<PAGE>
As filed with the Securities and Exchange Commission on February 9, 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. 1 [X]
Post-Effective Amendment No. _____ [ ]
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [ ]
PRE-EFFECTIVE AMENDMENT NO. 1 [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)
____ on (date) pursuant to paragraph (b)
____ 75 days after filing pursuant to paragraph (a)
____ on (date) pursuant to paragraph (a) of Rule 485
<PAGE>
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay the effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to Section 8(a), may determine.
Please forward copies of communications to:
Mark A. Wentzien
Davis Wright Tremaine
2300 First Interstate Tower
1300 S.W. Fifth Avenue
Portland, Oregon 97201
__________________________
An indefinite number of shares of Common Stock have been registered by the
issuer pursuant to Rule 24f-2 of the Investment Company Act of 1940.
<PAGE>
CRABBE HUSON FUNDS
Cross-Reference Sheet Showing Location in Prospectus and
Statement of Additional Information of
Information Required by Items of the Registration Form
FORM N-1A ITEM NUMBER AND CAPTION LOCATION
PART A
1. Cover Page . . . . . . . . . . . . . . . . . . . . . . . . .Cover Page
2. Synopsis
2(a) Shareholder Transaction Expenses . . . . . . . . . . . . .Expense Data
2(b)+(c) Synopsis of Prospectus . . . . . . . . . . . . . . .Prospectus Summary
3. Condensed Financial Information
3(a) Per share Income & Capital Changes . . . . . . . . . . .Not Applicable
3(b) Debt History . . . . . . . . . . . . . . . . . . . . . .Not Applicable
3(c) Performance Data . . . . . . . . . . . .Performance Comparisons; Yield
4 General Description of Registrant
4(a)(i) Organization . . . . . . . . . . .Investment Objectives and Policies;
Fundamental Policies
4(a)(ii) Investment Objectives and Policies . . . . . Investment Objectives and
Policies; Fundamental Policies
4(b) Other Investments. . . . . . . . . . . . . . . . . . . .Not Applicable
4(c) Risk Factors . . . Risk Factors; Special Risk Factors to be Considered
5 Management of the Fund
5(a) Board of Directors . . . . . . . . . . . . . . .Management of the Fund
5(b)(i) Investment Advisor . . . . . . . . . . . . . . .Management of the Fund
5(b)(ii) Services of Investment Advisor . . . . . . . . .Management of the Fund
<PAGE>
FORM N-1A ITEM NUMBER AND CAPTION LOCATION
5(b)(iii) Compensation of Advisor. . . . . . . . . . . . .Management of the Fund
5(c) Portfolio Manager(s) . . . . . . . . . . . . . .Management of the Fund
5(d) Other Management Services. . . . . . . . . . . . . . . .Not Applicable
5(e) Transfer Agent, Dividend Paying Agent. . . . . .Management of the Fund
5(f) Expenses . . . . . . . . . . . . . . . . . . . .Management of the Fund
5(g)(i) Brokerage Commissions. . . . . . . . . . . . . Allocation of Brokerage
5(g)(ii) Allocation of Brokerage. . . . . . . . . . . . Allocation of Brokerage
5A Management's Discussion of Fund Performance. . . . . . .Not Applicable
6 Capital Stock and Other Securities
6(a) Rights and Restrictions. . . . . . . . . . . . . . . . . Capital Stock
6(b) Control Persons. . . . . . . . . . . . . . . . . . . . Control Persons
6(c) Changes in Rights of Holders . . . . . . . . . . . . . . Capital Stock
6(d) Other Classes of Securities. . . . . . . . . . . . . . .Not Applicable
6(e) Shareholder Inquiries . . . . . . . . . . Special Investor Services -
Shareholder Inquiries
6(f) Dividends and Distributions. . . . . . . . . . . . . . . Capital Stock
6(g) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Taxes
7 Purchase of Securities Being Offered
7(a) Underwriter. . . . . . . . . . . . . . . . .How to Invest in the Funds
7(b) Determination of Offering Price. . . . . . . . . . . . Net Asset Value
7(c) Special Plans. . . . . . . . . . . . . . . How to Invest in the Funds;
Redemption or Exchange by Telephone;
Special Investor Services;
Systematic Withdrawal Plan
<PAGE>
FORM N-1A ITEM NUMBER AND CAPTION LOCATION
7(d) Minimum Investment . . How to Invest in the Funds - Minimum Investment
7(e) Trail Fee. . . . . . . . . . . . . . . . . . . . . . . .Not Applicable
7(f) 12b-1 Fees . . .How to Invest in the Funds - Sales Load and 12b-1 Fees
8 Redemption or Repurchase
8(a) Redemption Procedures and Charges. . . . . . .How to Sell Your Shares;
How to Exchange Your Shares;
Redemption or Exchange by Telephone
8(b) Repurchase through Broker-Dealer . . . . . . .How to Sell Your Shares;
How to Exchange Your Shares;
Redemption or Exchange by Telephone
8(c) Involuntary Redemption . . . . . . How to Sell Your Shares -
Involuntary Redemption
8(d) Delay of Redemption. . . . . . . . . . . . . . How to Sell Your Shares
9 Pending Legal Proceeding . . . . . . . . . . . . . . . .Not Applicable
PART B
10 Cover Page . . . . . . . . . . . . . . . . . . . . . . . . .Cover Page
11 Table of Contents. . . . . . . . . . . . . . . . . . Table of Contents
12 General Information and History . . . . . .General Information and
History of the Fund
13 Investment Objectives and Policies
13(a) Description. . . . . .Prospectus - Investment Objectives and Policies;
Fundamental Policies
13(b) Fundamental Policies . . . . . . . . . . . . .Investment Restrictions;
Loans of Portfolio Securities
13(c) Significant Policies . . . . . . . .Prospectus - Investment Objectives
and Policies; Fundamental Policies
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FORM N-1A ITEM NUMBER AND CAPTION LOCATION
13(d) Portfolio Turnover . . . . Portfolio Transactions - Portfolio Turnover
14 Management of the Fund
14(a) Directors and Officers . . . . . . . . . . . . . . . . . . .Management
14(b) Positions with Affiliates. . . . . . . . . . . . . . . . . .Management
14(c) Compensation . . . . . . . . . . . . . . . . . . . . . . . .Management
15 Control Persons and Principal Holders of Securities
15(a) Names and Addresses of Control Persons . . . . . . Control Persons and
Principal Holders of Securities
15(b) Ownership of Fund. . . . . . . . . . . . . . . . . Control Persons and
Principal Holders of Securities
15(c) Stock Holdings of Officers and Directors . . . . . Control Persons and
Principal Holders of Securities
16 Investment Advisory and Other. . .Prospectus - Management of the Fund;
Services Services Provided by the Advisor
16(a)(i) Control Persons of the Advisor . .Prospectus - Management of the Fund;
Services Provided by the Advisor
16(a)(ii) Affiliates of Registrant and. . . Prospectus - Management of the Fund;
Advisor Services Provided by the Advisor
16(a)(iii) Advisory Fee. . . . . . . . . . .Prospectus - Management of the Fund;
Services Provided by the Advisor
16(b) Services of Advisor. . . . . . . . . .Services Provided by the Advisor
16(c) Fees and Expenses. . . . . . . . . . .Services Provided by the Advisor
16(d) Other Management-Related Contracts . . . . . . Administration Contract
16(e) Other Persons Furnishing Advice for Compensation . . . .Not Applicable
<PAGE>
FORM N-1A ITEM NUMBER AND CAPTION LOCATION
16(f) Expenses of Distribution of Shares
Borne by Registrant. . . . . . . . . Services Provided by the Advisor;
Distribution Plan
16(g) Nonbank or Nontrust Custodial Services . . . . . . . . .Not Applicable
16(h) Custodian; Independent Public Accountant;
Transfer Agent . . . . . . . . . .Auditors; Custodian, Transfer Agent,
and Dividend Disbursing Agent
17 Brokerage and other Allocations
17(a) Effecting Transactions in
Portfolio Securities . . . . . . . . . . . . . .Portfolio Transactions
17(b) Payments of Commissions to Affiliates. . . . . . . . . .Not Applicable
17(c) Selection of Brokers . . . . . . . . . . . . . .Portfolio Transactions
17(d) Allocation . . . . . . . . . . . . . . . . . . . . . . .Not Applicable
17(e) Acquisition of Broker's Securities . . . . . . . . . . .Not Applicable
18 Capital Stock and Other Securities
18(a) Right of Each Class of Stock . . . . . . . . . . . General Information
18(b) Securities Other than Capital Stock. . . . . . . . . . .Not Applicable
18(f) Exemption. . . . . . . . . . . . . . . . . . . . . . . .Not Applicable
19 Purchase, Redemption and Pricing of Securities Being Offered
19(a) Manner of Offering . . . . . . .Purchase and Redemption of Fund Shares
19(b) Valuation of Securities and Assets . . . . . . . Pricing of Securities
Being Offered
19(c)
20 Tax Status . . . . . . . . . . . . .Dividends, Distributions and Taxes
21 Underwriters
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FORM N-1A ITEM NUMBER AND CAPTION LOCATION
21(a)(i) Nature of Underwriting. . . . .Prospectus - How to Invest in the Funds
Obligation
21(a)(ii) Continuous Offering. . . . . . Prospectus - How to Invest in the Funds
21(a)(iii) Prior Compensation of Underwriter . . . . . . . . . . .Not Applicable
21(b) Compensation to Affiliated Underwriters. . . . . . . . .Not Applicable
21(c) Other Payments to Underwriters and Dealers . . . . . . .Not Applicable
22 Calculation of Performance Data
22(a) Money Market Funds . . . . . . . . . . . . . . . . . . .Not Applicable
22(b)(i) Total Return . . . . . . . . . . . . . Calculation of Performance Data
22(b)(ii) Yield. . . . . . . . . . . . . . . . . Calculation of Performance Data
22(b)(iii) Tax Equivalent Yield. . . . . . . . . Calculation of Performance Data
23 Financial Statements . . . . . . . . . . . . . . .Financial Statements
<PAGE>
---------------------
CRABBE HUSON
FUNDS
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ADVISER
The Crabbe Huson Group, Inc.
Portland, Oregon
ADMINISTRATOR
State Street Bank and Trust Company
Boston, Massachusetts
TRANSFER AGENT
State Street Bank and Trust Company
Boston, Massachusetts
DISTRIBUTOR
Crabbe Huson Securities, Inc.
Portland, Oregon
CUSTODIAN
Investors Fiduciary Trust Company
Kansas City, Missouri
COUNSEL
Davis Wright Tremaine
Portland, Oregon
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
Portland, Oregon
PROSPECTUS
February , 1996
[LOGO]
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A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION BUT HAS NOT YET BECOME EFFECTIVE. INFORMATION
CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. THESE SECURITIES MAY NOT
BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. NEITHER THIS PROSPECTUS NOR THE STATEMENT OF
ADDITIONAL INFORMATION SHALL CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF
AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE OR
JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE OR
JURISDICTION.
<PAGE>
CRABBE HUSON FUNDS
PROSPECTUS
FEBRUARY __, 1996
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 , 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
17.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION, PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
- --------------------------------------------------------------------------------
A COPY OF THIS PROSPECTUS MUST BE DELIVERED TO RESIDENTS OF CERTAIN
STATES PRIOR TO CONSUMMATION OF A SALE OF SHARES IN THE FUND.
- --------------------------------------------------------------------------------
1
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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:
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES: (as a percentage of offering price)
Maximum Sales Load on Purchases............................................................ 0%
Maximum Sales Load Imposed on Reinvested Dividends......................................... 0%
Deferred Sales Load........................................................................ 0%
Redemption Fees............................................................................ 0%
Exchange Fees.............................................................................. 0%
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
Management Fees (after waiver)(1).......................................................... .75%(1)
12b(1) Fees(2)............................................................................. .25%(2)
Other Expenses............................................................................. .50%
Total Fund Operating Expenses (after reimbursement or waiver).............................. 1.50%
</TABLE>
EXAMPLE: You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return, (2) redemption at the end of each period and (3)
reinvestment of dividends and distributions and that the percentage
amounts listed under "Total Fund Operating Expenses" remain the same
each year.(3)
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS
- ------------------------------------------------------------ ------------------------------------------------------------
<S> <C>
$18.00 $56.00
</TABLE>
The purpose of the above table is to assist the investor in understanding
the various costs and expenses that an investor in the Fund will bear directly
or indirectly. Such costs and expenses include investment advisory fees and
administration costs. Additionally, a long-term shareholder should consider that
the fees and costs it will incur under the 12b-1 plan may result in the
shareholder paying more than the economic equivalent of the maximum front-end
sales charge permitted by the rules and regulations of the National Association
of Securities Dealers. See "Management of the Funds" and "Purchase of Shares."
The Fund is newly organized and has no operating history. The percentages
set forth in the table above under the caption "Other Expenses" have been
estimated based on the expected asset levels and the amount of expenses expected
to be incurred during the current fiscal period ending October 31, 1996.
- ------------------------
(1) For the fiscal year ending October 31, 1996, the Adviser has agreed to
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%.
2
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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 REIT's. For additional
information about specific risk factors associated with an investment in the
Fund, see "FUNDAMENTAL POLICIES," and "SPECIAL RISK FACTORS TO BE CONSIDERED"
in this Prospectus.
-------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES
-------------------------------------------
The Trust is a Delaware business trust operating as an
open-end, diversified, management company. A Certificate of Trust was filed in
the State of Delaware on 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 intends to commence operations on February 1, 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
3
<PAGE>
current income is secondary to the primary objective. The Fund seeks to invest
up to 100%, and under normal conditions at least 65%, of its 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 obligations. At no time will
the Fund have in excess of 20% of its total assets invested in fixed income
securities rated below investment grade (BBB by Standard and Poor's ("S&P") and
Baa by Moody's Investors Service ("Moody's")) or in excess of 5% of its total
assets invested in fixed income securities that are unrated. The maturities of
the fixed income securities shall be three years or less.
By itself, investment in the Fund does not constitute a balanced
investment approach. Securities that the Adviser believes have the greatest
growth potential may be regarded as speculative, and an investment in the Fund
may involve greater risk than is inherent in other mutual funds. The Fund's
focus on small market capitalization stocks may cause its net asset value to be
more volatile than other funds with different strategies. Because the Fund
invests primarily in common stocks, it may be appropriate only for investors who
can afford a longer term investment horizon or perspective. For a further
description of the risks associated with an investment in the Fund, see "SPECIAL
RISK FACTORS TO BE CONSIDERED."
INVESTMENT RESTRICTIONS
The Fund's investment restrictions prohibit, among other things, the
investment of more than 5% of the Fund's total assets in the securities of any
one issuer, and prohibit the investment of more than 25% of the Fund's total
assets in any one industry (except U.S. Government securities). In addition to
common stock, the assets of the Fund will sometimes be invested in convertible
and nonconvertible preferred stocks and bonds, which may or may not be rated.
However, no more than 20% of the Fund's total assets may be invested in fixed
income or convertible securities which are rated below the fourth highest grade
by Moody's and S&P (Baa by Moody's or BBB by S&P) and no more than 5% of the
Fund's total assets may be invested in unrated fixed income or convertible
securities. Obligations rated below the fourth highest grade are considered to
have speculative characteristics. See "SPECIAL RISK FACTORS TO BE CONSIDERED."
The Fund's investment restrictions and policies are more fully described
4
<PAGE>
under "FUNDAMENTAL POLICIES" and in the Statement of Additional Information. All
policies of the Fund may be changed without a shareholder vote unless the change
would affect the Fund's Fundamental Policies as set forth in this Prospectus or
the Investment Restrictions set forth in the Statement of Additional
Information.
DIVIDENDS AND DISTRIBUTIONS
The Fund expects to declare and distribute to shareholders, in
December, substantially all of its net investment income and net
realized capital gains, if any. The amount distributed will vary according
to the income received from securities held by the Fund and capital gains
realized from the sale of securities.
All distributions are paid and reinvested in additional shares of the
Fund at net asset value at the close of business on the record date, unless the
shareholder has elected to receive payments in cash.
---------------------------
FUNDAMENTAL POLICIES
---------------------------
The Fund has adopted a number of fundamental investment policies and
restrictions which may not be changed without a vote of the holders of "a
majority of the outstanding voting securities" of the Fund, as such term is
defined in the 1940 Act. For a listing of additional policies, see "INVESTMENT
RESTRICTIONS" in the Statement of Additional Information.
ISSUER AND INDUSTRY RESTRICTIONS The Fund's investment restrictions include a
prohibition on investing more than 5% of its total assets (at the time of the
purchase) in the securities of any one issuer. This policy however, does not
include investments in U.S. Government securities. The Fund is also prohibited
from investing more than 25% of its total assets in any one industry.
BORROWING RESTRICTIONS The Fund may from time to time increase its assets for
investment through bank borrowing. Such bank borrowing may be collateralized by
pledging the Fund's portfolio securities to the lending bank. In no case will
such borrowings exceed one-third of the value of the Fund's total assets
immediately after any such borrowing. If, for any reason, the current value of
the Fund's total assets falls below an amount equal to three times the amount of
its indebtedness from money borrowed, the Fund will, within three days (not
including Saturdays, Sundays and holidays), reduce its indebtedness to the
extent necessary to satisfy the one-third test.
Using borrowed funds to increase the amount of securities that may be
purchased is known as leverage. Investment gains realized with borrowed funds
that exceed the cost of such borrowings (including interest costs) will cause
the net asset value of Fund shares to increase more dramatically than would
otherwise be the case. On the other hand, leverage can cause the net asset value
of Fund shares to decrease more rapidly than normal if the securities purchased
with borrowed money decline in value or if the investment performance of such
securities does not cover the cost of borrowing.
FIXED INCOME SECURITIES The Fund may invest up to 20% of its total assets in
fixed income securities, including convertible stock, that are either unrated or
are rated less than Baa by Moody's or BBB by S&P, or in commercial paper that is
rated less than B-1 by Moody's or A- by S&P, although not more than 5% of the
Fund's total assets may be invested in fixed income securities that are unrated
(including convertible stock). Securities rated Baa by Moody's or BBB by S&P are
considered medium-grade, neither highly protected nor poorly secured, and they
may contain some elements of uncertainty over any great length of time and may
have certain speculative characteristics. Securities rated below Baa by Moody's
or BBB by S&P, commonly referred to as "junk bonds," and unrated securities (if
the Adviser has deemed these securities to be of a similar credit quality as
those securities rated below the fourth
5
<PAGE>
highest grade) must be considered predominantly speculative in nature and
subject to a significant risk of default as to payments of either principal or
interest, or both. A description of the ratings assigned to securities by
Moody's and S&P is attached to this Prospectus as Appendix A.
To the extent the Fund purchases cash equivalents, bank obligations, and
money market instruments, it will apply the same investment criteria to these
instruments as are applied to fixed income securities. Bank obligations will be
purchased only with respect to banks: (1) that have total assets in excess of
one billion dollars; (2) that are rated A or better by either Moody's or S&P; or
(3) whose deposits are insured by the Federal Depository Insurance Corporation.
The Fund will only invest in securities permitted by the SEC.
WHEN ISSUED AND/OR DELAYED DELIVERY The Fund may purchase and sell securities
on a when-issued and/or delayed-delivery basis. When-issued or delayed-delivery
transactions arise when securities are purchased or sold by the Fund, with
payment and delivery taking place in the future in order to secure what is
considered to be an advantageous price and yield to the Fund at the time of
entering into the transaction. When-issued securities are subject to market
fluctuations, and no interest accrues to a Fund until the time of delivery. The
value of the securities may be less at the time of delivery than the value of
the securities when the commitment was made. When a Fund engages in when-issued
and delayed-delivery transactions, it relies on the buyer or seller, as the case
may be, to consummate the sale. Failure to do so may result in the Fund missing
the opportunity of obtaining a price or yield considered to be advantageous. To
the extent any Fund engages in when-issued and delayed-delivery transactions, it
will do so for the purpose of acquiring portfolio securities consistent with its
investment objectives and policies, and not for the purpose of investment
leverage. The Fund may not commit more than 25% of its total assets to the
purchase of when-issued and delayed-delivery securities. A separate account
of liquid assets consisting of cash, U.S. government securities, or other high
grade debt obligations and equal the value of any purchase commitment of the
Fund will be maintained by the Fund's custodian until payment is made.
ILLIQUID SECURITIES AND UNSEASONED ISSUERS 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 operation less than
3 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 effect of
increasing the level of illiquidity in the Fund to the extent that qualified
institutional buyers become for a time interested in purchasing these
restricted securities.
OPTIONS AND FINANCIAL 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.
6
<PAGE>
The Fund may invest in stock index and interest futures contracts,
provided that the aggregate initial margin of all future 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 acccount 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.
OTHER INVESTMENT COMPANIES The Fund may invest in the securities of other
registered investment companies under the circumstances described under
"SECURITIES OF OTHER INVESTMENT COMPANIES" in the Statement of Additional
Information, and to the extent permitted under Section 12 of the 1940 Act
(currently, no more than 10% of the total assets of a Fund may be so invested,
no more than 5% of total assets of a Fund may be invested in the securities of
any other single investment company, and no more than 3% of the total
outstanding voting stock of an investment company may be purchased). Investments
in the securities of other registered investment companies are or may be subject
to duplicate expenses resulting from the management of the portfolio investment
company as well as those of the acquiring Fund.
------------------------------------------------
SPECIAL RISK FACTORS TO BE CONSIDERED
------------------------------------------------
NO GUARANTEE OF OBTAINING INVESTMENT OBJECTIVE There can be no guarantee or
assurance that the Fund's investment objective can or will be met.
INVESTMENT IN ISSUERS OF WHICH SHAREHOLDERS AND DIRECTORS OWN SHARES The Fund
may invest in securities of issuers of which the officers and directors, as a
group, may own beneficially more than five percent of the securities of that
issuer.
LIMITED OPERATING HISTORY OF FUND The Fund 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 NYSE. However, foreign securities held by the Fund may be traded
on Saturdays or other holidays when the NYSE is closed. Accordingly, the net
asset value of the Fund may be significantly affected on days when an investor
has no access to the Fund.
In addition, there may be less publicly available information about a
foreign company than about a domestic company. Foreign companies generally are
not subject to uniform accounting, auditing and financial reporting standards
comparable to those applicable to domestic companies. There is generally less
government regulation of stock exchanges, brokers and listed companies abroad
than in the United States, and the absence of negotiated brokerage commissions
in certain countries may result in higher brokerage fees. With respect to
certain foreign countries, there is a possibility of expropriation,
nationalization, or confiscatory taxation, which could affect investment in
those countries.
The Fund may invest a portion of its assets in developing countries with
new or developing capital markets, such as countries in Eastern Europe. The
considerations noted above regarding the risk 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 generally 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, and it can cause the
net asset value of Fund shares to increase or decrease in value more
dramatically than would otherwise be the case.
PUT, CALL OPTIONS, FUTURES CONTRACTS The Fund may invest up to 10% of its
total assets in both put or call options and futures contracts. See "FUNDAMENTAL
POLICIES" in this Prospectus for discussion of the risks associated with
investing in options and futures contracts.
7
<PAGE>
FIXED INCOME SECURITIES The Fund may invest up to 20% of its total assets in
fixed income securities, including convertible securities, that are either
unrated or rated below the fourth highest category by Moody's or S&P, although
not more than 5% of the Fund's total assets may be invested in fixed income
securities that are unrated. Such high-yielding, lower-rated securities,
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 higher-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.
INVESTMENT IN REITS The Fund may invest up to 25% of its total assets in real
estate investment trusts. Such REITs are pooled investment vehicles that invest
primarily in income producing real estate or real estate related loans or
interests. REITs are generally classified as equity REITs, mortgage REITs or a
combination of equity and mortgage REITs. Equity REITs invest the majority of
their assets directly in real property and derive income primarily from the
collection of rents. Equity REITs can also realize capital gains by selling
properties that have appreciated in value. Mortgage REITs invest the majority of
their assets in real estate mortgages and derive income from the collection of
interest payments. For federal income tax purposes, REITs attempt to qualify for
beneficial tax treatment by distributing 95% of their taxable income. If a REIT
is unable to qualify for such beneficial tax treatment, it would be taxed as a
corporation and distributions to its shareholders would therefore be reduced.
Investing in REITs involves certain unique risks in addition to those
risks associated with investing in the real estate industry in general. Equity
REITs may be affected by changes in the value of the underlying property owned
by the REITs, while mortgage REITs may be affected by the quality of any credit
extended. All REITs are dependent upon management skills, are not diversified,
and are subject to the risks of financing projects. REITs are subject to heavy
cash flow dependency, default by borrowers, self-liquidation, and the
possibilities of failing to qualify for the exemption from tax for distributed
income under the Internal Revenue Code of 1986, as amended (the "Code") and
failing to maintain their exemptions from the 1940 Act.
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 any 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 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.
8
<PAGE>
The Fund pays the Adviser a fee for its services that accrues daily and
is payable bi-monthly. Fees are based on a percentage of the average daily net
assets of the Fund, as follows:
<TABLE>
<CAPTION>
NET ASSET VALUE ANNUAL RATE
- -------------------------------------------------------------- ---------------
<S> <C>
First $100 million 1.00%
Next $400 million 0.85%
Amounts over $500 million 0.60%
</TABLE>
Fees paid by the Fund are higher than those paid by most other mutual
funds, 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 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 New York
Stock Exchange (the "NYSE"). The net asset value per share is computed by
dividing the value of all assets of the Fund, less its liabilities, by the
number of shares outstanding.
The value of securities listed or traded on a registered securities
exchange are valued at the last sale price on the day of the computation. This
includes over-the-counter securities for which last sale information is
available. Where last sale information is not available, the best bid price will
be used. Securities and assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or under the
direction of the Board of Trustees of the Fund. Such valuations and procedures
will be reviewed periodically by the Board of Trustees. The Fund may retain the
services of an outside pricing service to value its portfolio securities.
9
<PAGE>
----------------------------------------------------------------
WHEN TRANSACTIONS ARE RECORDED IN YOUR ACCOUNT
----------------------------------------------------------------
Your trade date is the date when transactions are recorded in your
account. Your shares are purchased, redeemed or exchanged at the net asset value
determined on your trade date.
If your purchase, redemption or exchange is received in good order by the
Transfer Agent prior to 4 p.m., Eastern Time, or the close of business on the
NYSE, whichever is earlier, your trade date is the date of receipt. If your
purchase, redemption or exchange is received in good order after 4 p.m., Eastern
Time, or the close of business on the NYSE, whichever is earlier, your trade
date is the next business day.
-----------------
HOW TO INVEST
-----------------
The Fund is designed so that shareholders have the option of making fund
investments within or outside of tax-advantaged retirement accounts.
Crabbe Huson Securities, Inc. (the "Distributor"), Portland, Oregon, an
affiliate of the Adviser and a corporation organized under the laws of Oregon,
is the distributor of the Fund's shares.
Shares of the Fund are offered continuously with no sales load at their
next determined net asset value after receipt of an order with payment by the
Transfer Agent. The Fund's shares are offered by the Distributor directly to the
public or through broker-dealers who enter into sales agreements with the
Distributor. The Fund reserves the right to reject any order to purchase shares.
SALES LOAD AND 12B-1 FEES
Although there are no sales charges levied directly by the Fund, approved
broker-dealers or other intermediaries, including financial institutions, may
charge the investor a transaction-based fee or other fees at either the time of
purchase or the time of redemption. Such charges may vary among broker-dealers
but in all cases will be retained by the broker-dealer and are not remitted to
the Fund, the Distributor, or the Adviser.
The Fund has adopted a distribution plan pursuant to rule 12b-1 under
the 1940 Act (the "Plan"). Under the Plan, the Distributor is
entitled to reimbursement for its actual expenses incurred in the
distribution and promotion of the Fund's shares. Total reimbursement to
the Distributor pursuant to the Plan may not exceed .25% per annum of the
average daily net assets of the Fund. These expenses include, but are
not limited to, expenses incurred in the printing of prospectuses and
statements of additional information for persons other than then-current
shareholders, expenses related to preparation and printing of sales
literature, and other distribution-related expenses. A portion of the
expenses reimbursed and paid to the Distributor will be paid by the
Distributor on a quarterly basis to broker-dealers, investment advisers or
other financial institutions that have entered into sales agreements with the
Distributor to actively promote 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.
MINIMUM INVESTMENT: The minimum initial investment in the Fund is
$2,000. Additional investments in the Fund must be in amounts of at least $500,
unless the investor is enrolled in the Fund's automatic
10
<PAGE>
investment program, the "Invest-O-Matic" program. For investors enrolled in
"Invest-O-Matic," additional investments of as little as $100 can be accepted by
the Fund. The Adviser, in its sole discretion, may waive any minimum purchase
requirements. The Fund reserves the right to vary the initial and subsequent
investment minimums at any time. The Fund will provide shareholders with written
notice of any such change.
PURCHASE BY CHECK OR CRABBE HUSON INSTANT ACCESS: Investors who desire
to purchase shares directly from the Fund should follow the instructions
indicated below.
- INITIAL INVESTMENT: Complete the Account Application. Mail your check
together with your completed account application to the following
address:
Crabbe Huson Funds
P.O. Box 8413
Boston, MA 02266-8413
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 Funds 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.
INVESTING BY WIRE: In addition to the above-mentioned methods an
investor may use to purchase shares, the Transfer Agent will accept wire orders
for purchase of the Fund's shares prior to 4 p.m., New York time. A wire
purchase will be made at the offering price based on the next calculation of net
asset value of the shares after the purchase order has been received by the
dealer. Any dealer submitting an order is obligated to do so promptly. The
following wire instructions should be followed and include your investment
account number, your investor shareholder registration and indicate your desire
to purchase shares in the Fund.
State Street Bank & Trust Co.
225 Franklin Street
Boston, MA 02110
ABA No. 011 0000 28
FOR CREDIT: Crabbe Huson
DDA No. 99051039
11
<PAGE>
INVESTING THROUGH AN AUTHORIZED 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 Internal Revenue Code. Investments
in the Fund may also be made in connection with established retirement plans.
For further information regarding these plans, contact your broker-dealer
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.
-------------------------------
HOW TO SELL YOUR SHARES
-------------------------------
Shares of the Fund may be redeemed at any time, without charge, at the
net asset value per share next determined after receipt by the Fund's Transfer
Agent of a redemption request in proper form from the investor. Payment for all
shares redeemed will be made by the Fund within seven days after receipt of a
redemption request in proper form except (as outlined by the 1940 Act) during a
period when 1) trading on the NYSE is restricted or the NYSE is closed for other
than customary weekends and holidays, 2) the SEC has by order permitted such
suspension for the protection of the Fund's shareholders, or 3) an emergency
exists making disposal of portfolio securities or valuation of net assets of the
Fund not reasonably practicable.
When a request for redemption is made shortly after the purchase of
shares, the Fund will not distribute the redemption proceeds until the check(s)
received for the shares purchased has cleared. Under such circumstances, it may
take as long as 15 days for a shareholder to receive the proceeds of a
redemption. Investors may avoid such delays by purchasing shares of the Fund
with a certified or cashier's check.
The market value of the securities in the Fund's portfolio is subject to
daily fluctuations, and the net asset value of the Fund's shares change
accordingly. Depending on the purchase price or other tax basis of the shares
redeemed, the investor may realize a capital gain or loss on each redemption.
REDEMPTION BY MAIL: To be in proper form, written requests for
redemption must 1) state the total dollar value of shares or the total number of
shares to be redeemed, 2) provide the investor's account number, and 3) be
signed by each registered owner exactly as the shares are registered. If the
proceeds of the redemption (a) exceed $15,000, (b) result from a 100% redemption
of the account, (c) are to be paid to a person other than the record owner, (d)
are to be sent to an address other than the address on the Transfer Agent's
records, or (e) are to be paid to a corporation, partnership, trust or
fiduciary, the signature(s) on the redemption request and on the certificates,
if any, or stock power must be guaranteed by an "eligible guarantor
institution." An "eligible guarantor institution" includes any bank, broker,
dealer or credit union that is a participant in the STAMP and Medallion
12
<PAGE>
signature program. The Transfer Agent reserves the right to request additional
information from, and make reasonable inquiries of, any eligible guarantor
institution. The Transfer Agent may require additional supporting documents for
redemptions made by corporations, executors, administrators, trustees, or
guardians. A redemption request will not be deemed to have been submitted until
the Transfer Agent receives all required documents in proper form. All documents
and correspondence concerning redemptions should be sent to the Fund's Transfer
Agent at the following address:
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." Should you wish to receive
instructions on how to obtain your funds by wire, please call the Transfer Agent
at (800) 541-9732.
INVOLUNTARY REDEMPTION: In order to reduce expenses, the Fund may redeem
all of the shares of any shareholder, other than a shareholder which is an IRA
or other tax-deferred retirement plan, in any Fund account which has a net asset
value of less than $2,000 due to a redemption. The Fund will give such
shareholders 60 days' prior written notice in which to purchase sufficient
additional shares to avoid such redemption.
Additionally, the Fund may compel the redemption of shares if, in its
opinion, such action would prevent the Fund from becoming a personal holding
company, as defined by the Internal Revenue Code.
REDEMPTIONS (BY SECURITIES DEALERS): The Fund accepts redemption orders
by telephone from securities dealers who have entered into sales agreements with
the Distributor. Such redemption orders should be placed by the dealer with the
Transfer Agent. Shares will be redeemed at the net asset value determined on a
shareholder's trade date. The seven-day period within which the proceeds of the
redemption will be sent to the shareholder or shareholder's dealer will begin on
the day of the net asset value calculation, unless the Transfer Agent has not
received a written request in proper form from the dealer by the seventh day. In
that event, the proceeds of the redemption will be sent to the shareholder or
the shareholder's dealer immediately upon the Transfer Agent's receipt of the
written request in proper form. Dealers are responsible for the prompt
transmittal of redemption orders to the Transfer Agent. Dealers not affiliated
with the Fund may charge a fee for handling redemptions.
--------------------------------------
HOW TO EXCHANGE YOUR SHARES
--------------------------------------
The proceeds from the redemption of shares of the Fund may be used to
purchase shares of any other publicly available mutual fund with respect to
which the Adviser is the investment adviser 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.
In order to protect shareholders from investors that may abuse the
exchange privilege to the detriment of the Fund and its shareholders, the Fund
reserves the right to terminate or modify the exchange privilege applicable to
all
13
<PAGE>
shareholders at any time upon 60 days' notice. This exchange privilege may be
temporarily or permanently suspended with respect to any shareholder that
engages in more than ten exchanges in any 12-month period.
Any written exchange request, in proper form, may be mailed to the
Transfer Agent at the following address:
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 for
shares in any other publicly available mutual fund of the Crabbe Huson Family of
Mutual Funds by telephone. 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. The Fund has
instituted an "Instant Access" Automated Information Service which allows an
investor to make redemptions and exchanges by telephone by use of a 4-digit
Personal Identification Number.
Telephone redemptions and exchanges may be made by calling the
Crabbe Huson "Instant Access" number, (800) 235-2442. Pursuant to the
"Instant Access" system, an investor may redeem by check or by ACH
redemption. If an investor redeems by check, he or she must have on file with
the Fund's Transfer Agent the appropriate authorization. The check will
always be mailed to the address listed on the account. The daily maximum
redemption through use of the "Instant Access" system is $100,000. An
investor can make an ACH redemption by telephone provided he or she has the
appropriate telephone authorization and ACH bank information on file with the
Fund's Transfer Agent.
Exchanges or redemptions by telephone may become difficult or impossible
to effect during periods of severe economic or market changes. If a shareholder
is unable to reach the Fund by telephone, redemptions or exchanges may be
effected either through the broker-dealer from which the shares were purchased,
or by sending a written redemption or exchange request in proper form by mail
directly to the Fund's Transfer Agent at the following address:
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
14
<PAGE>
--------------------------------
ALLOCATION OF BROKERAGE
--------------------------------
The Adviser is responsible for the overall management of the portfolio of
the Fund and determines which brokers will execute the purchases and sales of
the portfolio securities. The Adviser's foremost responsibility is to place
orders so as to achieve prompt execution at the most favorable price. However,
the Adviser may place orders with brokers that provide special brokerage and
research services or with brokers that promote the sale of the Fund's shares.
The Adviser is authorized, in recognition of the value of brokerage and research
services provided, to pay commissions to a broker in excess of the amounts which
another broker might have charged for effecting the same transaction.
A broker affiliated with the Adviser may be employed to execute brokerage
transactions on behalf of the Fund, as long as commissions paid are reasonable
and fair compared to the commissions received by other brokers in connection
with comparable transactions involving similar securities being purchased or
sold on a securities exchange during a comparable period of time. Additional
information about portfolio brokerage is included in the Statement of Additional
Information.
--------------------------------
SPECIAL INVESTOR SERVICES
--------------------------------
SHAREHOLDER INQUIRIES: Inquiries regarding specific information that
cannot be handled directly through an authorized broker-dealer of the Fund can
be directed to the Transfer Agent at The Crabbe Huson Family of Funds, P.O. Box
8413, Boston, MA 02266-8413. The Transfer Agent's toll-free telephone number is
(800) 541-9732.
APPLICATIONS: Applications for the Fund and the special programs listed
below are available through the Fund's Transfer Agent at The Crabbe Huson Family
of Mutual Funds, P.O. Box 8413, Boston, MA 02266-8413 or by calling the Transfer
Agent's toll-free telephone number (800) 541-9732.
THE CRABBE HUSON IRA (INDIVIDUAL RETIREMENT ACCOUNT): Certain
individuals who earn income may establish an Individual Retirement Account using
an IRA plan adopted by the Fund. These individuals may invest up to the lesser
of $2,000 or 100% of the individual's annual earnings in shares of the Fund. The
plan is also available for a Spousal IRA, transfer of an existing IRA, and for
certain rollover contributions from other qualified plans.
INVEST-O-MATIC: With Invest-O-Matic, a shareholder may make regular
monthly purchases of the Fund's shares in amounts as little as $100 via an
automatic debit to a bank account. Invest-O-Matic accounts may be modified or
terminated by the shareholder at any time.
GROUP INVESTMENT PLAN: Group Investment Plans are available for the
purchase of Fund shares by employee or other groups, using systematic payroll
deductions or other systematic payment arrangements. The Fund may, depending
upon the size of the plan, waive their minimum, initial and additional purchase
requirements.
CRABBE HUSON "INSTANT ACCESS": By calling (800) 235-2442, a current
investor can receive account information, purchase, redeem and exchange Fund
Shares. See "HOW TO INVEST IN THE FUND" and "REDEMPTION OR EXCHANGE BY
TELEPHONE."
15
<PAGE>
------------------------------------
SYSTEMATIC WITHDRAWAL PLAN
------------------------------------
A shareholder owning shares of the Fund with a total value of not less
than $5,000 may participate in a systematic withdrawal plan providing for fixed
payments to the shareholder of $100 or more at regular monthly intervals (the
"Systematic Withdrawal Plan"). The shareholder may realize a capital gain or
loss on each fixed-amount payment. Additional information concerning the
Systematic Withdrawal Plan is set forth in the Statement of Additional
Information. Shareholders desiring to participate in the Systematic Withdrawal
Plan may do so by completing and submitting the appropriate application to the
Transfer Agent. The Systematic Withdrawal Plan is voluntary and may be
terminated at any time by the shareholder.
-------------------------------------------------------------------------
CUSTODIAN, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
-------------------------------------------------------------------------
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
each of the Funds. The Transfer Agent uses Boston Financial Data Services as its
servicing agent in carrying out the Transfer Agent's responsibilities to the
Funds.
