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As filed with the Securities and Exchange Commission on August 16, 1996
File No.33-64363
811-7427
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. _____ [ ]
Post-Effective Amendment No. 2 [X]
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [ ]
Pre-Effective Amendment No. _____ [ ]
Post-Effective Amendment No. 2 [X]
(Check appropriate box or boxes.)
CRABBE HUSON FUNDS
(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)
_X_ on September 16, 1996 pursuant to paragraph (b)
___ 75 days after filing pursuant to paragraph (a)
___ on (date) pursuant to paragraph (a) of Rule 485
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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
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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.
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CRABBE HUSON
FUNDS
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MAILING ADDRESS
CRABBE HUSON FUNDS
P.O. Box 8413
Boston, MA 02266-8413
INVESTMENT ADVISER
The Crabbe Huson Group, Inc.
121 S.W. Morrison, Suite 1400
Portland, OR 97204
DISTRIBUTOR
Crabbe Huson Securities, Inc.
121 S.W. Morrison, Suite 1400
Portland, OR 97204
LEGAL COUNSEL
Davis Wright Tremaine
1300 S.W. Fifth Avenue, Suite 2300
Portland, OR 97201
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
1211 S.W. Fifth Avenue, Suite 2000
Portland, OR 97204
TRANSFER AGENT & INVESTOR SERVICES
State Street Bank and Trust Company
P.O. Box 8413
Boston, MA 02266-8413
FUND DIRECTORS
William W. Wyatt, Jr.
Louis Scherzer
Richard P. Wollenberg
Bob L. Smith
Gary L. Capps
Richard S. Huson
James E. Crabbe
Craig P. Stuvland
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PROSPECTUS
September , 1996
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The CRABBE HUSON SMALL CAP FUND (the "Fund") is a series of the Crabbe
Huson Funds, 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 September , 1996 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 12.
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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.
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A COPY OF THIS PROSPECTUS MUST BE DELIVERED TO RESIDENTS OF CERTAIN STATES
PRIOR TO CONSUMMATION OF A SALE OF SHARES IN THE FUND.
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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 intends
to commence operations on February 1, 1996 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. The Fund is permitted to invest up
to 25% of its total assets in real estate investment trusts, commonly referred
to as REITs. 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.
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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:
SHAREHOLDER TRANSACTION EXPENSES:
(as a percentage of offering price)
Maximum Sales Load on Purchases 0%
Maximum Sales Load Imposed on 0%
Reinvested Dividends
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 .50%
Total Fund Operating Expenses
(after reimbursement
or waiver) 1.50%
EXAMPLE: You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return, (2) redemption at the end of each period and (3)
reinvestment of dividends and distributions and that the percentage
amounts listed under "Total Fund Operating Expenses" remain the same
each year.(3)
ONE YEAR THREE YEARS
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$ 18.00 $ 56.00
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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
waive its advisory fee to the extent that Total Fund Operating Expenses
exceed 1.5%. Under this arrangement, the Adviser will not impose any
management fee 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, 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%.
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INVESTMENT OBJECTIVE AND POLICIES
The Trust is a Delaware business trust operating as an open-end,
diversified, management company. A Certificate of Trust was filed in the State
of Delaware 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 Trust commenced operations on February 16, 1996. 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 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 total 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
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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 it's 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 (except U.S. Government securities), and prohibit the investment of
more than 25% of the Fund's total assets in any one industry. 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 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, 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.
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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 complete listing of 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.
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 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
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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. Such 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 the Fund engages in when-issued and delayed-delivery transactions, it
will do so for the purpose of acquiring portfolio securities consistent with its
investment objective 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. A separate account of
liquid assets consisting of cash, U.S. Government securities or other high grade
debt obligations and equal to the value of any purchase commitment of the Fund
shall be maintained by the Fund's custodian until payment is made.
ILLIQUID SECURITIES. The Fund may invest up to 5% of its total assets in a
combination of illiquid securities and/or securities of issuers, including their
predecessors, which have been in existence less than three years. The following
securities in which the Fund will invest will be considered illiquid: (1)
repurchase agreements maturing in more than seven days; (2) restricted
securities (securities whose public resale is subject to legal restrictions);
and (3) any other securities in which the Fund may invest that are not readily
marketable. Securities eligible for resale to certain institutional investors
pursuant to Rule 144A of the Securities Act of 1933 shall not be considered
illiquid. The Board of Trustees may adopt guidelines and delegate to the
Adviser the daily function of determining and monitoring the liquidity of
restricted securities. The Board, however, will retain sufficient oversight and
be ultimately responsible for the determinations. In determining whether a
security is liquid, the Board shall consider whether the security can be
disposed of promptly in the ordinary course of business at a value reasonably
close to that used in the calculation of the net asset value per share.
Since it is not possible to predict with assurance how the market for
restricted securities sold and offered under Rule 144A will develop, the Board
will carefully monitor the Fund's investments in these securities, focusing on
such important factors, among others, as valuation, liquidity, and availability
of information. This practice could have the
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effect of increasing the level of illiquidity in the Fund to the extent that
qualified institutional buyers become for a time uninterested in purchasing
these restricted securities.
OPTIONS AND FUTURES TRANSACTIONS. The Fund may use options and futures
contracts, commonly referred to as derivatives, to attempt to enhance income,
and to reduce the overall risk of its investments ("hedge"). Each Fund's
ability to use these strategies may be limited by market conditions, regulatory
limits, and tax considerations. Appendix B to this prospectus describes the
instruments that the Fund may use and the way the Fund may use the instruments
for hedging purposes.
