unrated
(including convertible stock). Securities rated Baa by Moody's or BBB by S&P are
considered medium-grade, neither highly protected nor poorly secured, and they
may contain some elements of uncertainty over any great length of time and may
have certain speculative characteristics. Securities rated below Baa by Moody's
or BBB by S&P, commonly referred to as "junk bonds," and unrated securities (if
the Adviser has deemed these securities to be of a similar credit quality as
those securities rated below the fourth
5
<PAGE>
highest grade) must be considered predominantly speculative in nature and
subject to a significant risk of default as to payments of either principal or
interest, or both. A description of the ratings assigned to securities by
Moody's and S&P is attached to this Prospectus as Appendix A.
To the extent the Fund purchases cash equivalents, bank obligations, and
money market instruments, it will apply the same investment criteria to these
instruments as are applied to fixed income securities. Bank obligations will be
purchased only with respect to banks: (1) that have total assets in excess of
one billion dollars; (2) that are rated A or better by either Moody's or S&P; or
(3) whose deposits are insured by the Federal Depository Insurance Corporation.
The Fund will only invest in securities permitted by the SEC.
WHEN ISSUED AND/OR DELAYED DELIVERY The Fund may purchase and sell securities
on a when-issued and/or delayed-delivery basis. When-issued or delayed-delivery
transactions arise when securities are purchased or sold by the Fund, with
payment and delivery taking place in the future in order to secure what is
considered to be an advantageous price and yield to the Fund at the time of
entering into the transaction. When-issued securities are subject to market
fluctuations, and no interest accrues to a Fund until the time of delivery. The
value of the securities may be less at the time of delivery than the value of
the securities when the commitment was made. When a Fund engages in when-issued
and delayed-delivery transactions, it relies on the buyer or seller, as the case
may be, to consummate the sale. Failure to do so may result in the Fund missing
the opportunity of obtaining a price or yield considered to be advantageous. To
the extent any Fund engages in when-issued and delayed-delivery transactions, it
will do so for the purpose of acquiring portfolio securities consistent with its
investment objectives and policies, and not for the purpose of investment
leverage. The Fund may not commit more than 25% of its total assets to the
purchase of when-issued and delayed-delivery securities.
ILLIQUID SECURITIES The Fund may invest up to 10% of its total assets in
illiquid securities such as repurchase agreements with a maturity in excess of
seven days. Repurchase agreements are agreements under which a person purchases
a security and simultaneously commits to resell that security to the seller (a
commercial bank or recognized securities dealer) at an agreed upon price on an
agreed upon date within a number of days (usually not more than seven) from the
date of purchase. The resale price reflects the purchase price plus an agreed
upon market rate of interest that is unrelated to the coupon rate or maturity of
the purchased security. The Fund will engage in repurchase agreements only with
banks or broker-dealers whose obligations would qualify for direct purchase by
that Fund. A repurchase agreement involves the obligation of the seller to pay
an agreed-upon price, which obligation is, in effect, secured by the value of
the underlying security. All repurchase agreements are fully collateralized and
marked to market daily, and may therefore be viewed by the SEC or the courts as
loans collateralized by the underlying security. There are some risks associated
with repurchase agreements. For instance, in the case of default by the seller,
the Fund could incur a loss or, if bankruptcy proceedings are commenced against
the seller, the Fund could incur costs and delays in realizing upon the
collateral.
PUT, CALL OPTIONS The Fund may invest up to 10% of its total assets in put or
call options. This means that the Fund may write call options on securities it
owns or has the right to acquire, and may purchase put and call options on
individual securities written by others. However, the Fund may not write an
uncovered put or uncovered call option. Purchasing put or call options involves
greater risks than buying the underlying security because put and call options
expire in a relatively short period of time, which may result in the loss of the
entire investment in the put or call option upon expiration. In addition, if the
Fund writes a covered call option, that Fund may give up some or all of its
opportunity to profit from an increase in the market price of the underlying
security.
INTEREST RATE, STOCK MARKET FUTURES The Fund may invest up to 10% of its total
assets in interest rate futures and may invest up to 10% of its total assets in
stock market index futures (other than over the counter). The Fund may invest in
futures for hedging, rather than investment purposes and may either purchase or
sell futures for hedging
6
<PAGE>
purposes. Investments in futures, like purchases of put or call options, involve
a greater risk of loss of the entire investment upon expiration than purchases
of securities. Investments in futures and options are particularly dependent on
the Adviser's ability to accurately predict future yields and prices. If the
Adviser is incorrect in its predictions, if a Fund's positions are not well
correlated to the securities being hedged or if a Fund is unable to close out a
position due to an illiquid secondary market, the Fund will be exposed to the
risk of loss of the entire investment.
When required by SEC guidelines, if the Fund invests in options, futures
or repurchase agreements, or purchases or sells securities on a when-issued or
delayed-delivery basis, it will set aside liquid assets in a segregated account
with the Fund's custodian to secure its potential obligations under those
instruments or agreements.
OTHER INVESTMENT COMPANIES The Fund may invest in the securities of other
registered investment companies under the circumstances described under
"SECURITIES OF OTHER INVESTMENT COMPANIES" in the Statement of Additional
Information, and to the extent permitted under Section 12 of the 1940 Act
(currently, no more than 10% of the total assets of a Fund may be so invested,
no more than 5% of total assets of a Fund may be invested in the securities of
any other single investment company, and no more than 3% of the total
outstanding voting stock of an investment company may be purchased). Investments
in the securities of other registered investment companies are or may be subject
to duplicate expenses resulting from the management of the portfolio investment
company as well as those of the acquiring Fund.
------------------------------------------------
SPECIAL RISK FACTORS TO BE CONSIDERED
------------------------------------------------
NO GUARANTEE OF OBTAINING INVESTMENT OBJECTIVE There can be no guarantee or
assurance that the Fund's investment objective can or will be met.
INVESTMENT IN ISSUERS OF WHICH SHAREHOLDERS AND DIRECTORS OWN SHARES The Fund
may invest in securities of issuers of which the officers and directors, as a
group, may own beneficially more than five percent of the securities of that
issuer.
LIMITED OPERATING HISTORY OF FUND The Fund commenced operations on
and thus has a limited operating history.
FOREIGN SECURITIES The Fund may invest up to 35% of its total assets in foreign
securities, including securities issued by a foreign government. Such securities
may or may not be listed on a recognized domestic or foreign exchange. Moreover,
investments in foreign securities may be subject to special, extraordinary risks
including, but not limited to, foreign taxes and restrictions, illiquidity, and
fluctuations in currency values. In addition, the financial information
available regarding issuers of foreign debt securities is frequently not as
accurate or complete as would be available for a comparable domestic issuer. See
"SPECIAL INVESTMENT RISKS" in the Statement of Additional Information.
LEVERAGE The Fund may, from time to time, use borrowed money to increase its
portfolio positions. This practice is known as leverage, and it can cause the
net asset value of Fund shares to increase or decrease in value more
dramatically than would otherwise be the case.
PUT, CALL OPTIONS, STOCK INDEX FUTURES The Fund may invest up to 10% of its
total assets in put or call options and widely traded stock index futures, write
call options on securities the Fund owns or has the right to acquire or purchase
interest rate futures. The purchase of any of these instruments can result in
the entire loss of the investment in that particular instrument or, in the case
of writing covered options, can limit the opportunity to earn a profit on the
underlying security. The Fund cannot write uncovered put or call options.
7
<PAGE>
FIXED INCOME SECURITIES The Fund may invest up to 20% of its total assets in
fixed income securities, including convertible securities, that are either
unrated or rated below the fourth highest category by Moody's or S&P, although
not more than 5% of the Fund's total assets may be invested in fixed income
securities that are unrated. Such high-yielding, lower-rated securities,
commonly referred to as "junk bonds," present higher risk of untimely interest
and principal payments, default, and price volatility than higher-rated
securities, and may present problems as to liquidity and valuation. The value of
such securities will vary inversely with interest rates, and their value will
tend to reflect short-term economic and corporate developments to a greater
extent than higher quality fixed income securities.
INVESTMENT IN REITS The Fund may invest up to 25% of its total assets in real
estate investment trusts. Such REITs are pooled investment vehicles that invest
primarily in income producing real estate or real estate related loans or
interests. REITs are generally classified as equity REITs, mortgage REITs or a
combination of equity and mortgage REITs. Equity REITs invest the majority of
their assets directly in real property and derive income primarily from the
collection of rents. Equity REITs can also realize capital gains by selling
properties that have appreciated in value. Mortgage REITs invest the majority of
their assets in real estate mortgages and derive income from the collection of
interest payments. For federal income tax purposes, REITs attempt to qualify for
beneficial tax treatment by distributing 95% of their taxable income. If a REIT
is unable to qualify for such beneficial tax treatment, it would be taxed as a
corporation and distributions to its shareholders would therefore be reduced.
Investing in REITs involves certain unique risks in addition to those
risks associated with investing in the real estate industry in general. Equity
REITs may be affected by changes in the value of the underlying property owned
by the REITs, while mortgage REITs may be affected by the quality of any credit
extended. All REITs are dependent upon management skills, are not diversified,
and are subject to the risks of financing projects. REITs are subject to heavy
cash flow dependency, default by borrowers, self-liquidation, and the
possibilities of failing to qualify for the exemption from tax for distributed
income under the Internal Revenue Code of 1986, as amended (the "Code") and
failing to maintain their exemptions from the 1940 Act.
--------------------------------
MANAGEMENT OF THE FUND
--------------------------------
The Fund is managed by the Trust's Board of Trustees, and all powers and
authorities are exercised by or under the direction of the Board of Trustees.
Subject to the policies of, review by and overall control of the Board of
Trustees of the Trust the Adviser has been retained by the Fund to act as its
manager and investment adviser.
The Adviser is the investment adviser to the Fund under a Master
Investment Advisory Agreement dated . The Adviser was
incorporated in 1980 and has been engaged in the business of providing
investment advice since July 1, 1980. The address of the Adviser is 121 S.W.
Morrison, Suite 1415, Portland, Oregon 97204, mailing address: P.O. Box 6559,
Portland, Oregon 97228-6559.
James E. Crabbe and Richard S. Huson are controlling shareholders of the
Adviser. In addition, together they own 100% of the stock of the Distributor of
the Fund. Mr. Crabbe and Mr. Huson are primarily responsible for the day-to-day
management of the Adviser. Mr. Crabbe is President and a director of the Adviser
and Mr. Huson is Secretary and a director. Mr. Crabbe and Mr. Huson have been
primarily responsible for the operations of the Adviser since inception and have
served in various management positions with the Adviser.
8
<PAGE>
The Fund pays the Adviser a fee for its services that accrues daily and
is payable bi-monthly. Fees are based on a percentage of the average daily net
assets of the Fund, as follows:
<TABLE>
<CAPTION>
NET ASSET VALUE ANNUAL RATE
- -------------------------------------------------------------- ---------------
<S> <C>
First $100 million 1.00%
Next $400 million 0.85%
Amounts over $500 million 0.60%
</TABLE>
Fees paid by the Fund are higher than those paid by most other mutual funds. The
Adviser has undertaken to reimburse the Fund or to waive all or a portion of its
management fee to the extent that the total operating expenses exceed a stated
percentage per annum of the Fund's net asset value in effect with respect to the
Fund. This undertaking may be canceled upon 30 days written notice.
Additionally, many states require that mutual funds meet certain expense
limitations. The Fund, its Adviser, Distributor, and Transfer Agent intend to
qualify, meet, or conform to any individual state requirements while the Fund is
registered in that state.
Management of the Fund portfolio is handled on a day-to-day basis by
James E. Crabbe and John W. Johnson. Mr. Crabbe has managed the Fund's portfolio
since January 1, 1990. Mr. Johnson has been assisting in the management of the
Fund since August, 1995. From November, 1991 until May, 1995, Mr. Johnson was a
private investment banker. Between August, 1988 and November, 1991, Mr. Johnson
was director of equity investments for Kennedy Associates.
The Fund has retained State Street Bank and Trust Company to provide
certain administrative services to the Fund. Such services include preparation
of the Fund's federal, state and local tax returns, preparation of the Fund's
financial information and various other administrative services. For such
services, the Fund has agreed to pay State Street a fee based on the total
assets in the Crabbe Huson family of mutual funds managed by the Adviser for
which State Street performs administrative services. The fee shall be as
follows: First $500 million of assets managed by Adviser -- .06%; next $500
million -- .03%; thereafter -- .01%. The Fund will pay its pro rata share of
such fee.
---------------------
CONTROL PERSONS
---------------------
As of , owned 100% of the shares.
-------------------
NET ASSET VALUE
-------------------
The net asset value per share of the Fund is determined as of 4 p.m.,
Eastern Time, on each day during which securities are traded on the New York
Stock Exchange (the "NYSE"). The net asset value per share is computed by
dividing the value of all assets of the Fund, less its liabilities, by the
number of shares outstanding.
The value of securities listed or traded on a registered securities
exchange are valued at the last sale price on the day of the computation. This
includes over-the-counter securities for which last sale information is
available. Where last sale information is not available, the best bid price will
be used. Securities and assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or under the
direction of the Board of Trustees of the Fund. Such valuations and procedures
will be reviewed periodically by the Board of Trustees. The Fund may retain the
services of an outside pricing service to value its portfolio securities.
9
<PAGE>
----------------------------------------------------------------
WHEN TRANSACTIONS ARE RECORDED IN YOUR ACCOUNT
----------------------------------------------------------------
Your trade date is the date when transactions are recorded in your
account. Your shares are purchased, redeemed or exchanged at the net asset value
determined on your trade date.
If your purchase, redemption or exchange is received in good order by the
Transfer Agent prior to 4 p.m., Eastern Time, or the close of business on the
NYSE, whichever is earlier, your trade date is the date of receipt. If your
purchase, redemption or exchange is received in good order after 4 p.m., Eastern
Time, or the close of business on the NYSE, whichever is earlier, your trade
date is the next business day.
-----------------
HOW TO INVEST
-----------------
The Fund is designed so that shareholders have the option of making fund
investments within or outside of tax-advantaged retirement accounts.
Crabbe Huson Securities, Inc. (the "Distributor"), Portland, Oregon, an
affiliate of the Adviser and a corporation organized under the laws of Oregon,
is the distributor of the Fund's shares.
Shares of the Fund are offered continuously with no sales load at their
next determined net asset value after receipt of an order with payment by the
Transfer Agent. The Fund's shares are offered by the Distributor directly to the
public or through broker-dealers who enter into sales agreements with the
Distributor. The Fund reserves the right to reject any order to purchase shares.
SALES LOAD AND 12B-1 FEES
Although there are no sales charges levied directly by the Fund, approved
broker-dealers or other intermediaries, including financial institutions, may
charge the investor a transaction-based fee or other fees at either the time of
purchase or the time of redemption. Such charges may vary among broker-dealers
but in all cases will be retained by the broker-dealer and are not remitted to
the Fund, the Distributor, or the Adviser.
The Fund has adopted a distribution plan pursuant to rule 12b-1 under the
1940 Act (the "Plan"). Under the Plan, the Distributor is entitled to
reimbursement for its actual expenses incurred in the distribution and promotion
of the Fund's shares. Total reimbursement to the Distributor pursuant to the
Plan may not exceed .25% per annum of the average daily net assets of the Fund.
These expenses include, but are not limited to, expenses incurred in the
printing of prospectuses and statements of additional information for persons
other than then-current shareholders, expenses related to preparation and
printing of sales literature, and other distribution-related expenses. A portion
of the expenses reimbursed and paid to the Distributor will be paid by the
Distributor on a quarterly basis to broker-dealers that have entered into sales
agreements with the Distributor, and may be paid to investment executives of the
Distributor. The Fund will participate in joint distribution activities with
other funds managed by the Adviser. Distribution expenses that are not allocable
to a specific fund are allocated to a fund based on the percentage of new
accounts established to purchase shares in that fund during the fiscal year.
In the event expenses for the Fund in any one year exceed the maximum
reimbursable under the Plan, such expenses may not be carried forward to the
following year. The Fund will not be charged for any financing charges on any
unreimbursed expenses payable pursuant to the Plan.
MINIMUM INVESTMENT: The minimum initial investment in the Fund is
$2,000. Additional investments in the Fund must be in amounts of at least $500,
unless the investor is enrolled in the Fund's automatic
10
<PAGE>
investment program, the "Invest-O-Matic" program. For investors enrolled in
"Invest-O-Matic," additional investments of as little as $100 can be accepted by
the Fund. The Adviser, in its sole discretion, may waive any minimum purchase
requirements. The Fund reserves the right to vary the initial and subsequent
investment minimums at any time. The Fund will provide shareholders with written
notice of any such change.
PURCHASE BY CHECK OR CRABBE HUSON INSTANT ACCESS: Investors who desire
to purchase shares directly from the Fund should follow the instructions
indicated below.
- INITIAL INVESTMENT: Complete the Account Application. Mail your check
together with your completed account application to the following
address:
The Crabbe Huson Family of Funds
P.O. Box 8413
Boston, MA 02205-8587
Should you wish to overnight mail your investment, please use the following
address:
The Crabbe Huson Family of Funds
Two Heritage Drive
Quincy, MA 02171
- SUBSEQUENT INVESTMENTS: Detach and complete the stub attached to your
statement. Make a check payable to The Crabbe Huson Mutual Funds Group
Small Fund and write your shareholder account number on your check.
Mail your check together with your completed account application to
the following address: The Crabbe Huson Mutual Funds Group, P.O. Box
9135, Boston, MA 02205-8587.
An investor who desires to purchase additional shares may also do so
by calling 1-800-235-2442 and using the Fund's "INSTANT ACCESS"
automated information service. The purchase will occur the following
business day. Only investors who have provided current ACH bank
information can utilize this service.
In order to prevent lengthy processing delays caused by the clearing of
foreign checks, the Fund will only accept a foreign check which has been drawn
in U.S. dollars and has been issued by a foreign bank with a U.S. correspondent
bank. The name of the U.S. correspondent bank must be printed on the face of the
check. A charge may be imposed if any check used for investment does not clear.
INVESTING BY WIRE: In addition to the above-mentioned methods an
investor may use to purchase shares, the Transfer Agent will accept wire orders
for purchase of the Fund's shares prior to 4 p.m., New York time. A wire
purchase will be made at the offering price based on the next calculation of net
asset value of the shares after the purchase order has been received by the
dealer. Any dealer submitting an order is obligated to do so promptly. The
following wire instructions should be followed and include your investment
account number, your investor shareholder registration and indicate your desire
to purchase shares in the Fund.
State Street Bank & Trust Co.
225 Franklin Street
Boston, MA 02110
ABA No. 011 0000 28
FOR CREDIT: Crabbe Huson
DDA No. 99051039
11
<PAGE>
INVESTING THROUGH AN AUTHORIZED BROKER-DEALER: Fund shares are offered
without a front end sales load through selected broker-dealers who have entered
into sales agreements with the Distributor. Investors should contact an
authorized broker-dealer directly for appropriate purchase instructions, as well
as information pertaining to accounts and any service or transaction fees that
may be charged by them. It is the responsibility of dealers to transmit such
orders promptly.
CERTIFICATES: The issuance of shares is recorded on the books of the
Fund in full and fractional shares carried to the third decimal place. To avoid
additional operating costs, and for investor convenience, share certificates are
not issued.
RETIREMENT AND QUALIFIED PLANS
Investors may invest in the Fund through the Crabbe Huson IRA Pension
Plan. Investments in the Fund may also be made in connection with established
retirement plans. For further information on these plans, call the Transfer
Agent at (800) 541-9732.
In addition, an authorized broker-dealer may offer various tax deferred
retirement plans, including 401(k) plans or "tax sheltered accounts" under
section 403(b)(7) of the Internal Revenue Code. Investments in the Fund may also
be made in connection with established retirement plans. For further information
regarding these plans, contact your broker-dealer. If you are considering
adopting such a plan, you should consult with your own legal or tax adviser,
with respect to the establishment and maintenance of such a plan.
-------------------------------
HOW TO SELL YOUR SHARES
-------------------------------
Shares of the Fund may be redeemed at any time, without charge, at the
net asset value per share next determined after receipt by the Fund's Transfer
Agent of a redemption request in proper form from the investor. Payment for all
shares redeemed will be made by the Fund within seven days after receipt of a
redemption request in proper form except (as outlined by the 1940 Act) during a
period when 1) trading on the NYSE is restricted or the NYSE is closed for other
than customary weekends and holidays, 2) the SEC has by order permitted such
suspension for the protection of the Fund's shareholders, or 3) an emergency
exists making disposal of portfolio securities or valuation of net assets of the
Fund not reasonably practicable.
When a request for redemption is made shortly after the purchase of
shares, the Fund will not distribute the redemption proceeds until the check(s)
received for the shares purchased has cleared. Under such circumstances, it may
take as long as 15 days for a shareholder to receive the proceeds of a
redemption. Investors may avoid such delays by purchasing shares of the Fund
with a certified or cashier's check.
The market value of the securities in the Fund's portfolio is subject to
daily fluctuations, and the net asset value of the Fund's shares change
accordingly. Depending on the purchase price or other tax basis of the shares
redeemed, the investor may realize a capital gain or loss on each redemption.
REDEMPTION BY MAIL: To be in proper form, written requests for
redemption must 1) state the total dollar value of shares or the total number of
shares to be redeemed, 2) provide the investor's account number, and 3) be
signed by each registered owner exactly as the shares are registered. If the
proceeds of the redemption (a) exceed $15,000, (b) result from a 100% redemption
of the account, (c) are to be paid to a person other than the record owner, (d)
are to be sent to an address other than the address on the Transfer Agent's
records, or (e) are to be paid to a corporation, partnership, trust or
fiduciary, the signature(s) on the redemption request and on the certificates,
if any, or stock power must be guaranteed by an "eligible guarantor
institution." An "eligible guarantor institution" includes any bank, broker,
dealer or credit union that is a participant in the STAMP and Medallion
12
<PAGE>
signature program. The Transfer Agent reserves the right to request additional
information from, and make reasonable inquiries of, any eligible guarantor
institution. The Transfer Agent may require additional supporting documents for
redemptions made by corporations, executors, administrators, trustees, or
guardians. A redemption request will not be deemed to have been submitted until
the Transfer Agent receives all required documents in proper form. All documents
and correspondence concerning redemptions should be sent to the Fund's Transfer
Agent at the following address:
The Crabbe Huson Family of Funds
P.O. Box 8413
Boston, MA 02266-8413
REDEMPTION BY TELEPHONE OR WIRE: Redemptions may also be requested by
telephone. See "Redemption or Exchange by Telephone." Should you wish to receive
instructions on how to obtain your funds by wire, please call the Transfer Agent
at (800) 541-9732.
INVOLUNTARY REDEMPTION: In order to reduce expenses, the Fund may redeem
all of the shares of any shareholder, other than a shareholder which is an IRA
or other tax-deferred retirement plan, in any Fund account which has a net asset
value of less than $2,000 due to a redemption. The Fund will give such
shareholders 60 days' prior written notice in which to purchase sufficient
additional shares to avoid such redemption.
Additionally, the Fund may compel the redemption of shares if, in its
opinion, such action would prevent the Fund from becoming a personal holding
company, as defined by the Internal Revenue Code.
REDEMPTIONS (BY SECURITIES DEALERS): The Fund accepts redemption orders
by telephone from securities dealers who have entered into sales agreements with
the Distributor. Such redemption orders should be placed by the dealer with the
Transfer Agent. Shares will be redeemed at the net asset value determined on a
shareholder's trade date. The seven-day period within which the proceeds of the
redemption will be sent to the shareholder or shareholder's dealer will begin on
the day of the net asset value calculation, unless the Transfer Agent has not
received a written request in proper form from the dealer by the seventh day. In
that event, the proceeds of the redemption will be sent to the shareholder or
the shareholder's dealer immediately upon the Transfer Agent's receipt of the
written request in proper form. Dealers are responsible for the prompt
transmittal of redemption orders to the Transfer Agent. Dealers not affiliated
with the Fund may charge a fee for handling redemptions.
--------------------------------------
HOW TO EXCHANGE YOUR SHARES
--------------------------------------
The proceeds from the redemption of shares of the Fund may be used to
purchase shares of any other publicly available mutual fund with respect to
which the Adviser is the investment adviser. See "WHEN TRANSACTIONS ARE RECORDED
IN YOUR ACCOUNT."
BEFORE MAKING AN EXCHANGE TO ANOTHER FUND, THE INVESTOR SHOULD READ THE
PROSPECTUS RELATING TO THE FUND OR FUNDS INTO WHICH SHARES ARE BEING EXCHANGED.
The exchange of shares of the Fund for shares of another fund is treated
for federal and state income tax purposes as a sale on which an investor may
realize a capital gain or loss.
In order to protect shareholders from investors that may abuse the
exchange privilege to the detriment of the Fund and its shareholders, the Fund
reserves the right to terminate or modify the exchange privilege applicable to
all
13
<PAGE>
shareholders at any time upon 60 days' notice. This exchange privilege may be
temporarily or permanently suspended with respect to any shareholder that
engages in more than ten exchanges in any 12-month period.
Any written exchange request, in proper form, may be mailed to the
Transfer Agent at the following address:
The Crabbe Huson Family of Funds
P.O. Box 8413
Boston, MA 02266-8413
Should you wish to overnight mail your redemption request, please use the
following address:
The Crabbe Huson Family of Funds
Two Heritage Drive
Quincy, MA 02171
-------------------------------------------------
REDEMPTION OR EXCHANGE BY TELEPHONE
-------------------------------------------------
All or part of an investor's account may be redeemed or exchanged for
shares in any other publicly available mutual fund of the Crabbe Huson Family of
Mutual Funds by telephone if the investor has completed and placed on file with
the Transfer Agent the appropriate authorization.
The Fund and the Transfer Agent will employ reasonable procedures to
confirm that instructions communicated by telephone are properly authorized. The
failure of the Fund to do so may result in the Fund being liable for losses due
to unauthorized or fraudulent telephone transactions. However, the Fund and the
Transfer Agent will not be liable for executing telephonic instructions that are
deemed to be authorized after following reasonable procedures. The Fund has
instituted an "Instant Access" Automated Information Service which allows an
investor to make redemptions and exchanges by telephone by use of a 4-digit
Personal Identification Number.
Telephone redemptions and exchanges may be made by calling the Crabbe
Huson "Instant Access" number, (800) 235-2442. Pursuant to the "Instant Access"
system, an investor may redeem by check or by ACH redemption. If an investor
redeems by check, he or she must have on file with the Fund's Transfer Agent the
appropriate authorization. The check will always be mailed to the address listed
on the account. The daily maximum redemption is $100,000. An investor can make
an ACH redemption by telephone provided he or she has the appropriate telephone
authorization and ACH bank information on file with the Fund's Transfer Agent.