-----------------------------------------
LENDING OF PORTFOLIO SECURITIES
-----------------------------------------
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 Funds during the year) will generally
range between 20% and 150%. A higher portfolio turnover rate may involve
correspondingly greater transaction costs, which would be borne directly by the
Fund, as well as additional realized gains and/or losses to shareholders. See
"BROKERAGE ALLOCATION" and "TAXES" in the Prospectus.
16
<PAGE>
------
YIELD
------
The SEC has imposed a number of rules and policies regarding the
calculation of yield. The Fund intends to continually comply with these rules
and policies in their quotation of yield. For an explanation of the method of
yield calculation, see "CALCULATION OF PERFORMANCE DATA" in the Statement of
Additional Information.
------
TAXES
------
The Fund intends to qualify each year as a "regulated investment company"
under the Internal Revenue Code so it will not pay federal taxes on either
income or capital gains distributed to shareholders, although there can be no
assurance that 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.
The foregoing relates only to federal income tax consequences for
shareholders who are U.S. citizens or corporations. Shareholders should consult
their own tax advisers regarding these matters, and regarding state, local, and
other applicable tax laws.
The Fund will issue annually, in January, a full report to each
shareholder detailing the tax status of each distribution to the shareholder
during the calendar year. The Fund does not assume any responsibility for the
calculation of any taxable gain (or loss) from the purchase and sale of Fund
shares, including purchases made with reinvested dividends and/or capital gains.
Every shareholder should consult with their tax adviser concerning such
calculations and tax consequences.
As mentioned elsewhere in this Prospectus, the Trust intends to add
additional series after completion of the Reorganization. In such case, each
Fund will be treated as a separate entity and thus the provisions of the
internal
17
<PAGE>
revenue code applicable to registered investment companies generally will be
applied to each fund separately instead of the Trust as a whole. Net Capital
Gains, net investment income and operating expenses will be determined
separately for each Fund.
---------------------------------
PERFORMANCE COMPARISONS
---------------------------------
The Fund may compare its performance to other mutual funds with similar
investment objectives and to the mutual fund industry as a whole, as quoted by
ranking services and publications of general interest. For example, these
services or publications may include Lipper Analytical Services, Inc.,
Schabacker's Total Investment Service, CDA Technologies, SEI, Frank Russell
Trust, BARRON'S BUSINESS WEEK, CHANGING TIMES, THE FINANCIAL TIMES, FINANCIAL
WORLD, FORBES, INVESTOR'S DAILY, MONEY, MORNINGSTAR MUTUAL FUNDS, PERSONAL
INVESTOR, THE ECONOMIST, THE WALL STREET JOURNAL, INDIVIDUAL INVESTOR, LOUIS
RUKEYSER'S WALL STREET, FINANCIAL WORLD, and USA TODAY. These ranking services
and publications rank the performance of the Fund against all other funds over
specified periods and against funds in specified categories.
The Fund may also either include presentations of, or may compare its
performance or the performance of the Fund's Adviser to, a recognized stock or
bond index, including the Standard & Poor's 500, Standard & Poor's Mid-Cap,
Value Line, Dow Jones, and NASDAQ stock indices. The comparative material found
in advertisements, sales literature, or in reports to shareholders may contain
past or present performance ratings. This is not to be considered representative
or indicative of future results or future performance.
The performance of the Fund will be calculated as required by the rules
of the SEC. The Fund may publish average annual total return quotations for
recent one-, five-, and ten-year periods that would equate the initial amount
invested to the ending redeemable value. These standardized calculations do not
reflect the impact of federal or state income taxes. Such performance data will
include the effect of any sales or distribution charges.
Investments in the Fund are not insured and an investor's yield is not
guaranteed. Although the yields of bank money market deposit accounts and NOW
accounts will fluctuate, principal will not fluctuate and is insured by the
Federal Deposit Insurance Corporation up to $100,000. Bank passbook savings
accounts normally offer a fixed rate of interest, and their principal and
interest are also guaranteed and insured. Bank certificates of deposit offer
fixed or variable rates for a set term. Principal and fixed rates are guaranteed
and insured. There is no fluctuation in principal value. Withdrawal of these
deposits prior to maturity will normally be subject to a penalty.
The Fund's investment results will vary from time to time depending on
market conditions, the composition of the Fund's portfolio, and operating
expenses of the Fund. These factors and possible differences in the methods used
in calculating investment results should be considered when comparing
performance information regarding the Fund to information published for other
investment companies and other investment vehicles. You should also consider
return quotations relative to changes in the value of the Fund's shares and the
risks associated with the Fund's investment objectives and policies. At any time
in the future, return quotations may be higher or lower than past return
quotations, and there may be no assurance that any historical return-quotation
will continue in the future.
18
<PAGE>
-------------------
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 to the Trust as may be required by the 1940 Act,
the Declaration of Trust, the By-laws of the Trust, any registration of the
Trust with the Securities and Exchange Commission (or any successor agency)
or any state, or as the Trustees may consider necessary or desirable. Shares
issued are fully paid and nonassessable and have no preemptive or conversion
rights. Each share is entitled to participate equally in dividends and
distributions declared by its respective fund and in the net assets of that
Fund upon liquidation or dissolution after satisfaction of outstanding
liabilities. Amendment to the Declaration of Trust may be made upon approval
by shareholders holding the lesser of (i) 67% or more of the shares entitled
to vote on the matter, present in person at the meeting or represented by
proxy, if holders of more than 50% of the shares entitled to vote on the
matter are present, in person or by proxy, or (ii) a majority of the shares
issued and outstanding.
19
<PAGE>
-------------
APPENDIX A
-------------
BOND RATING AGENCIES
The following is a description of the bond ratings employed by Moody's
Investors Service, Inc. ("Moody's").
Aaa: Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or exceptionally stable margin, and
principal is secure. While the various protective elements are likely to change,
such changes as can be visualized are unlikely to impair the fundamentally
strong position of such issues.
Aa: Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present that
make the long-term risks appear somewhat larger than in Aaa securities.
A: Bonds rated A possess many favorable investment attributes and are to
be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present that
suggest a susceptibility to impairment sometime in the future.
Baa: Bonds rated Baa are considered as medium-grade obligations (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well.
Ba: Bonds rated Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B: Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.
Ca: Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C: Bonds rated C are the lowest rated class of bonds and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.
Moody's applies the numerical modifiers "1", "2", and "3" in each generic
rating classification from Aa through B. The modifier "1" indicates that the
security ranks in the higher end of its generic rating category; the modifier
"2" indicates a mid-range ranking; and the modifier "3" indicates that the issue
ranks in the lower end of its generic rating category.
The following is a description of the bond ratings employed by Standards
& Poor's Corporation ("S&P").
AAA: Bonds rated AAA are highest-grade obligations. Capacity to pay
interest and repay principal is extremely strong.
20
<PAGE>
AA: Bonds rated AA have a very strong capacity to pay interest and repay
principal, and differ from the highest rated issues only in small degree.
A: Bonds rated A have a strong capacity to pay interest and repay
principal, although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
BBB: Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in higher rated categories.
BB, B, CCC, CC, C: Debt rated BB, B, CCC, CC, and C is regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB indicates
the lowest degree of speculation and C the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
BB: Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
B: Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
BB or BB- rating.
CCC: Debt rated CCC has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial and economic
conditions to meet timely payment of interest and repayment of principal. In the
event of adverse business, financial, or economic conditions, it is not likely
to have the capacity to pay interest and repay principal. The CCC rating
category is also used for debt subordinated to senior debt that is assigned an
actual or implied B or B- rating.
CC: The rating CC is typically applied to debt subordinated to senior
debt that is assigned an actual or implied CCC rating.
C: The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating. The C rating may be
used to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.
C1: The rating C1 is reserved for income bonds on which no interest is
being paid.
D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
C: Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
21
<PAGE>
The S&P letter rating may be modified by the addition of a plus (+) or
minus sign (-), which is used to show relative standing within rating categories
between AA to CCC.
From time to time a bond rating agency may adjust its rating of a
particular bond issue. Subsequent to a Fund's purchase of a bond, such a bond
may have its rating reduced (down graded) to a category not permitted to be
owned by that Fund, or it may cease to be rated. Neither case would require that
a Fund eliminate such a bond from its portfolio. However, the Fund's Adviser
will consider such an event in determining whether or not the Fund should
continue to hold such a security.
22
<PAGE>
-------------
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 purchaser 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, when it believes that stock prices will
decline. Conversely, the Adviser may purchase a call option in a securities
index when it anticipates that stock prices will increase.
23
<PAGE>
------------------------------------------------------
------------------------------------------------------
No person has been authorized to give any information or make any
representations not contained in this Prospectus, or in the Statement of
Additional Information incorporated herein by reference, in connection with the
offering made by this Prospectus and, if given or made, such representations
must not be relied upon as having been authorized by the Funds or their
Distributor. This Prospectus does not constitute an offering by the Funds or by
their Distributor in any jurisdiction in which such offering may not lawfully be
made.
-------------------
TABLE OF CONTENTS
-------------------
<TABLE>
<CAPTION>
PAGE
---
<S> <C>
EXPENSE DATA.................................... 2
PROSPECTUS SUMMARY.............................. 3
SUMMARY OF RISK FACTORS......................... 3
INVESTMENT OBJECTIVE AND POLICIES............... 3
FUNDAMENTAL POLICIES............................ 5
SPECIAL RISK FACTORS TO BE CONSIDERED........... 7
MANAGEMENT OF THE FUND.......................... 8
CONTROL PERSONS................................. 9
NET ASSET VALUE................................. 9
WHEN TRANSACTIONS ARE RECORDED IN YOUR
ACCOUNT........................................ 10
HOW TO INVEST................................... 10
HOW TO SELL YOUR SHARES......................... 12
HOW TO EXCHANGE YOUR SHARES..................... 13
REDEMPTION OR EXCHANGE BY TELEPHONE............. 14
ALLOCATION OF BROKERAGE......................... 15
SPECIAL INVESTOR SERVICES....................... 15
SYSTEMATIC WITHDRAWAL PLAN...................... 16
CUSTODIAN, TRANSFER AGENT AND
DIVIDEND-DISBURSING AGENT...................... 16
LENDING OF PORTFOLIO SECURITIES................. 16
PORTFOLIO TURNOVER.............................. 16
YIELD........................................... 17
TAXES........................................... 17
PERFORMANCE COMPARISONS......................... 18
CAPITAL STRUCTURE............................... 19
APPENDIX A...................................... 20
APPENDIX B...................................... 23
</TABLE>
CRABBE HUSON
FUNDS
[LOGO]
The Crabbe Huson Small Cap Fund
PROSPECTUS
FEBRUARY __, 1996
------------------------------------------------------
------------------------------------------------------
23
<PAGE>
-----------------------------------
CRABBE HUSON FUNDS
-----------------------------------
CRABBE HUSON SMALL CAP FUND
-----------------------------------
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------
February __, 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
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Page No.
GENERAL INFORMATION AND HISTORY. . . . . . . . . . . . . . . . . . . . . . . 1
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
TRUSTEES AND OFFICERS OF THE TRUST. . . . . . . . . . . . . . . . . . . 1
SERVICES PROVIDED BY THE ADVISER . . . . . . . . . . . . . . . . . . . . . . 3
ADMINISTRATION CONTRACT. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
DISTRIBUTION PLAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES. . . . . . . . . . . . . 6
SYSTEMATIC WITHDRAWAL PLAN . . . . . . . . . . . . . . . . . . . . . . . . . 7
PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
GENERAL CONSIDERATIONS. . . . . . . . . . . . . . . . . . . . . . . . . 7
PORTFOLIO TURNOVER. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECURITIES OF OTHER INVESTMENT COMPANIES. . . . . . . . . . . . . . . . 12
LOANS OF PORTFOLIO SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . 12
PURCHASE AND REDEMPTION OF FUND SHARES . . . . . . . . . . . . . . . . . . . 13
PRICING OF SECURITIES BEING OFFERED. . . . . . . . . . . . . . . . . . . . . 14
CALCULATION OF PERFORMANCE DATA. . . . . . . . . . . . . . . . . . . . . . . 14
OTHER QUOTATIONS, COMPARISONS AND GENERAL INFORMATION . . . . . . . . . 15
DIVIDENDS, DISTRIBUTIONS AND TAXES . . . . . . . . . . . . . . . . . . . . . 15
GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
FOREIGN TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SPECIAL INVESTOR SERVICES. . . . . . . . . . . . . . . . . . . . . . . . . . 18
GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
COUNSEL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
CUSTODIAN, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT. . . . . . . . . . . 19
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ADDITIONAL INFORMATION REGARDING CERTAIN INVESTMENTS BY THE FUND . . . . . 20
GOVERNMENT SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . 20
SPECIAL INVESTMENT RISKS . . . . . . . . . . . . . . . . . . . . . . . . . . 20
FOREIGN SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
FUTURES CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Stock Index Futures. . . . . . . . . . . . . . . . . . . . . . . . 21
Interest Rate Futures. . . . . . . . . . . . . . . . . . . . . . . 21
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
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GENERAL INFORMATION AND HISTORY
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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.
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MANAGEMENT
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The Trustees and officers of the Trust are listed below, together with
information about their principal business occupations during at least the last
five years. Each of the individuals holds the equivalent position with the
Acquired Funds. The Crabbe Huson Group, Inc. is the Investment Adviser for the
Fund and the Acquired Funds (the "Adviser"). Crabbe Huson Securities, Inc. acts
as the Fund's distributor (the "Distributor").
TRUSTEES AND OFFICERS OF THE TRUST
CHERYL A. BURGERMEISTER*, 44, is Treasurer of the Trust. Ms. Burgermeister
has been the Treasurer and Chief Financial Officer of the Adviser since
July, 1987. Her business address is 121 SW Morrison, Suite 1400,
Portland, Oregon 97204. Ms. Burgermeister is Treasurer and a Director
of the Distributor.
GARY L. CAPPS, 59, is a Trustee of the Trust. Mr. Capps has been the
Executive Director of the Bend Chamber of Commerce since July, 1992. He has
been a Director of Bank of the Cascades in Bend, Oregon since 1980, and has
served as Chairman of the Board since 1983. His business address is 63085 N.
Hwy 97, Bend, Oregon 97701.
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JAMES E. CRABBE,* 50, is a Trustee and Vice President of the Trust. He is
a Director and President of the Trust's Adviser. Mr. Crabbe has, since
February, 1980, served in various management positions with the Adviser. His
business address is 121 SW Morrison, Suite 1400, Portland, Oregon 97204.
RICHARD S. HUSON,* 55, is a Trustee and President of the Trust. Mr. Huson
is a chartered financial analyst. Mr. Huson is a Director and Secretary of the
Trust's Adviser. Mr. Huson has, since February, 1980, served in various
management positions with the Adviser. His business address is 16 NW Oregon
Avenue, Bend, Oregon 97709.
LOUIS SCHERZER, 74, is a Trustee of the Trust. Mr. Scherzer, since
January, 1990, has been President and a Director of Scherzer Partners, Inc., a
real estate development and management firm located at 5440 SW Westgate Drive,
Suite 222, Portland, Oregon 97221.
ROBERT L. SMITH, 57, is a Trustee of the Trust. Mr. Smith has been
President of VIP's Industries since 1968, and has been a Director of Western
Security Bank since 1980, a Director of KeyCorp since 1988 and a Director of
Blue Cross/Blue Shield of Oregon since 1984. His business address is 280
Liberty Street S.E., Salem, Oregon 97301.
CRAIG P. STUVLAND,* 40, is a Trustee and Secretary of the Trust. Mr.
Stuvland has been employed by the Adviser since June, 1987; he is currently an
Executive Vice President and a Director. Mr. Stuvland's business address is 121
S.W. Morrison, Suite 1400, Portland, Oregon 97204. Mr. Stuvland is President
and a Director of the Trust's Distributor.
RICHARD P. WOLLENBERG, 80, is a Trustee of the Trust. Mr. Wollenberg has
been Chairman, President and Chief Executive Officer of Longview Fibre Company
since 1978, and a Trustee of Reed College since 1962. His business address is
Longview Fibre Company, P.O. Box 606, Longview, Washington 98632.
WILLIAM WENDELL WYATT, JR., 45, is a Trustee of the Trust. He has been
Chief of Staff, Officer of the Governor, State of Oregon, since April, 1995.
Prior to joining the Governor's staff, Mr. Wyatt was President of the Oregon
Business Council between October, 1987 and April, 1995. His business address is
Office of the Governor, Chief of Staff - Gov. Kitzhaber, 254 State Capitol,
Salem, Oregon 97310-0370.
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*The persons indicated are "interested persons" of the Trust, as defined in
the Investment Company Act of 1940 (the "1940 Act") as amended. They receive
no trustees' fees or salaries from the Trust.
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Under the Declaration of Trust, no annual or regular meeting of
shareholders is required. Thus, there will not ordinarily be an annual
shareholders' meeting (including for the purpose of electing trustees) unless
required by the Investment Company Act of 1940, as amended (the "Act"), or
unless a request to hold a meeting is properly made by at least 10 percent of
the shareholders of the Trust if all shareholders of the Trust are entitled to
vote on the matter or 10 percent of the affected series if such vote is on a
series by series basis. The Board of Trustees is responsible for the overall
management of the Trust, including general supervision and review of each
series' investment policies and activities. The Board of Trustees elects the
officers of the Trust who are responsible for supervising and administering the
Trust's day-to-day operations. The Trust has an audit committee that reviews
the reports and management letters of the auditors, reviews the terms of the
auditor's engagement and makes recommendations to the Board concerning the terms
of the auditor's engagement. The audit committee currently consists of Messrs.
Scherzer, Smith and Wyatt.
The Trust currently pays each Trustee who is not an "interested person"
$150.00 per meeting. The Trust does not intend to pay any individual
remuneration in excess of $60,000 per year. The Trust also reimburses Trustees'
expenses for attending shareholder and Trustee meetings for Trustees who are
not officers, directors, or employees of the Adviser or the Distributor.
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SERVICES PROVIDED BY THE ADVISER
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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
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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
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First $100 Million . . . . . . . . . . . . . . . . . . . 1.00%
Next $100 Million . . . . . . . . . . . . . . . . . . . 0.85%
Amounts Over $500 Million . . . . . . . . . . . . . . . 0.60%
The Adviser has agreed to waive its fee and/or reimburse the Fund for the
amount, if any, by which the total operating expenses of the Fund (including the
Adviser's compensation and any amounts paid pursuant to the Rule 12b-1 plan) for
any fiscal year exceed a certain annual rate applied to the average daily net
assets of the Fund. The annual rate in effect is 1.5% of the average daily net
assets of the Fund. This waiver may be withdrawn at any time upon 30 days'
written notice to the shareholders of the Fund. Even in the event of
discontinuance of this agreement, the Fund may still be subject to the laws of
certain states, which require that if a mutual fund's expenses (including
advisory fees but excluding interest, taxes, brokerage commissions and
extraordinary expenses) exceed certain percentages of average net assets, the
Fund must be reimbursed for such excess expenses.
Under the Advisory Agreement, the Adviser determines the structure of the
Fund's portfolio, the nature and timing of the changes in it, and the manner of
implementing such changes (subject to any directions it may receive from the
Fund's Board of Trustees); provides the Fund with investment advisory research
and related services for the investment of assets; furnishes (without expense to
the Fund) the services of such members of its organization as may be duly
elected officers or directors of the Fund; and pays all executive officers'
salaries and expenses. Additional information about the services provided by
the Adviser is described under "MANAGEMENT OF THE FUNDS" in the Prospectus.
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ADMINISTRATION CONTRACT
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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)
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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
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First $500 Million . . . . . . . . . . . . . . . . . . . 0.06%
Next $500 Million . . . . . . . . . . . . . . . . . . . . 0.03%
Thereafter . . . . . . . . . . . . . . . . . . . . . . . 0.01%
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DISTRIBUTION PLAN
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Rule 12b-1 under the Act requires that any payments made by the Trust in
connection with financing the distribution of its shares may only be made
pursuant to a written plan describing all aspects of the proposed financing of
distribution, and also requires that all agreements with any person relating to
the implementation of the plan must be in writing. Because some of the payments
described below to be made by the Trust are distribution expenses within the
meaning of Rule 12b-1, the Trust has entered into a distribution agreement with
the "Distributor" pursuant to a distribution plan (the "Plan") adopted in
accordance with such Rule.
Rule 12b-1 requires that, in order for the Plan to be effective as to any
series, the Plan must be approved by a majority of the outstanding voting
securities of that series, and requires that the Plan, together with any related
agreements, be approved by a vote of the Trustees of the Trust who are not
interested persons of the Trust and who have no direct or indirect financial
interest in the operation of the Plan or in the agreements related to the Plan,
cast in person at a meeting called for the purpose of voting on such plan or
agreement. The Plan and any agreement related to it must provide, in substance:
(a) that it shall continue in effect for a period of more than one
year from the date of its execution or adoption only so long as such
continuance is specifically approved at least annually in the manner
described in the Rule;
(b) that any person authorized to direct the disposition of moneys
paid or payable by the Trust pursuant to the Plan or any related agreement
shall provide to the Trust's Board of Trustees, and the Trustees shall
review, at least quarterly, a written report of the amounts so expended and
the purposes for which such expenditures were made; and
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(c) in the case of the Plan, that it may be terminated as to the Fund
at any time by a vote of a majority of the members of the Board of Trustees
of the Trust who are not interested persons of the Trust and who have no
direct or indirect financial interest in the operation of the Plan or in
any agreements related to the Plan, or by a vote of a majority of the
outstanding voting securities of the applicable series.
The Plan may not be amended to increase materially the amount to be spent
for distribution by the applicable series without approval by the shareholders
of that series, and all material amendments to the Plan must be approved in the
manner described in the Rule.
The Trust may rely upon Rule 12b-1 only if the selection and nomination of
the Trust's disinterested Trustees is committed to the discretion of the
disinterested Trustees. The Trust may implement or continue a plan pursuant to
Rule 12b-1 only if the Trustees who vote to approve such implementation or
continuation conclude, in the exercise of reasonable business judgment and in
light of their fiduciary duties under state law, and under Sections 36(a) and
(b) of the 1940 Act, that there is a reasonable likelihood that the plan will
benefit the Fund and its shareholders. The Board of Trustees has concluded that
there is a reasonable likelihood that a distribution plan will benefit the Fund.
Pursuant to the provisions of the Plan, the Fund may pay up to .25% of its
average daily net assets to the Distributor to reimburse the Distributor for
actual expenses incurred in the distribution and promotion of the Fund's shares.
Expenses for which the Distributor will be reimbursed under the Plan
include, but are not limited to, expenses incurred in the printing of
prospectuses and statements of additional information for persons other than
then-current shareholders, expenses related to preparation and printing of sales
literature, and other distribution-related expenses. Additionally, compensation
will be paid out on a quarterly basis to the Distributor and to broker-dealers
investment advisers and other financial institutions that have entered into
sales agreements with the Distributor to actively promote sale of the Fund's
shares, and may be paid to investment executives
of the Distributor.
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CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
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As of January 30, 1996, the Adviser owned 100% of all the
authorized and outstanding shares of the Fund.
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SYSTEMATIC WITHDRAWAL PLAN
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A shareholder owning or purchasing shares of the Fund having a net asset
value of $5,000 or more may participate in a systematic withdrawal plan
providing regular monthly payments in the amount of $100 or more from the shares
held in the Fund (the "Systematic Withdrawal Plan"). An application form
containing details of the Systematic Withdrawal Plan is available upon request
from State Street Bank & Trust Co., the Fund's transfer agent (the "Transfer
Agent"). The Plan is voluntary and may be terminated at any time by the
shareholders.
Income dividends and capital gain distributions on shares of the Fund held
in a Systematic Withdrawal Plan are automatically reinvested in additional
shares of the Fund at net asset value. A Systematic Withdrawal Plan is not an
annuity and does not and cannot protect against loss in declining markets.
Amounts paid to a shareholder from the Systematic Withdrawal Plan represent the
proceeds from redemptions of Fund shares, and the value of the shareholder's
investment in the Fund will be reduced to the extent that the payments exceed
any increase in the aggregate value of the shareholder's shares (including
shares purchased through reinvestment of dividends and distributions). If a
shareholder receives payments that are greater than the appreciation in value of
his or her shares, plus the income earned on the shares, the shareholder may
eventually withdraw his or her entire account balance. This will occur more
rapidly in a declining market. For tax purposes, depending upon the
shareholder's cost basis and date of purchase, each withdrawal will result in a
capital gain or loss. See "DIVIDENDS, DISTRIBUTIONS AND TAXES" in this
Statement of Additional Information and "TAXES" in the Trust's Prospectus.
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PORTFOLIO TRANSACTIONS
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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
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transactions and in transactions in the over-the-counter market. In
underwritten offerings, securities are purchased at a fixed price which
includes an amount of compensation to the underwriter, generally referred to
as the underwriter's concession or discount. On occasion, certain money
market instruments may be purchased directly from an issuer, in which case no
commissions or discounts are paid.
The primary considerations in the selection of a broker or dealer for
portfolio transactions are the availability of the desired security and the
prompt execution of orders in an effective manner at the most favorable prices.
Subject to those considerations, dealers that provide supplemental investment
research and statistical or other services to the Adviser may receive orders for
portfolio transactions by the Fund. Such services may include advice concerning
the value of securities; the advisability of investing in, purchasing, or
selling securities; the availability of securities; purchasers or sellers of
securities; and the furnishing of analysis and reports concerning industries,
economic facts and trends, and portfolio strategies. There is no formula for
such allocation. The research information received from brokers or dealers may
or may not be useful to the Fund and the Adviser in a number of ways. The
information may be in written form or may be obtained through direct contact
with individuals, and may include information on particular issuers as well as
market and general economic information. The Adviser will not be deemed to have
breached its obligations to the Fund solely by reason of having caused the Fund
to pay a broker or dealer an amount of commission for effecting a securities
transaction in excess of the amount of commission another broker or dealer could
have charged for effecting that transaction, if the Adviser has determined in
good faith that such amount of commission was reasonable in relation to the
value of the brokerage and research services provided to the Fund and to other
accounts of the Adviser.
In addition to placing the Fund's brokerage business with firms that
provide the above research, market and statistical services to the Adviser, the
Fund's brokerage business may also be placed with firms that promote the sale of
the Fund's shares, consistent with achieving the best price and execution.
Under the 1940 Act, persons affiliated with the Trust are prohibited from
dealing with the Trust as principals in the purchase or sale of securities of
the Trust. The Trust or broker-dealers affiliated with the Adviser will not
deal with affiliated parties, including the Distributor, in connection with
principal transactions.
The SEC has the authority to issue and amend regulations involving
transactions with affiliates of the Trust. While there is no indication that
it will do so, the SEC may issue regulations at any time that would prohibit
the Trust from
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executing portfolio transactions through an affiliate. The Trustees will
review all transactions with affiliates at least quarterly and determine the
overall reasonableness of any brokerage commissions paid.
Even though investment decisions for the Fund are made independently from
those of the other accounts managed by the Adviser or its affiliates, securities
of the same issuer may be purchased, held, or sold by the Fund and the other
accounts, because the same security may be suitable for all of them. When the
Fund and such other accounts are simultaneously engaged in purchase or sale of
the same security, efforts will be made to allocate price and amounts in an
equitable manner. In some cases, this procedure may adversely affect the price
paid or received by the Fund or the size of the position purchased or sold by
the Fund.
PORTFOLIO TURNOVER
The Fund generally does not trade in securities with the goal of obtaining
short-term profits, but when circumstances warrant, securities will be sold
without regard to the length of time the security has been held.
The Fund anticipates that, except in periods of unusual market conditions,
its annual portfolio turnover rate (the lesser of purchase or sales of portfolio
securities for the year divided by the monthly average of the value of the
portfolio securities owned by the Fund during the year) will generally range
between 20% and 150%. However, the rate of turnover will not be a limiting
factor when the Fund deems it desirable to purchase or sell securities. A
higher portfolio turnover rate may involve correspondingly greater transaction
costs (including brokerage commissions), which would be borne directly by the
Fund, as well as additional realized gains and/or losses to shareholders.
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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.
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The Fund may not:
1. Invest more than 20% of its total assets in fixed income
securities, including convertible stock, that are rated less than
Baa by Moody's Investor Service or BBB by Standard & Poor's, or
in commercial paper that is rated less than B-1 by Moody's or A-
by S&P; not more than 5% of the Fund's total assets may be
invested in fixed income securities that are unrated.
2. Invest an amount that exceeds 5% of the value of the Fund's total
assets in the securities of any one issuer. This restriction
does not apply to holdings of U.S. Government securities.
3. Invest more than 25% of its total assets in any one industry.
This restriction does not apply to holdings of U.S. Government
securities.
4. Issue any senior securities, as defined in the 1940 Act.
5. Purchase the securities of any issuer for the purpose of
exercising control of management, and a Fund may not acquire or
own more than 10% of any class of the securities of any issuer.
6. Invest in any security that would subject the Fund to unlimited
liability, although the Fund may invest in interest rate and
stock market futures.
7. Underwrite the securities of other issuers or invest more than
5% of total assets in any combination of illiquid securities
and securities of issuers, including their predecessors, which
have been in existence less than 3 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.
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11. Purchase portfolio securities from or sell securities directly to
any of the Fund's, or the Adviser's, officers, directors, or
employees as a principal for their own account.
12. Purchase or sell commodities or commodity contracts (stock index
and interest rate futures will not be considered commodity
contracts).
13. Purchase or sell real estate or real estate mortgages, provided
that the Fund may invest in marketable securities, such as
obligations of the Government National Mortgage Association, that
are secured by real estate or interests therein or are issued by
companies which invest in real estate or interests therein, such
as publicly traded real estate investment trusts.
14. Purchase or sell interests in oil, gas, or other mineral
exploration or development programs.
15. Lend portfolio securities, except as described in the Statement
of Additional Information under "LOANS OF PORTFOLIO SECURITIES."
16. Make loans to other persons, provided that, for purposes of this
restriction, the acquisition of bonds, debentures, or other
corporate debt securities and investment in government
obligations, short-term commercial paper, certificates of
deposit, 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.
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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. Invest more than 10% of the Fund's total assets in interest rate
futures contracts.
22. Sell securities short, unless such sales are made ""against
the box''.
23. 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 in
securities of any other single investment company, and no more than 3% of total
outstanding voting stock of any one investment company may be purchased). All
such securities must be acquired by a Fund in the open market in transactions
involving no commissions or discounts to a sponsor or dealer (other than
customary brokerage commissions). The issuers of investment company securities
acquired by the Fund are not required to redeem such securities in an amount
exceeding 1% of such issuers' total outstanding securities during any period of
less than 30 days, and the Fund will vote all proxies with respect to such
securities in the same proportion as the vote of all other holders of such
securities.
-----------------------------
LOANS OF PORTFOLIO SECURITIES
-----------------------------
Loans of portfolio securities involve the lending of securities to a
broker-dealer or institutional investor for its use in connection with short
sales, arbitrage or other securities transactions. Loans of portfolio
securities of the Fund will be made, if at all, in strict conformity with
applicable federal and state rules and regulations. The term of any such loans
will generally not exceed nine months.
The Fund will engage in loan transactions only if the following
conditions are met: (1) the Fund must receive at least 100% collateral in
the form of cash or cash equivalents (e.g., U.S. Treasury bills or notes)
from the borrower; (2) the borrower must increase the collateral whenever the
market value of the securities loaned (determined on a daily basis) rises
above the level of the collateral; (3) the Fund must be able to terminate the
loan after notice at any time; (4) the Fund must receive reasonable interest
on the loan or a flat fee from the borrower, as well as amounts equivalent to
any dividends, interest or other distributions on the securities
12
<PAGE>
loaned and any increase in the market value of the securities; (5) the Fund
may pay only reasonable custodian fees in connection with the loan; and (6)
voting rights on the securities loaned may pass to the borrower. If a
material event affecting the investment occurs, the Trustees of the Fund must
be able to terminate the loan and vote proxies or enter into an alternative
arrangement with the borrower to enable the Trustees to vote proxies.
Excluding items (1) and (2), these practices may be amended from time to time
as regulatory provisions dictate.
While there may be delays in recovery of loaned securities or even a loss
of the securities loaned should the borrower default, loans will be made only to
firms or broker-dealers deemed by the Adviser to be of good standing and will
not be made unless, in the judgment of the Adviser, the consideration to be
earned from such loans would justify the risk. Such loan transactions are
referred to in this section as "qualified loan transactions."
The purpose of a qualified loan transaction is to afford the Fund the
opportunity to continue to earn income on the securities loaned and, at the same
time, to earn income on the collateral held by it. In furtherance of this
purpose, the cash collateral acquired through qualified loan transactions may be
invested in any obligation in which a Fund is authorized to invest in accordance
with its investment objectives. The investment of the cash collateral in other
obligations subjects that investment, as well as the security loaned, to market
forces (i.e., capital appreciation or depreciation) just like any other
portfolio security.
--------------------------------------
PURCHASE AND REDEMPTION OF FUND SHARES
--------------------------------------
Information concerning the purchase and redemption of the Fund's shares is
set forth under "HOW TO INVEST IN THE FUND" and "HOW TO SELL YOUR SHARES" in the
Trust's Prospectus.
The Trust has entered into a distribution agreement with the Distributor.
This agreement obligates the Distributor to pay certain expenses in connection
with the offering of shares of the Fund, including expenses related to the
printing of prospectuses and statements of additional information, the
preparation and printing of sales literature, and other distribution-related
expenses. Shares of the Fund are offered continuously to the public by the
Distributor and broker-dealers, investment advisers and other financial
institution 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.
13
<PAGE>
-----------------------------------
PRICING OF SECURITIES BEING OFFERED
-----------------------------------
The price for shares of the Fund is the next determined net asset value of
the Fund per share.
The Fund's net asset value per share is computed by dividing the value of
the securities held by the Fund plus any cash or other assets (including
interest and dividends accrued but not yet received) minus all liabilities
(including accrued expenses) by the total number of shares outstanding at such
time. Expenses, including the fees payable to the Adviser, are accrued daily to
the extent practicable.
Dividends receivable are treated as assets from the date on which
securities go ex-dividend and interest on bonds is accrued daily.
-------------------------------
CALCULATION OF PERFORMANCE DATA
-------------------------------
The Trust may publish the Fund's average annual total return quotations for
recent one, five and ten-year periods computed by finding the average annual
compounded rates of return over the one, five and ten-year periods that would
equate the initial amount invested to the ending redeemable value.
The Trust may, from time to time, include in such advertisements or quotes
comparisons of the Fund's total return performance against one or more indices
of stock or bond performance. Such indices include, for example, the Standard &
Poor's 500 Stock Index and the Dow Jones Industrial.
For purposes of determining total return, the Fund uses the following
formula:
P(1+T) to the power of n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1, 5 or 10 year
periods (or fractional portion thereof)
Total return figures may also be published for recent one, five and ten-
year periods where the total return figures represent the percentage return
for the one, five and ten-year periods that would equate the initial amount
invested to
14
<PAGE>
the ending redeemable value. Total return percentages for periods of less
than one year are usually annualized.
Since the Fund's registration statement under the 1940 Act has been in
effect less than one year, the time period during which the registration
statement has been in effect will be substituted for the period stated.
OTHER QUOTATIONS, COMPARISONS AND GENERAL INFORMATION
From time to time, in advertisements, in sales literature, or in reports to
shareholders, the past performance of the Funds may be illustrated and/or
compared with that of other mutual funds with similar investment objectives, and
to stock or other relevant indices. For example, the Fund's total return may be
compared to averages or rankings prepared by LIPPER ANALYTICAL SERVICES, INC., a
widely recognized independent service which monitors mutual fund performance;
the STANDARD & POOR'S 500 STOCK INDEX, an unmanaged index of common stocks; or
the DOW JONES INDUSTRIAL AVERAGE, a recognized unmanaged index of common stock
of 30 industrial companies listed on the New York Stock Exchange.
In addition, the performance of the Fund may be compared to alternative
investment or savings vehicles and/or to indexes or indicators of economic
activity (E.G., inflation or interest rates). Performance rankings and listings
reported in newspapers or national business and financial publications, such as
BARRON'S, BUSINESS WEEK, CONSUMER'S DIGEST, CONSUMER'S REPORT, FINANCIAL WORLD,
FORBES, FORTUNE, INVESTOR'S BUSINESS DAILY, KIPLINGER'S, PERSONAL FINANCE
MAGAZINE, MONEY MAGAZINE, the NEW YORK TIMES, SMART MONEY, USA TODAY, U.S. NEWS
AND WORLD REPORT, THE WALL STREET JOURNAL and WORTH may also be cited (if the
Fund is listed in any such publication) or used for comparison, as well as
performance listings and rankings from various other sources, including
BLOOMBERG FINANCIAL SYSTEMS, CDA/WIESENBERGER INVESTMENT COMPANIES SERVICE,
DONOGHUE'S MUTUAL FUND ALMANAC, INVESTMENT COMPANY DATA, INC., JOHNSON'S CHARTS,
KANON BLOCH CARRE & CO., MICROPAL, INC., MORNINGSTAR, INC., SCHABACKER
INVESTMENT MANAGEMENT, TOWERS DATA SYSTEMS and WEISENBERGER INVESTMENT COMPANIES
SERVICE.
In addition, from time to time, quotations from articles from financial
publications, such as those listed above, may be used in advertisements, in
sales literature or in reports to shareholders of the Trust.
----------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
----------------------------------
GENERAL
The Fund intends to qualify as a regulated investment company under Part I
of Subchapter M of the Internal Revenue
15
<PAGE>
Code of 1986, as amended (the "Code"), but there is no assurance that it will
be able to do so. In general, to qualify for this treatment, the Fund must,
among other things, derive at least 90% of its gross income from dividends,
interest, gains from the sale of securities, and certain related income;
derive less than 30% of its gross income from the sale of securities held
less than three months; invest in securities within certain statutory limits;
and distribute to its shareholders at least 90% of its taxable income and 90%
of its net exempt interest income, if any, for the taxable year. If the Fund
does not so qualify, it will be treated for tax purposes as an ordinary
corporation and will receive no tax deduction for payments made to
shareholders.
As a regulated investment company for tax purposes, the Fund will be taxed
at regular corporate rates only on the undistributed portion of 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
16
<PAGE>
date of the redemption or sale and ending 30 days after such date, the
taxpayer acquires other Fund shares.
The writing of call options and other investment techniques and practices
which the Fund may utilize, as described in the Prospectus under "Fundamental
Policies," may create "straddles" for United States federal income tax purposes
and may affect the character and timing of the recognition of gains and losses
by the Fund. Such transactions may increase the amount of short-term capital
gain realized by the Fund, which is taxed as ordinary income when distributed to
shareholders.
Dividends paid by the Fund will qualify for the dividends-received
deductions for corporations to the extent they are derived from dividends paid
by domestic corporations.
Distributions, if any, of net long-term capital gains from the sale of the
Fund's securities are taxable to shareholders of the Fund at capital gains
rates, regardless of the length of time the shareholder has owned shares of the
Fund and regardless of whether the distributions are reinvested in shares of the
Fund.
The Trust is required by federal law to obtain from each of their
shareholders certification of the shareholder's correct taxpayer identification
number and certain other information. If a shareholder fails to certify such
number or to provide the necessary information to the Trust, or if the Trust
receives certain notices from the Internal Revenue Service, the Trust will be
required to withhold and pay to the United States Treasury 20% of any reportable
dividends or interest paid to such shareholder.
