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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
[Amendment No. ]
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Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(3)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) of
Section 240.14a-12
Name of Registrant as Specified in Its Charter:
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.
The Crabbe Huson U.S. Government Money Market Fund, Inc.
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(l)(ii), 14a-6(i)(l), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rule 14a-6(i)(4) and O-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction compute
pursuant to Exchange Act Rule O-11 (Set forth the
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amount on which the filing fee is calculated and state how it was
determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule O-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid
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2) Form Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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[CRABBE HUSON FAMILY OF MUTUAL FUNDS LETTERHEAD]
, 1995
Dear Shareholder:
The Boards of Directors of your Funds believe that savings can be
accomplished if the Funds are reorganized from their current structure as eight
separate Oregon corporations into separate series of a single Delaware business
trust. This change will NOT affect the investment or operating procedures of any
of the Funds. It will, however, reduce the sheer volume of governmental filings
that the Funds must make, significantly reduce costs associated with state
filings, and eliminate the requirement of annual proxy solicitations.
This reorganization, and these savings, can only be accomplished if
two-thirds of the outstanding shares of the Funds vote in favor of the
reorganization. That is why the directors of the Funds have directed that the
enclosed proxy statement, which describes in further detail the reorganization
and its effects, be prepared and submitted to the shareholders. We ask for your
vote in favor of the reorganization at the annual meeting of the shareholders to
be held on February 27, 1996.
I strongly believe that this reorganization will reduce expenses of the
Funds without changing in any substantial way the performance and operations of
the Funds. I urge you to review this material closely and mail in your proxy
cards or vote in person at the annual meeting. If you have any questions, please
call (800) 541-9732.
Sincerely,
CRABBE HUSON FAMILY OF
MUTUAL FUNDS
Richard S. Huson
PRESIDENT
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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.
THE CRABBE HUSON U.S. GOVERNMENT MONEY MARKET FUND, INC.
121 S.W. MORRISON, SUITE 1400
PORTLAND, OREGON 97204
NOTICE OF JOINT ANNUAL MEETING
Notice is hereby given that a joint annual meeting of the shareholders 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. (individually, a "Fund"
and, collectively, the "Funds") will be held jointly at 6:00 p.m., Pacific Time,
on February 27, 1996 at the Benson Hotel, Crystal Ballroom, Portland, Oregon
97205, for the following purposes:
(1) To approve or disapprove for each Fund a reorganization (the
"Reorganization") in which each Fund would become a separate series of the
Crabbe Huson Funds, a business trust organized under the laws of the State of
Delaware (the "Trust"), pursuant to an Agreement and Plan of Reorganization and
Liquidation whereby: (i) all of the assets and liabilities of each Fund will be
transferred to a corresponding series of the Trust; (ii) shareholders of each
Fund will receive an equal amount of shares in the corresponding series of the
Trust in exchange for their shares of the Fund; and (iii) each Fund will
subsequently be liquidated and dissolved. The Reorganization is contingent upon
approval of Proposals 3, 4 and 5 by the shareholders of the relevant Funds.
(2) To elect a Board of Directors for each Fund for the ensuing year or
portion thereof consisting of eight Directors and to authorize each Fund,
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prior to the effective time of the Reorganization, to vote its beneficial
interest in the Trust for the election of the same eight individuals to serve as
Trustees of the Trust.
(3) To authorize each Fund to vote its beneficial interest in the Trust to
approve a Master Investment Advisory Agreement between the Trust and The Crabbe
Huson Group, Inc., the Funds' current investment adviser ("Crabbe Huson Group").
(4) To authorize the Crabbe Huson Real Estate Investment Fund, Inc. to vote
its beneficial interest in the Real Estate Series of the Trust in favor of a
Sub-advisory Agreement among the Trust (on behalf of the Real Estate Series),
Crabbe Huson Group, and Aldrich, Eastman and Waltch, L.P.
(5) To authorize each Fund to vote its beneficial interest in the Trust to
approve a Distribution Plan pursuant to Rule 12b-1 of the Investment Company Act
of 1940 and the rules and regulations thereunder.
(6) To ratify the appointment by the Board of Directors of each Fund of KPMG
Peat Marwick LLP as independent auditors of each Fund.
(7) To transact such other business as may properly come before the meeting
or any adjournment thereof.
All shareholders are invited to attend the meeting. Shareholders of record
at the close of business on December 20, 1995, the record date fixed by the
Boards of Directors, are entitled to notice of and to vote at the meeting.
By Order of the
Board of Directors
of each Fund
December , 1995 Craig P. Stuvland,
SECRETARY
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YOUR VOTE IS IMPORTANT
PLEASE RETURN YOUR PROXY CARD(S)
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WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE MEETING, PLEASE SIGN AND DATE
EACH ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE. A SHAREHOLDER WHO
COMPLETES AND RETURNS A PROXY AND SUBSEQUENTLY ATTENDS THE MEETING MAY ELECT TO
VOTE IN PERSON, SINCE A PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS VOTED.
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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.
THE CRABBE HUSON U.S. GOVERNMENT MONEY MARKET FUND, INC.
121 S.W. MORRISON, SUITE 1400
PORTLAND, OREGON 97204
JOINT PROXY STATEMENT
The enclosed proxy is solicited by the Boards of Directors of each of The
Crabbe Huson Special Fund, Inc. (the "Special Fund"), The Crabbe Huson Real
Estate Investment Fund, Inc. (the "Real Estate Fund"), The Crabbe Huson Equity
Fund, Inc. (the "Equity Fund"), The Crabbe Huson Asset Allocation Fund, Inc.
(the "Asset Allocation Fund"), The Oregon Municipal Bond Fund, Inc. (the "Oregon
Bond Fund"), The Crabbe Huson Income Fund, Inc. (the "Income Fund"), The Crabbe
Huson U.S. Government Income Fund, Inc. (the "U.S. Government Income Fund"), and
The Crabbe Huson U.S. Government Money Market Fund, Inc. (the "U.S. Government
Money Market Fund") (individually, a "Fund" and, collectively, the "Funds") for
use at the joint annual meeting of shareholders to be held at the Benson Hotel,
Crystal Ballroom, Portland, Oregon 97205 at 6:00 p.m., Pacific Time, on February
27, 1996, and at any adjournment thereof. The Funds expect to mail this proxy
statement and each proxy to shareholders on or about December 22, 1995.
The Funds' investment adviser is The Crabbe Huson Group, Inc. located at 121
S.W. Morrison, Suite 1400, Portland, Oregon 97204 (the "Crabbe Huson Group").
State Street Bank and Trust Company, 1776 Heritage Drive, A4SW, North Quincy, MA
02171, provides administrative services. The Funds' shares are distributed by
Crabbe Huson Securities, Inc., 121 S.W. Morrison, Suite 1410, Portland, OR
97204.
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PRINCIPAL SHAREHOLDERS
A holder of record of common stock of a Fund at the close of business on
December 20, 1995 will be entitled to vote at the joint annual meeting in person
or by proxy. As of such date, with respect to each Fund, the number of shares of
common stock outstanding and entitled to vote are as set forth opposite the
Fund's name below:
Special Fund
Real Estate Fund
Equity Fund
Asset Allocation Fund
Oregon Bond Fund
Income Fund
U.S. Government Income Fund
U.S. Government Money Market Fund
With respect to the matters specified on the enclosed proxy card, shares
represented by duly executed proxies will be voted in accordance with the
specifications made. If no specification is made with respect to a particular
matter, shares will be voted in accordance with the recommendation of the
Directors. Proxies may be revoked at any time before they are exercised by a
written revocation received by the Secretary of each of the Funds, by properly
executing a later dated proxy or by attending the meeting and voting in person.
If you are a shareholder of more than one Fund, you will receive this proxy
statement and a separate proxy card for each Fund of which you are a
shareholder. PLEASE VOTE, SIGN AND RETURN EACH PROXY CARD YOU RECEIVE TO ENSURE
THAT ALL YOUR VOTES ARE COUNTED.
If you have any questions or would like more information about the matters
discussed in this Proxy Statement, please call, toll-free, (800) 541-9732.
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INTRODUCTION
On November 28, 1995, the Board of Directors of each Fund unanimously
approved an Agreement and Plan of Reorganization and Liquidation (the "Plan").
Each Plan provides that each Fund will transfer all of its assets and
liabilities to the Crabbe Huson Funds, a Delaware business trust (the "Trust"),
in exchange for all of the beneficial interests in a separate series of the
Trust. The beneficial interests will then be distributed to each Fund's current
shareholders and thereafter each Fund will be dissolved (the entire transaction
shall hereinafter be referred to as the "Reorganization"). The purpose of this
Proxy Statement is to request shareholder approval of the Reorganization. If the
shareholders approve the Reorganization, the Board of Directors of each Fund is
also requesting that the shareholders approve the Directors' actions in election
of Trustees and adoption of new agreements and a distribution plan for the
Trust. If the Reorganization is not approved by any Fund, or the adoption of
agreements and distribution plans are not approved for any Fund, the Board of
Directors of the Funds which have approved the Reorganization and adopted the
agreements and the new distribution plan will have the discretion to continue
the Reorganization without the Fund or Funds not approving those matters.
As part of this Proxy Statement, shareholders are additionally being asked
to elect new directors for each Fund and approve KMPG Peat Marwick LLP as the
Funds' independent auditors for the portion of the year the Funds' will operate
until the Reorganization is completed.
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PROPOSAL NO. 1
APPROVAL OF REORGANIZATION
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INTRODUCTION
As stated above, the Reorganization requires that each Fund transfer all of
its assets and liabilities to the Trust in exchange for beneficial interests in
the Trust. The beneficial interests will be distributed to the shareholders of
the Funds in liquidation of the Funds and the Funds will be dissolved. Each
shareholder of the Funds will have the same investment in the series of the
Trust as it did prior to the Reorganization. For a further
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discussion of the steps to be taken to consummate the Reorganization, see
"PROCEDURES FOR REORGANIZATION" in this Proposal No. 1. In order to ensure that
the Funds are operated in the same manner they were operated before the
Reorganization, the Reorganization is contingent upon, and will not take place
for any Fund, at the discretion of each Fund's Board of Directors without
approval by the shareholders of the Master Investment Advisory Agreement
(Proposal No. 3), the Subadvisory Agreement for the Real Estate Fund (Proposal
No. 4), and the new Distribution Plan under Rule 12b-1 (Proposal No. 5).
REASONS FOR REORGANIZATION
The principal purpose of the reorganization is to combine the Funds into a
single trust in order to achieve significant operational and cost-saving
advantages. The Trust will have separate series, each representing a current
Fund. See "PRINCIPAL FEATURES OF SERIES COMPANY" in this Proposal No. 1.
Currently, each Fund is required to file separate registration statements, and
regulatory reports with the SEC. Many of the reports will be combined into a
single report. Such reports require a great deal of preparation time and expense
which the Board of Directors believe will be reduced if the Funds convert to a
single trust entity. Additionally, the Funds anticipate significant savings from
the Reorganization resulting from reduced state filing fees. State filing fees
will be reduced because many states require separate registrations for each
mutual fund organized as a corporation, but do not require a separate
registration for each series of a business trust. Thus, in these states, the
number of filings will be reduced from eight to one. The resulting savings will
be approximately $10,000 per fund, per year. While there can be no assurance
that these "non portfolio" states will not amend their laws to require
registration of each series, until they do so the Trust and each series of the
Trust will continue to realize significant savings.
As a Delaware business trust, the Trust will not be required to hold annual
meetings of the shareholders on a regular basis. See "CERTAIN COMPARATIVE
INFORMATION ABOUT EACH FUND AND THE TRUST" in this Proposal No. 1. This will
result in additional savings in operating expenses since the Funds will not be
required to prepare, file, print, and mail proxy statements to shareholders on a
yearly basis. Each Fund could under Oregon law amend its articles of
incorporation to eliminate the need for an annual meeting
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and remain Oregon corporations. The Directors believe, however, that the
business advantages listed above for the Funds as a whole make it more desirable
for the Funds to reorganize as a Delaware business trust.
PRINCIPAL FEATURES OF SERIES COMPANY
The Funds are currently investment companies organized as separate Oregon
corporations. The Crabbe Huson Group is the investment adviser for all of the
Funds.
The Trust has been organized as a "series company" as that term is defined
under Rule 18f-2 of the Investment Company Act of 1940 and the rules and
regulations thereunder, as amended (the "1940 Act"). A single investment company
whose shares are divided into series or classes, each representing an interest
in a distinct portfolio of investments with different objectives, is considered
a "series company." In a "series company," the shareholders of any one series do
not participate in the investment results of any other series, but rather, have
a pro rata share of the assets and income of the portfolio securities belonging
to their own series.
The interests of shareholders in the various series of the Trust will be
separate and distinct. All consideration received for the sale of shares of a
particular series of the Trust, all assets in which such consideration is
invested, and all income, earnings and profits derived from such investments
will be allocated to and belong only to that series.