Exchanges or redemptions by telephone may become difficult or impossible
to effect during periods of severe economic or market changes. If a shareholder
is unable to reach the Fund by telephone, redemptions or exchanges may be
effected either through the broker-dealer from which the shares were purchased,
or by sending a written redemption or exchange request in proper form by mail
directly to the Fund's Transfer Agent at the following address:
The Crabbe Huson Family of Mutual Funds
P.O. Box 8413
Boston, MA 02266-8413
Should you wish to overnight mail your redemption request, please use the
following address:
The Crabbe Huson Family of Mutual Funds
Two Heritage Drive
Quincy, MA 02171
14
<PAGE>
--------------------------------
ALLOCATION OF BROKERAGE
--------------------------------
The Adviser is responsible for the overall management of the portfolio of
the Fund and determines which brokers will execute the purchases and sales of
the portfolio securities. The Adviser's foremost responsibility is to place
orders so as to achieve prompt execution at the most favorable price. However,
the Adviser may place orders with brokers that provide special brokerage and
research services or with brokers that promote the sale of the Fund's shares.
The Adviser is authorized, in recognition of the value of brokerage and research
services provided, to pay commissions to a broker in excess of the amounts which
another broker might have charged for effecting the same transaction.
A broker affiliated with the Adviser may be employed to execute brokerage
transactions on behalf of the Fund, as long as commissions paid are reasonable
and fair compared to the commissions received by other brokers in connection
with comparable transactions involving similar securities being purchased or
sold on a securities exchange during a comparable period of time. Additional
information about portfolio brokerage is included in the Statement of Additional
Information.
--------------------------------
SPECIAL INVESTOR SERVICES
--------------------------------
SHAREHOLDER INQUIRIES: Inquiries regarding specific information that
cannot be handled directly through an authorized broker-dealer of the Fund can
be directed to the Transfer Agent at The Crabbe Huson Family of Funds, P.O. Box
8413, Boston, MA 02266-8413. The Transfer Agent's toll-free telephone number is
(800) 541-9732.
APPLICATIONS: Applications for the Fund and the special programs listed
below are available through the Fund's Transfer Agent at The Crabbe Huson Family
of Mutual Funds, P.O. Box 8413, Boston, MA 02266-8413 or by calling the Transfer
Agent's toll-free telephone number (800) 541-9732.
THE CRABBE HUSON IRA (INDIVIDUAL RETIREMENT ACCOUNT): Certain
individuals who earn income may establish an Individual Retirement Account using
an IRA plan adopted by the Fund. These individuals may invest up to the lesser
of $2,000 or 100% of the individual's annual earnings in shares of the Fund. The
plan is also available for a Spousal IRA, transfer of an existing IRA, and for
certain rollover contributions from other qualified plans.
INVEST-O-MATIC: With Invest-O-Matic, a shareholder may make regular
monthly purchases of the Fund's shares in amounts as little as $100 via an
automatic debit to a bank account. Invest-O-Matic accounts may be modified or
terminated by the shareholder at any time.
GROUP INVESTMENT PLAN: Group Investment Plans are available for the
purchase of Fund shares by employee or other groups, using systematic payroll
deductions or other systematic payment arrangements. The Fund may, depending
upon the size of the plan, waive their minimum, initial and additional purchase
requirements.
CRABBE HUSON "INSTANT ACCESS": By calling (800) 235-2442, a current
investor can receive account information, purchase, redeem and exchange Fund
Shares. See "HOW TO INVEST IN THE FUND" and "REDEMPTION OR EXCHANGE BY
TELEPHONE."
15
<PAGE>
------------------------------------
SYSTEMATIC WITHDRAWAL PLAN
------------------------------------
A shareholder owning shares of the Fund with a total value of not less
than $5,000 may participate in a systematic withdrawal plan providing for fixed
payments to the shareholder of $100 or more at regular monthly intervals (the
"Systematic Withdrawal Plan"). The shareholder may realize a capital gain or
loss on each fixed-amount payment. Additional information concerning the
Systematic Withdrawal Plan is set forth in the Statement of Additional
Information. Shareholders desiring to participate in the Systematic Withdrawal
Plan may do so by completing and submitting the appropriate application to the
Transfer Agent. The Systematic Withdrawal Plan is voluntary and may be
terminated at any time by the shareholder.
-------------------------------------------------------------------------
CUSTODIAN, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
-------------------------------------------------------------------------
First Interstate Bank of Oregon, 1300 S.W. Fifth Avenue, Portland, Oregon
97201, acts as Custodian of the cash and securities of the Fund.
State Street Bank and Trust Company, 225 Franklin Street, Boston, MA
02110, 800-541-9732, acts as Transfer Agent and Dividend Disbursing Agent for
each of the Funds. The Transfer Agent uses Boston Financial Data Services as its
servicing agent in carrying out the Transfer Agent's responsibilities to the
Funds.
-----------------------------------------
LENDING OF PORTFOLIO SECURITIES
-----------------------------------------
Although the Fund has no present intention of doing so, it may loan
portfolio securities to broker-dealers or other institutional investors if at
least 100% cash (or cash equivalent) collateral is pledged and maintained by the
borrower. The Fund believes that the cash collateral would minimize the risk of
lending its portfolio securities. Such loans of portfolio securities may not be
made if the aggregate of such loans would exceed 10% of the value of the Fund's
total assets. If the borrower defaults, there may be delays in recovery of
loaned securities or even a loss of the securities loaned, in which case the
Fund would pursue the cash (or cash equivalent) collateral. While there is some
risk in loaning portfolio securities, loans will be made only to firms or
broker-dealers deemed by the Adviser, in consultation with the Adviser, to be of
good standing and will not be made unless, in the judgment of the Adviser, the
consideration to be earned from such loans would justify the risk. For
additional disclosure, see "INVESTMENT RESTRICTIONS -- LOANS OF PORTFOLIO
SECURITIES" in the Statement of Additional Information.
-------------------------
PORTFOLIO TURNOVER
-------------------------
The Fund generally does not trade in securities with the goal of
obtaining short-term profits, but when circumstances warrant, securities will be
sold without regard to the length of time the security has been held.
The Fund anticipates that, except in periods of unusual market
conditions, its annual portfolio turnover (the lesser of purchase or sales of
portfolio securities for the year divided by the monthly average of the value of
the portfolio securities owned by the Funds during the year) will generally
range between 20% and 150%. A higher portfolio turnover rate may involve
correspondingly greater transaction costs, which would be borne directly by the
Fund, as well as additional realized gains and/or losses to shareholders. See
"BROKERAGE ALLOCATION" and "TAXES" in the Prospectus.
16
<PAGE>
------
YIELD
------
The SEC has imposed a number of rules and policies regarding the
calculation of yield. The Fund intends to continually comply with these rules
and policies in their quotation of yield. For an explanation of the method of
yield calculation, see "CALCULATION OF PERFORMANCE DATA" in the Statement of
Additional Information.
------
TAXES
------
The Fund intends to qualify each year as a "regulated investment company"
under the Internal Revenue Code so it will not pay federal taxes on either
income or capital gains distributed to shareholders, although there can be no
assurance that they will so qualify.
The Fund would be subject to a 4% excise tax on a portion of its
undistributed income if they fail to meet certain annual distribution
requirements. The Fund intends to make distributions in a timely manner and,
accordingly, does not expect to be subject to the excise tax.
For federal income tax purposes, all Fund distributions are reportable as
adjusted gross income whether a shareholder elects to take them in cash or
reinvest them in additional shares of the Fund.
Distributions representing net investment income (including short-term
capital gains) are taxable as ordinary income. Distributions derived from net
long-term capital gains that are properly designated by the Fund as such will be
taxable to shareholders as long-term capital gains, whether received in cash or
reinvested in additional shares, regardless of how long the shareholder has held
the shares.
Under the Revenue Reconciliation Act of 1993 (the "Act"), potentially
favorable income tax treatment on distributions representing long-term capital
gains has been restored, effective for tax years beginning after 1992. Under the
Act, ordinary income may be taxed at marginal rates significantly (up to 11.6%)
higher than the marginal rate at which long-term capital gains are taxed.
Accordingly, distributions representing net long-term capital gains may be
subject to a reduced rate of tax to shareholders.
Shareholders may be subject to a $50 penalty under the Internal Revenue
Code and the Funds may be required to withhold and remit to the U.S. Treasury a
portion (31%) of any redemption or repurchase proceeds (including the value of
shares exchanged into another fund for whom the Adviser acts as Adviser) and of
any dividend or distribution on any account, where the shareholder failed to
provide a correct taxpayer identification number or to make certain required
certifications.
The foregoing relates only to federal income tax consequences for
shareholders who are U.S. citizens or corporations. Shareholders should consult
their own tax advisers regarding these matters, and regarding state, local, and
other applicable tax laws.
The Fund will issue annually, in January, a full report to each
shareholder detailing the tax status of each distribution to the shareholder
during the calendar year. The Fund does not assume any responsibility for the
calculation of any taxable gain (or loss) from the purchase and sale of Fund
shares, including purchases made with reinvested dividends and/or capital gains.
Every shareholder should consult with their tax adviser concerning such
calculations and tax consequences.
As mentioned elsewhere in this Prospectus, the Trust intends to add
additional series after completion of the Reorganization. In such case, each
Fund will be treated as a separate entity and thus the provisions of the
internal
17
<PAGE>
revenue code applicable to registered investment companies generally will be
applied to each fund separately instead of the Trust as a whole. Net Capital
Gains, net investment income and operating expenses will be determined
separately for each Fund.
---------------------------------
PERFORMANCE COMPARISONS
---------------------------------
The Fund may compare its performance to other mutual funds with similar
investment objectives and to the mutual fund industry as a whole, as quoted by
ranking services and publications of general interest. For example, these
services or publications may include Lipper Analytical Services, Inc.,
Schabacker's Total Investment Service, CDA Technologies, SEI, Frank Russell
Trust, BARRON'S BUSINESS WEEK, CHANGING TIMES, THE FINANCIAL TIMES, FINANCIAL
WORLD, FORBES, INVESTOR'S DAILY, MONEY, MORNINGSTAR MUTUAL FUNDS, PERSONAL
INVESTOR, THE ECONOMIST, THE WALL STREET JOURNAL, INDIVIDUAL INVESTOR, LOUIS
RUKEYSER'S WALL STREET, FINANCIAL WORLD, and USA TODAY. These ranking services
and publications rank the performance of the Fund against all other funds over
specified periods and against funds in specified categories.
The Fund may also either include presentations of, or may compare its
performance or the performance of the Fund's Adviser to, a recognized stock or
bond index, including the Standard & Poor's 500, Standard & Poor's Mid-Cap,
Value Line, Dow Jones, and NASDAQ stock indices. The comparative material found
in advertisements, sales literature, or in reports to shareholders may contain
past or present performance ratings. This is not to be considered representative
or indicative of future results or future performance.
The Fund may also compare its performance to other income-producing
securities such as (i) money market funds; (ii) various bank products (based on
average rates of bank and thrift institution certificates of deposit, money
market deposit accounts, and NOW accounts as reported by the Bank Rate Monitor
and other financial reporting services, including newspapers); and (iii) U.S.
treasury bills or notes. There are differences between these income-producing
alternatives and the Fund other than their yields, some of which are summarized
below.
The performance of the Fund will be calculated as required by the rules
of the SEC. The Fund may publish average annual total return quotations for
recent one-, five-, and ten-year periods that would equate the initial amount
invested to the ending redeemable value. These standardized calculations do not
reflect the impact of federal or state income taxes. Such performance data will
include the effect of any sales or distribution charges.
Investments in the Fund are not insured and an investor's yield is not
guaranteed. Although the yields of bank money market deposit accounts and NOW
accounts will fluctuate, principal will not fluctuate and is insured by the
Federal Deposit Insurance Corporation up to $100,000. Bank passbook savings
accounts normally offer a fixed rate of interest, and their principal and
interest are also guaranteed and insured. Bank certificates of deposit offer
fixed or variable rates for a set term. Principal and fixed rates are guaranteed
and insured. There is no fluctuation in principal value. Withdrawal of these
deposits prior to maturity will normally be subject to a penalty.
The Fund's investment results will vary from time to time depending on
market conditions, the composition of the Fund's portfolio, and operating
expenses of the Fund. These factors and possible differences in the methods used
in calculating investment results should be considered when comparing
performance information regarding the Fund to information published for other
investment companies and other investment vehicles. You should also consider
return quotations relative to changes in the value of the Fund's shares and the
risks associated with the Fund's investment objectives and policies. At any time
in the future, return quotations may be higher or lower than past return
quotations, and there may be no assurance that any historical return-quotation
will continue in the future.
18
<PAGE>
For more information about the calculation methods used to compute the
Fund's investment results, see "YIELD AND PERFORMANCE" in the Statement of
Additional Information.
-----------------
CAPITAL STOCK
-----------------
The Trust has authorized and issued a single class of no par value voting
common stock. The shares may be divided in separate series and sub-series at the
discretion of the Board of Trustees. Currently, only shares of the Fund are
available for sale, although the Trustees anticipate acquiring the assets and
liabilities of other Funds of the Crabbe Huson Family of Funds and selling nine
separate series. Shareholders of the Fund are entitled to one vote for each
dollar of net asset value held. Shareholders shall have the power to vote only
on the following matters: (1) the election of the initial trustees of the Trust,
the removal of trustees, and to the extent required by the 1940 Act, the
subsequent election of any trustee to fill any vacancy (although trustees may be
elected to fill vacancies or be removed by the Board of Trustees without a vote
of Shareholders, subject to certain restrictions in the 1940 Act); (2) any
contract entered into by the Trust to the extent Shareholders' approval is
required by the 1940 Act; (3) with respect to any termination or reorganization
of the Trust or any series thereof to the extent and as provided in the
Declaration of Trust; (4) with respect to any amendment of the Declaration of
Trust that adversely affects the rights of the shareholder; (5) with respect to
derivative actions whether or not a court action, proceeding or claim should or
should not be brought or maintained derivatively or as a class action on behalf
of the Trust or any series of the Trust or the Trust shareholders; (6) an
amendment of the Fund's Fundamental Policies as set forth in the Trust's
By-laws; and (7) with respect to such additional matters relating to the Trust
as may be required by the 1940 Act, the Declaration of Trust, the By-laws of the
Trust, any registration of the Trust with the Securities and Exchange Commission
(or any successor agency) or any state, or as the Trustees may consider
necessary or desirable. Shares issued are fully paid and nonassessable and have
no preemptive or conversion rights. Each share is entitled to participate
equally in dividends and distributions declared by its respective fund and in
the net assets of that Fund upon liquidation or dissolution after satisfaction
of outstanding liabilities. Amendment to the Declaration of Trust may be made
upon approval by shareholders holding the lesser of (i) 67% or more of the
shares entitled to vote on the matter, present in person at the meeting or
represented by proxy, if holders of more than 50% of the shares entitled to vote
on the matter are present, in person or by proxy, or (ii) a majority of the
shares issued and outstanding.
19
<PAGE>
-------------
APPENDIX A
-------------
BOND RATING AGENCIES
The following is a description of the bond ratings employed by Moody's
Investors Service, Inc. ("Moody's").
Aaa: Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or exceptionally stable margin, and
principal is secure. While the various protective elements are likely to change,
such changes as can be visualized are unlikely to impair the fundamentally
strong position of such issues.
Aa: Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present that
make the long-term risks appear somewhat larger than in Aaa securities.
A: Bonds rated A possess many favorable investment attributes and are to
be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present that
suggest a susceptibility to impairment sometime in the future.
Baa: Bonds rated Baa are considered as medium-grade obligations (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well.
Ba: Bonds rated Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B: Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.
Ca: Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C: Bonds rated C are the lowest rated class of bonds and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.
Moody's applies the numerical modifiers "1", "2", and "3" in each generic
rating classification from Aa through B. The modifier "1" indicates that the
security ranks in the higher end of its generic rating category; the modifier
"2" indicates a mid-range ranking; and the modifier "3" indicates that the issue
ranks in the lower end of its generic rating category.
The following is a description of the bond ratings employed by Standards
& Poor's Corporation ("S&P").
AAA: Bonds rated AAA are highest-grade obligations. Capacity to pay
interest and repay principal is extremely strong.
20
<PAGE>
AA: Bonds rated AA have a very strong capacity to pay interest and repay
principal, and differ from the highest rated issues only in small degree.
A: Bonds rated A have a strong capacity to pay interest and repay
principal, although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
BBB: Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in higher rated categories.
BB, B, CCC, CC, C: Debt rated BB, B, CCC, CC, and C is regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB indicates
the lowest degree of speculation and C the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
BB: Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
B: Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
BB or BB- rating.
CCC: Debt rated CCC has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial and economic
conditions to meet timely payment of interest and repayment of principal. In the
event of adverse business, financial, or economic conditions, it is not likely
to have the capacity to pay interest and repay principal. The CCC rating
category is also used for debt subordinated to senior debt that is assigned an
actual or implied B or B- rating.
CC: The rating CC is typically applied to debt subordinated to senior
debt that is assigned an actual or implied CCC rating.
C: The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating. The C rating may be
used to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.
C1: The rating C1 is reserved for income bonds on which no interest is
being paid.
D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
C: Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
21
<PAGE>
The S&P letter rating may be modified by the addition of a plus (+) or
minus sign (-), which is used to show relative standing within rating categories
between AA to CCC.
From time to time a bond rating agency may adjust its rating of a
particular bond issue. Subsequent to a Fund's purchase of a bond, such a bond
may have its rating reduced (down graded) to a category not permitted to be
owned by that Fund, or it may cease to be rated. Neither case would require that
a Fund eliminate such a bond from its portfolio. However, the Fund's Adviser
will consider such an event in determining whether or not the Fund should
continue to hold such a security.
22
<PAGE>
------------------------------------------------------
------------------------------------------------------
No person has been authorized to give any information or make any
representations not contained in this Prospectus, or in the Statement of
Additional Information incorporated herein by reference, in connection with the
offering made by this Prospectus and, if given or made, such representations
must not be relied upon as having been authorized by the Funds or their
Distributor. This Prospectus does not constitute an offering by the Funds or by
their Distributor in any jurisdiction in which such offering may not lawfully be
made.
-------------------
TABLE OF CONTENTS
-------------------
<TABLE>
<CAPTION>
PAGE
---
<S> <C>
EXPENSE DATA.................................... 2
PROSPECTUS SUMMARY.............................. 3
SUMMARY OF RISK FACTORS......................... 3
INVESTMENT OBJECTIVE AND POLICIES............... 3
FUNDAMENTAL POLICIES............................ 5
SPECIAL RISK FACTORS TO BE CONSIDERED........... 7
MANAGEMENT OF THE FUND.......................... 8
CONTROL PERSONS................................. 9
NET ASSET VALUE................................. 9
WHEN TRANSACTIONS ARE RECORDED IN YOUR
ACCOUNT........................................ 10
HOW TO INVEST................................... 10
HOW TO SELL YOUR SHARES......................... 12
HOW TO EXCHANGE YOUR SHARES..................... 13
REDEMPTION OR EXCHANGE BY TELEPHONE............. 14
ALLOCATION OF BROKERAGE......................... 15
SPECIAL INVESTOR SERVICES....................... 15
SYSTEMATIC WITHDRAWAL PLAN...................... 16
CUSTODIAN, TRANSFER AGENT AND
DIVIDEND-DISBURSING AGENT...................... 16
LENDING OF PORTFOLIO SECURITIES................. 16
PORTFOLIO TURNOVER.............................. 16
YIELD........................................... 17
TAXES........................................... 17
PERFORMANCE COMPARISONS......................... 18
CAPITAL STOCK................................... 19
APPENDIX A...................................... 20
</TABLE>
THE CRABBE HUSON
MUTUAL FUNDS GROUP
[LOGO]
The Crabbe Huson Small Cap Fund
PROSPECTUS
DECEMBER , 1995
------------------------------------------------------
------------------------------------------------------
<PAGE>
-----------------------------------
THE CRABBE HUSON MUTUAL FUNDS GROUP
-----------------------------------
THE CRABBE HUSON SMALL CAP FUND
-----------------------------------
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------
___________________, 1995
This Statement of Additional Information of The Crabbe Huson Mutual
Funds Group (the "Trust") is not a prospectus but should be read in
conjunction with the Prospectus of the Trust, dated the same date as this
Statement of Additional Information, which has been filed with the Securities
and Exchange Commission (the "SEC") and which is available without charge
upon request by calling (800) 541-9732 or writing the Fund at The Crabbe
Huson Mutual Funds Group, P.O. Box 8413, Boston, MA 02266-8413. This
Statement of Additional Information has been incorporated by reference into
the Prospectus.
<PAGE>
-----------------
TABLE OF CONTENTS
-----------------
Page No.
GENERAL INFORMATION AND HISTORY. . . . . . . . . . . . . . . . . . . . . . . 1
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
TRUSTEES AND OFFICERS OF THE TRUST. . . . . . . . . . . . . . . . . . . 1
SERVICES PROVIDED BY THE ADVISER . . . . . . . . . . . . . . . . . . . . . . 3
ADMINISTRATION CONTRACT. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
DISTRIBUTION PLAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES. . . . . . . . . . . . . 6
SYSTEMATIC WITHDRAWAL PLAN . . . . . . . . . . . . . . . . . . . . . . . . . 7
PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
GENERAL CONSIDERATIONS. . . . . . . . . . . . . . . . . . . . . . . . . 7
PORTFOLIO TURNOVER. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECURITIES OF OTHER INVESTMENT COMPANIES. . . . . . . . . . . . . . . . 12
LOANS OF PORTFOLIO SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . 12
PURCHASE AND REDEMPTION OF FUND SHARES . . . . . . . . . . . . . . . . . . . 13
PRICING OF SECURITIES BEING OFFERED. . . . . . . . . . . . . . . . . . . . . 14
CALCULATION OF PERFORMANCE DATA. . . . . . . . . . . . . . . . . . . . . . . 14
OTHER QUOTATIONS, COMPARISONS AND GENERAL INFORMATION . . . . . . . . . 15
DIVIDENDS, DISTRIBUTIONS AND TAXES . . . . . . . . . . . . . . . . . . . . . 15
GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
FOREIGN TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SPECIAL INVESTOR SERVICES. . . . . . . . . . . . . . . . . . . . . . . . . . 18
GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
COUNSEL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
CUSTODIAN, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT. . . . . . . . . . . 19
i
<PAGE>
ADDITIONAL INFORMATION REGARDING CERTAIN INVESTMENTS BY THE FUND . . . . . 20
GOVERNMENT SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . 20
SPECIAL INVESTMENT RISKS . . . . . . . . . . . . . . . . . . . . . . . . . . 20
FOREIGN SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
FUTURES CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Stock Index Futures. . . . . . . . . . . . . . . . . . . . . . . . 21
Interest Rate Futures. . . . . . . . . . . . . . . . . . . . . . . 21
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ii
<PAGE>
-------------------------------
GENERAL INFORMATION AND HISTORY
-------------------------------
On October 14, 1995, the Crabbe Huson Mutual Funds Group was organized as a
Delaware business trust operating as a open-end investment company pursuant to
a Declaration of Trust (the "Declaration of Trust"). The Trust intends to
offer various investment opportunities to the public in the form of various
series of its shares. Each series will offer investors a distinct portfolio of
investments and different objectives. Shareholders of any series will not
participate in the investment results of any other series, but rather, on a pro
rata basis, in the assets and income of the portfolio securities belonging to
their own series. The Crabbe Huson Small Cap Fund is currently the only series
being offered to the public by the Trust (the "Fund"). The Trust intends,
however, to enter into separate agreements and plans of reorganization and
liquidation (the "Reorganization") whereby the Trust will acquire the assets
and liabilities of The Crabbe Huson Special Fund, Inc., The Crabbe Huson Real
Estate Investment Fund, Inc., The Crabbe Huson Equity Fund, Inc., The Crabbe
Huson Asset Allocation Fund, Inc., The Oregon Bond Fund, Inc., The Crabbe Huson
Income Fund, Inc., The Crabbe Huson U.S. Government Income Fund, Inc. and The
Crabbe Huson U.S. Government Money Market Fund, Inc. (the "Acquired Funds").
It is anticipated that the assets of the Acquired Funds will be transferred to
the Trust in May, 1996, at which time the Trust will begin to sell shares of
the Acquired Funds to the public.
----------
MANAGEMENT
----------
The Trustees and officers of the Trust are listed below, together with
information about their principal business occupations during at least the last
five years. Each of the individuals holds the equivalent position with the
Acquired Funds. The Crabbe Huson Group, Inc. is the Investment Adviser for the
Fund and the Acquired Funds (the "Adviser"). Crabbe Huson Securities, Inc. acts
as the Fund's distributor (the "Distributor").
TRUSTEES AND OFFICERS OF THE TRUST
CHERYL A. BURGERMEISTER*, 44, is Treasurer of the Trust. Ms. Burgermeister
has been the Treasurer and Chief Financial Officer of the Adviser since
July, 1987. Her business address is 121 SW Morrison, Suite 1400,
Portland, Oregon 97204. Ms. Burgermeister is Treasurer and a Director
of the Distributor.
GARY L. CAPPS, 59, is a Trustee of the Trust. Mr. Capps has been the
Executive Director of the Bend Chamber of Commerce since July, 1992. He has
been a Director of Bank of the Cascades in Bend, Oregon since 1980, and has
served as Chairman of the Board since 1983. His business address is 63085 N.
Hwy 97, Bend, Oregon 97701.
1
<PAGE>
JAMES E. CRABBE,* 50, is a Trustee and Vice President of the Trust. He is
a Director and President of the Trust's Adviser. Mr. Crabbe has, since
February, 1980, served in various management positions with the Adviser. His
business address is 121 SW Morrison, Suite 1400, Portland, Oregon 97204.
RICHARD S. HUSON,* 55, is a Trustee and President of the Trust. Mr. Huson
is a chartered financial analyst. Mr. Huson is a Director and Secretary of the
Trust's Adviser. Mr. Huson has, since February, 1980, served in various
management positions with the Adviser. His business address is 16 NW Oregon
Avenue, Bend, Oregon 97709.
LOUIS SCHERZER, 74, is a Trustee of the Trust. Mr. Scherzer, since
January, 1990, has been President and a Director of Scherzer Partners, Inc., a
real estate development and management firm located at 5440 SW Westgate Drive,
Suite 222, Portland, Oregon 97221.
