Filed with the Securities and Exchange Commission on January 29, 1999.
1933 Act Registration File No.33-30975
1940 Act File No. 811-5875
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. ____
Post-Effective Amendment No. 11 /X/
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 13 /X/
THE CROWLEY PORTFOLIO GROUP, INC.
(Exact Name of Registrant as Specified in Charter)
3201-B Millcreek Road, Wilmington, DE 19808
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (302) 994-4700
Robert A. Crowley, President Copy to:
The Crowley Portfolio Group, Inc. Bruce G. Leto, Esq.
3201-B Millcreek Road Stradley, Ronon, Stevens & Young, LLP
Wilmington, DE 19808 2600 One Commerce Square
Philadelphia, PA 19103-7098
(Name and Address of Agent for Service) Philadelphia, PA 19103-7098
It is proposed that this filing will become effective
/_/ immediately upon filing pursuant to paragraph (b)
/_/ on ___________ pursuant to paragraph (b)
/X/ 60 days after filing pursuant to paragraph (a)(1)
/_/ on ___________ pursuant to paragraph (a)(1)
/_/ 75 days after filing pursuant to paragraph (a)(2)
/_/ on ___________ pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
/_/ This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant has filed a declaration registering an indefinite amount of
securities pursuant to Rule 24f-2 under the Investment Company Act of 1940, as
amended. Registrant filed the notice required by Rule 24f-2 for its fiscal year
ended November 30, 1998 on ______________, 1999.
<PAGE>
THE CROWLEY PORTFOLIO GROUP, INC.
PROSPECTUS
March 30, 1999
THE CROWLEY INCOME PORTFOLIO
Investing to maximize current income,
consistent with prudent risk
THE CROWLEY DIVERSIFIED MANAGEMENT PORTFOLIO
Investing to achieve a high total return,
consistent with reasonable risk
THE CROWLEY PORTFOLIO GROUP, INC.
3201-B Millcreek Road
Wilmington, DE 19808
(302) 994-4700
Like all mutual funds, the U.S. Securities and Exchange Commission has not
approved or disapproved of these securities or determined if this prospectus is
accurate or complete. It is a criminal offense to suggest otherwise.
<PAGE>
TABLE OF CONTENTS
Page
Summary of the Fund.........................................
Past Performance............................................
Investment Objectives and Policies .........................
Management's Discussion of Fund Performance.................
Main Risks..................................................
Management of the Fund......................................
General Operations..........................................
Shareholders' Information...................................
Pricing of Portfolio Shares..........................
Purchasing Shares.....................................
Redeeming Shares......................................
Special Plans...............................................
Dividends, Distributions and Taxes..........................
Financial Highlights........................................
Additional Information......................................
<PAGE>
THE CROWLEY PORTFOLIO GROUP, INC.
SUMMARY OF THE FUND
The Crowley Portfolio Group, Inc. ("Fund") currently offers two portfolios
- -- The Crowley Income Portfolio and The Crowley Diversified Management
Portfolio. Each Portfolio operates as a separate mutual fund and has its
own investment objective and policies. There is no assurance that a
Portfolio will achieve its objective.
Investment Objectives and Strategies
THE CROWLEY INCOME PORTFOLIO.
Objective: The objective of the Income Portfolio is to maximize current
income, consistent with prudent risk.
Strategy: The Crowley Income Portfolio invests primarily in a diversified
portfolio of fixed-income securities. The Portfolio also may invest its assets
in all classes of securities, bonds, preferred stocks and common stocks which it
believes have better income potential than fixed-income securities. The
investment advisor selects the Portfolio's diversified group of securities for
their high yields relative to risk involved. The investment advisor analyzes
trends in economic and market conditions by using a variety of technical and
fundamental indicators. The Portfolio's policy is to invest shorter to
intermediate term when interest rates are historically lower and longer-term
when interest rates are historically higher.
THE CROWLEY DIVERSIFIED MANAGEMENT PORTFOLIO
Objective: The objective of the Portfolio is high total return consistent
with reasonable risk.
Strategy: The Portfolio concentrates (invests 25% and up to 100% of the value of
its assets) in shares of other registered investment companies and makes other
investments in accordance with its investment policies. The Portfolio uses a
variety of investment techniques and analyzes economic and market trends in an
effort to generate a high total return. To achieve its objective, the
Portfolio's holdings may include investments in investment companies (including
money market mutual funds), closed-end investment companies, cash, cash
equivalents (such as repurchase agreements or certificates of deposit), stocks,
bonds and other debt obligations, as well as a variety of option and futures
transactions. The Portfolio may invest in investment companies that invest in
foreign stocks and bonds and gold and silver mining companies. To further
enhance the performance, the Advisor may invest in so-called "sector funds"
which, in general, concentrate their assets in one segment of the equity market.
Principal Investment Risks
Investing in securities has inherent risks, which could cause you to lose money.
Some of the risks in investing in the Portfolios are:
1. The Adviser makes all decisions regarding the Portfolio's investments.
Therefore, the success of each Portfolio depends on the success of the Adviser
in evaluating, selecting, and monitoring each Portfolio's investments. Like all
mutual funds, an investment in one of the Portfolios is subject to the risk that
the investments chosen by the investment manager may not perform as anticipated.
2. Each Portfolio may invest in lower-rated, high-risk fixed-income
securities, which have speculative characteristics. These securities are more
sensitive to changes in economic and other conditions and therefore such changes
would more readily affect the securities ability to make principal and interest
payments than higher rated securities.
3. The Crowley Diversified Management Portfolio concentrates in the shares of
registered investment companies. It is therefore directly affected by their
performance. By investing in registered investment companies, the Portfolio
indirectly pays a portion of the operating expenses, management expenses and
brokerage costs of such companies as well as the expenses of operating the
Portfolio. The Portfolio's investors indirectly may pay higher total operating
expenses and other costs than they might if they owned the underlying investment
companies directly. The Portfolio has the right to invest in investment
companies that impose a sales load or sales charges. Although the Portfolio
seeks to minimize such charges, they can reduce the Portfolio's investment
results.
4. The Crowley Diversified Management Portfolio may invest in securities of
registered investment companies that invest in foreign securities. Foreign
securities involve additional risks that shareholders should consider.
PAST PERFORMANCE
The bar charts and tables below show each Portfolio's annual returns and its
long-term performance. The bar charts show how each Portfolio's return has
changed from year to year. The second table shows how each Portfolio's average
annual returns for certain periods compare with those of broad-based securities
market indexes. The Crowley Income Portfolio is compared to both the Lipper
Short A Index and the Lipper Corporate A Index, while the Crowley Diversified
Management Portfolio is compared to the Lipper Growth Index. The bar charts and
tables assume that all dividends and capital gain distributions have been
reinvested in new shares of the Portfolio. This information indicates the risks
of investing in the Portfolios. Past performance is not necessarily an
indication of how a Portfolio will perform in the future.
PAST PERFORMANCE
THE CROWLEY INCOME PORTFOLIO
TOTAL RETURN
FOR EACH YEAR ENDED 12/31
12%|
11%| 11.36%
10%| 10.60%
9% | 9.48% 9.60%
8% | 8.42%
7% | 7.24% 7.03%
6% |
5% |
4% |
3% | 3.04%
2% |
1% | (1.83%)
0 -----------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 1997 1998
During the 9-year period shown in the bar chart, the highest return for a
quarter was _____% (quarter ending ___________) and the lowest return for a
quarter was ____ (quarter ending ___________)
Average Annual Total Returns
(for the periods ending
November 30, 1998) Past One Year Past Five Years Since Inception
The Crowley Income
Portfolio 7.03% 5.36% 7.14%
LIPPER SHORT A INDEX<F1> 0.00% 0.00% 0.00%
LIPPER CORPORATE A INDEX<F2> 0.00% 0.00% 0.00%
THE CROWLEY DIVERSIFIED MANAGEMENT PORTFOLIO
TOTAL RETURN
FOR EACH YEAR ENDED 12/31
12%| 12.33% 12.96%
11%|
10%|
9% |
8% | 8.30%
7% | 7.86%
6% |
5% |
4% |
3% |
2% |
1% |
0 --------------------------------
1995<F3> 1996 1997 1998
During the periods shown in the bar chart, the highest return for a
quarter was _____% (quarter ending ___________) and the lowest return for a
quarter was ____ (quarter ending ___________)
Average Annual Total Returns
(for the periods ending
December 31, 1998) Past One Year Since Inception
The Crowley Diversified
Management Portfolio 11.03% 11.04%
LIPPER GROWTH INDEX<F4> 0.00% 0.00%
<F1> The Lipper Short A Index....
<F2> The Lipper Corporate A Index.....
<F3> The Crowley Diversified Management Portfolio was established on April
1, 1995; this amount reflects the period of inception to December 31,
1995.
<F4> The Lipper Growth Index.....
<PAGE>
EXPENSES OF THE PORTFOLIOS
The following tables describe the fees and expenses that you may pay if you buy
and hold shares of the Portfolios.
Shareholder Transaction Fees (fees paid directly from your
investment): None
Annual Fund Operating Expenses (expenses deducted from Fund
assets)*
The Crowley Income The Crowley
Portfolio Diversified
Management Portfolio
Management Fees 0.60% 1.00%
Distribution None None
(12b-1) Fees
Other Expenses 0.79% 0.87%
- -------------- ----- ----
Total Annual 1.39% 1.87%
Fund Operating Expenses
*As a percentage of average annual net assets.
Example
The Examples are intended to help you compare the cost of investing in the
Portfolios with the cost of investing in other mutual funds.
The Examples assume that you invest $10,000 in a Portfolio for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Examples also assume that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
1 year 3 years 5 years 10 years
Crowley Income Portfolio $ $ $ $
Crowley Diversified
Management Portfolio $ $ $ $
<PAGE>
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
The line graphs depicted below for The Crowley Income Portfolio and The Crowley
Diversified Management Portfolio, respectively, illustrate the performance of
$10,000 in each Portfolio from their inception (November 30, 1989 for the Income
Portfolio and April 3, 1995 for the Diversified Management Portfolio), as
compared to certain broad-based indexes.