PROCEDURES FOR REORGANIZATION
Upon approval of the Reorganization by each Fund's shareholders, one share
of each series of the Trust will be issued to its corresponding Fund. Each Fund,
as the sole shareholder of its respective series in the Trust, will thereafter
transfer all of its assets and liabilities to its corresponding series in the
Trust in exchange for shares in the corresponding series of the Trust equal in
number to the shares held by shareholders of the applicable Fund. The shares
transferred to each Fund will then be distributed to the Fund's shareholders and
each Fund will thereafter be dissolved. As a result of the foregoing
transactions, each shareholder of each of the Funds will receive an equal number
of full and fractional shares of its respective series of the Trust in exchange
for the shares of common stock of the Fund previously held by such shareholder.
A shareholder's investment in a Fund will remain the same after the
Reorganization and each series will operate in the
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same manner, with the same investment objectives, policies, and restrictions
that its respective Fund had in the past, except as described in the section
entitled "LENDING OF PORTFOLIO SECURITIES" in this Proposal No. 1.
Assuming approval by shareholders of each of the Funds and receipt of
favorable rulings from the Internal Revenue Service concerning the consequences
of the Reorganization, it is currently contemplated that the Reorganization will
become effective at 4:00 p.m. Eastern Time on March 15, 1996. However, the
Reorganization may become effective at another time and date should
circumstances so warrant.
THE TRUST
GENERAL. The Trust has been established pursuant to a Certificate of Trust
under the laws of the State of Delaware (the "Certificate of Trust") which was
filed with the Secretary of State of Delaware on October 13, 1995. Subsequent to
filing the Certificate of Trust, the Trustees adopted a Declaration of Trust
(the "Declaration of Trust") and Bylaws.
The Trust is an open-end diversified management investment company. Each of
the Funds is an open-end diversified management investment company other than
the Oregon Bond Fund, which is currently non-diversified and will remain
non-diversified in series form. Each series of the Trust will have a fiscal year
ending October 31, the same as the existing fiscal year of each of the Funds.
VOTING RIGHTS. The Declaration of Trust provides that shareholders shall
have power to vote only on the following matters:
(i) the election of 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);
(ii) any contract entered into by the Trust to the extent shareholder
approval is required by the 1940 Act;
(iii) 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;
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(iv) with respect to any amendment of the Declaration of Trust that
adversely affects the rights of the shareholder;
(v) with respect to derivative actions on the question of 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;
(vi) an amendment of any Fund's Fundamental Policies as set forth in the
Trust's Bylaws, in which case only shareholders of the affected Fund
would be entitled to vote; and
(vii) with respect to such additional matters (1) relating to the Trust as
may be required by the 1940 Act, the Declaration of Trust, the Bylaws of
the Trust, (2) any registration of the Trust with the Securities and
Exchange Commission (or any successor agency) or any state, or (3) as
the Trustees may consider necessary or desirable.
The Declaration of Trust provides that each Trustee of the Trust serves
until the next meeting of shareholders, if any, called for the purpose of
re-electing Trustees or electing successors to such Trustees and until the
election and qualification of the Trustee's successor, or until the Trustee
sooner dies, resigns, becomes incapacitated or is removed. The Declaration of
Trust provides that a Trustee may be removed by (1) a written instrument signed
by at least fifty percent (50%) of the Trustees, such percentage to be
determined based upon the number of Trustees prior to removal, or (2) by vote of
shareholders holding not less than fifty percent (50%) of the shares
outstanding, cast in person or by proxy at a meeting called for that purpose.
Under the Declaration of Trust, shares of each series of the Trust vote
separately as a class on any matter submitted to shareholders except as to
voting for Trustees and except as otherwise required by the 1940 Act, in which
case the shareholders of all series of the Trust vote together as one class.
Shareholders of each series are therefore responsible for adoption and approval
of their own advisory agreements and distribution arrangements. In the event
that the Trustees determine that a matter only affects the interests of one or
more series, then only the shareholders of such affected series will be entitled
to vote on such matter.
The Trust filed a Registration Statement on November 16, 1995, with the
Securities and Exchange Commission, which is presently under review.
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Pursuant to the Registration Statement, the Trust will sell shares of the Crabbe
Huson Small Cap Fund Series ("Small Cap Series"). It is anticipated this
Registration Statement will become effective in early February, 1996. After the
Reorganization is approved by the shareholders of each Fund and completed, the
Trust will have, in addition to the Small Cap Series, the following eight
series: (1) The Crabbe Huson Special Fund ("Special Series"); (2) The Crabbe
Huson Real Estate Investment Fund ("Real Estate Series"); (3) The Crabbe Huson
Equity Fund ("Equity Series"); (4) The Crabbe Huson Asset Allocation Fund
("Asset Allocation Series"); (5) The Crabbe Huson Oregon Municipal Bond Fund
("Oregon Bond Series"); (6) The Crabbe Huson Income Fund ("Income Series"); (7)
The Crabbe Huson U.S. Government Income Fund ("U.S. Government Income Series"),
and (8) The Crabbe Huson U.S. Government Money Market Fund ("U.S. Government
Money Market Series"). Each series will hold assets and liabilities
corresponding to the Fund from which they were transferred. The Declaration of
Trust provides that the Board of Trustees may establish one or more additional
series or sub-series without any further action by the existing shareholders of
the Trust.
CERTAIN COMPARATIVE INFORMATION ABOUT EACH FUND AND THE TRUST
As a Delaware business trust, the Trust's operations will be governed by the
Declaration of Trust and Bylaws of the Trust and applicable Delaware law rather
than by the Articles of Incorporation and Bylaws of the Funds and the Oregon
Business Corporation Act (the "Corporation Act"). Certain differences between
the two forms of organization are summarized below.
TRUSTEES. The affairs of the Trust will be managed by a Board of Trustees
rather than a Board of Directors. The current directors of each of the Funds,
James E. Crabbe, Richard S. Huson, Gary L. Capps, Louis Scherzer, Bob L. Smith,
Craig P. Stuvland, Richard P. Wollenberg, and William Wendell Wyatt, Jr., are
the current Trustees of the Trust. If this Proposal No. 1 is approved,
shareholders of each Fund will be asked in Proposal No. 2 to ratify the election
of the above individuals as trustees of the Trust.
SHARES OF THE TRUST. The beneficial interests in the Trust are transferable
shares without par value. The Declaration of Trust permits the Trustees to issue
an unlimited number of shares and to divide such shares into an unlimited number
of series and sub-series, all without shareholder
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approval. Each share of any Trust series represents an equal proportionate
interest in the assets and liabilities belonging to that series. As such, each
share is entitled to dividends and distributions out of the income (after
expenses) belonging to that series as declared by the Board of Trustees. The
Articles of Incorporation of each of the Funds currently authorize only one
class of shares, other than the Real Estate Fund which authorizes the Board of
Directors to create additional classes and series of stock. The Funds are
currently authorized to issue the following number of shares: Special Fund --
100,000,000, Real Estate Fund -- 1,000,000,000, Equity Fund -- 100,000,000,
Asset Allocation Fund -- 100,000,000, Oregon Bond Fund -- 10,000,000, Income
Fund -- 100,000,000, Government Income Fund -- 100,000,000, and U.S. Government
Money Market Fund -- 2,000,000,000.
VOTING. The Trust has dollar-weighted voting. This means that on each
matter submitted to a vote of the Shareholders, each holder of a share of any
series shall be entitled to one vote for each dollar of net asset value standing
in the shareholder's name on the books of that particular series. The Trust
could provide that shares of each series are entitled to one vote per share,
regardless of the net asset value per share of the series. However, this would
result in a series with a low net asset value per share having more votes than a
series of identical size which has a higher net asset value per share. In other
words, without dollar-weighted voting, one series could have a disproportionate
impact on any matter submitted to all shareholders. Shareholders of the Funds
are entitled to one vote for each whole share and to a proportionate fractional
vote for each fractional share standing in the Shareholder's name on the books
of the respective Fund.
SHAREHOLDER ABILITY TO CALL MEETING. The Bylaws of each Fund and the
Corporation Act provide that a special meeting of shareholders shall be called
upon the written request of shareholders representing ten percent (10%) of the
outstanding shares. The Declaration of Trust and Trust Bylaws provide that
special meetings of the shareholders shall be called upon the written request of
holders of at least ten percent (10%) of the outstanding shares 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.
AMENDMENTS. Any amendment to the Declaration of Trust that adversely
affects the rights of shareholders may be adopted by a majority of
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the Trustees and the lesser of either: (A) 67% or more of the shares present at
a meeting, if the shareholders of more than 50% of the outstanding shares are
present or represented by proxy at such meeting, or (B) the holders of more than
50% of the outstanding shares. Each series affected by the amendment would vote
on the amendment separately. Under the Articles of Incorporation of each Fund
and the Corporation Act, the Articles of Incorporation may be amended upon
adoption of a resolution to that effect by the Directors of the Fund and
approval of such resolution by the holders of a majority of the outstanding
shares of the Fund.
SHAREHOLDER MEETINGS. Unlike each of the Funds, the Trust will not be
required to hold annual meetings of its shareholders. Pursuant to Proposal No. 2
of this Proxy Statement, the election of the Trustees of the Trust will be
ratified by the Funds as the sole shareholders of the respective series of the
Trust, as directed by the shareholders of the Funds. Subsequently, those persons
who will serve as the initial Trustees of the Trust will continue in that
position until they resign, die or are removed by a written instrument signed by
at least (50%) fifty percent of the Trustees or by vote of shareholders of the
Trust holding not less than (50%) fifty percent of the shares then outstanding,
cast in person or by proxy at a special meeting called for that purpose. The
Bylaws of each Fund permit removal of a Director by the holders of a majority of
the outstanding shares of the Fund.
LIABILITY OF DIRECTORS AND TRUSTEES. Under the Corporation Act, in addition
to any other liability imposed by law, a Director may be liable to a Fund: (1)
for voting or assenting to the declaration of any dividend or other distribution
of assets to shareholders which is contrary to the Corporation Act or the Fund's
Articles of Incorporation, or (2) for failing to discharge his duties in good
faith, with the care of an ordinarily prudent person and in a manner he
reasonably believes to be in the best interests of the corporation. Under the
Corporation Act and the Articles of Incorporation of each Fund, each Fund may
indemnify a Director who was or is a party or is threatened to be made a party
to any proceeding by reason of or arising from the fact that such individual was
a Director, provided the conduct of the Director was in good faith and the
Director reasonably believed that his or her conduct was in the best interests
of the Fund. Each Fund may also reimburse a Director's expenses if it receives
from the Director (a) a written affirmation from the Director stating that the
Director's actions were taken in good faith and were reasonably believed to be
in the best interest
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of the Fund and (b) a written undertaking to repay the advances if it is
ultimately determined that the Director did not meet the standard of conduct
referred to above. Under the Declaration of Trust, so long as the Trustees have
acted under the belief that their actions are in the best interests of the
Trust, they would be personally liable only for willful misfeasance, bad faith,
or gross negligence in the performance of their duties or by reason of reckless
disregard of their obligations and duties as Trustees. Under the Declaration of
Trust, Trustees and officers will be indemnified for the expenses of litigation
against them unless their conduct is determined to constitute willful
misfeasance, bad faith, gross negligence or reckless disregard of their duties.
The Trust may also advance money for these expenses provided that the Trustee or
officer undertakes to repay the Trust if his or her conduct is later adjudicated
to preclude indemnification and certain other conditions are met.
RECORD DATE. The Bylaws of the Trust allow the Trustees to fix a record
date not more than 120 days prior to the date of any meeting. The Bylaws of each
Fund and the Corporation Act provide that the record date may not be more than
70 days prior to the meeting.
The foregoing is only a summary of certain of the differences between each
Fund, their Articles of Incorporation, Bylaws and Oregon law and the Trust's
Declaration of Trust, Bylaws and Delaware law. It is not a complete list of
differences. Shareholders should refer to the provisions of the Articles of
Incorporation, Bylaws, Oregon law, and the Declaration of Trust, Bylaws and
Delaware law directly for a more thorough comparison. A shareholder who wishes
to receive a copy of any of these documents may write to P.O. Box 8413, Boston,
MA 02266-8413, or call (800) 541-9732.
TEMPORARY AMENDMENT TO FUNDS' INVESTMENT RESTRICTIONS
During the period immediately prior to the Reorganization, each Fund will
own the only outstanding share of its respective series of the Trust. The
purpose of the acquisition by each Fund of this nominal share prior to the
effective time of the Reorganization is to enable the Trust to avoid holding a
separate meeting of its shareholders in order to comply with the provisions of
the 1940 Act requiring shareholder election of Trustees, approval of the
proposed Master Investment Advisory Agreement and the Sub-advisory Agreement,
and approval of the proposed Distribution Plan. By each Fund acquiring a single
share of the corresponding series of the Trust, each Fund can through its board
of directors then vote to elect
11
<PAGE>
Trustees, approve the new Master Investment Advisory Agreement and the
Sub-advisory Agreement, and approve the new Distribution Plan following
favorable action by the shareholders of each Fund on Proposals 2, 3, 4 and 5 as
set forth in the Notice accompanying this Proxy Statement.