FOREIGN TAXES
As described below in "Special Investment Risks -- Foreign Securities,"
the Fund may be subject to foreign withholding taxes which would reduce the
return on its investments. Tax treaties between certain countries and the
United States may reduce or eliminate such taxes. It is expected that
shareholders of the Fund who are subject to United States federal income tax
will not be entitled to claim a federal income tax credit or deduction for
foreign taxes paid by the Fund.
Gains and losses realized by the Fund on certain transactions, including
sales of foreign debt securities and certain transactions involving foreign
currency, will be treated as ordinary income or loss for federal income tax
purposes to the extent, if any, that such gains or losses are attributable to
changes in exchange rates for foreign currencies. Accordingly, distributions
taxable as ordinary income will include the net amount, if any, of such foreign
17
<PAGE>
exchange gains and will be reduced by the net amount, if any, of such foreign
exchange losses.
If the Fund purchases shares in certain foreign investment entities, called
"passive foreign investment companies," it may be subject to United States
federal income tax on a portion of any "excess distribution" or gain from the
disposition of such share, even if such income is distributed as a taxable
dividend by such Fund to its shareholders. Additional charges in the nature of
interest may be imposed on either the Fund or its shareholders in respect of
deferred taxes arising from such distributions or gains.
If the Fund were to invest in a passive foreign investment company with
respect to which the Fund elected to make a "qualified electing fund" election,
in lieu of the foregoing requirement, the Fund might be required to include in
income each year a portion of the ordinary earnings and net capital gains of the
qualified electing fund, even if such amount were not distributed to the Fund.
-------------------------
SPECIAL INVESTOR SERVICES
-------------------------
The Trust offers certain shareholder services, which are designed to
facilitate investment in its shares. Each of the options is described in the
Trust's Prospectus. All of these special services may be terminated by either
the Fund or the shareholder without any prior written notice.
-------------------
GENERAL INFORMATION
-------------------
The Trust 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.
18
<PAGE>
Dividends, distributions, and redemptions of shares of the Trust are to be
paid as set forth in the Prospectus. Shareholders do not have preemptive rights
or any conversion rights. Liquidation of the Fund must be approved by two-
thirds of the outstanding voting securities of the Fund.
-------
COUNSEL
-------
The law firm of Davis Wright Tremaine, Portland, Oregon, will pass on
certain legal matters in connection with the issuance of shares of the Fund and
will also act as counsel to the Fund and as counsel to the Adviser and the
Distributor in connection with their relationship with the Fund.
--------
AUDITORS
--------
KPMG Peat Marwick LLP, Portland, Oregon, acts as the Funds' independent
auditors. In such capacity, KPMG Peat Marwick LLP performs the annual audit of
each Fund's financial statements and assists in the preparation of tax returns.
-------------------------------------------------------
CUSTODIAN, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
-------------------------------------------------------
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 they incur for services provided to the Fund.
19
<PAGE>
--------------------------------
ADDITIONAL INFORMATION REGARDING
CERTAIN INVESTMENTS BY THE FUND
--------------------------------
GOVERNMENT SECURITIES
The taxable fixed-income obligations in which the Fund may invest on a
short-term basis may include obligations issued or guaranteed by the United
States government, its agencies, instrumentalities, or authorities. Any such
obligations in which the Fund invests will consist of bills, notes, and bonds
issued by the United States Treasury or obligations issued by other agencies of
the United States Government. Examples of other government agencies in whose
obligations the Fund may invest include Federal Home Loan Intermediate Credit
banks, Federal Land Banks, Federal Home Loan Banks, and the Federal National
Mortgage Association. Obligations issued by the United States Treasury are
guaranteed by the full faith and credit of the United States Government.
Obligations issued by other federal agencies are direct obligations of such
agencies and are not guaranteed by the United States Government.
--------------------
FINANCIAL STATEMENTS
--------------------
Following are the Financial Statements for the Fund as of January 30,
1996.
20
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholder
Crabbe Huson Funds:
We have audited the accompanying statements of assets and liabilities of the
Crabbe Huson Small Cap Fund of the Crabbe Huson Funds, as of January 30,
1996. This statement of assets and liabilities is the responsibility of the
management of the Crabbe Huson Funds. Our responsibility is to express an
opinion on the statement of assets and liabilities based upon our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of assets and liabilities is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement of assets and
liabilities. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
statement of assets and liabilities presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities referred to above
presents fairly, in all material respects, the financial position of the
Crabbe Huson Small Cap Fund of the Crabbe Huson Funds as of January 30, 1996,
in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Portland, Oregon
January 30, 1996
<PAGE>
CRABBE HUSON FUNDS
Crabbe Houson Small Cap Fund
(in organization)
Statement of Assets and Liabilities
January 30, 1996
<TABLE>
<S> <C>
Assets:
Cash $ 100,000
Organization costs (note 2) 102,000
-------
Total assets 202,000
-------
Due to investment advisor (note 2) 102,000
-------
Total liabilities 102,000
-------
Net assets $ 100,000
-------
-------
Net asset value per share (10,000 shares of $.001
par value capital stock outstanding;
1,000,000,000 shares authorized) $ 10.00
-------
-------
</TABLE>
See accompanying notes to statement of assets and liabilities.
<PAGE>
CRABBE HUSON FUNDS
Crabbe Huson Small Cap Fund
(in organization)
Notes to Statement of Assets and Liabilities
January 30, 1996
1) ORGANIZATION
The Crabbe Huson Small Cap Fund (the Fund) is presently the one series
constituting the Crabbe Huson Funds, a trust operating as an open-end,
management investment company established under the laws of Delaware.
A Certificate of Trust was filed in the State of Delaware on
October 13, 1995. The Fund has had no operations other than those
matters related to its organization and registration as an open-end
diversified investment company under the Investment Company Act of 1940
and the sale of 10,000 shares of its capital stock at $10.00 per share
to The Crabbe Huson Group, Inc., the Fund's investment advisor.
2) ORGANIZATION COSTS
Organization costs of $102,000 have been capitalized as of January 30,
1996, and will be amortized based on assets expected to be managed over a
period of sixty months beginning on the date the Fund's registration
statement becomes effective. 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. The Crabbe Huson Group, Inc. has agreed to
advance the organization costs incurred by the Fund and will be reimbursed
for them after commencement of the Fund's operations.
<PAGE>
---------------------------
PART C
OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Index to Financial Statement.
Independent Auditors' Report dated January 30, 1996
Statement of Assets and Liabilities
(b) Exhibits:
1 Amended Declaration of Trust
2 Amended Bylaws
3 None
4 Copies of all instruments defining the rights of holders of the securities
being registered including, where applicable, the relevant portion of the
Declaration of Trust or bylaws of the registrant.(1)
5 Form of Master Investment Advisory Contract
6(a) Form of Distribution Agreement
6(b) Form of Selected Dealer Agreement
7 None
8 Form of Custody and Investment Accounting Agreement
9(a) Form of Administration Agreement
9(b) Form of Transfer Agency and Service Agreement
10 Opinion and Consent of Davis Wright Tremaine, Counsel to Registrant
11 Consent of Accountants
12 See paragraph (a) of this Item 24
- -------------------
(1) Incorporated by reference from the Pre-Effective Registration
Statement filed with the Securities and Exchange Commission on
November 16, 1995.
<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
14 Retirement Plans(2)
15 Distribution Plan
16 None
17 None
18 Power of Attorney
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Registrant does not have any subsidiaries and does not control any other company
or person. The Registrant is a recently organized Delaware business trust and
has not issued any securities as of the date of this Registration Statement. On
the effective date, The Crabbe Huson Group, Inc. will own 100% of the
outstanding shares of the Fund.
Item 26. NUMBER OF HOLDERS OF SECURITIES
Just prior to the effective date of this Registration Statement, it is expected
that there will be one record holder of shares of The Crabbe Huson Small Cap
Fund.
Item 27. INDEMNIFICATION
The Declaration of Trust of the Registrant contains the following provisions:
"LIMITATION OF LIABILITY. No personal liability for any debt or obligation of
the Trust shall attach to any Trustee of the Trust. Without limiting the
foregoing, a Trustee shall not be responsible for or liable in any event for any
neglect or wrongdoing of any officer, agent, employee, investment adviser,
subadviser, principal underwriter or custodian of the Trust, nor shall any
Trustee be responsible or liable for the act or omission of any other Trustee.
Nothing contained herein shall protect any Trustee against any liability to
which such Trustee would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office.
"Every note, bond, contract, instrument, certificate, Share or undertaking and
every other act or thing whatsoever executed or done by or on behalf of the
Trust or the Trustees or any of them in connection with the Trust shall be
conclusively deemed to have been executed or done only in or with respect to
their or his capacity as Trustees or Trustee and neither such Trustees or
Trustee nor the Shareholders shall be personally liable thereon.
- -------------------
(2) 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>
"Every note, bond, contract, instrument, certificate or undertaking made or
issued by the Trustees or by any officers or officer shall recite that the same
was executed or made by or on behalf of the Trust by them as Trustees or Trustee
or as officers or officer and not individually and that the obligations of such
instrument are not binding upon any of them or the Shareholders individually but
are binding only upon the assets and property of the Trust, and may contain such
further recitals as they or he may deem appropriate, but the omission thereof
shall not operate to bind any Trustees or Trustee or officers or officer or
Shareholders or Shareholder individually.
"All persons extending credit to, contracting with or having any claim against
the Trust shall look only to the assets of the Trust for payment under such
credit, contract or claim; and neither the Shareholders nor the Trustees nor any
of the Trust's officers, employees or agents, whether past, present or future,
shall be personally liable therefor.
. . . . .
"INDEMNIFICATION. Subject to the exceptions and limitations contained in this
Section 4, every person who is, or has been, a Trustee, officer, employee or
agent of the Trust, including persons who serve at the request of the Trust as
directors, trustees, officers, employees or agents of another organization in
which the Trust has an interest as a shareholder, creditor or otherwise
(hereinafter referred to as a "Covered Person"), shall be indemnified by the
Trust to the fullest extent permitted by law against liability and against all
expenses reasonably incurred or paid by him in connection with any claim,
action, suit or proceeding in which he becomes involved as a party or otherwise
by virtue of his being or having been such a Trustee, director, officer,
employee or agent and against amounts paid or incurred by him in settlement
thereof.
"No indemnification shall be provided hereunder to a Covered Person:
"(1) against any liability to the Trust or its Shareholders by reason of a final
adjudication by the court or other body before which the proceeding was brought
that he engaged in willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office;
"(2) with respect to any matter as to which he shall have been finally
adjudicated not to have acted in good faith in the reasonable belief that his
action was in the best interests of the Trust; or
"(3) in the event of a settlement or other disposition not involving a final
adjudication (as provided in paragraph (a) or (b)) and resulting in a payment by
a Covered Person, unless there has been either a determination that such Covered
Person did not
<PAGE>
engage in willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office by the court or other body
approving the settlement or other disposition, or a reasonable determination,
based on a review of readily available facts (as opposed to a full trial-type
inquiry), that he did not engage in such conduct, such determination being made
by:
"(a) a vote of a majority of the Disinterested Trustees acting on the matter
(provided that a majority of the Disinterested Trustees then in office act on
the matter); or
"(b) written opinion of independent legal counsel.
"The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not affect any other
rights to which any Covered Person may now or hereafter be entitled, shall
continue as to a person who has ceased to be such a Covered Person and shall
inure to the benefit of the heirs, executors and administrators of such a
person. Nothing contained herein shall affect any rights to indemnification to
which Trust personnel other than Covered Persons may be entitled by contract or
otherwise under law.
"Expenses of preparation and presentation of a defense to any claim, action,
suit or proceeding subject to a claim for indemnification under this Section 4
shall be advanced by the Trust prior to final disposition thereof upon receipt
of an undertaking by or on behalf of the recipient to repay such amount if it is
ultimately determined that he is not entitled to indemnification under this
Section 4, provided that either:
"(a) such undertaking is secured by a surety bond or some other appropriate
security or the Trust shall be insured against losses arising out of any such
advances; or
"(b) a majority of the Disinterested Trustees acting on the matter (provided
that a majority of the Disinterested Trustees then in office act on the matter)
or independent legal counsel in a written opinion shall determine, based upon a
review of the readily available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the recipient ultimately will be found
entitled to indemnification.
"As used in this Section 4, a "Disinterested Trustee" is one (x) who is not an
Interested Person of the Trust (including anyone, as such Disinterested Trustee,
who has been exempted from being an Interested Person by any rule, regulation or
order of the Commission), and (y) against whom none of such actions, suits or
other proceedings or another action, suit or other proceeding on the same or
similar grounds is then or has been pending.
"As used in this Section 4, the words "claim," "action," "suit" or "proceeding"
shall apply to all claims, actions, suits, proceedings
<PAGE>
(civil, criminal, administrative or other, including appeals), actual or
threatened; and the words "liability" and "expenses" shall include without
limitation, attorneys' fees, costs, judgments, amounts paid in settlement,
fines, penalties and other liabilities."
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 Assress Crabbe Huson Securities, Inc. Registrant
- ---------------- ----------------------------- ----------
Thomas F. Biesiadecki Secretary and Chief None
Compliance Officer
Cheryl A. Burgermeister Vice President, Treasurer Treasurer
121 SW Morrison and Director
Suite 1410
Portland, OR 97204
Craig L. Kolzow Vice President Assistant Treasurer
121 SW Morrison
Suite 1410
Portland, OR 97204
Craig P. Stuvland President and Director Secretary and
121 SW Morrison Director
Suite 1410
Portland, OR 97204
(c) Not applicable.
<PAGE>
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,
Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City,
Missouri 64105, at the offices of Davis Wright Tremaine, the Fund's legal
counsel, 1300 S.W. 5th Avenue, Suite 2300, Portland, Oregon, 97201 and at the
offices of State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts, the Fund's transfer agent.
Item 31. MANAGEMENT SERVICES
Not applicable.
Item 32. UNDERTAKINGS
(a) Not applicable.
(b) The Registrant undertakes to file a post-effective amendment, using
financial statements which need not be certified, within four to six
months from the effective date of Registrant's 1933 Act Registration
Statement.
(c) The Registrant undertakes to furnish to each person to whom a
Prospectus is delivered a copy of the Registrant's latest annual
report to shareholders, upon request and without charge.
(d) Registrant undertakes to call a shareholders meeting for the purpose
of voting upon a proposal to remove a trustee if requested to do so by
at least 10% of registrant's outstanding shares. Registrant also
undertakes to assist in communications among shareholders in
connection with such a meeting.
<PAGE>
SIGNATURES AND CERTIFICATION
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Portland, Oregon on January 31, 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 January 31, 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
Page 1 - SIGNATURES AND CERTIFICATION
<PAGE>
(3) Directors:
* Director
------------------------------
Gary L. Capps
* Director
------------------------------
James E. Crabbe
* Director
------------------------------
Richard S. Huson
* Director
------------------------------
William Wendell Wyatt
* Director
------------------------------
Craig P. Stuvland
* Director
------------------------------
Louis Scherzer
* Director
------------------------------
Bob L. Smith
* Director
------------------------------
Richard P. Wollenberg
By: /s/ Richard S. Huson
--------------------------------
Richard S. Huson,
Attorney-in-fact for the directors
and officers identified above by the
asterisk.
Page 2 - SIGNATURES AND CERTIFICATION
<PAGE>
EXHIBIT 99.1
AMENDED
DECLARATION OF TRUST
OF
CRABBE HUSON FUNDS
<PAGE>
INDEX
ARTICLE I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
NAME AND DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. Name . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Definitions. . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
NATURE AND PURPOSE OF TRUST . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
REGISTERED AGENT; PRINCIPAL PLACE OF BUSINESS . . . . . . . . . . . . . 3
ARTICLE IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
BENEFICIAL INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1. Shares of Beneficial Interest. . . . . . . . . . . . . 3
Section 2. Establishment and Designation of Series. . . . . . . . 4
(a) Assets Belonging to Series . . . . . . . . . . . . . . . 5
(b) Liabilities Belonging to Series. . . . . . . . . . . . . 5
(c) Dividends. . . . . . . . . . . . . . . . . . . . . . . . 6
(d) Liquidation. . . . . . . . . . . . . . . . . . . . . . . 6
(e) Voting . . . . . . . . . . . . . . . . . . . . . . . . . 7
(f) Redemption by Shareholder. . . . . . . . . . . . . . . . 7
(g) Redemption by Trust. . . . . . . . . . . . . . . . . . . 7
(h) Net Asset Value. . . . . . . . . . . . . . . . . . . . . 7
(i) Transfer . . . . . . . . . . . . . . . . . . . . . . . . 8
(j) Equality . . . . . . . . . . . . . . . . . . . . . . . . 8
(k) Fractions. . . . . . . . . . . . . . . . . . . . . . . . 8
(l) Conversion Rights. . . . . . . . . . . . . . . . . . . . 9
(m) Termination of Sales . . . . . . . . . . . . . . . . . . 9
Section 3. Ownership of Shares. . . . . . . . . . . . . . . . . . 9
Section 4. No Preemptive Rights, Etc. . . . . . . . . . . . . . . 9
Section 5. Status of Shares and Limitation of Personal
Liability . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE V . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
THE TRUSTEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 1. Management of the Trust. . . . . . . . . . . . . . . . 10
Section 2. Qualification and Number . . . . . . . . . . . . . . . 10
Section 3. Term and Election. . . . . . . . . . . . . . . . . . . 10
Section 4. Resignation and Removal. . . . . . . . . . . . . . . . 11
Section 5. Vacancies. . . . . . . . . . . . . . . . . . . . . . . 11
Section 6. Ownership of Assets of the Trust . . . . . . . . . . . 11
ARTICLE VI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
POWERS OF TRUSTEES. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 1. Powers . . . . . . . . . . . . . . . . . . . . . . . . 12
(a) Investments. . . . . . . . . . . . . . . . . . . . . . . 13
(b) Disposition of Assets. . . . . . . . . . . . . . . . . . 13
(c) Ownership Powers . . . . . . . . . . . . . . . . . . . . 13
(d) Subscription . . . . . . . . . . . . . . . . . . . . . . 13
(e) Form of Holding. . . . . . . . . . . . . . . . . . . . . 13
(f) Reorganization, etc. . . . . . . . . . . . . . . . . . . 13
i
<PAGE>
(g) Compromise . . . . . . . . . . . . . . . . . . . . . . . 13
(h) Partnerships, etc. . . . . . . . . . . . . . . . . . . . 13
(i) Borrowing and Security . . . . . . . . . . . . . . . . . 13
(j) Guarantees, etc. . . . . . . . . . . . . . . . . . . . . 14
(k) Insurance. . . . . . . . . . . . . . . . . . . . . . . . 14
(l) Pensions, etc. . . . . . . . . . . . . . . . . . . . . . 14
Section 2. Vote of Trustees . . . . . . . . . . . . . . . . . . . 14
ARTICLE VII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
EXPENSES OF THE TRUST . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE VIII . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
INVESTMENT ADVISER, UNDERWRITER . . . . . . . . . . . . . . . . . . . . 15
Section 1. Investment Adviser . . . . . . . . . . . . . . . . . . 15
Section 2. Underwriter; Transfer Agent. . . . . . . . . . . . . . 15
Section 3. Custodian. . . . . . . . . . . . . . . . . . . . . . . 16
Section 4. Parties to Contract. . . . . . . . . . . . . . . . . . 16
ARTICLE IX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SHAREHOLDERS' VOTING POWERS AND MEETINGS. . . . . . . . . . . . . . . . 16
Section 1. Voting Powers. . . . . . . . . . . . . . . . . . . . . 16
Section 2. Meetings . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3. Record Dates . . . . . . . . . . . . . . . . . . . . . 17
Section 4. Quorum and Required Vote . . . . . . . . . . . . . . . 18
Section 5. Action by Written Consent. . . . . . . . . . . . . . . 18
Section 6. Inspection of Records. . . . . . . . . . . . . . . . . 18
Section 7. Additional Provisions. . . . . . . . . . . . . . . . . 18
ARTICLE X . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
LIMITATION OF LIABILITY AND INDEMNIFICATION . . . . . . . . . . . . . . 18
Section 1. Limitation of Liability. . . . . . . . . . . . . . . . 18
Section 2. Trustees' Good Faith Action, Expert Advice, No Bond
or Surety . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3. Liability of Third Persons Dealing with Trustees . . . 20
Section 4. Indemnification. . . . . . . . . . . . . . . . . . . . 20
Section 5. Shareholders . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE XI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 1. Termination of Trust . . . . . . . . . . . . . . . . . 22
Section 2. Reorganization . . . . . . . . . . . . . . . . . . . . 22
Section 3. Filing of Copies, References, Headings . . . . . . . . 23
Section 4. Trustees May Resolve Ambiguities . . . . . . . . . . . 24
Section 5. Amendments . . . . . . . . . . . . . . . . . . . . . . 24
Section 6. Governing Law. . . . . . . . . . . . . . . . . . . . . 24
Section 7. Provisions in Conflict with Law or Regulations. . . . . . . 25
ii
<PAGE>
AMENDED
DECLARATION OF TRUST
OF
CRABBE HUSON FUNDS
DECLARATION OF TRUST made as of this _____ day of _______________, 1995 by
the Trustees hereunder.
WHEREAS, the Trustees desire to establish a trust for the purpose of
carrying on the business of an open-end investment company; and
WHEREAS, in furtherance of such purpose, the Trustees and any successor
Trustees elected in accordance with Article V hereof are acquiring and may
hereafter acquire assets and properties which they will hold and manage as
trustees of a Delaware business trust with transferable shares in accordance
with the provisions hereinafter set forth; and
WHEREAS, this Trust is authorized to issue its shares of beneficial
interest in separate series, all in accordance with the provisions set forth in
this Declaration of Trust;
NOW, THEREFORE, the Trustees and any successor Trustees elected or
appointed in accordance with Article V hereof hereby declare that they will hold
all cash, securities and other assets and properties, which they may from time
to time acquire in any manner as Trustees hereunder, IN TRUST, and that they
will manage and dispose of the same upon the following terms and conditions for
the benefit of the holders from time to time of shares of beneficial interest in
this Trust as hereinafter set forth.
ARTICLE I
NAME AND DEFINITIONS
Section 1. NAME. This Trust shall be known as "Crabbe Huson
Funds" and the Trustees shall conduct the business of the Trust under that
name or any other name or names as they may from time to time determine.
Section 2. DEFINITIONS. Whenever used herein, unless otherwise required
by the context or specifically provided below:
(a) The "Trust" shall mean the Delaware business trust established by this
Declaration of Trust, as amended from time to time;
(b) "Trustee" or "Trustees" shall mean each signatory to this Declaration
of Trust so long as such signatory shall continue in office in accordance with
the terms hereof, and all other individuals who at the time in question have
been duly elected or
DECLARATION OF TRUST - 1
<PAGE>
appointed and qualified in accordance with Article V hereof and are then in
office;
(c) "Shares" mean the shares of beneficial interest described in
Article IV hereof and include fractions of Shares as well as whole Shares;
(d) "Shareholder" means a record owner of Shares;
(e) The "1940 Act" refers to the Investment Company Act of 1940 (and any
successor statute) and the Rules and Regulations thereunder, all as amended from
time to time;
(f) The terms "Person," "Commission," "Interested Person," "Principal
Underwriter" and "Vote of a Majority of the Outstanding Voting Securities" shall
have the meanings given them in the 1940 Act;
(g) "Declaration of Trust" or "Declaration" shall mean this Declaration of
Trust as amended or restated from time to time;
(h) "By-Laws" shall mean the By-Laws of the Trust as amended from time to
time; and
(i) "Series" shall mean any of the separate series established and
designated under or in accordance with the provisions of Article IV.
ARTICLE II
NATURE AND PURPOSE OF TRUST
The Trust is a business trust of the type referred to in the Delaware
Business Trust Act, Chapter 38 of Title 12 of the Delaware Code (the "DBTA").
The Trustees shall file a certificate of trust in accordance with Section 3810
of the DBTA. The Trust is not intended to be, shall not be deemed to be, and
shall not be treated as, a general or a limited partnership, joint venture,
corporation or joint stock company, nor shall the Trustees or Shareholders or
any of them for any purpose be deemed to be, or be treated in any way whatsoever
as though they were, liable or responsible hereunder as partners or joint
venturers. The purpose of the Trust is to engage in, operate and carry on the
business of an open-end management investment company and to do any and all acts
or things as are necessary, convenient, appropriate, incidental or customary in
connection therewith.
This instrument shall be the governing instrument of the Trust and shall be
governed by and construed according to the laws of the State of Delaware. The
Trustees, on behalf of the Trust, may exercise all powers of trustees under the
DBTA. No provision of this Declaration shall, however, be effective to require
a waiver of compliance with any provision of the Securities Act of 1933, as
DECLARATION OF TRUST - 2
<PAGE>
amended, or the 1940 Act, or of any valid rule, regulation or order of the
Commission thereunder.
ARTICLE III
REGISTERED AGENT; PRINCIPAL PLACE OF BUSINESS
The name of the registered agent of the Trust is The Corporation Trust
Company and the registered agent's business address in Delaware is Corporation
Trust Center, 1209 Orange Street, Wilmington, Delaware 19801. The principal
place of business of the Trust is 121 S.W. Morrison Street, Suite 1425,
Portland, Oregon 97204. The Trustees may, without the approval of the
Shareholders, change the registered agent of the Trust and the principal place
of business of the Trust. In such event, the Trustees shall file a certificate
of amendment in accordance with Section 3810 of the DBTA.
ARTICLE IV
BENEFICIAL INTEREST
Section 1. SHARES OF BENEFICIAL INTEREST. The beneficial interests in the
Trust shall be divided into Shares, all without par value and of one class, but
the Trustees shall have the authority from time to time to divide the class of
Shares into two or more series of Shares ("Series"). Each Series of Shares,
including without limitation Series specifically established and designated in
Section 2 of this Article, shall be separate and distinct from any other Series
of the Trust. Each Series established hereunder shall be deemed to be a
separate and distinct operation. Each Series will maintain separate and
distinct records and the Trustees shall account for the assets of each Series
separately from the assets of other Series. The Trustees shall have exclusive
power without the requirement of shareholder approval to establish and designate
such separate and distinct Series, and to fix and determine the relative rights
and preferences as between the shares of the separate Series as to (i) rights of
redemption and the price, terms and manner of redemption, (ii) special and
relative rights as to dividends and other distributions and on liquidation,
(iii) sinking or purchase fund provisions, (iv) conversion rights, and (v)
conditions under which the several Series shall have separate voting rights or
no voting rights.
The number of authorized Shares is unlimited. The number of Shares of each
Series that may be issued is unlimited. The Trustees may issue Shares of any
Series for such consideration and on such terms as they may determine (or for no
consideration if pursuant to a Share dividend or split-up), all without action
or approval of the Shareholders. All Shares when so issued on the terms
determined by the Trustees shall be fully paid and nonassessable (but may be
subject to mandatory contribution back to
DECLARATION OF TRUST - 3
<PAGE>
the Trust as provided in subsection (g) of Section 2 of this Article). The
Trustees may classify or reclassify any unissued Shares or any Shares previously
issued and reacquired of any Series into one or more Series that may be
established and designated from time to time. The Trustees may hold as treasury
shares, reissue for such consideration and on such terms as they may determine,
or cancel, at their discretion from time to time, any Shares of any Series
reacquired by the Trust.
The Trustees may from time to time close the transfer books or establish
record dates and times for the purposes of determining the holders of Shares
entitled to be treated as such, to the extent provided or referred to in Section
3 of Article IX.
The establishment and designation of any Series in addition to those
established and designated in Section 2 to this Article shall be effective upon
the execution by a majority of the Trustees of an instrument setting forth such
establishment and designation and the relative rights and preferences of the
Shares of such Series, or as otherwise provided in such instrument. At any time
that there are no Shares outstanding of any particular Series previously
established and designated, the Trustees may by an instrument executed by a
majority of their number abolish that Series and the establishment and
designation thereof. Each instrument referred to in this paragraph shall have
the status of an amendment to this Declaration of Trust.
Any Trustee, officer or other agent of the Trust, and any organization in
which any such person is interested may acquire, own, hold and dispose of Shares
of any Series of the Trust to the same extent as if such person were not a
Trustee, officer or other agent of the Trust; and the Trust may issue and sell
or cause to be issued and sold and may purchase Shares of any Series from any
such person or any such organization subject only to the general limitations,
restrictions or other provisions applicable to the sale or purchase of Shares of
such Series generally.
Section 2. ESTABLISHMENT AND DESIGNATION OF SERIES. Without limiting the
authority of the Trustees set forth in Section 1 of this Article to establish
and designate any further Series, the Trustee hereby establishes and designates
nine Series: Crabbe Huson Small-Cap Fund, Crabbe Huson Special Fund,
Crabbe Huson Real Estate Investment Fund, Crabbe Huson Equity Fund, Crabbe
Huson Asset Allocation Fund, Crabbe Huson Oregon Municipal Bond Fund,
Crabbe Huson Income Fund, Crabbe Huson U.S. Government Income Fund, and
Crabbe Huson U.S. Government Money Market Fund. The above-mentioned Series
and any Shares of any further Series that may from time to time be established
and designated by the Trustees shall (unless the Trustees otherwise determine
with respect to some further Series at the time of establishing and designating
the same) have the following relative rights and preferences:
DECLARATION OF TRUST - 4
<PAGE>
(a) ASSETS BELONGING TO SERIES. All consideration received by the Trust
for the issue or sale of Shares of a particular Series, together with all assets
in which such consideration is invested or reinvested, all income, earnings,
profits, and proceeds thereof, including any proceeds derived from the sale,
exchange or liquidation of such assets, and any funds or payments derived from
any reinvestment of such proceeds in whatever form the same may be, shall be
held by the Trustees in trust for the benefit of the holders of Shares of that
Series and shall irrevocably belong to that Series for all purposes, and shall
be so recorded upon the books of account of the Series. Such consideration,
assets, income, earnings, profits, and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation of such assets, and any funds or
payments which are not readily identifiable as belonging to any particular
Series (collectively "General Items"), the Trustees shall allocate to and among
any one or more of the Series established and designated from time to time in
such manner and on such basis as they, in their sole discretion, deem fair and
equitable. Any General Items so allocated to a particular Series shall belong
to that Series. Each such allocation by the Trustees shall be conclusive and
binding upon the Shareholders of all Series for all purposes.
(b) LIABILITIES BELONGING TO SERIES. The assets belonging to each
particular Series shall be charged with the liabilities in respect of that
Series and all expenses, costs, charges and reserves attributable to that
Series, and any general liabilities, expenses, costs, charges or reserves of the
Trust which are not readily identifiable as belonging to any particular Series
shall be allocated and charged by the Trustees to and among any one or more of
the Series established and designated from time to time in such manner and on
such basis as the Trustees in their sole discretion deem fair and equitable.
Each allocation of liabilities, expenses, costs, charges and reserves by the
Trustees shall be conclusive and binding upon the Shareholders of all Series for
all purposes. Any creditor of any Series may look only to the assets of that
Series to satisfy such creditor's debt.
Without limitation of the foregoing provisions of this Section, but subject
to the right of the Trustees in their discretion to allocate general
liabilities, expenses, costs, charges or reserves as herein provided, the debts,
liabilities, obligations and expenses incurred, contracted for or otherwise
existing with respect to a particular Series shall be enforceable against the
assets of such Series only, and not against the assets of any other Series.
Notice of this limitation on interseries liabilities shall be set forth in the
certificate of trust of the Trust (whether originally or by amendment) as filed
or to be filed in the Office of the Secretary of State of the State of Delaware
pursuant to the DBTA, and upon the giving of such notice in the certificate of
trust, the statutory provisions of Section 3804 of the DBTA relating to
limitations on interseries liabilities (and the statutory effect under
Section 3804 of setting forth such
DECLARATION OF TRUST - 5
<PAGE>
notice in the certificate of trust) shall become applicable to the Trust and
each Series.
The Trustees shall have full discretion, to the extent not inconsistent
with the 1940 Act and not inconsistent with generally accepted accounting
principles, to determine which items shall be treated as income and which items
as capital; and each such determination and allocation shall be conclusive and
binding upon the Shareholders.
(c) DIVIDENDS. Dividends and distributions on Shares of a particular
Series may be paid with such frequency as the Trustees may determine, which may
be daily or otherwise pursuant to a standing resolution or resolutions adopted
only once or with such frequency as the Trustees may determine, to the holders
of Shares of that Series, from such of the income and capital gains, accrued or
realized, from the assets belonging to that Series, as the Trustees may
determine, after providing for actual and accrued liabilities belonging to that
Series. All dividends and distributions on Shares of a particular Series shall
be distributed pro rata to the holders of Shares of that Series in proportion to
the number of Shares of that Series held by such holders at the date and time of
record established for the payment of such dividends or distributions, except
that in connection with any dividend or distribution program or procedure the
Trustees may determine that no dividend or distribution shall be payable on
Shares as to which the Shareholder's purchase order and/or payment have not been
received by the time or times established by the Trustees under such program or
procedure. Such dividends and distributions may be made in cash or Shares of
that Series or a combination thereof as determined by the Trustees or pursuant
to any program that the Trustees may have in effect at the time for the election
by each Shareholder of the mode of the making of such dividend or distribution
to that Shareholder. Any such dividend or distribution paid in Shares will be
paid at the net asset value thereof as determined in accordance with
Subsection 2(h) of this Article.
(d) LIQUIDATION. In the event of the liquidation or dissolution of the
Trust or any Series, the Shareholders of each Series that has been established
and designated and that has voted to be liquidated or dissolved, shall be
entitled to receive, when and as declared by the Trustees, the excess of the
assets belonging to that Series over the liabilities belonging to that Series.
The assets so distributable to the Shareholders of any particular Series shall
be distributed among such Shareholders in proportion to the number of Shares of
that Series held by them and recorded on the books of the Series. The
liquidation of any particular Series may be authorized by vote of a majority of
the Trustees then in office subject to the approval of two-thirds of the
outstanding voting securities of that particular Series.
DECLARATION OF TRUST - 6
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(e) VOTING. On each matter submitted to a vote of the Shareholders, each
holder of a Share shall be entitled to one vote for each dollar of net asset
value standing in his name on the books of each Series in which he owns Shares
which is entitled to vote on the matter. All Shares of each Series shall vote
as a separate class except as to voting for Trustees and as otherwise required
by the 1940 Act. As to any matter which does not affect the interest of a
particular Series, only the holders of Shares of the one or more affected Series
shall be entitled to vote.
(f) REDEMPTION BY SHAREHOLDER. Each holder of record of Shares of a
particular Series shall have the right at such times as may be permitted by the
Trust and as otherwise required by the 1940 Act to require the Trust to redeem
all or any part of his Shares of that Series at a redemption price equal to the
net asset value per Share of that Series next determined in accordance with
Subsection 2(h) of this Article IV after the Shares are properly tendered for
redemption, less any charge which may be imposed by the Trust in connection with
such redemption and described in the Trust's then current prospectus. Payment
of the redemption price shall be in cash; provided, however, that if the
Trustees determine, which determination shall be conclusive, that conditions
exist which make payment wholly in cash unwise or undesirable, the Trust may,
subject to the requirements of the 1940 Act, make payment wholly or partly in
securities or other assets belonging to the Series of which the Shares being
redeemed are part at the value of such securities or assets used in such
determination of net asset value. Notwithstanding the foregoing, the Trust may
postpone payment of the redemption price and may suspend the right of the
holders of Shares of any Series to require the Trust to redeem Shares of that
Series during any period or at any time when and to the extent permissible under
the 1940 Act.
(g) REDEMPTION BY TRUST. The Trustees may cause the Trust to redeem at
net asset value the Shares of any holder of Shares in any Series if the net
asset value of the Shares in such Series is less than $2,000 as a result of
Shareholder redemptions. No such redemption shall be affected unless the Trust
has given the holder at least sixty (60) days notice of its intention to redeem
such Shares and an opportunity to purchase a sufficient number of additional
Shares to bring the aggregate current net asset value of the holder's Shares in
the particular Series above $2,000. Upon redemption of Shares pursuant to this
Section, the Trust shall promptly cause payment of the full redemption price to
be made to the holder of the Shares so redeemed. The Trust may reject any
purchase order, refuse to transfer such Shares and compel redemption of Shares
if, in its opinion, any such rejected action would prevent the Trust from
becoming a personal holding company as defined by the Internal Revenue Code of
1986, as amended.
(h) NET ASSET VALUE. The net asset value per Share of any Series shall be
the quotient obtained by dividing the value of the net assets of that Series
(being the value of the assets belonging
DECLARATION OF TRUSR - 7
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to that Series less the liabilities belonging to that Series) by the total
number of Shares of that Series outstanding, all determined in accordance with
the methods and procedures, including without limitation those with respect to
rounding, established by the Trustees from time to time.
The Trustees may determine to maintain the net asset value per Share of any
Series at a designated constant dollar amount and in connection therewith may
adopt procedures not inconsistent with the 1940 Act for the continuing
declarations of income attributable to that Series as dividends payable in
additional Shares of that Series at the designated constant dollar amount and
for the handling of any losses attributable to that Series. Such procedures may
provide that in the event of any loss each Shareholder shall be deemed to have
contributed to the capital of the Trust attributable to that Series his pro rata
portion of the total number of Shares required to be canceled in order to permit
the net asset value per Share of that Series to be maintained, after reflecting
such loss, at the designated constant dollar amount. Each Shareholder of the
Trust shall be deemed to have agreed, by his investment in any Series with
respect to which the Trustees shall have adopted any such procedure, to make the
contribution referred to in the preceding sentence in the event of any such
loss. The Trustees may delegate any of their powers and duties under this
Section with respect to appraisal of assets and liabilities in the determination
of net asset value or with respect to a suspension of the determination of net
asset value to an officer or officers or agent or agents of the Trust designated
from time to time by the Trustees.
(i) TRANSFER. All Shares of each particular Series shall be transferable.
(j) EQUALITY. All Shares of each particular Series shall represent an
equal proportionate interest in the assets belonging to that Series (subject to
the liabilities belonging to that Series), and each Share of any particular
Series shall be equal to each other Share of that Series; but the provisions of
this sentence shall not restrict any distinctions permissible under Subsection
2(c) of this Article IV that may exist with respect to dividends and
distributions on Shares of the same Series. The Trustees may from time to time
divide or combine the Shares of any particular Series into a greater or lesser
number of Shares of that Series without thereby changing the proportionate
beneficial interest in the assets belonging to that Series or in any way
affecting the rights of Shares of any other Series.
(k) FRACTIONS. Any fractional Share of any Series, if any such fractional
Share is outstanding, shall carry proportionately all the rights and obligations
of a whole Share of that Series, including rights and obligations of a whole
Share of that Series, including rights and obligations with respect to voting,
receipt of
DECLARATION OF TRUST - 8
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dividends and distributions, redemption of Shares, and liquidation of the Trust
or any Series.
(l) CONVERSION RIGHTS. Subject to compliance with the requirements of the
1940 Act, the Trustees shall have the authority to provide that holders of
Shares of any Series shall have the right to convert said Shares into Shares of
one or more other Series in accordance with such requirements and procedures as
may be established by the Trustees.
(m) TERMINATION OF SALES. The Trustees shall have the authority to
terminate the sales of Shares of any Series at any time or for such periods as
the Trustees may from time to time decide.