The Crowley Income Portfolio
[Line graph and total return table appear here]
The line graph illustrates the past performance of The Crowley Income Portfolio
as compared to both the Lipper Short A Index and the Lipper Corporate A Index.
The chart illustrates that a $10,000 investment in November of 1989 would be
worth _______ for The Crowley Income Portfolio, _______ for the Lipper Corporate
A Index and _______ for the Lipper Short A index through November 30, 1998. The
average total return chart for The Crowley Income Portfolio appears next to the
line graph. This chart illustrates that the average annual total return for The
Crowley Growth Portfolio was _____, _____ and _____ for the one, five, and since
inception time periods, respectively.
Source: LIPPER ANALYTICAL SERVICE, INC.
The objective of The Crowley Income Portfolio is to maximize current income,
consistent with prudent risk. The Portfolio has the flexibility to invest in
several types of fixed income vehicles but the majority of its investments must
be by definition investment grade, which means they must be in one of the four
top ratings of certain nationally recognized statistical rating organizations.
Since inception, the Portfolio has invested almost exclusively in high quality
corporate bonds, government and government agency bonds. By investing in such
bonds, the Portfolio has been able to reduce its exposure to the risk of default
by any one issuer. Over the nine years of operations, the Portfolio has not held
any securities that have defaulted or missed a coupon payment.
A second area of risk management has been through the use of maturity length.
Over the past nine years, the Advisor has taken a short to intermediate approach
to maturities. By selecting bonds that mature or are callable in several years,
the Advisor attempts to control the price volatility of investments within the
Portfolio. This should add an element of downside risk protection in the event
that interest rates were to rise.
As of November 30, 1998, the dollar weighted average maturity was _____ years,
as compared to 10.3 years as of November 30, 1997. The Advisor has continued to
maintain an investment position in preferred stocks. The Portfolio had a total
return of _____ for the fiscal year ended November 30, 1998. By comparison, the
Lipper Investment Grade Bond Index (Corporate A) had an investment return of
_____ for the same period. The Lipper Short Investment Grade Bond Index (Short
A) had an investment return of _____. Both indices may be comparable to the
Portfolio, depending on maturity and duration during a given period.
For the five year period ended November 30, 1998, the investment value for the
Short A would have been _______, the Corporate A would have been _______, while
the Portfolio produced an investment value of _______. Since inception, the
Portfolio produced an investment value of _______, while the Corporate A would
have been _______ and _______ for the Short A. [Over the first six years, the
Advisor continued to maintain a shorter weighted average maturity and has over
the last two years increased the weighted average maturity. During the first six
years the weighted average maturity was more similar to that of a Short A index
and currently reflects more of a Corporate A index.
The Crowley Diversified Management Portfolio
[Line graph and total return table appear here]
The line graph illustrates the past performance for The Crowley Diversified
Management Portfolio as compared to the Lipper Growth Index. The chart
illustrates that a $10,000 investment in April of 1995 would have been worth
_______ for The Crowley Diversified Management Portfolio and _______ for the
Lipper Growth Index through November 30, 1998. The average return chart for the
one year period and inception to November 30, 1998 for The Crowley Diversified
Management Portfolio appears next to the line graph. The Fund's average total
return for the one year and since inception time periods was _____ and _____.
Source: LIPPER ANALYTICAL SERVICE, INC.
The Crowley Diversified Management Portfolio seeks high total return consistent
with reasonable risk. The Portfolio invests primarily in shares of other
registered investment companies. Since inception in April of 1995, the Portfolio
had an investment value of _______. There is not a readily available index for
similar portfolios, which might be labeled "Flexible Portfolio Funds Index," so
management has chosen to compare the Lipper Growth Index as the broad based
index with which to compare the Portfolio. During the same period, (April 3,
1995 to November 30, 1997), the index would have produced an investment value of
$18,269. During the fiscal year ended November 30, 1998, "T.C.D.M." had a total
return of _____. The Lipper Growth Index would have had a total return of _____.
At year end the Portfolio had investments in 38 mutual funds in 10 different
fund groups. The greatest weighting was that of the Growth category (23.32%),
followed by Growth/Income (21.75%), Corporate High Yield (10.34%), Income
(9.43%), Aggressive Growth (8.25%), Balanced (7.86%), Small Company (6.78%),
Global Equity (5.17%), Foreign Equity (4.49%), and Pacific Equity (.55%). The
International portion of the Portfolio was at ___% as of November 30, 1998.
Management, over the next several years, intends to increase the number of
different companies to approximately 50, while continuing to stay close to fully
invested.
INVESTMENT OBJECTIVES AND POLICIES
Set forth below are the investment objectives and policies of each Portfolio.
THE CROWLEY INCOME PORTFOLIO
The Portfolio's objective is to maximize current income, consistent with prudent
risk (i.e., reasonable risk to principal). The Portfolio primarily seeks to earn
and pay its shareholders current income while limiting risk to principal through
prudent investing (i.e., achieving maximum current income with reasonable risk
to principal). The Portfolio seeks to achieve this objective by investing in a
diversified portfolio of debt securities of domestic corporations, United States
government securities, bankers' acceptances and certificates of deposit,
repurchase agreements and convertible securities. The Portfolio may also
purchase dividend paying common stocks which it believes have better income
potential than fixed-income securities.
Fixed-income securities will include debt securities and preferred stocks, some
of which may have a call on common stock by means of a conversion privilege or
attached warrants. Investment in corporate debt securities will meet a minimum
rating of Ca by Moody's Investor Service, Inc. ("Moody's") or C by Standard &
Poor's Corporation ("S&P") or, if not so rated, will have been issued by a
corporation having outstanding indebtedness rated at least Ca or C, and
dollar-denominated obligations of foreign issuers issued in the U.S. Only up to
35% of the Portfolio's assets may be invested in corporate debt securities rated
Baa or below by Moody's or BBB or below by S&P, or that are of comparable
quality. The remaining investments by the Portfolio in corporate debt securities
must be made in securities rated at least A by Moody's or A by S&P, or be of
comparable quality. However, if the rating attributed to a fixed-income security
that the Portfolio has purchased is reduced below the minimal accepted rating
after being purchased, the Portfolio may nonetheless retain the security.
The Portfolio's policy is to invest shorter to intermediate term when interest
rates are historically lower and longer-term when interest rates are
historically higher. The Portfolio may also utilize stock index futures and
options to a limited extent, although at no time will more than 5% of the
Portfolio's assets be allocated to futures or options premiums. The Portfolio
may also invest up to 10% of its assets in sponsored or unsponsored American
Depository Receipts.
In selecting corporate debt securities for the Portfolio, the Advisor reviews
and monitors the creditworthiness of each issuer and issue and also analyzes
interest rate trends and specific developments that may affect individual
issuers.
When the Advisor anticipates a generally declining trend in fixed-income
securities markets, the Advisor will begin to move more funds into cash and cash
equivalents. If the Advisor anticipates a prolonged or significant decline, then
the Portfolio may place most, if not all, of its funds in cash and cash
equivalents.
The Portfolio's Advisor will attempt to monitor and respond to changing economic
and market conditions and then, if necessary, reposition the Portfolio's assets,
depending on the trend analysis. Trends are analyzed by using a variety of
technical and fundamental indicators. The trends are determined by the Fund's
Advisor's judgment in light of current and past general economic and market
conditions. Some of the factors used in the analysis include: the direction of
interest rates, trends in yields, fiscal and monetary policy, economic growth,
inflation rates, industry trends and various moving averages. Fixed-income
securities are more dependent upon interest rate movements than are stocks. When
a general rising trend in the fixed-income market is identified, the Portfolio
will position itself in fixed-income securities. If a general rising trend is
identified in both the fixed-income market and the equity market, the Portfolio
will position itself in fixed-income securities, preferred stocks, and high
dividend paying stocks.
The range of maturities of obligations to be held by the Portfolio will
generally be intermediate to long term. The Portfolio retains the right to
invest in obligations with greater maturities when greater returns are available
because of higher interest rates. Currently, the Portfolio's range of maturities
is ten to fifteen years.
THE CROWLEY DIVERSIFIED MANAGEMENT PORTFOLIO
The Portfolio's objective is high total return consistent with reasonable risk.
The Crowley Portfolio seeks to achieve its investment objective by investing
primarily in shares of other open-end registered investment companies. While it
is the Portfolio's policy to invest primarily in registered investment
companies, the Portfolio may also utilize other investment vehicles. These
include cash or cash equivalents (such as repurchase agreements or certificates
of deposit), closed-end investment companies, stocks, bonds and other debt
objectives. Further, the Portfolio, under normal circumstances, will not invest
in a registered investment company that has a stated policy of investing more
than 50% of its assets in derivatives, and will not invest more than 35% of its
net assets in any registered investment company that may invest more than 35% of
its net assets in bonds rated lower than Baa by Moody's or BBB by Standard &
Poor's.
The Portfolio will invest only in investment companies that are registered. If a
registered investment company in which the Portfolio invests ceases to remain
registered, the Portfolio will dispose of the securities of the non-registered
investment company.
The Portfolio may invest in registered investment companies that are closed-end
funds. After their initial public offering, the shares of closed-end funds
frequently trade on the open market at a price per share which is less than the
net asset value per share, the difference representing the "market discount" of
such shares. Market discount may be due in part to the fact that the shares of
closed-end funds are not redeemable by the holder upon demand to the issuer at
the next determined net asset value, but rather are subject to the principles of
supply and demand in the market. A relative lack of secondary market purchasers
of closed-end fund shares also may contribute to such shares trading at a
discount to their net asset value.
Although the Portfolio intends primarily to purchase shares of closed-end funds
which trade at a market discount and which the investment manager believes
present the opportunity for capital appreciation or increased income due in part
to such market discount, there can be no assurance that the market discount on
shares of any closed-end fund will ever decrease. In fact, it is possible that
this market discount may increase or that the Portfolio may experience realized
or unrealized capital losses due to further decline in the market price of the
securities held in the portfolios of such closed-end funds, thereby adversely
affecting the net asset value of the Portfolio's shares. Similarly, there can be
no assurance that the shares of closed-end funds which trade at a premium will
continue to trade at a premium or that the premium will not decrease subsequent
to a purchase of such shares by the Portfolio. Although no assurances can be
given, the Advisor believes that its market research and analysis and the
diversification policies of the Portfolio will enable the Portfolio to avoid
significant declines in the net asset value of the Portfolio's shares due to
losses related to an individual issuer.