Each Fund has adopted certain Investment Restrictions which guide investment
of the Fund's portfolio. These Investment Restrictions cannot be changed without
shareholder approval. A number of the Investment Restrictions of each Fund will
be violated by the acquisition of the Trust share by the Fund. Set forth in
Exhibit 1 is a list of Investment Restrictions which preclude the respective
Fund from acquiring the Trust share and completing the Reorganization. By
approving the Reorganization, the shareholders will be authorizing a suspension
of these Investment Restrictions only to the extent necessary to permit the
Reorganization to take place.
TEMPORARY AMENDMENT TO EACH FUNDS' ARTICLES OF INCORPORATION
The Articles of Incorporation of each Fund prohibit the Funds from selling
shares after the shareholders approve the liquidation and dissolution of the
Fund. The intent of this provision is to prevent a Fund which is in the process
of winding up and going out of business from selling its shares during this
period. As part of the Reorganization, the shareholders of each of the Funds are
being asked to approve the dissolution and liquidation of the Funds. As
mentioned above in the section entitled "PROCEDURES FOR REORGANIZATION," in this
Proposal No. 1 the Funds will distribute to shareholders in the liquidation the
number of shares in the corresponding series of the Trust equal to the number of
shares the shareholder previously owned in the Fund. Each Fund will then be
dissolved. After the shareholders approve the Reorganization and subsequent
liquidation and dissolution a period of time will lapse before the
Reorganization and subsequent liquidation actually occur. This means that the
Articles of Incorporation of each Fund will be violated even though the Funds
are not really winding up their business. It is the intent of each Fund to
continue operations at all times and therefore, by approving the Reorganization
the shareholders will be authorizing the Board of Directors to continue
operations of the Fund during the period between when the shareholders approve
the Reorganization and when the Reorganization actually occurs, despite the fact
that the Articles of Incorporation provide otherwise.
12
<PAGE>
LENDING OF PORTFOLIO SECURITIES
The Prospectus for the Funds provides that each Fund may loan portfolio
securities to broker dealers and other institutional investors provided, among
other things, such loans do not exceed 10% of the value of each Fund's total
assets. The Board of Directors of the Special Fund, Equity Fund and the Asset
Allocation Fund recently adopted a resolution authorizing each of the Funds to
loan up to 20% of each Fund's total assets. This increase is still within each
Fund's Investment Restrictions. The Special Series, Equity Series and the Asset
Allocation Series intend to follow this new practice.
FEDERAL INCOME TAX CONSEQUENCES
It is anticipated that the transactions contemplated by the Plan will be tax
free at the federal level. Consummation of the Reorganization is subject to
receipt from the Internal Revenue Service of a private letter ruling providing
that the Reorganization can be accomplished tax-free and will not give rise to
the recognition of income, gain or loss for federal income tax purposes to any
of the Funds, the Trust, or the shareholders of the Funds. A shareholder's
adjusted basis for tax purposes in shares of a series of the Trust after the
Reorganization will be the same as the shareholder's adjusted basis for tax
purposes in the shares of the corresponding Fund immediately before the
Reorganization. Each shareholder should consult the shareholder's own tax
adviser with respect to the state and local tax consequences of the proposed
transaction.
The Reorganization is also conditioned upon receipt of a ruling from the
Internal Revenue Service to the effect that each series established pursuant to
the Declaration of Trust will be treated as a separate association taxable as a
corporation for federal income tax purposes, which potentially qualifies as a
regulated investment company under the provisions of Subchapter M of the
Internal Revenue Code. The Reorganization will not be completed until the above
rulings are received.
DISSENTER'S RIGHTS
The staff of the Securities and Exchange Commission has taken the position
in Investment Company Act Release 8752 (April 10, 1975) that adherence to
appraisal rights statutes such as that of Oregon by registered investment
companies issuing redeemable securities would constitute a violation of Rule
22c-1 under the 1940 Act. Rule 22c-1 precludes open-end investment companies
from redeeming securities otherwise than at a price
13
<PAGE>
based upon the net asset value next computed after receipt of a tender of such
security for redemption. In this connection, the staff has also taken the
position in Release No. 8752 that pursuant to Section 50 of the 1940 Act, Rule
22c-1 supersedes appraisal right statutes. While the Funds are not aware of any
judicial decision which has dealt with this issue, they intend to adhere to the
position of the staff of the Securities and Exchange Commission and will not
honor any shareholder's request for appraisal rights.
EXPENSES
The expenses related to the Reorganization will be borne by the Funds on a
pro rata basis.
RECOMMENDATION
THE BOARD OF DIRECTORS OF EACH FUND HAS UNANIMOUSLY APPROVED THE PROPOSED
REORGANIZATION AND HAS DETERMINED THAT PARTICIPATION IN THE REORGANIZATION IS IN
THE BEST INTERESTS OF EACH FUND AND THAT THE INTERESTS OF EXISTING SHAREHOLDERS
WILL NOT BE DILUTED AS A RESULT OF THE REORGANIZATION. THE BOARD OF DIRECTORS OF
EACH FUND RECOMMEND THAT SHAREHOLDERS VOTE FOR PROPOSAL NO. 1.
14
<PAGE>
------------------------
PROPOSAL NO. 2
ELECTION OF DIRECTORS AND
APPROVAL OF ELECTION OF TRUSTEES
------------------------
INTRODUCTION
At this meeting, it is intended that proxies not indicating a contrary
intent will be voted in favor of the election of the nominees named below as
Directors of each Fund, to hold office until their successors are elected and
qualified (the "Nominees") and until the Reorganization is completed. The
shareholders of each Fund are also being asked to authorize the Board of
Directors of each Fund, when each Fund becomes the sole shareholder of its
respective series in the Trust, to ratify the election of the Nominees as
Trustees of the Trust. The Nominees are currently the Trustees of the Trust
having been appointed as the initial trustees of the Trust. If shareholders of
each Fund approve the Reorganization and grant the Fund such authority, the
Board of Directors of each Fund intend to vote each Fund's beneficial interest
in the Trust to ratify election of the Nominees as Trustees of the Trust. Each
Trustee will serve as a Trustee of the Trust during the lifetime of the Trust,
except as such Trustee sooner dies, resigns, retires, or is removed as provided
in the Declaration of Trust. The purpose of this procedure is to enable the
Trustees of the Trust to be elected by the shareholders as required by the 1940
Act without another meeting of the shareholders of the Trust after the
Reorganization is completed.
ELECTION OF DIRECTORS AND TRUSTEES
Pursuant to the Bylaws of each Fund and the Trust, the number of Directors
and Trustees to be elected is eight. All nominees have consented to being named
in this proxy statement and to serve if elected. In case any of the nominees
should become unable to serve, the proxies may vote for a substitute to be
recommended by the applicable Board of Directors or Board of Trustees. None of
the Funds has an active nominating, standing or compensation committee. Each of
the Funds has an audit committee currently consisting of Messrs. Wyatt, Smith
and Scherzer. It is anticipated that the Trust will have an audit committee
consisting of the same individuals.
15
<PAGE>
INFORMATION CONCERNING NOMINEES
The following table shows the nominees who are standing for election and
their principal occupations which, unless specific dates are shown, are of more
than five years duration, although the titles held may not have been the same
throughout. The information as to their security holdings is based upon
information verified by the nominees.
<TABLE>
<CAPTION>
SHARES
NAME, AGE, PRINCIPAL DIRECTOR BENEFICIALLY
OCCUPATION, OF THE OWNED AS OF
OTHER DIRECTORSHIPS FUNDS SINCE DECEMBER 8, 1995
- ------------------------------- ------------------------------- -----------------
<S> <C> <C>
Gary L. Capps, 60: Executive 1992: All Funds
Director of the Bend Chamber
of Commerce since July, 1992;
Mr. Capps was previously the
owner and Chief Executive
Officer of ten radio stations
in Oregon, Idaho and
Washington; He has been a
Director of the Bank of the
Cascades in Bend, Oregon since
1978 and has served as
Chairman since 1984.
James E. Crabbe*, 50: Director 1988: All Funds except the
and President of the Crabbe Oregon Bond Fund and Special
Huson Group; Mr. Crabbe has, Fund
since 1980, served in various 1992: The Oregon Bond Fund and
management positions with the Special Fund
Crabbe Huson Group.
Richard S. Huson*, 55: Director 1988: All Funds except the
and Secretary of the Crabbe Oregon Bond Fund and the
Huson Group; Mr. Huson has, Special Fund
since 1980, served in various 1992: The Oregon Bond Fund and
management positions with the Special Fund
Crabbe Huson Group.
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
SHARES
NAME, AGE, PRINCIPAL DIRECTOR BENEFICIALLY
OCCUPATION, OF THE OWNED AS OF
OTHER DIRECTORSHIPS FUNDS SINCE DECEMBER 8, 1995
- ------------------------------- ------------------------------- -----------------
<S> <C> <C>
Louis Scherzer, 75: President 1985: The Oregon Bond Fund
of Louis Scherzer Partners, 1991: All other Funds
Inc. since 1988 and President
of Scherzer Real Estate Group,
Inc. since 1993; Mr. Scherzer
was employed by The Benj.
Franklin Federal Savings and
Loan Association from 1946 to
1985 and served as Senior
Executive Vice President and
Director from 1980 to 1985.
Bob L. Smith, 57: Chairman of 1988: All Funds except the
VIP's Industries, Inc. since Oregon Bond Fund and Special
1968; Mr. Smith has been a Fund
Director of Key Corp. since 1991: The Oregon Bond Fund and
1988, Blue Cross/ Blue Shield Special Fund
of Oregon since 1984, and
Flying J., Inc. since 1987.
Craig P. Stuvland*, 40: 1991: All Funds except the
Executive Vice President and Oregon Bond Fund and the
Director of the Crabbe Huson Special Fund (1)
Group since 1987. 1992: The Oregon Bond Fund and
the Special Fund (1)
Richard P. Wollenberg, 80: 1988: All Funds except the
Chief Executive Officer of Oregon Bond Fund and the
Longview Fibre Company since Special Fund
1978 and Chairman since 1985; 1991: The Oregon Bond Fund and
Mr. Wollenberg has been a the Special Fund
trustee of Reed College since
1962.
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
SHARES
NAME, AGE, PRINCIPAL DIRECTOR BENEFICIALLY
OCCUPATION, OF THE OWNED AS OF
OTHER DIRECTORSHIPS FUNDS SINCE DECEMBER 8, 1995
- ------------------------------- ------------------------------- -----------------
<S> <C> <C>
William Wendell Wyatt, Jr., 45: 1985: The Oregon Bond Fund
Chief of Staff, Office of the 1987: The Special Fund
Governor, State of Oregon, 1991: All other Funds
since April, 1995; President
of the Oregon Business Council
between March, 1995 and
September 1987.
</TABLE>
- ------------------------
* The persons indicated are "interested persons" of each of the Funds, as
defined in the 1940 Act.
(1) Mr. Stuvland resigned as a Board member of each of the Funds on November 9,
1994, in contemplation of the acquisition by Prudential Direct Advisers of
the Crabbe Huson Group. When the acquisition did not occur, Mr. Stuvland was
reappointed to each Board in March, 1995.
There were four meetings of the Boards of Directors of the Funds during the
fiscal year ended October 31, 1995. A majority of all Directors were present at
these meetings.
The members of each Fund's Board of Directors are selected annually by each
Fund's shareholders. Each trustee will serve as a trustee of the Trust during
the lifetime of the Trust, except as such Trustee sooner dies, resigns, retires,
or is removed as provided in the Declaration of Trust. There will not be annual
meetings to elect Trustees. The Boards of Directors and Board of Trustees are
responsible for the overall management of the Funds and the Trust and each
series thereof, respectively, including general supervision and review of their
investment policies and activities. The Board of Directors and Board of Trustees
elect the officers of the Funds and the Trust, respectively. The officers are
responsible for supervising and administering the Funds' and Trust's day-to-day
operations. In accordance with the 1940 Act, the Funds and the Trust are not
permitted to pay compensation to, or to pay the expenses of, any officer or
Director who is deemed to be an "interested person" of the Funds or the Trust
(as defined in the 1940 Act).
EXECUTIVE OFFICERS OF THE FUNDS
The following schedule sets forth certain information furnished by each of
the current principal executive officers of the Funds. Each current officer will
hold his respective position until the Reorganization or until his
18
<PAGE>
successor is duly elected or appointed or until he is removed by the Board of
Directors, whichever shall occur first. Each executive officer currently holds
the identical position with the Trust and has held such position since October
14, 1995, the date the Trust was organized. The business address of each
individual listed below is 121 S.W. Morrison, Suite 1400, Portland, Oregon
97204.