The Fund may invest up to 10% of its total assets in premiums on put and
call options, both exchange-traded and over-the-counter. The Fund may also
purchase options on securities indices, foreign currencies, and futures
contracts. The Fund may enter into closing transactions, exercise its options,
or permit the options to expire. The Fund may only write call options that are
covered. A call option is covered if written on a security the Fund already
owns.
The Fund may invest in stock index and interest futures contracts, provided
that the aggregate initial margin of all futures contracts in which the Fund
invests shall not exceed 10% of the total assets of the Fund after taking into
account unrealized profits and unrealized losses on any such transactions it has
entered into. Upon entering into a futures contract, the Fund will set aside
liquid assets, such as cash, U.S. Government securities, or other high grade
debt obligations in a segregated account with the Fund's custodian to secure its
potential obligation under such contract.
The principal risks of options and futures transactions are: (a) imperfect
correlation between movements in the prices of options or futures contracts and
movements in the prices of the securities hedged or used for cover; (b) lack of
assurance that a liquid secondary market will exist for any particular option or
futures contract at any particular time; (c) the need for additional skills and
techniques beyond those required for normal portfolio management; (d) losses on
futures contracts, which may be unlimited, from market movements not anticipated
by the Adviser; (e) possible need to defer closing out certain options or future
contracts in order to continue to qualify for beneficial tax treatment afforded
"regulated investment companies" under the Internal Revenue Code of 1986, as
amended (the "Code").
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
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subject to duplicate expenses resulting from the management of the portfolio
investment company as well as those of the 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 up to five percent of the securities of that
issuer.
LIMITED OPERATING HISTORY OF FUND. The Fund intends to commence operations
on February 1, 1996 and thus has a limited operating history.
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.
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 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 New York Stock Exchange ("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
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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.
The Fund may invest a portion of its assets in developing countries or in
countries with new or developing capital markets, such as countries in Eastern
Europe. The considerations noted above regarding the risks of investing in
foreign securities are generally more significant for these investments. These
countries may have relatively unstable governments and securities markets in
which only a small number of securities trade. Markets of developing countries
may be more volatile than markets of developed countries. Investments in these
markets may involve significantly greater risks, as well as the potential for
greater gains.
LEVERAGE. The Fund may, from time to time, use borrowed money to increase
its portfolio positions. This practice 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.
PUT, CALL OPTIONS, FUTURES CONTRACTS. The Fund may invest up to 10% of its
total assets in both put or call options or futures contracts. See "FUNDAMENTAL
POLICIES" in this Prospectus for discussion of the risks associated with
investing in options and futures contracts.
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 are
commonly referred to as "junk bonds." Such securities are predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal. Investment in such securities normally involves a greater degree of
investment and credit risk than does investment in a high-rated security. In
addition, the market for such securities is usually less broad than the market
for higher-rated securities, which could affect their marketability. The market
prices of such securities may fluctuate more than the market prices of higher-
rated securities in response to changes in interest rates and economic
conditions. Moreover, with such securities, there is a greater possibility that
an adverse change in the financial condition of the issuer, particularly a
highly leveraged issuer, may affect its ability to make payments of principal
and interest.
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INVESTMENT IN REITS. The Fund may invest up to 25% of its total assets in
real estate investment trusts ("REITS"). 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 Code and failing to maintain their exemptions from the 1940
Act.
REPURCHASE AGREEMENTS. The Fund may engage in repurchase agreements.
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.
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
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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 January 31, 1996. 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.
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:
NET ASSET VALUE ANNUAL RATE
--------------- -----------
First $100 million 1.00%
Next $400 million 0.85%
Amounts over $500 million 0.60%
Fees paid by the Fund are higher than those paid by most other mutual funds,
although the Board of Trustees of the Fund believes that the fees are comparable
to the fees charged by other mutual funds with similar investment objectives and
policies. 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. Since 1980, Mr. Crabbe has served in various
management positions with the Adviser. Mr. Crabbe currently manages the
portfolio of the Crabbe Huson Special Fund, a Fund that Mr. Crabbe has managed
on behalf of the Adviser since 1990. Mr. Johnson has been associated with the
Adviser since August, 1995. From November, 1991 until May, 1995, Mr. Johnson
was a private investment banker. Between
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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 January 30, 1996, the Adviser 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 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.
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.
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HOW TO INVEST IN THE FUND
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, investment advisers, or
other financial institutions that have entered into sales agreements with the
Distributor to actively promote the sale of the Fund's shares, 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.
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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 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:
Crabbe Huson Funds
P.O. Box 8413
Boston, MA 02266-8513
Should you wish to overnight mail your investment, please use the following
address:
Crabbe Huson 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 Small Cap Fund and write
your shareholder account number on your check. Mail your check together with
your completed account application to the following address: Crabbe Huson
Funds, P.O. Box 8413, Boston, MA 02266-8413.
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.
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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
INVESTING THROUGH AN AUTHORIZED THIRD PARTY: Fund shares are offered
without a front end sales load through selected broker-dealers, investment
advisers, and other financial institutions who have entered into sales
agreements with the Distributor. Investors should contact one of these
authorized parties directly for appropriate purchase instructions, as well as
information pertaining to accounts and any service or transaction fees that may
be charged by them.
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 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 or financial adviser. 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.
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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.
Should you wish to receive instructions on how to obtain your funds by
wire, please call the Transfer Agent at (800) 541-9732.
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 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:
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Crabbe Huson 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."
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 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 in every state in which the exchange
may be made legally. 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.