Section 3. OWNERSHIP OF SHARES. The ownership and transfer of Shares
shall be recorded on the books of the Series or its transfer or similar agent.
No certificates certifying the ownership of Shares shall be issued except as the
Trustees may otherwise determine from time to time. The Trustees may make such
rules as they consider appropriate for the issuance of share certificates,
transfer of Shares and similar matters for each Series. The record books of
each Series, as kept by the Series or any transfer or similar agent of the
Series, shall be conclusive as to who are the holders of Shares and as to the
number of Shares held from time to time by each Shareholder.
Section 4. NO PREEMPTIVE RIGHTS, ETC. The holders of Shares shall not, as
such holders, have any right to acquire, purchase or subscribe for any Shares or
securities of the Trust which it may hereafter issue or sell, other than such
right, if any, as the Trustees in their discretion may determine. The holders
of Shares shall have no appraisal rights with respect to their Shares and,
except as otherwise determined by resolution of the Trustees in their sole
discretion, shall have no exchange or conversion rights with respect to their
Shares. No action may be brought by a Holder on behalf of the Trust unless
Holders owning no less than 10% of the then outstanding Shares, or Series or
class thereof, join in the bringing of such action. A Holder of Shares in a
particular Series or a particular class of the Trust shall not be entitled to
participate in a derivative or class action lawsuit on behalf of any other
Series or any other class or on behalf of the Holders of Shares in any other
Series or any other class of the Trust.
Section 5. STATUS OF SHARES AND LIMITATION OF PERSONAL LIABILITY. Shares
shall be deemed to be personal property giving only the rights provided in this
Declaration of Trust. Every Person by virtue of having become registered as a
Shareholder shall be held to have expressly assented and agreed to the terms of
this Declaration of Trust and to have become a party thereto. The death of a
Shareholder during the continuance of the Trust shall not operate to terminate
the Trust nor entitle the representative of any deceased Shareholder to an
accounting or to take any action in
DECLARATION OF TRUST - 9
<PAGE>
court or elsewhere against the Trust or the Trustees. The representative shall
be entitled to the same rights as the decedent under this Trust. Ownership of
Shares shall not entitle the Shareholder to any title in or to the whole or any
part of the Trust property or right to call for a partition or division of the
same or for an accounting. Neither the Trustees, nor any officer, employee or
agent of the Trust shall have any power to bind any Shareholder personally or to
call upon any Shareholder for the payment of any sum of money or assessment
whatsoever other than such as the Shareholder may at any time personally agree
to pay by way of subscription for any Shares or otherwise. The Shareholders
shall be entitled to the same limitation of personal liability extended to
stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware.
ARTICLE V
THE TRUSTEES
Section 1. MANAGEMENT OF THE TRUST. The business and affairs of the Trust
shall be managed by the Trustees, and they shall have all powers necessary and
desirable to carry out that responsibility.
Section 2. QUALIFICATION AND NUMBER. Each Trustee shall be a natural
person. A Trustee need not be a Shareholder, a citizen of the United States, or
a resident of the State of Delaware. By the vote or consent of a majority of
the Trustees then in office, the Trustees may fix the number of Trustees at a
number not less than three (3) nor more than ten (10) and may fill the vacancies
created by any such increase in the number of Trustees; provided, however, that
at all times at least forty percent (40%) of the Trustees shall not be
Interested Persons as defined in the 1940 Act. Except as determined from time
to time by resolution of the Trustees, no decrease in the number of Trustees
shall have the effect of removing any Trustee from office prior to the
expiration of his term, but the number of Trustees may be decreased in
conjunction with the removal of a Trustee pursuant to Section 4 of this
Article V.
Section 3. TERM AND ELECTION. Each Trustee shall hold office until the
next meeting of Shareholders called for the purpose of considering the election
or re-election of such Trustee or of a successor to such Trustee, and until his
successor is elected and qualified, and any Trustee who is appointed by the
Trustees in the interim to fill a vacancy as provided hereunder shall have the
same remaining term as that of his predecessor, if any, or such term as the
Trustees may determine. Any vacancy resulting from a newly created Trusteeship
or the death, resignation, retirement, removal, or incapacity of a Trustee may
be filled by the affirmative vote or consent of a majority of the Trustees then
in office.
DECLARATION OF TRUST - 10
<PAGE>
Section 4. RESIGNATION AND REMOVAL. Any Trustee may resign or retire as a
Trustee (without need for prior or subsequent accounting) by an instrument in
writing signed by him and delivered or mailed to the Chairman, if any, the
President or the Secretary, and such resignation or retirement shall be
effective upon such delivery, or at a later date according to the terms of the
instrument. Any Trustee may be removed with or without cause at any time:
(1) by written instrument signed by at least fifty percent (50%) of the number
of trustees prior to such removal, specifying the date upon which such removal
shall become effective or (2) by vote of shareholders holding not less than
fifty percent (50%) of Shares outstanding, cast in person or by proxy at any
meeting called for that purpose.
Section 5. VACANCIES. Any vacancy or anticipated vacancy resulting for
any reason, including without limitation the death, resignation, retirement,
removal or incapacity of any of the Trustees, or resulting from an increase in
the number of Trustees by the other Trustees may (but need not unless required
by the 1940 Act) be filled by a majority of the remaining Trustees, subject to
the provisions of Section 16(a) of the 1940 Act, through the appointment in
writing of such other person as such remaining Trustees in their discretion
shall determine. The appointment shall be effective upon the written acceptance
of the person named therein to serve as a trustee and agreement by such person
to be bound by the provisions of this Declaration of Trust, except that any such
appointment in anticipation of a vacancy occurring by reason of retirement,
resignation, or increase in number of Trustees to be effective at a later date
shall become effective only at or after the effective date of the retirement,
resignation or increase in number of Trustees.
Section 6. OWNERSHIP OF ASSETS OF THE TRUST. The assets of the Trust
shall be held separate and apart from any assets now or hereafter held in any
capacity other than as Trustee hereunder by the Trustees or any successor
Trustees. Legal title to all the Trust property shall be vested in the Trust as
a separate legal entity under the DBTA, except that the Trustees shall have the
power to cause legal title to any Trust property to be held by or in the name of
one or more of the Trustees or in the name of any other Person on behalf of the
Trust on such terms as the Trustees may determine. In the event that title to
any part of the Trust property is vested in one or more Trustees, the right,
title and interest of the Trustees in the Trust property shall vest
automatically in each person who may hereafter become a Trustee upon his or her
due election and qualification. Upon the resignation, removal or death of a
Trustee he or she shall automatically cease to have any right, title or interest
in any of the Trust property, and the right, title and interest of such Trustee
in the Trust property shall vest automatically in the remaining Trustees. To
the extent permitted by law, such vesting and cessation of title shall be
effective whether or not conveyancing documents have been executed and
delivered. No
DECLARATION OF TRUST - 11
<PAGE>
Shareholder shall be deemed to have a severable ownership in any individual
asset of the Trust or any right of partition or possession thereof.
ARTICLE VI
POWERS OF TRUSTEES
Section 1. POWERS. Subject to the provisions of this Declaration of
Trust, the business of the Trust shall be managed by the Trustees, and they
shall have all powers necessary or convenient to carry out that responsibility
and the purpose of the Trust. Without limiting the foregoing, the Trustees may
adopt By-Laws not inconsistent with this Declaration of Trust providing for the
conduct of the business and affairs of the Trust and may amend and repeal them
to the extent that such By-Laws do not reserve that right to the Shareholders;
they may from time to time in accordance with the provisions of Section 2 of
Article IV hereof establish Series, each such Series to operate as a separate
and distinct investment medium and with separately defined investment
objectives, policies and investment purposes; they may as they consider
appropriate elect and remove officers and appoint and terminate agents and
consultants and hire and terminate employees, any one or more of the foregoing
of whom may be a Trustee, and may provide for the compensation of all of the
foregoing; they may appoint from their own number, and terminate, any one or
more committees consisting of two or more Trustees, including without implied
limitation an executive committee, which may, when the Trustees are not in
session (but subject to the 1940 Act), exercise some or all of the power and
authority of the Trustees as the Trustees may determine; in accordance with
Article VIII they may employ one or more advisers, administrators, depositories
and custodians and may authorize any depository or custodian to employ
subcustodians or agents and to deposit all or any part of such assets in a
system or systems for the central handling of securities and debt instruments,
retain transfer, dividend, accounting or Shareholder servicing agents or any of
the foregoing, provide for the distribution of Shares by the Trust through one
or more distributors, principal underwriters or otherwise, set record dates or
times for the determination of Shareholders; they may compensate or provide for
the compensation of the Trustees, officers, advisers, administrators,
custodians, other agents, consultants and employees of the Trust or the Trustees
on such terms as they deem appropriate; and in general they may delegate to any
officer of the Trust, to any committee of the Trustees and to any employee,
adviser, administrator, distributor, depository, custodian, transfer and
dividend disbursing agent, or any other agent or consultant of the Trust such
authority, powers, functions and duties as they consider desirable or
appropriate for the conduct of the business and affairs of the Trust, including
without implied limitation, the power and authority to act in the name of the
Trust and of the Trustees, to sign documents and to act as attorney-in-fact for
the Trustees.
DECLARATION OF TRUST - 12
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Without limiting the foregoing and to the extent not inconsistent with the
1940 Act, other applicable law and the Fundamental Policies of the applicable
Series as established in the Bylaws, the Trustees shall have power and authority
for and on behalf of the Trust and each separate Series as established hereunder
as follows:
(a) INVESTMENTS. To invest and reinvest cash and other property, and to
hold cash or other property uninvested without in any event being bound or
limited by any present or future law or custom in regard to investments by
trustees;
(b) DISPOSITION OF ASSETS. To sell, exchange, lend, pledge, mortgage,
hypothecate, write options on and lease any or all of the assets of the Trust;
(c) OWNERSHIP POWERS. To vote or give assent, or exercise any rights of
ownership, with respect to securities or other property; and to execute and
deliver proxies or powers of attorney to such person or persons as the Trustees
shall deem proper, granting to such person or persons such power and discretion
with relation to securities or other property as the Trustees shall deem proper,
granting to such person or persons such power and discretion with relation to
securities or other property as the Trustees shall deem proper;
(d) SUBSCRIPTION. To exercise powers and rights of subscription or
otherwise which in any manner arise out of ownership of securities;
(e) FORM OF HOLDING. To hold any securities or other property in a form
not indicating any trust, whether in bearer, unregistered or other negotiable
form, or in the name of the Trustees or of the Trust or of any Series or in the
name of a custodian, subcustodian or other depositary or a nominee or nominees
or otherwise;
(f) REORGANIZATION, ETC. To consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or issuer, any
security of which is or was held in the Trust; to consent to any contract,
lease, mortgage, purchase or sale of property by such corporation or issuer, and
to pay calls or subscriptions with respect to any security held in the Trust;
(g) COMPROMISE. To compromise, arbitrate or otherwise adjust claims in
favor of or against the Trust or any Series or any matter in controversy,
including but not limited to claims for taxes;
(h) PARTNERSHIPS, ETC. To enter into joint ventures, general or limited
partnerships and any other combinations or associations;
(i) BORROWING AND SECURITY. To borrow funds and to mortgage and pledge
the assets of the Trust or any Series or any part
DECLARATION OF TRUST - 13
<PAGE>
thereof to secure obligations arising in connection with such borrowing;
(j) GUARANTEES, ETC. To endorse or guarantee the payment of any notes or
other obligations of any person; to make contracts of guaranty or suretyship, or
otherwise assume liability for payment thereof; and to mortgage and pledge the
Trust property (or Series property) or any part thereof to secure any of or all
such obligations;
(k) INSURANCE. To purchase and pay for entirely out of Trust property
such insurance as they may deem necessary or appropriate for the conduct of the
business, including, without limitation, insurance policies insuring the assets
of the Trust and payment of distributions and principal on its portfolio
investments, and insurance policies insuring the Shareholders, Trustees,
officers, employees, agents, consultants, investment advisers, managers,
administrators, distributors, principal underwriters, or independent
contractors, or any thereof (or any person connected therewith), of the Trust
individually against all claims and liabilities of every nature arising by
reason of holding, being or having held any such office or position, or by
reason of any action alleged to have been taken or omitted by any such person in
any such capacity, including any action taken or omitted that may be determined
to constitute negligence, whether or not the Trust would have the power to
indemnify such person against such liability; and
(l) PENSIONS, ETC. To pay pensions for faithful service, as deemed
appropriate by the Trustees, and to adopt, establish and carry out pension,
profit-sharing, share bonus, share purchase, savings, thrift and other
retirement, incentive and benefit plans, including the purchasing of life
insurance and annuity contracts as a means of providing such retirement and
other benefits, for any or all of the Trustees, officers, employees and agents
of the Trust.
Section 2. VOTE OF TRUSTEES. Except as otherwise provided by the 1940 Act
or other applicable law, this Declaration of Trust or the By-Laws, any action to
be taken by the Trustees on behalf of the Trust or any Series may be taken by a
majority of the Trustees present at a meeting of Trustees (a quorum, consisting
of at least a majority of the Trustees then in office, being present), including
any meeting held by means of a conference telephone or other communications
equipment by means of which all persons participating in the meeting can hear
each other at the same time, or by written consents of a majority of the
Trustees then in office (or such larger or different number as may be required
by the 1940 Act or other applicable law).
DECLARATION OF TRUST - 14
<PAGE>
ARTICLE VII
EXPENSES OF THE TRUST
The Trustees are authorized to pay or cause to be paid all expenses, fees,
charges, taxes and liabilities incurred or arising in connection with the Trust
or any Series, or in connection with the management thereof, including, but not
limited to, the Trustees' compensation and such expenses and charges for the
Trust's officers, employees, investment advisers, administrator, distributor,
principal underwriter, auditor, counsel, depository, custodian, transfer agent,
dividend disbursing agent, accounting agent, shareholder servicing agent, and
such other agents, consultants, and independent contractors and such other
expenses and charges as the Trustees may deem necessary or proper to incur.
Without limiting the generality of any other provision hereof, the Trustees
shall be entitled to reasonable compensation from the Trust for their services
as Trustees and may fix the amount of such compensation.
ARTICLE VIII
INVESTMENT ADVISER, UNDERWRITER
AND TRANSFER AGENT
Section 1. INVESTMENT ADVISER. The Trust may enter into written contracts
with one or more persons, to act as investment adviser or investment subadviser
to each of the Series, and as such to perform such functions as the Trustees may
deem reasonable and proper, including, without limitation, investment advisory,
management, research, valuation of assets, clerical and administrative
functions, under such terms and conditions, and for such compensation, as the
Trustees may in their discretion deem advisable.
Upon the termination of any contract with The Crabbe Huson Group, Inc., or
any corporation affiliated with The Crabbe Huson Group, Inc., acting as
investment adviser or manager, the Trustees are hereby required to promptly
change the name of the Trust to a name which does not include "Crabbe Huson" or
any approximation or abbreviation thereof, unless the prior written consent of
the Crabbe Huson Group, Inc. is obtained.
Section 2. UNDERWRITER; TRANSFER AGENT. The Trust may enter into a
written contract or contracts with an underwriter or underwriters or a
distributor or distributors whereby the Trust may either agree to sell Shares to
the other party or parties to the contract or appoint such other party or
parties its sales agent or agents for such Shares and with such other provisions
as the Trustees may deem reasonable and proper, and the Trustees may in their
discretion from time to time enter into transfer agency and/or shareholder
service contract(s), in each case with such
DECLARATION OF TRUST - 15
<PAGE>
terms and conditions, and providing for such compensation, as the Trustees may
in their discretion deem advisable.
Section 3. CUSTODIAN. The Trust may employ a Custodian, which shall be a
bank or trust company having an aggregate capital, surplus, and undivided
profits of at least $1,000,000, pursuant to such terms and conditions as the
Trustees may direct.
Section 4. PARTIES TO CONTRACT. Any contract of the character described
in Sections 1, 2 and 3 of this Article VIII or in Article X hereof may be
entered into with any corporation, firm, partnership, trust or association,
including, without limitation, the investment adviser, any investment subadviser
or an affiliate of the investment adviser or investment subadviser, although one
or more of the Trustees or officers of the Trust may be an officer, director,
trustee, shareholder, or member of such other party to the contract, or may
otherwise be interested in such contract and no such contract shall be
invalidated or rendered voidable by reason of the existence of any such
relationship, nor shall any person holding such relationship be liable merely by
reason of such relationship for any loss or expense to the Trust under or by
reason of said contract or be accountable for any profit realized directly or
indirectly therefrom, provided that the contract when entered into was not
inconsistent with the provisions of this Article VIII, Article X, or the By-
Laws. The same person (including a firm, corporation, partnership, trust or
association) may be the other party to contracts entered into pursuant to
Sections 1 and 2 above or Article X, and any individual may be financially
interested or otherwise affiliated with persons who are parties to any or all of
the contracts mentioned in this Section 3.
ARTICLE IX
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 1. VOTING POWERS. The Shareholders shall have power to vote only
(i) for the election or removal of Trustees as provided in Section 3 of
Article V, (ii) with respect to any contract with a third party provider of
services as to which Shareholder approval is required by the 1940 Act, (iii)
with respect to any termination or reorganization of the Trust or any Sub-Trust
to the extent and as provided in Sections 1 and 2 of Article XI, (iv) with
respect to any amendment of this Declaration of Trust to the extent and as
provided in Section 5 of Article XI, (v) with respect to any court action,
proceeding or claim brought or maintained derivatively or as a class action on
behalf of the Trust, any Series thereof or the Shareholders of the Trust
(provided, however, that a shareholder of a particular Series shall not be
entitled to a derivative or class action on behalf of any other Series or
shareholder of any other Series), and (vi) with respect to such additional
matters relating to the Trust as may be required by the 1940 Act, this
Declaration of Trust, the By-Laws or any registration of the Trust with the
Commission (or any successor
DECLARATION OF TRUST - 16
<PAGE>
agency) or any state, or as the Trustees may consider necessary or desirable.
There shall be no cumulative voting in the election of Trustees. Shares may be
voted in person or by proxy. A proxy with respect to Shares held in the name of
two or more persons shall be valid if executed by any one of them unless at or
prior to exercise of the proxy the Trust receives a specific written notice to
the contrary from any one of them. A proxy purporting to be executed by or on
behalf of a Shareholder shall be deemed valid unless challenged at or prior to
its exercise and the burden of proving invalidity shall rest on the challenger.
Until Shares are issued, the Trustees may exercise all rights of Shareholders
and may take any action required by law, this Declaration of Trust or the By-
Laws to be taken by Shareholders.
Section 2. MEETINGS. No annual or regular meetings of Shareholders is
required. Special meetings of Shareholders may be called by the Trustees from
time to time for the purpose of taking action upon any matter requiring the vote
or authority of the Shareholders as herein provided or upon any other matter
deemed by the Trustees to be necessary or desirable. Written notice of any
meeting of Shareholders shall be given or caused to be given by the Trustees by
mailing or transmitting such notice at least ten days before such meeting,
postage prepaid, stating the time, place and purpose of the meeting, to each
Shareholder at the Shareholder's address as it appears on the records of the
Trust. The Trustees shall promptly call and give notice of a meeting of
Shareholders for the purpose of voting upon removal of any Trustee of the Trust
when requested to do so in writing by Shareholders holding not less than 10% of
the Shares of the Trust then outstanding. For all other matters, the Trustees
shall call or give notice of a meeting within 30 days after written application
by Shareholders holding at least 10% of the Shares then outstanding of the Trust
(if Shareholders of all Series are required to vote in the aggregate) or of any
Series (if Shareholders of such Series are entitled to vote by Series)
requesting a meeting be called for any other purpose requiring action by the
Shareholders as provided herein or in the By-Laws.
Section 3. RECORD DATES. For the purpose of determining the Shareholders
who are entitled to vote or act at any meeting or any adjournment thereof, or
who are entitled to participate in any dividend or distribution, or for the
purpose of any other action, the Trustees may from time to time close the
transfer books for such period, not exceeding 30 days (except at or in
connection with the termination of the Trust), as the Trustees may determine; or
without closing the transfer books the Trustees may fix a date and time not more
than 120 days prior to the date of any meeting of Shareholders or other action
as the date and time of record for the determination of Shareholders entitled to
vote at such meeting or any adjournment thereof or to be treated as Shareholders
of record for purposes of such other action, and any Shareholder who was a
Shareholder at the date and time so fixed shall be entitled to vote at such
meeting or any adjournment thereof or to be treated as a
DECLARATION OF TRUST - 17
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Shareholder of record for purposes of such other action, even though he has
since that date and time disposed of his Shares, and no Shareholder becoming
such after that date and time shall be so entitled to vote at such meeting or
any adjournment thereof or to be treated as a Shareholder of record for purposes
of such other action.
Section 4. QUORUM AND REQUIRED VOTE. A majority of the Shares entitled to
vote shall be a quorum for the transaction of business at a Shareholders'
meeting, but any lesser number shall be sufficient for adjournments. Any
adjourned session or sessions may be held, within a reasonable time after the
date set for the original meeting without the necessity of further notice. A
majority of the Shares voted, at a meeting of which a quorum is present shall
decide any questions and a plurality shall elect a Trustee, except when a
different vote is required or permitted by any provision of the 1940 Act or
other applicable law or by this Declaration of Trust or the By-Laws.
Section 5. ACTION BY WRITTEN CONSENT. Subject to the provisions of the
1940 Act and other applicable law, any action taken by Shareholders may be taken
without a meeting if a majority of Shareholders entitled to vote on the matter
(or such larger proportion thereof as shall be required by the 1940 Act or by
any express provision of this Declaration of Trust or the By-Laws) consent to
the action in writing and such written consents are filed with the records of
the meetings of Shareholders. Such consent shall be treated for all purposes as
a vote taken at a meeting of Shareholders.
Section 6. INSPECTION OF RECORDS. The records of the Trust shall be open
to inspection by Shareholders to the same extent as is required for stockholders
of a Delaware business corporation under the Delaware General Corporation Law.
Section 7. ADDITIONAL PROVISIONS. The By-Laws may include further
provisions for Shareholders' votes and meetings and related matters not
inconsistent with the provisions hereof.
ARTICLE X
LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 1. LIMITATION OF LIABILITY. No personal liability for any debt or
obligation of the Trust shall attach to any Trustee of the Trust. Without
limiting the foregoing, a Trustee shall not be responsible for or liable in any
event for any neglect or wrongdoing of any officer, agent, employee, investment
adviser, subadviser, principal underwriter or custodian of the Trust, nor shall
any Trustee be responsible or liable for the act or omission of any other
Trustee.
DECLARATION OF TRUST - 18
<PAGE>
Every note, bond, contract, instrument, certificate, Share or undertaking
and every other act or thing whatsoever executed or done by or on behalf of the
Trust or the Trustees or any of them in connection with the Trust shall be
conclusively deemed to have been executed or done only in or with respect to
their or his capacity as Trustees or Trustee and neither such Trustees or
Trustee nor the Shareholders shall be personally liable thereon.
Every note, bond, contract, instrument, certificate or undertaking made or
issued by the Trustees or by any officers or officer shall recite that the same
was executed or made by or on behalf of the Trust by them as Trustees or Trustee
or as officers or officer and not individually and that the obligations of such
instrument are not binding upon any of them or the Shareholders individually but
are binding only upon the assets and property of the Trust or a Series thereof,
and may contain such further recitals as they or he may deem appropriate, but
the omission thereof shall not operate to bind any Trustees or Trustee or
officers or officer or Shareholders or Shareholder individually.
All persons extending credit to, contracting with or having any claim
against the Trust shall look only to the assets of the Trust or a Series thereof
for payment under such credit, contract or claim; and neither the Shareholders
nor the Trustees nor any of the Trust's officers, employees or agents, whether
past, present or future, shall be personally liable therefor.
Section 2. TRUSTEES' GOOD FAITH ACTION, EXPERT ADVICE, NO BOND OR SURETY.
The exercise by the Trustees of their powers and discretions hereunder shall be
binding upon the Trust, the Shareholders and any other interested person. A
Trustee shall be liable to the Trust or the shareholders only for his own
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee, and for nothing else,
and shall not be liable for errors of judgment or mistakes of fact or law. The
Trustees shall not be responsible or liable in any event for any neglect or
wrongdoing of any officer, agent, employee, consultant, adviser, administrative
distributor, principal underwriter, custodian, transfer agent, dividend
disbursing agent, Shareholder servicing agent, or accounting agent of the Trust,
nor shall any Trustee be responsible for any act or omission of any other
Trustee. The Trustees may take advice of counsel or other experts with respect
to the meaning and operation of this Declaration of Trust and their duties as
Trustees hereunder, and shall be under no liability for any act or omission in
accordance with such advice or for failing to follow such advice. In
discharging their duties, the Trustees, when acting in good faith, shall be
entitled to rely upon the books of account of the Trust and upon written reports
made to the Trustees by any officer appointed by them, any independent public
accountant and (with respect to the subject matter of the contract involved) any
officer, partner or responsible employee of any other party to any contract
entered into hereunder. The Trustees shall not be
DECLARATION OF TRUST - 19
<PAGE>
required to give any bond as such, nor any surety if a bond is required. The
provisions of this Declaration, to the extent that they restrict the duties and
liabilities of the Trustees otherwise existing at law or in equity, are agreed
by the Shareholders and all other Persons to replace such other duties and
liabilities of the Trustees.
Section 3. LIABILITY OF THIRD PERSONS DEALING WITH TRUSTEES. No person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the Trust or upon
its order.
Section 4. INDEMNIFICATION. Subject to the exceptions and limitations
contained in this Section 4, every person who is, or has been, a Trustee,
officer, employee or agent of the Trust, including persons who serve at the
request of the Trust as directors, trustees, officers, employees or agents of
another organization in which the Trust has an interest as a shareholder,
creditor or otherwise (hereinafter referred to as a "Covered Person"), shall be
indemnified by the Trust to the fullest extent permitted by law against
liability and against all expenses reasonably incurred or paid by him in
connection with any claim, action, suit or proceeding in which he becomes
involved as a party or otherwise by virtue of his being or having been such a
Trustee, director, officer, employee or agent and against amounts paid or
incurred by him in settlement thereof.
No indemnification shall be provided hereunder to a Covered Person:
(a) for any liability to the Trust or its Shareholders arising out of a
final adjudication by the court or other body before which the proceeding was
brought that he engaged in willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office;
(b) with respect to any matter as to which he shall have been finally
adjudicated not to have acted in good faith in the reasonable belief that his
action was in the best interests of the Trust; or
(c) in the event of a settlement or other disposition not involving a
final adjudication (as provided in paragraph (a) or (b)) and resulting in a
payment by a Covered Person, unless there has been either a determination that
such Covered Person did not engage in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office by the court or other body approving the settlement or other disposition,
or a reasonable determination, based on a review of readily available facts (as
opposed to a full trial-type inquiry), that he did not engage in such conduct,
such determination being made by:
DECLARATION OF TRUST - 20
<PAGE>
(i) a vote of a majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested Trustees then in office
act on the matter); or
(ii) written opinion of independent legal counsel.
The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not affect any other
rights to which any Covered Person may now or hereafter be entitled, shall
continue as to a person who has ceased to be a Covered Person and shall inure to
the benefit of the heirs, executors and administrators of such a person.
Nothing contained herein shall affect any rights to indemnification to which
Trust personnel other than Covered Persons may be entitled by contract or
otherwise under law.
Expenses of preparation and presentation of a defense to any claim, action,
suit or proceeding subject to a claim for indemnification under this Section 4
shall be advanced by the Trust prior to final disposition thereof upon receipt
of an undertaking by or on behalf of the recipient to repay such amount if it is
ultimately determined that he is not entitled to indemnification under this
Section 4, provided that either:
(a) such undertaking is secured by a surety bond or some other
appropriate security or the Trust shall be insured against losses arising out of
any such advances; or
(b) a majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested Trustees then in office
act on the matter) or independent legal counsel in a written opinion shall
determine, based upon a review of the readily available facts (as opposed to a
full trial-type inquiry), that there is reason to believe that the recipient
ultimately will be found entitled to indemnification.
As used in this Section 4, a "Disinterested Trustee" is one (i) who is not
an Interested Person of the Trust (including anyone, as such Disinterested
Trustee, who has been exempted from being an Interested Person by any rule,
regulation or order of the Commission), and (ii) against whom none of such
actions, suits or other proceedings or another action, suit or other proceeding
on the same or similar grounds is then or has been pending.
As used in this Section 4, the words "claim," "action," "suit" or
"proceeding" shall apply to all claims, actions, suits, proceedings (civil,
criminal, administrative or other, including appeals), actual or threatened; and
the words "liability" and "expenses" shall include without limitation,
attorneys' fees, costs, judgments, amounts paid in settlement, fines, penalties
and other liabilities.
Section 5. SHAREHOLDERS. No personal liability for any debt or obligation
of the Trust shall attach to any Shareholder or
DECLARATION OF TRUST - 21
<PAGE>
former Shareholder of the Trust. In case any Shareholder or former Shareholder
of the Trust shall be held to be personally liable solely by reason of his being
or having been a Shareholder and not because of his acts or omissions or for
some other reason, the Shareholder or former Shareholder (or his heirs,
executors, administrators or other legal representatives or in the case of a
corporation or other entity, its corporate or other general successor) shall be
entitled out of the assets of the Trust to be held harmless from and indemnified
against all loss and expense arising from such liability; provided, however,
there shall be no liability or obligation of the Trust arising hereunder to
reimburse any Shareholder for taxes paid by reason of such Shareholder's
ownership of any Share or for losses suffered by reason of any changes in value
of any Trust assets. The Trust shall, upon request by the Shareholder or former
Shareholder, assume the defense of any claim made against the Shareholder for
any act or obligation of the Trust and satisfy any judgment thereon.
ARTICLE XI
MISCELLANEOUS
Section 1. TERMINATION OF TRUST. Unless terminated as provided herein,
the Trust shall continue without limitation of time. The Trust may be
terminated at any time upon the vote of a majority of Trustees and the approval
by the affirmative vote of two-thirds of the outstanding Shares of each Series.
Upon termination of the Trust thereof, after paying or otherwise providing
for all charges, taxes, expenses and liabilities, whether due or accrued or
anticipated, as may be determined by the Trustees, the Trust shall, in
accordance with such procedures as the Trustees consider appropriate, reduce the
remaining assets of the Trust to distributable form in cash or other securities,
or any combination thereof, and distribute the proceeds to the holders of the
Shares of the Trust in the manner set forth by resolution of the Trustees. The
Trustees shall thereafter file a certificate of cancellation in accordance with
Section 3010 of the DBTA.
Section 2. REORGANIZATION. The Trustees may sell, convey, merge and
transfer the assets of the Trust, or the assets belonging to any one or more
Series, to another trust, partnership, association or corporation organized
under the laws of any state of the United States, or to the Trust to be held as
assets belonging to another Series of the Trust, in exchange for cash, shares or
other securities (including, in the case of a transfer to another Series of the
Trust, Shares of such other Series) with such transfer either (i) being made
subject to, or with the assumption by the transferee of, the liabilities
belonging to each Series the assets of which are so transferred, or (ii) not
being made subject to, or not with the assumption of, such liabilities;
provided, however, that no assets belonging to any particular Series shall be
DECLARATION OF TRUST - 22
<PAGE>
so transferred unless the terms of such transfer shall have first been approved
at a meeting called for the purpose by the affirmative Vote of a Majority of the
Outstanding Voting Securities of that Series. Following such transfer, the
Trustees shall distribute such cash, shares or other securities (giving due
effect to the assets and liabilities belonging to and any other differences
among the various Series the assets belonging to which have so been transferred)
among the Shareholders of the Series the assets belonging to which have been so
transferred; and if all of the assets of the Trust have been so transferred, the
Trust shall be terminated.
The Trust, or any one or more Series, may, either as the successor,
survivor, or non-survivor, (i) consolidate with one or more other trusts,
partnerships, associations or corporations organized under the laws of the State
of Delaware or any other state of the United States, to form a new consolidated
trust, partnership, association or corporation under the laws of which any one
of the constituent entities is organized, or (ii) merge into one or more other
trusts, partnerships, associations or corporations organized under the laws of
the State of Delaware or any other state of the United States, or have one or
more such trusts, partnerships, associations or corporations merged into it, any
such consolidation or merger to be upon such terms and conditions as are
specified in an agreement and plan of reorganization entered into by the Trust,
or one or more Series as the case may be, in connection therewith. The terms
"merge" or "merger" as used herein shall also include the purchase or
acquisition of any assets of any other trust, partnership, association or
corporation which is an investment company organized under the laws of the State
of Delaware or any other state of the United States. Any such consolidation or
merger shall require the Vote of a Majority of the Outstanding Voting Securities
of each Series affected thereby. In accordance with Section 3815(f) of DBTA, an
agreement of merger or consolidation may effect any amendment to this
Declaration or the By-Laws or effect the adoption of a new declaration of trust
or by-laws of the Trust if the Trust is the surviving or resulting business
trust. A certificate of merger or consolidation of the Trust shall be signed by
a majority of the Trustees.
Section 3. FILING OF COPIES, REFERENCES, HEADINGS. The original or a copy
of this Declaration of Trust and of each amendment hereto shall be kept in the
office of the Trust where it may be inspected by any Shareholder. Anyone
dealing with the Trust may rely on a certificate by an officer or Trustee of the
Trust as to whether or not any such amendments have been made and as to any
matters in connection with the Trust hereunder, and with the same effect as if
it were the original, may rely on a copy certified by an officer or Trustee of
the Trust to be a copy of this Declaration of Trust or of any such amendments.
In this Declaration of Trust or in any such amendment, references to this
Declaration of Trust, and all expressions like "herein," "hereof" and
"hereunder," shall
DECLARATION OF TRUST - 23
<PAGE>
be deemed to refer to this Declaration of Trust as a whole and as amended or
affected by any such amendment, and masculine pronouns shall be deemed to
include the feminine and the neuter, as the context shall require. Headings are
placed herein for convenience of reference only, and in case of any conflict,
the text of this instrument, rather than the headings, shall control. This
instrument may be executed in any number of counterparts, each of which shall be
deemed an original.
Section 4. TRUSTEES MAY RESOLVE AMBIGUITIES. The Trustees may construe
any of the provisions of this Declaration insofar as the same may appear to be
ambiguous or inconsistent with any other provisions hereof, and any such
construction hereof by the Trustees in good faith shall be conclusive as to the
meaning to be given to such provisions.
Section 5. AMENDMENTS. Except as otherwise specifically provided in this
Declaration of Trust, this Declaration of Trust may be amended at any time by an
instrument in writing signed by a majority of the then Trustees and the Vote of
a Majority of the Outstanding Voting Securities of Shares of each Series
entitled to vote. An amendment will not be approved as to any Series the
Shareholders of which do not approve the amendment. An amendment which in the
determination of the Trustees shall affect the holders of one or more Series or
classes of Shares but not the holders of all outstanding Series or classes shall
be authorized by vote of the Shareholders holding a majority of the Shares
entitled to vote to each Series and class affected and no vote of Shareholders
of a Series or class not affected shall be required. In addition,
notwithstanding any other provision to the contrary contained in this
Declaration of Trust, the Trustees may amend this Declaration of Trust without
the vote or consent of Shareholders (i) at any time if the Trustees deem it
necessary in order for the Trust or any Series to meet the requirements of
applicable Federal or State laws or regulations, or the requirements of the
regulated investment company provisions of the Internal Revenue Code, (ii) to
designate Series or exercise other powers with respect thereto in accordance
with Section 1 and 2 of Article IV hereof, or (iii) change the name of the Trust
or to supply any omission, cure any ambiguity or cure, correct or supplement any
defective or inconsistent provision contained herein.
Section 6. GOVERNING LAW. This Declaration is executed by all of the
Trustees and delivered with reference to DBTA and the laws of the State of
Delaware, and the rights of all parties and the validity and construction of
every provision hereof shall be subject to and construed according to DBTA and
the laws of the State of Delaware (unless and to the extent otherwise provided
for and/or preempted by the 1940 Act or other applicable federal securities
laws); provided, however, that there shall not be applicable to the Trust, the
Trustees or this Declaration (a) the provisions of Section 3540 of Title 12 of
the Delaware Code or (b) any provisions of the laws (statutory or common) of the
State of
DECLARATION OF TRUST - 24
<PAGE>
Delaware (other than the DBTA) pertaining to trusts which are inconsistent with
the rights, duties, powers, limitations or liabilities of the Trustees set forth
or referenced in this Declaration.
Section 7. PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS.
(a) The provisions of this Declaration are severable, and if the
Trustees shall determine, with the advice of counsel, that any of such
provisions is in conflict with the 1940 Act, the DBTA, or with other applicable
laws and regulations, the conflicting provisions shall be deemed never to have
constituted a part of this Declaration; provided, however, that such
determination shall not affect any of the remaining provisions of this
Declaration or render invalid or improper any action taken or omitted prior to
such determination.
(b) If any provision of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of this
Declaration in any jurisdiction.
IN WITNESS WHEREOF, the undersigned, being the Trustees of the Trust, have
executed this instrument as of the date first written above.
"Trustees"
--------------------------------------------------
James E. Crabbe
--------------------------------------------------
Richard S. Huson
--------------------------------------------------
Gary L. Capps
--------------------------------------------------
Louis Scherzer
--------------------------------------------------
Robert L. Smith
--------------------------------------------------
Craig P. Stuvland
--------------------------------------------------
Richard P. Wollenberg
--------------------------------------------------
William Wendell Wyatt, Jr.
<PAGE>
EXHIBIT 99.2
AMENDED
BY-LAWS
OF
CRABBE HUSON FUNDS
ARTICLE 1
AGREEMENT AND DECLARATION
OF TRUST AND PRINCIPAL OFFICE
1.1 AGREEMENT AND DECLARATION OF TRUST. These By-Laws shall be subject to
the Declaration of Trust as from time to time in effect (the "Declaration of
Trust"), of CRABBE HUSON FUNDS, the Delaware business trust
established by the Declaration of Trust (the "Trust").
1.2 PRINCIPAL OFFICE OF THE TRUST. The principal office of the Trust
shall be located at 121 S.W. Morrison, Suite 1400, Portland, Oregon 97204.
ARTICLE 2
MEETINGS OF TRUSTEES
2.1 REGULAR MEETINGS. Regular meetings of the Trustees may be held
without call or notice at such places and at such times as the Trustees may from
time to time determine, provided that notice of the first regular meeting
following any such determination shall be given to absent Trustees.
2.2 SPECIAL MEETINGS. Special meetings of the Trustees may be held at any
time and at any place designated in the call of the meeting when called by the
Chairman of the Board, the President or the Treasurer or by two or more
Trustees, sufficient notice thereof being given to each Trustee by the Secretary
or an Assistant Secretary or by the officer or the Trustees calling the meeting.
2.3 NOTICE. It shall be sufficient notice to a Trustee of a special
meeting to send notice by mail at least forty-eight hours or by telegram at
least twenty-four hours before the meeting addressed to the Trustee at his usual
or last known business or residence address or to give notice to him in person
or by telephone at least twenty-four hours before the meeting. Notice of a
meeting need not be given to any Trustee if a written waiver of notice, executed
by him before or after the meeting , is filed with the records of the meeting,
or to any Trustee who attends the meeting without protesting prior thereto or at
its commencement the
BY-LAWS - PAGE 1
<PAGE>
lack of notice to him. Neither notice of a meeting nor a waiver of a notice
need specify the purposes of the meeting.