<TABLE>
<CAPTION>
EXECUTIVE
OFFICER
NAME, AGE AND BUSINESS EXPERIENCE POSITION SINCE
- --------------------------------------------------- ----------------- ------------
<S> <C> <C>
Richard S. Huson, age 55. President 7/90
Mr. Huson is a chartered financial analyst. Mr.
Huson has been a director and served in various
management positions with Crabbe Huson Group since
1980.
James E. Crabbe, age 50. Vice President 7/88
Mr. Crabbe has been a director and has, since
1980, served in various management positions with
Crabbe Huson Group.
Craig P. Stuvland, age 40. Secretary 7/90
Mr. Stuvland has been employed by Crabbe Huson
Group since June, 1987. He is currently Executive
Vice President -- Treasurer.
Cheryl Burgermeister, age 44. Treasurer 6/95
Ms. Burgermeister has been the Treasurer and Chief
Financial Officer of The Crabbe Huson Group since
July, 1987.
</TABLE>
19
<PAGE>
COMPENSATION OF OFFICERS AND DIRECTORS
The following table sets forth directors fees received by the disinterested
directors of the Funds.
<TABLE>
<CAPTION>
WOLLENBERG WYATT SMITH CAPPS SCHERZER PER FUND
----------- --------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Special Fund...... $ 1,800 $ 1,400 $ 1,800 $ 1,800 $ 1,800 $ 8,600
Real Estate
Fund............. $ 600 $ 450 $ 600 $ 600 $ 600 $ 2,850
Equity Fund....... $ 1,600 $ 1,200 $ 1,600 $ 1,600 $ 1,600 $ 7,600
Asset Allocation
Fund............. $ 1,600 $ 1,200 $ 1,600 $ 1,600 $ 1,600 $ 7,600
Oregon Bond
Fund............. $ 600 $ 450 $ 600 $ 600 $ 600 $ 2,850
Income Fund....... $ 200 $ 150 $ 200 $ 200 $ 200 $ 950
U.S. Government
Income Fund...... $ 200 $ 150 $ 200 $ 200 $ 200 $ 950
U.S. Government
Money Market
Fund............. $ 600 $ 450 $ 600 $ 600 $ 600 $ 2,850
----------- --------- --------- --------- ----------- ---------
Total....... $ 7,200 $ 5,450 $ 7,200 $ 7,200 $ 7,200 $ 34,250
----------- --------- --------- --------- ----------- ---------
----------- --------- --------- --------- ----------- ---------
</TABLE>
20
<PAGE>
------------------------
PROPOSAL NO. 3
APPROVAL OF MASTER INVESTMENT
ADVISORY AGREEMENT
------------------------
INTRODUCTION
Crabbe Huson Group, located at 121 S.W. Morrison, Suite 1400, Portland,
Oregon 97204, currently serves as the investment adviser of each Fund, under
advisory contracts originally dated September 27, 1988 for the Special Fund, the
Equity Fund and the Oregon Bond Fund; March 4, 1994 for the Real Estate Fund;
and August 7, 1988 for the other Funds (the "Existing Advisory Contracts"). The
advisory contract for the Real Estate Fund was last submitted to a vote of
shareholders on March 4, 1994. The Board of Directors of the Real Estate Fund
reconsidered and ratified the Real Estate Fund's advisory contract at a meeting
held on August 30, 1994. The advisory contracts of the other Funds were last
submitted to the shareholders on February 22, 1994 at their last annual meeting.
The Funds have followed the practice of having the shareholders approve the
Existing Advisory Contracts at every annual meeting.
By their terms, the Existing Advisory Contracts will terminate upon
consummation of the Reorganization. Accordingly, pursuant to this Proposal No.
3, shareholders of each Fund are being asked to authorize their Fund, as the
sole shareholder of its respective series of the Trust, to vote in favor of the
Master Investment Advisory Agreement between the Trust and Crabbe Huson Group
("Master Investment Advisory Agreement").
Descriptions of Crabbe Huson Group, the Existing Advisory Contracts, and the
Master Investment Advisory Agreement are set forth below. The summaries of
material terms and provisions of the Master Investment Advisory Agreement are
qualified in their entirety by reference to the form of Master Investment
Advisory Agreement which is attached as Exhibit 2 to this proxy statement.
21
<PAGE>
CRABBE HUSON GROUP
James E. Crabbe and Richard S. Huson are the controlling shareholders of
Crabbe Huson Group. The Funds' distributor is Crabbe Huson Securities, Inc. ("CH
Securities"). The sole shareholders of CH Securities are James E. Crabbe and
Richard S. Huson. CH Securities is an affiliate of Crabbe Huson Group.
The names and principal occupation of the principal executive officer and
each director of Crabbe Huson Group is listed below. Their business address is
121 S.W. Morrison, Suite 1425, Portland, Oregon 97204.
<TABLE>
<CAPTION>
NAME AND POSITION PRINCIPAL OCCUPATION
- ----------------------------- ----------------------------------------
<S> <C>
James E. Crabbe Mr. Crabbe has, since 1980, served in
Director, President various management positions with
Crabbe Huson Group
Richard S. Huson Mr. Huson has, since 1980, served in
Director various management positions with
Crabbe Huson Group
Cheryl A. Burgermeister Ms. Burgermeister has been the Chief
Director Financial Officer for Crabbe Huson
Group since 1987
Craig P. Stuvland Mr. Stuvland has been an Executive Vice
Director President of Crabbe Huson Group since
1987
Charles D. Davidson Mr. Davidson has been the Chief
Director Operating Officer of Crabbe Huson Group
since June, 1995. Prior to joining
Crabbe Huson Group, Mr. Davidson worked
six years as an attorney with the law
firm of Garvey, Schubert & Barer
</TABLE>
DESCRIPTION OF EXISTING ADVISORY CONTRACTS
Under the Existing Advisory Contracts with each Fund, Crabbe Huson Group
provides research, advice and supervision with respect to management of each
Fund's portfolio of investments, determines which securities are to be purchased
and sold and what portion of each Fund's assets are to be held, invested, and
reinvested, and places orders for the purchase and
22
<PAGE>
sale of portfolio securities. Crabbe Huson Group furnishes, for the use of the
Funds, office space and all necessary office facilities, equipment and personnel
for servicing the investments of the Funds, maintains their organization, and
provides shareholder communications and information services. Crabbe Huson Group
pays the salaries and expenses, if any, of officers and directors of the Funds
who are "interested persons" of the Funds. Subject to the authority of the
Boards of Directors of the Funds, officers of Crabbe Huson Group are responsible
for the overall management of the Funds' business. CH Securities currently pays
the marketing expenses of the Funds, including the cost of printing and
delivering the prospectuses to prospective shareholders. A portion of these
expenses is borne by each Fund under a plan each Fund has adopted pursuant to
Rule 12b-1 under the 1940 Act.
All other expenses incurred in the operation of the Funds are paid by the
Funds as they incur them. These expenses include taxes, interest, brokerage fees
and commissions, if any; fees of directors who are not "interested persons"; SEC
filing and qualification fees and state Blue Sky qualification fees; charges of
the custodian, the Funds' administrator, dividend disbursing agent, and Crabbe
Huson Group; certain insurance premiums; outside auditing and legal expenses;
costs of maintenance of corporate existence; investor services, corporate
reports to government agencies and corporate meetings; costs of preparing and
distributing prospectuses for regulatory purposes and for distribution to
existing shareholders of the Funds; costs of issuing certificates representing
shares of the Funds (if issued); bookkeeping and appraisal charges; pricing of
portfolio securities; certain clerical and administrative personnel expenses;
dues and expenses for trade organizations; and any extraordinary expenses. Any
expenses that are common to all of the Funds are allocated based on each Fund's
respective net asset value.
Under the Existing Advisory Contracts, each Fund currently pays Crabbe Huson
Group 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 Fund per annum as set forth below:
23
<PAGE>
SPECIAL FUND
REAL ESTATE FUND
EQUITY FUND
ASSET ALLOCATION FUND
<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%
INCOME FUND
<CAPTION>
NET ASSET VALUE ANNUAL RATE
- -------------------------------------------------- ---------------
<S> <C>
First $100 Million................................ 0.75%
Next $400 Million................................. 0.60%
Amounts Over $500 Million......................... 0.50%
</TABLE>
OREGON BOND FUND
U.S. GOVERNMENT INCOME FUND
U.S. GOVERNMENT MONEY MARKET FUND
<TABLE>
<CAPTION>
NET ASSET VALUE ANNUAL RATE
- -------------------------------------------------- ---------------
<S> <C>
First $100 Million................................ 0.50%
Next $400 Million................................. 0.45%
Amounts Over $500 Million......................... 0.40%
</TABLE>
The fees paid by the Special Fund, the Real Estate Fund, the Equity Fund,
the Asset Allocation Fund, and the Income Fund are higher than those paid by
most other mutual funds. Pursuant to its agreement to waive
24
<PAGE>
or reimburse fees, Crabbe Huson Group waived, reimbursed and received the
following amounts during the fiscal year ended October 31, 1995, resulting in
total Fund expenses for advisory fees for that year as follows:
<TABLE>
<CAPTION>
FUND
FEE EXPENSES FEE
WAIVED REIMBURSED PAID
-------- ---------- ----------
<S> <C> <C> <C>
Special Fund.............................................................................. $ 697 $ 0 $5,397,351
Real Estate Fund.......................................................................... $ 75,190 $ 0 $ 115,429
Equity Fund............................................................................... $ 0 $ 0 $2,471,465
Asset Allocation Fund..................................................................... $ 14,567 $ 0 $1,168,648
Oregon Bond Fund.......................................................................... $ 20,866 $ 0 $ 113,176
Income Fund............................................................................... $ 49,010 $33,288 $ (33,287)
U.S. Government Income Fund............................................................... $ 43,576 $26,493 $ (26,493)
U.S. Government Money Market Fund......................................................... $230,305 $ 0 $ 22,893
</TABLE>
The agreement to waive fees is cancelable by Crabbe Huson Group on 30 days
written notice to shareholders. Crabbe Huson Group recently provided notice to
the shareholders of the Special, Equity and Asset Allocation Funds stating that
it no longer intended to waive fees or reimburse expenses. The Board of
Directors does not believe that this change will have a material impact on each
of those Fund's expenses since the Funds have been operating at an expense level
below that at which the Crabbe Huson Group had agreed to waive fees or reimburse
expenses.
In addition to the payments received by Crabbe Huson Group pursuant to the
Existing Advisory Contracts, the Funds made the following payments listed below
to affiliates of Crabbe Huson Group during the fiscal year ended October 31,
1995. The payments to CH Securities were for expenses incurred by CH Securities
in distribution of the Funds' shares pursuant to each Fund's 12b-1 distribution
plan. The payments to Pacific Northwest Trust Company (the "Trust Company") were
to compensate
25
<PAGE>
the Trust Company for its services as transfer agent and dividend-disbursing
agent for each Fund and for accounting services provided to the Funds by the
Trust Company for a portion of fiscal year 1995.
<TABLE>
<CAPTION>
CH SECURITIES TRUST COMPANY
------------- -------------
<S> <C> <C>
Special Fund.............................................................................. $ 84,322.08 $111,390
Real Estate Fund.......................................................................... $ 475.65 $ 29,196
Equity Fund............................................................................... $ 28,862.18 $ 37,320
Asset Allocation Fund..................................................................... $ 5,194.19 $ 18,251
Oregon Bond Fund.......................................................................... $ 479.58 $ 7,987
Income Fund............................................................................... $ 794.13 $ 7,987
U.S. Government Income Fund............................................................... $ 1,046.91 $ 7,987
U.S. Government Money Market Fund......................................................... $ 6,091.71 $ 8,878
</TABLE>
The Existing Advisory Contracts provide that, in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard for its
obligations thereunder, Crabbe Huson Group is not liable for any act or omission
in the course of or in connection with the rendering of services under the
Existing Advisory Contracts. The Existing Advisory Contracts do not restrict the
ability of Crabbe Huson Group to act as investment adviser for any other person,
firm or corporation, including other investment companies.
THE MASTER INVESTMENT ADVISORY AGREEMENT
The material terms and conditions of the Master Investment Advisory
Agreement are summarized below.
The Master Investment Advisory Agreement between the Trust and the Crabbe
Huson Group is substantially the same as the Existing Advisory Contracts. The
investment advisory fee rates provided for in the Master Investment Advisory
Agreement for each series are the same as the rates currently being paid by the
Funds. Under the Master Investment Advisory Agreement, Crabbe Huson will provide
to the Trust and to each separate series within the Trust management and
investment advisory services. Crabbe Huson Group will provide an investment
program and carry out the investment policy of each series of the Trust and
manage the portfolio of each series.