The Portfolio must structure its investments in other investment company shares
to comply with certain provisions of federal and state securities laws. The
Portfolio and its affiliates currently may not hold more than 3% of an
underlying fund's shares. In the event that the Portfolio holds more than 1% of
an underlying fund's shares, the underlying fund is obligated to redeem only 1%
of the underlying fund's outstanding securities during any period of less than
30 days. Consequently, any shares of an underlying fund held by the Portfolio in
excess of 1% of the underlying fund's outstanding shares will be considered
illiquid securities that, together with other such securities, may not exceed
10% of the Portfolio's net assets. When the Portfolio is more heavily
concentrated in small investment companies, it may not be able to readily
dispose of such investment company shares and may be forced to redeem Portfolio
shares in-kind to redeeming Portfolio shareholders by delivering shares of
investment companies that are held in the Portfolio. The Portfolio may be
restricted in its ability to redeem because of the 1% limitation discussed
above; however, Portfolio shareholders who redeem their shares in-kind would not
be so restricted. Applicable fundamental policies are reflected in the
Portfolio's investment restrictions.
To achieve the Portfolio's investment objective, the Advisor attempts to
determine the prevailing trend in the equity market. The strategy consists of
moving into those investments, which would most benefit from the prevailing
trend. In choosing from among the available investment companies, the Advisor
considers among other things, the prior performance of the underlying investment
company, its management, its performance in both up and down markets, the
current composition of its portfolio and current investment philosophy.
The Advisor attempts to monitor and respond to changing economic and market
conditions as well as monitor the performance of the investments. If necessary,
the Advisor will reposition the Portfolio's assets to meet the changing
environment.
When the Advisor has identified a significant upward trend in a particular
industry group, the Portfolio retains the right to invest in investment
companies that concentrate in a particular industry sector. The Portfolio may
invest in these investment companies, which tend to have greater fluctuations in
value when compared to other categories of investment companies.
The Portfolio expects that it will select the investment companies in which it
will invest based, in part, upon an analysis of the past and projected
performance and investment structure of the investment companies. However, the
Portfolio must consider other factors in the selection of the investment
companies. These other factors include the investment company's size,
shareholder services, liquidity, the investment objective and investment
techniques, etc. The Portfolio may be affected by the losses of such underlying
investment companies, and the level or risk arising from the investment
practices of such investment companies (such as repurchase agreements, quality
standards, or lending of securities). The Portfolio has no control over the
risks taken by such investment companies. The Portfolio can also elect to redeem
(subject to the 1% limitation discussed above) its investment in an underlying
investment company (or sell it to the company as a closed-end one) if that
action is considered necessary or appropriate.
In accordance with the federal securities laws that regulate mutual funds, if an
underlying fund submits a matter to shareholders for a vote, the Portfolio will
either vote the shares: (i) in accordance with instructions received from
Portfolio shareholders; or (ii) in the same proportion as the vote of all other
holders of such securities.
MAIN RISKS
Lower-Rated, High-Risk Securities. Each Portfolio may invest up to 35% of its
net assets in fixed-income securities that are medium investment grade or lower
(rated Baa or lower by Moody's, or BBB or lower by S&P, or are of comparable
quality). The Portfolios intend to invest in such securities in order to take
advantage of additional investment opportunities that come to the attention of
the advisor from time to time. Medium investment grade securities (those rated
Baa by Moody's or BBB by S&P, or, if unrated, are of comparable quality) have
speculative characteristics. Changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with higher-rated fixed-income
securities. Securities rated below Baa by Moody's or BBB by S&P, are considered
high-yield, high-risk securities, and are commonly referred to as "junk bonds."
These bonds are predominately speculative and are subject to a substantial
degree of credit risk. Neither Portfolio will invest in fixed-income securities
that are of an investment grade either rated or considered lower than C by S&P
or Ca by Moody's. However, the Portfolios may retain a fixed income security
whose rating drops below the minimal acceptable rating after being purchased.
Any additional investments in fixed-income securities by the Portfolios must be
high investment grade or better (rated A or better by Moody's and S&P, or of
comparable quality).
Risks of Investing in Other Investment Companies. The Crowley Diversified
Management Portfolio, by investing in shares of investment companies, indirectly
pays a portion of the operating expenses, management expenses and brokerage
costs of such companies as well as the expense of operating the Portfolios.
Thus, the Portfolio's investors may indirectly pay higher total operating
expenses and other costs than they might pay by owning the underlying investment
companies directly. The Portfolio attempts to identify investment companies that
have demonstrated superior management in the past, thus possibly offsetting
these factors by producing better results and/or lower costs and expenses than
other investment companies. There can be no assurance that this result will be
achieved.
Further, the Portfolio may invest in investment companies which concentrate
(invest 25% or more of the value of their assets) in a particular industry.
These companies tend to have greater fluctuation in value than other investment
companies. The Crowley Diversified Management Portfolio may also invest in
shares of registered investment companies, which invest in foreign securities.
Underlying Funds.
The underlying funds in which the Portfolios invest may invest in various
obligations and employ various investment techniques. The following describes
some of the most common of such obligations and techniques.
Illiquid and Restricted Securities. An underlying fund may invest up to 15% of
its net assets in illiquid securities for which there is no readily available
market. Illiquid Securities may include restricted securities the disposition of
which would be subject to legal restrictions. During the time it takes to
dispose of illiquid securities, the value of the securities (and therefore the
value of the underlying fund's shares held by a Portfolio) could decline.
Foreign Securities. An underlying fund may invest its assets in securities of
foreign issuers. There may be less publicly available information about these
issuers than is available about companies in the U.S. and such information may
be less reliable. Foreign securities are subject to heightened political, social
and economic risks, including the possibility of expropriation, nationalization,
confiscation, confiscatory taxation, exchange controls or other foreign
governmental restrictions. All of these risks are heightened for investments in
emerging markets.
Foreign Currency Transactions. In connection with its portfolio transactions in
securities traded in a foreign currency, an underlying fund may enter into
forward contracts to purchase or sell an agreed upon amount of a specific
currency at a future date which may be any fixed number of days from the date of
the contract agreed upon by the parties at a price set at the time of the
contract. Although such contracts tend to minimize the risk of loss due to a
change in the value of the subject currency, they tend to limit any potential
gain which might result should the value of such currency change favorably
during the contract period.
Industry Concentration. An underlying fund may concentrate its investments
within one industry. Because investments within a single industry would all be
affected by developments within that industry, a fund which concentrates in an
industry is subject to greater risk than a fund which invests in a broader range
of securities. In addition, the value of the shares of such an underlying fund
may be subject to greater market fluctuation than an investment in a more
diversified fund.
Loans Of Portfolio Securities. An underlying fund may lend its portfolio
securities equal in value up to one-third of its total assets. The loan is
secured continuously; however, loans of securities involve a risk that the
borrower may fail to return the securities or may fail to provide additional
collateral.
Short Sales. An underlying fund may sell securities short. In a short sale, the
fund sells stock, which it does not own, making delivery with securities
"borrowed" from a broker. The fund will incur a loss as a result of the short
sale if the price of the security increases between the date of the short sale
and the date on which the fund replaced the borrowed security. The fund may be
required to pay a premium, dividend or interest.
Risk Factors Regarding Options, Futures and Options on Futures. Successful use
by an underlying fund of options on stock or bond indices, financial and
currency futures contracts and related options, and currency options will be
subject to the investment manager's ability to predict correctly movements in
the direction of the securities and currency markets generally or of a
particular segment. If a fund's investment manager is not successful in
employing such instruments in managing a fund's investments, the fund's
performance will be worse than if it did not employ such strategies. In
addition, a fund will pay commissions and other costs in connection with such
investments, which may increase the fund's expenses and reduce the return. In
writing options on futures, a fund's loss is potentially unlimited and may
exceed the amount of the premium received.
Certain derivative positions may be closed out only on an exchange that provides
a secondary market. There can be no assurance that a liquid secondary market
will exist for any particular option, futures contract or option thereon at any
specific time. Thus, it may not be possible to close such a position and this
could have an adverse impact on a fund. When trading options on foreign
exchanges or in the OTC market many of the protections afforded to exchange
participants will not be available and a secondary market may not exist.
Leverage Through Borrowing. An underlying fund may borrow to increase its
holdings of portfolio securities. The fund is required to maintain continuous
asset coverage of 300% with respect to such borrowings and to sell (within three
days) sufficient portfolio holdings to restore such coverage if it should
decline to less than 300%, even if disadvantageous. Leveraging will exaggerate
the effect of any increase or decrease in the value of portfolio securities on
the fund's net asset value, and money borrowed will be subject to interest costs
and fees which may exceed the interest and gains, if any, received from the
securities purchased with borrowed funds.
Year 2000 Issues. Like all mutual funds, the Fund and its service providers
utilize systems that must accurately process date related information on or
after January 1, 2000. If the systems used by the Fund or its service providers
(investment manager and distributor, transfer agent, custodian, administrator
and others) are negatively affected by Year 2000 issues, the Fund may not be
able to handle securities trades, payments of interest and dividends, or pricing
and account services. Although, at this time, there can be no assurance that
there will be no adverse impact on the Fund, the Fund's service providers have
advised the Fund that they have been actively working on necessary changes to
their computer systems to prepare for the year 2000 and expect that their
systems, and those of other parties they deal with, will be adapted in time for
that event.
MANAGEMENT OF THE FUND
Investment Advisor. The investment advisor for each Portfolio is Crowley &
Crowley Corp., a corporation organized on August 28, 1989 under the laws of the
state of Delaware, (the "Advisor"), 3201-B Millcreek Road, Suite H, Wilmington,
DE 19808. The Management Contracts provide that Crowley & Crowley Corp. shall
supervise and manage each Portfolio's investments and shall determine each
Portfolio's portfolio transactions, subject to periodic review and ratification
by the Fund's Directors. The Advisor is responsible for selecting brokers and
dealers to execute transactions for the Portfolios. The Board has also
authorized the Advisor and the Fund's officers to consider sales of Portfolio
shares when allocating brokerage, subject to the policy of obtaining best price
and execution on such transactions.