2.4 QUORUM. At any meeting of the Trustees a majority of the Trustees
then in office shall constitute a quorum. Any meeting may be adjourned from
time to time by a majority of the votes cast upon the question, whether or not a
quorum is present, and the meeting may be held as adjourned without further
notice.
2.5 PARTICIPATION BY TELEPHONE. One or more of the Trustees or of any
committee of the Trustees may participate in a meeting thereof by means of a
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at a meeting.
ARTICLE 3
OFFICERS
3.1 ENUMERATION; QUALIFICATION. The officers of the Trust shall be a
Chairman of the Board, a President, a Treasurer, a Secretary and such other
officers, including Vice Presidents, if any, as the Trustees from time to time
may in their discretion elect. The Trust may also have such agents as the
Trustees from time to time may in their discretion appoint. The Chairman of the
Board shall be a Trustee and may, but need not be, a shareholder; and any other
officer may, but need not be, a Trustee or shareholder. Any two or more offices
may be held by the same person except that the same person may not be both
President and Treasurer.
3.2 ELECTION. The Chairman of the Board, the President, the Treasurer and
the Secretary shall be elected annually by the Trustees at a meeting held within
the first four months of the Trust's fiscal year. The meeting at which the
officers are elected shall be known as the annual meeting of Trustees. Other
officers, if any, may be elected or appointed by the Trustees at said meeting or
at any other time. Vacancies in any office may be filled at any time.
3.3 TENURE. The Chairman of the Board, the President, the Treasurer and
the Secretary shall hold office until the next annual meeting of the Trustees
and until their respective successors are chosen and qualified, or in each case
until he sooner dies, resigns, is removed or becomes disqualified. Each other
officer shall hold office and each agent shall retain authority at the pleasure
of the Trustees.
3.4 POWERS. Subject to the other provisions of these By-Laws, each
officer shall have, in addition to the duties and powers herein and in the
Declaration of Trust set forth, such duties and
BY-LAWS - PAGE 2
<PAGE>
powers as are commonly incident to the office occupied by him as if the Trust
were organized as a Delaware business corporation and such other duties and
powers as the Trustees may from time to time designate.
3.5 CHAIRMAN; PRESIDENT. Unless the Trustees otherwise provide, the
Chairman of the Board, or, if there is no Chairman, or in the absence of the
Chairman, the President, shall preside at all meetings of the shareholders and
of the Trustees. Unless the Trustees otherwise provide, the President shall be
the Chief Executive Officer.
3.6 VICE PRESIDENT. The Vice President, or if there be more than one Vice
President, the Vice Presidents in the order determined by the Trustees (or if
there be no such determination, then in the order of their election) shall in
the absence of the President or in the event of his inability or refusal to act,
perform the duties of the President, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the President. The Vice
Presidents shall perform such other duties and have such other powers as the
Board of Trustees or the President may from time to time prescribe.
3.7 TREASURER. The Treasurer shall be the chief financial and accounting
officer of the Trust, and shall, subject to the provisions of the Declaration of
Trust and to any arrangement made by the Trustees with a custodian, investment
adviser or manager, or transfer, shareholder servicing or similar agent, be in
charge of the valuable papers, books of account and accounting records of the
Trust, and shall perform such other duties and have such other powers as may be
designated from time to time by the Board of Trustees or the President may from
time to time prescribe.
3.8 ASSISTANT TREASURER. The Assistant Treasurer, or if there shall be
more than one, the Assistant Treasurers in the order determined by the Trustees
(or if there be no such determination, then in the order of their election),
shall, in the absence of the Treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the Treasurer and
shall perform such other duties and have such other powers as the Board of
Trustees or the President may from time to time prescribe.
3.9 SECRETARY. The Secretary shall record all proceedings of the
shareholders and the Trustees in books to be kept for such purposes, which books
or a copy thereof shall be kept at the principal office of the Trust or at such
other place as designated by the Trustees. In the absence of the Secretary from
any meeting of the shareholders or Trustees, an Assistant Secretary, or if there
be none or if he is absent, a temporary secretary chosen at such meeting shall
record the proceedings thereof in the aforesaid books.
BY-LAWS - PAGE 3
<PAGE>
BY-LAWS - PAGE 4
<PAGE>
3.10 ASSISTANT SECRETARY. The Assistant Secretary, or if there be more
than one, the Assistant Secretaries in the order determined by the Trustees (or
if there be no determination, then in the order of their election), shall, in
the absence of the Secretary or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the Secretary and shall perform
such other duties and have such other powers as the Board of Trustees or
President may from time to time prescribe.
3.11 RESIGNATIONS, RETIREMENT AND REMOVALS. Any Trustee or officer may
resign at any time by written instrument signed by him and delivered to the
Chairman of the Board, the President or the Secretary or to a meeting of the
Trustees. Such resignation shall be effective upon receipt unless specified to
be effective at some other time. The Trustees may remove any officer elected by
them with or without cause. To the extent that any officer or Trustee of the
Trust receives compensation from the Trust and except as may otherwise be
expressly provided in a written agreement with the Trust, no Trustee or officer
resigning and no officer removed shall have any right to any compensation for
any period following his resignation or removal, or any right to damages on
account of such removal.
ARTICLE 4
COMMITTEES
4.1 GENERAL. The Trustees, by vote of a majority of the Trustees then in
office, may elect from their number an Audit Committee, Contracts Committee,
Executive Committee or Nominating Committee or other committees, and may
delegate thereto some or all of their powers except those which by law, by the
Declaration of Trust, or by these By-Laws may not be delegated. Except as the
Trustees may otherwise determine, any such committee may make rules for the
conduct of its business, but unless otherwise provided by the Trustees or in
such rules, its business shall be conducted so far as possible in the same
manner as is provided by these By-Laws for the Trustees themselves. All members
of such committees shall hold such offices at the pleasure of the Trustees. The
Trustees may abolish any such committee at any time. Any committee to which the
Trustees delegate any of their powers or duties shall keep records of its
meetings and shall report its action to the Trustees. The Trustees shall have
power to rescind any action of any committee, but no such rescission shall have
retroactive effect.
ARTICLE 5
REPORTS
5.1 GENERAL. The Trustees and officers shall render reports at the time
and in the manner required by the Declaration of Trust
BY-LAWS - PAGE 5
<PAGE>
or any applicable law. Officers and committees shall render such additional
reports as they may deem desirable or as may from time to time be required by
the Trustees.
ARTICLE 6
FISCAL YEAR
6.1 GENERAL. The fiscal year of the Trust shall be fixed by resolution of
the Trustees.
ARTICLE 7
SEAL
7.1 GENERAL. There shall be no company seal.
ARTICLE 8
EXECUTION OF PAPERS
8.1 GENERAL. Except as the Trustees may generally or in particular cases
authorize the execution thereof in some other manner, all deeds, leases,
contracts, notes and other obligations made by the Trustees shall be signed by
the President, any Vice President, or by the Treasurer and need not bear the
seal of the Trust.
ARTICLE 9
ISSUANCE OF SHARE CERTIFICATES
9.1 SHARE CERTIFICATES. In lieu of issuing certificates for shares, the
Trustees or the transfer agent may either issue receipts therefor or may keep
accounts upon the books of the Trust for the record holders of such shares, who
shall in either case be deemed, for all purposes hereunder, to be the holders of
certificates for such shares as if they had accepted such certificates and shall
be held to have expressly assented and agreed to the terms hereof.
The Trustees may at any time authorize the issuance of share certificates
either in limited cases or to all shareholders. In that event, a shareholder
may receive a certificate stating the number of shares owned by him, in such
form as shall be prescribed from time to time by the Trustees. Such certificate
shall be signed by the President or a Vice President and by the Treasurer or
Assistant Treasurer. Such signatures may be facsimiles if the certificate is
signed by a transfer agent, or by a registrar, other than a Trustee, officer or
employee of the Trust. In case any officer who has signed or whose facsimile
signature has been placed on such certificate shall cease to be such officer
before such
BY-LAWS - PAGE 6
<PAGE>
certificate is issued, it may be issued by the Trust with the same effect as if
he were such officer at the time of its issue.
9.2 LOSS OF CERTIFICATES. In case of the alleged loss or destruction or
the mutilation of a share certificate, a duplicate certificate may be issued in
place thereof, upon such terms as the Trustees shall prescribe.
9.3 ISSUANCE OF NEW CERTIFICATE TO PLEDGEE. A pledgee of shares
transferred as collateral security shall be entitled to a new certificate if the
instrument of transfer substantially describes the debt or duty that is intended
to be secured thereby. Such new certificate shall express on its face that it
is held as collateral security, and the name of the pledgor shall be stated
thereon, who alone shall be liable as a shareholder, and entitled to vote
thereon.
9.4 DISCONTINUANCE OF ISSUANCE OF CERTIFICATE. The Trustees may at any
time discontinue the issuance of share certificates and may, by written notice
to each shareholder, require the surrender of share certificates to the Trust
for cancellation. Such surrender and cancellation shall not affect the
ownership of shares in the Trust.
ARTICLE 10
DEALINGS WITH TRUSTEES AND OFFICERS
10.1 GENERAL. Any Trustee, officer or other agent of the Trust may
acquire, own and dispose of shares of the Trust to the same extent as if he were
not a Trustee, officer or agent; and the Trustees may accept subscriptions to
shares or repurchase shares from any firm or company in which any Trustee,
officer or other agent of the Trust may have an interest.
ARTICLE 11
FUNDAMENTAL POLICIES
11.1 FUNDAMENTAL POLICIES. Attached hereto as Exhibit A is a list of the
individual investment restrictions of each respective Series of the Trust which
shall be "fundamental policies" of that Series. Each Sub-Trust's "fundamental
policies" may not be changed without approval by a "majority vote of the
outstanding voting securities" of such Series as that term is defined in the
Investment Company Act of 1940.
BY-LAWS - PAGE 7
<PAGE>
ARTICLE 12
AMENDMENTS TO THE BY-LAWS
12.1 GENERAL. These By-Laws, other than a change to the investment
restrictions of a series, may be amended or repealed, in whole or in part, by
majority of the Trustees then in office at any meeting of the Trustees, or by
one or more writings signed by such a majority.
The foregoing By-Laws were adopted by the Board of Trustees on October
_____, 1995.
----------------------------------------
, Secretary
--------------------
BY-LAWS - PAGE 8
<PAGE>
EXHIBIT A
-----------------------
INVESTMENT RESTRICTIONS
-----------------------
The investment restrictions described below have been adopted by the Short
Special Fund (the "Fund") as fundamental investment policies. These fundamental
investment policies may not be changed without the approval of the holders of
the lesser of a majority of the Fund's outstanding shares or 67% of the shares
represented at a meeting of shareholders at which the holders of more than 50%
of the shares are represented.
If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage beyond the specified limit resulting
from a change in values of assets will not be considered a violation of the
investment restrictions relating to purchases of portfolio securities.
The Fund may not:
1. The Fund invests more than 20% of its total assets in fixed
income securities, including convertible stock, that are rated
less than Moody's Baa or S&P BBB, or in commercial paper that is
rated less than B-1 by Moody's or A- by S&P; not more than 5% of
the Fund's total assets may be invested in fixed income
securities that are unrated. Securities rated below the fourth
highest grade and unrated fixed income securities have
speculative characteristics and additional risks.
2. Invest an amount that exceeds 5% of the value of the Fund's total
assets in the securities of any one issuer. This restriction
does not apply to holdings of U.S. Government securities.
3. Invest more than 25% of its total assets in any one industry.
This restriction does not apply to holdings of U.S. Government
securities.
4. Issue any senior securities, as defined in the 1940 Act.
5. Purchase the securities of any issuer for the purpose of
exercising control of management, and a Fund may not acquire or
own more than 10% of any class of the securities of any issuer.
<PAGE>
6. Invest in any security that would subject the Fund to unlimited
liability, although the Fund may sell securities short and may
invest in interest rate and stock market futures.
7. Underwrite the securities of other issuers or invest more than
50% of its total assets in any combination of illiquid
securities and securities of issuers which have been in
existence less than three years, including their predecessors.
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 Information under "LOANS OF PORTFOLIO SECURITIES."
<PAGE>
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.
17. Borrow money, except as set forth in the Fund's Prospectus. In
no case will borrowing exceed one-third of the value of a Fund's
total assets immediately after any such borrowing. If, for any
reason, the current value of the Fund's total assets falls below
an amount equal to three times the amount of its indebtedness for
money borrowed, the Fund will, within three days (not including
Saturdays, Sundays and holidays), reduce its indebtedness to the
extent necessary to satisfy the one-third test.
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 stock index
futures.
21. Invest more than 10% of the Fund's total assets in interest rate
futures contracts.
22. Sell securities short, unless such sales are made "against the
box."
23. 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 10% of the
securities of an issuer together own beneficially more than 5%
of the securities of that issuer.
<PAGE>
EXHIBIT 99.5
MASTER INVESTMENT ADVISORY AGREEMENT
This Master Investment Advisory Agreement is made this ___ day of
_______________, 1996 by and between the Crabbe Huson Funds, a Delaware business
trust (the "Trust"), and The Crabbe Huson Group, Inc., an Oregon corporation
(the "Adviser").
RECITALS
1. The Trust is organized to operate as an open-end management
investment company and during the term of this Agreement will be so registered
under the Investment Company Act of 1940 (the "1940 Act").
2. The Adviser is engaged in the business of rendering investment
management services under the Investment Advisers Act of 1940.
3. The Trust will operate as a "series company" as contemplated by
Rule 18f-2 under the 1940 Act and is authorized to issue shares of beneficial
interest ("Shares") in separate series and sub-series with each such series and
sub-series representing an interest in a separate portfolio of securities and
other assets during the term of this Agreement.
4. The Trust intends initially to offer Shares in one Series: The
Crabbe Huson Small Cap Fund. Shortly thereafter, 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 "Existing Funds"), intend to transfer substantially all
their assets into the Trust, and the Trust will issue shares in the following
eight additional series to the shareholders of the Existing Funds, (1) The
Crabbe Huson Special Fund; (2) The Crabbe Huson Real Estate Investment Fund; (3)
The Crabbe Huson Equity Fund; (4) The Crabbe Huson Asset Allocation Fund; (5)
The Crabbe Huson Income Fund; (6) The Crabbe Huson Municipal Bond Fund; (7) The
Crabbe Huson U.S. Government Income Fund; and (8) The U.S. Government Money
Market Fund together with The Crabbe Huson Small Cap Fund Series (the "Initial
Series"). The Initial Series, together with all other Series subsequently
established by the Trust with respect to which the Trust desires to retain the
Adviser to render investment advisory services hereunder and with respect to
which the Adviser is willing to provide such services, shall hereinafter be
referred to collectively as the "Series."
1 - INVESTMENT ADVISORY AGREEMENT
<PAGE>
AGREEMENT
In consideration of the mutual covenants contained in this Agreement,
it is hereby agreed as follows:
1. DUTIES OF THE MANAGER.
1.1 GENERAL DUTIES OF ADVISER. The Trust hereby retains the
Adviser to act as its manager and investment adviser and to furnish the Trust
with the management and investment advisory services described below, subject to
the policies of, review by and overall control of the Board of Trustees of the
Trust, for the period and on the terms and conditions set forth in this
Agreement. The Adviser hereby accepts such employment and agrees during such
period, at its own expense, to render such services, and to arrange for the
rendering of such services, and to assume the obligations herein set forth for
the compensation provided for herein.
1.2 MANAGEMENT AND ADMINISTRATIVE SERVICES. The Adviser shall
perform, or supervise the performance of, the management and administrative
services necessary for the operation of each Series to the extent requested by
the Trustees and to the extent such services are not already performed by State
Street Bank and Trust Company ("State Street") pursuant to the Administration
Agreement, dated _______________, between State Street and the Trust.
1.3 INVESTMENT ADVISORY SERVICES. The Adviser shall provide
each Series with, or supervise the provision of, such investment research,
advice and supervision as the latter may from time to time consider necessary
for the proper supervision of the assets of each Series. The Adviser shall act
as investment adviser to each Series and as such shall furnish continuously an
investment program for each Series and shall make determinations, or supervise
the making of determinations, as to which securities shall be purchased, sold or
exchanged and what portion of the assets of each Series shall be held in the
various securities in which each Series invests or in cash, subject always to
the restrictions of the Declaration of Trust and By-Laws of the Trust, as
amended from time to time, the provisions of the 1940 Act and the statements
relating to each Series' investment objective, investment policies and
investment restrictions as the same are set forth in the Prospectus and
Statement of Additional Information. The Adviser shall make determinations, or
supervise the making of determinations, as to the manner in which voting rights,
rights to consent to corporate action and any other rights pertaining to each
Series' portfolio securities shall be exercised. Should the Board of Trustees,
however, make any definite determination as to investment policy and notify the
Adviser thereof in writing, the Adviser shall be bound by such determination for
the period, if any, specified in
2 - INVESTMENT ADVISORY AGREEMENT
<PAGE>
such notice or until similarly notified that such determination has been
revoked. The Adviser shall take, on behalf of each Series, all actions which it
deems necessary to implement the investment policies determined as provided
above, and in particular to place, or supervise the placing of, all orders for
the purchase or sale of portfolio securities for each Series' account with
brokers or dealers selected by it, and to that end, the Adviser is authorized as
the agent of the Trust to give instructions to the custodian of the Trust as to
deliveries of securities and payments of cash for the account of each Series.
In connection with the selection of such brokers or dealers and the placing of
such orders, the Adviser is directed at all times to seek to obtain executions
and price within the policy guidelines determined by the Board of Trustees of
the Trust and set forth in the Prospectus and Statement of Additional
Information. Subject to this requirement and the provisions of the 1940 Act,
the Securities Exchange Act of 1934, as amended, and other applicable provisions
of law, the Adviser or subadviser, if any, may select brokers or dealers with
which it, the subadviser or the Trust, is affiliated.
1.4 ADDITION OF A SERIES. In the event that the Trust
establishes one or more Series of Shares other than the Initial Series with
respect to which it desires to retain the Adviser to render management and
investment advisory services hereunder, it shall so notify the Adviser in
writing, indicating the advisory fee which will be payable with respect to the
additional Series of Shares and indicating any further information it may need
to approve the retention of the Adviser. If the Adviser is willing to render
such services, it shall so notify the Trust in writing and supply any requested
information. If the information is satisfactory, the Board of Trustees shall,
at a duly called meeting, retain the Adviser and such series shall become a
Series under this Agreement.
2. ALLOCATION OF CHARGES AND EXPENSES.
2.1 PROVISION OF FACILITIES AND PERSONNEL BY ADVISER. Adviser
agrees to furnish such investment advice described in paragraph 1, above, and to
furnish, for the use of the Trust, office space and all necessary office
facilities, equipment and personnel for servicing the investments of each
Series, maintaining its organization and assisting in providing shareholder
communications and information services and to permit any of its officers and
employees to serve, without compensation, as trustees, or officers of the Trust
if elected to such positions. Adviser shall pay the salaries and fees, if any,
of all officers of the Trust and of all trustees of the Trust who are
"interested persons" as defined in the 1940 Act of the Trust or of the Adviser
and of all personnel of the Trust or Adviser performing services relating to
research, statistical and investment activities.
3 - INVESTMENT ADVISORY AGREEMENT
<PAGE>
2.2 RESPONSIBILITY FOR EXPENSES. The Trust shall pay all its
expenses other than those expressly stated to be payable by Adviser herein or
the Trust's Distributor pursuant to the Distribution Agreement (as defined in
the Fund's current Prospectus). The expenses payable by the Trust shall
include, without limitation, (a) interest and taxes; (b) fees payable hereunder;
(c) brokerage commissions and other costs in connection with the purchase or
sale of securities; (d) fees and expenses of its Trustees other than those who
are "interested persons" of the Trust or the Adviser; (e) legal and audit
expenses; (f) transfer agent expenses and expenses for servicing shareholder
accounts; (g) expenses of computing the net asset value of the Shares of the
Trust and the amount of dividends payable thereon; (h) custodian fees and
expenses; (i) fees and expenses related to the registration and qualification of
the Trust and its Shares for distribution under state and federal securities
laws; (j) expenses of printing and mailing reports, notices and proxy materials
to shareholders of the Trust; (k) the cost of share certificates, if any; (l)
reports, membership and dues in the Investment Company Institute or any similar
organization; (m) expenses of preparing and type setting prospectuses; (n)
expenses of printing and mailing prospectuses sent to existing shareholders; (o)
such nonrecurring expenses as may arise, including expenses incurred in actions,
suits or proceedings to which the Trust is a party and the legal obligation
which the Trust may have to indemnify its officers and Trustees in respect
thereto; (p) costs of State Street; and (q) such other expenses as the Trustees
may, from time to time, determine to be properly payable by the Trust.
2.3 EXPENSES IN EXCESS OF LIMITATIONS. If the operating
expenses of a Series, including amounts payable to the Adviser pursuant to
Section 5 of this Agreement, for any fiscal year ending on a date on which this
Agreement is in effect exceed the expense limitations applicable to the Series
imposed by any state securities laws, or regulations thereunder, as such
limitations may be raised or lowered from time to time, the Adviser shall reduce
its management fee to the extent of such excess and, if required by any such
laws or regulations, will reimburse the Trust for annual operating expenses in
excess of any expense limitation that may be applicable; provided, however,
there shall be excluded from such expenses the amount of any interest, taxes,
brokerage commissions, and extraordinary expenses (including, but not limited
to, legal claims and liabilities and litigation costs and any indemnification
related thereto) paid or payable by the Trust. Such reduction, if any, shall be
computed and accrued daily, shall be settled on a monthly basis and shall be
based upon the expense limitation applicable to the Series as of the end of the
last business day of the month. Should two or more such expense limitations be
applicable as of the end of the last business day of the month, that expense
limitation which results in the largest reduction in the Adviser's fee shall be
applicable.
4 - INVESTMENT ADVISORY AGREEMENT
<PAGE>
Such reimbursement, if any, shall be made by the Adviser within 30 days of the
date upon which audited financial statements in the fiscal year as to which such
reimbursement is due are first available to the Trust.
2.4 COMPUTATION OF EXPENSE LIMITATION. For purposes of this
provision, should any applicable expense limitation be based upon the gross
income of a Series, such gross income shall include, but not be limited to,
interest on debt securities in the Series' portfolio accrued to and including
the last day of the Series' fiscal year, the record dates for which fall on or
prior to the last day of such fiscal year, but shall not include gains from the
sales of securities.
3. CONTROL OF INVESTMENT POLICIES. The investment policies and all
other actions of each Series are, and shall at all times be, subject to the
control and direction of the Board of Trustees of the Trust.
4. PLACEMENT OF ORDERS. With respect to services performed in
connection with the purchase and sale of portfolio securities on behalf of each
Series, the Adviser may place transaction orders for each Series with brokers or
dealers selected by the Adviser. In connection with the selection of such
brokers or dealers and the placing of such orders, the Adviser shall not be
deemed to have acted unlawfully or to have breached any duty, created by this
Agreement or otherwise, solely by reason of its having caused a Series 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 would 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 by such broker or dealer, viewed in
terms of either that particular transaction or the Adviser's overall
responsibility with respect to the Series and to other accounts of the Adviser
as to which the Adviser exercises investment discretion.
5. COMPENSATION. The Trust shall pay the Adviser as full
compensation for all services rendered to a Series a management fee for that
Series determined in accordance with Schedule A attached hereto, which schedule
shall be amended any time a Series is added to the Initial Series.
6. RELATIONSHIP OF PARTIES. In acting under this Agreement, the
Adviser shall be an independent contractor and shall not be an agent of the
Trust. The services of the Adviser under this Agreement are not to be deemed
exclusive, and the Adviser shall be free to render similar services or other
services to others, including other investment companies, so long as its
5 - INVESTMENT ADVISORY AGREEMENT
<PAGE>
services under this Agreement are not impaired by the delivery of such services.
7. LIABILITY OF ADVISER.
7.1 LIMITATION OF LIABILITY. The Adviser shall exercise its
best judgment in rendering the services provided by it under this Agreement.
The Adviser shall not be liable for any error of judgment or mistake of law or
for any loss arising out of any investment or for any act or omission in the
execution and management of the Fund, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services (in
which case any award of damages shall be limited to the period and the amount
set forth in Section 36(b)(3) of the 1940 Act) or loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties, or from reckless disregard by it of its obligations and duties
hereunder. The Adviser shall not be liable for any losses caused by
disturbances of its operations by virtue of force majeure, war, riot, or damage
caused by nature or due to other events for which the Adviser is not responsible
(E.G., strike, lock-out or losses caused by the imposition of foreign exchange
controls, expropriation of assets or other acts of domestic or foreign
authorities). As used in this Section 7.1, the term Adviser shall include any
affiliates of the Adviser performing services for the Trust contemplated hereby
and directors, officers, partners and employees of the Adviser and of such
affiliate.
7.2 INDEMNIFICATION. The Trust shall indemnify the Adviser, its
officers, directors, shareholders and employees (each, "Indemnitees") and hold
Indemnitees harmless from and against all damages, liabilities, costs and
expenses (including reasonable attorneys' fees and amounts reasonably paid in
settlement) incurred by the Indemnitees or by reason of any pending, threatened
or completed action, suit, investigation or other proceeding (including an
action or suit by or in the right of the Trust or its security holders) arising
out of or otherwise based upon any action actually or allegedly taken or omitted
to be taken by the Indemnitees in connection with the performance of any of its
duties or obligations under this Agreement; provided, however, that nothing
contained herein shall protect or be deemed to protect the Indemnitees against
or entitle or be deemed to entitle the Indemnitees to indemnification in respect
of any liability to the Trust or its security holders to which the Indemnitees
would otherwise be subject by reason of a breach of fiduciary duty with respect
to the receipt of compensation for services or of willful misfeasance, bad faith
or gross negligence in the performance of its duties, or by reason of its
reckless disregard of its duties and obligations under this Agreement
(hereinafter "Disabling Conduct"). The determination whether the actions of an
Indemnitee constituted Disabling Conduct shall be established (a) by a final
6 - INVESTMENT ADVISORY AGREEMENT
<PAGE>
decision on the merits by a court or other body before whom the proceeding was
brought that the Indemnitee did not engage in Disabling Conduct or (b) in the
event of a settlement or other disposition not involving a final decision on the
merits and resulting in a payment by an Indemnitee (unless there has been a
determination that such Indemnitee did not engage in Disabling Conduct by the
court or other body approving the settlement or other disposition) a reasonable
determination, based on a review of readily available facts that Indemnitee did
not engage in Disabling Conduct, such determination being made by: (i) a vote
of a majority of the Disinterested Trustees acting on the matter (provided that
a majority of Disinterested Trustees act on the matter) or (ii) written opinion
of independent legal counsel. Expenses of preparation and presentation of a
defense to any claim, suit or proceeding subject to a claim for indemnification
under this Section 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, provided that either: (a) such undertaking
is secured by a surety bond or some other appropriate security or the Trust
shall be insured against such losses arising out of any such advances; or (b) a
majority of the Disinterested Trustees acting on the matter (provided that a
majority of Disinterested Trustees act on the matter) or independent legal
counsel in a written opinion shall determine, based upon a review of the readily
available facts that there is reason to believe that the recipient ultimately
will be found entitled to indemnification. For purposes of this Section, a
Disinterested Trustee is one (i) who is not an Interested Person of the Trust as
such term is defined in the 1940 Act and (ii) against whom none of such actions,
suits or other proceedings or another action, suit or proceeding on the same or
similar ground is then or has been pending.
8. LICENSE TO USE THE CRABBE HUSON NAMES. The Trust is named the
Crabbe Huson Funds and each Series may be identified, in part, by the name
"Crabbe Huson." The Trust acknowledges that prior to the date hereof, the name
"Crabbe Huson" has been used by each of the Trust's predecessors, and, along
with the name "The Crabbe Huson Family of Mutual Funds" and certain other names
which include the words "Crabbe Huson" (the "Crabbe Huson Names"), were used and
will be used with the permission of the Adviser or its predecessors-in-
interests. The Adviser hereby grants to the Trust a nonexclusive right and
license to use the Crabbe Huson Names and the words "Crabbe Huson" as part of
the name of the Trust and each Series of the Trust only for so long as this
Agreement or any extension, renewal or amendment hereof remains in effect,
including any similar agreement with any organization which shall have succeeded
to the Adviser's business as Adviser or any extension, renewal or amendment
thereof remain in effect. The Trust agrees that it shall acquire no interest in
the name "Crabbe Huson," that
7 - INVESTMENT ADVISORY AGREEMENT
<PAGE>
all uses thereof by the Trust shall inure to the benefit of the Adviser and that
it shall not challenge the validity or Adviser's ownership thereof.
9. ACKNOWLEDGEMENT OF INTERESTED STATUS. Subject to all applicable
statutes and regulations, it is understood that directors, officers or agents of
the Trust are or may be interested in the Adviser as officers, directors,
agents, shareholders or otherwise and that the officers, directors, shareholders
and agents of the Adviser may be interested in the Trust as officers, directors,
agents, shareholders or otherwise.
10. TERMINATION. This Agreement shall become effective on the date
hereof and shall remain in full force and effect until the annual anniversary of
the date of this Agreement, unless sooner terminated as provided below. This
Agreement shall continue in force from year to year thereafter, but only as long
as such continuance is specifically approved at least annually in the manner
required by the 1940 Act. This Agreement shall automatically terminate in the
event of its assignment, and may be terminated at any time without payment of
any penalty by the Trust or by the Adviser on 60 days written notice to the
other party. This Agreement may be terminated at any time without notice by the
Trust if it is established by a court of competent jurisdiction that the Adviser
or any officer or director of the Adviser has taken action which results in a
breach of the covenants of the Adviser set forth in this Agreement. Termination
of this Agreement shall not affect the right of the Adviser to receive payments
on any unpaid balance of the compensation described in Section 5 earned prior to
such termination.
11. SEVERABILITY. If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule or otherwise, the remainder
of this Agreement shall not thereby be affected.
12. NOTICES. Any notice under this Agreement shall be in writing,
addressed and delivered or mailed, postage prepaid, to the other party at such
address as such other party may designate for the receipt of such notice.
IN WITNESS WHEREOF, the Fund and Adviser have caused this Agreement to
be executed as of the date first written above.
CRABBE HUSON FUNDS THE CRABBE HUSON GROUP, INC.
- ----------------------------------- ----------------------------------------
By: Richard S. Huson By: James E. Crabbe
Its: President Its: President
8 - INVESTMENT ADVISORY AGREEMENT
<PAGE>
SCHEDULE A
Each Series shall pay the Adviser as compensation for its services, a
fee determined and accrued daily and paid bi-monthly, based on a stated
percentage of the average daily net assets of such Series per annum as set forth
below
CRABBE HUSON SPECIAL FUND
CRABBE HUSON SMALL CAP FUND
CRABBE HUSON REAL ESTATE FUND
CRABBE HUSON EQUITY FUND SERIES
CRABBE HUSON ASSET ALLOCATION FUND SERIES
Net Asset Value Annual Rate
- --------------- -----------
First $100 Million . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.00%
Next $400 Million . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.85%
Amounts over $500 Million . . . . . . . . . . . . . . . . . . . . . . . . 0.60%
CRABBE HUSON INCOME FUND
Net Asset Value Annual Rate
- --------------- ------------
First $100 Million . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.75%
Next $400 Million . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.60%
Amounts over $500 Million . . . . . . . . . . . . . . . . . . . . . . . . 0.50%
OREGON MUNICIPAL BOND FUND
CRABBE HUSON U.S. GOVERNMENT INCOME FUND
CRABBE HUSON U.S. GOVERNMENT MONEY MARKET FUND
Net Asset Value Annual Rate
- --------------- -----------
First $100 Million . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.50%
Next $400 Million . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.45%
Amounts over $500 Million . . . . . . . . . . . . . . . . . . . . . . . . 0.40%
<PAGE>
EXHIBIT 99.6(A)
CRABBE HUSON FUNDS
DISTRIBUTION AGREEMENT
Agreement made as of _______________, 1996, between Crabbe Huson
Funds, a Delaware business trust (the "Trust"), and Crabbe Huson Securities,
Inc. (the "Distributor").
RECITALS
1. The Trust is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end management investment company. It
is in the interest of the Trust to offer its shares of beneficial interest in
the Trust (the "Shares") for sale to the public on a continuous basis.
2. The Trust operates as a "series company" within the meaning of
Rule 18f-2 of the 1940 Act. The Trust's Declaration of Trust establishes nine
separate series and permits the Board of Trustees to establish additional series
(the "Series").
3. The Distributor is a broker-dealer registered under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and is engaged
in the business of distributing Shares of registered investment companies either
directly or through other broker-dealers.
4. The Trust and the Distributor wish to enter into an agreement
with each other, with respect to the continuous offering of the Trust's Shares
from and after the date hereof in order to promote the growth of the Trust and
facilitate the distribution of its Shares.
5. The Trust has adopted a plan of distribution pursuant to Rule
12b-1 under the 1940 Act (the "Plan") that provides that each Series shall
become subject to the Plan authorizing payments by the Trust to the Distributor
with respect to the distribution of Shares of that Series and the maintenance of
shareholder accounts. Upon approval of the shareholders of each Series that
Series shall become subject to the Plan.
DISTRIBUTION AGREEMENT - 1
<PAGE>
AGREEMENT
NOW, THEREFORE, the parties agree as follows:
Section 1. APPOINTMENT OF THE DISTRIBUTOR.
The Trust hereby appoints the Distributor to act as the distributor of
Shares of each Series of the Trust on the terms and for the period set forth in
this Agreement. The Distributor hereby accepts such appointment and agrees to
render the services and duties set forth in Section 4 hereof.
Section 2. DELIVERY OF DOCUMENTS.
The Trust has furnished the Distributor with copies, properly
certified or otherwise authenticated, of each of the following documents and
will deliver to the Distribution all future amendments and supplements, if any:
(i) The Trust's Declaration of Trust;
(ii) The Trust's By-Laws:
(iii) Resolutions of the Trust's Board of Trustees authorizing the
execution and delivery of this Agreement;
(iv) The Trust's most recent amendment to its Registration Statement
under the Securities Act of 1933, as amended (the "Securities Act"), and the
1940 Act on Form N-1A as filed with the Securities and Exchange Commission (the
"Commission") relating to the Trust (the Registration Statement, as presently in
effect and as amended or supplemented from time to time, is herein called the
"Registration Statement");
(v) The Trust's most recent Prospectus and Statement of Additional
Information and all amendments and supplements thereto (such Prospectus and
Statement of Additional Information and supplements thereto, as presently in
effect and as from time to time amended and supplemented, are herein called the
"Prospectus");
(vi) The Trust's audited financial statements; and
(vii) Any other information that the Distributor may reasonably
request.
Section 3. REGISTRATION AND SALE OF ADDITIONAL SHARES.
The Trust will from time to time use its best efforts to register
under the Securities Act such Shares not already so registered as the
Distributor may reasonably be expected to sell as agent on behalf of the Trust.
This Agreement relates to the
DISTRIBUTION AGREEMENT - 2
<PAGE>
issue and sale of Shares that are duly authorized and registered and available
for sale by the Trust if, but only if, the Trust sees fit to sell them. The
Trust will take such action as may be necessary from time to time to qualify
Shares for sale in such states as are mutually agreeable to the Distributor and
the Trust, and to maintain such qualification if and so long as such Shares are
duly registered under the Securities Act.
Section 4. SERVICES AND DUTIES.
The Distributor enters into the following covenants with respect to
its services and duties:
4.1 The Distributor agrees to sell, as agent on behalf of the Trust,
from time to time during the term of this Agreement, authorized and issued
Shares of each Series upon the terms and at the public offering price, which
will be the net asset value per share of the Series as determined in the
Prospectus. The Distributor is hereby authorized and will use its best efforts
(but only in states in which it may lawfully do so) to enter into agreements
with broker-dealers that are lawfully registered under federal and applicable
state law ("Selling Agents") providing for such Selling Agents to obtain from
investors unconditional orders for Shares, provided that the Distributor may in
its discretion refuse to accept orders for such Shares from any particular
applicant. The Distributor will act only in its own behalf as principal in
making agreements with Selling Agents. No broker-dealer or other person which
enters into a selling or servicing agreement with the Distributor shall be
authorized to act as agent for the Trust in connection with the offering or sale
of Shares to the public or otherwise. The Distributor shall use its reasonable
efforts to sell Shares of the Trust but shall not be obligated to sell any
certain number of Shares.
4.2 The Distributor shall prepare and, after review by the Trust,
file with the National Association of Securities Dealers, Inc. or other
organization as required by federal or other applicable laws and regulations,
all sales literature (advertisements, brochures and shareholder communications)
for each Series. The Trust will not permit the use of any sales literature
unless it has been so reviewed and filed.
4.3 In performing all of its services and duties as the Distributor,
the Distributor will act in conformity with the Declaration of Trust, By-Laws,
Prospectus and resolutions and other instructions of the Trust's Board of
Trustees (as provided by the Trust) and will comply with the requirements of the
Securities Act, the Exchange Act, the 1940 Act and all other applicable federal
or state laws.
DISTRIBUTION AGREEMENT - 3
<PAGE>
4.4 The Trust shall have the right to suspend the sale of Shares at
any time in response to conditions in the securities markets or otherwise, and
to suspend the redemption of Shares of any Series at any time permitted by the
1940 Act or the rules and regulations ("Rules") promulgated thereunder. If and
whenever a suspension of the right of redemption or postponement of the date of
payment or redemption has been declared and has become effective, then, until
such suspension or postponement is terminated, no further orders for the Series
shall be accepted by the Distributor except such unconditional orders placed
with the Distributor before the Distributor has knowledge of the suspension.
4.5 The Trust reserves the right to reject any order for Shares but
will not do so arbitrarily or without reasonable cause.
Section 5. COMPENSATION.
5.1 The Trust shall pay up to one-twelfth (1/12) of .25% of each
Series' average daily net assets to the Distributor to reimburse the Distributor
for actual expenses incurred in the distribution and promotion of the Trust's
Shares, to the extent permitted by Rule 12b-1, and as determined in accordance
with the Prospectus and the Plan. Amounts payable under the Plan shall be
accrued daily and paid monthly or at such other intervals as the Trustees may
determine. Amounts payable under the Plan shall be subject to the limitations
of Article III, Section 26 of the NASD Rules of Fair Practice. Distribution
expenses that are not allocable to a specific Series are allocated to a Series
based on the number of new accounts established by that Series during the fiscal
year compared with new accounts established by all Series.
5.2 So long as the Plan or any amendment thereto is in effect, the
Distributor, on a quarterly basis, shall inform the Board of Trustees of the
trailer commissions to be paid by the Distributor to Selling Agents who have
entered into selling agent agreements with the Distributor, or any other amounts
expended by the Distributor under this Agreement, and of the purposes of such
expenditures. So long as the Plan (or any amendment thereto) is in effect, at
the request of the Board of Trustees or any agent or representative of the
Trust, the Distributor shall provide such additional information as may
reasonably be requested concerning the activities of the Distributor hereunder
and the costs incurred in performing such activities.
5.3 Expenses of distribution with respect to the Shares of the Trust
include, among others:
(a) commissions, including trailer commissions paid to, or on
account of, broker-dealers that have entered into selling
agent
DISTRIBUTION AGREEMENT - 4
<PAGE>
agreements with the Distributor with respect to Shares of
the Fund;
(b) advertising for the Fund in various forms through any
available medium, including the cost of printing and mailing
Fund Prospectuses, and periodic financial reports and sales
literature to persons other than current shareholders of the
Fund; and
(c) compensation to investment advisors or other persons or
entities that promote the sale of any Series' shares.