Crabbe Huson Group shall pay for maintaining the staff and personnel
necessary to perform its obligations under the Master Investment Advisory
Agreement and shall provide office space, equipment, and facilities to the
26
<PAGE>
Trust and each series of the Trust. Expenses of the Trust not borne by Crabbe
Huson Group include costs of printing and mailing shareholder reports,
registration statements, prospectuses and proxies to shareholders, fees of
trustees of the Trust (other than interested trustees), fees imposed by
regulatory authorities, charges by Crabbe Huson Group for advisory services,
custodial, disbursing agent, transfer agent, outside legal and accounting fees,
taxes, brokerage fees and commissions, and other charges in connection with
portfolio transactions, expenses of trustees' meetings, and the expenses of
shareholder meetings, if any.
In the event the operating expenses of any series of the Trust exceed
expense limitations applicable to the series by state securities laws or
regulations, Crabbe Huson Group will reduce its fee by the extent of such
excess. Additionally, Crabbe Huson Group has voluntarily agreed to reimburse the
expenses of the following series or to waive all or a portion of its management
fee at such times and to the extent that the total operating expenses for the
series exceed: 1.50% per annum of the net asset value of the Real Estate Fund
Series, 0.80% per annum of the net asset value of the Income Fund Series; 0.75%
per annum of the net asset value of the U.S. Government Income Fund Series;
0.70% per annum of the net asset value of the U.S. Government Money Market Fund
Series; and 0.98% per annum of the net asset value of the Oregon Bond Fund
Series. The Special Series, Equity Series, and the Asset Allocation Series will
not waive fees or reimburse expenses. Crabbe Huson Group may eliminate this
voluntary waiver upon 30 days written notice to shareholders.
As to each series, the Master Investment Advisory Contract will remain in
force for a period of more than two years only so long as such continuance is
specifically approved at least annually by (i) the Board of Trustees or by a
vote of a majority of the outstanding voting securities of the affected series
and (ii) a majority of Trustees who are not parties to the Master Investment
Advisory Agreement or interested persons of any such party in a vote cast in
person at a meeting called for the purpose of voting on such approval. The
Master Investment Advisory Agreement may be terminated as to any series at any
time, without the payment of any penalty, by the Board of Trustees, or by the
vote of a majority of the outstanding voting securities of the affected series,
or by Crabbe Huson Group on sixty days written notice to the other party. The
Master Investment Advisory Agreement shall automatically terminate in the event
of its assignment (as that term is defined in the 1940 Act).
27
<PAGE>
The Master Investment Advisory Agreement provides that Crabbe Huson Group
shall use its best judgment in rendering services. It 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
Trust, except a loss resulting from (i) a breach of fiduciary duty with respect
to the receipt of compensation for services, (ii) willful misfeasance, bad
faith, or gross negligence on its part in the performance of its duties, or
(iii) reckless disregard by it of its obligations and duties. The Trust and each
series of the Trust shall indemnify Crabbe Huson Group and hold it harmless from
and against all losses incurred by Crabbe Huson Group in or by reason of any
pending, threatened, or completed action, suit, investigation, or other
proceeding arising out of or otherwise based upon any action actually or
allegedly taken or omitted to be taken by Crabbe Huson Group in connection with
the performance of any of its duties or obligations under the Master Investment
Advisory Agreement, except that Crabbe Huson Group shall not be indemnified in
the event of a breach of its fiduciary duty with respect to the receipt of
compensation for services, willful misfeasance, bad faith, gross negligence in
the performance of its duties or reckless disregard of its duties and
obligations. The Existing Advisory Contracts do not contain indemnity provisions
in favor of Crabbe Huson Group.
The Master Investment Advisory Agreement provides a nonexclusive right and
license to the Trust and each series of the Trust to use the name and mark
"Crabbe Huson" (the "CH Mark") as part of the Trust and each series' name. This
right exists only for so long as the terms of the Master Investment Advisory
Agreement or any extension, renewal or amendment remains in effect. The Trust on
behalf of each series agrees not to use the CH Mark or any name similar to it if
the Master Investment Advisory Agreement is terminated in whole or as to any
series or if Crabbe Huson Group's function is transferred or assigned to a
company which Crabbe Huson Group or its affiliates does not control. The
Existing Advisory Agreements do not contain such a provision. However, Crabbe
Huson Group believes that the Funds have understood that they have been using
the CH Mark only by permission of Crabbe Huson Group and that the express
licensing provision contained in the Master Investment Advisory Agreement merely
memorializes the understanding of the parties.
28
<PAGE>
RECOMMENDATION
THIS PROXY STATEMENT SEEKS THE APPROVAL OF THE SHAREHOLDERS OF EACH FUND OF
THIS PROPOSAL AND AUTHORIZES THE DIRECTORS OF EACH FUND TO APPROVE THE MASTER
INVESTMENT ADVISORY AGREEMENT ON BEHALF OF EACH FUND AS THE SOLE SHAREHOLDER OF
ITS RESPECTIVE SERIES OF THE TRUST. THE DIRECTORS OF EACH FUND, INCLUDING THE
DIRECTORS WHO ARE NOT "INTERESTED PERSONS" OF THE FUNDS, AS DEFINED IN THE 1940
ACT, HAVE UNANIMOUSLY APPROVED, AND RECOMMEND THAT THE SHAREHOLDERS APPROVE, THE
MASTER INVESTMENT ADVISORY AGREEMENT.
29
<PAGE>
------------------------
PROPOSAL NO. 4
APPROVAL OF SUBADVISORY AGREEMENT
------------------------
INTRODUCTION
Aldrich, Eastman & Waltch, L.P. ("AEW") currently provides investment
advisory services for the Real Estate Fund pursuant to a Subadvisory Agreement
between AEW, Crabbe Huson Group, and the Real Estate Fund, dated September 6,
1995 (the "Subadvisory Contract"). It is proposed that the Trust, on behalf of
the Real Estate Series, enter into contract with Crabbe Huson Group and AEW on
terms which are substantially the same as the current agreement (the "Proposed
Subadvisory Agreement"). Information regarding AEW and the terms of the Proposed
Subadvisory Agreement are set forth below. The summary of the material terms and
provisions of the Proposed Subadvisory Agreement are qualified in their entirety
by reference to the form of Proposed Subadvisory Agreement which is attached as
Exhibit 3 to this Proxy Statement.
AEW
AEW is a registered investment adviser founded in 1981 currently managing
approximately $4.4 billion in assets. AEW is dedicated exclusively to building
and managing real estate investment portfolios for institutional investors.
AEW's business address is 225 Franklin Street, Boston, Massachusetts 02110-2803.
The principal executive officer of AEW is Joseph F. Azrack. Mr. Azrack's
principal occupation is Director and President of AEW. The general partner of
AEW is AEW Holdings L.P. ("AEW Holdings"). The general partner of AEW Holdings
is Aldrich, Eastman & Waltch, Inc. ("AEW, Inc."). Their business address is 225
Franklin Street, Boston, Massachusetts 02110-2803. The shareholders of AEW, Inc.
include certain current and former executive employees of AEW.
PROPOSED SUBADVISORY AGREEMENT
The Proposed Subadvisory Agreement provides, among other things, that,
subject to the supervision of Crabbe Huson Group and the Trustees, AEW shall
furnish continuously an investment program for the Real Estate Series; make
determinations as to which securities shall be purchased, sold or exchanged, and
as to what portion of the assets of the Real Estate
30
<PAGE>
Series shall be held in securities or cash within the guidelines of the Real
Estate Series' Prospectus and Statement of Additional Information and make
determinations as to the manner in which rights pertaining to the Real Estate
Series' securities shall be exercised. AEW is directed at all times, subject to
the supervision of Crabbe Huson Group, to seek to obtain execution and price
within the policy guidelines determined by the trustees and set forth in the
Prospectus and Statement of Additional Information of the Real Estate Series,
and it is expressly authorized to allocate brokerage of the Real Estate Series
to broker dealers affiliated with Crabbe Huson Group.
AEW will furnish, at its own expense, all administrative services, office
equipment and facilities, investment advisory, statistical and research
services, and executive, supervisory, compliance and clerical personnel
necessary to carry out its obligations under the Proposed Subadvisory Agreement.
AEW will be exculpated from liability and indemnified by the Real Estate Series
from and against losses to the same extent as the Crabbe Huson Group.
As compensation for its services, Crabbe Huson Group will pay to AEW at the
end of each calendar month, a fee equal to the greater of (a) 37.5% of one
percent of the average daily net asset value of the Real Estate Series (the
"ADNAV") up to the first $100 million of net asset value, 31.88% of one percent
of the ADNAV for the next $400 million of net asset value, and 22.5% of one
percent of the ADNAV for amounts in excess of $500 million of net asset value,
or (b) 50% of the actual fees paid by the Real Estate Series to the Crabbe Huson
Group. The fee paid by Crabbe Huson Group will not increase any of the fees
incurred by the Fund, and will not affect Crabbe Huson Group's agreement,
terminable on 30 days' notice, to waive certain of its fees and/or reimburse
expenses.
The Proposed Subadvisory Agreement for the Real Estate Series may be
terminated, without payment of any penalty, by the Trustees or by the vote of a
majority of the outstanding voting securities of the Real Estate Series, or by
AEW or Crabbe Huson Group on thirty days' written notice to the other party and
the Real Estate Series. In the event of termination, the Trustees would have the
authority to permit Crabbe Huson Group to make all investment advisory decisions
without seeking shareholder approval.
31
<PAGE>
RECOMMENDATION
THIS PROXY STATEMENT SEEKS THE APPROVAL OF THE SHAREHOLDERS OF THE REAL
ESTATE FUND OF THIS PROPOSAL AND AUTHORIZES THE DIRECTORS OF THE REAL ESTATE
FUND TO APPROVE THE PROPOSED SUBADVISORY AGREEMENT ON BEHALF OF THE REAL ESTATE
FUND AS THE SOLE SHAREHOLDER OF THE REAL ESTATE SERIES OF THE TRUST. THE
DIRECTORS OF THE REAL ESTATE FUND BELIEVE THAT THE NEW ARRANGEMENT IS IN THE
BEST INTERESTS OF THE SHAREHOLDERS OF THE REAL ESTATE FUND AND RECOMMEND THAT
THE SHAREHOLDERS OF THE REAL ESTATE FUND VOTE "FOR" THE PROPOSAL.
32
<PAGE>
------------------------
PROPOSAL NO. 5
APPROVAL OF A NEW
12B-1 DISTRIBUTION PLAN
------------------------
INTRODUCTION
Currently, each of the Funds has adopted a Rule 12b-1 Distribution Plan (the
"Existing Plan" or "Existing Plans") under which each Fund is authorized to
enter into a Distribution Agreement solely with Crabbe Huson Securities, Inc.
("CH Securities"). The Trust's current Board of Trustees has established a 12b-1
Plan on terms substantially identical to each one of the Existing Plans.
Accordingly, shareholders of each Fund are being asked to authorize the Board of
Directors of each Fund to vote as shareholders of the Trust in favor of the
12b-1 Plan currently adopted by the Trust (the "New Plan"). The Directors of
each Fund will also authorize each series of the Trust to become a party to the
current distribution agreement between the Trust and CH Securities.
BOARDS' EVALUATION AND RECOMMENDATION
The Directors, in voting to recommend the New Plan, considered several
factors. They reviewed the maximum aggregate amounts that could be paid under
the New Plan, the potential application of amounts paid under the New Plan, and
the substantial similarity of the New Plan to the Existing Plans. The Directors
reviewed the substantial success in attracting additional shareholders and
assets to the Funds over the past two years, which they believe was, in part,
attributable to the expenditure of proceeds from the Existing Plans. The
Directors considered the desirability of continuing to increase the size of each
series of the Fund in order to decrease per share expenses, and believe that the
availability of proceeds under the New Plan would assist in expanding each
series of the Fund. The Directors also noted that the New Plan would not
increase the maximum expenses payable under the Existing Plans from the current
.25% of net assets payable under each Existing Plans.
DESCRIPTION OF EXISTING PLANS
Each one of the Funds currently has a distribution plan pursuant to Rule
12b-1 under the 1940 Act. The Existing Plans were adopted September 27, 1988 and
amended November 30, 1993 and November 28, 1995 for
33
<PAGE>
all Funds other than the Real Estate Fund. The Real Estate Fund's plan was
adopted March 4, 1994, ratified by the Board of Directors on August 30, 1994,
and amended November 28, 1995. Pursuant to each of the Plans, a Fund may pay up
to .25% per annum of that Fund's average daily net assets to CH Securities, the
Funds' distributor. CH Securities' address is 121 S.W. Morrison, Suite 1410,
Portland, Oregon 97204.