Pursuant to its Management Contract with each Portfolio, the Advisor will manage
the assets of each Portfolio in accordance with the stated objective, policies
and restrictions of the Portfolio and manage the business affairs of the Fund
(subject to the supervision of the Fund's Board of Directors and the Fund's
officers). The Advisor will also provide administrative and clerical services,
keep certain books and records in connection with its services to the Fund and
supervise the services rendered to the Fund by other persons. The Advisor has
also authorized any of its directors, officers and employees who have been
elected as directors or officers of the Fund to serve in the capacities in which
they have been elected. Services furnished by the Advisor under the contracts
may be furnished through the medium of any such directors and officers.
As compensation for its services as Advisor, the Advisor receives a fee,
computed daily and payable monthly, at the annualized rate of 1.00% of the
average daily net assets of The Crowley Diversified Management Portfolio and
0.60% of the average daily net assets of The Crowley Income Portfolio. The
Advisor pays all expenses incurred by it in rendering management services to the
Fund including the costs of accounting, bookkeeping and data processing services
provided in its role as administrator. The Fund bears its costs of operations.
These expenses include, but are not limited to: the fee of the Advisor, taxes,
brokerage fees, fees associated with calculating the net asset value of each
Portfolio daily, legal fees, custodian and auditing fees, and printing and other
expenses which are not expressly assumed by the Advisor under the Management
Contracts. For the fiscal year ending November 30, 1998, The Crowley Income
Portfolio and The Crowley Diversified Management Portfolio incurred expenses
equal to ____%, and ____%, respectively, of average net assets.
The Advisor, pursuant to the Management Contracts, also serves as the
Portfolios' administrator. The Management Contracts provide that the Advisor
will furnish each Portfolio with office facilities, with any ordinary clerical
and bookkeeping services not furnished by the custodian, or distributor and with
Portfolio accounting services. Such services include the maintenance of the
Fund's books and records of each Portfolio. The Advisor has not agreed to
perform daily pricing for the Fund. The Fund will perform that function.
Portfolio Manager. The portfolio manager for each Portfolio is Mr. Robert A.
Crowley, who has been managing the Portfolios since their inception, in 1989 for
The Crowley Income Portfolio and 1995 for The Crowley Diversified Management
Portfolio. Mr. Crowley, who, received his law degree from Widener University
School of Law in 1998, his Chartered Financial Analyst certification in 1990,
his Bachelor of Science Degree in Business Administration from the University of
Delaware in 1980 and his Masters Degree in Business Administration from George
Washington University in 1985. In addition to his responsibilities in managing
the Portfolios, Mr. Crowley is a financial planner with Crowley & Crowley Corp.
Prior to managing the Portfolios, Mr. Crowley managed individual securities
accounts in addition to engaging in financial planning activities.
GENERAL OPERATIONS
Except as indicated elsewhere in the prospectus, the Fund is responsible for the
payment of its expenses, including: (a) the fees payable to the Advisor, the
Distributor and the Transfer Agent; (b) the fees and expenses of directors who
are not affiliated with the Advisor or the Distributor; (c) the fees and certain
expenses of the Fund's Custodian; (d) the charges and expenses of the Fund's
legal counsel and independent accountants; (e) brokers' commissions and any
issue or transfer taxes chargeable to a Portfolio in connection with its
securities transactions; (f) all taxes and corporate fees payable by the Fund to
governmental agencies; (g) the fees of any trade association of which the Fund
is a member; (h) the cost of stock certificates, if any, representing shares of
the Portfolio; (i) reimbursements of the organization expenses of the Fund and
the fees and expenses involved in registering and maintaining registration of
the Fund and its shares with the Securities and Exchange Commission laws, and
the preparation and printing of the Fund's registration statements and
prospectuses for such purposes; (j) allocable communications expenses with
respect to investor services and all expenses of shareholders and directors
meetings and of preparing, printing and mailing prospectuses and reports to
shareholders; (k) litigation and indemnification expenses and other
extraordinary expenses not incurred in the ordinary course of the Fund's
business; and (l) compensation for employees of the Fund.
SHAREHOLDERS' INFORMATION
Pricing of Portfolio Shares
The price for a Portfolio share is determined by the net asset value per share
("NAV") of the Portfolio share. The NAV is determined by the Fund as of the
close of regular trading on each day that the New York Stock Exchange is open
for unrestricted trading and on which there is a purchase or redemption of a
Portfolio's share. The net asset value is determined by the Fund by dividing the
value of the Portfolio's securities, plus any cash and other assets, less all
liabilities, by the number of shares outstanding (assets - liabilities/ # of
shares = NAV). Expenses and fees of the Portfolio, including the advisory and
the distributor fees, are accrued daily and taken into account for the purpose
of determining the net asset value.
In calculating the NAV, the value of a Portfolio's securities is determined in
one of several ways depending on the security. Portfolio securities listed or
traded on a securities exchange for which representative market quotations are
available, will be valued at the last quoted sales price on the security's
principal exchange on that day. Listed securities not traded on an exchange that
day, and other securities which are traded in the over-the-counter market, will
be valued at the last reported bid price in the market on that day, if any.
Securities for which market quotations are not readily available, and all other
assets, will be valued at their respective fair market value as determined in
good faith by, or under procedures established by, the Board of Directors. The
Fund may use independent pricing services to assist in calculating the NAV.
The SAI contains additional information regarding the pricing of the Fund
shares.
Purchasing Shares
Purchase Price: Shares of the Fund are offered for sale to the public through
its distributor, Crowley Securities (the "Distributor") and selected dealers.
The purchase price of the shares is the first NAV computed after the Distributor
receives the purchase order and the Custodian receives payment for the purchased
shares. However, the net asset value per share is only calculated when there is
enough trading in a Portfolio's securities that the current net asset value of
the shares might be materially affected by the changes in value of these
securities Minimum Investments: The minimum initial investment in the Fund is
$5,000, and each subsequent investment must be at least $1,000. The minimum
amount may consist of a single investment in one Portfolio or an aggregate
investment in any combination of the Portfolios. An investment by a spouse or
parent may be combined with an investment of the other spouse or children to
meet the minimum initial or subsequent investment limit. Further, an investment
by a tax-qualified plan may be combined with a personal investment to meet the
minimum initial or subsequent investment limit. How to Purchase Shares: Initial
or subsequent investments in any Portfolio may be made by completing the
application form and mailing it together with your check made payable to The
Crowley Portfolio Group, Inc.
Send a check for at least $5000 for initial investments or $1000 for subsequent
investments and completed application form to:
Crowley Securities
3201-B Millcreek Road
Wilmington, DE 19808
Your purchase will be made in full and fractional shares of the Portfolio
calculated to three decimal places. Shares are normally held in an open account
for shareholders by each Portfolio. The Portfolio will send a statement to
shareholders detailing the shares owned at the time of each transaction. Share
certificates for full shares are available at any time by written request at no
additional cost to the shareholder. However, no certificates will be issued for
fractional shares.
Each Portfolio reserves the right in its sole discretion: (i) to suspend the
offering of its shares; and (ii) to reject purchase orders when in the best
interest of the Portfolio.
Redeeming Shares
Shareholders may redeem all or a portion of their shares without charge on any
day on which the Portfolio calculates its net asset value. Redemptions of shares
of each Portfolio will be made at the NAV next determined after the Transfer
Agent receives a redemption request meeting the requirements described below.
The Portfolios normally send redemption proceeds on the next business day, and
no later than seven calendar days after receiving a redemption request in proper
form.
If a Portfolio receives a redemption request for shares that have recently been
purchased by check, payment of the redemption may be delayed until the Portfolio
confirms with the Custodian Bank that the purchase check has cleared. This may
take up to 15 days from the purchase date. The Board of Directors may suspend
the right of redemption or postpone the date of payment during any period when:
(a) trading on the New York Stock Exchange is restricted as determined by the
Securities and Exchange Commission or such Exchange is closed for other than
weekends and holidays; (b) the Securities and Exchange Commission has by order
permitted such suspension; or (c) an emergency, as defined by rules of the
Commission, exists during which time the sale of Portfolio securities or
valuation of securities held by the Portfolio are not reasonably practicable.
Each Portfolio also reserves the right to redeem a shareholder's account if the
shareholder's aggregate investment in the Fund falls below the minimum initial
investment amount, which is currently $5,000. The Portfolio will not close out a
shareholder's account without informing the shareholder in writing at least
sixty (60) days before making such redemption. During this time the shareholder
may purchase additional shares in any amount necessary to bring the account back
to $5,000. The Portfolio will not redeem an investor's account that is worth
less than $5,000 solely due to a market decline.
Redemption Requirements
All redemption requests must be in writing and should be submitted to:
The Crowley Financial Group, Inc.
3201-B Millcreek Road
Suite H Wilmington, DE 19808.
The redemption request must:
(1) Identify the Portfolio and the shareholder's account number;
(2) State the number of shares to be redeemed and
(3) Be signed by each registered owner exactly as the
shares are registered.
(4) If the shares to be redeemed were issued in certificate form, the
certificates must be endorsed for transfer (or be accompanied by
an endorsed stock power) and submitted along with the redemption
request
When Signature Guarantees are Required
A signature guarantee is required for redemption requests in an amount greater
than $10,000, a redemption to be paid to someone other than to the shareholder
of record, regardless of the dollar amount, or if the proceeds are to be sent
other than to the address of record. The guarantor of a signature must be a
national bank or trust company (not a savings bank), a member bank of the
Federal Reserve System or a member firm of a national securities exchange. The
Transfer Agent may require additional supporting documents for redemptions
requested by corporations, executors, administrators, trustees and guardians. A
redemption request is not considered to be properly received until the Transfer
Agent receives all required documents in proper form. Questions with respect to
the proper form for redemption requests should be directed to the Transfer Agent
at the numbers listed on the cover of this Prospectus.