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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
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:
Crabbe Huson Funds
P.O. Box 8413
Boston, MA 02266-8413
Should you wish to overnight mail your redemption request, please use the
following address:
Crabbe Huson 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 by
telephone for shares in any other publicly available mutual fund which the
Adviser is the investment adviser. An investor shall be entitled to this option
unless the investor has completed and placed on file with the Transfer Agent an
authorization indicating its desire not to use telephone 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. Such
reasonable procedures include the "Instant Access" Automated Information Service
instituted by the Fund 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. An investor can make an ACH redemption by telephone
provided he or she has the appropriate telephone
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authorization and ACH bank information on file with the Fund's Transfer Agent.
The daily maximum redemption through use of the "Instant Access" system is
$100,000.
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:
Crabbe Huson Funds
P.O. Box 8413
Boston, MA 02266-8413
Should you wish to overnight mail your redemption request, please use the
following address:
Crabbe Huson Funds
Two Heritage Drive
Quincy, MA 02171
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.
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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 Crabbe Huson 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."
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
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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
Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City,
Missouri 64105, 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 the Fund.
The Transfer Agent uses Boston Financial Data Services as its servicing agent in
carrying out the Transfer Agent's responsibilities to the Fund.
LENDING OF PORTFOLIO SECURITIES
The Fund 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 20% 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 Fund 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
"ALLOCATION OF BROKERAGE," and "TAXES" in the Prospectus.
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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 Code so it will not pay federal taxes on either income or capital
gains distributed to shareholders, although there can be no assurance that it
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
taxable 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, 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.
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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 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 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.
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<PAGE>
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.
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 STRUCTURE
Beneficial interests in the Trust shall be divided into shares, all without
par value and of one class. 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
-27-
<PAGE>
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 SEC (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.
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<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.
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.
-29-
<PAGE>
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 regarding as having extremely poor prospects of ever attaining
any real investment standing.
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.
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<PAGE>
APPENDIX B
THE FUND may use some or all of the following hedging instruments:
OPTIONS ON EQUITY AND DEBT SECURITIES -- A call option is a short-term
contract pursuant to which the purchaser of the option, in return for a premium,
has the right to buy the security underlying the option at a specified price at
any time during the term of the option. The writer of the call option, who
receives the premium, has the obligation, upon exercise of the option during the
option term, to deliver the underlying security against payment of the exercise
price. A put option is a similar contract that gives its purchaser, in return
for a premium, the right to sell the underlying security at a specified price
during the option term. The writer of the put option, who receives the premium,
has the obligation, upon exercise of the option during the option term, to buy
the underlying security at the exercise price.
OPTIONS ON SECURITIES INDICES -- A securities index assigns relative values
to the securities included in the index and fluctuates with changes in the
market values of those securities. An index option operates in the same way as
a more traditional stock option, except that exercise of an index option is
effected with cash payment and does not involve delivery of securities. Thus,
upon exercise of an index option, the purchase will realize, and the writer will
pay, an amount based on the difference between the exercise price and the
closing price of the index.
STOCK INDEX FUTURES CONTRACTS -- A stock index futures contract is a
bilateral agreement pursuant to which one party agrees to accept, and the other
party agrees to make, delivery of an amount of cash equal to a specified dollar
amount times the difference between the stock index value at the close of
trading of the contract and the price at which the futures contract is
originally struck. No physical delivery of the stocks comprising the index is
made. Generally, contracts are closed out prior to the expiration date of the
contract.
INTEREST RATE FUTURES CONTRACTS -- Interest rate futures contracts are
bilateral agreements pursuant to which one party agrees to make, and the other
party agrees to accept, delivery of a specified type of debt security at a
specified future time and at a specified price. Although such futures contracts
by their terms call for actual delivery or acceptance of debt securities, in
most cases the contracts are closed out before the settlement date without the
making or taking of delivery.
OPTIONS ON FUTURES CONTRACTS -- Options on futures contracts are similar to
options on securities or currency, except that an option on a futures contract
gives the purchaser the right, in return for the premium, to assume a position
in a futures contract (a long position if the option is a call and a short
position if the option is a put), rather than to purchase or sell a security or
currency, at a specified price at any time during the option term. Upon
exercise of the option, the delivery of the futures position to the holder of
the option will be accompanied by delivery of the accumulated balance that
represents the amount by which the market price of the futures contract exceeds,
in the case of a call, or is less than, in the case of a put, the exercise price
of the option on the future. The writer of an option, upon exercise, will
assume a short position in the case of a call and a long position in the case of
a put.
Purchase of these financial instruments allows the Adviser to hedge against
changes in market conditions. For example, the Adviser may purchase a put
option in a securities index or when it believes that the stock prices will
decline. Conversely, the Adviser may purchase a call option in a securities
index when it anticipates that stock prices will increase.