Expenses for which CH Securities is reimbursed under the Existing Plan
include, but are not limited to, compensation paid to registered representatives
of CH Securities and to broker dealers which have entered into sales agreements
with CH Securities; expenses incurred in the printing of prospectuses,
statements of additional information and reports used for sales purposes;
expenses of preparation and printing of sales literature; advertisement,
promotion, marketing and sales expenses; and other distribution related
expenses.
Each Existing Plan continues in effect indefinitely as long as it is
approved on its anniversary date by a vote of the Directors who are not
"interested persons" of the Fund and who have no direct or indirect financial
interest in the operation of the Existing Plan or any agreements related to the
Existing Plan (the "Qualified Directors"), cast in person at a meeting called
for the purpose of voting on this Existing Plan. Each Existing Plan may be
terminated at any time by a vote of the majority of the Qualified Directors of
the respective Fund or by a vote of the majority of the outstanding securities
of the Fund, without penalty to the Fund. An Existing Plan may not be amended
materially, except on a vote of the Qualified Directors of the respective Fund
cast in person at a meeting called for the purpose of voting on the Existing
Plan amendments. Further, an Existing Plan may not be amended to increase
materially the amount to be spent for distribution without the approval of a
majority of the outstanding voting securities of the Fund.
34
<PAGE>
During the fiscal year ending October 31, 1995, each Fund paid the following
distribution fees pursuant to its Plan in the aggregate and as a percentage of
that Fund's average daily net assets during the fiscal year:
<TABLE>
<CAPTION>
AGGREGATE PERCENT OF
DISTRIBUTION AVERAGE NET AVERAGE NET PAYMENT TO
FUND FEES ASSETS ASSETS AFFILIATES*
- ------------------------------------------------------------ ------------ ------------ ------------- -----------
<S> <C> <C> <C> <C>
Special Fund................................................ $ 1,809,820 $682,389,632 .25% $ 84,322
Real Estate Fund............................................ $ 81,437 $ 19,063,283 .25% $ 475
Equity Fund................................................. $ 621,909 $273,762,773 .25% $ 28,862
Asset Allocation Fund....................................... $ 421,755 $121,631,498 .25% $ 5,194
Oregon Bond Fund............................................ $ 61,567 $ 26,805,738 .25% $ 479
Income Fund................................................. $ 26,760 $ 6,539,948 .25% $ 794
U.S. Government Income Fund................................. $ 35,826 $ 8,713,035 .25% $ 1,046
U.S. Government Money Market Fund........................... $ 146,868 $ 50,625,572 .25% $ 6,091
</TABLE>
- ------------------------
* All payments to affiliates were made to CH Securities.
APPROVAL OF NEW 12B-1 DISTRIBUTION PLAN
The Board of Trustees of the Trust approved a new Distribution Plan pursuant
to Rule 12b-1 of the 1940 Act. Shareholders of each of the Funds are now being
asked to authorize their respective Fund to authorize the Fund, as sole
shareholder of its respective series of the Trust, to vote in favor of adoption
of the New Plan. The New Plan permits the Trust to engage CH Securities to
provide distribution services to each series of the Trust, upon shareholder
approval.
The New Plan permits CH Securities to 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 allows the officers of the Trust to directly or indirectly finance
additional activity which is primarily intended to result in the sale of shares
of the Trust. The New Plan calls for each series to reimburse CH Securities up
to 1/12 of 0.25% of a Fund's average daily net assets on a monthly basis. The
distribution plan is designed to assist CH Securities in retaining and
attracting assets for each series of the Trust. Each series may reimburse CH
Securities for fees paid to intermediaries who have assisted in selling shares
of that series, and may also
35
<PAGE>
reimburse CH Securities for actual expenses incurred by that particular series
in connection with various promotional activities engaged in, including the
development of and distribution of high quality marketing literature, media
advertising, direct response mailings, and public relations activities.
The New Plan shall continue in effect indefinitely; provided, however, that
such continuance is subject to annual approval by a vote of the Board of
Trustees and of the members of the Board of Trustees who are not "interested
persons" of the Trust and who have no direct or indirect financial interest in
the operation of the New Plan or any agreements related to the New Plan, cast in
person at a meeting called for the purpose of voting on the New Plan ("Qualified
Trustees").
The New Plan may be amended at any time by the Trustees provided that any
amendment to increase materially the amount to be expended from the assets of
any series for the services described in the New Plan shall be effective only
upon the approval by a vote of a majority of the outstanding voting securities
of the respective series, and any material amendment of this New 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. The New Plan may be terminated at any time by a vote
of a majority of the Qualified Trustees or by a vote of the majority of the
outstanding voting securities of the respective series.
There are no material differences between the New Plan and the Existing
Plans.
RECOMMENDATION
THIS PROXY STATEMENT SEEKS THE APPROVAL OF THE SHAREHOLDERS OF THE FUNDS OF
THIS PROPOSAL NO. 5 AND AUTHORIZES THE DIRECTORS OF EACH FUND TO APPROVE THE NEW
PLAN ON BEHALF OF EACH FUND AS THE SOLE SHAREHOLDER OF ITS RESPECTIVE SERIES OF
THE TRUST. THE DIRECTORS, INCLUDING THE DIRECTORS WHO ARE NOT "INTERESTED
PERSONS" OF THE FUNDS, AS DEFINED IN THE 1940 ACT, BELIEVE THAT THE NEW
ARRANGEMENT IS IN THE BEST INTERESTS OF THE SHAREHOLDERS OF EACH FUND AND
RECOMMEND THAT THE SHAREHOLDERS OF EACH FUND VOTE "FOR" THE PROPOSAL.
36
<PAGE>
------------------------
PROPOSAL NO. 6
RATIFICATION OF
INDEPENDENT AUDITOR
------------------------
Pursuant to Section 32 of the 1940 Act, the Board of Directors of each Fund,
including a majority of directors who are not "interested persons" of each Fund,
unanimously selected the firm of KPMG Peat Marwick LLP, Portland, Oregon as
independent auditors for the Funds for the fiscal years ending October 31, 1995,
and October 31, 1996. This is the first annual meeting to be held since the
Board of Directors made such selection at a duly called meetings. The selection
is subject to ratification at the next succeeding annual meeting of
shareholders. Further, it is anticipated that at fiscal year end the
Reorganization will have been completed and KMPG Peat Marwick LLP will be acting
as independent auditors for the Trust. KPMG Peat Marwick LLP has served as each
Fund's independent auditors since September, 1989. Representatives of KPMG Peat
Marwick LLP are expected to be present at the annual meeting, and will have an
opportunity to make a statement if they desire to do so. Such representatives
are also expected to be available to respond to appropriate questions. Proposal
No. 6 seeks the ratification of KPMG Peat Marwick LLP as independent auditors
for the Funds and the Trust for the fiscal years ending October 31, 1995, and
October 31, 1996.
RECOMMENDATION
The Directors, including the directors who are not interested persons,
believe that KPMG Peat Marwick LLP should be selected as the Funds' and the
Trust's independent auditors and recommend that the shareholders ratify their
selection.
------------------------
VOTING, SOLICITATION
------------------------
VOTING, QUORUM
Each share of a Fund is entitled to one vote on each matter submitted to a
vote of the shareholders of that Fund at the meeting; no shares have cumulative
voting rights.
37
<PAGE>
Approval of Proposal No. 1 requires the affirmative vote of the holders of
two-thirds of the outstanding shares of each Fund. Proposal No. 2, involving the
election of directors and authorizing the election of trustees, requires the
affirmative vote of a majority of the shares of each respective Fund present in
person or represented by proxy at the meeting, provided a quorum is present.
Approval of Proposals 3, 4, 5, and 6 require the affirmative vote of the lesser
of (i) 67% or more of the shares of each Fund present in person at the meeting
or represented by proxy, if holders of more than 50% of the shares of such Fund
outstanding on the record date are present, in person or by proxy, or (ii) 50%
of the outstanding shares of the respective Fund on the record date.
A quorum for the transaction of business is constituted with respect to each
Fund by the presence in person or by proxy of the holders of not less than a
majority of the outstanding shares of such Fund entitled to vote at the meeting.
If, by the time scheduled for the meeting, a quorum of shareholders of each Fund
is not present or if a quorum of each Fund's shareholders is present but
sufficient votes in favor of each of the Proposals described in this proxy
statement are not received, the persons named as proxies may propose one or more
adjournments of the meeting to permit further solicitation of proxies from
shareholders of any Fund which has not received sufficient votes. Any such
adjournment will require the affirmative vote of a majority of the shares of the
Fund with respect to which the meeting is being adjourned, present in person or
represented by proxy at the session of the meeting to be adjourned. The persons
named as proxies will vote in favor of any such adjournment if they determine
that such adjournment and additional solicitation are reasonable and in the
interests of the respective Fund's shareholders. The meeting may be adjourned
without further notice, to a date not more than 120 days after the original
record date.
In tallying shareholder votes, abstentions and broker non-votes (i.e.
proxies sent in by brokers and other nominees which cannot be voted on a
Proposal because instructions have not been received from the beneficial owners)
will be counted for purposes of determining whether a quorum is present for
purposes of convening the meeting. Abstentions and broker non-votes will be
considered to be both present and issued and outstanding and, as a result, will
have the effect of being counted as votes against a specific Proposal.
38
<PAGE>
If the accompanying form or forms of proxy are properly executed and
returned in time to be voted at the meeting, the shares convened thereby will be
voted in accordance with the instructions thereon by the shareholder. Executed
proxies that are unmarked will be voted for each Proposal submitted to a vote of
the shareholders. Any proxy may be revoked at any time prior to its exercise by
providing written notice of revocation to the appropriate Fund, by delivering a
duly executed proxy bearing a later date, or by attending the meeting and voting
in person.
SOLICITATION OF PROXIES
In addition to the solicitation of proxies by mail or expedited delivery
service, the Directors of the Funds and employees and agents of Crabbe Huson
Group may solicit proxies in person or by telephone. The Funds will request each
bank or broker holding shares for others in its name or custody, or in the names
of one or more nominees, to forward copies of the proxy materials to the persons
for whom it holds such shares and to request authorization to execute the
proxies. Upon request, such banks, brokers, and nominees will be reimbursed for
their out-of-pocket expenses in connection therewith. D.F. King & Co. Inc. has
been retained to aid in the overall organization of this proxy solicitation,
including the proxy production, mailing, and vote processing. The cost of
preparing, assembling, mailing, transmitting proxy materials and of soliciting
proxies on behalf of the Board of Directors will be borne by the Funds.
BENEFICIAL OWNERSHIP
The following table shows the persons known by the Funds to beneficially own
5 percent or more of any class of any of the Funds' voting securities, and the
ownership of the officers and the persons nominated as Directors of the Funds,
individually and as a group, as of December 8, 1995. Beneficial owners marked
with an asterisk are nominees holding shares for beneficial owners and the Funds
have no records concerning the actual beneficial owners:
39
<PAGE>
THE CRABBE HUSON SPECIAL FUND, INC.
<TABLE>
<CAPTION>
APPROXIMATE
NUMBER OF SHARES APPROXIMATE
BENEFICIALLY PERCENT OF
BENEFICIAL OWNERS OWNED SHARES
- ----------------------------------------- ----------------- -------------
<S> <C> <C>
Charles Schwab & Co. Inc.*
Special Custody A/C
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104-4122
Gary L. Capps, Director
Bob L. Smith, Director
Richard P. Wollenberg, Director
William Wendell Wyatt, Jr., Director
Officers and Directors as a group
</TABLE>
THE CRABBE HUSON REAL ESTATE INVESTMENT FUND, INC.
<TABLE>
<CAPTION>
APPROXIMATE
NUMBER OF SHARES APPROXIMATE
BENEFICIALLY PERCENT OF
BENEFICIAL OWNERS OWNED SHARES
- ----------------------------------------- ----------------- -------------
<S> <C> <C>
Enele Co. C/F*
Pacific Northwest Trust Company
121 S.W. Morrison, Suite 1450
Portland, OR 97204-3144
Richard P. Wollenberg, Director
Richard S. Huson, President
Officers and Directors as a group
</TABLE>
40
<PAGE>
THE CRABBE HUSON EQUITY FUND, INC.
<TABLE>
<CAPTION>
APPROXIMATE
NUMBER OF SHARES APPROXIMATE
BENEFICIALLY PERCENT OF
BENEFICIAL OWNERS OWNED SHARES
- ----------------------------------------- ----------------- -------------
<S> <C> <C>
Enele Co. C/F*
Pacific Northwest Trust Company
121 S.W. Morrison, Suite 1450
Portland, Oregon
Charles Schwab & Co., Inc.*
Special Custody A/C
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104-4122
Bob L. Smith, Director
Richard P. Wollenberg, Director
Officers and Directors as a group
</TABLE>
THE CRABBE HUSON ASSET ALLOCATION FUND, INC.