Redemptions In-Kind
If the Board determines that it would be detrimental to the best interest of the
remaining shareholders of a Portfolio to make payment in cash, the Portfolio may
pay the redemption price in whole or in part by a "redemption in-kind." A
redemption in-kind is a payment in portfolio securities rather than cash. Such
securities will be valued by using the procedures to determine the net asset
value at the time of the redemption. The shareholder may experience additional
expenses such as brokerage commissions in order to sell the securities received
from the Portfolio. In-kind payments do not have to constitute a cross section
of the securities in the Portfolio. The Fund will not recognize gain or loss for
federal tax purposes on the securities used to complete an in-kind redemption,
but the shareholder will recognize gain or loss equal to the difference between
the fair market value of the securities received and the shareholder's basis in
the Portfolio shares redeemed.
Shareholders who have questions about a redemption should contact the Transfer
Agent at (302) 994-4700.
SPECIAL PLANS
Retirement Plans. Each Portfolio also offers its shares for use in certain Tax
Sheltered (such as IRA, Keogh, 401(k) and 403(b)(7) plans) and Withdrawal Plans.
Information on these Plans is available from the Portfolios' Distributor or by
reviewing the Statement of Additional Information.
Exchange Privilege. Shareholders of one Portfolio may exchange all or part of
their shares for shares in another Portfolio, at net asset value. There is no
fee for exchanges, and shareholder's may make two exchanges per calendar year.
Shares of a Portfolio are available only in states where such shares may
lawfully be sold. The amount invested must equal or exceed the required minimum
investment of the Portfolio which is purchased. To exchange shares, shareholders
should contact the Portfolios' Distributor. A shareholder requesting an exchange
will be sent a current prospectus and an exchange authorization form to
authorize the exchange. Exchanges may not be made by telephone. The Fund retains
the right to modify the terms of its exchange privilege or to terminate the
privilege.
An exchange, for tax purposes, constitutes the sale of one Portfolio and the
purchase of another. The sale may involve either a capital gain or loss to the
shareholder for federal income tax purposes.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Portfolio will declare and pay annual dividends to its shareholders of
substantially all of its net investment income, if any, earned during the year
from its investments. Each Portfolio will also distribute net realized capital
gains, if any, once each year. Expenses of the Portfolios, including the
advisory fee, are accrued each day. Dividends will be reinvested and
distributions will be made in additional shares of a Portfolio on the payment
date, unless the shareholder has elected in writing to receive dividends or
distributions in cash. The additional shares will be purchased at the NAV
determined on the record date of the dividend or distribution. An election may
be changed by notifying the Transfer Agent in writing thirty days before the
record date.
In general, distributions form a Portfolio are taxable to you as either ordinary
income or capital gains. This is true whether you reinvest your distributions in
additional shares of a Portfolio or receive them in cash. Any capital gains
distributed by the Fund are taxable to you as long-term capital gains no matter
how long you have owned your shares. For corporate investors, dividends from net
investment income may qualify in part for the corporate dividends-received
deduction. The portion of dividends paid by a Portfolio that so qualifies will
be designated each year in a notice mailed to the Portfolio's shareholders. The
availability of the dividends-received deduction is subject to certain holding
period and debt financing restrictions imposed under the Code on the corporation
claiming the deduction.
Although dividends generally will be treated as distributed when paid, dividends
which are declared in October, November or December to shareholders of record on
a specified date in one of those months, but which, for operational reasons, may
not be paid to the shareholder until the following January, will be treated for
tax purposes as if paid by a Portfolio and received by the shareholder on
December 31 of the year declared.
The sale of shares of a Portfolio is a taxable event and may result in a capital
gain or loss to shareholders subject to tax. Capital gain or loss may be
realized from an ordinary redemption of shares or an exchange of shares between
two Portfolios. In addition to federal taxes, shareholders may be subject to
state and local taxes on distributions.
Each year, the Portfolio will mail you information on the tax status of the
Portfolio's dividends and distributions. By law, each Portfolio is required to
withhold 31% of your distributions and proceeds if you do not provide your
correct taxpayer identification number, or certify that such number is correct,
or if the IRS instructs the Portfolio to do so.
The tax discussion set forth above is included for general information only.
Prospective investors should consult their own tax advisers concerning the
federal, state, local or foreign tax consequences of an investment in a
Portfolio. Additional information on tax matters relating to the Portfolios and
their shareholders is included in the section entitled "Dividends, Distributions
and Taxes" in the Statement of Additional Information.
<PAGE>
FINANCIAL HIGHLIGHTS
The following financial highlights from December 6, 1989 through November 30,
1998 are derived from the financial statements of The Crowley Income Portfolio,
The Crowley Portfolio Group, Inc. and have been audited by Tait, Weller & Baker,
independent auditors. The data should be read in conjunction with the financial
statements, related notes, and the report of Tait, Weller & Baker covering such
financial information and highlights for the fiscal year ended November 30,
1998, all of which are incorporated by reference into the Fund's Statement of
Additional Information. A copy of the Fund's Annual Report (including the report
of Tait, Weller & Baker) may be obtained from the Fund upon request at no
charge.
CROWLEY INCOME PORTFOLIO
<PAGE>
12/01/97 12/01/96 12/01/9512/01/94 12/01/93
to to to to to
11/30/98 11/30/97 11/30/9611/30/95 11/30/94
-------- -------- ---------------- --------
Net Asset $10.89 $11.08 $10.69 $11.57
------ ------ ------ ------
Value,
Beginning
of Period
Income
from
Investment
Operations:
Net .69 .59 .65 .61
Investment
Income:
Net Gains .07 (.15) .37 (.76)
or Losses
on
Securities
(both
realized &
unrealized)
Total from .76 .44 1.02 (.15)
Investment
Operations
Less
Distributions:
Dividends (.65) (.62) (.63) (.66)
(from net
investment
income)
Distributions (--) (--) (--) (.07)
(from
capital
gains)
Return of (--) (--) (--) (--)
---- ---- ---- ----
Capital
Total (.65) (.62) (.63) (.73)
----- ----- ----- -----
Distributions
Net Asset $11.00 $10.90 $11.08 $10.69
====== ====== ====== ======
Value, End
of Period
Total 7.34% 4.16% 10.12% (1.43%)
Return
Ratios/Supplemental
Data:
Net $9,373 $9,529 $8,940 $6,654
Assets,
End of
Period
(000s
omitted)
Ratio of .39% 1.39% 1.43% 1.37%
Expenses
to Average
Net Assets
Ratio of 6.22% 5.62% 6.43% 6.28%
Net Income
to Average
Net Assets
Portfolio 22.81% 66.18% 31.60% 14.45%
Turnover
Rate
(a) Effective date of the Fund's initial registration under the Securities Act
Of 1933, as amended.
(b) Annualized.
(c) The ratio of operating expenses and net income before reimbursement
of expenses by the advisor were 1.37% and 6.49%, respectively, for 1991
and 1.61% and 6.48%, respectively, for 1990.
<PAGE>
FINANCIAL HIGHLIGHTS
The following financial highlights from April 3, 1995 (commencement of
operations) through November 30, 1998 are derived from the financial statements
of The Crowley Diversified Management Portfolio of The Crowley Portfolio Group,
Inc. and have been audited by Tait, Weller & Baker, independent auditors. The
data should be read in conjunction with the financial statements, related notes,
and the report of Tait, Weller & Baker covering such financial information and
highlights for the fiscal year ended November 30, 1997, all of which are
incorporated by reference into the Fund's Statement of Additional Information. A
copy of the Fund's Annual Report (including the report of Tait, Weller & Baker)
may be obtained from the Fund upon request at no charge.
CROWLEY DIVERSIFIED MANAGEMENT PORTFOLIO
12/01/97 12/01/96 12/01/95 04/03/95(a)
to to to to
11/30/98 11/30/97 11/30/96 11/30/95
-------- -------- -------- --------
Net Asset Value, $12.15 $10.71 $10.00
Beginning of
Period
Income from
Investment
Operations:
Net Investment .17 05 ---
Income
1.17 1.43 .71
---- ---- ---
Net Gains or
Losses on
Securities (both
realized &
unrealized
1.34 1.48 .71
---- ---- ---
Total from
Investment
Operations
Less
Distributions:
(.18) (.04) ---
Dividends (from
net investment
income)
(.44) --- ---
Distributions
(from capital
gains)
(.62) (.04) ---
----- ----- ---
Total
Distributions
$12.87 $12.15 $10.71
====== ====== ======
Net Asset Value,
End of Period
11.64% 13.87% 7.10%
Total Return
Ratios/Supplemental
Data:
$2,240 $1,500 $962
Net Assets, End
of Period (000s
omitted)
1.87% 2.22% 2.06%(b)
Ratio of
Expenses to
Average Net
Assets
1.08% 0.46% (0.09%)(b)
Ratio of Net
Income (Loss) to
Average Net
Assets
--- 20.69% ---
Portfolio
Turnover Rate
(a) Effective date of the Fund's initial registration under the Securities Act
of 1933, as amended.
(b) Annualized.
<PAGE>
ADDITIONAL INFORMATION
You can find more information about The Crowley Portfolio Group, Inc. and its
Portfolios in the Statement of Additional Information (SAI) and Annual and
Semi-Annual Reports.
The SAI includes expanded information about investment practices, risks and
operations. The SAI supplements, and is incorporated by reference into this
Prospectus.
The Annual and Semi-Annual Reports focus on information about each Portfolio's
investments and performance. In these reports, you will find a discussion of the
market conditions and investment strategies that significantly affected each
Portfolio's performance during the last fiscal year.
How to get these materials and other information about the Portfolios:
Call collect or write The Crowley Portfolio Group, Inc. as shown below.
Visit the SEC's Public Reference Room in Washington, DC (1-800-SEC-0330).
Visit the SEC's Internet site at http://www.sec.gov.
Request copies of this information by writing to the Public Reference
Section of the SEC, Washington, DC 20549-6009 (a copying fee may be charged).
THE CROWLEY PORTFOLIO GROUP, INC.
3201-B Millcreek Road
Wilmington, DE 19808
(302) 997-4700 811-5875
THE CROWLEY PORTFOLIO GROUP, INC.