ROBERT L. SMITH, 57, is a Trustee of the Trust. Mr. Smith has been
President of VIP's Industries since 1968, and has been a Director of Western
Security Bank since 1980, a Director of KeyCorp since 1988 and a Director of
Blue Cross/Blue Shield of Oregon since 1984. His business address is 280
Liberty Street S.E., Salem, Oregon 97301.
CRAIG P. STUVLAND,* 40, is a Trustee and Secretary of the Trust. Mr.
Stuvland has been employed by the Adviser since June, 1987; he is currently an
Executive Vice President and a Director. Mr. Stuvland's business address is 121
S.W. Morrison, Suite 1400, Portland, Oregon 97204. Mr. Stuvland is President
and a Director of the Trust's Distributor.
RICHARD P. WOLLENBERG, 80, is a Trustee of the Trust. Mr. Wollenberg has
been Chairman, President and Chief Executive Officer of Longview Fibre Company
since 1978, and a Trustee of Reed College since 1962. His business address is
Longview Fibre Company, P.O. Box 606, Longview, Washington 98632.
WILLIAM WENDELL WYATT, JR., 45, is a Trustee of the Trust. He has been
Chief of Staff, Officer of the Governor, State of Oregon, since April, 1995.
Prior to joining the Governor's staff, Mr. Wyatt was President of the Oregon
Business Council between October, 1987 and April, 1995. His business address is
Office of the Governor, Chief of Staff - Gov. Kitzhaber, 254 State Capitol,
Salem, Oregon 97310-0370.
- -----------------
*The persons indicated are "interested persons" of the Trust, as defined in
the Investment Company Act of 1940 (the "1940 Act") as amended. They receive
no trustees' fees or salaries from the Trust.
2
<PAGE>
Under the Declaration of Trust, no annual or regular meeting of
shareholders is required. Thus, there will not ordinarily be an annual
shareholders' meeting (including for the purpose of electing trustees) unless
required by the Investment Company Act of 1940, as amended (the "Act"), or
unless a request to hold a meeting is properly made by at least 10 percent of
the shareholders of the Trust if all shareholders of the Trust are entitled to
vote on the matter or 10 percent of the affected series if such vote is on a
series by series basis. The Board of Trustees is responsible for the overall
management of the Trust, including general supervision and review of each
series' investment policies and activities. The Board of Trustees elects the
officers of the Trust who are responsible for supervising and administering the
Trust's day-to-day operations. The Trust has an audit committee that reviews
the reports and management letters of the auditors, reviews the terms of the
auditor's engagement and makes recommendations to the Board concerning the terms
of the auditor's engagement. The audit committee currently consists of Messrs.
Scherzer, Smith and Wyatt. The Trust currently pays each Trustee who is not an
"interested person" $150.00 per meeting.
The Trust also reimburses Trustees' expenses for attending shareholder and
Trustee meetings for Trustees who are not officers, directors, or employees of
the Adviser or the Distributor.
--------------------------------
SERVICES PROVIDED BY THE ADVISER
--------------------------------
The Adviser entered into a Master Investment Advisory Agreement dated
______________________ (the "Advisory Agreement") with the Trust. Pursuant to
the Advisory Agreement the Adviser has been retained by the Trust to render
management and investment advisory services to the Fund and to the Acquired
Funds as soon as the Reorganization is completed and shareholder approval of the
Reorganization and the Advisory Agreement is obtained from the shareholders of
each of the Acquired Funds. A subsequent series added to the Trust will become
part of the Advisory Agreement only upon approval by the Board of Trustees and
the shareholders of the new series. The Adviser was incorporated in 1980 and
has been engaged in the business of providing investment advice since July 1,
1980. The address of the Adviser is 121 SW Morrison, Suite 1425, Portland,
Oregon 97204; mailing address: P.O. Box 6559, Portland, Oregon 97228-6559.
James E. Crabbe and Richard S. Huson are controlling shareholders of the
Adviser. Together, they also own 100% of the stock of the Trust's
Distributor. Mr. Crabbe is President and a Director of the Adviser and Mr.
Huson is Secretary and a Director. They are primarily responsible for the
day-to-day management of the Adviser. Mr. Crabbe and Mr. Huson have been
primarily responsible since the inception of
3
<PAGE>
the Adviser. Both Mr. Crabbe and Mr. Huson have served in various
management positions with the Adviser since 1980. Mr. Crabbe and Mr. Huson
are members of the Trust's Board of Trustees and are officers of the Trust.
The Fund pays the Adviser a fee for its services that accrues daily and is
payable bi-monthly. Fees are based on a percentage of the average net assets of
the Fund, as follows:
NET ASSET VALUE ANNUAL RATE
--------------- -----------
First $100 Million . . . . . . . . . . . . . . . . . . . 1.00%
Next $100 Million . . . . . . . . . . . . . . . . . . . 0.85%
Amounts Over $500 Million . . . . . . . . . . . . . . . 0.60%
The Adviser has agreed to waive its fee and/or reimburse the Fund for the
amount, if any, by which the total operating expenses of the Fund (including the
Adviser's compensation and any amounts paid pursuant to the Rule 12b-1 plan) for
any fiscal year exceed a certain annual rate applied to the average daily net
assets of the Fund. The annual rate in effect is 1.5% of the average daily net
assets of the Fund. This waiver may be withdrawn at any time upon 30 days'
written notice to the shareholders of the Fund. Even in the event of
discontinuance of this agreement, the Fund may still be subject to the laws of
certain states, which require that if a mutual fund's expenses (including
advisory fees but excluding interest, taxes, brokerage commissions and
extraordinary expenses) exceed certain percentages of average net assets, the
Fund must be reimbursed for such excess expenses.
Under the Advisory Agreement, the Adviser determines the structure of the
Fund's portfolio, the nature and timing of the changes in it, and the manner of
implementing such changes (subject to any directions it may receive from the
Fund's Board of Trustees); provides the Fund with investment advisory research
and related services for the investment of assets; furnishes (without expense to
the Fund) the services of such members of its organization as may be duly
elected officers or directors of the Fund; and pays all executive officers'
salaries and expenses. Additional information about the services provided by
the Adviser is described under "MANAGEMENT OF THE FUNDS" in the Prospectus.
-----------------------
ADMINISTRATION CONTRACT
-----------------------
The Trust has entered into an Administration Agreement (the "Agreement")
with State Street Bank and Trust Company ("State Street"). Pursuant to the
Agreement, State Street has agreed to assist the Trust in the performance of
certain administrative services, including, but not limited to (1) overseeing
the determination of the Fund's net asset value in accordance with the Board of
Trustee's policies, (2)
4
<PAGE>
preparation of each of the Fund's federal, state and local income tax
returns, (3) preparation of the Fund's financial information to be included
in the Fund's semi-annual and annual reports, proxy statements and other
communications to Fund shareholders. As compensation for its services, State
Street will be paid as follows, based on total average assets of all Funds,
including the Acquired Funds:
AVERAGE ASSETS ANNUAL FEE
-------------- ----------
First $500 Million . . . . . . . . . . . . . . . . . . . 0.06%
Next $500 Million . . . . . . . . . . . . . . . . . . . . 0.03%
Thereafter . . . . . . . . . . . . . . . . . . . . . . . 0.01%
-----------------
DISTRIBUTION PLAN
-----------------
Rule 12b-1 under the Act requires that any payments made by the Trust in
connection with financing the distribution of its shares may only be made
pursuant to a written plan describing all aspects of the proposed financing of
distribution, and also requires that all agreements with any person relating to
the implementation of the plan must be in writing. Because some of the payments
described below to be made by the Trust are distribution expenses within the
meaning of Rule 12b-1, the Trust has entered into a distribution agreement with
the "Distributor" pursuant to a distribution plan (the "Plan") adopted in
accordance with such Rule.
Rule 12b-1 requires that, in order for the Plan to be effective as to any
series, the Plan must be approved by a majority of the outstanding voting
securities of that series, and requires that the Plan, together with any related
agreements, be approved by a vote of the Trustees of the Trust who are not
interested persons of the Trust and who have no direct or indirect financial
interest in the operation of the Plan or in the agreements related to the Plan,
cast in person at a meeting called for the purpose of voting on such plan or
agreement. The Plan and any agreement related to it must provide, in substance:
(a) that it shall continue in effect for a period of more than one
year from the date of its execution or adoption only so long as such
continuance is specifically approved at least annually in the manner
described in the Rule;
(b) that any person authorized to direct the disposition of moneys
paid or payable by the Trust pursuant to the Plan or any related agreement
shall provide to the Trust's Board of Trustees, and the Trustees shall
review, at least quarterly, a written report of the amounts so expended and
the purposes for which such expenditures were made; and
5
<PAGE>
(c) in the case of the Plan, that it may be terminated as to the Fund
at any time by a vote of a majority of the members of the Board of Trustees
of the Trust who are not interested persons of the Trust and who have no
direct or indirect financial interest in the operation of the Plan or in
any agreements related to the Plan, or by a vote of a majority of the
outstanding voting securities of the applicable series.
The Plan may not be amended to increase materially the amount to be spent
for distribution by the applicable series without approval by the shareholders
of that series, and all material amendments to the Plan must be approved in the
manner described in the Rule.
The Trust may rely upon Rule 12b-1 only if the selection and nomination of
the Trust's disinterested Trustees is committed to the discretion of the
disinterested Trustees. The Trust may implement or continue a plan pursuant to
Rule 12b-1 only if the Trustees who vote to approve such implementation or
continuation conclude, in the exercise of reasonable business judgment and in
light of their fiduciary duties under state law, and under Sections 36(a) and
(b) of the 1940 Act, that there is a reasonable likelihood that the plan will
benefit the Fund and its shareholders. The Board of Trustees has concluded that
there is a reasonable likelihood that a distribution plan will benefit the Fund.
Pursuant to the provisions of the Plan, the Fund may pay up to .25% of its
average daily net assets to the Distributor to reimburse the Distributor for
actual expenses incurred in the distribution and promotion of the Fund's shares.
Expenses for which the Distributor will be reimbursed under the Plan
include, but are not limited to, expenses incurred in the printing of
prospectuses and statements of additional information for persons other than
then-current shareholders, expenses related to preparation and printing of sales
literature, and other distribution-related expenses. Additionally, compensation
will be paid out on a quarterly basis to the Distributor and to broker-dealers
which have entered into sales agreements with the Distributor, and may be paid
to investment executives of the Distributor.
---------------------------------------------------
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
---------------------------------------------------
As of _________, 1995, _______________________________ owns 100% of all the
authorized and outstanding shares of the Fund.
6
<PAGE>
--------------------------
SYSTEMATIC WITHDRAWAL PLAN
--------------------------
A shareholder owning or purchasing shares of the Fund having a net asset
value of $5,000 or more may participate in a systematic withdrawal plan
providing regular monthly payments in the amount of $100 or more from the shares
held in the Fund (the "Systematic Withdrawal Plan"). An application form
containing details of the Systematic Withdrawal Plan is available upon request
from State Street Bank & Trust Co., the Fund's transfer agent (the "Transfer
Agent"). The Plan is voluntary and may be terminated at any time by the
shareholders.
Income dividends and capital gain distributions on shares of the Fund held
in a Systematic Withdrawal Plan are automatically reinvested in additional
shares of the Fund at net asset value. A Systematic Withdrawal Plan is not an
annuity and does not and cannot protect against loss in declining markets.
Amounts paid to a shareholder from the Systematic Withdrawal Plan represent the
proceeds from redemptions of Fund shares, and the value of the shareholder's
investment in the Fund will be reduced to the extent that the payments exceed
any increase in the aggregate value of the shareholder's shares (including
shares purchased through reinvestment of dividends and distributions). If a
shareholder receives payments that are greater than the appreciation in value of
his or her shares, plus the income earned on the shares, the shareholder may
eventually withdraw his or her entire account balance. This will occur more
rapidly in a declining market. For tax purposes, depending upon the
shareholder's cost basis and date of purchase, each withdrawal will result in a
capital gain or loss. See "DIVIDENDS, DISTRIBUTIONS AND TAXES" in this
Statement of Additional Information and "TAXES" in the Trust's Prospectus.
----------------------
PORTFOLIO TRANSACTIONS
----------------------
GENERAL CONSIDERATIONS
The Adviser is responsible for decisions to buy and sell securities for the
Fund, the selection of brokers and dealers to effect the transactions and the
negotiation of brokerage commissions, if any. Purchases and sales of securities
on a securities exchange are effected through brokers who charge a negotiated
commission for their services. Orders may be directed to any broker.
In the over-the-counter market, debt and equity securities are generally
traded on a "net" basis with dealers acting as principal for their own accounts
without a stated commission, although the price of a security usually includes a
profit to the dealer. A Fund may also pay a mark-up (sometimes referred to as a
dealer's "turn") in principal
7
<PAGE>
transactions and in transactions in the over-the-counter market. In
underwritten offerings, securities are purchased at a fixed price which
includes an amount of compensation to the underwriter, generally referred to
as the underwriter's concession or discount. On occasion, certain money
market instruments may be purchased directly from an issuer, in which case no
commissions or discounts are paid.
The primary considerations in the selection of a broker or dealer for
portfolio transactions are the availability of the desired security and the
prompt execution of orders in an effective manner at the most favorable prices.
Subject to those considerations, dealers that provide supplemental investment
research and statistical or other services to the Adviser may receive orders for
portfolio transactions by the Fund. Such services may include advice concerning
the value of securities; the advisability of investing in, purchasing, or
selling securities; the availability of securities; purchasers or sellers of
securities; and the furnishing of analysis and reports concerning industries,
economic facts and trends, and portfolio strategies. There is no formula for
such allocation. The research information received from brokers or dealers may
or may not be useful to the Fund and the Adviser in a number of ways. The
information may be in written form or may be obtained through direct contact
with individuals, and may include information on particular issuers as well as
market and general economic information. The Adviser will not be deemed to have
breached its obligations to the Fund solely by reason of having caused the Fund
to pay a broker or dealer an amount of commission for effecting a securities
transaction in excess of the amount of commission another broker or dealer could
have charged for effecting that transaction, if the Adviser has determined in
good faith that such amount of commission was reasonable in relation to the
value of the brokerage and research services provided to the Fund and to other
accounts of the Adviser.
In addition to placing the Fund's brokerage business with firms that
provide the above research, market and statistical services to the Adviser, the
Fund's brokerage business may also be placed with firms that promote the sale of
the Fund's shares, consistent with achieving the best price and execution.
Under the 1940 Act, persons affiliated with the Trust are prohibited from
dealing with the Trust as principals in the purchase or sale of securities of
the Trust. The Trust or broker-dealers affiliated with the Adviser will not
deal with affiliated parties, including the Distributor, in connection with
principal transactions.
The SEC has the authority to issue and amend regulations involving
transactions with affiliates of the Trust. While there is no indication that
it will do so, the SEC may issue regulations at any time that would prohibit
the Trust from
8
<PAGE>
executing portfolio transactions through an affiliate. The Trustees will
review all transactions with affiliates at least quarterly and determine the
overall reasonableness of any brokerage commissions paid.
Even though investment decisions for the Fund are made independently from
those of the other accounts managed by the Adviser or its affiliates, securities
of the same issuer may be purchased, held, or sold by the Fund and the other
accounts, because the same security may be suitable for all of them. When the
Fund and such other accounts are simultaneously engaged in purchase or sale of
the same security, efforts will be made to allocate price and amounts in an
equitable manner. In some cases, this procedure may adversely affect the price
paid or received by the Fund or the size of the position purchased or sold by
the Fund.
PORTFOLIO TURNOVER
The Fund generally does not trade in securities with the goal of obtaining
short-term profits, but when circumstances warrant, securities will be sold
without regard to the length of time the security has been held.
The Fund anticipates that, except in periods of unusual market conditions,
its annual portfolio turnover rate (the lesser of purchase or sales of portfolio
securities for the year divided by the monthly average of the value of the
portfolio securities owned by the Fund during the year) will generally range
between 20% and 150%. However, the rate of turnover will not be a limiting
factor when the Fund deems it desirable to purchase or sell securities. A
higher portfolio turnover rate may involve correspondingly greater transaction
costs (including brokerage commissions), which would be borne directly by the
Fund, as well as additional realized gains and/or losses to shareholders.
-----------------------
INVESTMENT RESTRICTIONS
-----------------------
The investment restrictions described below have been adopted by the Fund
as fundamental investment policies. These fundamental investment policies may
not be changed without the approval of the holders of the lesser of a majority
of the Fund's outstanding shares or 67% of the shares represented at a meeting
of shareholders at which the holders of more than 50% of the shares are
represented.
If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage beyond the specified limit resulting
from a change in the value of the portfolio of assets will not be considered a
violation of the investment restrictions relating to purchases of portfolio
securities.
9
<PAGE>
The Fund may not:
1. Invest more than 20% of its total assets in fixed income
securities, including convertible stock, that are rated less than
Baa by Moody's Investor Service or BBB by Standard & Poor's, or
in commercial paper that is rated less than B-1 by Moody's or A-
by S&P; not more than 5% of the Fund's total assets may be
invested in fixed income securities that are unrated.
2. Invest an amount that exceeds 5% of the value of the Fund's total
assets in the securities of any one issuer. This restriction
does not apply to holdings of U.S. Government securities.
3. Invest more than 25% of its total assets in any one industry.
This restriction does not apply to holdings of U.S. Government
securities.
4. Issue any senior securities, as defined in the 1940 Act.
5. Purchase the securities of any issuer for the purpose of
exercising control of management, and a Fund may not acquire or
own more than 10% of any class of the securities of any issuer.
6. Invest in any security that would subject the Fund to unlimited
liability, although the Fund may invest in interest rate and
stock market futures.
7. Underwrite the securities of other issuers or invest more than
10% of net assets in illiquid securities, such as repurchase
agreements with a maturity in excess of seven days.
Notwithstanding the above, the Fund may not invest in restricted
securities (including, but not limited to, nonpublicly traded
debt securities).
8. Invest in securities of other investment companies, except as set
forth in the Statement of Additional Information under
"SECURITIES OF OTHER INVESTMENT COMPANIES."
9. Purchase securities on margin.
10. Write uncovered put or uncovered call options.
10
<PAGE>
11. Purchase portfolio securities from or sell securities directly to
any of the Fund's, or the Adviser's, officers, directors, or
employees as a principal for their own account.
12. Purchase or sell commodities or commodity contracts (stock index
and interest rate futures will not be considered commodity
contracts).
13. Purchase or sell real estate or real estate mortgages, provided
that the Fund may invest in marketable securities, such as
obligations of the Government National Mortgage Association, that
are secured by real estate or interests therein or are issued by
companies which invest in real estate or interests therein, such
as publicly traded real estate investment trusts.
14. Purchase or sell interests in oil, gas, or other mineral
exploration or development programs.
15. Lend portfolio securities, except as described in the Statement
of Additional Information under "LOANS OF PORTFOLIO SECURITIES."
16. Make loans to other persons, provided that, for purposes of this
restriction, the acquisition of bonds, debentures, or other
corporate debt securities and investment in government
obligations, short-term commercial paper, certificates of
deposit, bankers' acceptances, and repurchase agreements will not
be deemed to be the making of a loan.
17. Borrow money, except as set forth in the Fund's Prospectus. In
no case will borrowing exceed one-third of the value of the
Fund's total assets immediately after any such borrowing. If,
for any reason, the current value of the Fund's total assets
falls below an amount equal to three times the amount of its
indebtedness for money borrowed, the Fund will, within three days
(not including Saturdays, Sundays and holidays), reduce its
indebtedness to the extent necessary to satisfy the one-third
test.
18. Invest more than 10% of the Fund's total assets in put or call
options.
11
<PAGE>
19. Invest more than 35% of the Fund's total assets in foreign
securities.
20. Invest more than 10% of the Fund's total assets in stock index
futures.
21. Invest more than 10% of the Fund's total assets in interest rate
futures contracts.
SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will not invest in securities of other investment companies (i.e.,
mutual funds), except in connection with a merger, consolidation,
reorganization, or acquisition of assets, and except to the extent permitted by
Section 12 of the 1940 Act (which currently provides that no more than 10% of
the total assets of a Fund may be invested in securities of other investment
companies, no more than 5% of the total assets of a Fund may be invested in
securities of any other single investment company, and no more than 3% of total
outstanding voting stock of any one investment company may be purchased). All
such securities must be acquired by a Fund in the open market in transactions
involving no commissions or discounts to a sponsor or dealer (other than
customary brokerage commissions). The issuers of investment company securities
acquired by the Fund are not required to redeem such securities in an amount
exceeding 1% of such issuers' total outstanding securities during any period of
less than 30 days, and the Fund will vote all proxies with respect to such
securities in the same proportion as the vote of all other holders of such
securities.
-----------------------------
LOANS OF PORTFOLIO SECURITIES
-----------------------------
Loans of portfolio securities involve the lending of securities to a
broker-dealer or institutional investor for its use in connection with short
sales, arbitrage or other securities transactions. Loans of portfolio
securities of the Fund will be made, if at all, in strict conformity with
applicable federal and state rules and regulations. The term of any such loans
will generally not exceed nine months.
The Fund will engage in loan transactions only if the following
conditions are met: (1) the Fund must receive at least 100% collateral in
the form of cash or cash equivalents (e.g., U.S. Treasury bills or notes)
from the borrower; (2) the borrower must increase the collateral whenever the
market value of the securities loaned (determined on a daily basis) rises
above the level of the collateral; (3) the Fund must be able to terminate the
loan after notice at any time; (4) the Fund must receive reasonable interest
on the loan or a flat fee from the borrower, as well as amounts equivalent to
any dividends, interest or other distributions on the securities
12
<PAGE>
loaned and any increase in the market value of the securities; (5) the Fund
may pay only reasonable custodian fees in connection with the loan; and (6)
voting rights on the securities loaned may pass to the borrower. If a
material event affecting the investment occurs, the Trustees of the Fund must
be able to terminate the loan and vote proxies or enter into an alternative
arrangement with the borrower to enable the Trustees to vote proxies.
Excluding items (1) and (2), these practices may be amended from time to time
as regulatory provisions dictate.
While there may be delays in recovery of loaned securities or even a loss
of the securities loaned should the borrower default, loans will be made only to
firms or broker-dealers deemed by the Adviser to be of good standing and will
not be made unless, in the judgment of the Adviser, the consideration to be
earned from such loans would justify the risk. Such loan transactions are
referred to in this section as "qualified loan transactions."
The purpose of a qualified loan transaction is to afford the Fund the
opportunity to continue to earn income on the securities loaned and, at the same
time, to earn income on the collateral held by it. In furtherance of this
purpose, the cash collateral acquired through qualified loan transactions may be
invested in any obligation in which a Fund is authorized to invest in accordance
with its investment objectives. The investment of the cash collateral in other
obligations subjects that investment, as well as the security loaned, to market
forces (i.e., capital appreciation or depreciation) just like any other
portfolio security.
--------------------------------------
PURCHASE AND REDEMPTION OF FUND SHARES
--------------------------------------
Information concerning the purchase and redemption of the Fund's shares is
set forth under "HOW TO INVEST IN THE FUND" and "HOW TO SELL YOUR SHARES" in the
Trust's Prospectus.
The Trust has entered into a distribution agreement with the Distributor.
This agreement obligates the Distributor to pay certain expenses in connection
with the offering of shares of the Fund, including expenses related to the
printing of prospectuses and statements of additional information, the
preparation and printing of sales literature, and other distribution-related
expenses. Shares of the Fund are offered continuously to the public by the
Distributor and broker-dealers who enter into sales agreements with the
Distributor. A portion of these costs are reimbursed by the Trust pursuant to
the Plan. Additional information about the distribution arrangements is
provided under "HOW TO INVEST IN THE FUNDS" in the Prospectus and "DISTRIBUTION
PLAN" in this Statement of Additional Information.
13
<PAGE>
-----------------------------------
PRICING OF SECURITIES BEING OFFERED
-----------------------------------
The price for shares of the Fund is the next determined net asset value of
the Fund per share.
The Fund's net asset value per share is computed by dividing the value of
the securities held by the Fund plus any cash or other assets (including
interest and dividends accrued but not yet received) minus all liabilities
(including accrued expenses) by the total number of shares outstanding at such
time. Expenses, including the fees payable to the Adviser, are accrued daily to
the extent practicable.
Dividends receivable are treated as assets from the date on which
securities go ex-dividend and interest on bonds is accrued daily.
-------------------------------
CALCULATION OF PERFORMANCE DATA
-------------------------------
The Trust may publish the Fund's average annual total return quotations for
recent one, five and ten-year periods computed by finding the average annual
compounded rates of return over the one, five and ten-year periods that would
equate the initial amount invested to the ending redeemable value.
The Trust may, from time to time, include in such advertisements or quotes
comparisons of the Fund's total return performance against one or more indices
of stock or bond performance. Such indices include, for example, the Standard &
Poor's 500 Stock Index and the Dow Jones Industrial.
For purposes of determining total return, the Fund uses the following
formula:
P(1+T) to the power of n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1, 5 or 10 year
periods (or fractional portion thereof)
Total return figures may also be published for recent one, five and ten-
year periods where the total return figures represent the percentage return
for the one, five and ten-year periods that would equate the initial amount
invested to
14
<PAGE>
the ending redeemable value. Total return percentages for periods of less
than one year are usually annualized.
Since the Fund's registration statement under the 1940 Act has been in
effect less than one year, the time period during which the registration
statement has been in effect will be substituted for the period stated.
OTHER QUOTATIONS, COMPARISONS AND GENERAL INFORMATION
From time to time, in advertisements, in sales literature, or in reports to
shareholders, the past performance of the Funds may be illustrated and/or
compared with that of other mutual funds with similar investment objectives, and
to stock or other relevant indices. For example, the Fund's total return may be
compared to averages or rankings prepared by LIPPER ANALYTICAL SERVICES, INC., a
widely recognized independent service which monitors mutual fund performance;
the STANDARD & POOR'S 500 STOCK INDEX, an unmanaged index of common stocks; or
the DOW JONES INDUSTRIAL AVERAGE, a recognized unmanaged index of common stock
of 30 industrial companies listed on the New York Stock Exchange.