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<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
PAGE
PROSPECTUS SUMMARY......................................................... -3-
EXPENSE DATA............................................................... -4-
INVESTMENT OBJECTIVE AND POLICIES.......................................... -6-
FUNDAMENTAL POLICIES....................................................... -8-
SPECIAL RISK FACTORS TO BE CONSIDERED..................................... -11-
MANAGEMENT OF THE FUND.................................................... -13-
CONTROL PERSONS........................................................... -14-
NET ASSET VALUE........................................................... -15-
WHEN TRANSACTIONS ARE RECORDED IN YOUR ACCOUNT............................ -15-
HOW TO INVEST IN THE FUND................................................. -16-
HOW TO SELL YOUR SHARES................................................... -19-
HOW TO EXCHANGE YOUR SHARES............................................... -20-
REDEMPTION OR EXCHANGE BY TELEPHONE....................................... -21-
ALLOCATION OF BROKERAGE................................................... -22-
SPECIAL INVESTOR SERVICES................................................. -23-
SYSTEMATIC WITHDRAWAL PLAN................................................ -23-
CUSTODIAN, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT................... -24-
LENDING OF PORTFOLIO SECURITIES........................................... -24-
PORTFOLIO TURNOVER........................................................ -24-
YIELD..................................................................... -25-
TAXES..................................................................... -25-
PERFORMANCE COMPARISONS................................................... -26-
CAPITAL STRUCTURE......................................................... -27-
APPENDIX A................................................................ -29-
APPENDIX B................................................................ -31-
CRABBE HUSON FUNDS
The Crabbe Huson Small Cap Fund
Prospectus
September , 1996
<PAGE>
CRABBE HUSON FUNDS
CRABBE HUSON SMALL CAP FUND
STATEMENT OF ADDITIONAL INFORMATION
September , 1996
This Statement of Additional Information of the Crabbe Huson Funds (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 Funds, 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............................................. 4
ADMINISTRATION CONTRACT...................................................... 5
DISTRIBUTION PLAN ........................................................ 5
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.......................... 7
SYSTEMATIC WITHDRAWAL PLAN................................................... 7
PORTFOLIO TRANSACTIONS....................................................... 8
GENERAL CONSIDERATIONS................................................... 8
PORTFOLIO TURNOVER....................................................... 9
INVESTMENT RESTRICTIONS...................................................... 10
SECURITIES OF OTHER INVESTMENT COMPANIES................................. 12
LOANS OF PORTFOLIO SECURITIES................................................ 13
PURCHASE AND REDEMPTION OF FUND SHARES....................................... 14
PRICING OF SECURITIES BEING OFFERED.......................................... 14
CALCULATION OF PERFORMANCE DATA.............................................. 15
OTHER QUOTATIONS, COMPARISONS AND GENERAL INFORMATION.................... 15
DIVIDENDS, DISTRIBUTIONS AND TAXES........................................... 16
GENERAL.................................................................. 16
FOREIGN TAXES............................................................ 18
SPECIAL INVESTOR SERVICES.................................................... 19
GENERAL INFORMATION.......................................................... 19
COUNSEL...................................................................... 19
AUDITORS..................................................................... 20
CUSTODIAN, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT...................... 20
i
<PAGE>
ADDITIONAL INFORMATION REGARDING CERTAIN INVESTMENTS BY THE FUND ............ 20
GOVERNMENT SECURITIES.................................................... 20
FINANCIAL STATEMENTS......................................................... 21
<PAGE>
GENERAL INFORMATION AND HISTORY
On October 13, 1995, A Certificate of Trust was filed in the State of
Delaware authorizing the Crabbe Huson Funds to operate as a Delaware business
trust. On October 14, 1995, the Board of Trustees adopted the Trust's
Declaration of Trust ("Declaration of Trust") and Bylaws. Pursuant to the
Declaration of Trust, the Trust will operate as an open-end investment company.
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 Municipal 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
- -------------------
*The person 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.
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<PAGE>
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.
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,
2
<PAGE>
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 to
April, 1995. His business address is Office of the Governor, Chief of Staff -
Gov. Kitzhaber, 254 State Capitol, Salem, Oregon 97310-0370.
Under the Declaration of Trust, no annual or regular meeting of
shareholders is required. Thus, there will not ordinarily be an annual
shareholder's 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.
COMPENSATION OF OFFICERS AND TRUSTEES
The following table sets forth compensation anticipated to be paid to the
disinterested Trustees of the Fund for the fiscla year ending October 31, 1996.
Officers and the disinterested trustees will not receive compensation in an
amount exceeding $60,000.
COMPENSATION TABLE
Total
Compensation
Aggregate from Fund
Compensation Complex Paid
From Fund, to Trustees,
Name of Person, Position Per Trustee Per Trustee
- ------------------------ ----------- -----------
Wollenberg, Smith,
Capps, Scherzer $ 450 $ 7,650
Directors
Wyatt $ 450 $ 5,900
The Trust also reimburses Trustees' expenses for attending shareholder and
Trustee meetings for Trustees who are not officers, directors, or employees of
the Adviser of the Distributor.
3
<PAGE>
SERVICES PROVIDED BY THE ADVISER
The Adviser entered into a Master Investment Advisory Agreement dated
January 31, 1996 (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 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
4
<PAGE>
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) 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
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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
(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
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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,
investment advisers, and other financial institutions that have entered into
sales agreements with the Distributor to actively promote the sale of the Fund's
shares, and may be paid to investment executives of the Distributor.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of January 30, 1996, the Adviser owned 100% of all the authorized and
outstanding shares of the Fund
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
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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 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.
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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 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
9
<PAGE>
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.
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.
10
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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 5%
of its total assets in a combination of illiquid securities and
securities of issuers, including their predecessors, which have
been in existence less than three years.
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.
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
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<PAGE>
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
and bankers' acceptances 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.
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 any
combination of stock index futures and interest rate futures
contracts.
21. Sell securities short, unless such sales are made "against the
box."
22. Purchase or retain the securities of any issuer if the officers
or trustees of the Fund, its advisers or managers, owning
beneficially more than one-half of 1% of the securities of an
issuer together own beneficially more than 5% of the securities
of that issuer.
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
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<PAGE>
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 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,
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<PAGE>
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, investment advisers, and other financial
institutions who enter into sales agreements with the Distributor to actively
promote the sale of the Fund's shares. 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.