Section 6. ALLOCATION OF EXPENSES.
6.1 The Trust shall bear all costs and expenses of the continuous
offering of its Shares, including fees and disbursements of its counsel and
auditors, in connection with the preparation and filing of any required
Registration Statements and/or Prospectuses under the 1940 Act or the Securities
Act, and preparing and mailing annual and periodic reports and proxy materials
to shareholders (including but not limited to the expense of setting in type any
such Registration Statements, Prospectuses, annual or periodic reports or proxy
materials). The Trust shall also bear the cost and expenses of qualification of
the Shares for sale, and, if necessary or advisable in connection therewith, of
qualifying the Trust as a broker or dealer, in such states of the United States
or other jurisdictions as shall be selected by the Trust, and the cost and
expense payable to each such state for continuing qualification therein until
the Trust decides to discontinue such qualification. As set forth in Section
4.1 above, the Trust shall also bear the expenses it assumes pursuant to the
Plan with respect to distribution of the Shares, so long as the Plan is in
effect. The Distributor shall pay all fees and expenses in connection with its
qualification as a broker-dealer in the various states and other expenses which
have been mutually agreed upon in connection with the offer and sale of Shares
which have not been specifically allocated to the Trust.
Section 7. INDEMNIFICATION.
7.1 The Trust agrees to indemnify, defend and hold the Distributor,
its officers and directors and any person who controls the Distributor within
the meaning of Section 15 of the Securities Act, free and harmless from and
against any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which the Distributor, its
officers, directors or any such controlling person may incur under the
Securities Act, or under common law or
DISTRIBUTION AGREEMENT - 5
<PAGE>
otherwise, arising out of or based upon any untrue statement of a material fact
contained in the Registration Statement or Prospectus or arising out of or based
upon any alleged omission to state a material fact required to be stated in
either thereof or necessary to make the statements in either thereof not
misleading, except insofar as such claims, demands, liabilities or expenses
arise out of or are based upon any such untrue statement or omission or alleged
untrue statement or omission made in reliance upon and in conformity with
information furnished in writing by the Distributor to the Trust for use in the
Registration Statement or Prospectus; provided, however, that this indemnity
agreement shall not inure to the benefit of any such officer, director, or
controlling person unless a court of competent jurisdiction shall determine in a
final decision on the merits, that the person to be indemnified was not liable
by reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of its reckless disregard of its
obligations under this Agreement ("disabling conduct"), or, in the absence of
such a decision, a reasonable determination, based upon a review of the facts,
that the indemnified person was not liable by reason of disabling conduct, by
(a) a vote of a majority of a quorum of Trustees who are neither "interested
persons" of the Trust as defined in Section 2(a)(19) of the 1940 Act nor parties
to the proceeding, or (b) an independent legal counsel in a written opinion.
The Trust's agreement to indemnify the Distributor, its officers and directors
and any such controlling person as aforesaid is expressly conditioned upon the
Trust's being promptly notified of any action brought against the Distributor,
its officers or directors, or any such controlling person, such notification to
be given by letter or telegram addressed to the Trust at its principal business
office. The Trust agrees promptly to notify the Distributor of the commencement
of any litigation or proceedings against it or any of its officers or directors
in connection with the issue and sale of any Shares.
7.2 The Distributor agrees to indemnify, defend and hold the Trust,
its officers and Trustees and any person who controls the Trust, if any, within
the meaning of Section 15 of the Securities Act, free and harmless from and
against any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending against such claims, demands or liabilities
and any counsel fees incurred in connection therewith) with the Trust, its
officers and Trustees or any such controlling person may incur under the
Securities Act or under common law or otherwise, but only to the extent that
such liability or expense incurred by the Trust, its Trustees or officers or
such controlling person resulting from such claims or demands shall arise out of
or be based upon any alleged untrue statement of a material fact contained in
information furnished in writing by the Distributor to the Trust for use in the
Registration Statement or Prospectus or shall arise out of or be
DISTRIBUTION AGREEMENT - 6
<PAGE>
based upon any alleged omission to state a material fact in connection with such
information required to be stated in the Registration Statement or Prospectus or
necessary to make such information not misleading. The Distributor's agreement
to indemnify the Trust, its officers and Trustees and any such controlling
person as aforesaid, is expressly conditioned upon the Distributor being
promptly notified of any action brought against the Trust, its officers and
Trustees or any such controlling person, such notification being given to the
Distributor at its principal business office.
Section 8. DURATION AND TERMINATION OF THIS AGREEMENT.
8.1 This Agreement shall become effective as of the date first above
written and shall remain in force for two years from the date hereof and
thereafter as to each Series of the Trust which has approved the Plan, but only
so long as such continuance is specifically approved at least annually by (a)
the Board of Trustees of the Trust, or by the vote of a majority of the
outstanding voting securities of the Shares of each Series, and (b) by the vote
of a majority of those Trustees who are not parties to this Agreement or
interested persons of any such parties and who have no direct or indirect
financial interest in this Agreement or in the operation of the Trust's Plan or
in any agreement related thereto ("Independent Trustees"), cast in person at a
meeting called for the purpose of voting upon such approval.
8.2 This Agreement may be terminated at any time as to any Series,
without the payment of any penalty, by a majority of the Independent Trustees or
by vote of a majority of the outstanding voting securities of the Shares of the
Series, or by the Distributor, on sixty (60) days' written notice to the other
party. This Agreement shall automatically terminate in the event of its
assignment.
8.3 The terms "affiliated person," "assignment," "interested person"
and "vote of a majority of the outstanding voting securities," when used in this
Agreement, shall have the respective meanings specified in the 1940 Act.
Section 9. AMENDMENTS TO THIS AGREEMENT.
This Agreement may be amended by the parties only if such amendment is
specifically approved by (a) the Board of Trustees of the Trust, or by the vote
of a majority of the outstanding voting securities of the Shares of any Series
affected by the Amendment, and (b) by the vote of a majority of the Independent
Trustees cast in person at a meeting called for the purpose of voting on such
amendment.
DISTRIBUTION AGREEMENT - 7
<PAGE>
Section 10. GOVERNING LAW.
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of the State of Oregon as at the time in effect and the
applicable provisions of the 1940 Act. To the extent that the applicable law of
the State of Oregon, or any of the provisions herein, conflict with the
applicable provisions of the 1940 Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year above written.
CRABBE HUSON SECURITIES, INC.
By:
----------------------------------------------
CRABBE HUSON FUNDS
By:
----------------------------------------------
DISTRIBUTION AGREEMENT - 8
<PAGE>
EXHIBIT 99.6(b)
Date:
SELECTED DEALER AGREEMENT
FOR
CRABBE HUSON FUNDS
- -------------------------------
Name of Firm
- -------------------------------
Address of Principal Office
- -------------------------------
City State Zip Code
Gentlemen:
We have entered into a distribution agreement with The Crabbe Huson
Funds acting as the exclusive distributor to the Fund for the purpose of
distributing its shares to investors, either directly or indirectly through
other broker-dealers. We invite you to become a member of the Selling Group and
to participate in the distribution of the shares of the Fund on the following
terms and conditions:
1. Orders for shares received from you will be accepted by us on
behalf of the Fund only at the public offering price applicable to each other,
as established by the then effective Prospectus of the Fund. The procedure
relating to the handling of orders shall be subject to instructions which we
shall forward, from time to time, to all members of the Selling Group. Initial
purchase orders shall not be accepted from any investor by you in amounts of
less than $2,000, and subsequent purchase orders shall not be accepted in
amounts of less than $500. All orders are subject to acceptance by us, and we
reserve the right, in our sole discretion, to reject any order.
2. The Fund does not offer a sales commission.
1 - SELECTED DEALER AGREEMENT
<PAGE>
3. As a member of the Selling Group, you agree to purchase shares
only from the Fund or from your customers. You agree that all purchases of
shares from the Fund shall be made only to cover orders received by you from
your customers or for your own bona fide investment. If you purchase shares
from your customers, you agree to pay such customers not less than the
redemption price in effect on the date of such purchase, as defined in the then
current Prospectus of the Fund.
4. Only unconditional orders for shares will be accepted.
5. All settlement checks should be made payable to the Fund and
should be drawn on a United States bank. Settlements shall be made promptly,
but in no case later than _____ business days after our acceptance of the order.
If payment for shares is not received by State Street Bank and Trust Company on
a timely basis, we reserve the right, without notice, to forthwith cancel the
sale.
6. We reserve the right, at our discretion, without notice to you,
to suspend sales or withdraw the offering of shares of any of the Fund entirely,
to change the offering price as provided in the Prospectus, or to cancel this
Agreement. Except as specified in the previous sentence, any amendment to this
Agreement will be effective only if in writing and signed by both parties
hereto.
7. No person is authorized to make any representations concerning
the Fund or its shares except those contained in the effective Prospectus and
any such information as may be released by the Fund as information supplemental
to the Prospectus. In purchasing shares, you shall rely solely upon the
representations contained in the Prospectus and supplemental information
mentioned above.
8. Additional copies of any Prospectus and any printed information
issued as supplemental to any Prospectus will be supplied by us to members of
the Selling Group in reasonable quantities upon request.
9. In no transaction shall you have any authority whatever to act as
agent of the Fund or of us or of any member of the Selling Group.
10. This Agreement may be terminated upon written notice by either
party at any time, and shall automatically terminate upon its attempted
assignment by you, by operation of law or otherwise, or by us otherwise than by
operation of law.
2 - SELECTED DEALER AGREEMENT
<PAGE>
11. Your acceptance of this Agreement constitutes a representation
(i) that you are a Securities and Exchange Commission registered securities
broker-dealer and a member in good standing of the National Association of
Securities Dealer, Inc.; you agree to comply with the Rules of Fair Practice of
the National Association of Securities Dealer, Inc., including specifically
Section 2 and 26 of Article III thereof; or you are a bank as defined in Section
3(a)(6) of the Securities Exchange Act of 1934 and not otherwise required to
register as a broker-dealer pursuant to Rule 3b-9 thereunder; (ii) that you will
maintain adequate records with respect to your customers; and (iii) that such
transactions are without recourse against you by your customers. You likewise
agree that you will not make available shares of the Fund in any state or other
jurisdiction in which we inform you such shares may not lawfully be offered for
sale.
12. This Agreement shall become effective upon receipt by us of a
signed copy. All amendments to this Agreement shall take effect on the date set
forth in the Notice of Amendment sent to you by us. All communications to us
should be sent to the aforementioned address. Any notice to you shall be duly
given if mailed or telegraphed to you at your address specified above. This
Agreement shall be construed in accordance wit the laws of Oregon.
13. We agree to pay to you, in compensation for your expenses in
marketing and distributing shares of the Fund, distribution expenses in
accordance with the Distribution Plan that has been adopted by the Fund, a copy
of which is attached hereto as Exhibit 1. As long as this Distribution Plan is
in effect and distribution expenses are being paid to us by the participating
Fund, we will pay to you _____ of .25% of the asset value, each calculated on
the total amount invested in shares of the Fund as to which any individual
working for you is broker of record.
All such distribution expense payments are subject to termination or alteration
in accordance with the terms of the Distribution Plan, the terms of its approval
by the participating Fund, and any requirement now existing or hereafter adopted
by the United States Securities Exchange Commission.
CRABBE HUSON SECURITIES, INC.
Date: By:
--------------------------- ----------------------------
Richard S. Huson, President
The undersigned accepts your invitation to become a member of the Selling Group
and agrees to abide by the terms and conditions of the foregoing Agreement. The
undersigned acknowledges receipt of the Prospectus of the Fund for use in
connection with this offering.
3 - SELECTED DEALER AGREEMENT
<PAGE>
------------------------------
Firm Name
Date: By:
--------------------------- ----------------------------
Authorized Signature
The above Agreement should be executed in triplicate and signed copies should be
returned to Crabbe Huson Securities.
4 - SELECTED DEALER AGREEMENT
<PAGE>
EXHIBIT 99.8
CUSTODY AND INVESTMENT ACCOUNTING AGREEMENT
THIS AGREEMENT made the ___ day of January, 1996, by and between
INVESTORS FIDUCIARY TRUST COMPANY, a trust company chartered under the laws of
the state of Missouri, having its trust office located at 127 West 10th Street,
Kansas City, Missouri 64105 ("Custodian"), and CRABBE HUSON FUNDS, a business
trust organized and existing under the laws of the State of Delaware, having its
principal office and place of business at 121 S.W. Morrison Street, Suite 1400,
Portland, Oregon 97204.
WITNESSETH:
WHEREAS, Fund desires to appoint Investors Fiduciary Trust Company as
custodian of the securities and monies of Fund's investment portfolio and as its
agent to perform certain investment accounting and recordkeeping functions; and
WHEREAS, Investors Fiduciary Trust Company is willing to accept such
appointment;
NOW THEREFORE, for and in consideration of the mutual promises contained
herein, the parties hereto, intending to be legally bound, mutually covenant and
agree as follows:
1. APPOINTMENT OF CUSTODIAN. Fund hereby constitutes and appoints Custodian
as:
A. Custodian of the securities and monies at any time owned by the Fund;
and
B. Agent to perform certain accounting and recordkeeping functions
relating to portfolio transactions required of a duly registered
investment company under Rule
Page 1 - CUSTODY AND INVESTMENT ACCOUNTING AGREEMENT
<PAGE>
31a of the Investment Company Act of 1940 (the "1940 Act") and to
calculate the net asset value of the Fund.
2. REPRESENTATIONS AND WARRANTIES.
A. Fund hereby represents, warrants and acknowledges to Custodian:
1. That it is a business trust duly organized and existing and in
good standing under the laws of its state of organization, and
that it is registered under the 1940 Act; and
2. That it has the requisite power and authority under applicable
law, its Trust Agreement and its Bylaws to enter into this
Agreement; that it has taken all requisite action necessary to
appoint Custodian as custodian and investment accounting and
recordkeeping agent for the Fund; that this Agreement has been
duly executed and delivered by Fund; and that this Agreement
constitutes a legal, valid and binding obligation of Fund,
enforceable in accordance with its terms.
B. Custodian hereby represents, warrants and acknowledges to Fund:
1. That it is a trust company duly organized and existing and
in good standing under the laws of the State of Missouri;
and
2. That it has the requisite power and authority under
applicable law, its Charter and its Bylaws to enter into and
perform this Agreement; that this Agreement has been duly
executed and delivered by Custodian; and that this Agreement
constitutes a legal, valid and
Page 2 - CUSTODY AND INVESTMENT ACCOUNTING AGREEMENT
<PAGE>
binding obligation of Custodian, enforceable in accordance
with its terms.
3. DUTIES AND RESPONSIBILITIES OF CUSTODIAN.
A. DELIVERY OF ASSETS
Except as permitted by the 1940 Act, Fund will deliver or cause to be
delivered to Custodian on the effective date of this Agreement, or as
soon thereafter as practicable, and from time to time thereafter, all
portfolio securities acquired by it and monies then owned by it or
from time to time coming into its possession during the time this
Agreement shall continue in effect. Custodian shall have no
responsibility or liability whatsoever for or on account of securities
or monies not so delivered.
B. DELIVERY OF ACCOUNTS AND RECORDS
Fund shall turn over or cause to be turned over to Custodian all of
the Fund's relevant accounts and records previously maintained.
Custodian shall be entitled to rely conclusively on the completeness
and correctness of the accounts and records turned over to it, and
Fund shall indemnify and hold Custodian harmless of and from any and
all expenses, damages and losses whatsoever arising out of or in
connection with any error, omission, inaccuracy or other deficiency of
such accounts and records or in the failure of Fund to provide, or to
provide in a timely manner, any accounts, records or information
needed by the Custodian to perform its functions hereunder.
Page 3 - CUSTODY AND INVESTMENT ACCOUNTING AGREEMENT
<PAGE>
C. DELIVERY OF ASSETS TO THIRD PARTIES
Custodian will receive delivery of and keep safely the assets of Fund
delivered to it from time to time segregated in a separate account,
and if Fund is comprised of more than one portfolio of investment
securities (each a "Portfolio") Custodian shall keep the assets of
each Portfolio segregated in a separate account. Custodian will not
deliver, assign, pledge or hypothecate any such assets to any person
except as permitted by the provisions of this Agreement or any
agreement executed by it according to the terms of Section 3.S. of
this Agreement. Upon delivery of any such assets to a subcustodian
pursuant to Section 3.S. of this Agreement, Custodian will create and
maintain records identifying those assets which have been delivered to
the subcustodian as belonging to the Fund, by Portfolio if applicable.
The Custodian is responsible for the safekeeping of the securities and
monies of Fund only until they have been transmitted to and received
by other persons as permitted under the terms of this Agreement,
except for securities and monies transmitted to subcustodians
appointed under Section 3.S. of this Agreement, for which Custodian
remains responsible to the extent provided in Section 3.S. hereof.
Custodian may participate directly or indirectly through a
subcustodian in the Depository Trust Company (DTC), Treasury/Federal
Reserve Book Entry System (Fed System), Participant Trust Company
(PTC) or other depository approved by the Fund (as such entities are
defined at 17 CFR Section 270.17f-4(b)) (each a "Depository" and
collectively, the "Depositories").
D. REGISTRATION OF SECURITIES
Page 4 - CUSTODY AND INVESTMENT ACCOUNTING AGREEMENT
<PAGE>
The Custodian shall at all times hold registered securities of the
Fund in the name of the Custodian, the Fund, or a nominee of either of
them, unless specifically directed by instructions to hold such
registered securities in so-called "street name," provided that, in
any event, all such securities and other assets shall be held in an
account of the Custodian containing only assets of the Fund, or only
assets held by the Custodian as a fiduciary or custodian for
customers, and provided further, that the records of the Custodian at
all times shall indicate the Fund or other customer for which such
securities and other assets are held in such account and the
respective interests therein. If, however, the Fund directs the
Custodian to maintain securities in "street name", notwithstanding
anything contained herein to the contrary, the Custodian shall be
obligated only to utilize its best efforts to timely collect income
due the Fund on such securities and to notify the Fund of relevant
corporate actions including, without limitation, pendency of calls,
maturities, tender or exchange offers. All securities, and the
ownership thereof by Fund, which are held by Custodian hereunder,
however, shall at all times be identifiable on the records of the
Custodian. The Fund agrees to hold Custodian and its nominee harmless
for any liability as a shareholder of record of securities held in
custody.
E. EXCHANGE OF SECURITIES
Upon receipt of instructions as defined herein in Section 4.A,
Custodian will exchange, or cause to be exchanged, portfolio
securities held by it for the account of Fund for other securities or
cash issued or paid in connection with any reorganization,
recapitalization, merger, consolidation, split-up of shares, change of
Page 5 - CUSTODY AND INVESTMENT ACCOUNTING AGREEMENT
<PAGE>
par value, conversion or otherwise, and will deposit any such
securities in accordance with the terms of any reorganization or
protective plan. Without instructions, Custodian is authorized to
exchange securities held by it in temporary form for securities in
definitive form, to effect an exchange of shares when the par value of
the share is changed, and, upon receiving payment therefor, to
surrender bonds or other securities held by it at maturity or when
advised of earlier call for redemption, except that Custodian shall
receive instructions prior to surrendering any convertible security.
F. PURCHASES OF INVESTMENTS OF THE FUND - OTHER THAN 0PTIONS AND FUTURES.
Fund will, on each business day on which a purchase of securities
(other than options and futures) shall be made by it, deliver to
Custodian instructions which shall specify with respect to each such
purchase:
1. If applicable, the name of the Portfolio making such purchase;
2. The name of the issuer and description of the security;
3. The number of shares and the principal amount purchased, and
accrued interest, if any;
4. The trade date;
5. The settlement date;
6. The purchase price per unit and the brokerage commission, taxes
and other expenses payable in connection with the purchase;
7. The total amount payable upon such purchase;
Page 6 - CUSTODY AND INVESTMENT ACCOUNTING AGREEMENT
<PAGE>
8. The name of the person from whom or the broker or dealer through
whom the purchase was made; and
9. Whether the security is to be received in certificated form or
via a specified Depository.
In accordance with such instructions, Custodian will pay for out of
monies held for the account of Fund, but only insofar as such monies
are available for such purpose, and receive the portfolio securities
so purchased by or for the account of Fund, except that Custodian may
in its sole discretion advance funds to the Fund which may result in
an overdraft because the monies held by the Custodian on behalf of the
Fund are insufficient to pay the total amount payable upon such
purchase. Except as otherwise instructed by Fund, such payment shall
be made by the Custodian only upon receipt of securities: (a) by the
Custodian; (b) by a clearing corporation of a national exchange of
which the Custodian is a member; or (c) by a Depository.
Notwithstanding the foregoing, (i) in the case of a repurchase
agreement, the Custodian may release funds to a Depository prior to
the receipt of advice from the Depository that the securities
underlying such repurchase agreement have been transferred by book-
entry into the account maintained with such Depository by the
Custodian, on behalf of its customers, provided that the Custodian's
instructions to the Depository require that the Depository make
payment of such funds only upon transfer by book-entry of the
securities underlying the repurchase agreement in such account; (ii)
in the case of time deposits, call account deposits, currency deposits
and other deposits, foreign exchange
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transactions, futures contracts or options, the Custodian may make
payment therefor before receipt of an advice or confirmation
evidencing said deposit or entry into such transaction; and (iii) in
the case of the purchase of securities, the settlement of which occurs
outside of the United States of America, the Custodian may make, or
cause a subcustodian appointed pursuant to Section 3.S.2. of this
Agreement to make, payment therefor in accordance with generally
accepted local custom and market practice.
G. SALES AND DELIVERIES OF INVESTMENTS OF THE FUND - OTHER THAN OPTIONS
AND FUTURES
Fund will, on each business day on which a sale of investment
securities (other than options and futures) of Fund has been made,
deliver to Custodian instructions specifying with respect to each such
sale:
1. If applicable, the name of the Portfolio making such sale;
2. The name of the issuer and description of the securities;
3. The number of shares and principal amount sold, and accrued
interest, if any;
4. The date on which the securities sold were purchased or other
information identifying the securities sold and to be delivered;
5. The trade date;
6. The settlement date;
7. The sale price per unit and the brokerage commission, taxes or
other expenses payable in connection with such sale;
8. The total amount to be received by Fund upon such sale; and
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9. The name and address of the broker or dealer through whom or
person to whom the sale was made.
In accordance with such instructions, Custodian will deliver or cause
to be delivered the securities thus designated as sold for the account
of Fund to the broker or other person specified in the instructions
relating to such sale. Except as otherwise instructed by Fund, such
delivery shall be made upon receipt of payment therefor: (a) in such
form as is satisfactory to the Custodian; (b) credit to the account of
the Custodian with a clearing corporation of a national securities
exchange of which the Custodian is a member; or (c) credit to the
account of the Custodian, on behalf of its customers, with a
Depository. Notwithstanding the foregoing: (i) in the case of
securities held in physical form, such securities shall be delivered
in accordance with "street delivery custom" to a broker or its
clearing agent; or (ii) in the case of the sale of securities, the
settlement of which occurs outside of the United States of America,
the Custodian may make, or cause a subcustodian appointed pursuant to
Section 3.S.2. of this Agreement to make, payment therefor in
accordance with generally accepted local custom and market practice.
H. PURCHASES OR SALES OF OPTIONS AND FUTURES
Fund will, on each business day on which a purchase or sale of the
following options and/or futures shall be made by it, deliver to
Custodian instructions which shall specify with respect to each such
purchase or sale:
1. If applicable, the name of the Portfolio making such purchase or
sale;
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2. Security Options
a. The underlying security;
b. The price at which purchased or sold;
c. The expiration date;
d. The number of contracts;
e. The exercise price;
f. Whether the transaction is an opening, exercising, expiring
or closing transaction;
g. Whether the transaction involves a put or call;
h. Whether the option is written or purchased;
i. Market on which option traded; and
j. Name and address of the broker or dealer through whom the
sale or purchase was made.
3. Options on Indices
a. The index;
b. The price at which purchased or sold;
c. The exercise price;
d. The premium;
e. The multiple;
f. The expiration date;
g. Whether the transaction is an opening, exercising, expiring
or closing transaction;
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h. Whether the transaction involves a put or call;
i. Whether the option is written or purchased; and
j. The name and address of the broker or dealer through whom
the sale or purchase was made, or other applicable
settlement instructions.
4. Security Index Futures Contracts
a. The last trading date specified in the contract and, when
available, the closing level, thereof;
b. The index level on the date the contract is entered into;
c. The multiple;
d. Any margin requirements;
e. The need for a segregated margin account (in addition to
instructions, and if not already in the possession of
Custodian, Fund shall deliver a substantially complete and
executed custodial safekeeping account and procedural
agreement which shall be incorporated by reference into this
Custody Agreement); and
f. The name and address of the futures commission merchant
through whom the sale or purchase was made, or other
applicable settlement instructions.
5. Options on Index Future Contracts
a. The underlying index future contract;
b. The premium;
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c. The expiration date;
d. The number of options;
e. The exercise price;
f. Whether the transaction involves an opening, exercising,
expiring or closing transaction;
g. Whether the transaction involves a put or call;
h. Whether the option is written or purchased; and
i. The market on which the option is traded.
I. SECURITIES PLEDGED OR LOANED
If specifically allowed for in the prospectus of Fund, and subject to
such additional terms and conditions as Custodian may require:
1. Upon receipt of instructions, Custodian will release or cause to
be released securities held in custody to the pledgee designated
in such instructions by way of pledge or hypothecation to secure
any loan incurred by Fund; provided, however, that the securities
shall be released only upon payment to Custodian of the monies
borrowed, except that in cases where additional collateral is
required to secure a borrowing already made, further securities
may be released or caused to be released for that purpose upon
receipt of instructions. Upon receipt of instructions, Custodian
will pay, but only from funds available for such purpose, any
such loan upon redelivery to it of the securities pledged or
hypothecated therefor and upon surrender of the note or notes
evidencing such loan.
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2. Upon receipt of instructions, Custodian will release securities
held in custody to the borrower designated in such instructions;
provided, however, that the securities will be released only upon
deposit with Custodian of full cash collateral as specified in
such instructions, and that Fund will retain the right to any
dividends, interest or distribution on such loaned securities.
Upon receipt of instructions and the loaned securities, Custodian
will release the cash collateral to the borrower.
J. ROUTINE MATTERS
Custodian will, in general, attend to all routine and mechanical
matters in connection with the sale, exchange, substitution, purchase,
transfer, or other dealings with securities or other property of Fund
except as may be otherwise provided in this Agreement or directed from
time to time by the Fund in writing.
K. DEPOSIT ACCOUNTS
Custodian will open and maintain one or more special purpose deposit
accounts in the name of Custodian ("Accounts"), subject only to draft
or order by Custodian upon receipt of instructions. All monies
received by Custodian from or for the account of Fund shall be
deposited in said Accounts. Barring events not in the control of the
Custodian such as strikes, lockouts or labor disputes, riots, war or
equipment or transmission failure or damage, fire, flood, earthquake
or other natural disaster, action or inaction of governmental
authority or other causes beyond its control, at 9:00 a.m., Kansas
City time, on the second business day after receipt by Custodian of
deposit of any check into an Account, Custodian agrees to make Fed
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Funds available to the Fund in the amount of the check, provided
Custodian agrees to provide reasonable back-up and disaster recovery
procedures. Deposits made by Federal Reserve wire will be available
to the Fund immediately and ACH wires will be available to the Fund on
the next business day. Income earned on the portfolio securities will
be credited to the Fund based on the schedule attached as Exhibit A.
The Custodian will be entitled to reverse any credited amounts where
credits have been made and monies are not formally collected. If
monies are collected after such reversal, the Custodian will credit
the Fund in that amount. Custodian may open and maintain Accounts in
its own banking department, or in such other banks or trust companies
as may be designated by it or by Fund in writing, all such Accounts,
however, to be in the name of Custodian and subject only to its draft
or order. Funds received and held for the account of different
Portfolios shall be maintained in separate Accounts established for
each Portfolio.
L. INCOME AND OTHER PAYMENTS TO FUND
Custodian will:
1. Collect, claim and receive and deposit for the account of Fund
all income and other payments which become due and payable on or
after the effective date of this Agreement with respect to the
securities deposited under this Agreement, and credit the account
of Fund in accordance with the schedule attached hereto as
Exhibit A. If, for any reason, the Fund is credited with income
that is not subsequently collected, Custodian may reverse that
credited amount.
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2. Execute ownership and other certificates and affidavits for all
federal, state and local tax purposes in connection with the
collection of bond and note coupons; and
3. Take such other action as may be necessary or proper in
connection with:
a. the collection, receipt and deposit of such income and other
payments, including but not limited to the presentation for
payment of:
1. all coupons and other income items requiring
presentation; and
2. all other securities which may mature or be called,
redeemed, retired or otherwise become payable and
regarding which the Custodian has actual knowledge, or
should reasonably be expected to have knowledge; and
b. the endorsement for collection, in the name of Fund, of all
checks, drafts or other negotiable instruments.
Custodian, however, will not be required to institute suit or take
other extraordinary action to enforce collection except upon receipt
of instructions and upon being indemnified to its satisfaction against
the costs and expenses of such suit or other actions. Custodian will
receive, claim and collect all share dividends, rights and other
similar items and will deal with the same pursuant to instructions.
Unless prior instructions have been received to the contrary,
Custodian will,
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without further instructions, sell any rights held for the account of
Fund on the last trade date prior to the date of expiration of such
rights.
M. PAYMENT OF DIVIDENDS AND OTHER DISTRIBUTIONS
On the declaration of any dividend or other distribution on the shares
of beneficial interest of Fund ("Fund Shares") by the Trustees of
Fund, Fund shall deliver to Custodian instructions with respect
thereto. On the date specified in such instructions for the payment
of such dividend or other distribution, Custodian will pay out of the
monies held for the account of Fund, insofar as the same shall be
available for such purposes, and credit to the account of the Dividend
Disbursing Agent for Fund, such amount as may be specified in such
instructions.
N. SHARES OF FUND PURCHASED BY FUND
Whenever any Fund Shares are repurchased or redeemed by Fund, Fund or
its agent shall advise Custodian of the aggregate dollar amount to be
paid for such shares and shall confirm such advice in writing. Upon
receipt of such advice, Custodian shall charge such aggregate dollar
amount to the account of Fund and either deposit the same in the
account maintained for the purpose of paying for the repurchase or
redemption of Fund Shares or deliver the same in accordance with such
advice. Custodian shall not have any duty or responsibility to
determine that Fund Shares have been removed from the proper
shareholder account or accounts or that the proper number of Fund
Shares have been cancelled and removed from the shareholder records.
0. SHARES OF FUND PURCHASED FROM FUND
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Whenever Fund Shares are purchased from Fund, Fund will deposit or
cause to be deposited with Custodian the amount received for such
shares. Custodian shall not have any duty or responsibility to
determine that Fund Shares purchased from Fund have been added to the
proper shareholder account or accounts or that the proper number of
such shares have been added to the shareholder records.
P. PROXIES AND NOTICES
Custodian will promptly deliver or mail or have delivered or mailed to
Fund all proxies properly signed, all notices of meetings, all proxy
statements and other notices, requests or announcements affecting or
relating to securities held by Custodian for Fund and will, upon
receipt of instructions, execute and deliver or cause its nominee to
execute and deliver or mail or have delivered or mailed such proxies
or other authorizations as may be required. Except as provided by
this Agreement or pursuant to instructions hereafter received by
Custodian, neither it nor its nominee will exercise any power inherent
in any such securities, including any power to vote the same, or
execute any proxy, power of attorney, or other similar instrument
voting any of such securities, or give any consent, approval or waiver
with respect thereto, or take any other similar action.
Q. DISBURSEMENTS
Custodian will pay or cause to be paid, insofar as funds are available
for the purpose, bills, statements and other obligations of Fund
(including but not limited to obligations in connection with the
conversion, exchange or surrender of securities owned by Fund,
interest charges, dividend disbursements, taxes,
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<PAGE>
management fees, custodian fees, legal fees, auditors' fees, transfer
agents' fees, brokerage commissions, compensation to personnel, and
other operating expenses of Fund) pursuant to instructions of Fund
setting forth the name of the person to whom payment is to be made,
the amount of the payment, and the purpose of the payment.
R. DAILY STATEMENT OF ACCOUNTS
Custodian will, each business day, render to Fund a detailed statement
of the amounts received or paid and of securities received or
delivered for the account of Fund during each business day. Custodian
will, monthly and upon request by Fund, render a detailed statement of
the securities and monies held for Fund under this Agreement, and
Custodian will maintain such books and records as are necessary to
enable it to do so. Custodian will permit such persons as are
authorized by Fund, including Fund's independent public accountants,
reasonable access to such records or will provide reasonable
confirmation of the contents of such records, and if demanded,
Custodian will permit federal and state regulatory agencies to examine
the securities, books and records. Upon the written instructions of
Fund or as demanded by federal or state regulatory agencies, Custodian
will instruct any subcustodian to permit such persons as are
authorized by Fund, including Fund's independent public accountants,
reasonable access to such records or to provide reasonable
confirmation of the contents of such records, and to permit such
agencies to examine the books, records and securities held by such
subcustodian which relate to Fund.
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S. APPOINTMENT OF SUBCUSTODIANS
1. Notwithstanding any other provisions of this Agreement, all or
any of the monies or securities of Fund may be held in
Custodian's own custody or in the custody of one or more other
banks or trust companies acting as subcustodians as may be
selected by Custodian. Any such subcustodian selected by the
Custodian must have the qualifications required for a Custodian
under the 1940 Act, as amended. Custodian shall be responsible
to the Fund for any loss, damage or expense suffered or incurred
by the Fund resulting from the actions or omissions of any
subcustodians selected and appointed by Custodian (except
subcustodians appointed at the request of Fund and as provided in
Subsection 2 below) to the same extent Custodian would be
responsible to the Fund under Section 5. of this Agreement if it
committed the act or omission itself. Upon request of the Fund,
Custodian shall be willing to contract with other subcustodians
reasonably acceptable to the Custodian for purposes of (i)
effecting thirdparty repurchase transactions with banks, brokers,
dealers, or other entities through the use of a common custodian
or subcustodian, or (ii) providing depository and clearing agency
services with respect to certain variable rate demand note
securities, or (iii) for other reasonable purposes specified by
Fund; provided, however, that the Custodian shall be responsible
to the Fund for any loss, damage or expense suffered or incurred
by the Fund resulting from the actions or omissions of any such
subcustodian only to the
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same extent such subcustodian is responsible to the Custodian.
The Fund shall be entitled to review the Custodian's contracts
with any such subcustodians appointed at the request of Fund.
Custodian shall be responsible to the Fund for any loss, damage
or expense suffered or incurred by the Fund resulting from the
actions or omissions of any Depository only to the same extent
such Depository is responsible to Custodian.
2. Notwithstanding any other provisions of this Agreement, Fund's
foreign securities (as defined in Rule 17f-5(c)(1) under the 1940
Act) and Fund's cash or cash equivalents, in amounts deemed by
the Fund to be reasonably necessary to effect Fund's foreign
securities transactions, may be held in the custody of one or
more banks or trust companies acting as subcustodians, and
thereafter, pursuant to a written contract or contracts as
approved by Fund's Trustees, may be transferred to accounts
maintained by any such subcustodian with eligible foreign
custodians, as defined in Rule 17f-5(c)(2). Custodian shall be
responsible to the Fund for any loss, damage or expense suffered
or incurred by the Fund resulting from the actions or omissions
of any foreign subcustodians only to the same extent the foreign
subcustodian is liable to the domestic subcustodian with which
the Custodian contracts for foreign subcustody purposes.
T. ACCOUNTS AND RECORDA
Custodian will prepare and maintain, with the direction and as
interpreted by the Fund, Fund's accountants and/or other advisors, in
complete, accurate and current
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form all accounts and records (i) required to be maintained by Fund
with respect to portfolio transactions under Rule 31a of the 1940 Act,
(ii) required to be maintained as a basis for calculation of the
Fund's net asset value, and (iii) as otherwise agreed upon between the
parties. Custodian will preserve said records in the manner and for
the periods prescribed in the 1940 Act or for such longer period as is
agreed upon by the parties. Custodian relies upon Fund to furnish, in
writing or its electronic or digital equivalent, accurate and timely
information needed by Custodian to complete Fund's records and perform
daily calculation of the Fund's net asset value. Custodian shall
incur no liability and Fund shall indemnify and hold harmless
Custodian from and against any liability arising from any failure of
Fund to furnish such information in a timely and accurate manner, even
if Fund subsequently provides accurate but untimely information. It
shall be the responsibility of Fund to furnish Custodian with the
declaration, record and payment dates and amounts of any dividends or
income and any other special actions required concerning each of its
securities when such information is not readily available from
generally accepted securities industry services or publications.
U. ACCOUNTS AND RECORDS PROPERTY OF FUND
Custodian acknowledges that all of the accounts and records maintained
by Custodian pursuant to this Agreement are the property of Fund, and
will be made available to Fund for inspection or reproduction within a
reasonable period of time, upon demand. Custodian will assist Fund's
independent auditors, or upon approval of Fund, or upon demand, any
regulatory body, in any requested review of Fund's
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accounts and records but shall be reimbursed by Fund for all expenses
and employee time invested in any such review outside of routine and
normal periodic reviews. Upon receipt from Fund of the necessary
information or instructions, Custodian will supply information from
the books and records it maintains for Fund that Fund needs for tax
returns, questionnaires, periodic reports to shareholders and such
other reports and information requests as Fund and Custodian shall
agree upon from time to time.
V. ADOPTION OF PROCEDURES
Custodian and Fund may from time to time adopt procedures as they
agree upon, and Custodian may conclusively assume that no procedure
approved or directed by Fund or its accountants or other advisors
conflicts with or violates any requirements of its prospectus, Trust
Agreement, Bylaws, any applicable law, rule or regulation, or any
order, decree or agreement by which Fund may be bound. Fund will be
responsible to notify Custodian of any changes in statutes,
regulations, rules, requirements or policies which might necessitate
changes in Custodian's responsibilities or procedures.
W. CALCULATION OF NET ASSET VALUE
Custodian will calculate Fund's net asset value, in accordance with
Fund's prospectus. Custodian will price the securities and foreign
currency holdings of Fund for which market quotations are available by
the use of outside services designated by Fund which are normally used
and contracted with for this purpose; all other securities and foreign
currency holdings will be priced in accordance with
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Fund's instructions. Custodian will have no responsibility for the
accuracy of the prices quoted by these outside services or for the
information supplied by Fund or for acting upon such instructions.
X. ADVANCES
In the event Custodian or any subcustodian shall, in its sole
discretion, advance cash or securities for any purpose (including but
not limited to securities settlements, purchase or sale of foreign
exchange or foreign exchange contracts and assumed settlement) for the
benefit of any Portfolio, the advance shall be payable by the Fund on
demand. Any such cash advance shall be subject to an overdraft charge
at the rate set forth in the then-current fee schedule from the date
advanced until the date repaid. As security for each such advance,
Fund hereby grants Custodian and such subcustodian a lien on and
security interest in all property at any time held for the account of
the applicable Portfolio, including without limitation all assets
acquired with the amount advanced. Should the Fund fail to promptly
repay the advance upon request of the Custodian, the Custodian and
such subcustodian shall be entitled to utilize available cash and to
dispose of such Portfolio's assets pursuant to applicable law to the
extent necessary to obtain reimbursement of the amount advanced and
any related overdraft charges.