In addition, the performance of the Fund may be compared to alternative
investment or savings vehicles and/or to indexes or indicators of economic
activity (E.G., inflation or interest rates). Performance rankings and listings
reported in newspapers or national business and financial publications, such as
BARRON'S, BUSINESS WEEK, CONSUMER'S DIGEST, CONSUMER'S REPORT, FINANCIAL WORLD,
FORBES, FORTUNE, INVESTOR'S BUSINESS DAILY, KIPLINGER'S, PERSONAL FINANCE
MAGAZINE, MONEY MAGAZINE, the NEW YORK TIMES, SMART MONEY, USA TODAY, U.S. NEWS
AND WORLD REPORT, THE WALL STREET JOURNAL and WORTH may also be cited (if the
Fund is listed in any such publication) or used for comparison, as well as
performance listings and rankings from various other sources, including
BLOOMBERG FINANCIAL SYSTEMS, CDA/WIESENBERGER INVESTMENT COMPANIES SERVICE,
DONOGHUE'S MUTUAL FUND ALMANAC, INVESTMENT COMPANY DATA, INC., JOHNSON'S CHARTS,
KANON BLOCH CARRE & CO., MICROPAL, INC., MORNINGSTAR, INC., SCHABACKER
INVESTMENT MANAGEMENT, TOWERS DATA SYSTEMS and WEISENBERGER INVESTMENT COMPANIES
SERVICE.
In addition, from time to time, quotations from articles from financial
publications, such as those listed above, may be used in advertisements, in
sales literature or in reports to shareholders of the Trust.
----------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
----------------------------------
GENERAL
The Fund intends to qualify as a regulated investment company under Part I
of Subchapter M of the Internal Revenue
15
<PAGE>
Code of 1986, as amended (the "Code"), but there is no assurance that it will
be able to do so. In general, to qualify for this treatment, the Fund must,
among other things, derive at least 90% of its gross income from dividends,
interest, gains from the sale of securities, and certain related income;
derive less than 30% of its gross income from the sale of securities held
less than three months; invest in securities within certain statutory limits;
and distribute to its shareholders at least 90% of its taxable income and 90%
of its net exempt interest income, if any, for the taxable year. If the Fund
does not so qualify, it will be treated for tax purposes as an ordinary
corporation and will receive no tax deduction for payments made to
shareholders.
As a regulated investment company for tax purposes, the Fund will be taxed
at regular corporate rates only on the undistributed portion of their net income
and capital gains.
If the Fund is required to pay federal income taxes on any retained net
capital gain (i.e., the excess of net long-term capital gains over net short-
term capital losses and any capital loss carryover), the Fund may elect to treat
such gain as having been distributed to its shareholders. The election will
cause such amounts to be taxed to the shareholders. Each shareholder may claim
a credit against his income taxes equal to such shareholder's proportionate
share of the federal income tax liability that is paid by the Fund, and will
generally be entitled to increase the adjusted tax basis of his shares in the
Fund by the difference between his pro rata share of such gains and his tax
credit.
The Code requires a regulated investment company to pay a nondeductible 4%
excise tax if such company does not distribute at least 98% of its ordinary
income, determined on a calendar year basis, and 98% of its capital gains,
determined, in general, on an October 31 year-end. The tax is generally applied
against the excess of this required distribution over the amount actually
distributed. The Fund intends to distribute an amount of income and capital
gains that is sufficient to avoid imposition of the 4% excise tax.
The value of any shares redeemed by the Fund or repurchased or otherwise
sold may be more or less than the shareholder's tax basis in the shares at the
time the redemption, repurchase or sale is made. Any gain or loss will
generally be taxable for federal income tax purposes. Any loss realized on the
sale, redemption or repurchase of shares of the Fund that have been held by the
shareholder for six months or less will be treated for tax purposes as a long-
term capital loss to the extent of any net long-term capital gains distributions
received by the shareholder with respect to such shares. Losses on the
redemption or on the sale of shares of the Fund are not deductible if, and to
the extent that, within a period beginning 30 days before the
16
<PAGE>
date of the redemption or sale and ending 30 days after such date, the
taxpayer acquires other Fund shares.
The writing of call options and other investment techniques and practices
which the Fund may utilize, as described in the Prospectus under "Fundamental
Policies," may create "straddles" for United States federal income tax purposes
and may affect the character and timing of the recognition of gains and losses
by the Fund. Such transactions may increase the amount of short-term capital
gain realized by the Fund, which is taxed as ordinary income when distributed to
shareholders.
Dividends paid by the Fund will qualify for the dividends-received
deductions for corporations to the extent they are derived from dividends paid
by domestic corporations.
Distributions, if any, of net long-term capital gains from the sale of the
Fund's securities are taxable to shareholders of the Fund at capital gains
rates, regardless of the length of time the shareholder has owned shares of the
Fund and regardless of whether the distributions are reinvested in shares of the
Fund.
The Trust is required by federal law to obtain from each of their
shareholders certification of the shareholder's correct taxpayer identification
number and certain other information. If a shareholder fails to certify such
number or to provide the necessary information to the Trust, or if the Trust
receives certain notices from the Internal Revenue Service, the Trust will be
required to withhold and pay to the United States Treasury 20% of any reportable
dividends or interest paid to such shareholder.
FOREIGN TAXES
As described below in "Special Investment Risks -- Foreign Securities,"
the Fund may be subject to foreign withholding taxes which would reduce the
return on its investments. Tax treaties between certain countries and the
United States may reduce or eliminate such taxes. It is expected that
shareholders of the Fund who are subject to United States federal income tax
will not be entitled to claim a federal income tax credit or deduction for
foreign taxes paid by the Fund.
Gains and losses realized by the Fund on certain transactions, including
sales of foreign debt securities and certain transactions involving foreign
currency, will be treated as ordinary income or loss for federal income tax
purposes to the extent, if any, that such gains or losses are attributable to
changes in exchange rates for foreign currencies. Accordingly, distributions
taxable as ordinary income will include the net amount, if any, of such foreign
17
<PAGE>
exchange gains and will be reduced by the net amount, if any, of such foreign
exchange losses.
If the Fund purchases shares in certain foreign investment entities, called
"passive foreign investment companies," it may be subject to United States
federal income tax on a portion of any "excess distribution" or gain from the
disposition of such share, even if such income is distributed as a taxable
dividend by such Fund to its shareholders. Additional charges in the nature of
interest may be imposed on either the Fund or its shareholders in respect of
deferred taxes arising from such distributions or gains.
If the Fund were to invest in a passive foreign investment company with
respect to which the Fund elected to make a "qualified electing fund" election,
in lieu of the foregoing requirement, the Fund might be required to include in
income each year a portion of the ordinary earnings and net capital gains of the
qualified electing fund, even if such amount were not distributed to the Fund.
-------------------------
SPECIAL INVESTOR SERVICES
-------------------------
The Trust offers certain shareholder services, which are designed to
facilitate investment in its shares. Each of the options is described in the
Trust's Prospectus. All of these special services may be terminated by either
the Fund or the shareholder without any prior written notice.
-------------------
GENERAL INFORMATION
-------------------
The Trust was formed under Delaware law on October 13, 1995.
The beneficial interests in the Trust are divided into shares, all without
par value and of one class. The Trustees have the authority from time to time
to divide the shares into two or more series and further into sub-series. The
Declaration of Trust currently contemplates the existence of nine separate
series. The first series is the Fund which will be effective as of the date of
this Statement of Additional Information. The other eight series will be
offered to the public upon completion of the Reorganization.
In each matter submitted to a vote of the shareholders, each holder of a
share of the Trust shall be entitled to one vote for each dollar of net asset
value held by the shareholder. Each series will vote as a separate class for
all matters, except as required by the 1940 Act. As to a matter which does not
affect the interest of a particular series, only the holders of shares of the
one or more affected series shall be entitled to vote.
18
<PAGE>
Dividends, distributions, and redemptions of shares of the Trust are to be
paid as set forth in the Prospectus. Shareholders do not have preemptive rights
or any conversion rights. Liquidation of the Fund must be approved by two-
thirds of the outstanding voting securities of the Fund.
-------
COUNSEL
-------
The law firm of Davis Wright Tremaine, Portland, Oregon, will pass on
certain legal matters in connection with the issuance of shares of the Fund and
will also act as counsel to the Fund and as counsel to the Adviser and the
Distributor in connection with their relationship with the Fund.
--------
AUDITORS
--------
KPMG Peat Marwick LLP, Portland, Oregon, acts as the Funds' independent
auditors. In such capacity, KPMG Peat Marwick LLP performs the annual audit of
each Fund's financial statements and assists in the preparation of tax returns.
-------------------------------------------------------
CUSTODIAN, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
-------------------------------------------------------
First Interstate Bank of Oregon serves as the custodian (the "Custodian")
of cash and securities of the Fund. State Street Bank & Trust Company serves as
the Fund's transfer agent and dividend-disbursing agent (the "Transfer Agent").
Boston Financial Data Services is the Transfer Agent's Servicing Agent in
carrying out the Transfer Agent's responsibilities to the Fund. The Transfer
Agent processes requests for the purchase or redemption of the Fund's shares,
sends statements of ownership to shareholders, and performs other administrative
duties on behalf of the Fund. Neither the Custodian nor the Transfer Agent
plays any role in establishing the investment policies of the Fund or in
determining which securities are to be purchased or sold by the Fund. All fees
and expenses of the Custodian and the Transfer Agent are paid by the Fund. For
its custodial services to the Fund, the Custodian receives monthly fees based
upon the Fund's month-end, aggregate net asset value, plus certain charges for
securities transactions. For its services as transfer agent and dividend-
disbursing agent, the Transfer Agent receives fees from the Fund based upon the
number of shareholder accounts maintained and the number of transactions
effected. The Custodian and the Transfer Agent are also reimbursed by the Fund
for out-of-pocket expenses, including clerical and administrative expenses
incurred by the Transfer Agent for services provided to the Fund.
19
<PAGE>
--------------------------------
ADDITIONAL INFORMATION REGARDING
CERTAIN INVESTMENTS BY THE FUND
--------------------------------
GOVERNMENT SECURITIES
The taxable fixed-income obligations in which the Fund may invest on a
short-term basis may include obligations issued or guaranteed by the United
States government, its agencies, instrumentalities, or authorities. Any such
obligations in which the Fund invests will consist of bills, notes, and bonds
issued by the United States Treasury or obligations issued by other agencies of
the United States Government. Examples of other government agencies in whose
obligations the Fund may invest include Federal Home Loan Intermediate Credit
banks, Federal Land Banks, Federal Home Loan Banks, and the Federal National
Mortgage Association. Obligations issued by the United States Treasury are
guaranteed by the full faith and credit of the United States Government.
Obligations issued by other federal agencies are direct obligations of such
agencies and are not guaranteed by the United States Government.
------------------------
SPECIAL INVESTMENT RISKS
------------------------
FOREIGN SECURITIES
The Fund may invest up to 35% of its total assets in foreign securities,
which may or may not be traded on an exchange. The Fund may purchase securities
issued by issuers in any country. Securities of foreign companies are
frequently denominated in foreign currencies, and the Fund may temporarily hold
uninvested reserves in bank deposits in foreign currencies. As a result, the
Fund will be affected favorably or unfavorably by changes in currency rates and
in exchange control regulations, and they may incur expenses in connection with
conversion between various currencies. Subject to its investment restrictions,
the Fund may invest in other investment companies that invest in foreign
securities. The Fund does not expect to invest more than 5% of its respective
assets in such investment companies.
Foreign securities may be subject to foreign government taxes that would
reduce the income yield on such securities. Certain foreign governments levy
withholding taxes against dividend and interest income. Although in some
countries a portion of these taxes is recoverable, the non-recovered portion of
any foreign withholding taxes would reduce the income the Fund received from any
foreign investments.
Foreign investments involve certain risks, such as political or economic
instability of the issuer or of the country of the issuer, difficulty of
predicting international trade patterns, and the possibility of imposition of
exchange
20
<PAGE>
controls. Such securities may also be subject to greater fluctuations
in price than securities of domestic corporations or of the United States
Government. In addition, the net asset value of the Fund is determined and
shares of the Fund can be redeemed only on days during which securities are
traded on the NYSE. However, foreign securities held by the Fund may be traded
on Saturdays or other holidays when the NYSE is closed. Accordingly, the net
asset value of the Fund may be significantly affected on days when an investor
has no access to the Fund.
In addition, there may be less publicly available information about a
foreign company than about a domestic company. Foreign companies generally are
not subject to uniform accounting, auditing and financial reporting standards
comparable to those applicable to domestic companies. There is generally less
government regulation of stock exchanges, brokers and listed companies abroad
than in the United States, and the absence of negotiated brokerage commissions
in certain countries may result in higher brokerage fees. With respect to
certain foreign countries, there is a possibility of expropriation,
nationalization, or confiscatory taxation, which could affect investment in
those countries.
FUTURES CONTRACTS
STOCK INDEX FUTURES
The Fund may invest up to 10% of its total assets in futures contracts of
broad based stock market indices. Purchasing such contracts involves greater
risks than buying the underlying securities because futures contracts expire in
a relatively short period of time and may result in the loss of the entire
investment in such contracts. The Fund intends to use such contracts primarily
for hedging and defensive purposes.
INTEREST RATE FUTURES
The Fund may invest up to 10% of its total assets in futures contracts on
fixed income securities such as U.S. Government Bonds, bills or notes. The Fund
intends to use such contracts for hedging or defensive purposes.
Interest rate futures contracts carry the risk of loss of the entire amount
of investment since they have a limited expiration date.
--------------------
FINANCIAL STATEMENTS
--------------------
To be filed by amendment.
21
<PAGE>
---------------------------
PART C
OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Index to Financial Statement.
Prior to the effective date of this Registration Statement, the necessary
financial statements will be filed by amendment.
(b) Exhibits:
1 Declaration of Trust
2 Bylaws
3 None
4 Copies of all instruments defining the rights of holders of the securities
being registered including, where applicable, the relevant portion of the
Declaration of Trust or bylaws of the registrant.
5 Form of Investment Advisory and Service Contract(1)
6(a) Form of Distribution Agreement(1)
6(b) Form of Selected Dealer Agreement(1)
7 None
8 Form of Custodial Agreement(1)
9(a) Form of Transfer Agent and Dividend-Disbursing Agent Agreement(1)
9(b) Form of Accounting Services Agreement(1)
10 Opinion and Consent of Davis Wright Tremaine, Counsel to Registrant(1)
11 Consent of Accountants(1)
12 See paragraph (a) of this Item 24
- -------------------
(1) To be supplied by amendment
<PAGE>
13 Written assurance from Registrant's initial shareholder that its purchase
was made for investment purposes without any present intention of redeeming
or reselling(1)
14 Retirement Plans(1)
15 Distribution Plan(1)
16 None
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Registrant does not have any subsidiaries and does not control any other company
or person. The Registrant is a recently organized Delaware business trust and
has not issued any securities as of the date of this Registration Statement. On
the effective date, ______________ will own 100% of the outstanding shares of
the Fund.
Item 26. NUMBER OF HOLDERS OF SECURITIES
Just prior to the effective date of this Registration Statement, it is expected
that there will be one record holder of shares of The Crabbe Huson Small Cap
Fund.
Item 27. INDEMNIFICATION
The Declaration of Trust of the Registrant contains the following provisions:
"LIMITATION OF LIABILITY. No personal liability for any debt or obligation of
the Trust shall attach to any Trustee of the Trust. Without limiting the
foregoing, a Trustee shall not be responsible for or liable in any event for any
neglect or wrongdoing of any officer, agent, employee, investment adviser,
subadviser, principal underwriter or custodian of the Trust, nor shall any
Trustee be responsible or liable for the act or omission of any other Trustee.
Nothing contained herein shall protect any Trustee against any liability to
which such Trustee would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office.
"Every note, bond, contract, instrument, certificate, Share or undertaking and
every other act or thing whatsoever executed or done by or on behalf of the
Trust or the Trustees or any of them in connection with the Trust shall be
conclusively deemed to have been executed or done only in or with respect to
their or his capacity as Trustees or Trustee and neither such Trustees or
Trustee nor the Shareholders shall be personally liable thereon.
- -------------------
(1) To be supplied by amendment
<PAGE>
"Every note, bond, contract, instrument, certificate or undertaking made or
issued by the Trustees or by any officers or officer shall recite that the same
was executed or made by or on behalf of the Trust by them as Trustees or Trustee
or as officers or officer and not individually and that the obligations of such
instrument are not binding upon any of them or the Shareholders individually but
are binding only upon the assets and property of the Trust, and may contain such
further recitals as they or he may deem appropriate, but the omission thereof
shall not operate to bind any Trustees or Trustee or officers or officer or
Shareholders or Shareholder individually.
"All persons extending credit to, contracting with or having any claim against
the Trust shall look only to the assets of the Trust for payment under such
credit, contract or claim; and neither the Shareholders nor the Trustees nor any
of the Trust's officers, employees or agents, whether past, present or future,
shall be personally liable therefor.
. . . . .
"INDEMNIFICATION. Subject to the exceptions and limitations contained in this
Section 4, every person who is, or has been, a Trustee, officer, employee or
agent of the Trust, including persons who serve at the request of the Trust as
directors, trustees, officers, employees or agents of another organization in
which the Trust has an interest as a shareholder, creditor or otherwise
(hereinafter referred to as a "Covered Person"), shall be indemnified by the
Trust to the fullest extent permitted by law against liability and against all
expenses reasonably incurred or paid by him in connection with any claim,
action, suit or proceeding in which he becomes involved as a party or otherwise
by virtue of his being or having been such a Trustee, director, officer,
employee or agent and against amounts paid or incurred by him in settlement
thereof.
"No indemnification shall be provided hereunder to a Covered Person:
"(1) against any liability to the Trust or its Shareholders by reason of a final
adjudication by the court or other body before which the proceeding was brought
that he engaged in willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office;
"(2) with respect to any matter as to which he shall have been finally
adjudicated not to have acted in good faith in the reasonable belief that his
action was in the best interests of the Trust; or
"(3) in the event of a settlement or other disposition not involving a final
adjudication (as provided in paragraph (a) or (b)) and resulting in a payment by
a Covered Person, unless there has been either a determination that such Covered
Person did not
<PAGE>
engage in willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office by the court or other body
approving the settlement or other disposition, or a reasonable determination,
based on a review of readily available facts (as opposed to a full trial-type
inquiry), that he did not engage in such conduct, such determination being made
by:
"(a) a vote of a majority of the Disinterested Trustees acting on the matter
(provided that a majority of the Disinterested Trustees then in office act on
the matter); or
"(b) written opinion of independent legal counsel.
"The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not affect any other
rights to which any Covered Person may now or hereafter be entitled, shall
continue as to a person who has ceased to be such a Covered Person and shall
inure to the benefit of the heirs, executors and administrators of such a
person. Nothing contained herein shall affect any rights to indemnification to
which Trust personnel other than Covered Persons may be entitled by contract or
otherwise under law.
"Expenses of preparation and presentation of a defense to any claim, action,
suit or proceeding subject to a claim for indemnification under this Section 4
shall be advanced by the Trust prior to final disposition thereof upon receipt
of an undertaking by or on behalf of the recipient to repay such amount if it is
ultimately determined that he is not entitled to indemnification under this
Section 4, provided that either:
"(a) such undertaking is secured by a surety bond or some other appropriate
security or the Trust shall be insured against losses arising out of any such
advances; or
"(b) a majority of the Disinterested Trustees acting on the matter (provided
that a majority of the Disinterested Trustees then in office act on the matter)
or independent legal counsel in a written opinion shall determine, based upon a
review of the readily available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the recipient ultimately will be found
entitled to indemnification.
"As used in this Section 4, a "Disinterested Trustee" is one (x) who is not an
Interested Person of the Trust (including anyone, as such Disinterested Trustee,
who has been exempted from being an Interested Person by any rule, regulation or
order of the Commission), and (y) against whom none of such actions, suits or
other proceedings or another action, suit or other proceeding on the same or
similar grounds is then or has been pending.
"As used in this Section 4, the words "claim," "action," "suit" or "proceeding"
shall apply to all claims, actions, suits, proceedings
<PAGE>
(civil, criminal, administrative or other, including appeals), actual or
threatened; and the words "liability" and "expenses" shall include without
limitation, attorneys' fees, costs, judgments, amounts paid in settlement,
fines, penalties and other liabilities."
"LIMITATION OF LIABILITY. No personal liability for any debt or obligation of
the Trust shall attach to any Trustee of the Trust. Without limiting the
foregoing, a Trustee shall not be responsible for or liable in any event for any
neglect or wrongdoing of any officer, agent, employee, investment adviser,
subadviser, principal underwriter or custodian of the Trust, nor shall any
Trustee be responsible or liable for the act or omission of any other Trustee.
Nothing contained herein shall protect any Trustee against any liability to
which such Trustee would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office.
"Every note, bond, contract, instrument, certificate, Share or undertaking and
every other act or thing whatsoever executed or done by or on behalf of the
Trust or the Trustees or any of them in connection with the Trust shall be
conclusively deemed to have been executed or done only in or with respect to
their or his capacity as Trustees or Trustee and neither such Trustees or
Trustee nor the Shareholders shall be personally liable thereon.
"Every note, bond, contract, instrument, certificate or undertaking made or
issued by the Trustees or by any officers or officer shall recite that the same
was executed or made by or on behalf of the Trust by them as Trustees or Trustee
or as officers or officer and not individually and that the obligations of such
instrument are not binding upon any of them or the Shareholders individually but
are binding only upon the assets and property of the Trust, and may contain such
further recitals as they or he may deem appropriate, but the omission thereof
shall not operate to bind any Trustees or Trustee or officers or officer or
Shareholders or Shareholder individually.
"All persons extending credit to, contracting with or having any claim against
the Trust shall look only to the assets of the Trust for payment under such
credit, contract or claim; and neither the Shareholders nor the Trustees nor any
of the Trust's officers, employees or agents, whether past, present or future,
shall be personally liable therefor. . . .
"INDEMNIFICATION. Subject to the exceptions and limitations contained in this
Section 4, every person who is, or has been, a Trustee, officer, employee or
agent of the Trust, including persons who serve at the request of the Trust as
directors, trustees, officers, employees or agents of another organization in
which the Trust has an interest as a shareholder, creditor or otherwise
(hereinafter referred to as a "Covered Person"), shall be indemnified by the
Trust to the fullest extent permitted by law
<PAGE>
against liability and against all expenses reasonably incurred or paid by him in
connection with any claim, action, suit or proceeding in which he becomes
involved as a party or otherwise by virtue of his being or having been such a
Trustee, director, officer, employee or agent and against amounts paid or
incurred by him in settlement thereof.
"No indemnification shall be provided hereunder to a Covered Person:
"(a) against any liability to the Trust or its Shareholders by reason of a final
adjudication by the court or other body before which the proceeding was brought
that he engaged in willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office;
"(b) with respect to any matter as to which he shall have been finally
adjudicated not to have acted in good faith in the reasonable belief that his
action was in the best interests of the Trust; or
"(c) in the event of a settlement or other disposition not involving a final
adjudication (as provided in paragraph (a) or (b)) and resulting in a payment by
a Covered Person, unless there has been either a determination that such Covered
Person did not engage in willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office by the
court or other body approving the settlement or other disposition, or a
reasonable determination, based on a review of readily available facts (as
opposed to a full trial-type inquiry), that he did not engage in such conduct,
such determination being made by:
"(i) a vote of a majority of the Disinterested Trustees acting on the matter
(provided that a majority of the Disinterested Trustees then in office act on
the matter); or
"(ii) written opinion of independent legal counsel.
"The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not affect any other
rights to which any Covered Person may now or hereafter be entitled, shall
continue as to a person who has ceased to be such a Covered Person and shall
inure to the benefit of the heirs, executors and administrators of such a
person. Nothing contained herein shall affect any rights to indemnification to
which Trust personnel other than Covered Persons may be entitled by contract or
otherwise under law.
"Expenses of preparation and presentation of a defense to any claim, action,
suit or proceeding subject to a claim for indemnification under this Section 4
shall be advanced by the Trust prior to final disposition thereof upon receipt
of an undertaking by or on behalf of the recipient to repay such amount if it is
<PAGE>
ultimately determined that he is not entitled to indemnification under this
Section 4, provided that either:
"(a) such undertaking is secured by a surety bond or some other appropriate
security or the Trust shall be insured against losses arising out of any such
advances; or
"(b) a majority of the Disinterested Trustees acting on the matter (provided
that a majority of the Disinterested Trustees then in office act on the matter)
or independent legal counsel in a written opinion shall determine, based upon a
review of the readily available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the recipient ultimately will be found
entitled to indemnification.
"As used in this Section 4, a "Disinterested Trustee" is one (x) who is not an
Interested Person of the Trust (including anyone, as such Disinterested Trustee,
who has been exempted from being an Interested Person by any rule, regulation or
order of the Commission), and (y) against whom none of such actions, suits or
other proceedings or another action, suit or other proceeding on the same or
similar grounds is then or has been pending.
"As used in this Section 4, the words 'claim,' 'action,' 'suit' or 'proceeding'
shall apply to all claims, actions, suits, proceedings (civil, criminal,
administrative or other, including appeals), actual or threatened; and the words
'liability' and 'expenses' shall include without limitation, attorneys' fees,
costs, judgments, amounts paid in settlement, fines, penalties and other
liabilities."
Insurance of Officers, Directors, Employers and Agents
"(k) INSURANCE. To purchase and pay for entirely out of Trust property such
insurance as they may deem necessary or appropriate for the conduct of the
business, including, without limitation, insurance policies insuring the assets
of the Trust and payment of distributions and principal on its portfolio
investments, and insurance policies insuring the Shareholders, Trustees,
officers, employees, agents, consultants, investment advisers, managers,
administrators, distributors, principal underwriters, or independent
contractors, or any thereof (or any person connected therewith), of the Trust
individually against all claims and liabilities of every nature arising by
reason of holding, being or having held any such office or position, or by
reason of any action alleged to have been taken or omitted by any such person in
any such capacity, including any action taken or omitted that may be determined
to constitute negligence, whether or not the Trust would have the power to
indemnify such person against such liability . . ."
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing
<PAGE>
provision or otherwise, the Registrant has been advised that in the opinion of
the Securities & Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liability (other than the payment
by the registrant of expenses incurred or paid by a director, officer or
controlling person in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of whether such indemnification
by it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
The Registrant has made application for insurance to indemnify the directors and
officers of the registrant against liabilities incurred as a result of serving
in such capacity.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
The business and other connections of the officers, directors of the
Registrant's investment advisor, The Crabbe Huson Group, Inc., are listed on the
Form ADV of The Crabbe Huson Group, Inc. as currently on file with the
Commission (File No. 801-15154), the text of which is incorporated herein by
reference. The following sections of such Form ADV are incorporated herein by
reference: (a) Items 1 and 2 of Part 2, and (b) Section 6, Business Background
of each Schedule D.