<TABLE>
<CAPTION>
APPROXIMATE
NUMBER OF SHARES APPROXIMATE
BENEFICIALLY PERCENT OF
BENEFICIAL OWNERS OWNED SHARES
- ----------------------------------------- ----------------- -------------
<S> <C> <C>
Enele Co. C/F*
Pacific Northwest Trust Company
121 SW Morrison, Suite 1450
Portland, Oregon
Gary L. Capps, Director
Richard S. Huson, President
William Wendell Wyatt, Jr.
Officers and Directors as a group
</TABLE>
41
<PAGE>
THE OREGON MUNICIPAL BOND FUND, INC .
<TABLE>
<CAPTION>
APPROXIMATE
NUMBER OF SHARES APPROXIMATE
BENEFICIALLY PERCENT OF
BENEFICIAL OWNERS OWNED SHARES
- ----------------------------------------- ----------------- -------------
<S> <C> <C>
Gary L. Capps
Officers and Directors as a group
</TABLE>
THE CRABBE HUSON INCOME FUND, INC.
<TABLE>
<CAPTION>
APPROXIMATE
NUMBER OF SHARES APPROXIMATE
BENEFICIALLY PERCENT OF
BENEFICIAL OWNERS OWNED SHARES
- ----------------------------------------- ----------------- -------------
<S> <C> <C>
Klamath Medical Service Bureau
2500 Daggett Street
Klamath Falls, Oregon
Lowa Columbia Pathologists
Project Sharing
William Elton
2656 Jerry Avenue
Longview, WA 98632-4436
Enele Co. C/F*
Pacific Northwest Trust Company
121 S.W. Morrison, Suite 1450
Portland, Oregon
Enele Co. FBO
Blackwell NA Ret A/C 5326
121 S.W. Morrison, Suite 1450
Portland, OR 97204-3144
Officers and Directors, as a group
</TABLE>
42
<PAGE>
THE CRABBE HUSON U.S. GOVERNMENT INCOME FUND, INC.
<TABLE>
<CAPTION>
APPROXIMATE
NUMBER OF SHARES APPROXIMATE
BENEFICIALLY PERCENT OF
BENEFICIAL OWNERS OWNED SHARES
- ----------------------------------------- ----------------- -------------
<S> <C> <C>
Klamath Medical Service Bureau
2500 Daggett Street
Klamath Falls, Oregon
Pacific Northwest Trust Company C/F
Robert B. Hodge, IRA
369 Kubli Road
Grants Pass, Oregon
Enele Co. C/F*
Pacific Northwest Trust Company
121 S.W. Morrison, Suite 1450
Portland, Oregon 97204
Pacific Northwest Trust
Company C/F
Beverly M. Hodge
369 Kubli Road
Grants Pass, OR 97527
Officers and Directors as a group
</TABLE>
THE CRABBE HUSON U.S. GOVERNMENT
MONEY MARKET FUND, INC.
<TABLE>
<CAPTION>
APPROXIMATE
NUMBER OF SHARES APPROXIMATE
BENEFICIALLY PERCENT OF
BENEFICIAL OWNERS OWNED SHARES
- ----------------------------------------- ----------------- -------------
<S> <C> <C>
Enele Co.
Pacific Northwest Trust Company
121 S.W. Morrison, Suite 1450
Portland, Oregon
James E. Crabbe, Secretary
Richard S. Huson, President
Officers and Directors, as a group
</TABLE>
43
<PAGE>
------------------------
SHAREHOLDER PROPOSALS
------------------------
The Funds do not anticipate holding an annual meeting of shareholders in
1997. A shareholder desiring to submit a proposal for presentation at a meeting
of shareholders should send the proposal to the officers of that Fund at 121
S.W. Morrison, Suite 1400, Portland, OR 97204.
------------------------
OTHER MATTERS
------------------------
Management does not know of any other matters to be presented at the meeting
other than those mentioned in this Proxy Statement. However, if any other
business should come before the meeting, it is management's intention that
proxies which do not contain specific restrictions to the contrary will be voted
on such matters in accordance with the judgment of the persons named in the
enclosed form of proxy. If any nominee for election as Director shall be unable
to serve by reason of an unexpected occurrence, the proxies will vote according
to their best judgment.
By Orders of the
Board of Directors
of each Fund
Craig P. Stuvland
SECRETARY
Portland, Oregon
December 22, 1995
44
<PAGE>
EXHIBIT 1
INVESTMENT RESTRICTIONS
The investment restrictions described below have been adopted by the Funds
as fundamental investment policies. These fundamental investment policies may
not be changed without the approval of the holders of the lesser of (a) a
majority of a Fund's outstanding shares or (b) 67% of the shares represented at
a meeting of shareholders at which the holders of more than 50% of the shares
are represented.
THE CRABBE HUSON SPECIAL FUND, INC.
THE CRABBE HUSON EQUITY FUND, INC.
THE CRABBE HUSON ASSET ALLOCATION FUND, INC.
These funds may not:
1. Invest an amount that exceeds 5.0% of the value of a Fund's total assets
in the securities of any one issuer. This restriction does not apply to
holdings of U.S. Government securities.
2. Invest more than 25% of their total assets in any one industry. This
restriction does not apply to holdings of U.S. Government securities.
3. 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.
4. Underwrite the securities of other issuers or invest more than 10% of
net assets in illiquid securities, such as repurchase agreements with a
maturity in excess of seven days. Notwithstanding the above, these Funds
may not invest in restricted securities (including, but not limited to,
nonpublicly traded debt securities).
5. Invest in securities of other investment companies, except as set forth
in the Statement of Additional Information under "SECURITIES OF OTHER
INVESTMENT COMPANIES."
1
<PAGE>
THE CRABBE HUSON REAL ESTATE INVESTMENT FUND, INC.
This Fund may not:
1. With respect to at least 75% of the Fund's total assets, invest an
amount that exceeds 5% of the value of the Fund's total assets in the
securities of any one issuer or invest in more than 10% of the
outstanding voting securities of any one issuer. This restriction does
not apply to holdings of government securities.
2. Purchase the securities of any issuer for the purpose of exercising
control of management, and the Fund may not acquire or own more than 10%
of any class of the securities of any company.
3. Invest more than 5% of its total assets in "restricted securities"
(i.e., securities that would be required to be registered prior to
distribution to the public), excluding restricted securities eligible
for resale to certain institutional investors pursuant to Rule 144A of
the Securities Act of 1933; provided, however, that no more than 15% of
the Fund's total assets may be invested in restricted securities,
including securities eligible for resale under rule 144A....
THE OREGON MUNICIPAL BOND FUND, INC.
This Fund may not:
1. Purchase common stocks, preferred stocks, warrants, or other equity
securities.
2. Purchase securities of any issuer (other than obligations of, or
guaranteed by, the United States Government, its agencies, or
instrumentalities) if, as a result, more than 25% of the value of the
Fund's total assets would be invested in securities of that issuer....
3. With respect to at least 50% of the Fund's total assets, purchase
securities of any issuer (except securities issued or guaranteed by the
United States government or its agencies or instrumentalities) if, as a
result, more than 5% of the value of the fund's total assets would be
invested in securities of that issuer.
4. Invest more than 10% of the Fund's total assets in securities of issuers
that, with their predecessors, have a record of less than 3 years of
continuous operation.
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5. Concentrate more than 25% of the value of its total assets in any one
industry; PROVIDED HOWEVER, that, for purposes of this limitation,
tax-exempt municipal securities and United States Government obligations
are not considered to be part of any industry....
6. Invest in securities subject to legal or contractual restrictions on
resale or in repurchase agreements maturing in more than seven days if,
as a result of such investment, more than 10% of the net assets of the
Fund would be invested in such securities.
7. Invest in companies for the purpose of exercising control or management.
8. Invest in securities of other investment companies, except as set forth
in the Statement of Additional Information under "Securities of Other
Investment Companies."
THE CRABBE HUSON INCOME FUND, INC.
This Fund may not:
1. Buy or sell common stock.
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 (except
U.S. Government securities).
4. Purchase the securities of any issuer for the purpose of exercising
control of management, and the Fund may not acquire or own more than 10%
of any class of the securities of any issuer.
5. Underwrite the securities of other issuers or invest more than 10% of
its net assets in illiquid securities, such as repurchase agreements
with a maturity in excess of seven days. Notwithstanding the above, the
Fund may not invest in restricted securities (including, but not limited
to, nonpublicly traded debt securities).
3
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6. Invest in securities of other investment companies, except as set forth
in the Statement of Additional Information under the heading "SECURITIES
OF OTHER INVESTMENT COMPANIES."
THE CRABBE HUSON U.S. GOVERNMENT INCOME FUND, INC.
This Fund may not:
1. Buy or sell common stock
2. Underwrite the securities of other issuers or invest more than 10% of
its net assets in illiquid securities, such as repurchase agreements
with a maturity in excess of seven days. Notwithstanding the above, the
Fund may not invest in restricted securities (including, but not limited
to, nonpublicly traded debt securities).
3. Invest in securities of other investment companies.
4. Purchase securities that are other than direct or indirect obligations
of the United States Government or its agencies or instrumentalities and
repurchase agreements with respect to those obligations.
THE CRABBE HUSON U.S. GOVERNMENT MONEY MARKET FUND, INC.
This Fund may not:
1. Buy or sell common stock.
2. Invest an amount that exceeds 5% of the value of the Fund's total assets
in the securities of any one issuer (excluding U.S. Government
securities).
3. Invest more than 25% of its total assets in any one industry (excluding
U.S. Government securities).
4. Purchase securities that are other than direct or indirect obligations
of the United States Government or its agencies or instrumentalities and
repurchase agreements with respect to those obligations.
5. Purchase the securities of any issuer for the purpose of exercising
control of management, and the Fund may not acquire or own more than 10%
of any class of securities of any issuer.
4
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6. Underwrite the securities of other issuers or invest more than 10% of
its net assets in illiquid securities, such as repurchase agreements
with a maturity in excess of seven days. Notwithstanding the above, the
Fund may not invest in restricted securities (including but not limited
to, nonpublicly traded debt securities).
7. Invest in securities of other investment companies.
5
<PAGE>
EXHIBIT 2
MASTER INVESTMENT ADVISORY AGREEMENT
This Master Investment Advisory Agreement is made this day of ,
1995 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
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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."
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
2
<PAGE>
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 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.
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<PAGE>
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.
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 organi-zation; (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.
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<PAGE>
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. 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
5
<PAGE>
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
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
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<PAGE>
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.
8. LICENSE TO USE THE CRABBE HUSON NAMES. The Trust is named the
Crabbe Huson Mutual Funds Group 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
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<PAGE>
shall acquire no interest in the name "Crabbe Huson," that 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.
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IN WITNESS WHEREOF, the Fund and Adviser have caused this Agreement to be
executed as of the date first written above.
CRABBE HUSON FUNDS
------------------------------------------------------------------
By: Richard S. Huson
Its: President
THE CRABBE HUSON GROUP, INC.
------------------------------------------------------------------
By: James E. Crabbe
Its: President
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<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
SPECIAL FUND SERIES
SMALL CAP FUND SERIES
REAL ESTATE FUND SERIES
EQUITY FUND SERIES
ASSET ALLOCATION FUND SERIES
<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%
INCOME FUND SERIES
<CAPTION>
NET ASSET VALUE ANNUAL RATE
- -------------------------------------------------- ---------------
<S> <C>
First $100 Million................................ 0.75%
Next $400 Million................................. 0.60%
Amounts over $500 Million......................... 0.50%
OREGON BOND FUND SERIES
U.S. GOVERNMENT INCOME FUND SERIES
U.S. GOVERNMENT MONEY MARKET FUND SERIES
<CAPTION>
NET ASSET VALUE ANNUAL RATE
- -------------------------------------------------- ---------------
<S> <C>
First $100 Million................................ 0.50%
Next $400 Million................................. 0.45%
Amounts over $500 Million......................... 0.40%
</TABLE>
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<PAGE>
EXHIBIT 3
SUBADVISORY AGREEMENT
(THE REAL ESTATE SERIES)
THIS AGREEMENT made this 6th day of September, 1995, by and among The Crabbe
Huson Group, Inc., an Oregon corporation (the "Adviser"), Aldrich, Eastman, &
Waltch, L.P., a Delaware limited partnership (the "Subadviser"), and the Crabbe
Huson Funds, a Delaware business trust (the "Trust").
BACKGROUND
12.0.1 The Trust is engaged in business as a diversified open-end
investment company registered under the Investment Company Act of 1940 and the
rules and regulations thereunder, as amended (hereinafter referred to as the
"Investment Company Act"). The Read Estate Fund Series is a series of the Trust
(the "Series").
12.0.2 The Adviser and the Subadviser are engaged in business as registered
investment advisers under the Investment Advisers Act of 1940, as amended.