STATEMENT OF ADDITIONAL INFORMATION
March 30, 1999
The Crowley Income Portfolio
The Crowley Diversified Management Portfolio
Information about the Fund and its Portfolios is included in the Prospectus
dated March 30, 1999. No investment in shares of the Portfolios should be made
without first reading the Prospectus. Certain information from the Annual Report
has been incorporated by reference into this Statement of Additional
Information. To get a free copy of the Prospectus or Annual Report, write to the
following address or call collect the following telephone number.
INVESTMENT MANAGER
AND DISTRIBUTOR
THE CROWLEY PORTFOLIO GROUP, INC.
3201-B Millcreek Road
Wilmington, DE 19808
(302) 994-4700
<PAGE>
TABLE OF CONTENTS
Page
INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . .
Money Market Securities . . . . . . . . . . . . .
Foreign Investments . . . . . . . . . . . . . .
Investment Company Securities . . . . . . . . . . .
Portfolio Turnover. . . . . . . . . . . . . . .
INVESTMENT RESTRICTIONS. . . . . . . . . . . . . .
INVESTMENT ADVISOR . . . . . . . . . . . . . . .
DISTRIBUTOR. . . . . . . . . . . . . . . . . .
ALLOCATION OF PORTFOLIO BROKERAGE. . . . . . . . . . .
TRANSFER AGENCY FUNCTION . . . . . . . . . . . . .
PURCHASE OF SHARES . . . . . . . . . . . . . . .
Tax-Sheltered Retirement Plans. . . . . . . . . . .
OFFICERS AND DIRECTORS OF THE FUND . . . . . . . . . .
OWNERSHIP OF SECURITIES. . . . . . . . . . . . . .
GENERAL INFORMATION. . . . . . . . . . . . . . .
Audits and Reports. . . . . . . . . . . . . . .
Custodian . . . . . . . . . . . . . . . . .
DIVIDENDS, DISTRIBUTIONS AND TAXES . . . . . . . . . .
PERFORMANCE. . . . . . . . . . . . . . . . . .
Comparisons and Advertisements. . . . . . . . . . .
FINANCIAL STATEMENTS . . . . . . . . . . . . . . .
<PAGE>
FUND HISTORY AND CLASSIFICATION
The Crowley Portfolio Group, Inc. ("Fund") is an open-end diversified investment
company. It was organized as a series Maryland corporation on August 15, 1989
and currently offers shares of two series. The Fund's two series are The Crowley
Income Portfolio and The Crowley Diversified Management Portfolio (each, a
"Portfolio").
INVESTMENT STRATEGIES AND RISKS
The objective of The Crowley Income Portfolio is to maximize current income,
consistent with prudent risk. The objective of The Crowley Diversified
Management Portfolio is high total return consistent with reasonable risk. The
Portfolios will use a variety of investment strategies in an effort to balance
portfolio risks and to hedge market risks. There can be no assurance that the
objectives of the Portfolios will be achieved.
Each Portfolio seeks to achieve its objective by making investments selected in
accordance with the Portfolio's investment restrictions and policies. Each
Portfolio will vary its investment strategy to achieve its objective, as
described in the Portfolio's prospectus. This Statement of Additional
Information contains further information concerning the techniques and
operations of each Portfolio, the securities in which it will invest, and the
policies it will follow.
The Crowley Income Portfolio will primarily invest in debt securities,
dividend-paying stocks and preferred stocks; The Crowley Diversified Management
Portfolio concentrates its investments in shares of registered investment
companies. Each Portfolio may invest its assets directly in money market
securities whenever deemed appropriate by the advisor to achieve the Portfolio's
investment objective. It may invest, without limitation, in such securities for
temporary defensive purposes.
Fixed Income Securities
Lower-Rated, High Risk Securities. Each Portfolio may invest up to 35% of its
net assets in fixed-income securities that are medium investment grade or lower,
which means that they have a rating of Baa or lower as determined by Moody's or
BBB or lower by S&P or are of comparable quality. The Portfolios intend to
invest in such securities in order to take advantage of additional investment
opportunities that come to the attention of the Advisor from time to time. Any
additional investments in fixed-income securities must be rated A or better by
Moody's and S&P, or deemed to be of comparable quality, which means they are
high investment grade or better.
Fixed-income securities that are rated Baa by Moody's or BBB by S&P or, if
unrated, are of comparable quality have speculative characteristics. Changes in
economic conditions or other circumstances are more likely to lead to a weakened
capacity to make principal and interest payments than is the case with higher
rated fixed-income securities. Categories below this level are considered high
yield, high-risk securities ("junk bonds"). They are commonly called junk bonds.
(See "Ratings Appendix" to this Prospectus for more rating information.) Junk
bonds are predominately speculative and are subject to a substantial degree of
credit risk.
The Portfolios will not invest in fixed-income securities which are rated lower
than C by S&P, Ca by Moody's or similarly by another rating agency, or, if
unrated, are considered to be of a lower quality than such ratings. However, the
Portfolios may retain a fixed-income security whose rating drops below the
minimal acceptable rating after being purchased.
Such lower-rated and unrated securities generally entail greater risk, including
the possibility of default or bankruptcy of the issuers, or loss of principal or
income. Such securities generally involve greater price volatility and may be
more thinly traded, than securities in higher rated categories. This may
adversely affect and cause large fluctuations in the daily net asset value of a
Portfolio. Also, it may be difficult for the Portfolios to accurately value such
securities at certain times or to sell such securities under certain market
conditions. Adverse publicity and investor perceptions, whether or not based on
a fundamental analysis, may decrease the values and liquidity of junk bonds.
Legislative and regulatory developments also could have a material effect on
junk bonds.
The economy and interest rates may affect junk bonds differently than other
securities. Prices are less sensitive to interest rate changes than higher-rated
securities, but more sensitive to adverse economic changes or individual
corporate developments. Also, during an economic downturn or substantial period
of rising interest rates, highly leveraged issuers may experience financial
stress which would adversely affect their ability to service principal and
interest payment obligations, to meet projected business goals and to obtain
additional financing. If the issuer of a junk bond defaults, the Fund may incur
additional expenses to seek recovery. Changes by recognized rating agencies in
their rating of any security or its issuer ordinarily have a more dramatic
effect on the values of these junk bonds than on the values of higher-rated
securities. Such changes will affect the Portfolios' net asset value per share.
For more information regarding the risks associated with junk bonds, see "Junk
Bonds" in the "Appendix - Investment Policies of Underlying Funds."
Money Market Securities
Each Portfolio may invest in money market securities, which include: marketable
securities issued or guaranteed as to principal and interest by the government
of the United States or by its agencies or instrumentalities, domestic bank
certificates of deposit, bankers' acceptances, prime commercial paper and
repurchase agreements (secured by United States Treasury or agency obligations).
Securities issued or guaranteed as to principal and interest by the United
States government ("Government Securities") include a variety of Treasury
securities, which differ in their interest rates, maturities and dates of issue.
Treasury bills have a maturity of one year or less; Treasury notes have
maturities of one to ten years; Treasury bonds generally have a maturity of
greater than five years. The Portfolios will only acquire Government Securities
which are supported by the "full faith and credit" of the United States.
Securities that are backed by the full faith and credit of the United States
include Treasury bills, Treasury notes, Treasury bonds, and obligations of the
Government National Mortgage Association, the Farmers Home Administration, and
the Export-Import Bank. The Portfolios' direct investments in money market
securities will generally favor securities with shorter maturities (maturities
of less than 60 days), which are less affected by price fluctuations than those
with longer maturities.
Cash equivalents will consist of high-quality money market instruments, which
return maximum current income and maintain preservation of capital. These
instruments are considered safe because of their short-term maturities,
liquidity and high-quality ratings.
Certificates of deposit are certificates issued against funds deposited in a
commercial bank or a savings and loan association for a definite period of time
and earning a specified return. Bankers' acceptances are negotiable drafts or
bills of exchange, normally drawn by an importer or exporter to pay for specific
merchandise, which are "accepted" by a bank, meaning, in effect, that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Investments in bank certificates of deposit and bankers' acceptances are
generally limited to domestic banks and savings and loan associations that are
members of the Federal Deposit Insurance Corporation or Federal Savings and Loan
Insurance Corporation having a net worth of at least one hundred million dollars
("Domestic Banks") and domestic branches of foreign banks (limited to
institutions having total assets not less than $1 billion or its equivalent).
Investments in prime commercial paper may be made in notes, drafts, or similar
instruments payable on demand or having a maturity at the time of issuance not
exceeding nine months, exclusive of days of grace, or any renewal thereof
payable on demand or having a maturity likewise limited. Commercial paper is
limited to the two highest ratings of Moody's and S&P. Firms rate borrowers
differently according to their classifications. S&P rates companies from A for
the highest quality to D for the lowest quality rating. The A-rated companies
are also subdivided into three groups depending on relative strength. Moody's
uses P-1 as their highest rating along with P-2 and P-3. Commercial Paper may be
purchased that is rated P-1 or P-2 by Moody's or A-1 or A-2 by S&P. Instruments
such as commercial paper and notes that are issued by companies having an
outstanding debt rated within these two highest ratings may be purchased.