Item 29. PRINCIPAL UNDERWRITER
(a) Registrant's Distributor, Crabbe Huson Securities, Inc., also acts as
exclusive distributor of the Crabbe Huson Special Fund, Inc., The
Oregon Municipal Bond Fund, Inc., The Crabbe Huson Equity Fund, Inc.,
The Crabbe Huson Asset Allocation Fund, Inc., The Crabbe Huson U.S.
Government Money Market Fund, Inc., The Crabbe Huson Income Fund,
Inc., The Crabbe Huson U.S. Government Income Fund, Inc., and The
Crabbe Huson Real Estate Investment Fund, Inc., Oregon corporations
registered under the Securities Act of 1933 and the Investment Company
Act of 1940.
<PAGE>
b) The directors and officers of Crabbe Huson Securities, Inc., as of the
date of this Registration Statement, are as follows:
(1) (2) (3)
Positions and
Name and Principal Position and Office with Office with
Business Assress Crabbe Huson Securities, Inc. Registrant
- ---------------- ----------------------------- ----------
Craig R. Stuvland President and Director Secretary and
121 SW Morrison Director
Suite 1410
Portland, OR 97204
Cheryl Burgermeister Vice President, Secretary, Treasurer
121 SW Morrison Treasurer and Director
Suite 1410
Portland, OR 97204
(c) Not applicable.
Item 30. LOCATION OF ACCOUNTS AND RECORDS
The accounts, books and other documents required to be maintained by the Fund
pursuant to section 31(a) of the Investment Company Act of 1940 and the rules
thereunder will be maintained at the offices of the Fund at 121 SW Morrison,
Suite 1415, Portland, Oregon 97204, at the offices of the Custodian, First
Interstate Bank of Oregon, 1300 S.W. Fifth Avenue, Portland, Oregon 97201, at
the offices of Davis Wright Tremaine, the Fund's legal counsel, 1300 S.W. 5th
Avenue, Suite 2300, Portland, Oregon, 97201 and at the offices of State Street
Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts, the Fund's
transfer agent.
Item 31. MANAGEMENT SERVICES
Not applicable.
Item 32. UNDERTAKINGS
(a) Not applicable.
(b) The Registrant undertakes to file a post-effective amendment, using
financial statements which need not be certified, within four to six
months from the effective date of Registrant's 1933 Act Registration
Statement.
(c) The Registrant undertakes to furnish to each person to whom a
Prospectus is delivered a copy of the Registrant's latest annual
report to shareholders, upon request and without charge.
<PAGE>
(d) Registrant undertakes to call a shareholders meeting for the purpose
of voting upon a proposal to remove a trustee if requested to do so by
at least 10% of registrant's outstanding shares. Registrant also
undertakes to assist in communications among shareholders in
connection with such a meeting.
<PAGE>
SIGNATURES AND CERTIFICATION
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Portland, Oregon on October 14, 1995.
----
THE CRABBE HUSON SMALL CAP FUND
By:/s/ Richard S. Huson
------------------------------------
Richard S. Huson, President
We, the undersigned Directors and Officers of THE CRABBE HUSON SMALL
CAP FUND, do hereby constitute and appoint Richard S. Huson our true and lawful
attorney and agent, to do any and all acts and things in our name and behalf in
our capacities as Directors and Officers, and to execute any and all instruments
for us and in our name in the capacities indicated below, which said attorney
and agent may deem necessary or advisable to enable said Fund to comply with the
Securities Act of 1933, as amended, the Investment Company Act of 1940 and any
rules, regulations and requirements of the Securities and Exchange Commission,
in connection with this Registration Statement, including specifically, but not
without limitation, the power and authority to sign for us or any of us in our
names in the capacities indicated below, any and all amendments (including
post-effective amendment) hereto; and we do hereby ratify and confirm that said
attorney and agent shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on October 14, 1995, by the
----
following persons in the capacities indicated:
(1) Principal Executive Officers:
/s/ Richard S. Huson President
-----------------------------
Richard S. Huson
(2) Principal Accounting and
Financial Officer
/s/ Cheryl A. Burgermeister Treasurer
------------------------------
Cheryl A. Burgermeister
Page 1 - SIGNATURES AND CERTIFICATION
<PAGE>
(3) Directors:
/s/ Gary L. Capps Director
------------------------------
Gary L. Capps
/s/ James E. Crabbe Director
------------------------------
James E. Crabbe
/s/ Richard S. Huson Director
------------------------------
Richard S. Huson
/s/ William Wendell Wyatt Director
------------------------------
William Wendell Wyatt
/s/ Craig P. Stuvland Director
------------------------------
Craig P. Stuvland
/s/ Louis Scherzer Director
------------------------------
Louis Scherzer
/s/ Bob L. Smith Director
------------------------------
Bob L. Smith
/s/ Richard P. Wollenberg Director
------------------------------
Richard P. Wollenberg
Page 2 - SIGNATURES AND CERTIFICATION
<PAGE>
EXHIBIT 1
DECLARATION OF TRUST
OF
THE CRABBE HUSON MUTUAL FUNDS GROUP
<PAGE>
INDEX
ARTICLE I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
NAME AND DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. Name . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Definitions. . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
NATURE AND PURPOSE OF TRUST . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
REGISTERED AGENT; PRINCIPAL PLACE OF BUSINESS . . . . . . . . . . . . . 3
ARTICLE IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
BENEFICIAL INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1. Shares of Beneficial Interest. . . . . . . . . . . . . 3
Section 2. Establishment and Designation of Series. . . . . . . . 4
(a) Assets Belonging to Series . . . . . . . . . . . . . . . 5
(b) Liabilities Belonging to Series. . . . . . . . . . . . . 5
(c) Dividends. . . . . . . . . . . . . . . . . . . . . . . . 6
(d) Liquidation. . . . . . . . . . . . . . . . . . . . . . . 6
(e) Voting . . . . . . . . . . . . . . . . . . . . . . . . . 7
(f) Redemption by Shareholder. . . . . . . . . . . . . . . . 7
(g) Redemption by Trust. . . . . . . . . . . . . . . . . . . 7
(h) Net Asset Value. . . . . . . . . . . . . . . . . . . . . 7
(i) Transfer . . . . . . . . . . . . . . . . . . . . . . . . 8
(j) Equality . . . . . . . . . . . . . . . . . . . . . . . . 8
(k) Fractions. . . . . . . . . . . . . . . . . . . . . . . . 8
(l) Conversion Rights. . . . . . . . . . . . . . . . . . . . 9
(m) Termination of Sales . . . . . . . . . . . . . . . . . . 9
Section 3. Ownership of Shares. . . . . . . . . . . . . . . . . . 9
Section 4. No Preemptive Rights, Etc. . . . . . . . . . . . . . . 9
Section 5. Status of Shares and Limitation of Personal
Liability . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
THE TRUSTEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 1. Management of the Trust. . . . . . . . . . . . . . . . 10
Section 2. Qualification and Number . . . . . . . . . . . . . . . 10
Section 3. Term and Election. . . . . . . . . . . . . . . . . . . 10
Section 4. Resignation and Removal. . . . . . . . . . . . . . . . 11
Section 5. Vacancies. . . . . . . . . . . . . . . . . . . . . . . 11
Section 6. Ownership of Assets of the Trust . . . . . . . . . . . 11
ARTICLE VI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
POWERS OF TRUSTEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 1. Powers . . . . . . . . . . . . . . . . . . . . . . . . 12
(a) Investments. . . . . . . . . . . . . . . . . . . . . . . 13
(b) Disposition of Assets. . . . . . . . . . . . . . . . . . 13
(c) Ownership Powers . . . . . . . . . . . . . . . . . . . . 13
(d) Subscription . . . . . . . . . . . . . . . . . . . . . . 13
(e) Form of Holding. . . . . . . . . . . . . . . . . . . . . 13
(f) Reorganization, etc. . . . . . . . . . . . . . . . . . . 13
i
<PAGE>
(g) Compromise . . . . . . . . . . . . . . . . . . . . . . . 13
(h) Partnerships, etc. . . . . . . . . . . . . . . . . . . . 13
(i) Borrowing and Security . . . . . . . . . . . . . . . . . 13
(j) Guarantees, etc. . . . . . . . . . . . . . . . . . . . . 14
(k) Insurance. . . . . . . . . . . . . . . . . . . . . . . . 14
(l) Pensions, etc. . . . . . . . . . . . . . . . . . . . . . 14
Section 2. Vote of Trustees . . . . . . . . . . . . . . . . . . . 14
ARTICLE VII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
EXPENSES OF THE TRUST . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE VIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
INVESTMENT ADVISER, UNDERWRITER . . . . . . . . . . . . . . . . . . . . 15
Section 1. Investment Adviser . . . . . . . . . . . . . . . . . . 15
Section 2. Underwriter; Transfer Agent. . . . . . . . . . . . . . 15
Section 3. Custodian. . . . . . . . . . . . . . . . . . . . . . . 16
Section 4. Parties to Contract. . . . . . . . . . . . . . . . . . 16
ARTICLE IX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SHAREHOLDERS' VOTING POWERS AND MEETINGS. . . . . . . . . . . . . . . . 16
Section 1. Voting Powers. . . . . . . . . . . . . . . . . . . . . 16
Section 2. Meetings . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3. Record Dates . . . . . . . . . . . . . . . . . . . . . 17
Section 4. Quorum and Required Vote . . . . . . . . . . . . . . . 18
Section 5. Action by Written Consent. . . . . . . . . . . . . . . 18
Section 6. Inspection of Records. . . . . . . . . . . . . . . . . 18
Section 7. Additional Provisions. . . . . . . . . . . . . . . . . 18
ARTICLE X . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
LIMITATION OF LIABILITY AND INDEMNIFICATION . . . . . . . . . . . . . . 18
Section 1. Limitation of Liability. . . . . . . . . . . . . . . . 18
Section 2. Trustees' Good Faith Action, Expert Advice, No Bond
or Surety . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3. Liability of Third Persons Dealing with Trustees . . . 20
Section 4. Indemnification. . . . . . . . . . . . . . . . . . . . 20
Section 5. Shareholders . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE XI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 1. Termination of Trust . . . . . . . . . . . . . . . . . 22
Section 2. Reorganization . . . . . . . . . . . . . . . . . . . . 22
Section 3. Filing of Copies, References, Headings . . . . . . . . 23
Section 4. Trustees May Resolve Ambiguities . . . . . . . . . . . 24
Section 5. Amendments . . . . . . . . . . . . . . . . . . . . . . 24
Section 6. Governing Law. . . . . . . . . . . . . . . . . . . . . 24
Section 7. Provisions in Conflict with Law or Regulations. . . . . . . 25
ii
<PAGE>
DECLARATION OF TRUST
OF
THE CRABBE HUSON MUTUAL FUNDS GROUP
DECLARATION OF TRUST made as of this _____ day of _______________, 1995 by
the Trustees hereunder.
WHEREAS, the Trustees desire to establish a trust for the purpose of
carrying on the business of an open-end investment company; and
WHEREAS, in furtherance of such purpose, the Trustees and any successor
Trustees elected in accordance with Article V hereof are acquiring and may
hereafter acquire assets and properties which they will hold and manage as
trustees of a Delaware business trust with transferable shares in accordance
with the provisions hereinafter set forth; and
WHEREAS, this Trust is authorized to issue its shares of beneficial
interest in separate series, all in accordance with the provisions set forth in
this Declaration of Trust;
NOW, THEREFORE, the Trustees and any successor Trustees elected or
appointed in accordance with Article V hereof hereby declare that they will hold
all cash, securities and other assets and properties, which they may from time
to time acquire in any manner as Trustees hereunder, IN TRUST, and that they
will manage and dispose of the same upon the following terms and conditions for
the benefit of the holders from time to time of shares of beneficial interest in
this Trust as hereinafter set forth.
ARTICLE I
NAME AND DEFINITIONS
Section 1. NAME. This Trust shall be known as "The Crabbe Huson Mutual
Funds Group" and the Trustees shall conduct the business of the Trust under that
name or any other name or names as they may from time to time determine.
Section 2. DEFINITIONS. Whenever used herein, unless otherwise required
by the context or specifically provided below:
(a) The "Trust" shall mean the Delaware business trust established by this
Declaration of Trust, as amended from time to time;
(b) "Trustee" or "Trustees" shall mean each signatory to this Declaration
of Trust so long as such signatory shall continue in office in accordance with
the terms hereof, and all other individuals who at the time in question have
been duly elected or
DECLARATION OF TRUST - 1
<PAGE>
appointed and qualified in accordance with Article V hereof and are then in
office;
(c) "Shares" mean the shares of beneficial interest described in
Article IV hereof and include fractions of Shares as well as whole Shares;
(d) "Shareholder" means a record owner of Shares;
(e) The "1940 Act" refers to the Investment Company Act of 1940 (and any
successor statute) and the Rules and Regulations thereunder, all as amended from
time to time;
(f) The terms "Person," "Commission," "Interested Person," "Principal
Underwriter" and "Vote of a Majority of the Outstanding Voting Securities" shall
have the meanings given them in the 1940 Act;
(g) "Declaration of Trust" or "Declaration" shall mean this Declaration of
Trust as amended or restated from time to time;
(h) "By-Laws" shall mean the By-Laws of the Trust as amended from time to
time; and
(i) "Series" shall mean any of the separate series established and
designated under or in accordance with the provisions of Article IV.
ARTICLE II
NATURE AND PURPOSE OF TRUST
The Trust is a business trust of the type referred to in the Delaware
Business Trust Act, Chapter 38 of Title 12 of the Delaware Code (the "DBTA").
The Trustees shall file a certificate of trust in accordance with Section 3810
of the DBTA. The Trust is not intended to be, shall not be deemed to be, and
shall not be treated as, a general or a limited partnership, joint venture,
corporation or joint stock company, nor shall the Trustees or Shareholders or
any of them for any purpose be deemed to be, or be treated in any way whatsoever
as though they were, liable or responsible hereunder as partners or joint
venturers. The purpose of the Trust is to engage in, operate and carry on the
business of an open-end management investment company and to do any and all acts
or things as are necessary, convenient, appropriate, incidental or customary in
connection therewith.
This instrument shall be the governing instrument of the Trust and shall be
governed by and construed according to the laws of the State of Delaware. The
Trustees, on behalf of the Trust, may exercise all powers of trustees under the
DBTA. No provision of this Declaration shall, however, be effective to require
a waiver of compliance with any provision of the Securities Act of 1933, as
DECLARATION OF TRUST - 2
<PAGE>
amended, or the 1940 Act, or of any valid rule, regulation or order of the
Commission thereunder.
ARTICLE III
REGISTERED AGENT; PRINCIPAL PLACE OF BUSINESS
The name of the registered agent of the Trust is The Corporation Trust
Company and the registered agent's business address in Delaware is Corporation
Trust Center, 1209 Orange Street, Wilmington, Delaware 19801. The principal
place of business of the Trust is 121 S.W. Morrison Street, Suite 1425,
Portland, Oregon 97204. The Trustees may, without the approval of the
Shareholders, change the registered agent of the Trust and the principal place
of business of the Trust. In such event, the Trustees shall file a certificate
of amendment in accordance with Section 3810 of the DBTA.
ARTICLE IV
BENEFICIAL INTEREST
Section 1. SHARES OF BENEFICIAL INTEREST. The beneficial interests in the
Trust shall be divided into Shares, all without par value and of one class, but
the Trustees shall have the authority from time to time to divide the class of
Shares into two or more series of Shares ("Series"). Each Series of Shares,
including without limitation Series specifically established and designated in
Section 2 of this Article, shall be separate and distinct from any other Series
of the Trust. Each Series established hereunder shall be deemed to be a
separate and distinct operation. Each Series will maintain separate and
distinct records and the Trustees shall account for the assets of each Series
separately from the assets of other Series. The Trustees shall have exclusive
power without the requirement of shareholder approval to establish and designate
such separate and distinct Series, and to fix and determine the relative rights
and preferences as between the shares of the separate Series as to (i) rights of
redemption and the price, terms and manner of redemption, (ii) special and
relative rights as to dividends and other distributions and on liquidation,
(iii) sinking or purchase fund provisions, (iv) conversion rights, and (v)
conditions under which the several Series shall have separate voting rights or
no voting rights.
The number of authorized Shares is unlimited. The number of Shares of each
Series that may be issued is unlimited. The Trustees may issue Shares of any
Series for such consideration and on such terms as they may determine (or for no
consideration if pursuant to a Share dividend or split-up), all without action
or approval of the Shareholders. All Shares when so issued on the terms
determined by the Trustees shall be fully paid and nonassessable (but may be
subject to mandatory contribution back to
DECLARATION OF TRUST - 3
<PAGE>
the Trust as provided in subsection (g) of Section 2 of this Article). The
Trustees may classify or reclassify any unissued Shares or any Shares previously
issued and reacquired of any Series into one or more Series that may be
established and designated from time to time. The Trustees may hold as treasury
shares, reissue for such consideration and on such terms as they may determine,
or cancel, at their discretion from time to time, any Shares of any Series
reacquired by the Trust.
The Trustees may from time to time close the transfer books or establish
record dates and times for the purposes of determining the holders of Shares
entitled to be treated as such, to the extent provided or referred to in Section
3 of Article IX.
The establishment and designation of any Series in addition to those
established and designated in Section 2 to this Article shall be effective upon
the execution by a majority of the Trustees of an instrument setting forth such
establishment and designation and the relative rights and preferences of the
Shares of such Series, or as otherwise provided in such instrument. At any time
that there are no Shares outstanding of any particular Series previously
established and designated, the Trustees may by an instrument executed by a
majority of their number abolish that Series and the establishment and
designation thereof. Each instrument referred to in this paragraph shall have
the status of an amendment to this Declaration of Trust.
Any Trustee, officer or other agent of the Trust, and any organization in
which any such person is interested may acquire, own, hold and dispose of Shares
of any Series of the Trust to the same extent as if such person were not a
Trustee, officer or other agent of the Trust; and the Trust may issue and sell
or cause to be issued and sold and may purchase Shares of any Series from any
such person or any such organization subject only to the general limitations,
restrictions or other provisions applicable to the sale or purchase of Shares of
such Series generally.
Section 2. ESTABLISHMENT AND DESIGNATION OF SERIES. Without limiting the
authority of the Trustees set forth in Section 1 of this Article to establish
and designate any further Series, the Trustee hereby establishes and designates
nine Series: The Crabbe Huson Small-Cap Fund, The Crabbe Huson Special Fund,
The Crabbe Huson Real Estate Investment Fund, The Crabbe Huson Equity Fund, The
Crabbe Huson Asset Allocation Fund, The Crabbe Huson Oregon Municipal Bond Fund,
The Crabbe Huson Income Fund, The Crabbe Huson U.S. Government Income Fund, and
The Crabbe Huson U.S. Government Money Market Fund. The above-mentioned Series
and any Shares of any further Series that may from time to time be established
and designated by the Trustees shall (unless the Trustees otherwise determine
with respect to some further Series at the time of establishing and designating
the same) have the following relative rights and preferences:
DECLARATION OF TRUST - 4
<PAGE>
(a) ASSETS BELONGING TO SERIES. All consideration received by the Trust
for the issue or sale of Shares of a particular Series, together with all assets
in which such consideration is invested or reinvested, all income, earnings,
profits, and proceeds thereof, including any proceeds derived from the sale,
exchange or liquidation of such assets, and any funds or payments derived from
any reinvestment of such proceeds in whatever form the same may be, shall be
held by the Trustees in trust for the benefit of the holders of Shares of that
Series and shall irrevocably belong to that Series for all purposes, and shall
be so recorded upon the books of account of the Series. Such consideration,
assets, income, earnings, profits, and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation of such assets, and any funds or
payments which are not readily identifiable as belonging to any particular
Series (collectively "General Items"), the Trustees shall allocate to and among
any one or more of the Series established and designated from time to time in
such manner and on such basis as they, in their sole discretion, deem fair and
equitable. Any General Items so allocated to a particular Series shall belong
to that Series. Each such allocation by the Trustees shall be conclusive and
binding upon the Shareholders of all Series for all purposes.
(b) LIABILITIES BELONGING TO SERIES. The assets belonging to each
particular Series shall be charged with the liabilities in respect of that
Series and all expenses, costs, charges and reserves attributable to that
Series, and any general liabilities, expenses, costs, charges or reserves of the
Trust which are not readily identifiable as belonging to any particular Series
shall be allocated and charged by the Trustees to and among any one or more of
the Series established and designated from time to time in such manner and on
such basis as the Trustees in their sole discretion deem fair and equitable.
Each allocation of liabilities, expenses, costs, charges and reserves by the
Trustees shall be conclusive and binding upon the Shareholders of all Series for
all purposes. Any creditor of any Series may look only to the assets of that
Series to satisfy such creditor's debt.
Without limitation of the foregoing provisions of this Section, but subject
to the right of the Trustees in their discretion to allocate general
liabilities, expenses, costs, charges or reserves as herein provided, the debts,
liabilities, obligations and expenses incurred, contracted for or otherwise
existing with respect to a particular Series shall be enforceable against the
assets of such Series only, and not against the assets of any other Series.
Notice of this limitation on interseries liabilities shall be set forth in the
certificate of trust of the Trust (whether originally or by amendment) as filed
or to be filed in the Office of the Secretary of State of the State of Delaware
pursuant to the DBTA, and upon the giving of such notice in the certificate of
trust, the statutory provisions of Section 3804 of the DBTA relating to
limitations on interseries liabilities (and the statutory effect under
Section 3804 of setting forth such
DECLARATION OF TRUST - 5
<PAGE>
notice in the certificate of trust) shall become applicable to the Trust and
each Series.
The Trustees shall have full discretion, to the extent not inconsistent
with the 1940 Act and not inconsistent with generally accepted accounting
principles, to determine which items shall be treated as income and which items
as capital; and each such determination and allocation shall be conclusive and
binding upon the Shareholders.
(c) DIVIDENDS. Dividends and distributions on Shares of a particular
Series may be paid with such frequency as the Trustees may determine, which may
be daily or otherwise pursuant to a standing resolution or resolutions adopted
only once or with such frequency as the Trustees may determine, to the holders
of Shares of that Series, from such of the income and capital gains, accrued or
realized, from the assets belonging to that Series, as the Trustees may
determine, after providing for actual and accrued liabilities belonging to that
Series. All dividends and distributions on Shares of a particular Series shall
be distributed pro rata to the holders of Shares of that Series in proportion to
the number of Shares of that Series held by such holders at the date and time of
record established for the payment of such dividends or distributions, except
that in connection with any dividend or distribution program or procedure the
Trustees may determine that no dividend or distribution shall be payable on
Shares as to which the Shareholder's purchase order and/or payment have not been
received by the time or times established by the Trustees under such program or
procedure. Such dividends and distributions may be made in cash or Shares of
that Series or a combination thereof as determined by the Trustees or pursuant
to any program that the Trustees may have in effect at the time for the election
by each Shareholder of the mode of the making of such dividend or distribution
to that Shareholder. Any such dividend or distribution paid in Shares will be
paid at the net asset value thereof as determined in accordance with
Subsection 2(h) of this Article.
(d) LIQUIDATION. In the event of the liquidation or dissolution of the
Trust or any Series, the Shareholders of each Series that has been established
and designated and that has voted to be liquidated or dissolved, shall be
entitled to receive, when and as declared by the Trustees, the excess of the
assets belonging to that Series over the liabilities belonging to that Series.
The assets so distributable to the Shareholders of any particular Series shall
be distributed among such Shareholders in proportion to the number of Shares of
that Series held by them and recorded on the books of the Series. The
liquidation of any particular Series may be authorized by vote of a majority of
the Trustees then in office subject to the approval of two-thirds of the
outstanding voting securities of that particular Series.
DECLARATION OF TRUST - 6
<PAGE>
(e) VOTING. On each matter submitted to a vote of the Shareholders, each
holder of a Share shall be entitled to one vote for each dollar of net asset
value standing in his name on the books of each Series in which he owns Shares
which is entitled to vote on the matter. All Shares of each Series shall vote
as a separate class except as to voting for Trustees and as otherwise required
by the 1940 Act. As to any matter which does not affect the interest of a
particular Series, only the holders of Shares of the one or more affected Series
shall be entitled to vote.
(f) REDEMPTION BY SHAREHOLDER. Each holder of record of Shares of a
particular Series shall have the right at such times as may be permitted by the
Trust and as otherwise required by the 1940 Act to require the Trust to redeem
all or any part of his Shares of that Series at a redemption price equal to the
net asset value per Share of that Series next determined in accordance with
Subsection 2(h) of this Article IV after the Shares are properly tendered for
redemption, less any charge which may be imposed by the Trust in connection with
such redemption and described in the Trust's then current prospectus. Payment
of the redemption price shall be in cash; provided, however, that if the
Trustees determine, which determination shall be conclusive, that conditions
exist which make payment wholly in cash unwise or undesirable, the Trust may,
subject to the requirements of the 1940 Act, make payment wholly or partly in
securities or other assets belonging to the Series of which the Shares being
redeemed are part at the value of such securities or assets used in such
determination of net asset value. Notwithstanding the foregoing, the Trust may
postpone payment of the redemption price and may suspend the right of the
holders of Shares of any Series to require the Trust to redeem Shares of that
Series during any period or at any time when and to the extent permissible under
the 1940 Act.
(g) REDEMPTION BY TRUST. The Trustees may cause the Trust to redeem at
net asset value the Shares of any holder of Shares in any Series if the net
asset value of the Shares in such Series is less than $2,000 as a result of
Shareholder redemptions. No such redemption shall be affected unless the Trust
has given the holder at least sixty (60) days notice of its intention to redeem
such Shares and an opportunity to purchase a sufficient number of additional
Shares to bring the aggregate current net asset value of the holder's Shares in
the particular Series above $2,000. Upon redemption of Shares pursuant to this
Section, the Trust shall promptly cause payment of the full redemption price to
be made to the holder of the Shares so redeemed. The Trust may reject any
purchase order, refuse to transfer such Shares and compel redemption of Shares
if, in its opinion, any such rejected action would prevent the Trust from
becoming a personal holding company as defined by the Internal Revenue Code of
1986, as amended.
(h) NET ASSET VALUE. The net asset value per Share of any Series shall be
the quotient obtained by dividing the value of the net assets of that Series
(being the value of the assets belonging
DECLARATION OF TRUSR - 7
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to that Series less the liabilities belonging to that Series) by the total
number of Shares of that Series outstanding, all determined in accordance with
the methods and procedures, including without limitation those with respect to
rounding, established by the Trustees from time to time.