12.0.3 The Adviser has entered into a Master Investment Advisory Contract
with the Series dated , 1996 (the "Advisory Contract").
12.0.4 The Subadviser is willing to provide investment advisory services to
the Adviser in connection with the Series' operations on the terms and
conditions hereinafter set forth.
AGREEMENT
In consideration of the mutual covenants and agreements of the parties
hereto herein set forth, the parties covenant and agree as follows:
ARTICLE I
DUTIES OF THE SUBADVISER
Subject to the supervision of the Adviser, the Subadviser shall continuously
furnish an investment program for the Series and shall determine from time to
time which securities shall be purchased, sold or exchanged and what portion of
the assets of the Series shall be held in the various
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<PAGE>
securities in which the Series invests or in cash, subject always to the
restrictions of the Declaration of Trust and Bylaws of the Series, as amended
from time to time, the provisions of the Investment Company Act and the
statements relating to the Series' investment objective, investment policies and
investment restrictions as the same are set forth in the currently effective
prospectus and statement of additional information relating to the shares of the
Series under the Securities Act of 1933, as amended (the "Prospectus" and
"Statement of Additional Information," respectively). Subject to the supervision
of the Adviser, the Subadviser may make determinations as to the manner in which
voting rights, rights to consent to corporate action and any other rights
pertaining to the Series' securities shall be exercised. Subject to the
supervision of the Adviser, the Subadviser shall take, on behalf of the Series,
all actions which it deems necessary to implement the investment policies
determined as provided above, and in particular to place all orders for the
purchase or sale of portfolio securities for the Series' account with brokers or
dealers selected by it, and to that end, the Subadviser is authorized as the
agent of the Series to give instructions to the Custodian of the Series as to
deliveries of securities and payments of cash for the account of the Series. In
connection with the selection of such brokers or dealers and the placing of such
orders, the Subadviser is directed at all times, subject to the supervision of
the Adviser, 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 Investment Company Act, the Securities Exchange Act of 1934,
as amended, and other applicable provisions of law, the Subadviser may select
brokers or dealers with which the Adviser, the Subadviser or the Series, is
affiliated.
ARTICLE II
ALLOCATION OF CHARGES AND EXPENSES
The Subadviser shall furnish, at its own expense, all administrative
services, office equipment and facilities, investment advisory, statistical and
research services, and executive, supervisory, compliance and clerical personnel
necessary to carry out its obligations under this Agreement. The Subadviser
shall not be responsible for any expenses other than those set forth in this
Article II.
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<PAGE>
ARTICLE III
COMPENSATION OF THE SUBADVISER
As compensation for its services, the Adviser will pay to the Subadviser at
the end of each calendar month, a fee equal to the greater of (a) 37.5% of one
percent of the average daily net asset value of the Series (the "ADNAV") up to
the first $100 million of net asset value, 31.88% of one percent of the ADNAV
for the next $400 million of net asset value, and 22.5% of one percent of the
ADNAV for amounts in excess of $500 million of net asset value, or (b) 50% of
the actual fees paid by the Series to Crabbe Huson Group.
ARTICLE IV
LIMITATION OF LIABILITY OF THE SUBADVISER
The Subadviser shall exercise its best judgment in rendering the services
provided by it under this Agreement. The Subadviser 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
Series, 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) of the
Investment Company 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. As used in this Article
IV, the term "Subadviser" shall include any partners, shareholders, directors,
officers, and employees of the Subadviser. The Subadviser shall be protected
with respect to actions which it takes or from which it forbears in reliance on
advice of any unaffiliated agent or counsel, if such agent or counsel has been
prudently selected.
The Series shall indemnify the Subadviser and hold it harmless from and
against all damages, liabilities, costs and expenses (including reasonable
attorneys' fees and amounts reasonably paid in settlement) incurred by the
Subadviser in 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 Series or its security holders) arising out of or otherwise based
upon any action actually or allegedly taken or omitted to be taken by the
Subadviser in connection with the performance of any of its
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duties or obligations under this Agreement; provided, however, that nothing
contained herein shall protect or be deemed to protect the Subadviser against or
entitle or be deemed to entitle the Subadviser to indemnification in respect of
any liability to the Series or its security holders to which the Subadviser
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.
ARTICLE V
COMPLIANCE WITH SECURITIES LAWS AND REGULATIONS
In rendering its services hereunder, the Subadviser shall comply in all
material respects with all applicable federal and state securities laws and
regulations. It shall (i) remain registered as an investment adviser with the
Securities and Exchange Commission and with regulatory agencies in each
jurisdiction in which, as subadviser of the Series, such registration is
required, (ii) provide information and reports for the purpose of establishing
that it is complying with applicable laws, regulations and compliance procedures
at such intervals and in such detail as the Adviser may reasonably request,
(iii) provide information for the purpose of allowing the Adviser, the Series
and the Trust to file all regulatory and compliance reports it is required to
file including any filings required by the Securities and Exchange Commission,
state regulatory agencies, and the NASD, and (iv) notify the Adviser promptly of
any event which comes to the attention of the Subadviser or any of its officers,
directors or employees which constitutes a failure to comply with applicable
laws, regulations and compliance procedures. Adviser, on its own behalf and on
behalf of the Series, acknowledges receipt from Subadviser (at least 48 hours
prior to entering into this Agreement) of Part II of Subadviser's Form ADV as
filed with the Securities and Exchange Commission.
ARTICLE VI
DURATION AND TERMINATION OF THIS AGREEMENT
This Agreement shall become effective as of the date first above written and
shall remain in force for a period of more than two years only so long as the
Investment Advisory Contract remains in force and provided that such continuance
is specifically approved at least annually by (i) the
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Board of Trustees of the Trust or by the vote of a majority of the outstanding
voting securities of the Series and (ii) a majority of those Trustees who are
not parties to this Agreement or interested persons of any such party cast in
person at a meeting called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Board of Trustees of the Trust or by vote of a majority of the
outstanding voting securities of the Series, or by the Subadviser or the Adviser
on thirty days' written notice to the other party. This Agreement shall not be
assigned by the Subadviser without the prior consent of Adviser and the Trust.
ARTICLE VII
AMENDMENTS OF THIS AGREEMENT
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought, and no amendment, transfer, assignment, sale, hypothecation or pledge of
this Agreement shall be effective until approved by (i) the vote of a majority
of outstanding voting securities of the Series, and (ii) a majority of those
Trustees who are not parties to this Agreement or interested persons of any such
party cast in person at a meeting called for the purpose of voting on such
approval.
ARTICLE VIII
DEFINITIONS OF CERTAIN TERMS
The terms "vote of a majority of the outstanding voting securities,"
"assignment," "affiliated person" and "interested person," when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act of 1940, and the Rules and Regulations thereunder, subject, however,
to such exemptions as may be granted by the Securities and Exchange Commission
under said Act.
ARTICLE IX
GOVERNING LAW
This Agreement shall be construed in accordance with the laws of the State
of Oregon without reference to choice of law principles thereof and in
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accordance with the applicable provisions of the Investment Company Act. To the
extent that the applicable laws of the State of Oregon, or any of the provisions
herein, conflict with the applicable provisions of the Investment Company Act,
the latter shall control.
ARTICLE X
MISCELLANEOUS
The Adviser, on its own behalf and on behalf of the Series, acknowledges
that Subadviser, on behalf of other clients, on its own behalf, and/or on behalf
of any of its affiliates, may from time to time make or consider making
investments in real estate related companies, including, without limitation,
real estate investment trusts. Such investments may take the form of an
acquisition of publicly traded debt and/or equity securities of such companies
or the acquisition, through private placement, of an interest in such companies.
In connection with such investments, Subadviser may be in a position to
participate in or influence management of such companies, for example, through
representation on the Board of Directors. The Adviser acknowledges that certain
executive level employees of Subadviser currently serve as directors of the
following companies: Taubman Centers, Inc., Evans Withycombe, Inc. and La Quinta
Motor Inns, Inc. Subadviser shall, in such circumstances, take appropriate
measures to preserve the integrity of any material, non-public information which
may be available to Subadviser and to prevent dissemination of such information
to any employees involved in trading securities of such companies or making any
recommendations regarding the purchase or sale of such securities by any client
of Subadviser.
Subadviser shall assign such qualified personnel and shall devote such time
as it shall deem advisable or appropriate to enable Subadviser fully to perform
its obligations hereunder. It is understood that Subadviser provides investment
advisory services for other clients, both taxable and tax-exempt, including
private and public pension funds. It is further understood that Subadviser may
take investment action on behalf of such other clients that differs from
investment action taken on behalf of the Series. If the purchase or sale of
assets for the Series and for one or more such other clients is considered at or
about the same time, the transactions in such assets will be allocated among the
several clients in a manner deemed equitable by Subadviser.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
THE CRABBE HUSON
GROUP, INC.
By:
------------------------------
Name:
Title:
ALDRICH, EASTMAN, &
WALTCH, L.P.
By:
------------------------------
Name:
Title:
CRABBE HUSON FUNDS
By:
------------------------------
Name:
Title:
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FORM OF PROXY
PROXY PROXY
[NAME OF FUND]
(the "Fund")
Joint Annual Meeting
February 27, 1996
at 6:00 p.m., Pacific Standard Time
Benson Hotel, Crystal Ballroom,
Portland, Oregon 97205
The undersigned shareholder hereby appoints Richard S. Huson and Craig P.
Stuvland, or either of them, Proxies for the undersigned to vote on behalf of
the shareholder at the joint annual meeting of the Shareholders 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., and any adjournment thereof, to be
held at 6:00 p.m., Pacific Standard Time, February 27, 1996, Benson Hotel,
Crystal Ballroom, Portland, Oregon 97205, on the proposals described in the
Notice of Joint Annual Meeting of Shareholders and the accompanying Joint
Proxy Statement for said meeting.
(1) To approve or disapprove for the Fund a reorganization (the
"Reorganization") in which the Fund would become a separate series of the
Crabbe Huson Funds, a business trust organized under the laws of the State
of Delaware (the "Trust") pursuant to an Agreement and Plan of
Reorganization and Liquidation whereby: (i) all of the assets and
liabilities of the Fund will be transferred to a corresponding series of
the Trust; (ii) shareholders of the Fund will receive an equal amount of
shares in the corresponding series of the Trust in exchange for their
shares of the Fund; and (iii) the Fund will subsequently be liquidated and
dissolved.
FOR [ ] AGAINST [ ] WITHHOLD [ ]
<PAGE>
(2) ELECTION OF DIRECTORS & TRUSTEES
[ ] FOR all nominees below (except as noted to the contrary below)
[ ] WITHHOLD authority to vote for all nominees listed below
Gary L. Capps, James E. Crabbe, Richard S. Huson, Louis Scherzer,
Bob L. Smith, Craig P. Stuvland, Richard P. Wollenberg, William
Wendell Wyatt, Jr. (INSTRUCTION: To withhold authority for any
individual nominee, write that nominee's name on the line
provided below.)
-----------------------------------------------------------------
(3) To authorize the Fund to vote its beneficial interest in the [Name of
Series] of the Trust in favor of a Master Investment Advisory Agreement
between the Trust (on behalf of the [Name of Series]) and The Crabbe Huson
Group, Inc., the Fund's current investment adviser ("Crabbe Huson Group").
FOR [ ] AGAINST [ ] WITHHOLD [ ]
(4) To authorize the Fund to vote its beneficial interest in the Real Estate
Series of the Trust in favor of a Sub-advisory Agreement among the Trust
(on behalf of the [Name of Series]) Crabbe Huson Group, and Aldrich,
Eastman and Waltch, L.P. [This Proposal only applicable to Real Estate
Fund]
FOR [ ] AGAINST [ ] WITHHOLD [ ]
(5) To authorize the Fund to vote its beneficial interest in the Trust to
approve a Distribution Plan pursuant to Rule 12b-1 of the Investment
Company Act of 1940 and the rules and regulations thereunder.
FOR [ ] AGAINST [ ] WITHHOLD [ ]
(6) To ratify the appointment by the Board of Directors of the Fund of KPMG
Peat Marwick LLP as independent auditors of each Fund.
FOR [ ] AGAINST [ ] WITHHOLD [ ]
(7) To transact such other business as may properly come before the meeting or
any adjournment thereof.
FOR [ ] AGAINST [ ] WITHHOLD [ ]
<PAGE>
PLEASE SIGN, DATE AND RETURN THIS PROXY PROMPTLY IN THE
POSTAGE-PAID ENVELOPE PROVIDED
The Proxy is solicited by Management and will be voted as specified.
Unless otherwise specified in the squares provided, the undersigned's vote is
to be cast FOR proposals (1 through (7). Discretionary authority is hereby
granted as to any other matters that may come before the meeting. Management
knows of no other matters to be considered by the Shareholders.
x_______________________________________
x_______________________________________
Sign here as name(s) appear at left.
Date __________________________, 199__