Repurchase Agreements
Under a repurchase agreement the Portfolio acquires a debt instrument for a
relatively short period (usually not more than one week) subject to the
obligations of the seller to repurchase and of the Portfolio to resell such
instrument at a fixed price. The use of repurchase agreements involves certain
risks. For example, if the seller of the agreement defaults on its obligation to
repurchase the underlying securities at a time when the value of these
securities has declined, the Portfolio may incur a loss upon disposition of
them. If the seller of the agreement becomes insolvent and subject to
liquidation or reorganization under the Bankruptcy Code or other laws, a
bankruptcy court may determine that the underlying securities are collateral not
within the control of the Portfolio and therefore subject to sale by the trustee
in bankruptcy. Finally, it is possible that the Portfolio may not be able to
substantiate its interest in the underlying securities. While management of the
Portfolio acknowledges these risks, it is expected that they can be controlled
through stringent security selection and careful monitoring procedures. The
Portfolio will enter into repurchase agreements only with banks which are
members of the Federal Reserve System, or securities dealers who are members of
a national securities exchange or are market-makers in government securities and
report to the Market Reports Division of the Federal Reserve Bank of New York
and, in either case, only where the debt instrument collateralizing the
repurchase agreement is a U.S. Treasury or agency obligation supported by the
full faith and credit of the U.S. A repurchase agreement may also be viewed as
the loan of money by the Portfolio to the seller. The resale price specified is
normally in excess of the purchase price, reflecting an agreed upon interest
rate. The rate is effective for the period of time the Portfolio is invested in
the agreement and may not be related to the coupon rate on the underlying
security. The term of these repurchase agreements will usually be short (from
overnight to one week) and at no time will a Portfolio invest in repurchase
agreements of more than sixty days. The securities, which are collateral for the
repurchase agreements, however, may have maturity dates in excess of sixty days
from the effective date of the repurchase agreement. A Portfolio will always
receive, as collateral, securities whose market value, including accrued
interest, will be at least equal to 102% of the dollar amount to be paid to the
Portfolio under each agreement at its maturity, and the Portfolio will make
payment for such securities only upon physical delivery or evidence of book
entry transfer to the account of the Custodian. If the seller defaults, the
Portfolio might incur a loss if the value of the collateral securing the
repurchase agreement declines, and might incur disposition costs about
liquidation of the collateral. In addition, if bankruptcy proceedings are
commenced with respect to the seller of the security, collection of the
collateral by the Portfolio may be delayed or limited. A Portfolio may not enter
into a repurchase agreement with more than seven days to maturity if, as a
result, more than 10% of the market value of the Portfolio's net assets would be
invested in such repurchase agreements together with any other illiquid assets.
Foreign Investments
The Portfolios have the authority to invest up to 5% of their respective assets
in foreign securities, including sponsored or unsponsored American Depository
Receipts ("ADRs") for securities of foreign issuers, and the authority to invest
an additional 5% of their respective assets in sponsored or unsponsored American
Depository Receipts only. ADRs are receipts typically issued by a U.S. bank or
trust company evidencing ownership of underlying foreign securities. These
securities are not denominated in the same currency as their underlying
securities, but rather in U.S. dollars. The issuers of unsponsored ADRs are not
obligated to disclose material information in the United States and therefore
there may not be a correlation between such information and the market value of
unsponsored ADRs. Investment in foreign issuers, directly or through ADRs,
involves certain risks, which are in addition to the usual risks inherent in
domestic investments. Such risks include the fact that there may be less
publicly available information about foreign companies, and such companies are
generally not subject to uniform accounting, auditing and financial reporting
standards.
Investment Company Securities
Each investment company in which The Crowley Diversified Management Portfolio
invests will be a registered investment company, and will operate subject to a
variety of regulatory constraints. While such regulation does not guarantee the
investment success of an investment company, or assure that it will not suffer
investment losses, the Advisor believes that such investment companies provide a
sound foundation upon which to base an investment portfolio. By investing in a
broad spectrum of such companies the Portfolio hopes to benefit from the
collective research and analysis of many experienced investment personnel.
There are many types of investment companies. All maintain portfolios, which are
generally liquid, but can be composed of different kinds of securities and
involve different objectives. Such companies may seek only income, only
appreciation, or various combinations of these. They may invest in money market
securities, short or long-term bonds, dividend producing stocks, tax-exempt
municipal securities, or a variety of other instruments. They may seek
speculative or conservative investments ranging from securities issued by new
companies to securities issued by "blue- chip" companies. An investment company
which has a policy of holding 80% of its assets in debt securities maturing in
thirteen months or less, or which holds itself out as a "money market fund,"
will be treated as a money market fund by the Portfolio.
The Portfolio's investment advisor will be responsible for monitoring and
evaluating these kinds of factors to select investment company fund securities
for the Portfolio in accordance with the policies and techniques described in
the prospectus.
The Portfolio, by investing in shares of investment companies, indirectly pay a
portion of the operating expenses, management expenses and brokerage costs of
such companies as well as the expense of operating the Portfolio. Thus, the
Portfolio's investors will indirectly pay higher total operating expenses and
other costs than they would pay by owning the underlying investment companies
directly. The Portfolio attempts to identify investment companies that have
demonstrated superior management in the past, thus possibly offsetting these
factors by producing better results and/or lower costs and expenses than other
investment companies. There can be no assurance that this result will be
achieved.
Investment decisions by the investment advisors of the underlying funds are made
independently of the Portfolio and its Advisor. Therefore, the investment
advisor of one underlying fund may be purchasing shares of the same issuer whose
shares are being sold by the investment advisor of another such fund. The result
of this would be an indirect expense to the Portfolio without accomplishing any
investment purpose.
The Portfolio expects that it will select the investment companies in which it
will invest based, in part, upon an analysis of the past and projected
performance and investment structure of the investment companies. However, the
Portfolio must consider other factors in the selection of investment companies.
These other factors include the Investment Company's size, shareholder services,
liquidity, investment objective and investment techniques, etc. The Portfolio
will be affected by the losses of its underlying investment companies, and the
level of risk arising from the investment practices of such investment companies
(such as repurchase agreements, quality standards, or lending of securities) and
has no control over the risks taken by such investment companies. The Portfolio
can also elect to redeem (subject to the 1% limitation discussed in the
Portfolio's prospectus) its investment in an underlying investment company (or
sell it if the company is a closed-end one) if that action is considered
necessary or appropriate.
Portfolio Turnover
It is not the policy of the Portfolios to purchase or sell securities for
short-term trading purposes, but each Portfolio of the Fund may sell securities
to recognize gains or avoid potential for loss. A Portfolio of the Fund will,
however, sell any portfolio security (without regard to the time it has been
held) when the investment advisor believes that market conditions,
credit-worthiness factors or general economic conditions warrant such a step.
The Fund presently estimates that the annualized portfolio turnover rates for
The Crowley Income Portfolio, and The Crowley Diversified Management Portfolio
generally will not exceed 100% and 200%, respectively. High portfolio turnover
(100% or more) will involve additional transaction costs (such as brokerage
commissions or sales charges or adverse tax effects) which are borne by the
respective Portfolio. (See "Dividends, Distributions and Taxes" in the
prospectus.) For the fiscal years ended November 30, 1996, 1997 and 1998, the
portfolio turnover rates for The Crowley Income Portfolio were 66.18%, 22.81%
and _____, respectively. For the fiscal years ended November 30, 1996, 1997 and
1998, the portfolio turnovers for the Crowley Diversified Management Portfolio
were 20.69% and _____, respectively.
Futures and Options
Each Portfolio may seek to protect itself from anticipated market action by
using "hedging" techniques which the Fund expects will generate gains which
would offset losses on other securities owned by the Fund. These hedging
techniques could involve combinations of various techniques, such as the
purchase or sale of stocks or the use of stock options, stock index options,
stock index futures and options thereon to seek to achieve increases in the
values of such options and futures which offset decreases in the values of other
securities owned by the Fund. The Fund's Advisor would select the specific
technique(s) based upon analysis of the Fund's Portfolios, market conditions,
relative costs and risks, tax effects and other factors. There can be variations
between the relative movements of investments and the hedge selected with
respect to that investment. This may increase or decrease the gains or losses
each Fund achieves by its hedging relative to losses or gains on the hedged
investments. The Portfolio will limit its investments in futures or options
premiums to 5% or less of its assets. The following descriptions illustrate some
of the techniques and risks involved in such hedging.
Options. Each Portfolio intends to purchase and/or write ("sell") call and put
options that are traded on U.S. Securities Exchanges. Each Portfolio seeks to
enhance its objective by receiving premiums for writing covered call and put
options. Although each Portfolio receives premium income from these techniques,
any appreciation realized will be limited by the terms of the option. Each
Portfolio may purchase call options to protect against an increase in the price
of securities that it ultimately wants to buy. It may purchase put options to
protect its Portfolio securities against a decline in market value.
Stock Index Futures. Each Portfolio intends to purchase and sell stock index
futures contracts. A Portfolio may sell stock index futures contracts in
anticipation of, or during a market decline to attempt to offset the decrease in
market value of its common stocks that might otherwise result; and it may
purchase such contracts in order to offset increases in the cost of common
stocks that it intends to purchase.
Options on Stock Indexes and Stock Index Futures. Each Portfolio intends to
purchase and/or write call and put options on stock indexes that are traded on
U.S. Exchanges. The Portfolios also intend to purchase and/or write call and put
options on stock index futures, which are traded on U.S. Exchanges. Options on
stock index futures are similar to options on stocks or options on stock
indexes.
The selection of the foregoing techniques or any combination of them to be used
at any particular time will depend upon an assessment of the relative
implementation costs and the liquidity of the particular secondary market in
which such options, stock index futures, and options on stock indexes and stock
index futures are traded.
Risks of Transactions in Stock Options, Stock Index Options and Options on Stock
Index Futures. An option position may be closed out only on an Exchange that
provides a secondary market for an option of the same series. Although the
Portfolios will generally purchase or write only those options for which the
Advisor believes there is an active secondary market, there is no assurance that
a liquid secondary market on an Exchange will exist for any particular option.
In such event, it might not be possible to effect closing transactions in
particular options, with the result that the Portfolio would have to exercise
its options in order to realize any profit or allow the option to expire. The
inability to closeout these options may result in a loss to the Portfolio. If
exercised, the Portfolio would incur brokerage commissions upon the subsequent
disposition of underlying securities acquired. An imperfect correlation exists
between the options and securities being hedged. Success of any hedging position
depends on the ability of the investment advisor to predict a stock and interest
rate movement. The skills necessary for successful use of hedges are different
than those used in the selection of equity or fixed-income securities. The
Advisor's officer who will be responsible for hedging does not have experience
in managing portfolios that trade in such hedging instruments. If the Advisor is
incorrect in its forecasts regarding market values, interest rates, and other
applicable factors, the Portfolio utilizing these investment techniques may be
in a worse position than if the investment techniques had never been used.
While the Portfolios have not adopted fundamental limitations on their futures
or options activities, they must comply with certain requirements of the U.S.