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
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<PAGE>
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:
n
P(1+T) = 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 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
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<PAGE>
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 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
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<PAGE>
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 its 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 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.
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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
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.
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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 intends to commence business on February 1, 1996.
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.
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
19
<PAGE>
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
Investors Fiduciary Trust Company 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.
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
20
<PAGE>
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.
FINANCIAL STATEMENTS
Following are the unaudited financial statements for the Fund as of July
31, 1996. The audited financial statements for the Fund are incorporated by
reference to the pre-effective registration statement filed by the Fund on
February 9, 1996.
21
<PAGE>
- --------------------------------------------------------------------------------
CRABBE HUSON SMALL CAP FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
July 31, 1996
(Unaudited)
SHARES OR
FACE VALUE SECURITIES DESCRIPTION MARKET VALUE
- ---------- ------------------------------------------------ --------------
COMMON STOCK - 53.7%
BASIC MATERIALS - 7.5%
35,600 * Battle Mountain Gold . . . . . . . . . . . . . . . $ 324,850
14,300 General Chemical Group . . . . . . . . . . . . . . 259,188
3,300 * Pegasus Gold, Inc. . . . . . . . . . . . . . . . . 40,013
52,000 * Rollins Environmental Services . . . . . . . . . . 149,500
------------
773,551
------------
CONSUMER CYCLICALS - 5.7%
15,000 * Ann Taylor Stores, Inc.. . . . . . . . . . . . . 180,000
20,900 * Bombay Co, Inc . . . . . . . . . . . . . . . . . 112,337
7,400 * Burlington Coat Factory. . . . . . . . . . . . . 78,625
12,300 Cato Corp - Class A. . . . . . . . . . . . . . . 73,800
4,800 * Dress Barn, Inc. . . . . . . . . . . . . . . . . 43,200
28,100 * Payless Cashways, Inc. . . . . . . . . . . . . . 108,888
------------
596,850
------------
CONSUMER STAPLES - 6.8%
19,900 Fleming Companies. . . . . . . . . . . . . . . . 300,987
18,400 Hudson Foods, Inc - Class A. . . . . . . . . . . 259,900
9,100 * Suiza Foods Corp . . . . . . . . . . . . . . . . 147,875
------------
708,762
------------
ENERGY - 5.4%
21,300 Forrest Oil Corp . . . . . . . . . . . . . . . . 279,562
28,600 Snyder Oil Corp. . . . . . . . . . . . . . . . . 282,425
------------
561,987
------------
FINANCIAL - 5.8%
12,200 * Farm Family Holdings . . . . . . . . . . . . . . 213,500
14,000 * Risk Capital Holdings, Inc . . . . . . . . . . . 243,250
5,000 Zurich Reinsurance Centre. . . . . . . . . . . . 150,000
------------
606,750
------------
HEALTHCARE - 5.9%
14,100 * Coventry Corp. . . . . . . . . . . . . . . . . . 176,250
21,100 * Horizon/CMS Healthcare Corp. . . . . . . . . . . 205,725
10,400 Integrated Health Services . . . . . . . . . . . 231,400
------------
613,375
------------
*Non-income producing security.
See accompanying notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
CRABBE HUSON SMALL CAP FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
July 31, 1996
(Unaudited)
SHARES OR
FACE VALUE SECURITIES DESCRIPTION MARKET VALUE
- ---------- ------------------------------------------------ --------------
COMMON STOCK - (CONTINUED)
--------------------------
INDUSTRIALS - 13.2%
4,600 Century Aluminum Co. . . . . . . . . . . . . . . $ 67,275
6,600 Crompton & Knowles Corp. . . . . . . . . . . . . 99,000
25,100 Giddings & Lewis, Inc. . . . . . . . . . . . . . 291,787
134,700 * Lytton Minerals, Ltd . . . . . . . . . . . . . . 313,609
27,600 Oregon Steel Mills, Inc. . . . . . . . . . . . . 386,400
5,500 TJ International, Inc. . . . . . . . . . . . . . 88,000
7,300 Wabash National Corp . . . . . . . . . . . . . . 126,838
-------------
1,372,909
-------------
TRANSPORTATION - 3.4%
4,600 Hunt (JB) Transportation Services,Inc. . . . . . 84,525
3,600 * Landstar System, Inc . . . . . . . . . . . . . . 92,700
300 US Freightways Corp. . . . . . . . . . . . . . . 5,306
13,700 * Yellow Corp. . . . . . . . . . . . . . . . . . . 174,675
-------------
357,206
-------------
Total Common Stock . . . . . . . . . . . . . . . . . . . . . . 5,591,390
-------------
SHORT TERM INVESTMENTS - 47.9%
------------------------------
DISCOUNT NOTE - 43.9%
$ 600,000 Federal Home Loan Bank 5.270%** 8/01/96. . . . . 600,000
2,000,000 Federal Home Loan Bank 5.260%** 8/07/96. . . . . 1,998,247
1,970,000 Federal Home Loan Bank 5.250%** 8/14/96. . . . . 1,966,265
-------------
4,564,512
-------------
INVESTMENT COMPANY - 4.0%
416,106 Seven Seas Money Market Fund 5.110%*** . . . . . 416,106
-------------
Total Short Term Investments . . . . . . . . . . . . . . . . . 4,980,618
-------------
Total Investments - 101.6% . . . . . . . . . . . . . . . . . . 10,572,008
(Cost $10,731,989)
Cash - 0.0% . . . . . . . . . . . . . . . . . . . . . . . . 655
Other Assets and (Liabilities), Net - (1.6%) . . . . . . . . . (168,187)
-------------
TOTAL NET ASSETS - 100.0%. . . . . . . . . . . . . . . . . . . $10,404,476
-------------
-------------
*Non-income producing security.