The Trustees may determine to maintain the net asset value per Share of any
Series at a designated constant dollar amount and in connection therewith may
adopt procedures not inconsistent with the 1940 Act for the continuing
declarations of income attributable to that Series as dividends payable in
additional Shares of that Series at the designated constant dollar amount and
for the handling of any losses attributable to that Series. Such procedures may
provide that in the event of any loss each Shareholder shall be deemed to have
contributed to the capital of the Trust attributable to that Series his pro rata
portion of the total number of Shares required to be canceled in order to permit
the net asset value per Share of that Series to be maintained, after reflecting
such loss, at the designated constant dollar amount. Each Shareholder of the
Trust shall be deemed to have agreed, by his investment in any Series with
respect to which the Trustees shall have adopted any such procedure, to make the
contribution referred to in the preceding sentence in the event of any such
loss. The Trustees may delegate any of their powers and duties under this
Section with respect to appraisal of assets and liabilities in the determination
of net asset value or with respect to a suspension of the determination of net
asset value to an officer or officers or agent or agents of the Trust designated
from time to time by the Trustees.
(i) TRANSFER. All Shares of each particular Series shall be transferable.
(j) EQUALITY. All Shares of each particular Series shall represent an
equal proportionate interest in the assets belonging to that Series (subject to
the liabilities belonging to that Series), and each Share of any particular
Series shall be equal to each other Share of that Series; but the provisions of
this sentence shall not restrict any distinctions permissible under Subsection
2(c) of this Article IV that may exist with respect to dividends and
distributions on Shares of the same Series. The Trustees may from time to time
divide or combine the Shares of any particular Series into a greater or lesser
number of Shares of that Series without thereby changing the proportionate
beneficial interest in the assets belonging to that Series or in any way
affecting the rights of Shares of any other Series.
(k) FRACTIONS. Any fractional Share of any Series, if any such fractional
Share is outstanding, shall carry proportionately all the rights and obligations
of a whole Share of that Series, including rights and obligations of a whole
Share of that Series, including rights and obligations with respect to voting,
receipt of
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dividends and distributions, redemption of Shares, and liquidation of the Trust
or any Series.
(l) CONVERSION RIGHTS. Subject to compliance with the requirements of the
1940 Act, the Trustees shall have the authority to provide that holders of
Shares of any Series shall have the right to convert said Shares into Shares of
one or more other Series in accordance with such requirements and procedures as
may be established by the Trustees.
(m) TERMINATION OF SALES. The Trustees shall have the authority to
terminate the sales of Shares of any Series at any time or for such periods as
the Trustees may from time to time decide.
Section 3. OWNERSHIP OF SHARES. The ownership and transfer of Shares
shall be recorded on the books of the Series or its transfer or similar agent.
No certificates certifying the ownership of Shares shall be issued except as the
Trustees may otherwise determine from time to time. The Trustees may make such
rules as they consider appropriate for the issuance of share certificates,
transfer of Shares and similar matters for each Series. The record books of
each Series, as kept by the Series or any transfer or similar agent of the
Series, shall be conclusive as to who are the holders of Shares and as to the
number of Shares held from time to time by each Shareholder.
Section 4. NO PREEMPTIVE RIGHTS, ETC. The holders of Shares shall not, as
such holders, have any right to acquire, purchase or subscribe for any Shares or
securities of the Trust which it may hereafter issue or sell, other than such
right, if any, as the Trustees in their discretion may determine. The holders
of Shares shall have no appraisal rights with respect to their Shares and,
except as otherwise determined by resolution of the Trustees in their sole
discretion, shall have no exchange or conversion rights with respect to their
Shares. No action may be brought by a Holder on behalf of the Trust unless
Holders owning no less than 10% of the then outstanding Shares, or Series or
class thereof, join in the bringing of such action. A Holder of Shares in a
particular Series or a particular class of the Trust shall not be entitled to
participate in a derivative or class action lawsuit on behalf of any other
Series or any other class or on behalf of the Holders of Shares in any other
Series or any other class of the Trust.
Section 5. STATUS OF SHARES AND LIMITATION OF PERSONAL LIABILITY. Shares
shall be deemed to be personal property giving only the rights provided in this
Declaration of Trust. Every Person by virtue of having become registered as a
Shareholder shall be held to have expressly assented and agreed to the terms of
this Declaration of Trust and to have become a party thereto. The death of a
Shareholder during the continuance of the Trust shall not operate to terminate
the Trust nor entitle the representative of any deceased Shareholder to an
accounting or to take any action in
DECLARATION OF TRUST - 9
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court or elsewhere against the Trust or the Trustees. The representative shall
be entitled to the same rights as the decedent under this Trust. Ownership of
Shares shall not entitle the Shareholder to any title in or to the whole or any
part of the Trust property or right to call for a partition or division of the
same or for an accounting. Neither the Trustees, nor any officer, employee or
agent of the Trust shall have any power to bind any Shareholder personally or to
call upon any Shareholder for the payment of any sum of money or assessment
whatsoever other than such as the Shareholder may at any time personally agree
to pay by way of subscription for any Shares or otherwise. The Shareholders
shall be entitled to the same limitation of personal liability extended to
stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware.
ARTICLE V
THE TRUSTEES
Section 1. MANAGEMENT OF THE TRUST. The business and affairs of the Trust
shall be managed by the Trustees, and they shall have all powers necessary and
desirable to carry out that responsibility.
Section 2. QUALIFICATION AND NUMBER. Each Trustee shall be a natural
person. A Trustee need not be a Shareholder, a citizen of the United States, or
a resident of the State of Delaware. By the vote or consent of a majority of
the Trustees then in office, the Trustees may fix the number of Trustees at a
number not less than three (3) nor more than ten (10) and may fill the vacancies
created by any such increase in the number of Trustees; provided, however, that
at all times at least forty percent (40%) of the Trustees shall not be
Interested Persons as defined in the 1940 Act. Except as determined from time
to time by resolution of the Trustees, no decrease in the number of Trustees
shall have the effect of removing any Trustee from office prior to the
expiration of his term, but the number of Trustees may be decreased in
conjunction with the removal of a Trustee pursuant to Section 4 of this
Article V.
Section 3. TERM AND ELECTION. Each Trustee shall hold office until the
next meeting of Shareholders called for the purpose of considering the election
or re-election of such Trustee or of a successor to such Trustee, and until his
successor is elected and qualified, and any Trustee who is appointed by the
Trustees in the interim to fill a vacancy as provided hereunder shall have the
same remaining term as that of his predecessor, if any, or such term as the
Trustees may determine. Any vacancy resulting from a newly created Trusteeship
or the death, resignation, retirement, removal, or incapacity of a Trustee may
be filled by the affirmative vote or consent of a majority of the Trustees then
in office.
DECLARATION OF TRUST - 10
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Section 4. RESIGNATION AND REMOVAL. Any Trustee may resign or retire as a
Trustee (without need for prior or subsequent accounting) by an instrument in
writing signed by him and delivered or mailed to the Chairman, if any, the
President or the Secretary, and such resignation or retirement shall be
effective upon such delivery, or at a later date according to the terms of the
instrument. Any Trustee may be removed with or without cause at any time:
(1) by written instrument signed by at least fifty percent (50%) of the number
of trustees prior to such removal, specifying the date upon which such removal
shall become effective or (2) by vote of shareholders holding not less than
fifty percent (50%) of Shares outstanding, cast in person or by proxy at any
meeting called for that purpose.
Section 5. VACANCIES. Any vacancy or anticipated vacancy resulting for
any reason, including without limitation the death, resignation, retirement,
removal or incapacity of any of the Trustees, or resulting from an increase in
the number of Trustees by the other Trustees may (but need not unless required
by the 1940 Act) be filled by a majority of the remaining Trustees, subject to
the provisions of Section 16(a) of the 1940 Act, through the appointment in
writing of such other person as such remaining Trustees in their discretion
shall determine. The appointment shall be effective upon the written acceptance
of the person named therein to serve as a trustee and agreement by such person
to be bound by the provisions of this Declaration of Trust, except that any such
appointment in anticipation of a vacancy occurring by reason of retirement,
resignation, or increase in number of Trustees to be effective at a later date
shall become effective only at or after the effective date of the retirement,
resignation or increase in number of Trustees.
Section 6. OWNERSHIP OF ASSETS OF THE TRUST. The assets of the Trust
shall be held separate and apart from any assets now or hereafter held in any
capacity other than as Trustee hereunder by the Trustees or any successor
Trustees. Legal title to all the Trust property shall be vested in the Trust as
a separate legal entity under the DBTA, except that the Trustees shall have the
power to cause legal title to any Trust property to be held by or in the name of
one or more of the Trustees or in the name of any other Person on behalf of the
Trust on such terms as the Trustees may determine. In the event that title to
any part of the Trust property is vested in one or more Trustees, the right,
title and interest of the Trustees in the Trust property shall vest
automatically in each person who may hereafter become a Trustee upon his or her
due election and qualification. Upon the resignation, removal or death of a
Trustee he or she shall automatically cease to have any right, title or interest
in any of the Trust property, and the right, title and interest of such Trustee
in the Trust property shall vest automatically in the remaining Trustees. To
the extent permitted by law, such vesting and cessation of title shall be
effective whether or not conveyancing documents have been executed and
delivered. No
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Shareholder shall be deemed to have a severable ownership in any individual
asset of the Trust or any right of partition or possession thereof.
ARTICLE VI
POWERS OF TRUSTEES
Section 1. POWERS. Subject to the provisions of this Declaration of
Trust, the business of the Trust shall be managed by the Trustees, and they
shall have all powers necessary or convenient to carry out that responsibility
and the purpose of the Trust. Without limiting the foregoing, the Trustees may
adopt By-Laws not inconsistent with this Declaration of Trust providing for the
conduct of the business and affairs of the Trust and may amend and repeal them
to the extent that such By-Laws do not reserve that right to the Shareholders;
they may from time to time in accordance with the provisions of Section 2 of
Article IV hereof establish Series, each such Series to operate as a separate
and distinct investment medium and with separately defined investment
objectives, policies and investment purposes; they may as they consider
appropriate elect and remove officers and appoint and terminate agents and
consultants and hire and terminate employees, any one or more of the foregoing
of whom may be a Trustee, and may provide for the compensation of all of the
foregoing; they may appoint from their own number, and terminate, any one or
more committees consisting of two or more Trustees, including without implied
limitation an executive committee, which may, when the Trustees are not in
session (but subject to the 1940 Act), exercise some or all of the power and
authority of the Trustees as the Trustees may determine; in accordance with
Article VIII they may employ one or more advisers, administrators, depositories
and custodians and may authorize any depository or custodian to employ
subcustodians or agents and to deposit all or any part of such assets in a
system or systems for the central handling of securities and debt instruments,
retain transfer, dividend, accounting or Shareholder servicing agents or any of
the foregoing, provide for the distribution of Shares by the Trust through one
or more distributors, principal underwriters or otherwise, set record dates or
times for the determination of Shareholders; they may compensate or provide for
the compensation of the Trustees, officers, advisers, administrators,
custodians, other agents, consultants and employees of the Trust or the Trustees
on such terms as they deem appropriate; and in general they may delegate to any
officer of the Trust, to any committee of the Trustees and to any employee,
adviser, administrator, distributor, depository, custodian, transfer and
dividend disbursing agent, or any other agent or consultant of the Trust such
authority, powers, functions and duties as they consider desirable or
appropriate for the conduct of the business and affairs of the Trust, including
without implied limitation, the power and authority to act in the name of the
Trust and of the Trustees, to sign documents and to act as attorney-in-fact for
the Trustees.
DECLARATION OF TRUST - 12
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Without limiting the foregoing and to the extent not inconsistent with the
1940 Act, other applicable law and the Fundamental Policies of the applicable
Series as established in the Bylaws, the Trustees shall have power and authority
for and on behalf of the Trust and each separate Series as established hereunder
as follows:
(a) INVESTMENTS. To invest and reinvest cash and other property, and to
hold cash or other property uninvested without in any event being bound or
limited by any present or future law or custom in regard to investments by
trustees;
(b) DISPOSITION OF ASSETS. To sell, exchange, lend, pledge, mortgage,
hypothecate, write options on and lease any or all of the assets of the Trust;
(c) OWNERSHIP POWERS. To vote or give assent, or exercise any rights of
ownership, with respect to securities or other property; and to execute and
deliver proxies or powers of attorney to such person or persons as the Trustees
shall deem proper, granting to such person or persons such power and discretion
with relation to securities or other property as the Trustees shall deem proper,
granting to such person or persons such power and discretion with relation to
securities or other property as the Trustees shall deem proper;
(d) SUBSCRIPTION. To exercise powers and rights of subscription or
otherwise which in any manner arise out of ownership of securities;
(e) FORM OF HOLDING. To hold any securities or other property in a form
not indicating any trust, whether in bearer, unregistered or other negotiable
form, or in the name of the Trustees or of the Trust or of any Series or in the
name of a custodian, subcustodian or other depositary or a nominee or nominees
or otherwise;
(f) REORGANIZATION, ETC. To consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or issuer, any
security of which is or was held in the Trust; to consent to any contract,
lease, mortgage, purchase or sale of property by such corporation or issuer, and
to pay calls or subscriptions with respect to any security held in the Trust;
(g) COMPROMISE. To compromise, arbitrate or otherwise adjust claims in
favor of or against the Trust or any Series or any matter in controversy,
including but not limited to claims for taxes;
(h) PARTNERSHIPS, ETC. To enter into joint ventures, general or limited
partnerships and any other combinations or associations;
(i) BORROWING AND SECURITY. To borrow funds and to mortgage and pledge
the assets of the Trust or any Series or any part
DECLARATION OF TRUST - 13
<PAGE>
thereof to secure obligations arising in connection with such borrowing;
(j) GUARANTEES, ETC. To endorse or guarantee the payment of any notes or
other obligations of any person; to make contracts of guaranty or suretyship, or
otherwise assume liability for payment thereof; and to mortgage and pledge the
Trust property (or Series property) or any part thereof to secure any of or all
such obligations;
(k) INSURANCE. To purchase and pay for entirely out of Trust property
such insurance as they may deem necessary or appropriate for the conduct of the
business, including, without limitation, insurance policies insuring the assets
of the Trust and payment of distributions and principal on its portfolio
investments, and insurance policies insuring the Shareholders, Trustees,
officers, employees, agents, consultants, investment advisers, managers,
administrators, distributors, principal underwriters, or independent
contractors, or any thereof (or any person connected therewith), of the Trust
individually against all claims and liabilities of every nature arising by
reason of holding, being or having held any such office or position, or by
reason of any action alleged to have been taken or omitted by any such person in
any such capacity, including any action taken or omitted that may be determined
to constitute negligence, whether or not the Trust would have the power to
indemnify such person against such liability; and
(l) PENSIONS, ETC. To pay pensions for faithful service, as deemed
appropriate by the Trustees, and to adopt, establish and carry out pension,
profit-sharing, share bonus, share purchase, savings, thrift and other
retirement, incentive and benefit plans, including the purchasing of life
insurance and annuity contracts as a means of providing such retirement and
other benefits, for any or all of the Trustees, officers, employees and agents
of the Trust.
Section 2. VOTE OF TRUSTEES. Except as otherwise provided by the 1940 Act
or other applicable law, this Declaration of Trust or the By-Laws, any action to
be taken by the Trustees on behalf of the Trust or any Series may be taken by a
majority of the Trustees present at a meeting of Trustees (a quorum, consisting
of at least a majority of the Trustees then in office, being present), including
any meeting held by means of a conference telephone or other communications
equipment by means of which all persons participating in the meeting can hear
each other at the same time, or by written consents of a majority of the
Trustees then in office (or such larger or different number as may be required
by the 1940 Act or other applicable law).
DECLARATION OF TRUST - 14
<PAGE>
ARTICLE VII
EXPENSES OF THE TRUST
The Trustees are authorized to pay or cause to be paid all expenses, fees,
charges, taxes and liabilities incurred or arising in connection with the Trust
or any Series, or in connection with the management thereof, including, but not
limited to, the Trustees' compensation and such expenses and charges for the
Trust's officers, employees, investment advisers, administrator, distributor,
principal underwriter, auditor, counsel, depository, custodian, transfer agent,
dividend disbursing agent, accounting agent, shareholder servicing agent, and
such other agents, consultants, and independent contractors and such other
expenses and charges as the Trustees may deem necessary or proper to incur.
Without limiting the generality of any other provision hereof, the Trustees
shall be entitled to reasonable compensation from the Trust for their services
as Trustees and may fix the amount of such compensation.
ARTICLE VIII
INVESTMENT ADVISER, UNDERWRITER
AND TRANSFER AGENT
Section 1. INVESTMENT ADVISER. The Trust may enter into written contracts
with one or more persons, to act as investment adviser or investment subadviser
to each of the Series, and as such to perform such functions as the Trustees may
deem reasonable and proper, including, without limitation, investment advisory,
management, research, valuation of assets, clerical and administrative
functions, under such terms and conditions, and for such compensation, as the
Trustees may in their discretion deem advisable.
Upon the termination of any contract with The Crabbe Huson Group, Inc., or
any corporation affiliated with The Crabbe Huson Group, Inc., acting as
investment adviser or manager, the Trustees are hereby required to promptly
change the name of the Trust to a name which does not include "Crabbe Huson" or
any approximation or abbreviation thereof, unless the prior written consent of
the Crabbe Huson Group, Inc. is obtained.
Section 2. UNDERWRITER; TRANSFER AGENT. The Trust may enter into a
written contract or contracts with an underwriter or underwriters or a
distributor or distributors whereby the Trust may either agree to sell Shares to
the other party or parties to the contract or appoint such other party or
parties its sales agent or agents for such Shares and with such other provisions
as the Trustees may deem reasonable and proper, and the Trustees may in their
discretion from time to time enter into transfer agency and/or shareholder
service contract(s), in each case with such
DECLARATION OF TRUST - 15
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terms and conditions, and providing for such compensation, as the Trustees may
in their discretion deem advisable.
Section 3. CUSTODIAN. The Trust may employ a Custodian, which shall be a
bank or trust company having an aggregate capital, surplus, and undivided
profits of at least $1,000,000, pursuant to such terms and conditions as the
Trustees may direct.
Section 4. PARTIES TO CONTRACT. Any contract of the character described
in Sections 1, 2 and 3 of this Article VIII or in Article X hereof may be
entered into with any corporation, firm, partnership, trust or association,
including, without limitation, the investment adviser, any investment subadviser
or an affiliate of the investment adviser or investment subadviser, although one
or more of the Trustees or officers of the Trust may be an officer, director,
trustee, shareholder, or member of such other party to the contract, or may
otherwise be interested in such contract and no such contract shall be
invalidated or rendered voidable by reason of the existence of any such
relationship, nor shall any person holding such relationship be liable merely by
reason of such relationship for any loss or expense to the Trust under or by
reason of said contract or be accountable for any profit realized directly or
indirectly therefrom, provided that the contract when entered into was not
inconsistent with the provisions of this Article VIII, Article X, or the By-
Laws. The same person (including a firm, corporation, partnership, trust or
association) may be the other party to contracts entered into pursuant to
Sections 1 and 2 above or Article X, and any individual may be financially
interested or otherwise affiliated with persons who are parties to any or all of
the contracts mentioned in this Section 3.
ARTICLE IX
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 1. VOTING POWERS. The Shareholders shall have power to vote only
(i) for the election or removal of Trustees as provided in Section 3 of
Article V, (ii) with respect to any contract with a third party provider of
services as to which Shareholder approval is required by the 1940 Act, (iii)
with respect to any termination or reorganization of the Trust or any Sub-Trust
to the extent and as provided in Sections 1 and 2 of Article XI, (iv) with
respect to any amendment of this Declaration of Trust to the extent and as
provided in Section 5 of Article XI, (v) with respect to any court action,
proceeding or claim brought or maintained derivatively or as a class action on
behalf of the Trust, any Series thereof or the Shareholders of the Trust
(provided, however, that a shareholder of a particular Series shall not be
entitled to a derivative or class action on behalf of any other Series or
shareholder of any other Series), and (vi) with respect to such additional
matters relating to the Trust as may be required by the 1940 Act, this
Declaration of Trust, the By-Laws or any registration of the Trust with the
Commission (or any successor
DECLARATION OF TRUST - 16
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agency) or any state, or as the Trustees may consider necessary or desirable.
There shall be no cumulative voting in the election of Trustees. Shares may be
voted in person or by proxy. A proxy with respect to Shares held in the name of
two or more persons shall be valid if executed by any one of them unless at or
prior to exercise of the proxy the Trust receives a specific written notice to
the contrary from any one of them. A proxy purporting to be executed by or on
behalf of a Shareholder shall be deemed valid unless challenged at or prior to
its exercise and the burden of proving invalidity shall rest on the challenger.
Until Shares are issued, the Trustees may exercise all rights of Shareholders
and may take any action required by law, this Declaration of Trust or the By-
Laws to be taken by Shareholders.
Section 2. MEETINGS. No annual or regular meetings of Shareholders is
required. Special meetings of Shareholders may be called by the Trustees from
time to time for the purpose of taking action upon any matter requiring the vote
or authority of the Shareholders as herein provided or upon any other matter
deemed by the Trustees to be necessary or desirable. Written notice of any
meeting of Shareholders shall be given or caused to be given by the Trustees by
mailing or transmitting such notice at least ten days before such meeting,
postage prepaid, stating the time, place and purpose of the meeting, to each
Shareholder at the Shareholder's address as it appears on the records of the
Trust. The Trustees shall promptly call and give notice of a meeting of
Shareholders for the purpose of voting upon removal of any Trustee of the Trust
when requested to do so in writing by Shareholders holding not less than 10% of
the Shares of the Trust then outstanding. For all other matters, the Trustees
shall call or give notice of a meeting within 30 days after written application
by Shareholders holding at least 10% of the Shares then outstanding of the Trust
(if Shareholders of all Series are required to vote in the aggregate) or of any
Series (if Shareholders of such Series are entitled to vote by Series)
requesting a meeting be called for any other purpose requiring action by the
Shareholders as provided herein or in the By-Laws.
Section 3. RECORD DATES. For the purpose of determining the Shareholders
who are entitled to vote or act at any meeting or any adjournment thereof, or
who are entitled to participate in any dividend or distribution, or for the
purpose of any other action, the Trustees may from time to time close the
transfer books for such period, not exceeding 30 days (except at or in
connection with the termination of the Trust), as the Trustees may determine; or
without closing the transfer books the Trustees may fix a date and time not more
than 120 days prior to the date of any meeting of Shareholders or other action
as the date and time of record for the determination of Shareholders entitled to
vote at such meeting or any adjournment thereof or to be treated as Shareholders
of record for purposes of such other action, and any Shareholder who was a
Shareholder at the date and time so fixed shall be entitled to vote at such
meeting or any adjournment thereof or to be treated as a
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Shareholder of record for purposes of such other action, even though he has
since that date and time disposed of his Shares, and no Shareholder becoming
such after that date and time shall be so entitled to vote at such meeting or
any adjournment thereof or to be treated as a Shareholder of record for purposes
of such other action.
Section 4. QUORUM AND REQUIRED VOTE. A majority of the Shares entitled to
vote shall be a quorum for the transaction of business at a Shareholders'
meeting, but any lesser number shall be sufficient for adjournments. Any
adjourned session or sessions may be held, within a reasonable time after the
date set for the original meeting without the necessity of further notice. A
majority of the Shares voted, at a meeting of which a quorum is present shall
decide any questions and a plurality shall elect a Trustee, except when a
different vote is required or permitted by any provision of the 1940 Act or
other applicable law or by this Declaration of Trust or the By-Laws.
Section 5. ACTION BY WRITTEN CONSENT. Subject to the provisions of the
1940 Act and other applicable law, any action taken by Shareholders may be taken
without a meeting if a majority of Shareholders entitled to vote on the matter
(or such larger proportion thereof as shall be required by the 1940 Act or by
any express provision of this Declaration of Trust or the By-Laws) consent to
the action in writing and such written consents are filed with the records of
the meetings of Shareholders. Such consent shall be treated for all purposes as
a vote taken at a meeting of Shareholders.
Section 6. INSPECTION OF RECORDS. The records of the Trust shall be open
to inspection by Shareholders to the same extent as is required for stockholders
of a Delaware business corporation under the Delaware General Corporation Law.
Section 7. ADDITIONAL PROVISIONS. The By-Laws may include further
provisions for Shareholders' votes and meetings and related matters not
inconsistent with the provisions hereof.
ARTICLE X
LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 1. LIMITATION OF LIABILITY. No personal liability for any debt or
obligation of the Trust shall attach to any Trustee of the Trust. Without
limiting the foregoing, a Trustee shall not be responsible for or liable in any
event for any neglect or wrongdoing of any officer, agent, employee, investment
adviser, subadviser, principal underwriter or custodian of the Trust, nor shall
any Trustee be responsible or liable for the act or omission of any other
Trustee.
DECLARATION OF TRUST - 18
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Every note, bond, contract, instrument, certificate, Share or undertaking
and every other act or thing whatsoever executed or done by or on behalf of the
Trust or the Trustees or any of them in connection with the Trust shall be
conclusively deemed to have been executed or done only in or with respect to
their or his capacity as Trustees or Trustee and neither such Trustees or
Trustee nor the Shareholders shall be personally liable thereon.
Every note, bond, contract, instrument, certificate or undertaking made or
issued by the Trustees or by any officers or officer shall recite that the same
was executed or made by or on behalf of the Trust by them as Trustees or Trustee
or as officers or officer and not individually and that the obligations of such
instrument are not binding upon any of them or the Shareholders individually but
are binding only upon the assets and property of the Trust or a Series thereof,
and may contain such further recitals as they or he may deem appropriate, but
the omission thereof shall not operate to bind any Trustees or Trustee or
officers or officer or Shareholders or Shareholder individually.
All persons extending credit to, contracting with or having any claim
against the Trust shall look only to the assets of the Trust or a Series thereof
for payment under such credit, contract or claim; and neither the Shareholders
nor the Trustees nor any of the Trust's officers, employees or agents, whether
past, present or future, shall be personally liable therefor.
Section 2. TRUSTEES' GOOD FAITH ACTION, EXPERT ADVICE, NO BOND OR SURETY.