Y. EXERCISE OF RIGHTS: TENDER OFFERS
Upon receipt of instructions, the Custodian shall: (a) deliver
warrants, puts, calls, rights or similar securities to the issuer or
trustee thereof, or to the agent of such issuer or trustee, for the
purpose of exercise or sale, provided that the new
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securities, cash or other assets, if any, are to be delivered to the
Custodian; and (b) deposit securities upon invitations for tenders
thereof, provided that the consideration for such securities is to be
paid or delivered to the Custodian or the tendered securities are to
be returned to the Custodian.
4. INSTRUCTIONS.
A. The term "instructions", as used herein, means written (including
telecopied or telexed) or oral instructions which Custodian reasonably
believes were given by a designated representative of Fund. Fund
shall deliver to Custodian, prior to delivery of any assets to
Custodian and thereafter from time to time as changes therein are
necessary, written instructions naming one or more designated
representatives to give instructions in the name and on behalf of
Fund, which instructions may be received and accepted by Custodian as
conclusive evidence of the authority of any designated representative
to act for Fund and may be considered to be in full force and effect
(and Custodian will be fully protected in acting in reliance thereon)
until receipt by Custodian of notice to the contrary. Unless such
written instructions delegating authority to any person to give
instructions specifically limit such authority to specific matters or
require that the approval of anyone else will first have been
obtained, Custodian will be under no obligation to inquire into the
right of such person, acting alone, to give any instructions
whatsoever which Custodian may receive from such person. If Fund
fails to provide Custodian any such instructions naming designated
representatives, any instructions received by Custodian from a person
reasonably believed to be an
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appropriate representative of Fund shall constitute valid and proper
instructions hereunder.
B. No later than the next business day immediately following each oral
instruction, Fund will send Custodian written confirmation of such
oral instruction. At Custodian's sole discretion, Custodian may
record on tape, or otherwise, any oral instruction whether given in
person or via telephone, each such recording identifying the parties,
the date and the time of the beginning and ending of such oral
instruction.
C. If Custodian shall provide Fund direct access to any computerized
recordkeeping and reporting system used hereunder or if Custodian and
Fund shall agree to utilize any electronic system of communication,
Fund shall be fully responsible for any and all consequences of the
use or misuse of the terminal device, passwords, access instructions
and other means of access to such system(s) which are utilized by,
assigned to or otherwise made available to the Fund. Fund agrees to
implement and enforce appropriate security policies and procedures to
prevent unauthorized or improper access to or use of such system(s).
Custodian shall be fully protected in acting hereunder upon any
instructions, communications, data or other information received by
Custodian by such means as fully and to the same effect as if
delivered to Custodian by written instrument signed by the requisite
authorized representative(s) of Fund. Fund shall indemnify and hold
Custodian harmless from and against any and all losses, damages,
costs, charges, counsel fees, payments, expenses and liability which
may be suffered or incurred by Custodian as a result
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of the use or misuse, whether authorized or unauthorized, of any such
system(s) by Fund or by any person who acquires access to such
system(s) through the terminal device, passwords, access instructions
or other means of access to such system(s) which are utilized by,
assigned to or otherwise made available to the Fund, except to the
extent attributable to any negligence or willful misconduct by
Custodian.
5. LIMITATION OF LIABILITY OF CUSTODIAN.
A. Custodian shall at all times use reasonable care and due diligence and
act in good faith in performing its duties under this Agreement.
Custodian shall not be responsible for, and the Fund shall indemnify
and hold Custodian harmless from and against, any and all losses,
damages, costs, charges, counsel fees, payments, expenses and
liability which may be asserted against Custodian, incurred by
Custodian or for which Custodian may be held to be liable, arising out
of or attributable to:
1. All actions taken by Custodian pursuant to this Agreement or any
instructions provided to it hereunder, provided that Custodian
has acted in good faith and with due diligence and reasonable
care; and
2. The Fund's refusal or failure to comply with the terms of this
Agreement (including without limitation the Fund's failure to pay
or reimburse Custodian under this indemnification provision), the
Fund's negligence or willful misconduct, or the failure of any
representation or warranty of the Fund hereunder to be and remain
true and correct in all respects at all times.
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B. Custodian may request and obtain at the expense of Fund the advice and
opinion of counsel for Fund or of its own counsel with respect to
questions or matters of law, and it shall be without liability to Fund
for any action taken or omitted by it in good faith, in conformity
with such advice or opinion. If Custodian reasonably believes that it
could not prudently act according to the instructions of the Fund or
the Fund's accountants or counsel, it may in its discretion, with
notice to the Fund, not act according to such instructions.
C. Custodian may rely upon the advice and statements of Fund, Fund's
accountants and officers or other authorized individuals, and other
persons believed by it in good faith to be expert in matters upon
which they are consulted, and Custodian shall not be liable for any
actions taken, in good faith, upon such advice and statements.
D. If Fund requests Custodian in any capacity to take any action which
involves the payment of money by Custodian, or which might make it or
its nominee liable for payment of monies or in any other way,
Custodian shall be indemnified and held harmless by Fund against any
liability on account of such action; provided, however, that nothing
herein shall obligate Custodian to take any such action except in its
sole discretion.
E. Custodian shall be protected in acting as custodian hereunder upon any
instructions, advice, notice, request, consent, certificate or other
instrument or paper appearing to it to be genuine and to have been
properly executed. Custodian shall be entitled to receive upon
request as conclusive proof of any fact
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or matter required to be ascertained from Fund hereunder a certificate
signed by an officer or designated representative of Fund. Fund shall
also provide Custodian instructions with respect to any matter
concerning this Agreement requested by Custodian.
F. Custodian shall be under no duty or obligation to inquire into, and
shall not be liable for:
1. The validity of the issue of any securities purchased by or
for Fund, the legality of the purchase of any securities or
foreign currency positions or evidence of ownership required by
Fund to be received by Custodian, or the propriety of the
decision to purchase or amount paid therefor;
2. The legality of the sale of any securities or foreign currency
positions by or for Fund, or the propriety of the amount for
which the same are sold;
3. The legality of the issue or sale of any Fund Shares, or the
sufficiency of the amount to be received therefor;
4. The legality of the repurchase or redemption of any Fund Shares,
or the propriety of the amount to be paid therefor; or
5. The legality of the declaration of any dividend by Fund, or the
legality of the issue of any Fund Shares in payment of any stock
dividend.
G. Custodian shall not be liable for, or considered to be Custodian of,
any money represented by any check, draft, wire transfer,
clearinghouse funds, uncollected funds, or instrument for the payment
of money to be received by it on behalf of Fund until Custodian
actually receives such money; provided, however, that it shall
Page 28 - CUSTODY AND INVESTMENT ACCOUNTING AGREEMENT
<PAGE>
advise Fund promptly if it fails to receive any such money in the
ordinary course of business and shall cooperate with Fund toward the
end that such money shall be received.
H. Except as provided in Section 3.S., Custodian shall not be responsible
for loss occasioned by the acts, neglects, defaults or insolvency of
any broker, bank, trust company, or any other person with whom
Custodian may deal.
I. Custodian shall not be responsible or liable for the failure or delay
in performance of its obligations under this Agreement, or those of
any entity for which it is responsible hereunder, arising out of or
caused, directly or indirectly, by circumstances beyond the affected
entity's reasonable control, including, without limitation: any
interruption, loss or malfunction of any utility, transportation,
computer (hardware or software) or communication service; inability to
obtain labor, material, equipment or transportation, or a delay in
mails; governmental or exchange action, statute, ordinance, rulings,
regulations or direction; war, strike, riot, emergency, civil
disturbance, terrorism, vandalism, explosions, labor disputes,
freezes, floods, fires, tornados, acts of God or public enemy,
revolutions, or insurrection, provided Custodian agrees to provide
reasonable back-up and disaster recovery procedures.
J. EXCEPT FOR VIOLATIONS OF SECTION 9, IN NO EVENT AND UNDER NO
CIRCUMSTANCES SHALL EITHER PARTY TO THIS AGREEMENT BE LIABLE TO
ANYONE, INCLUDING, WITHOUT
Page 29 - CUSTODY AND INVESTMENT ACCOUNTING AGREEMENT
<PAGE>
LIMITATION TO THE OTHER PARTY, FOR CONSEQUENTIAL, SPECIAL OR PUNITIVE
DAMAGES FOR ANY ACT OR FAILURE TO ACT UNDER ANY PROVISION OF THIS
AGREEMENT EVEN IF ADVISED OF THIS POSSIBILITY THEREOF.
6. COMPENSATION. In consideration for its services hereunder as Custodian and
investment accounting and recordkeeping agent, Fund will pay to Custodian
such compensation as shall be set forth in a separate fee schedule to be
agreed to by Fund and Custodian from time to time. A copy of the initial
fee schedule is attached hereto and incorporated herein by reference.
Custodian shall also be entitled to receive, and Fund agrees to pay to
Custodian, on demand, reimbursement for Custodian's cash disbursements and
reasonable out-of-pocket costs and expenses, including attorney's fees,
incurred by Custodian in connection with the performance of services
hereunder. Custodian may charge such compensation against monies held by
it for the account of Fund, provided Custodian has first delivered a
statement of charges to Fund. Custodian will also be entitled to charge
against any monies held by it for the account of Fund the amount of any
loss, damage, liability, advance, overdraft or expense for which it shall
be entitled to reimbursement from Fund, including but not limited to fees
and expenses due to Custodian for other services provided to the Fund by
Custodian. Custodian will be entitled to reimbursement by the Fund for the
losses, damages, liabilities, advances, overdrafts and expenses of
subcustodians only to the extent that (i) Custodian would have been
entitled to reimbursement hereunder if it had incurred the same itself
directly, and (ii) Custodian is obligated to reimburse the subcustodian
therefor.
Page 30 - CUSTODY AND INVESTMENT ACCOUNTING AGREEMENT
<PAGE>
7. TERM AND TERMINATION. The initial term of this Agreement shall be for a
period of one year. Thereafter, either party to this Agreement may
terminate the same by notice in writing, delivered or mailed, postage
prepaid, to the other party hereto and received not less than sixty (60)
days prior to the date upon which such termination will take effect.
Upon termination of this Agreement, Fund will pay Custodian its fees and
compensation due hereunder and its reimbursable disbursements, costs and
expenses paid or incurred to such date and Fund shall designate a successor
custodian by notice in writing to Custodian by the termination date. In
the event no written order designating a successor custodian has been
delivered to Custodian on or before the date when such termination becomes
effective, then Custodian may, at its option, deliver the securities, funds
and properties of Fund to a bank or trust company at the selection of
Custodian, and meeting the qualifications for custodian set forth in the
1940 Act and having not less that Two Million Dollars ($2,000,000)
aggregate capital, surplus and undivided profits, as shown by its last
published report, or apply to a court of competent jurisdiction for the
appointment of a successor custodian or other proper relief, or take any
other lawful action under the circumstances; provided, however, that Fund
shall reimburse Custodian for its costs and expenses, including reasonable
attorney's fees, incurred in connection therewith. Custodian will, upon
termination of this Agreement and payment of all sums due to Custodian from
Fund hereunder or otherwise, deliver to the successor custodian so
specified or appointed, or as specified by the court, at Custodian's
office, all securities then held by Custodian hereunder, duly endorsed and
in form for transfer, and all funds and other properties of Fund deposited
with or held by Custodian hereunder, and Custodian will co-operate in
Page 31 - CUSTODY AND INVESTMENT ACCOUNTING AGREEMENT
<PAGE>
effecting changes in book-entries at all Depositories. Upon delivery to a
successor custodian or as specified by the court, Custodian will have no
further obligations or liabilities under this Agreement. Thereafter such
successor will be the successor custodian under this Agreement and will be
entitled to reasonable compensation for its services. In the event that
securities, funds and other properties remain in the possession of the
Custodian after the date of termination hereof owing to failure of the Fund
to appoint a successor custodian, the Custodian shall be entitled to
compensation as provided in the then-current fee schedule hereunder for its
services during such period as the Custodian retains possession of such
securities, funds and other properties, and the provisions of this
Agreement relating to the duties and obligations of the Custodian shall
remain in full force and effect.
8. NOTICES. Notices, requests, instructions and other writings addressed to
Fund at 121 S.W. Morrison Street, Suite 1400, Portland, Oregon 97204, or at
such other address as Fund may have designated to Custodian in writing,
will be deemed to have been properly given to Fund hereunder; and notices,
requests, instructions and other writings addressed to Custodian at its
offices at 127 West 10th Street, Kansas City, Missouri 64105, Attention:
Custody Department, or to such other address as it may have designated to
Fund in writing, will be deemed to have been properly given to Custodian
hereunder.
9. CONFIDENTIALITY.
A. Fund shall preserve the confidentiality of the computerized investment
portfolio recordkeeping and accounting system used by Custodian (the
"Portfolio Accounting System") and the tapes, books, reference
manuals, instructions, records, programs,
Page 32 - CUSTODY AND INVESTMENT ACCOUNTING AGREEMENT
<PAGE>
documentation and information of, and other materials relevant to, the
Portfolio Accounting System and the business of Custodian
("Confidential Information"). Fund shall not voluntarily disclose any
such Confidential Information to any other person other than its own
employees who reasonably have a need to know such information pursuant
to this Agreement. Fund shall return all such Confidential
Information to Custodian upon termination or expiration of this
Agreement.
B. Fund has been informed that the Portfolio Accounting System is
licensed for use by Custodian from DST Systems, Inc. ("Licensor"), and
Fund acknowledges that Custodian and Licensor have proprietary rights
in and to the Portfolio Accounting System and all other Custodian or
Licensor programs, code, techniques, knowhow, data bases, supporting
documentation, data formats, and procedures, including without
limitation any changes or modifications made at the request or expense
or both of Fund (collectively, the "Protected Information"). Fund
acknowledges that the Protected Information constitutes confidential
material and trade secrets of Custodian and Licensor. Fund shall
preserve the confidentiality of the Protected Information, and Fund
hereby acknowledges that any unauthorized use, misuse, disclosure or
taking of Protected Information, residing or existing internal or
external to a computer, computer system, or computer network, or the
knowing and unauthorized accessing or causing to be accessed of any
computer, computer system, or computer network, may be subject to
civil liabilities and criminal penalties under applicable law. Fund
shall so inform employees and agents who have access to the Protected
Information or to any computer equipment capable
Page 33 - CUSTODY AND INVESTMENT ACCOUNTING AGREEMENT
<PAGE>
of accessing the same. Licensor is intended to be and shall be a
third party beneficiary of the Fund's obligations and undertakings
contained in this paragraph.
10. MULTIPLE PORTFOLIOS. If Fund is comprised of more than one Portfolio:
A. Each Portfolio shall be regarded for all purposes hereunder as a
separate party apart from each other Portfolio. Unless the context
otherwise requires, with respect to every transaction covered by this
Agreement, every reference herein to the Fund shall be deemed to
relate solely to the particular Portfolio to which such transaction
relates. Under no circumstances shall the rights, obligations or
remedies with respect to a particular Portfolio constitute a right,
obligation or remedy applicable to any other Portfolio. The use of
this single document to memorialize the separate agreement of each
Portfolio is understood to be for clerical convenience only and shall
not constitute any basis for joining the Portfolios for any reason.
B. Additional Portfolios may be added to this Agreement, provided that
Custodian consents to such addition. Rates or charges for each
additional Portfolio shall be as agreed upon by Custodian and Fund in
writing.
11. LIMITATION OF LIABILITY. Notice is hereby given that a copy of Fund's
Certificate of Trust and all amendments thereto is on file with the
Secretary of State of the state of its organization; that this Agreement
has been executed on behalf of Fund by the undersigned duly authorized
representative of Fund in his/her capacity as such and not individually;
and that the obligations of this Agreement shall only be binding upon the
assets and property of Fund and shall not be binding upon any trustee,
officer or shareholder of Fund individually.
Page 34 - CUSTODY AND INVESTMENT ACCOUNTING AGREEMENT
<PAGE>
12. MISCELLANEOUS.
A. This Agreement shall be construed according to, and the rights and
liabilities of the parties hereto shall be governed by, the laws of
the State of Missouri, without reference to the choice of laws
principles thereof.
B. All terms and provisions of this Agreement shall be binding upon,
inure to the benefit of and be enforceable by the parties hereto and
their respective successors and permitted assigns.
C. The representations and warranties, the indemnifications extended
hereunder, and the provisions of Section 9. hereof are intended to and
shall continue after and survive the expiration, termination or
cancellation of this Agreement.
D. No provisions of the Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed
by each party hereto.
E. The failure of either party to insist upon the performance of any
terms or conditions of this Agreement or to enforce any rights
resulting from any breach of any of the terms or conditions of this
Agreement, including the payment of damages, shall not be construed as
a continuing or permanent waiver of any such terms, conditions, rights
or privileges, but the same shall continue and remain in full force
and effect as if no such forbearance or waiver had occurred. No
waiver, release or discharge of any party's rights hereunder shall be
effective unless contained in a written instrument signed by the party
sought to be charged.
Page 35 - CUSTODY AND INVESTMENT ACCOUNTING AGREEMENT
<PAGE>
F. The captions in the Agreement are included for convenience of
reference only, and in no way defer or limit any of the provisions
hereof or otherwise affect their construction or effect.
G. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which together shall
constitute one and the same instrument.
H. If any provision of this Agreement shall be determined to be invalid
or unenforceable, the remaining provisions of this Agreement shall not
be affected thereby, and every provision of this Agreement shall
remain in full force and effect and shall remain enforceable to the
fullest extent permitted by applicable law.
I. This Agreement may not be assigned by either party hereto without the
prior written consent of the other party.
J. Neither the execution nor performance of this Agreement shall be
deemed to create a partnership or joint venture by and between
Custodian and Fund.
K. Except as specifically provided herein, this Agreement does not in any
way affect any other agreements entered into among the parties hereto
and any actions taken or omitted by either party hereunder shall not
affect any rights or obligations of the other party hereunder.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective duly authorized officers.
Page 36 - CUSTODY AND INVESTMENT ACCOUNTING AGREEMENT
<PAGE>
INVESTORS FIDUCIARY TRUST COMPANY
By:
----------------------------------------------
Title:
--------------------------------------------
CRABBE HUSON FUNDS
By:
----------------------------------------------
Title:
-------------------------------------------
Page 37 - CUSTODY AND INVESTMENT ACCOUNTING AGREEMENT
<PAGE>
EXHIBIT A
INVESTORS FIDUCIARY TRUST COMPANY
AVAILABILITY SCHEDULE BY TRANSACTION TYPE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
TRANSACTION DTC PHYSICAL FED
----------- --- -------- ---
- ------------------------------------------------------------------------------------------------------------------
TYPE CREDIT DATE FUNDS TYPE CREDIT DATE FUNDS TYPE CREDIT DATE FUNDS TYPE
---- ----------- ---------- ----------- ---------- ----------- ----------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Calls Puts As Received C or F* As Received C or F*
- ------------------------------------------------------------------------------------------------------------------
Maturities As Received C or F* Mat. Date C or F* Mat. Date F
- ------------------------------------------------------------------------------------------------------------------
Tender Reorgs. As Received C As Received C N/A
- ------------------------------------------------------------------------------------------------------------------
Dividends Paydate C Paydate C N/A
- ------------------------------------------------------------------------------------------------------------------
Floating Rate Int. Paydate C Paydate C N/A
- ------------------------------------------------------------------------------------------------------------------
Floating Rate Int. N/A As Rate Received C N/A
(No Rate)
- ------------------------------------------------------------------------------------------------------------------
Mtg. Backed P&I Paydate C Paydate + 1 Bus. C Paydate F
Day
- ------------------------------------------------------------------------------------------------------------------
Fixed Rate Int. Paydate C Paydate C Paydate F
- ------------------------------------------------------------------------------------------------------------------
Euroclear N/A C Paydate C
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
LEGEND
C = Clearinghouse Funds
F = Fed Funds
N/A = Not Applicable
* Availability based on how received.
<PAGE>
EXHIBIT 99.9(a)
ADMINISTRATION AGREEMENT
Agreement dated as of , 1996 by and between State Street Bank and
Trust Company, a Massachusetts trust company (the "Administrator"), and Crabbe
Huson Funds (the "Fund").
WHEREAS, the Fund is registered as an open-end, management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Fund desires to retain the Administrator to furnish certain
administrative services to the Fund, and the Administrator is willing to furnish
such services on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto agree as follows:
1. APPOINTMENT OF ADMINISTRATOR
The Fund hereby appoints the Administrator to act as administrator with
respect to the Fund for purposes of providing certain administrative services
for the period and on the terms set forth in this Agreement. The Administrator
accepts such appointment and agrees to render the services stated herein.
The Fund will initially consist of the portfolio(s) and/or class(es) of
shares (each an "Investment Fund") listed in Schedule A to this Agreement. In
the event that the Fund establishes one or more additional Investment Funds with
respect to which it wishes to retain the Administrator to act as administrator
hereunder, the Fund shall notify the Administrator in writing. Except as
otherwise provided in this Section 1, upon written acceptance by the
Administrator, such Investment Fund shall become subject to the provisions of
this Agreement to the same extent as the existing Investment Funds, except to
the extent that such provisions (including those relating to the compensation
and expenses payable by the Fund and its Investment Funds) may be modified with
respect to each additional Investment Fund in writing by the Fund and the
Administrator at the time of the addition of the Investment Fund. Upon written
notice to the Administrator that the Fund wishes to retain the Administrator to
act as administrator hereunder for the Oregon Municipal Bond Fund, Crabbe Huson
Special Fund, Crabbe Huson Asset Allocation Fund, Crabbe Huson Equity Fund,
Crabbe Huson Income, and Crabbe Huson U.S. Government Money Market Fund, the
Administrator shall accept such Investment Funds.
2. DELIVERY OF DOCUMENTS
The Fund will promptly deliver to the Administrator copies of each of the
following documents and all future amendments and supplements, if any:
a. The Fund's charter document and by-laws;
b. The Fund's currently effective registration statement under the
Securities Act of 1933, as amended (the "1933 Act") and the 1940 Act
and the Fund's Prospectus and Statement of Additional Information and
all amendments and supplements thereto as presently in effect;
c. Certified copies of the resolutions of the Board of Trustees of the
Fund (the "Board") authorizing (1) this Agreement and (2) certain
individuals on behalf of the Fund to (a)
<PAGE>
give instructions to the Administrator pursuant to this Agreement and
(b) sign checks and pay expenses;
d. A copy of the investment advisory agreement between the Fund and its
investment adviser; and
e. Such other certificates, documents or opinions which the Administrator
may, in its reasonable discretion, deem necessary or appropriate in
the proper performance of its duties.
3. REPRESENTATION AND WARRANTIES OF THE ADMINISTRATOR
The Administrator represents and warrants to the Fund that:
a. It is a Massachusetts trust company , duly organized, existing and in
good standing under the laws of The Commonwealth of Massachusetts;
b. It has the corporate power and authority to carry on its business in
the State of Delaware;
c. All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement;
d. No legal or administrative proceedings have been instituted or
threatened which would impair the Administrator's ability to perform
its duties and obligations under this Agreement; and
e. Its entrance into this Agreement shall not cause a material breach or
be in material conflict with any other agreement or obligation of the
Administrator or any law or regulation applicable to it.
4. REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to the Administrator that:
a. It is a business trust, duly organized and existing and in good
standing under the laws of Delaware;
b. It has the corporate power and authority under applicable laws and by
its charter document and by-laws to enter into and perform this
Agreement;
c. All requisite proceedings have been taken to authorize it to enter
into and perform this Agreement;
d. It is an investment company properly registered under the 1940 Act;
e. A registration statement under the 1933 Act and the 1940 Act has been
filed and will be effective and remain effective during the term of
this Agreement. The Fund also warrants
2
<PAGE>
to the Administrator that as of the effective date of this Agreement,
all necessary filings under the securities laws of the states in which
the Fund offers or sells its shares have been made;
f. No legal or administrative proceedings have been instituted or
threatened which would impair the Fund's ability to perform its duties
and obligation under this Agreement;
g. Its entrance into this Agreement shall not cause a material breach or
be in material conflict with any other agreement or obligation of the
Fund or any law or regulation applicable to it; and
h. As of the close of business on the date of this Agreement, the Fund is
authorized to issue an unlimited number of shares of beneficial
interest.
5. ADMINISTRATION SERVICES
The Administrator shall provide the following services, in each case,
subject to the control, supervision and direction of the Fund and the review and
comment by the Fund's auditors and legal counsel and in accordance with
procedures which may be established from time to time between the Fund and the
Administrator:
a. Oversee the determination and publication of the Fund's net asset
value for each Investment Fund in accordance with the Fund's policy as
adopted from time to time by the Board;
b. Oversee the maintenance by each Investment Fund's custodian of certain
books and records of that Investment Fund as required under Rule
31a-1(b) of the 1940 Act;
c. Prepare each Investment Fund's federal, state and local income tax
returns for review by the Investment Fund's independent accountants
and filing by the Fund's treasurer;
d. Review expense calculation and perform expense allocation for each
Investment Fund subject to approval by officers of the Fund and
arrange for payment of each Investment Fund's expenses;
e. Prepare for review and approval by officers of the Fund financial
information for the Fund's semi-annual and annual reports, proxy
statements and other communications required or otherwise to be sent
to Fund shareholders, and arrange for the printing and dissemination
of such reports and communications to shareholders;
f. Prepare for review by an officer of and legal counsel for the Fund,
the Fund's periodic financial reports required to be filed with the
Securities and Exchange Commission ("SEC") on Form N-SAR and financial
information (in a camera ready and Edgar format) required by Form N-1A
and such other reports, forms or filings as may be mutually agreed
upon;
3
<PAGE>
g. Prepare reports relating to the business and affairs of each
Investment Fund as may be mutually agreed upon and not otherwise
prepared by each Investment Fund's investment adviser, custodian,
legal counsel or independent accountants;
h. Make such reports and recommendations to the Board concerning the
performance of the independent accountants as the Board may reasonably
request;
i. Make such reports and recommendations to the Board concerning the
performance and fees of the Fund's custodian and transfer and dividend
disbursing agent ("Transfer Agent") as the Board may reasonably
request or deems appropriate;
j. Oversee and review calculations of fees paid to each Investment Fund's
investment adviser, the custodian and the Transfer Agent;
k. Consult with the Fund's officers, independent accountants, legal
counsel, custodian and Transfer Agent in establishing the accounting
policies of each Investment Fund;
l. Review implementation of any dividend reinvestment programs authorized
by the Board;
m. Respond to or refer to the Fund's officers or Transfer Agent,
shareholder inquiries relating to any Investment Fund;
n. Provide periodic testing of portfolios to assist each Investment
Fund's investment adviser in complying with Internal Revenue Code
mandatory qualification requirements, the requirements of the 1940 Act
and each Investment Fund's prospectus limitations as may be mutually
agreed upon;
o. Prepare and file Rule 24f-2 notices;
p. Prepare and file all state registrations of the Fund's securities
pursuant to the specific instructions of the Fund and as detailed in
Schedule C to this Agreement;
q. Monitor the amount of Fund shares sold in each jurisdiction in which
such shares are registered and notify the Fund when a specified
percentage of such shares (as determined by the fund's distributor)
has been sold; and
r. Assist the Fund in determining the amount of Fund shares to register
in each jurisdiction.
The Administrator will also provide the office facilities and the personnel
required by it to perform the services contemplated herein.
6. FEES; EXPENSES; EXPENSE REIMBURSEMENT
The Administrator shall receive from each Investment Fund such compensation
for the Administrator's services provided pursuant to this Agreement as may be
agreed to from time to time in a written fee schedule approved by the parties
and initially set forth in Schedule B to this Agreement. The fees are accrued
daily and billed monthly and shall be due and payable upon receipt of the
invoice. Upon
4
<PAGE>
the termination of this Agreement before the end of any month, the fee for the
part of the month before such termination shall be prorated according to the
proportion which such part bears to the full monthly period and shall be payable
upon the date of termination of this Agreement. In addition, each Investment
Fund shall reimburse the Administrator for the Investment Fund's share of out-
of-pocket costs incurred by the Administrator in connection with this Agreement
as initially set forth in Schedule B.
Each Investment Fund agrees to promptly reimburse the Administrator for any
equipment and supplies specially ordered by or for it through the Administrator
and for any other expenses not contemplated by this Agreement that the
Administrator may incur on the Investment Fund's behalf at the Investment Fund's
request or with the Investment Fund's consent.
The Fund will bear all expenses that are incurred in its operation and
not specifically assumed by the Administrator. Expenses to be borne by the
Fund, include, but are not limited to: organizational expenses; cost of
services of independent accountants and outside legal and tax counsel (including
such counsel's review of the Fund's registration statement, proxy materials,
federal and state tax qualification as a regulated investment company and other
reports and materials prepared by the Administrator under this Agreement); cost
of any services contracted for by the Fund directly from parties other than the
Administrator; cost of trading operations and brokerage fees, commissions and
transfer taxes in connection with the purchase and sale of securities for the
Fund; investment advisory fees; taxes, insurance premiums and other fees and
expenses applicable to its operation; costs incidental to any meetings of
shareholders including, but not limited to, legal and accounting fees, proxy
filing fees and the costs of preparation, printing and mailing of any proxy
materials; costs incidental to Board meetings, including fees and expenses of
Board members; the salary and expenses of any officer, director or employee of
the Fund; costs incidental to the preparation, printing and distribution of the
Fund's registration statements and any amendments thereto and shareholder
reports; cost of typesetting and printing of prospectuses; cost of preparation
(other than the preparation specified in Section 5) and filing of the Fund's tax
returns, Form N-1A and Form N-SAR, and all notices, registrations and amendments
associated with applicable federal and state tax and securities laws; all
applicable registration fees and filing fees required under federal and state
securities laws; fidelity bond and directors' and officers' liability insurance;
and cost of independent pricing services used in computing the Fund's net asset
value.
The Administrator is authorized to and may employ or associate with such
person or persons as the Administrator may deem desirable to assist it in
performing its duties under this Agreement; provided, however, that the
compensation of such person or persons shall be paid by the Administrator and
that the Administrator shall be as fully responsible to the Fund for the acts
and omissions of any such person or persons as it is for its own acts and
omissions.
7. INSTRUCTIONS AND ADVICE
At any time the Administrator may apply to any officer of the Fund for
instructions and may consult with its own legal counsel or outside counsel for
the Fund or the independent accountants for the Fund at the expense of the Fund
or the respective Investment Fund, with respect to any matter arising in
connection with the services to be performed by the Administrator under this
Agreement. The Administrator shall advise the Fund of any such consultation
with legal counsel. The Administrator shall not be liable and shall be
indemnified by the Fund for any action taken or omitted by it in good faith in
reliance upon any such instructions or advice or upon any paper or document
believed by it to be genuine and to have been signed by the proper person or
persons. The Administrator shall not be held to have
5
<PAGE>
notice of any change of authority of any person until receipt of written notice
thereof from the Fund. Nothing in this paragraph shall be construed as imposing
upon the Administrator any obligation to seek such instructions or advice, or to
act in accordance with such advice when received.
8. LIMITATION OF LIABILITY AND INDEMNIFICATION
The Administrator shall be responsible for the performance of only such
duties as are set forth in this Agreement and except as otherwise provided under
Section 6, shall have no responsibility for the actions or activities of any
other party, including other service providers. The Administrator shall have no
liability for any error of judgement or mistake of law or for any loss or damage
resulting from the performance or nonperformance of its duties hereunder unless
solely caused by or resulting from the negligence or willful misconduct of the
Administrator, its officers or employees. The Administrator shall not be liable
for any consequential damages of any kind whatsoever (including, without
limitation, attorney's fees) under any provision of this Agreement or for any
such damages arising out of any act or failure to act hereunder. In any event,
the Administrator's liability under this Agreement shall be limited to an amount
equal to its total annual compensation earned and fees paid hereunder during the
preceding twelve months multiplied by two and one-half (2.5) for any liability
or loss suffered by the Fund or any Investment Fund including, but not limited
to, any liability relating to qualification of the Fund or one of the Investment
Funds as a regulated investment company or any liability relating to the Fund's
and Investment Fund's compliance with any federal or state tax or securities
statute, regulation or ruling.
The Administrator shall not be responsible or liable for any failure or
delay in performance of its obligations under this Agreement arising out of or
caused, directly or indirectly, by circumstances beyond its control, including
without limitation, work stoppage, power or other mechanical failure, computer
virus, natural disaster, governmental action or communication disruption.
Each Investment Fund shall indemnify and hold the Administrator harmless
from all loss, cost, damage and expense, including reasonable fees and expenses
for counsel, incurred by the Administrator resulting from any claim, demand,
action or suit in connection with the Administrator's acceptance of this
Agreement on behalf of such Investment Fund, any action or omission by it in the
performance of its duties hereunder, or as a result of acting upon any
instructions reasonably believed by it to have been duly authorized by the Fund
on such Investment Fund's behalf, provided that this indemnification shall not
apply to actions or omissions of the Administrator, its officers or employees in
cases of its or their own negligence or willful misconduct.
The Fund will be entitled to participate at its own expense in the defense,
or, if it so elects, to assume the defense of any suit brought to enforce any
liability subject to the indemnification provided above. In the event the Fund
elects to assume the defense of any such suit and retain counsel, the
Administrator or any of its affiliated persons, named as defendant or defendants
in the suit, may retain additional counsel but shall bear the fees and expenses
of such counsel unless (i) the Fund shall have specifically authorized the
retaining of such counsel or (ii) the Administrator shall have determined in
good faith that the retention of such counsel is required as a result of a
conflict of interest.
The indemnification contained herein shall survive the termination of this
Agreement.
6
<PAGE>
9. CONFIDENTIALITY
The Administrator agrees that, except as otherwise required by law or in
connection with any required disclosure to a banking or other regulatory
authority, it will keep confidential all records and information in its
possession relating to the Fund or its shareholders or shareholder accounts and
will not disclose the same to any person except at the request or with the
written consent of the Fund.
10. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS; RECORDS
The Fund assumes full responsibility for complying with all securities,
tax, commodities and other laws, rules and regulations applicable to it;
provided, however, that the foregoing does not limit the Administrator's
responsibility to the Fund for the performance of its duties under this
Agreement as determined in accordance with Section 8 of this Agreement.
In compliance with the requirements of Rule 31a-3 under the 1940 Act, the
Administrator agrees that all records which it maintains for the Fund shall at
all times remain the property of the Fund, shall be readily accessible during
normal business hours, and shall be promptly surrendered upon the termination of
the Agreement or otherwise on written request. The Administrator further agrees
that all records which it maintains for the Fund pursuant to Rule 31a-1 under
the 1940 Act will be preserved for the periods prescribed by Rule 31a-2 under
the 1940 Act unless any such records are earlier surrendered as provided above.
Records shall be surrendered in usable machine-readable form.
11. SERVICES NOT EXCLUSIVE
The services of the Administrator to the Fund are not to be deemed
exclusive, and the Administrator shall be free to render similar services to
others. The Administrator shall be deemed to be an independent contractor and
shall, unless otherwise expressly provided herein or authorized by the Fund from
time to time, have no authority to act or represent the Fund in any way or
otherwise be deemed an agent of the Fund.
12. TERM, TERMINATION AND AMENDMENT
This Agreement shall become effective on the date of this agreement. The
Agreement shall remain in effect until August 1, 1997, and shall automatically
continue in effect thereafter with respect to the Fund unless terminated in
writing by either party at the end of such period or thereafter on sixty (60)
days' prior written notice. Termination of this Agreement with respect to any
given Investment Fund shall in no way affect the continued validity of this
Agreement with respect to any other Investment Fund. Upon termination of this
Agreement, the Fund shall pay to the Administrator such compensation and any
reimbursable expenses as may be due under the terms hereof as of the date of
such termination, including reasonable out-of-pocket expenses associated with
such termination. This Agreement may be modified or amended from time to time
by mutual written agreement of the parties hereto.
13. NOTICES
Any notice or other communication authorized or required by this Agreement
to be given to either party shall be in writing and deemed to have been given
when delivered in person or by confirmed facsimile, or posted by certified mail,
return receipt requested, to the following address (or such other
7
<PAGE>
address as a party may specify by written notice to the other): if to the Fund:
Crabbe Huson Funds, One Financial Center, 121 S.W. Morrison, Suite 1400,
Portland, OR 97204, Attn: Cheryl A. Burgermeister, fax: 503-295-2939; if to
the Administrator: State Street Bank and Trust Company, 1776 Heritage Drive,
North Quincy, Massachusetts 02171, Attn: David M. Elwood, Vice President and
Senior Counsel, fax: (617) 985-2497.
14. NON-ASSIGNABILITY
This Agreement shall not be assigned by any of the parties hereto without
the prior consent in writing of the other party, except that the Administrator
may assign this Agreement to a successor of all or a substantial portion of its
business, or to a party controlling, controlled by or under common control with
the Administrator.
15. SUCCESSORS
This Agreement shall be binding on and shall inure to the benefit of the
Fund and the Administrator and their respective successors and permitted
assigns.
16. ENTIRE AGREEMENT
This Agreement contains the entire understanding between the parties hereto
with respect to the subject matter hereof and supersedes all previous
representations, warranties or commitments regarding the services to be
performed hereunder whether oral or in writing.
17. WAIVER
The failure of a party to insist upon strict adherence to any term of this
Agreement on any occasion shall not be considered a waiver nor shall it deprive
such party of the right thereafter to insist upon strict adherence to that term
or any term of this Agreement. Any waiver must be in writing signed by the
waiving party.
18. SEVERABILITY
If any provision of this Agreement is invalid or unenforceable, the balance
of the Agreement shall remain in effect, and if any provision is inapplicable to
any person or circumstance it shall nevertheless remain applicable to all other
persons and circumstances.
19. GOVERNING LAW
This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the laws of The Commonwealth of Massachusetts.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the date first written above.
CRABBE HUSON FUNDS
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
STATE STREET BANK AND TRUST COMPANY
By:
-------------------------------------
Name: Ronald E. Logue
Title: Executive Vice President
9
<PAGE>
ADMINISTRATION AGREEMENT
Crabbe Huson Funds
SCHEDULE A
LISTING OF INVESTMENT FUNDS
Crabbe Huson Small Cap Fund
10
<PAGE>
ADMINISTRATION AGREEMENT
Crabbe Huson Funds
SCHEDULE B
FEES AND EXPENSES
Compensation under this Agreement shall be as provided in the Fee Schedule to
the Administration Agreement between the Administrator and the Crabbe Huson
Funds dated as of August 1, 1995.
11
<PAGE>
ADMINISTRATION AGREEMENT
Crabbe Huson Funds
SCHEDULE C
REGISTRATION OF FUND SHARES
WITH STATE SECURITIES ADMINISTRATORS
AT THE SPECIFIC DIRECTION OF THE FUND, THE ADMINISTRATOR WILL PREPARE REQUIRED
DOCUMENTATION AND REGISTER FUND SHARES IN ACCORDANCE WITH THE SECURITIES LAWS OF
EACH JURISDICTION IN WHICH FUND SHARES ARE TO BE OFFERED OR SOLD PURSUANT TO
INSTRUCTIONS GIVEN TO THE ADMINISTRATOR BY THE FUND.