**Rate reflects purchase yield to maturity.
***Rate reflects 7 day yield as of July 31, 1996.
See accompanying notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
CRABBE HUSON SMALL CAP FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
July 31, 1996
(Unaudited)
ASSETS:
Investment securities, at market (cost $10,731,989) (Note 1) $ 10,572,008
Cash 655
Receivables:
Dividends and interest 1,179
Fund shares sold 18,966
Organization expenses (Note 1) 117,384
Prepaid Expenses 88
-----------------
$ 10,710,280
-----------------
LIABILITIES:
Payables:
Investment securities payable 152,141
Fund shares redeemed 51,419
Accrued liabilities 102,244
-----------------
305,804
-----------------
NET ASSETS: $ 10,404,476
-----------------
-----------------
NET ASSETS CONSIST OF:
Capital shares 963
Capital paid in 10,148,193
Undistributed accumulated net investment income 34,988
Undistributed accumulated net
realized gain on investments 380,313
Net unrealized depreciation
on investments (Note 4) (159,981)
-----------------
$ 10,404,476
-----------------
-----------------
CAPITAL SHARES, PAR VALUE $.001
Authorized 1,000,000,000
Outstanding (Note 3) 962,968
-----------------
-----------------
NET ASSET VALUE PER SHARE $ 10.80
-----------------
-----------------
See accompanying notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
CRABBE HUSON SMALL CAP FUND
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the period from February 20, 1996 (commencement of operations) to July 31,
1996.
(Unaudited)
INVESTMENT INCOME
Interest $ 68,929
Dividends 11,355
-----------------------
80,284
-----------------------
EXPENSES
Investment advisory fees (Note 2) 30,197
Distribution fees (Note 2) 7,549
Transfer agent 6,736
Printing 612
Postage 789
Custody 5,129
Legal 287
Auditing 180
Insurance 73
Directors' fees 267
Registration fees 3,511
Amortization of organization expenses 3,029
Administration Fees (Note 2) 1,333
Miscellaneous 490
-----------------------
60,182
Fees waived by investment advisor (Note 2) (13,129)
Fees paid indirectly (Note 2) (1,757)
-----------------------
NET EXPENSES 45,296
-----------------------
NET INVESTMENT INCOME 34,988
-----------------------
REALIZED AND UNREALIZED GAIN:
Net realized gain on investments 380,313
Net change in unrealized depreciation
of investments (159,981)
-----------------------
NET GAIN ON INVESTMENTS 220,332
-----------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 255,320
-----------------------
-----------------------
See accompanying notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
CRABBE HUSON SMALL CAP FUND
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
For the period from February 20, 1996 (commencement of operations) to July 31,
1996
(Unaudited)
INCREASE IN NET ASSETS
FROM OPERATIONS:
Net investment income $ 34,988
Net realized gain on investments 380,313
Net change in unrealized depreciation
of investments (159,981)
-----------------
Increase in net assets
resulting from operations 255,320
CAPITAL SHARE TRANSACTIONS, NET (Note 3) 10,049,156
-----------------
Total increase in net assets 10,304,476
FUND NET ASSETS, BEGINNING OF PERIOD 100,000
-----------------
FUND NET ASSETS, END OF PERIOD (including undistributed net $ 10,404,476
-----------------
investment income of $34,988) -----------------
See accompanying notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
CRABBE HUSON SMALL CAP FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
(Unaudited)
For a share outstanding for the period February 20, 1996 (commencement of
investment operations) through July 31, 1996.
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.04
Net Realized & Unrealized
Gain (Loss) on Securities 0.76
--------------
Total from Investment Operations 0.80
--------------
NET ASSET VALUE, END OF PERIOD $ 10.80
--------------
--------------
TOTAL RETURN 8.00% (a)
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets, End of Period $10,404,476
Ratio of Expenses to Average Net Assets 1.56% (b)(c)
Ratio of Net Investment Income to Average Net Assets 1.10% (b)(c)
Portfolio Turnover Rate 65.49%
Average Commission Rate $ 0.0304 (d)
RATIOS IF FEES HAD NOT BEEN WAIVED AND/OR REIMBURSED
- ----------------------------------------------------
Ratio of Expenses to Average Net Assets 1.99% (b)(c)
Ratio of Net Investment Income to Average Net Assets 0.67% (b)(c)
RATIOS NET OF EXPENSES PAID INDIRECTLY
- --------------------------------------
Ratio of Expenses to Average Net Assets 1.50% (c)
Ratio of Net Investment Income to Average Net Assets 1.16% (c)
- ---------------------------------------------------
(a) Total return would have been lower had certain expenses not been waived.
Not annualized.
(b) Ratios include expenses paid indirectly through certain expense offset
arrangements.
(c) Computed on an annualized basis.
(d) Disclosure of the average commission rate paid relates to the purchase and
sale of investment securities and is required for Funds that invest greater
than 10% of average net assets in equity transactions.
<PAGE>
- --------------------------------------------------------------------------------
CRABBE HUSON FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
July 31, 1996
(Unaudited)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION: The Crabbe Huson Small Cap Fund (the "Fund") is a series of the
Crabbe Huson Funds, 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.
SECURITY VALUATION: Securities listed or traded on a registered securities
exchange are valued at the last price on the date 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 is
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. Cash equivalents relating to
Firm Commitment Purchase Agreements are segregated by the custodian and may not
be sold while the current commitment is outstanding.