The exercise by the Trustees of their powers and discretions hereunder shall be
binding upon the Trust, the Shareholders and any other interested person. A
Trustee shall be liable to the Trust or the shareholders only for his own
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee, and for nothing else,
and shall not be liable for errors of judgment or mistakes of fact or law. The
Trustees shall not be responsible or liable in any event for any neglect or
wrongdoing of any officer, agent, employee, consultant, adviser, administrative
distributor, principal underwriter, custodian, transfer agent, dividend
disbursing agent, Shareholder servicing agent, or accounting agent of the Trust,
nor shall any Trustee be responsible for any act or omission of any other
Trustee. The Trustees may take advice of counsel or other experts with respect
to the meaning and operation of this Declaration of Trust and their duties as
Trustees hereunder, and shall be under no liability for any act or omission in
accordance with such advice or for failing to follow such advice. In
discharging their duties, the Trustees, when acting in good faith, shall be
entitled to rely upon the books of account of the Trust and upon written reports
made to the Trustees by any officer appointed by them, any independent public
accountant and (with respect to the subject matter of the contract involved) any
officer, partner or responsible employee of any other party to any contract
entered into hereunder. The Trustees shall not be
DECLARATION OF TRUST - 19
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required to give any bond as such, nor any surety if a bond is required. The
provisions of this Declaration, to the extent that they restrict the duties and
liabilities of the Trustees otherwise existing at law or in equity, are agreed
by the Shareholders and all other Persons to replace such other duties and
liabilities of the Trustees.
Section 3. LIABILITY OF THIRD PERSONS DEALING WITH TRUSTEES. No person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the Trust or upon
its order.
Section 4. INDEMNIFICATION. Subject to the exceptions and limitations
contained in this Section 4, every person who is, or has been, a Trustee,
officer, employee or agent of the Trust, including persons who serve at the
request of the Trust as directors, trustees, officers, employees or agents of
another organization in which the Trust has an interest as a shareholder,
creditor or otherwise (hereinafter referred to as a "Covered Person"), shall be
indemnified by the Trust to the fullest extent permitted by law against
liability and against all expenses reasonably incurred or paid by him in
connection with any claim, action, suit or proceeding in which he becomes
involved as a party or otherwise by virtue of his being or having been such a
Trustee, director, officer, employee or agent and against amounts paid or
incurred by him in settlement thereof.
No indemnification shall be provided hereunder to a Covered Person:
(a) for any liability to the Trust or its Shareholders arising out of a
final adjudication by the court or other body before which the proceeding was
brought that he engaged in willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office;
(b) with respect to any matter as to which he shall have been finally
adjudicated not to have acted in good faith in the reasonable belief that his
action was in the best interests of the Trust; or
(c) in the event of a settlement or other disposition not involving a
final adjudication (as provided in paragraph (a) or (b)) and resulting in a
payment by a Covered Person, unless there has been either a determination that
such Covered Person did not engage in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office by the court or other body approving the settlement or other disposition,
or a reasonable determination, based on a review of readily available facts (as
opposed to a full trial-type inquiry), that he did not engage in such conduct,
such determination being made by:
DECLARATION OF TRUST - 20
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(i) a vote of a majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested Trustees then in office
act on the matter); or
(ii) written opinion of independent legal counsel.
The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not affect any other
rights to which any Covered Person may now or hereafter be entitled, shall
continue as to a person who has ceased to be a Covered Person and shall inure to
the benefit of the heirs, executors and administrators of such a person.
Nothing contained herein shall affect any rights to indemnification to which
Trust personnel other than Covered Persons may be entitled by contract or
otherwise under law.
Expenses of preparation and presentation of a defense to any claim, action,
suit or proceeding subject to a claim for indemnification under this Section 4
shall be advanced by the Trust prior to final disposition thereof upon receipt
of an undertaking by or on behalf of the recipient to repay such amount if it is
ultimately determined that he is not entitled to indemnification under this
Section 4, provided that either:
(a) such undertaking is secured by a surety bond or some other
appropriate security or the Trust shall be insured against losses arising out of
any such advances; or
(b) a majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested Trustees then in office
act on the matter) or independent legal counsel in a written opinion shall
determine, based upon a review of the readily available facts (as opposed to a
full trial-type inquiry), that there is reason to believe that the recipient
ultimately will be found entitled to indemnification.
As used in this Section 4, a "Disinterested Trustee" is one (i) who is not
an Interested Person of the Trust (including anyone, as such Disinterested
Trustee, who has been exempted from being an Interested Person by any rule,
regulation or order of the Commission), and (ii) against whom none of such
actions, suits or other proceedings or another action, suit or other proceeding
on the same or similar grounds is then or has been pending.
As used in this Section 4, the words "claim," "action," "suit" or
"proceeding" shall apply to all claims, actions, suits, proceedings (civil,
criminal, administrative or other, including appeals), actual or threatened; and
the words "liability" and "expenses" shall include without limitation,
attorneys' fees, costs, judgments, amounts paid in settlement, fines, penalties
and other liabilities.
Section 5. SHAREHOLDERS. No personal liability for any debt or obligation
of the Trust shall attach to any Shareholder or
DECLARATION OF TRUST - 21
<PAGE>
former Shareholder of the Trust. In case any Shareholder or former Shareholder
of the Trust shall be held to be personally liable solely by reason of his being
or having been a Shareholder and not because of his acts or omissions or for
some other reason, the Shareholder or former Shareholder (or his heirs,
executors, administrators or other legal representatives or in the case of a
corporation or other entity, its corporate or other general successor) shall be
entitled out of the assets of the Trust to be held harmless from and indemnified
against all loss and expense arising from such liability; provided, however,
there shall be no liability or obligation of the Trust arising hereunder to
reimburse any Shareholder for taxes paid by reason of such Shareholder's
ownership of any Share or for losses suffered by reason of any changes in value
of any Trust assets. The Trust shall, upon request by the Shareholder or former
Shareholder, assume the defense of any claim made against the Shareholder for
any act or obligation of the Trust and satisfy any judgment thereon.
ARTICLE XI
MISCELLANEOUS
Section 1. TERMINATION OF TRUST. Unless terminated as provided herein,
the Trust shall continue without limitation of time. The Trust may be
terminated at any time upon the vote of a majority of Trustees and the approval
by the affirmative vote of two-thirds of the outstanding Shares of each Series.
Upon termination of the Trust thereof, after paying or otherwise providing
for all charges, taxes, expenses and liabilities, whether due or accrued or
anticipated, as may be determined by the Trustees, the Trust shall, in
accordance with such procedures as the Trustees consider appropriate, reduce the
remaining assets of the Trust to distributable form in cash or other securities,
or any combination thereof, and distribute the proceeds to the holders of the
Shares of the Trust in the manner set forth by resolution of the Trustees. The
Trustees shall thereafter file a certificate of cancellation in accordance with
Section 3010 of the DBTA.
Section 2. REORGANIZATION. The Trustees may sell, convey, merge and
transfer the assets of the Trust, or the assets belonging to any one or more
Series, to another trust, partnership, association or corporation organized
under the laws of any state of the United States, or to the Trust to be held as
assets belonging to another Series of the Trust, in exchange for cash, shares or
other securities (including, in the case of a transfer to another Series of the
Trust, Shares of such other Series) with such transfer either (i) being made
subject to, or with the assumption by the transferee of, the liabilities
belonging to each Series the assets of which are so transferred, or (ii) not
being made subject to, or not with the assumption of, such liabilities;
provided, however, that no assets belonging to any particular Series shall be
DECLARATION OF TRUST - 22
<PAGE>
so transferred unless the terms of such transfer shall have first been approved
at a meeting called for the purpose by the affirmative Vote of a Majority of the
Outstanding Voting Securities of that Series. Following such transfer, the
Trustees shall distribute such cash, shares or other securities (giving due
effect to the assets and liabilities belonging to and any other differences
among the various Series the assets belonging to which have so been transferred)
among the Shareholders of the Series the assets belonging to which have been so
transferred; and if all of the assets of the Trust have been so transferred, the
Trust shall be terminated.
The Trust, or any one or more Series, may, either as the successor,
survivor, or non-survivor, (i) consolidate with one or more other trusts,
partnerships, associations or corporations organized under the laws of the State
of Delaware or any other state of the United States, to form a new consolidated
trust, partnership, association or corporation under the laws of which any one
of the constituent entities is organized, or (ii) merge into one or more other
trusts, partnerships, associations or corporations organized under the laws of
the State of Delaware or any other state of the United States, or have one or
more such trusts, partnerships, associations or corporations merged into it, any
such consolidation or merger to be upon such terms and conditions as are
specified in an agreement and plan of reorganization entered into by the Trust,
or one or more Series as the case may be, in connection therewith. The terms
"merge" or "merger" as used herein shall also include the purchase or
acquisition of any assets of any other trust, partnership, association or
corporation which is an investment company organized under the laws of the State
of Delaware or any other state of the United States. Any such consolidation or
merger shall require the Vote of a Majority of the Outstanding Voting Securities
of each Series affected thereby. In accordance with Section 3815(f) of DBTA, an
agreement of merger or consolidation may effect any amendment to this
Declaration or the By-Laws or effect the adoption of a new declaration of trust
or by-laws of the Trust if the Trust is the surviving or resulting business
trust. A certificate of merger or consolidation of the Trust shall be signed by
a majority of the Trustees.
Section 3. FILING OF COPIES, REFERENCES, HEADINGS. The original or a copy
of this Declaration of Trust and of each amendment hereto shall be kept in the
office of the Trust where it may be inspected by any Shareholder. Anyone
dealing with the Trust may rely on a certificate by an officer or Trustee of the
Trust as to whether or not any such amendments have been made and as to any
matters in connection with the Trust hereunder, and with the same effect as if
it were the original, may rely on a copy certified by an officer or Trustee of
the Trust to be a copy of this Declaration of Trust or of any such amendments.
In this Declaration of Trust or in any such amendment, references to this
Declaration of Trust, and all expressions like "herein," "hereof" and
"hereunder," shall
DECLARATION OF TRUST - 23
<PAGE>
be deemed to refer to this Declaration of Trust as a whole and as amended or
affected by any such amendment, and masculine pronouns shall be deemed to
include the feminine and the neuter, as the context shall require. Headings are
placed herein for convenience of reference only, and in case of any conflict,
the text of this instrument, rather than the headings, shall control. This
instrument may be executed in any number of counterparts, each of which shall be
deemed an original.
Section 4. TRUSTEES MAY RESOLVE AMBIGUITIES. The Trustees may construe
any of the provisions of this Declaration insofar as the same may appear to be
ambiguous or inconsistent with any other provisions hereof, and any such
construction hereof by the Trustees in good faith shall be conclusive as to the
meaning to be given to such provisions.
Section 5. AMENDMENTS. Except as otherwise specifically provided in this
Declaration of Trust, this Declaration of Trust may be amended at any time by an
instrument in writing signed by a majority of the then Trustees and the Vote of
a Majority of the Outstanding Voting Securities of Shares of each Series
entitled to vote. An amendment will not be approved as to any Series the
Shareholders of which do not approve the amendment. An amendment which in the
determination of the Trustees shall affect the holders of one or more Series or
classes of Shares but not the holders of all outstanding Series or classes shall
be authorized by vote of the Shareholders holding a majority of the Shares
entitled to vote to each Series and class affected and no vote of Shareholders
of a Series or class not affected shall be required. In addition,
notwithstanding any other provision to the contrary contained in this
Declaration of Trust, the Trustees may amend this Declaration of Trust without
the vote or consent of Shareholders (i) at any time if the Trustees deem it
necessary in order for the Trust or any Series to meet the requirements of
applicable Federal or State laws or regulations, or the requirements of the
regulated investment company provisions of the Internal Revenue Code, (ii) to
designate Series or exercise other powers with respect thereto in accordance
with Section 1 and 2 of Article IV hereof, or (iii) change the name of the Trust
or to supply any omission, cure any ambiguity or cure, correct or supplement any
defective or inconsistent provision contained herein.
Section 6. GOVERNING LAW. This Declaration is executed by all of the
Trustees and delivered with reference to DBTA and the laws of the State of
Delaware, and the rights of all parties and the validity and construction of
every provision hereof shall be subject to and construed according to DBTA and
the laws of the State of Delaware (unless and to the extent otherwise provided
for and/or preempted by the 1940 Act or other applicable federal securities
laws); provided, however, that there shall not be applicable to the Trust, the
Trustees or this Declaration (a) the provisions of Section 3540 of Title 12 of
the Delaware Code or (b) any provisions of the laws (statutory or common) of the
State of
DECLARATION OF TRUST - 24
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Delaware (other than the DBTA) pertaining to trusts which are inconsistent with
the rights, duties, powers, limitations or liabilities of the Trustees set forth
or referenced in this Declaration.
Section 7. PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS.
(a) The provisions of this Declaration are severable, and if the
Trustees shall determine, with the advice of counsel, that any of such
provisions is in conflict with the 1940 Act, the DBTA, or with other applicable
laws and regulations, the conflicting provisions shall be deemed never to have
constituted a part of this Declaration; provided, however, that such
determination shall not affect any of the remaining provisions of this
Declaration or render invalid or improper any action taken or omitted prior to
such determination.
(b) If any provision of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of this
Declaration in any jurisdiction.
IN WITNESS WHEREOF, the undersigned, being the Trustees of the Trust, have
executed this instrument as of the date first written above.
"Trustees"
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James E. Crabbe
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Richard S. Huson
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Gary L. Capps
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Louis Scherzer
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Robert L. Smith
--------------------------------------------------
Craig P. Stuvland
--------------------------------------------------
Richard P. Wollenberg
--------------------------------------------------
William Wendell Wyatt, Jr.
DECLARATION OF TRUST - 25
<PAGE>
EXHIBIT 2
BY-LAWS
OF
THE CRABBE HUSON MUTUAL FUNDS GROUP
ARTICLE 1
AGREEMENT AND DECLARATION
OF TRUST AND PRINCIPAL OFFICE
1.1 AGREEMENT AND DECLARATION OF TRUST. These By-Laws shall be subject to
the Declaration of Trust as from time to time in effect (the "Declaration of
Trust"), of THE CRABBE HUSON MUTUAL FUNDS GROUP, the Delaware business trust
established by the Declaration of Trust (the "Trust").
1.2 PRINCIPAL OFFICE OF THE TRUST. The principal office of the Trust
shall be located at 121 S.W. Morrison, Suite 1400, Portland, Oregon 97204.
ARTICLE 2
MEETINGS OF TRUSTEES
2.1 REGULAR MEETINGS. Regular meetings of the Trustees may be held
without call or notice at such places and at such times as the Trustees may from
time to time determine, provided that notice of the first regular meeting
following any such determination shall be given to absent Trustees.
2.2 SPECIAL MEETINGS. Special meetings of the Trustees may be held at any
time and at any place designated in the call of the meeting when called by the
Chairman of the Board, the President or the Treasurer or by two or more
Trustees, sufficient notice thereof being given to each Trustee by the Secretary
or an Assistant Secretary or by the officer or the Trustees calling the meeting.
2.3 NOTICE. It shall be sufficient notice to a Trustee of a special
meeting to send notice by mail at least forty-eight hours or by telegram at
least twenty-four hours before the meeting addressed to the Trustee at his usual
or last known business or residence address or to give notice to him in person
or by telephone at least twenty-four hours before the meeting. Notice of a
meeting need not be given to any Trustee if a written waiver of notice, executed
by him before or after the meeting , is filed with the records of the meeting,
or to any Trustee who attends the meeting without protesting prior thereto or at
its commencement the
BY-LAWS - PAGE 1
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lack of notice to him. Neither notice of a meeting nor a waiver of a notice
need specify the purposes of the meeting.
2.4 QUORUM. At any meeting of the Trustees a majority of the Trustees
then in office shall constitute a quorum. Any meeting may be adjourned from
time to time by a majority of the votes cast upon the question, whether or not a
quorum is present, and the meeting may be held as adjourned without further
notice.
2.5 PARTICIPATION BY TELEPHONE. One or more of the Trustees or of any
committee of the Trustees may participate in a meeting thereof by means of a
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at a meeting.
ARTICLE 3
OFFICERS
3.1 ENUMERATION; QUALIFICATION. The officers of the Trust shall be a
Chairman of the Board, a President, a Treasurer, a Secretary and such other
officers, including Vice Presidents, if any, as the Trustees from time to time
may in their discretion elect. The Trust may also have such agents as the
Trustees from time to time may in their discretion appoint. The Chairman of the
Board shall be a Trustee and may, but need not be, a shareholder; and any other
officer may, but need not be, a Trustee or shareholder. Any two or more offices
may be held by the same person except that the same person may not be both
President and Treasurer.
3.2 ELECTION. The Chairman of the Board, the President, the Treasurer and
the Secretary shall be elected annually by the Trustees at a meeting held within
the first four months of the Trust's fiscal year. The meeting at which the
officers are elected shall be known as the annual meeting of Trustees. Other
officers, if any, may be elected or appointed by the Trustees at said meeting or
at any other time. Vacancies in any office may be filled at any time.
3.3 TENURE. The Chairman of the Board, the President, the Treasurer and
the Secretary shall hold office until the next annual meeting of the Trustees
and until their respective successors are chosen and qualified, or in each case
until he sooner dies, resigns, is removed or becomes disqualified. Each other
officer shall hold office and each agent shall retain authority at the pleasure
of the Trustees.
3.4 POWERS. Subject to the other provisions of these By-Laws, each
officer shall have, in addition to the duties and powers herein and in the
Declaration of Trust set forth, such duties and
BY-LAWS - PAGE 2
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powers as are commonly incident to the office occupied by him as if the Trust
were organized as a Delaware business corporation and such other duties and
powers as the Trustees may from time to time designate.
3.5 CHAIRMAN; PRESIDENT. Unless the Trustees otherwise provide, the
Chairman of the Board, or, if there is no Chairman, or in the absence of the
Chairman, the President, shall preside at all meetings of the shareholders and
of the Trustees. Unless the Trustees otherwise provide, the President shall be
the Chief Executive Officer.
3.6 VICE PRESIDENT. The Vice President, or if there be more than one Vice
President, the Vice Presidents in the order determined by the Trustees (or if
there be no such determination, then in the order of their election) shall in
the absence of the President or in the event of his inability or refusal to act,
perform the duties of the President, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the President. The Vice
Presidents shall perform such other duties and have such other powers as the
Board of Trustees or the President may from time to time prescribe.
3.7 TREASURER. The Treasurer shall be the chief financial and accounting
officer of the Trust, and shall, subject to the provisions of the Declaration of
Trust and to any arrangement made by the Trustees with a custodian, investment
adviser or manager, or transfer, shareholder servicing or similar agent, be in
charge of the valuable papers, books of account and accounting records of the
Trust, and shall perform such other duties and have such other powers as may be
designated from time to time by the Board of Trustees or the President may from
time to time prescribe.
3.8 ASSISTANT TREASURER. The Assistant Treasurer, or if there shall be
more than one, the Assistant Treasurers in the order determined by the Trustees
(or if there be no such determination, then in the order of their election),
shall, in the absence of the Treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the Treasurer and
shall perform such other duties and have such other powers as the Board of
Trustees or the President may from time to time prescribe.
3.9 SECRETARY. The Secretary shall record all proceedings of the
shareholders and the Trustees in books to be kept for such purposes, which books
or a copy thereof shall be kept at the principal office of the Trust or at such
other place as designated by the Trustees. In the absence of the Secretary from
any meeting of the shareholders or Trustees, an Assistant Secretary, or if there
be none or if he is absent, a temporary secretary chosen at such meeting shall
record the proceedings thereof in the aforesaid books.
BY-LAWS - PAGE 3
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BY-LAWS - PAGE 4
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3.10 ASSISTANT SECRETARY. The Assistant Secretary, or if there be more
than one, the Assistant Secretaries in the order determined by the Trustees (or
if there be no determination, then in the order of their election), shall, in
the absence of the Secretary or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the Secretary and shall perform
such other duties and have such other powers as the Board of Trustees or
President may from time to time prescribe.
3.11 RESIGNATIONS, RETIREMENT AND REMOVALS. Any Trustee or officer may
resign at any time by written instrument signed by him and delivered to the
Chairman of the Board, the President or the Secretary or to a meeting of the
Trustees. Such resignation shall be effective upon receipt unless specified to
be effective at some other time. The Trustees may remove any officer elected by
them with or without cause. To the extent that any officer or Trustee of the
Trust receives compensation from the Trust and except as may otherwise be
expressly provided in a written agreement with the Trust, no Trustee or officer
resigning and no officer removed shall have any right to any compensation for
any period following his resignation or removal, or any right to damages on
account of such removal.
ARTICLE 4
COMMITTEES
4.1 GENERAL. The Trustees, by vote of a majority of the Trustees then in
office, may elect from their number an Audit Committee, Contracts Committee,
Executive Committee or Nominating Committee or other committees, and may
delegate thereto some or all of their powers except those which by law, by the
Declaration of Trust, or by these By-Laws may not be delegated. Except as the
Trustees may otherwise determine, any such committee may make rules for the
conduct of its business, but unless otherwise provided by the Trustees or in
such rules, its business shall be conducted so far as possible in the same
manner as is provided by these By-Laws for the Trustees themselves. All members
of such committees shall hold such offices at the pleasure of the Trustees. The
Trustees may abolish any such committee at any time. Any committee to which the
Trustees delegate any of their powers or duties shall keep records of its
meetings and shall report its action to the Trustees. The Trustees shall have
power to rescind any action of any committee, but no such rescission shall have
retroactive effect.
ARTICLE 5
REPORTS
5.1 GENERAL. The Trustees and officers shall render reports at the time
and in the manner required by the Declaration of Trust
BY-LAWS - PAGE 5
<PAGE>
or any applicable law. Officers and committees shall render such additional
reports as they may deem desirable or as may from time to time be required by
the Trustees.
ARTICLE 6
FISCAL YEAR
6.1 GENERAL. The fiscal year of the Trust shall be fixed by resolution of
the Trustees.
ARTICLE 7
SEAL
7.1 GENERAL. There shall be no company seal.
ARTICLE 8
EXECUTION OF PAPERS
8.1 GENERAL. Except as the Trustees may generally or in particular cases
authorize the execution thereof in some other manner, all deeds, leases,
contracts, notes and other obligations made by the Trustees shall be signed by
the President, any Vice President, or by the Treasurer and need not bear the
seal of the Trust.
ARTICLE 9
ISSUANCE OF SHARE CERTIFICATES
9.1 SHARE CERTIFICATES. In lieu of issuing certificates for shares, the
Trustees or the transfer agent may either issue receipts therefor or may keep
accounts upon the books of the Trust for the record holders of such shares, who
shall in either case be deemed, for all purposes hereunder, to be the holders of
certificates for such shares as if they had accepted such certificates and shall
be held to have expressly assented and agreed to the terms hereof.
The Trustees may at any time authorize the issuance of share certificates
either in limited cases or to all shareholders. In that event, a shareholder
may receive a certificate stating the number of shares owned by him, in such
form as shall be prescribed from time to time by the Trustees. Such certificate
shall be signed by the President or a Vice President and by the Treasurer or
Assistant Treasurer. Such signatures may be facsimiles if the certificate is
signed by a transfer agent, or by a registrar, other than a Trustee, officer or
employee of the Trust. In case any officer who has signed or whose facsimile
signature has been placed on such certificate shall cease to be such officer
before such
BY-LAWS - PAGE 6
<PAGE>
certificate is issued, it may be issued by the Trust with the same effect as if
he were such officer at the time of its issue.
9.2 LOSS OF CERTIFICATES. In case of the alleged loss or destruction or
the mutilation of a share certificate, a duplicate certificate may be issued in
place thereof, upon such terms as the Trustees shall prescribe.
9.3 ISSUANCE OF NEW CERTIFICATE TO PLEDGEE. A pledgee of shares
transferred as collateral security shall be entitled to a new certificate if the
instrument of transfer substantially describes the debt or duty that is intended
to be secured thereby. Such new certificate shall express on its face that it
is held as collateral security, and the name of the pledgor shall be stated
thereon, who alone shall be liable as a shareholder, and entitled to vote
thereon.
9.4 DISCONTINUANCE OF ISSUANCE OF CERTIFICATE. The Trustees may at any
time discontinue the issuance of share certificates and may, by written notice
to each shareholder, require the surrender of share certificates to the Trust
for cancellation. Such surrender and cancellation shall not affect the
ownership of shares in the Trust.
ARTICLE 10
DEALINGS WITH TRUSTEES AND OFFICERS
10.1 GENERAL. Any Trustee, officer or other agent of the Trust may
acquire, own and dispose of shares of the Trust to the same extent as if he were
not a Trustee, officer or agent; and the Trustees may accept subscriptions to
shares or repurchase shares from any firm or company in which any Trustee,
officer or other agent of the Trust may have an interest.
ARTICLE 11
FUNDAMENTAL POLICIES
11.1 FUNDAMENTAL POLICIES. Attached hereto as Exhibit A is a list of the
individual investment restrictions of each respective Series of the Trust which
shall be "fundamental policies" of that Series. Each Sub-Trust's "fundamental
policies" may not be changed without approval by a "majority vote of the
outstanding voting securities" of such Series as that term is defined in the
Investment Company Act of 1940.
BY-LAWS - PAGE 7
<PAGE>
ARTICLE 12
AMENDMENTS TO THE BY-LAWS
12.1 GENERAL. These By-Laws, other than a change to the investment
restrictions of a series, may be amended or repealed, in whole or in part, by
majority of the Trustees then in office at any meeting of the Trustees, or by
one or more writings signed by such a majority.
The foregoing By-Laws were adopted by the Board of Trustees on October
_____, 1995.
----------------------------------------
, Secretary
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BY-LAWS - PAGE 8
<PAGE>
EXHIBIT A
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INVESTMENT RESTRICTIONS
-----------------------
The investment restrictions described below have been adopted by the Short
Special Fund (the "Fund") as fundamental investment policies. These fundamental
investment policies may not be changed without the approval of the holders of
the lesser of a majority of the Fund's outstanding shares or 67% of the shares
represented at a meeting of shareholders at which the holders of more than 50%
of the shares are represented.
If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage beyond the specified limit resulting
from a change in values of assets will not be considered a violation of the
investment restrictions relating to purchases of portfolio securities.
The Fund may not:
1. The Fund invests more than 20% of its total assets in fixed
income securities, including convertible stock, that are rated
less than Moody's Baa or S&P BBB, or in commercial paper that is
rated less than B-1 by Moody's or A- by S&P; not more than 5% of
the Fund's total assets may be invested in fixed income
securities that are unrated. Securities rated below the fourth
highest grade and unrated fixed income securities have
speculative characteristics and additional risks.
2. Invest an amount that exceeds 5% of the value of the Fund's total
assets in the securities of any one issuer. This restriction
does not apply to holdings of U.S. Government securities.
3. Invest more than 25% of its total assets in any one industry.
This restriction does not apply to holdings of U.S. Government
securities.