THE FUND SHALL BE SOLELY RESPONSIBLE FOR THE DETERMINATION (i) OF THOSE
JURISDICTIONS IN WHICH FUND SHARES ARE TO BE REGISTERED AND (ii) THE NUMBER OF
FUND SHARES TO BE REGISTERED IN EACH SUCH JURISDICTION. IN THE EVENT THAT THE
ADMINISTRATOR BECOMES AWARE OF (a) THE SALE OF FUND SHARES IN A JURISDICTION IN
WHICH FUND SHARES ARE NOT REGISTERED FOR OFFER AND SALE OR (b) THE SALE OF FUND
SHARES IN EXCESS OF THE NUMBER OF FUND SHARES REGISTERED IN SUCH JURISDICTION,
THE ADMINISTRATOR SHALL REPORT SUCH INFORMATION TO THE FUND, AND IT SHALL BE THE
FUND'S RESPONSIBILITY TO DETERMINE APPROPRIATE CORRECTIVE ACTION AND INSTRUCT
THE ADMINISTRATOR WITH RESPECT THERETO.
The registration services shall consist of the following:
1. Filing of Fund's Application to Register Securities and amendments, if
applicable;
2. Filing of amendments to the Fund's registration statement;
3. Filing Fund sales reports and advertising literature where required;
4. Payment at the expense of the Fund of all Fund state registration and
filing fees;
5. Filing the Prospectuses and Statements of Additional Information and any
amendments or supplements thereto;
6. Filing of annual reports and proxy statements where required; and
7. The performance of such additional services as the Administrator and the
Fund may agree upon in writing.
Unless otherwise specified in writing by the Administrator, registration
services by the Administrator shall not include determining the availability of
exemptions under a jurisdiction's blue sky law. Any such determination shall be
made by the Fund or its legal counsel. In connection with the services
described herein, the Fund shall cause the Fund's distributor to issue in favor
of the Administrator a power of attorney to register Fund shares on behalf of
the Fund, which power of attorney shall be substantially in the form of Exhibit
I attached hereto.
12
<PAGE>
EXHIBIT I
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, as of ________________, 1996 that the
undersigned Crabbe Huson Securities Inc., the distributor (the
"Distributor") with respect to the Crabbe Huson Funds (the "Fund") with
principal offices at One Financial Center, 121 S.W. Morrison, Suite 1425,
Portland, OR 97204, makes, constitutes, and appoints STATE STREET BANK AND
TRUST COMPANY (the "Administrator") with principal offices at 225 Franklin
Street, Boston, Massachusetts its lawful attorney-in-fact for it to do as
if it were itself acting, the following:
1. REGISTRATION OF FUND SHARES. The power to register shares of the Fund in
each jurisdiction in which Fund shares are offered or sold and in
connection therewith the power to prepare, execute, and deliver and file
any and all Fund applications, including without limitation, applications
to register shares, consents, including consents to service of process,
reports, including without limitation, all periodic reports, claims for
exemption, or other documents and instruments now or hereafter required or
appropriate in the judgement of the Administrator in connection with the
registration of Fund shares.
2. AUTHORIZED SIGNERS. Pursuant to this Limited Power of Attorney,
individuals holding the titles of Officer, Blue Sky Manager, or Senior Blue
Sky Administrator at the Administrator shall have authority to act on
behalf of the Distributor with respect to item 1 above.
The execution of this limited power of attorney shall be deemed coupled
with an interest and shall be revocable only upon receipt by the
Administrator of such termination of authority. Nothing herein shall be
construed to constitute the appointment of the Administrator as or
otherwise authorize the Administrator to act as an officer, director or
employee of the Distributor or the Fund.
IN WITNESS WHEREOF, the Distributor has caused this Agreement to be executed in
its name and on its behalf by and through its duly authorized officer, as of the
date first written above.
CRABBE HUSON SECURITIES INC.
By:
-------------------------
Name:
-----------------------
Title:
----------------------
13
<PAGE>
EXHIBIT 99.9(b)
TRANSFER AGENCY AND SERVICE AGREEMENT
between
CRABBE HUSON FUNDS
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
PAGE
Article 1 TERMS OF APPOINTMENT; DUTIES OF THE BANK. . . . . . . . 1
Article 2 FEES AND EXPENSES . . . . . . . . . . . . . . . . . . . 3
Article 3 REPRESENTATIONS AND WARRANTIES OF THE BANK. . . . . . . 3
Article 4 REPRESENTATIONS AND WARRANTIES OF THE FUNDS . . . . . . 4
Article 5 DATA ACCESS AND PROPRIETARY INFORMATION . . . . . . . . 4
Article 6 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . 5
Article 7 STANDARD OF CARE. . . . . . . . . . . . . . . . . . . . 6
Article 8 COVENANTS OF THE TRUST AND THE BANK . . . . . . . . . . 6
Article 9 TERMINATION OF AGREEMENT. . . . . . . . . . . . . . . . 7
Article 10 ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . 8
Article 11 AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . 8
Article 12 MASSACHUSETTS LAW TO APPLY. . . . . . . . . . . . . . . 8
Article 13 FORCE MAJEURE . . . . . . . . . . . . . . . . . . . . . 8
Article 14 CONSEQUENTIAL DAMAGES . . . . . . . . . . . . . . . . . 8
Article 15 MERGER OF AGREEMENT . . . . . . . . . . . . . . . . . . 9
Article 16 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . 9
Article 17 MULTIPLE FUNDS. . . . . . . . . . . . . . . . . . . . . 9
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the _____ day of ____________________, 199___, between
Crabbe Huson Funds, a Delaware business trust, (the "Trust"), on behalf of the
Mutual Funds listed on the attached schedule (as may be amended from time to
time having their principal offices and places of business at 121 SW Morrison,
Suite 1410, Portland, Oregon 97204, (the "Funds"), and STATE STREET BANK AND
TRUST COMPANY, a Massachusetts trust company having its principal office and
place of businesses at 225 Franklin Street, Boston, Massachusetts 02110 (the
"Bank").
WHEREAS, the Trust desires to appoint the Bank as its transfer agent,
dividend disbursing agent, custodian of certain retirement plans and agent in
connection with certain other activities, and the Bank desires to accept such
appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
Article 1 TERMS OF APPOINTMENT; DUTIES OF THE BANK
1.1 Subject to the terms and conditions set forth in this Agreement, the
Trust hereby employs and appoints the Bank to act as, and the Bank agrees
to act as its transfer agent for the Funds' authorized and issued shares of
its beneficial interests, no par value, ("Shares"), dividend disbursing
agent, custodian of certain retirement plans and agent in connection with
any accumulation, open-account or similar plans provided to the
shareholders of the Trust ("Shareholders") and set out in the currently
effective prospectus and statement of additional information ("prospectus")
of the Trust, including without limitation any periodic investment plan or
periodic withdrawal program.
1.2 The Bank agrees that it will perform the following services:
(a) In accordance with procedures established from time to time
by agreement between the Trust and the Bank, the Bank shall:
(i) Receive for acceptance, orders for the purchase of Shares,
and promptly deliver payment and appropriate documentation
thereof to the Custodian of each of the Funds as authorized
by the Trust's Board of Trustees of the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate number of
Shares and hold such Shares in the appropriate Shareholder
account;
(iii) Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation thereof
to the Custodian;
(iv) In respect to the transactions in items (i), (ii) and (iii)
above, the Bank shall execute transactions directly with
broker-dealers authorized by the Trust who shall thereby be
deemed to be acting on behalf of the Trust;
(v) At the appropriate time as and when it receives monies paid
to it by the Custodian with respect to any redemption, pay
over or cause to be paid over in the appropriate manner such
monies as instructed by the redeeming Shareholders;
Page 1 - TRANSFER AGENCY AND SERVICE AGREEMENT
<PAGE>
(vi) Effect transfers of Shares by the registered owners thereof
upon receipt of appropriate instructions;
(vii) Prepare and transmit payments for dividends and
distributions declared by the Funds;
(viii) Issue replacement certificates for those certificates
alleged to have been lost, stolen or destroyed upon receipt
by the Bank of indemnification satisfactory to the Bank and
protecting the Bank and the Funds, and the Bank at its
option, may issue replacement certificates in place of
mutilated stock certificates upon presentation thereof and
without such indemnity;
(ix) Maintain records of account for and advise the Funds and its
Shareholders as to the foregoing; and
(x) Record the issuance of shares of the Funds and maintain
pursuant to SEC Rule 17Ad-10(e) a record of the total number
of shares of the Funds which are authorized, based upon data
provided to it by the Funds, and issued and outstanding.
The Bank shall also provide the Funds on a regular basis
with the total number of shares which are authorized and
issued and outstanding and shall have no obligation, when
recording the issuance of shares, to monitor the issuance of
such shares or to take cognizance of any laws relating to
the issue or sale of such shares, which functions shall be
the sole responsibility of the Trust.
(b) In addition to and neither in lieu nor in contravention of
the services set forth in the above paragraph (a), the Bank
shall: (i) perform the customary services of a transfer
agent, dividend disbursing agent, custodian of certain
retirement plans and, as relevant, agent in connection with
accumulation, open-account or similar plans (including
without limitation any periodic investment plan or periodic
withdrawal program), including but not limited to:
maintaining all Shareholder accounts, preparing Shareholder
meeting lists, mailing proxies, mailing Shareholder reports
and prospectuses to current Shareholders, withholding taxes
on U.S. resident and non-resident alien accounts, preparing
and filing U.S. Treasury Department Forms 1099 and other
appropriate forms required with respect to dividends and
distributions by federal authorities for all Shareholders,
preparing and mailing confirmation forms and statements of
account to Shareholders for all purchases and redemptions of
Shares and other confirmable transactions in Shareholder
accounts, preparing and mailing activity statements for
Shareholders, and providing Shareholder account information
and (ii) provide a system which will enable the Funds to
monitor the total number of Shares sold in each State.
(c) In addition, the Trust shall (i) identify to the Bank in
writing those transactions and assets to be treated as
exempt from blue sky reporting for each State and (ii)
verify the establishment of transactions for each State on
the system prior to activation and thereafter monitor the
daily activity for each State. The responsibility of the
Bank for the Trust's blue sky State registration status is
solely limited to the initial establishment
Page 2 - TRANSFER AGENCY AND SERVICE AGREEMENT
<PAGE>
of transactions subject to blue sky compliance by the Funds
and the reporting of such transactions to the Funds as
provided above.
(d) Procedures as to who shall provide certain of these services
in Article 1 may be established from time to time by
agreement between the Trust and the Bank per the attached
service responsibility schedule. The Bank may at times
perform only a portion of these services and the Trust or
its agent may perform these services on the Funds's behalf.
(e) The Bank shall provide additional services on behalf of the
Trust (i.e., escheatment services) which may be agreed upon
in writing between the Trust and the Bank.
Article 2 FEES AND EXPENSES
2.1 For the performance by the Bank pursuant to this Agreement, the Trust
agrees to pay the Bank an annual maintenance fee for each Shareholder
account as set out in the initial fee schedule attached hereto. Such fees
and out-of-pocket expenses and advances identified under Section 2.2 below
may be changed from time to time subject to mutual written agreement
between the Trust and the Bank.
2.2 In addition to the fee paid under Section 2.1 above, the Trust agrees
to reimburse the Bank for out-of-pocket expenses, including but not limited
to confirmation production, postage, forms, telephone, microfilm,
microfiche, tabulating proxies, records storage, or advances incurred by
the Bank for the items set out in the fee schedule attached hereto. In
addition, any other expenses incurred by the Bank at the request or with
the consent of the Trust, will be reimbursed by the Trust on behalf of the
applicable fund.
2.3 The Trust agrees to pay all fees and reimbursable expenses within five
days following the receipt of the respective billing notice. Postage for
mailing of dividends, proxies, Fund reports and other mailings to all
shareholder accounts shall be advanced to the Bank by the Trust at least
seven (7) days prior to the mailing date of such materials.
Article 3 REPRESENTATIONS AND WARRANTIES OF THE BANK
The Bank represents and warrants to the Trust that:
3.1 It is a trust company duly organized and existing and in good standing
under the laws of the Commonwealth of Massachusetts.
3.2 It is duly qualified to carry on its business in the Commonwealth of
Massachusetts.
3.3 It is empowered under applicable laws and by its Charter and By-Laws
to enter into and perform this Agreement.
3.4 All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement.
3.5 It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
Page 3 - TRANSFER AGENCY AND SERVICE AGREEMENT
<PAGE>
Article 4 REPRESENTATIONS AND WARRANTIES OF THE FUNDS
The Trust represents and warrants to the Bank that:
4.1 It is a Delaware business trust duly organized and existing and in
good standing under the laws of Delaware.
4.2 The Trust is empowered under applicable laws and by its Declaration of
Trust and By-Laws to enter into and perform this Agreement.
4.3 All actions required by said Declaration of Trust and By-Laws have
been taken to authorize the Trust to enter into and perform this Agreement.
4.4 The Trust is an open-end and diversified management investment company
registered under the Investment Company Act of 1940, as amended.
4.5 A registration statement under the Securities Act of 1933, as amended
is currently effective and will remain effective, and appropriate state
securities law filings have been made and will continue to be made, with
respect to all Shares of the Trust being offered for sale.
Article 5 DATA ACCESS AND PROPRIETARY INFORMATION
5.1 The Trust acknowledges that the data bases, computer programs, screen
formats, report formats, interactive design techniques, and documentation
manuals furnished to the Trust by the Bank as part of the Trust's ability
to access certain Fund-related data ("Customer Data") maintained by the
Bank on data bases under the control and ownership of the Bank or other
third party ("Data Access Services") constitute copyrighted, trade secret,
or other proprietary information (collectively, "Proprietary Information")
of substantial value to the Bank or other third party. In no event shall
Proprietary Information be deemed Customer Data. The Trust agrees to treat
all Proprietary Information as proprietary to the Bank and further agrees
that it shall not divulge any Proprietary Information to any person or
organization except as may be provided hereunder. Without limiting the
foregoing, the Trust agrees for itself and its employees and agents:
(a) to access Customer Data solely from locations as may be
designated in writing by the Bank and solely in accordance
with the Bank's applicable user documentation;
(b) to refrain from copying or duplicating in any way the
Proprietary Information;
(c) to refrain from obtaining unauthorized access to any portion
of the Proprietary Information, and if such access is
inadvertently obtained, to inform in a timely manner of such
fact and dispose of such information in accordance with the
Bank's instructions;
(d) to refrain from causing or allowing third-party data
acquired hereunder from being retransmitted to any other
computer facility or other location, except with the prior
written consent of the Bank;
Page 4 - TRANSFER AGENCY AND SERVICE AGREEMENT
<PAGE>
(e) that the Trust shall have access only to those authorized
transactions agreed upon by the parties;
(f) to honor all reasonable written requests made by the Bank to
protect at the Bank's expense the rights of the Bank in
Proprietary Information at common law, under federal
copyright law and under other federal or state law.
Each party shall take reasonable efforts to advise its employees of their
obligations pursuant to this Article 5. The obligations of this Article shall
survive any earlier termination of this Agreement.
5.2 If the Trust notifies the Bank that any of the Data Access Services do
not operate in material compliance with the most recently issued user
documentation for such services, the Bank shall endeavor in a timely manner
to correct such failure. Organizations from which the Bank may obtain
certain data included in the Data Access Services are solely responsible
for the contents of such data and the Trust agrees to make no claim against
the Bank arising out of the contents of such third-party data, including,
but not limited to, the accuracy thereof. DATA ACCESS SERVICES AND ALL
COMPUTER PROGRAMS AND SOFTWARE SPECIFICATIONS USED IN CONNECTION THEREWITH
ARE PROVIDED ON AN AS IS, AS AVAILABLE BASIS. THE BANK EXPRESSLY DISCLAIMS
ALL WARRANTIES EXCEPT THOSE EXPRESSLY STATED HEREIN INCLUDING, BUT NOT
LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
5.3 If the transactions available to the Trust include the ability to
originate electronic instructions to the Bank in order to (i) effect the
transfer or movement of cash or Shares or (ii) transmit Shareholder
information or other information (such transactions constituting a
"COEFI"), then in such event the Bank shall be entitled to rely on the
validity and authenticity of such instruction without undertaking any
further inquiry as long as such instruction is undertaken in conformity
with security procedures established by the Bank from time to time.
Article 6 INDEMNIFICATION
6.1 The Bank shall not be responsible for, and the Trust shall indemnify
and hold the Bank harmless from and against, any and all losses, damages,
costs, charges, counsel fees, payments, expenses and liability arising out
of or attributable to:
(a) All actions of the Bank or its agent or subcontractors
required to be taken pursuant to this Agreement, provided
that such actions are taken in good faith and without
negligence or willful misconduct.
(b) The Trust's lack of good faith, negligence or willful
misconduct which arise out of the breach of any
representation or warranty of the Trust hereunder.
(c) The reliance on or use by the Bank or its agents or
subcontractors of information, records, documents or
services which (i) are received by the Bank or its agents or
subcontractors, and (ii) have been prepared, maintained or
performed by the Trust or any other person or firm on
Page 5 - TRANSFER AGENCY AND SERVICE AGREEMENT
<PAGE>
behalf of the Trust including but not limited to any
previous transfer agent or registrar.
(d) The reliance on, or the carrying out by the Bank or its
agents or subcontractors of any instructions or requests of
the Trust.
(e) The offer or sale of Shares in violation of any requirement
under the federal securities laws or regulations or the
securities laws or regulations of any state that such Shares
be registered in such state or in violation of any stop
order or other determination or ruling by any federal agency
or any state with respect to the offer or sale of such
Shares in such state.
6.2 At any time the Bank may apply to any officer of the Trust for
instructions, and may consult with legal counsel with respect to any matter
arising in connection with the services to be performed by the Bank under
this Agreement, and the Bank and its agents or subcontractors shall not be
liable and shall be indemnified by the Trust for any action taken or
omitted by it in reliance upon such instructions or upon the opinion of
such counsel. The Bank, its agents and subcontractors shall be protected
and indemnified in acting upon any paper or document furnished by or on
behalf of the Trust, reasonably believed to be genuine and to have been
signed by the proper person or persons, or upon any instruction,
information, data, records or documents provided the Bank or its agents or
subcontractors by machine readable input, telex, CRT data entry or other
similar means authorized by the Trust, and shall not be held to have notice
of any change of authority of any person, until receipt of written notice
thereof from the Trust. The Bank, its agents and subcontractors shall also
be protected and indemnified in recognizing stock certificates which are
reasonably believed to bear the proper manual or facsimile signatures of
the officers of the Trust, and the proper countersignature of any former
transfer agent or former registrar, or of a co-transfer agent or co-
registrar.
6.3 In order that the indemnification provisions contained in this Article
6 shall apply, upon the-assertion of a claim for which the Trust may be
required to indemnify the Bank, the Bank shall promptly notify the Trust of
such assertion, and shall keep the Trust advised with respect to all
developments concerning such claim. The Trust shall have the option to
participate with the Bank in the defense of such claim or to defend against
said claim in its own name or in the name of the Bank. The Bank shall in
no case confess any claim or make any compromise in any case in which the
Trust may be required to indemnify the Bank except with the Trust's prior
written consent.
6.4 Limit exposure of individual funds for actions arising by conduct of
other fund.
Article 7 STANDARD OF CARE
7.1 The Bank shall at all times act in good faith and agrees to use its
best efforts within reasonable limits to insure the accuracy of all
services performed under this Agreement, but assumes no responsibility and
shall not be liable for loss or damage due to errors unless said errors are
caused by its negligence, bad faith, or willful misconduct of that of its
employees.
Article 8 COVENANTS OF THE TRUST AND THE BANK
8.1 The Trust shall promptly furnish to the Bank the following:
Page 6 - TRANSFER AGENCY AND SERVICE AGREEMENT
<PAGE>
(a) A certified copy of the resolution of the Board of Trustees
of the Trust authorizing the appointment of the Bank and the
execution and delivery of this Agreement.
(b) A copy of the Declaration of Trust and By-Laws of the Trust
and all amendments thereto.
8.2 The Bank hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Trust for safekeeping of stock
certificates, check forms and facsimile signature imprinting devices, if
any; and for the preparation or use, and for keeping account of, such
certificates, forms and devices.
8.3 The Bank shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the Investment Company Act of 1940, as amended,
and the Rules thereunder, the Bank agrees that all such records prepared or
maintained by the Bank relating to the services to be performed by the Bank
hereunder are the property of the Trust and the applicable Fund and will be
preserved, maintained and made available in accordance with such Section
and Rules, and will be surrendered promptly to the Trust and the applicable
Fund on and in accordance with its request.
8.4 The Bank and the Trust and the applicable Fund agree that all books,
records, information and data pertaining to the business of the other party
which are exchanged or received pursuant to the negotiation or the carrying
out of this Agreement shall remain confidential, and shall not be
voluntarily disclosed to any other person, except as may be required by
law.
8.5 In case of any requests or demands for the inspection of the
Shareholder records of the Trust and the applicable Fund, the Bank will
endeavor to notify the Trust and the applicable Fund and to secure
instructions from an authorized officer of the Trust and the applicable
Fund as to such inspection. The Bank reserves the right, however; to
exhibit the Shareholder records to any person whenever it is advised by its
counsel that it may be held liable for the failure to exhibit the
Shareholder records to such person.
Article 9 TERMINATION OF AGREEMENT
9.1 This Agreement shall continue for a period of one year (the "Initial
Term") and be renewed or terminated as stated below.
9.2 This Agreement may be terminated or renewed after the Initial Term by
either party upon sixty (60) days written notice to the other.
9.3 Should the Trust exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and material will be borne
by the Trust. Additionally, the Bank reserves the right to charge for any
other reasonable expenses associated with such termination.
9.4 Should either party terminate before the Initial Term, the terminating
party shall reimburse the other party for all reasonable costs and out-of-
pocket expenses incurred by
Page 7 - TRANSFER AGENCY AND SERVICE AGREEMENT
<PAGE>
the other party associated with the movement of records and material from
the prior transfer agent to the Bank during the transition or conversation
from the prior transfer agent.
Article 10 ASSIGNMENT
10.1 Except as provided in Section 10.3 below, neither this Agreement nor
any rights or obligations hereunder may be assigned by either party without
the written consent of the other party.
10.2 This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
10.3 The Bank may, without further consent on the part of the Funds,
subcontract for the performance hereof with (i) Boston Financial Data
Services, Inc., a Massachusetts corporation ("BFDS") which is duly
registered as a transfer agent pursuant to Section 17A(c)(1) of the
Securities Exchange Act of 1934, as amended ("Section 17A(c)(1)"), (ii) a
BFDS subsidiary duly registered as a transfer agent pursuant to Section
17A(c)(1) or (iii) a BFDS affiliate; provided, however, that the Bank shall
be as fully responsible to the Funds for the acts and omissions of any
subcontractor as it is for its own acts and omissions.
Article 11 AMENDMENT
11.1 This Agreement may be amended or modified by a written agreement
executed by both parties and authorized or approved by a resolution of the
Board of Trustees of the Trust.
Article 12 MASSACHUSETTS LAW TO APPLY
12.1 This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
Article 13 FORCE MAJEURE
13.1 In the event either party is unable to perform its obligations under
the terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other
causes reasonably beyond its control, such party shall not be liable for
damages to the other for any damages resulting from such failure to perform
or otherwise from such causes.
Article 14 CONSEQUENTIAL DAMAGES
14.1 Neither party to this Agreement shall be liable to the other party
for Consequential damages under any provision of this Agreement or for any
consequential damages arising out of any act or failure to act hereunder.
Page 8 - TRANSFER AGENCY AND SERVICE AGREEMENT
<PAGE>
Article 15 MERGER OF AGREEMENT
15.1 This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject
matter hereof whether oral or written.
Article 16 COUNTERPARTS
16.1 This Agreement may be executed by the parties hereto on any number of
counterparts, and all of said counterparts taken together shall be deemed
to constitute one and the same instrument.
Article MULTIPLE FUNDS
17.1 Each Fund shall be regarded for all purposes hereunder as a separate
party apart from each other Fund. Unless the context otherwise requires,
with respect to every transaction covered by this Agreement, every
reference herein to the Funds or the Trust shall be deemed to relate to the
particular Fund to which such transaction relates. Under no circumstances
shall the rights, obligations or remedies with respect to a particular Fund
constitute a right, obligation or remedy applicable to any other Fund. The
use of this single document to memorialize the separate agreement of the
Trust on behalf of each Fund is understood to be for clerical convenience
only and shall not constitute any basis for joining the Funds for any
reason.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
BY:
---------------------------------------
ATTEST:
- ------------------------------------
STATE STREET BANK AND TRUST COMPANY
BY:
---------------------------------------
Executive Vice President
ATTEST:
- ------------------------------------
Page 9-TRANSFER AGENCY AND SERVICE AGREEMENT
<PAGE>
STATE STREET BANK & TRUST COMPANY
FUND SERVICE RESPONSIBILITIES
Service Performed Responsibility
- ----------------- --------------
Bank Fund
---- ----
1. Receives orders for the purchase of Shares. X
2. Issue Shares and hold Shares in Shareholders X
accounts.
3. Receive redemption requests. X
4. Effect transactions 1-3 above directly with broker- X
dealers.
5. Pay over monies to redeeming Shareholders. X
6. Effect transfers of Shares. X
7. Prepare and transmit dividends and distributions. X
8. Issue Replacement Certificates. X
9. Reporting of abandoned property. X
10. Maintain records of account. X
11. Maintain and keep a current and accurate control X
book for each issue of securities.
12. Mail proxies. X
13. Mail Shareholder reports. X
14. Mail prospectuses to current Shareholders. X
15. Withhold taxes on U.S. resident and non-resident X
alien accounts.
16. Prepare and file U.S. Treasury Department forms. X
17. Prepare and mail account and confirmation X
statements for Shareholders.
18. Provide Shareholder account information. X
Page 10 - TRANSFER AGENCY AND SERVICE AGREEMENT
<PAGE>
19. Blue sky reporting. X
* Such services are more fully described in article 1.2 (A), (b) and (c) of
the Agreement.
BY:
---------------------------------------
ATTEST:
- ----------------------------------
STATE STREET BANK AND TRUST COMPANY
BY:
---------------------------------------
EXECUTIVE VICE PRESIDENT
ATTEST:
- ----------------------------------
Page 11 - TRANSFER AGENCY AND SERVICE AGREEMENT
<PAGE>
FUND SCHEDULE
* Crabbe Huson Small Cap Fund
Page 12 - TRANSFER AGENCY AND SERVICE AGREEMENT
<PAGE>
EXHIBIT 99.10
[DAVIS WRIGHT TREMAINE LETTERHEAD]
January 31, 1996
Crabbe Huson Funds
121 SW Morrison
Suite 1400
Portland, OR 97204
Dear Sirs:
This opinion is being furnished in connection with the registration by
Crabbe Huson Funds, a Delaware business trust (the "Trust") of an unlimited
number of shares of beneficial interest, no par value (the "Beneficial
Interests"), pursuant to the Trust's registration statement on Form N1-A, as
amended (the "Registration Statement"), under the Securities Act of 1933 and the
Investment Company Act of 1940.
As counsel for the Trust, we are familiar with the proceedings taken
by it in connection with the authorization, issuance and sale of the Beneficial
Interests, including the adoption of a Declaration of Trust authorizing the
issuance of the Beneficial Interests computed at a price determined in the
manner described in the Registration Statement. In addition, we have examined
and are familiar with the Trust's Declaration of Trust and Bylaws, both as
amended to the date of this opinion, and such other documents as we have deemed
relevant to the matters referred to in this opinion.
We are members of the Oregon Bar and do not express herein any opinion
concerning any law other than the laws of the State of Oregon.
Based upon the foregoing, we are of the opinion that the Beneficial
Interests, upon issuance and sale in the manner referred to in the Registration
Statement, will be legally issued, fully paid and non-assessable by the Trust.
We hereby consent to the filing of this Opinion as an exhibit to the
Registration Statement and to the use of our name in the Registration Statement.
DAVIS WRIGHT TREMAINE
/S/ DAVIS WRIGHT TREMAINE
<PAGE>
EXHIBIT 99.11
INDEPENDENT AUDITORS' CONSENT
The Board of Trustees and Shareholder
Crabbe Huson Funds:
We consent to the inclusion of our report dated January 30, 1996, on the
Crabbe Huson Small Cap Fund presently the one series constituting the Crabbe
Huson Funds, included in the Crabbe Huson Funds Pre-Effective Amendment No. 1
to the Registration Statement No. 33-64363 on Form N-1A under the Securities
Act of 1933 and Amendment No. 1 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.
KPMG PEAT MARWICK LLP
/S/ KPMG PEAT MARWICK LLP
Portland, Oregon
February 8, 1996
<PAGE>
EXHIBIT 99.13
SUBSCRIPTION AGREEMENT
BETWEEN CRABBE HUSON FUNDS AND
THE CRABBE HUSON GROUP, INC.
- --------------------------------------------------------------------------------
This Subscription Agreement ("Agreement") is by and between Crabbe Huson
Funds, a Delaware business trust, (the Company") and The Crabbe Huson Group,
Inc., an Oregon corporation ("Subscriber").
The Subscriber subscribes for the number of shares of beneficial interest
of the Crabbe Huson Small Cap Fund series (the "Fund") of the Company set forth
opposite its name (the "Initial Shares").
<TABLE>
<CAPTION>
Subscriber Consideration Paid No. of Shares
- ---------- ------------------ -------------
<S> <C> <C>
The Crabbe Huson Group, Inc. $100,000.00 10,000
</TABLE>
The Subscriber understands and acknowledges that it is acquiring the
Initial Shares without a view to distribution or resale, and the Subscriber has
no present intention of redeeming or selling its shares. Company and Subscriber
both understand and agree that the costs incurred in connection with the
organization and registration as an investment company under the Investment
Company Act of 1940 were initially paid by Subscriber and will be repaid to
Subscriber by Fund. The amortization of such expenses payable by Subscriber on
behalf of the Company have been deferred and will be amortized by the Company
over 60 months based upon the projected assets expected in the Fund during such
period beginning at the commencement of operations. If any of the Initial
Shares of the Company are redeemed during the amortization period, the amount
paid by the Company to Subscriber on any withdrawal of Initial Shares in the
Company will be reduced by a portion of the unamortized organization expenses,
determined by multiplying the unamortized expenses by a fraction the numerator
of which is the value of the Initial Shares redeemed and the denominator of
which is the value of the Initial Shares at the time of this subscription after
taking into account any prior redemptions of such Initial Shares. Subscriber
agrees to require any subsequent holder of its shares to consent to the terms of
this subscription agreement prior to the transfer of the shares to the
subsequent holder.
1 - STOCK SUBSCRIPTION AGREEMENT
<PAGE>
By signing below, the Subscriber agrees to the above terms. DATED this
30th day of January, 1996.
CRABBE HUSON FUNDS
- -----------------------------------------
By: Richard S. Huson
Its: President
THE CRABBE HUSON GROUP, INC.
- -----------------------------------------
By: James E. Crabbe
Its: President
2 - STOCK SUBSCRIPTION AGREEMENT
<PAGE>
EXHIBIT 99.15
CRABBE HUSON FUNDS
DISTRIBUTION PLAN
DISTRIBUTION PLAN, as of _______________, 1996, of Crabbe Huson Funds,
a Delaware business trust (the "Trust").
RECITALS
1. The Trust has been organized to operate as an open-end management
investment company and is registered under the Investment Company Act of 1940
(collectively with the rules and regulations promulgated thereunder, the "1940
Act").
2. The Trustees of the Trust under the Trust's Declaration of Trust
are authorized to issue an unlimited number of shares of beneficial interest of
the Trust, without par value (the "Shares"), and to create an unlimited number
of series of Shares of the Trust with each series having its own investment
objectives, assets and liabilities.
3. The Trust intends to distribute the Shares in accordance with
Rule 12b-1 ("Rule 12b-1") under the 1940 Act and desires to adopt this
Distribution Plan (the "Plan") as a plan of distribution pursuant to Rule 12b-1.
4. The Trust operates as a "series company" within the meaning of
Rule 18f-2 of the Act. Pursuant to its Declaration of Trust the Trust has
authorized nine series of its shares of beneficial interest.
5. The Trust desires to engage Crabbe Huson Securities, Inc. (the
"Distributor") to provide certain distribution services for the Trust.
6. The Distributor is a broker/dealer properly licensed to act as a
distributor of securities and is willing to act as such in the sale and
distribution of shares of each of the series as are designated by the Trust.
7. The Trust desires to enter into a distribution agreement in such
form as may from time to time be approved by the Trustees of the Trust in the
manner specified in Rule 12b-1 (the "Distribution Agreement") with the
Distributor, whereby the Distributor will provide facilities and personnel and
render services to the Trust in connection with the offering and distribution of
the Shares.
DISTRIBUTION PLAN - 1
<PAGE>
8. The Trust desires to reimburse the Distributor, within specified
limits, for the Distributor's actual expenses incurred in the distribution and
promotion of the Shares.
9. The Trustees, in considering whether the Trust should adopt and
implement this Plan, have evaluated such information as they deemed necessary to
an informed determination as to whether this Plan should be adopted and
implemented and have considered such pertinent factors as they deemed necessary
to form the basis for a decision to use assets of the Trust for such purposes,
and have determined that there is a reasonable likelihood that the adoption and
implementation of this Plan will benefit the Trust and its shareholders.
PLAN
NOW, THEREFORE, the Trustees hereby adopt this Plan for the Trust as a
plan of distribution in accordance with Rule 12b-1, on the following terms and
conditions:
1. The Distributor shall perform such services and bear such costs
as shall be specified in a Distribution Agreement approved by a majority of all
the Trustees and of the Trustees 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 (the "Qualified Trustees").
2. The proper officers of the Trust may authorize the direct or
indirect use of the Trust assets to finance the sale of Shares ("Additional
Sales Activity"). Expenses attributable to such Additional Sales Activity may
include, without limitation, the cost of printing sales literature,
prospectuses, statements of additional information and reports used for sale
purposes for persons other than then-current shareholders, the cost of mailing
such materials in circumstances in which the Distributor will not incur such
mail costs, compensation paid to registered representatives of the Distributor
and to broker/dealers which have entered into sales agreements with the
Distributor, compensation to investment advisors and other persons or entities
that promote the sale of any Series' Shares, advertisement, promotion, marketing
and sales expenses and compensation to investment advisers or other persons or
entities that promote the sale of any Series' Shares.
3. The Trust may pay up to one-twelfth (1/12) of .25% of each
series' average daily net assets on a monthly basis to the Distributor to
reimburse the Distributor for actual expenses incurred in the distribution and
promotion of that series' Shares, to the extent permitted by Rule 12b-1, and as
determined in accordance with the Trust's prospectus and the Rules of Fair
DISTRIBUTION PLAN - 2
<PAGE>
Practice of the National Association of Securities Dealers, Inc. All or any
part of the reimbursements may be waived by the Distributor in the Distribution
Agreement. Distribution expenses that are not allocable to a specific series
shall be allocated to a series based on the number of new accounts established
by that series compared with the number of new accounts established by all
Series.
4. Nothing herein contained shall be deemed to require the Trust to
take any action contrary to the Declaration of Trust of the Trust or By-Laws of
the Trust or any applicable statutory or regulatory requirement to which the
Trust is subject or by which it is bound, or to relieve or deprive the Trustees
of the responsibility for and control of the conduct of the affairs of the
Trust.
5. This Plan shall become effective as to each series upon (1)
approval by a vote of at least a "majority of the outstanding voting securities"
of that series, and (b) approval by a vote of the Trustees and of the Qualified
Trustees, such votes to be cast in person at a meeting called for the purpose of
voting on this Plan.
6. This Plan shall continue in effect indefinitely for each series;
PROVIDED, HOWEVER, that such continuance is subject to annual approval by a vote
of the Trustees and of the Qualified Trustees, such votes to be cast in person
at a meeting called for the purpose of voting on continuance of this Plan. If
such annual approval is not obtained, this Plan shall expire as to any series on
the date which is 15 months after the date of last approval.
7. This Plan may be amended at any time by the Trustees, provided
that (a) any amendment to increase materially the amount to be expended from the
assets of the Trust for the services described herein shall be effective only
upon the approval by a vote of a "majority of the outstanding voting securities"
of any series affected by the amendment, and (b) any material amendment of this
Plan shall be effective only upon approval by a vote of the Trustees and of the
Qualified Trustees, such votes to be cast in person at a meeting called for the
purpose of voting on such amendment. This Plan may be terminated as to any
series at any time by a vote of a majority of the Qualified Trustees or by a
vote of a "majority of the outstanding voting securities" of that particular
series.
8. The officers of the Trust shall provide the Trustees, and the
Trustees shall review, at least quarterly, a written report of the amounts
expended under this Plan and the purposes for which such expenditures were made.
DISTRIBUTION PLAN - 3
<PAGE>
9. While this Plan is in effect, the selection and nomination of
those Trustees who are not "interested persons" of the Trust shall be committed
to the discretion of such disinterested Trustees.
10. For the purpose of this Plan, the terms "interested persons" and
"majority of the outstanding voting securities" are used as defined in the 1940
Act.
11. The Trust shall preserve copies of this Plan, and each agreement
related hereto and each report referred to in paragraph 8 hereof (collectively,
the "Records") for a period of six years from the end of the fiscal year in
which such Record was made, and each such Record shall be kept in an easily
accessible place for the first two years of said record-keeping.
12. This Plan shall be construed in accordance with the laws of the
State of Oregon and the applicable provisions of the 1940 Act.
13. If any provision of this Plan shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Plan shall not
be affected thereby.
DISTRIBUTION PLAN - 4
<PAGE>
EXHIBIT 99.18
(POWER OF ATTORNEY)
SIGNATURES AND CERTIFICATION
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Portland, Oregon on October 14, 1995.
THE CRABBE HUSON SMALL CAP FUND
By: /s/ Richard S. Huson
-----------------------------------------
Richard S. Huson, President
We, the undersigned Directors and Officers of THE CRABBE HUSON SMALL
CAP FUND, do hereby constitute and appoint Richard S. Huson our true and lawful
attorney and agent, to do any and all acts and things in our name and behalf in
our capacities as Directors and Officers, and to execute any and all instruments
for us and in our name in the capacities indicated below, which said attorney
and agent may deem necessary or advisable to enable said Fund to comply with the
Securities Act of 1933, as amended, the Investment Company Act of 1940 and any
rules, regulations and requirements of the Securities and Exchange Commission,
in connection with this Registration Statement, including specifically, but not
without limitation, the power and authority to sign for us or any of us in our
names in the capacities indicated below, any and all amendments (including post-
effective amendment) hereto; and we do hereby ratify and confirm that said
attorney and agent shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on October 14, 1995, by the
following persons in the capacities indicated:
(1) Principal Executive Officers:
/s/ Richard S. Huson President
-----------------------------------
Richard S. Huson
(2) Principal Accounting and
Financial Officer
/s/ Cheryl A. Burgermeister Treasurer
-----------------------------------
Cheryl A. Burgermeister
<PAGE>
(3) Directors:
/s/ Gary L. Capps Director
-----------------------------------
Gary L. Capps
/s/ James E. Crabbe Director
-----------------------------------
James E. Crabbe
/s/ Richard S. Huson Director
-----------------------------------
Richard S. Huson
/s/ William Wendell Wyatt Director
-----------------------------------
William Wendell Wyatt
/s/ Craig P. Stuvland Director
-----------------------------------
Craig P. Stuvland
/s/ Louis Scherzer Director
-----------------------------------
Louis Scherzer
/s/ Bob L. Smith Director
-----------------------------------
Bob L. Smith
/s/ Richard P. Wollenberg Director
-----------------------------------
Richard P. Wollenberg
Page 2 - SIGNATURES AND CERTIFICATION