SECURITY TRANSACTIONS AND INVESTMENT INCOME: Security transactions are
accounted for on the trade date, the date the order to buy or sell is executed.
Interest income is recorded daily on the accrual basis. Interest income
consists of interest accrued plus the accretion of original issue discount and
minus the amortization of investment premium, both calculated on an effective
interest basis. Dividend income and distributions to shareholders are recorded
on the ex-dividend date. Net realized gains and losses on investments are
computed on the first-in, first-out method.
DIVIDENDS AND DISTRIBUTIONS: The Fund expects to declare and distribute to
shareholders, in December, substantially all of its net investment income and
net realized capital gains, if any.
OPTIONS: The Fund may write call options on securities they own or have the
right to acquire, and may purchase put and call options on individual securities
and indexes written by others. The purchase of any of these instruments can
result in the entire loss on 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.
When an option is written (sold), an amount equal to the premium received is
recorded as a liability. The amount of liability is adjusted daily to reflect
the current market value of the option written. When an option written by the
Fund expires on its stipulated expiration date, the Fund realizes a gain equal
to the net premium received for the option. When the Fund enters into a closing
purchase transaction, the Fund realizes a gain or loss equal to the difference
between the cost of a closing purchase transaction and the premium received when
the call option was written. In the case of either expiration of a written
option or a closing purchase transaction, the liability related to such option
is extinguished.
<PAGE>
- --------------------------------------------------------------------------------
CRABBE HUSON FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
July 31, 1996
(Unaudited)
OPTIONS (CONTINUED): Call or put options purchased are accounted for in the
same manner as marketable portfolio securities. When a call or put option is
exercised, the proceeds from the underlying securities bought or sold are
decreased by the premium paid in determining the gain or loss.
Options on stock indexes differ from options on securities in that the exercise
of an option on a stock index does not involve delivery of the actual underlying
security and are settled in cash only.
ORGANIZATION COSTS: Expenses incurred in connection with the organization of
the Fund are amortized over a sixty-month period. The amortization is
calculated based upon the projected growth in net assets of the Fund. The Fund
has amortized $3,029 through July 31, 1996. The Crabbe Huson Group, Inc., the
Fund's investment advisor, has agreed that, in the event any of the initial
shares are redeemed during the 60-month period for amortizing the Fund's
organization costs, the Fund will be reimbursed by the investment advisor for
the unamortized balances of such costs in the same proportion as the number of
shares reduced bears to the number of initial shares outstanding at the time of
redemption.
FEDERAL INCOME TAXES: It is the Fund's policy to distribute substantially all
of its taxable income to shareholders and otherwise comply with the provisions
of the Internal Revenue Code applicable to regulated investment companies.
Therefore, no provision has been made for Federal income or excise taxes. Due
to the timing of dividend distributions and the differences in accounting for
income and realized gains (losses) for financial statement and federal income
tax purposes, the fiscal year in which amounts are distributed may differ from
the year in which the income and realized gains (losses) are recorded by the
Fund. The differences between the income or gains distributed on a book versus
tax basis are shown as excess distributions of net investment income and net
realized gain on sales of investments in the Statement of Changes in Net Assets.
ESTIMATES: The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
income and expenses at the date of the financial statements. Actual results
could differ from these estimates.
NOTE 2. INVESTMENT ADVISOR AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISOR: The Fund has entered into an investment advisory agreement
with The Crabbe Huson Group, Inc. (the "Advisor"), an affiliated company. The
investment advisory fee is accrued daily and paid semi-monthly at the rate of
1.00% of the Fund's daily net assets up to $100 million, 0.85% of the next $400
million, and 0.60% of those assets in excess of $500 million.
<PAGE>
- --------------------------------------------------------------------------------
CRABBE HUSON FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
July 31, 1996
(Unaudited)
INVESTMENT ADVISOR (CONTINUED): The Advisor has voluntarily agreed to waive its
management fee and/or reimburse, the Fund for the amount, if any, by which the
total operating and management expenses (including the Advisor's compensation
and any amounts paid pursuant to the Fund's Rule 12b-1 plan but excluding
interest, taxes, brokerage fees and commissions, and extraordinary expenses)
exceeds 1.50% of its average daily net assets.
DISTRIBUTOR: The Fund has entered into a distribution agreement (the
"Distribution Plan") with Crabbe Huson Securities, Inc. (the "Distributor"), an
affiliated company. Under the Distribution Plan, the Fund may pay up to 1/4 of
1% of its average daily net assets to the Distributor as reimbursement for its
actual expenses incurred in the distribution and promotion of shares.
ADMINISTRATOR: State Street Bank and Trust Company (the "Administrator")
serves as administrator of the Fund. The Administrator performs certain
administrative services for the Fund. Such services relate to administration,
operations and compliance. The Fund pays the Administrator a fee based on the
total net assets of the Funds managed by the Advisor. The fee shall be as
follows: first $500 million managed by Advisor - .06%; next $500 million -
.03%; thereafter - .01%. Each Fund pays its pro rata share of such fee, plus
certain out of pocket costs.
TRUSTEES FEES: As of July 31, 1996, the Fund had no outstanding fees payable to
the disinterested trustees.
FEES PAID INDIRECTLY: The Fund has entered into a custodian, recordkeeping, and
pricing agreement with Investors Fiduciary Trust Company ("IFTC"). IFTC's fees
for these services are subject to reduction by credits earned by the Fund, based
on the cash balance of the Fund held by IFTC as Custodian. For the period ended
July 31, 1996, the Fund had earned $1,757 in such credits.