4. Issue any senior securities, as defined in the 1940 Act.
5. Purchase the securities of any issuer for the purpose of
exercising control of management, and a Fund may not acquire or
own more than 10% of any class of the securities of any issuer.
6. Sell securities short, except as permitted in the Prospectus.
<PAGE>
7. Invest in any security that would subject the Fund to unlimited
liability, although the Fund may sell securities short and may
invest in interest rate and stock market futures.
8. Underwrite the securities of other issuers or invest more than
10% of net assets in illiquid securities, such as repurchase
agreements with a maturity in excess of seven days.
Notwithstanding the above, the Fund may not invest in restricted
securities (including, but not limited to, nonpublicly traded
debt securities).
9. Invest in securities of other investment companies, except as set
forth in the Statement of Additional Information under
"SECURITIES OF OTHER INVESTMENT COMPANIES."
10. Purchase securities on margin.
11. Write uncovered put or uncovered call options.
12. Purchase portfolio securities from or sell securities directly to
any of the Fund's, or the Adviser's, officers, directors, or
employees as a principal for their own account.
13. Purchase or sell commodities or commodity contracts (stock index
and interest rate futures will not be considered commodity
contracts).
14. Purchase or sell real estate or real estate mortgages, provided
that the Fund may invest in marketable securities, such as
obligations of the Government National Mortgage Association, that
are secured by real estate or interests therein or are issued by
companies which invest in real estate or interests therein, such
as publicly traded real estate investment trusts.
15. Purchase or sell interests in oil, gas, or other mineral
exploration or development programs.
16. Lend portfolio securities, except as described in the Statement
of Additional Information under "LOANS OF PORTFOLIO SECURITIES."
<PAGE>
17. Make loans to other persons, provided that, for purposes of this
restriction, the acquisition of bonds, debentures, or other
corporate debt securities and investment in government
obligations, short-term commercial paper, certificates of
deposit, bankers' acceptances, and repurchase agreements will not
be deemed to be the making of a loan.
18. Borrow money, except as set forth in the Fund's Prospectus. In
no case will borrowing exceed one-third of the value of a Fund's
total assets immediately after any such borrowing. If, for any
reason, the current value of the Fund's total assets falls below
an amount equal to three times the amount of its indebtedness for
money borrowed, the Fund will, within three days (not including
Saturdays, Sundays and holidays), reduce its indebtedness to the
extent necessary to satisfy the one-third test.
19. Invest more than 10% of the Fund's total assets in put or call
options.
20. Invest more than 35% of the Fund's total assets in foreign
securities.
21. Invest more than 10% of the Fund's total assets in stock index
futures.
22. Invest more than 10% of the Fund's total assets in interest rate
futures contracts.
<PAGE>
EXHIBIT 4
ARTICLE IV
BENEFICIAL INTEREST
Section A. SHARES OF BENEFICIAL INTEREST. The beneficial interests in the
Trust shall be divided into Shares, all without par value and of one class, but
the Trustees shall have the authority from time to time to divide the class of
Shares into two or more series of Shares ("Series"). Each Series of Shares,
including without limitation Series specifically established and designated in
Section 2 of this Article, shall be separate and distinct from any other Series
of the Trust. Each Series established hereunder shall be deemed to be a
separate and distinct operation. Each Series will maintain separate and
distinct records and the Trustees shall account for the assets of each Series
separately from the assets of other Series. The Trustees shall have exclusive
power without the requirement of shareholder approval to establish and designate
such separate and distinct Series, and to fix and determine the relative rights
and preferences as between the shares of the separate Series as to (i) rights of
redemption and the price, terms and manner of redemption, (ii) special and
relative rights as to dividends and other distributions and on liquidation,
(iii) sinking or purchase fund provisions, (iv) conversion rights, and (v)
conditions under which the several Series shall have separate voting rights or
no voting rights.
The number of authorized Shares is unlimited. The number of Shares of each
Series that may be issued is unlimited. The Trustees may issue Shares of any
Series for such consideration and on such terms as they may determine (or for no
consideration if pursuant to a Share dividend or split-up), all without action
or approval of the Shareholders. All Shares when so issued on the terms
determined by the Trustees shall be fully paid and nonassessable (but may be
subject to mandatory contribution back to the Trust as provided in subsection
(g) of Section 2 of this Article). The Trustees may classify or reclassify any
unissued Shares or any Shares previously issued and reacquired of any Series
into one or more Series that may be established and designated from time to
time. The Trustees may hold as treasury shares, reissue for such consideration
and on such terms as they may determine, or cancel, at their discretion from
time to time, any Shares of any Series reacquired by the Trust.
The Trustees may from time to time close the transfer books or establish
record dates and times for the purposes of determining the holders of Shares
entitled to be treated as such, to the extent provided or referred to in Section
3 of Article IX.
<PAGE>
The establishment and designation of any Series in addition to those
established and designated in Section 2 to this Article shall be effective upon
the execution by a majority of the Trustees of an instrument setting forth such
establishment and designation and the relative rights and preferences of the
Shares of such Series, or as otherwise provided in such instrument. At any time
that there are no Shares outstanding of any particular Series previously
established and designated, the Trustees may by an instrument executed by a
majority of their number abolish that Series and the establishment and
designation thereof. Each instrument referred to in this paragraph shall have
the status of an amendment to this Declaration of Trust.
Any Trustee, officer or other agent of the Trust, and any organization in
which any such person is interested may acquire, own, hold and dispose of Shares
of any Series of the Trust to the same extent as if such person were not a
Trustee, officer or other agent of the Trust; and the Trust may issue and sell
or cause to be issued and sold and may purchase Shares of any Series from any
such person or any such organization subject only to the general limitations,
restrictions or other provisions applicable to the sale or purchase of Shares of
such Series generally.
Section B. ESTABLISHMENT AND DESIGNATION OF SERIES. Without limiting the
authority of the Trustees set forth in Section 1 of this Article to establish
and designate any further Series, the Trustee hereby establishes and designates
nine Series: The Crabbe Huson Small-Cap Fund, The Crabbe Huson Special Fund,
The Crabbe Huson Real Estate Investment Fund, The Crabbe Huson Equity Fund, The
Crabbe Huson Asset Allocation Fund, The Crabbe Huson Oregon Municipal Bond Fund,
The Crabbe Huson Income Fund, The Crabbe Huson U.S. Government Income Fund, and
The Crabbe Huson U.S. Government Money Market Fund. The above-mentioned Series
and any Shares of any further Series that may from time to time be established
and designated by the Trustees shall (unless the Trustees otherwise determine
with respect to some further Series at the time of establishing and designating
the same) have the following relative rights and preferences:
(1) ASSETS BELONGING TO SERIES. All consideration received by the Trust
for the issue or sale of Shares of a particular Series, together with all assets
in which such consideration is invested or reinvested, all income, earnings,
profits, and proceeds thereof, including any proceeds derived from the sale,
exchange or liquidation of such assets, and any funds or payments derived from
any reinvestment of such proceeds in whatever form the same may be, shall be
held by the Trustees in trust for the benefit of the holders of Shares of that
Series and shall irrevocably belong to that Series for all purposes, and shall
be so recorded upon the books of account of the Series. Such consideration,
assets, income, earnings, profits, and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation of such
<PAGE>
assets, and any funds or payments which are not readily identifiable as
belonging to any particular Series (collectively "General Items"), the Trustees
shall allocate to and among any one or more of the Series established and
designated from time to time in such manner and on such basis as they, in their
sole discretion, deem fair and equitable. Any General Items so allocated to a
particular Series shall belong to that Series. Each such allocation by the
Trustees shall be conclusive and binding upon the Shareholders of all Series for
all purposes.
(2) LIABILITIES BELONGING TO SERIES. The assets belonging to each
particular Series shall be charged with the liabilities in respect of that
Series and all expenses, costs, charges and reserves attributable to that
Series, and any general liabilities, expenses, costs, charges or reserves of the
Trust which are not readily identifiable as belonging to any particular Series
shall be allocated and charged by the Trustees to and among any one or more of
the Series established and designated from time to time in such manner and on
such basis as the Trustees in their sole discretion deem fair and equitable.
Each allocation of liabilities, expenses, costs, charges and reserves by the
Trustees shall be conclusive and binding upon the Shareholders of all Series for
all purposes. Any creditor of any Series may look only to the assets of that
Series to satisfy such creditor's debt.
Without limitation of the foregoing provisions of this Section, but subject
to the right of the Trustees in their discretion to allocate general
liabilities, expenses, costs, charges or reserves as herein provided, the debts,
liabilities, obligations and expenses incurred, contracted for or otherwise
existing with respect to a particular Series shall be enforceable against the
assets of such Series only, and not against the assets of any other Series.
Notice of this limitation on interseries liabilities shall be set forth in the
certificate of trust of the Trust (whether originally or by amendment) as filed
or to be filed in the Office of the Secretary of State of the State of Delaware
pursuant to the DBTA, and upon the giving of such notice in the certificate of
trust, the statutory provisions of Section 3804 of the DBTA relating to
limitations on interseries liabilities (and the statutory effect under
Section 3804 of setting forth such notice in the certificate of trust) shall
become applicable to the Trust and each Series.
The Trustees shall have full discretion, to the extent not inconsistent
with the 1940 Act and not inconsistent with generally accepted accounting
principles, to determine which items shall be treated as income and which items
as capital; and each such determination and allocation shall be conclusive and
binding upon the Shareholders.
(3) DIVIDENDS. Dividends and distributions on Shares of a particular
Series may be paid with such frequency as the Trustees
<PAGE>
may determine, which may be daily or otherwise pursuant to a standing resolution
or resolutions adopted only once or with such frequency as the Trustees may
determine, to the holders of Shares of that Series, from such of the income and
capital gains, accrued or realized, from the assets belonging to that Series, as
the Trustees may determine, after providing for actual and accrued liabilities
belonging to that Series. All dividends and distributions on Shares of a
particular Series shall be distributed pro rata to the holders of Shares of that
Series in proportion to the number of Shares of that Series held by such holders
at the date and time of record established for the payment of such dividends or
distributions, except that in connection with any dividend or distribution
program or procedure the Trustees may determine that no dividend or distribution
shall be payable on Shares as to which the Shareholder's purchase order and/or
payment have not been received by the time or times established by the Trustees
under such program or procedure. Such dividends and distributions may be made
in cash or Shares of that Series or a combination thereof as determined by the
Trustees or pursuant to any program that the Trustees may have in effect at the
time for the election by each Shareholder of the mode of the making of such
dividend or distribution to that Shareholder. Any such dividend or distribution
paid in Shares will be paid at the net asset value thereof as determined in
accordance with Subsection 2(h) of this Article.
(4) LIQUIDATION. In the event of the liquidation or dissolution of the
Trust or any Series, the Shareholders of each Series that has been established
and designated and that has voted to be liquidated or dissolved, shall be
entitled to receive, when and as declared by the Trustees, the excess of the
assets belonging to that Series over the liabilities belonging to that Series.
The assets so distributable to the Shareholders of any particular Series shall
be distributed among such Shareholders in proportion to the number of Shares of
that Series held by them and recorded on the books of the Series. The
liquidation of any particular Series may be authorized by vote of a majority of
the Trustees then in office subject to the approval of two-thirds of the
outstanding voting securities of that particular Series.
(5) VOTING. On each matter submitted to a vote of the Shareholders, each
holder of a Share shall be entitled to one vote for each dollar of net asset
value standing in his name on the books of each Series in which he owns Shares
which is entitled to vote on the matter. All Shares of each Series shall vote
as a separate class except as to voting for Trustees and as otherwise required
by the 1940 Act. As to any matter which does not affect the interest of a
particular Series, only the holders of Shares of the one or more affected Series
shall be entitled to vote.
(6) REDEMPTION BY SHAREHOLDER. Each holder of record of Shares of a
particular Series shall have the right at such times as
<PAGE>
may be permitted by the Trust and as otherwise required by the 1940 Act to
require the Trust to redeem all or any part of his Shares of that Series at a
redemption price equal to the net asset value per Share of that Series next
determined in accordance with Subsection 2(h) of this Article IV after the
Shares are properly tendered for redemption, less any charge which may be
imposed by the Trust in connection with such redemption and described in the
Trust's then current prospectus. Payment of the redemption price shall be in
cash; provided, however, that if the Trustees determine, which determination
shall be conclusive, that conditions exist which make payment wholly in cash
unwise or undesirable, the Trust may, subject to the requirements of the 1940
Act, make payment wholly or partly in securities or other assets belonging to
the Series of which the Shares being redeemed are part at the value of such
securities or assets used in such determination of net asset value.
Notwithstanding the foregoing, the Trust may postpone payment of the redemption
price and may suspend the right of the holders of Shares of any Series to
require the Trust to redeem Shares of that Series during any period or at any
time when and to the extent permissible under the 1940 Act.
(7) REDEMPTION BY TRUST. The Trustees may cause the Trust to redeem at
net asset value the Shares of any holder of Shares in any Series if the net
asset value of the Shares in such Series is less than $2,000 as a result of
Shareholder redemptions. No such redemption shall be affected unless the Trust
has given the holder at least sixty (60) days notice of its intention to redeem
such Shares and an opportunity to purchase a sufficient number of additional
Shares to bring the aggregate current net asset value of the holder's Shares in
the particular Series above $2,000. Upon redemption of Shares pursuant to this
Section, the Trust shall promptly cause payment of the full redemption price to
be made to the holder of the Shares so redeemed. The Trust may reject any
purchase order, refuse to transfer such Shares and compel redemption of Shares
if, in its opinion, any such rejected action would prevent the Trust from
becoming a personal holding company as defined by the Internal Revenue Code of
1986, as amended.
(8) NET ASSET VALUE. The net asset value per Share of any Series shall be
the quotient obtained by dividing the value of the net assets of that Series
(being the value of the assets belonging to that Series less the liabilities
belonging to that Series) by the total number of Shares of that Series
outstanding, all determined in accordance with the methods and procedures,
including without limitation those with respect to rounding, established by the
Trustees from time to time.
The Trustees may determine to maintain the net asset value per Share of any
Series at a designated constant dollar amount and in connection therewith may
adopt procedures not inconsistent with the 1940 Act for the continuing
declarations of income attributable to that Series as dividends payable in
additional Shares of that
<PAGE>
Series at the designated constant dollar amount and for the handling of any
losses attributable to that Series. Such procedures may provide that in the
event of any loss each Shareholder shall be deemed to have contributed to the
capital of the Trust attributable to that Series his pro rata portion of the
total number of Shares required to be canceled in order to permit the net asset
value per Share of that Series to be maintained, after reflecting such loss, at
the designated constant dollar amount. Each Shareholder of the Trust shall be
deemed to have agreed, by his investment in any Series with respect to which the
Trustees shall have adopted any such procedure, to make the contribution
referred to in the preceding sentence in the event of any such loss. The
Trustees may delegate any of their powers and duties under this Section with
respect to appraisal of assets and liabilities in the determination of net asset
value or with respect to a suspension of the determination of net asset value to
an officer or officers or agent or agents of the Trust designated from time to
time by the Trustees.
(9) TRANSFER. All Shares of each particular Series shall be transferable.
(10) EQUALITY. All Shares of each particular Series shall represent an
equal proportionate interest in the assets belonging to that Series (subject to
the liabilities belonging to that Series), and each Share of any particular
Series shall be equal to each other Share of that Series; but the provisions of
this sentence shall not restrict any distinctions permissible under Subsection
2(c) of this Article IV that may exist with respect to dividends and
distributions on Shares of the same Series. The Trustees may from time to time
divide or combine the Shares of any particular Series into a greater or lesser
number of Shares of that Series without thereby changing the proportionate
beneficial interest in the assets belonging to that Series or in any way
affecting the rights of Shares of any other Series.
(11) FRACTIONS. Any fractional Share of any Series, if any such fractional
Share is outstanding, shall carry proportionately all the rights and obligations
of a whole Share of that Series, including rights and obligations of a whole
Share of that Series, including rights and obligations with respect to voting,
receipt of dividends and distributions, redemption of Shares, and liquidation of
the Trust or any Series.
(12) CONVERSION RIGHTS. Subject to compliance with the requirements of the
1940 Act, the Trustees shall have the authority to provide that holders of
Shares of any Series shall have the right to convert said Shares into Shares of
one or more other Series in accordance with such requirements and procedures as
may be established by the Trustees.
<PAGE>
(13) TERMINATION OF SALES. The Trustees shall have the authority to
terminate the sales of Shares of any Series at any time or for such periods as
the Trustees may from time to time decide.
Section C. OWNERSHIP OF SHARES. The ownership and transfer of Shares
shall be recorded on the books of the Series or its transfer or similar agent.
No certificates certifying the ownership of Shares shall be issued except as the
Trustees may otherwise determine from time to time. The Trustees may make such
rules as they consider appropriate for the issuance of share certificates,
transfer of Shares and similar matters for each Series. The record books of
each Series, as kept by the Series or any transfer or similar agent of the
Series, shall be conclusive as to who are the holders of Shares and as to the
number of Shares held from time to time by each Shareholder.
Section D. NO PREEMPTIVE RIGHTS, ETC. The holders of Shares shall not, as
such holders, have any right to acquire, purchase or subscribe for any Shares or
securities of the Trust which it may hereafter issue or sell, other than such
right, if any, as the Trustees in their discretion may determine. The holders
of Shares shall have no appraisal rights with respect to their Shares and,
except as otherwise determined by resolution of the Trustees in their sole
discretion, shall have no exchange or conversion rights with respect to their
Shares. No action may be brought by a Holder on behalf of the Trust unless
Holders owning no less than 10% of the then outstanding Shares, or Series or
class thereof, join in the bringing of such action. A Holder of Shares in a
particular Series or a particular class of the Trust shall not be entitled to
participate in a derivative or class action lawsuit on behalf of any other
Series or any other class or on behalf of the Holders of Shares in any other
Series or any other class of the Trust.
Section E. STATUS OF SHARES AND LIMITATION OF PERSONAL LIABILITY. Shares
shall be deemed to be personal property giving only the rights provided in this
Declaration of Trust. Every Person by virtue of having become registered as a
Shareholder shall be held to have expressly assented and agreed to the terms of
this Declaration of Trust and to have become a party thereto. The death of a
Shareholder during the continuance of the Trust shall not operate to terminate
the Trust nor entitle the representative of any deceased Shareholder to an
accounting or to take any action in court or elsewhere against the Trust or the
Trustees. The representative shall be entitled to the same rights as the
decedent under this Trust. Ownership of Shares shall not entitle the
Shareholder to any title in or to the whole or any part of the Trust property or
right to call for a partition or division of the same or for an accounting.
Neither the Trustees, nor any officer, employee or agent of the Trust shall have
any power to bind any Shareholder personally or to call upon any Shareholder for
the payment of any sum of money or assessment whatsoever other than
<PAGE>
such as the Shareholder may at any time personally agree to pay by way of
subscription for any Shares or otherwise. The Shareholders shall be entitled to
the same limitation of personal liability extended to stockholders of private
corporations for profit organized under the General Corporation Law of the State
of Delaware.
<PAGE>
ARTICLE IX
LIMITATION OF LIABILITY AND INDEMNIFICATION
Section F. LIMITATION OF LIABILITY. No personal liability for any debt or
obligation of the Trust shall attach to any Trustee of the Trust. Without
limiting the foregoing, a Trustee shall not be responsible for or liable in any
event for any neglect or wrongdoing of any officer, agent, employee, investment
adviser, subadviser, principal underwriter or custodian of the Trust, nor shall
any Trustee be responsible or liable for the act or omission of any other
Trustee.
Every note, bond, contract, instrument, certificate, Share or undertaking
and every other act or thing whatsoever executed or done by or on behalf of the
Trust or the Trustees or any of them in connection with the Trust shall be
conclusively deemed to have been executed or done only in or with respect to
their or his capacity as Trustees or Trustee and neither such Trustees or
Trustee nor the Shareholders shall be personally liable thereon.
Every note, bond, contract, instrument, certificate or undertaking made or
issued by the Trustees or by any officers or officer shall recite that the same
was executed or made by or on behalf of the Trust by them as Trustees or Trustee
or as officers or officer and not individually and that the obligations of such
instrument are not binding upon any of them or the Shareholders individually but
are binding only upon the assets and property of the Trust or a Series thereof,
and may contain such further recitals as they or he may deem appropriate, but
the omission thereof shall not operate to bind any Trustees or Trustee or
officers or officer or Shareholders or Shareholder individually.
All persons extending credit to, contracting with or having any claim
against the Trust shall look only to the assets of the Trust or a Series thereof
for payment under such credit, contract or claim; and neither the Shareholders
nor the Trustees nor any of the Trust's officers, employees or agents, whether
past, present or future, shall be personally liable therefor.
Section G. TRUSTEES' GOOD FAITH ACTION, EXPERT ADVICE, NO BOND OR SURETY.
The exercise by the Trustees of their powers and discretions hereunder shall be
binding upon the Trust, the Shareholders and any other interested person. A
Trustee shall be liable to the Trust or the shareholders only for his own
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee, and for nothing else,
and shall not be liable for errors of judgment or mistakes of fact or law. The
Trustees shall not be responsible or liable in any event for any neglect or
wrongdoing of any officer, agent, employee, consultant, adviser, administrative
distributor, principal underwriter, custodian, transfer agent, dividend
<PAGE>
disbursing agent, Shareholder servicing agent, or accounting agent of the Trust,
nor shall any Trustee be responsible for any act or omission of any other
Trustee. The Trustees may take advice of counsel or other experts with respect
to the meaning and operation of this Declaration of Trust and their duties as
Trustees hereunder, and shall be under no liability for any act or omission in
accordance with such advice or for failing to follow such advice. In
discharging their duties, the Trustees, when acting in good faith, shall be
entitled to rely upon the books of account of the Trust and upon written reports
made to the Trustees by any officer appointed by them, any independent public
accountant and (with respect to the subject matter of the contract involved) any
officer, partner or responsible employee of any other party to any contract
entered into hereunder. The Trustees shall not be required to give any bond as
such, nor any surety if a bond is required. The provisions of this Declaration,
to the extent that they restrict the duties and liabilities of the Trustees
otherwise existing at law or in equity, are agreed by the Shareholders and all
other Persons to replace such other duties and liabilities of the Trustees.
Section H. LIABILITY OF THIRD PERSONS DEALING WITH TRUSTEES. No person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the Trust or upon
its order.
Section I. INDEMNIFICATION. Subject to the exceptions and limitations
contained in this Section 4, every person who is, or has been, a Trustee,
officer, employee or agent of the Trust, including persons who serve at the
request of the Trust as directors, trustees, officers, employees or agents of
another organization in which the Trust has an interest as a shareholder,
creditor or otherwise (hereinafter referred to as a "Covered Person"), shall be
indemnified by the Trust to the fullest extent permitted by law against
liability and against all expenses reasonably incurred or paid by him in
connection with any claim, action, suit or proceeding in which he becomes
involved as a party or otherwise by virtue of his being or having been such a
Trustee, director, officer, employee or agent and against amounts paid or
incurred by him in settlement thereof.
No indemnification shall be provided hereunder to a Covered Person:
(1) for any liability to the Trust or its Shareholders arising out of a
final adjudication by the court or other body before which the proceeding was
brought that he engaged in willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office;
<PAGE>
(2) with respect to any matter as to which he shall have been finally
adjudicated not to have acted in good faith in the reasonable belief that his
action was in the best interests of the Trust; or
(3) in the event of a settlement or other disposition not involving a
final adjudication (as provided in paragraph (a) or (b)) and resulting in a
payment by a Covered Person, unless there has been either a determination that
such Covered Person did not engage in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office by the court or other body approving the settlement or other disposition,
or a reasonable determination, based on a review of readily available facts (as
opposed to a full trial-type inquiry), that he did not engage in such conduct,
such determination being made by:
(a) a vote of a majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested Trustees then in office
act on the matter); or
(b) written opinion of independent legal counsel.
The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not affect any other
rights to which any Covered Person may now or hereafter be entitled, shall
continue as to a person who has ceased to be a Covered Person and shall inure to
the benefit of the heirs, executors and administrators of such a person.
Nothing contained herein shall affect any rights to indemnification to which
Trust personnel other than Covered Persons may be entitled by contract or
otherwise under law.
Expenses of preparation and presentation of a defense to any claim, action,
suit or proceeding subject to a claim for indemnification under this Section 4
shall be advanced by the Trust prior to final disposition thereof upon receipt
of an undertaking by or on behalf of the recipient to repay such amount if it is
ultimately determined that he is not entitled to indemnification under this
Section 4, provided that either:
(a) such undertaking is secured by a surety bond or some other
appropriate security or the Trust shall be insured against losses arising out of
any such advances; or
(b) a majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested Trustees then in office
act on the matter) or independent legal counsel in a written opinion shall
determine, based upon a review of the readily available facts (as opposed to a
full trial-type inquiry), that there is reason to believe that the recipient
ultimately will be found entitled to indemnification.
<PAGE>
As used in this Section 4, a "Disinterested Trustee" is one (i) who is not
an Interested Person of the Trust (including anyone, as such Disinterested
Trustee, who has been exempted from being an Interested Person by any rule,
regulation or order of the Commission), and (ii) against whom none of such
actions, suits or other proceedings or another action, suit or other proceeding
on the same or similar grounds is then or has been pending.
As used in this Section 4, the words "claim," "action," "suit" or
"proceeding" shall apply to all claims, actions, suits, proceedings (civil,
criminal, administrative or other, including appeals), actual or threatened; and
the words "liability" and "expenses" shall include without limitation,
attorneys' fees, costs, judgments, amounts paid in settlement, fines, penalties
and other liabilities.
Section J. SHAREHOLDERS. No personal liability for any debt or obligation
of the Trust shall attach to any Shareholder or former Shareholder of the Trust.
In case any Shareholder or former Shareholder of the Trust shall be held to be
personally liable solely by reason of his being or having been a Shareholder and
not because of his acts or omissions or for some other reason, the Shareholder
or former Shareholder (or his heirs, executors, administrators or other legal
representatives or in the case of a corporation or other entity, its corporate
or other general successor) shall be entitled out of the assets of the Trust to
be held harmless from and indemnified against all loss and expense arising from
such liability; provided, however, there shall be no liability or obligation of
the Trust arising hereunder to reimburse any Shareholder for taxes paid by
reason of such Shareholder's ownership of any Share or for losses suffered by
reason of any changes in value of any Trust assets. The Trust shall, upon
request by the Shareholder or former Shareholder, assume the defense of any
claim made against the Shareholder for any act or obligation of the Trust and
satisfy any judgment thereon.