NOTE 3. CAPITAL SHARE TRANSACTIONS
Transactions in capital shares for the period February 20, 1996 (commencement of
investment operations) through July 31, 1996 were as follows:
SHARES AMOUNT
------------ ------------
Shares Sold 1,072,175 $11,370,649
Shares issued in reinvestment
of dividends __ __
Shares redeemed (119,207) (1,321,493)
------------ ------------
Net increase (decrease) 952,968 $10,049,156
------------ ------------
------------ ------------
<PAGE>
- --------------------------------------------------------------------------------
CRABBE HUSON FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
July 31, 1996
(Unaudited)
NOTE 4. INVESTMENT TRANSACTIONS
Aggregate purchases and sales for the period February 20, 1996 (commencement of
investment operations) through July 31, 1996 (excluding short-term securities)
were $7,825,329 and $2,454,276, respectively.
The identified cost of investments in securities owned by the Fund and its
respective gross unrealized appreciation and depreciation at July 31, 1996 were
as follows:
IDENTIFIED GROSS UNREALIZED NET UNREALIZED
COST APPRECIATION (DEPRECIATION) DEPRECIATION
------------- ------------ ------------ --------------
$10,731,989 $198,349 $(358,330) $(159,981)
<PAGE>
------------------------------
PART C
OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Index to Financial Statement.
Audited Statement of Assets and Liabilities as of
January 30, 1996(1)
Notes to Financial Statements as of January 30, 1996(1)
Unaudited Statement of Assets and Liabilities
as of July 31, 1996
Statement of Operations from February 20, 1996 to
July 31, 1996
Notes to Financial Statements as of July 31, 1996(1)
(b) Exhibits:
1 Amended Declaration of Trust(1)
2 Amended Bylaws(1)
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.(2)
5 Form of Master Investment Advisory Contract(1)
6(a) Form of Distribution Agreement(1)
6(b) Form of Selected Dealer Agreement(1)
7 None
8 Form of Custody and Investment Accounting(1)
9(a) Form of Administration and Transfer Agent Agreement(1)
10 Opinion and Consent of Davis Wright Tremaine, Counsel to Registrant(1)
11 Consent of KPMG Peat Marwick
12 See paragraph (a) of this Item 24
- ----------------------------
(2) Incorporated by reference from the Pre-Effective Registration Statement
filed with the Securities and Exchange Commission on November 16, 1995.
(1) Incorporated by reference from Pre-Effective Amendment No. 1 filed with
the Securities and Exchange Commission on February 9, 1996.
<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(3)
15 Distribution Plan(1)
16 None
17 Financial Data Schedule
18 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.
Item 26. NUMBER OF HOLDERS OF SECURITIES
As of August 14, 1996, there were 325 recorded 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
- -----------------------------
(3) Incorporated by reference from the Post-Effective Amendment No. 5
filed by the Crabbe Huson Equity Fund, Inc., File Nos. 33-25044 and 811-5837.
<PAGE>
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 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
<PAGE>
"(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 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
<PAGE>
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 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.
<PAGE>
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.
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 Address Crabbe Huson Securities, Inc. Registrant
- ---------------- ----------------------------- -------------
Thomas F. Biesiadecki Secretary and Chief
121 SW Morrison Compliance Officer
Suite 1410
Portland, OR 97204
Craig L. Kolzow Vice President Assistant
121 SW Morrison Treasurer
Suite 1410
Portland, OR 97204
Cheryl A. Burgermeister Vice President, Treasurer
121 SW Morrison Treasurer and Director
Suite 1410
Portland, OR 97204
Craig P. Stuvland President and Director Secretary and
121 SW Morrison Director
Suite 1410
Portland, OR 97204
<PAGE>
(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 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.
(c) 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 August , 1996.
CRABBE HUSON FUNDS
By:/s/ RICHARD S. HUSON
-----------------------------------
Richard S. Huson, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on August , 1996, 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
* Treasurer
----------------------------------
Cheryl A. Burgermeister
(3) Trustees:
* Trustee
----------------------------------
Gary L. Capps
* Trustee
----------------------------------
James E. Crabbe
Page 1 - SIGNATURES AND CERTIFICATION
<PAGE>
* Trustee
----------------------------------
Richard S. Huson
* Trustee
----------------------------------
William Wendell Wyatt
* Trustee
----------------------------------
Craig P. Stuvland
* Trustee
----------------------------------
Louis Scherzer
* Trustee
----------------------------------
Bob L. Smith
* Trustee
----------------------------------
Richard P. Wollenberg
/s/ RICHARD S. HUSON
----------------------------------
By: Richard S. Huson
Attorney in Fact for the
trustees and officers
identified above by an
asterisk
Page 2 - SIGNATURES AND CERTIFICATION
<PAGE>
EXHIBIT 99.11
INDEPENDENT AUDITORS CONSENT
Board of Trustees and Shareholders
Crabbe Huson Funds:
We consent to the incorporation by reference to our report dated January 30,
1996, on the Crabbe Huson Small Cap Fund, presently the one series
constituting the Crabbe Huson Funds, in the Crabbe Huson Funds Post-Effective
Amendment No. 2 to the Registration Statement No. 33-64363 on Form N-1A under
the Securities and Exchange Act of 1933 and Post-Effective Amendment No. 2 to
the Registration Statement No. 811-7427 under the Investment Company Act of
1940.
We also consent to the reference to our firm under the heading "Auditors" in
the Statement of Additional Information.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Portland, OR
August 16, 1996