Securities and Exchange Commission and the Commodities Futures Trading
Commission. For example, these provisions require that each Portfolio shall not
purchase or sell any futures or puts or calls on futures if immediately
thereafter the sum of the amount of the Portfolio's margin deposits (both
initial and variation deposits) and premiums paid for outstanding puts and/or
calls on futures would exceed 5% of the value of its total assets. This
limitation could, however, change if regulatory provisions applicable to the
Portfolios were to be changed. The Portfolios will not engage in transactions in
future contracts or related options for speculation but only as a hedge against
changes resulting from market conditions in the values of securities held in the
Portfolio or which a Portfolio intends to purchase. Although it is not a
fundamental policy, a Portfolio will not purchase or sell futures contracts or
purchase or sell related options if immediately thereafter more than 30% of its
net assets would be so invested. Shareholders will be notified in advance of any
change in this limitation.
By writing a call option, the Portfolio limits its opportunity to profit from
any increase in the market value of the underlying security above the exercise
price of the option. By writing a put option, the Portfolio assumes the risk
that it may be required to purchase the underlying security for an exercise
price higher than its current market value, resulting in a potential capital
loss unless the security subsequently appreciates in value.
Foreign Securities and Currency Considerations
The Crowley Diversified Management Portfolio may invest in shares of registered
Investment companies that invest in foreign securities. Investments in
securities of foreign issuers may involve greater risks that those of U.S.
issuers. There is generally less information available to the public about
non-U.S. companies and less government regulation and supervision of non-U.S.
stock exchanges, brokers and listed companies. Non-U.S. companies are not
subject to uniform global accounting, auditing and financial reporting
standards, practices and requirements. Securities of some non-U.S. companies are
less liquid and their prices more volatile than securities of comparable U.S.
companies. Securities trading practices abroad may offer less protection to
investors. Settlement of transactions in some non-U.S. markets may be delayed or
may be less frequent than in the U.S., which could affect the liquidity of the
underlying fund's portfolio, and, in turn, the Portfolio. Additionally, in some
non-U.S. countries, there is the possibility of expropriation or confiscatory
taxation, limitations on the removal of securities, property or other assets of
the fund, political or social instability, or diplomatic developments which
could affect U.S. investments in those countries. The Portfolio intends to
invest in such registered investment companies that diversify broadly among
countries, but reserves the right to invest in investment companies that invest
a substantial portion of assets in one or more countries if economic and
business conditions warrant such investments. The Advisor will consider these
factors in managing the Portfolio's investments.
The U.S. dollar market value of the underlying funds' investments and of
dividends and interest earned by the underlying funds, and in turn, the
Portfolio may be significantly affected by changes in currency exchange rates.
Some currency prices may be volatile, and there is the possibility of
governmental controls on currency exchange or governmental intervention in
currency markets, which could adversely affect the underlying funds and, in
turn, the Portfolio. Although underlying funds may attempt to manage currency
exchange rate risks, there is no assurance that the underlying funds will do so
at an appropriate time or that it will be able to predict exchange rates
accurately. For example, if any of the funds increase their exposure to a
currency and that currency's price subsequently falls, such currency management
may result in increased losses to those funds. Similarly, if any of the funds
decrease their exposure to a currency, and the currency's price rises, those
funds will lose the opportunity to participate in the currency's appreciation.
These events may adversely affect the Portfolio.
INVESTMENT RESTRICTIONS
The Fund has adopted the investment restrictions set forth below for each
Portfolio in addition to those discussed in the Prospectus. Some of these
investment restrictions are fundamental policies of the Portfolios, and cannot
be changed without the approval of a majority of the outstanding voting
securities. As stated in the 1940 Act, a "vote of a majority of the outstanding
voting securities" means the affirmative vote of the lesser of: (1) more than
50% of the outstanding shares, or (2) 67% or more of the shares present at a
meeting if more than 50% of the outstanding shares are represented at the
meeting in person or by proxy.
Changes in values of particular Portfolio assets or the assets of the Portfolio
as a whole will not cause a violation of the investment restrictions so long as
percentage restrictions are observed by the Portfolio at the time it purchases
any security.
Fundamental Policies. As a matter of fundamental policy, each Portfolio will
not:
(a) as to 75% of the Portfolio's total assets, invest more than 5% of its total
assets in the securities of any one issuer. (This limitation does not apply to
cash and cash items, obligations issued or guaranteed by the United States
Government, its agencies or instrumentalities.)
(b) purchase more than 10% of the voting securities, or more than 10% of any
class of securities of any issuer. For purposes of this restriction, all
outstanding fixed-income securities of an issuer are considered as one class.
(c) purchase or sell commodities or commodity futures contracts, provided that
each Portfolio may enter into futures contracts and related options and make
initial and variation margin deposits in connection therewith.
(d) make loans of money or securities, except: (i) by the purchase of
fixed-income obligations in which the Portfolio may invest consistent with its
investment objective and policies; or (ii) by investment in repurchase
agreements.
(e) invest in securities of any company if, to the knowledge of the Portfolio,
any officer or director of the Fund or the Advisor owns more than 0.5% of the
outstanding securities of such company and such officers and directors (who own
more than 0.5%) in the aggregate own more than 5% of the outstanding securities
of such company.
(f) borrow money, except the Portfolio may borrow from banks: (i) for temporary
or emergency purposes in an amount not exceeding 5% of the Portfolio's assets;
or (ii) to meet redemption requests that might otherwise require the untimely
disposition of portfolio securities, in an amount up to 33 1/3% of the value of
the Portfolio's total assets (including the amount borrowed) valued at market
less liabilities (not including the amount borrowed) at the time the borrowing
was made. While borrowings exceed 5% of the value of the Portfolio's total
assets, the Portfolio will not purchase securities. Interest paid on borrowings
will reduce net income.
(g) pledge, hypothecate, mortgage or otherwise encumber its assets, except in an
amount up to 33 1/3% of the value of its net assets but only to secure
borrowings for temporary or emergency purposes, such as to effect redemptions.
(h) purchase the securities of any issuer, if, as a result, more than 10% of the
value of a Portfolio's net assets would be invested in securities that are
subject to legal or contractual restrictions on resale ("restricted
securities"), in securities for which there are no readily available market
quotations, or in repurchase agreements maturing in more than seven days, if all
such securities would constitute more than 10% of the Portfolio's net assets.
(i) issue senior securities;
(j) engage in the underwriting of securities except insofar as the Portfolio may
be deemed an underwriter under the Securities Act of 1933 in disposing of a
portfolio security;
(k) purchase or sell real estate or interests therein, although it may purchase
securities of issuers which engage in real estate operations and securities
which are secured by real estate or interests therein;
(l) invest for the purpose of exercising control or management of another
company;
(m) purchase oil, gas or other mineral leases, rights or royalty contracts or
exploration or development programs, except that the Portfolio may invest in the
securities of companies which invest in or sponsor such programs;
(n) concentrate (invest 25% or more of the value of its assets) its investments
in any industry (this restriction does not apply to The Crowley Diversified
Management Portfolio with respect to registered investment companies);
(o) make purchases of securities on "margin", or make short sales of securities,
provided that each Portfolio may enter into futures contracts and related
options and make initial and variation margin deposits in connection therewith.
For the Crowley Diversified Management Portfolio only
The Crowley Diversified Management Portfolio will not
* invest in any investment company if a purchase of its shares would result in
the Portfolio and its affiliates owning more than 3% of the total outstanding
stock of such investment company.
* invest in any investment company which itself does not qualify as a
diversified investment company under the Internal Revenue Code.
With the exception of investment restriction (f) relating to borrowing, so long
as percentage restrictions are observed by each Portfolio at the time it
purchases any security, changes in values of particular Portfolio assets or the
assets of the Portfolio as a whole will not cause a violation of any of the
foregoing restrictions.
MANAGEMENT OF THE FUND
Board of Directors and Officers of the Fund. The Board of Directors of the Fund
consists of six individuals, four of whom are not "interested persons" of the
Fund as than term is defined in the 1940 Act. The Directors are fiduciaries for
the Fund's shareholders and are governed by the laws of the state of Maryland in
this regard. The directors, in addition to functions set forth under "Investment
Advisor" and "Distributor" review the actions of the officers and decide on
general policy.
Compensation to officers and directors of the Fund who are affiliated with the
Investment Advisor or the Distributor is paid by the Investment Advisor or the
Distributor, respectively, and not by the Fund.
The names, addresses and occupational history of the Directors and principal
executive officers are listed below.
Principal
Positions Held Occupation(s) During
Name, Address and Age with the Fund the Past Five Years
+*Robert A. Crowley (40) President, Treasurer Vice President, Crowley &
3201-B Millcreek Road and Director Crowley (financial
Wilmington, DE 19808 planning and registered
investment advisor
(formerly Crowley
Planning & Management
Corp.) from November,
1986 until present;
Vice President, The
Crowley Financial Group,
Inc. (financial
management firm and
transfer agent) from
February, 1990 to
present; Vice President,
Crowley Real Estate
Services,
Inc. from September,1986
until present; General
Partner, Crowley
Securities (registered
broker-dealer) from
February, 1985 until
present; Partner, Crowley
Insurance, (insurance
brokerage) July, 1986
until present.
+*Frederick J.
Crowley, Jr. (42) Vice President, President, Crowley &
Secretary and Crowley Corp.(financial
planning and registered
3201-B Millcreek Road Director investment advisor)
(formerly Crowley
Planning and Management
Corp.) from November,
1986 until present;
President and Treasurer,
The Crowley Financial
Group, Inc. (financial
management firm and
transfer agent) from
February, 1990 to present;
Vice President, Crowley
Real Estate Services,
Inc. (real estate
brokerage) from September,
1986 until present;
General Partner, Crowley
Securities (registered
broker-dealer) from
February, 1985 until
present; Partner, Crowley
Insurance (insurance
brokerage) July, 1985
until present.
William O. Cregar (73) Director Retired. Formerly Security
4556 Simon Road Director, E.I. duPont de
Wilmington, DE 19803 Nemours & Co., until
December, 1990.
Bruce A. Humphries (51) Director Operations Senior
2 Radburn Lane Management, Data
Newark, DE 19711 International, Inc.
Daniel J. Piscitello (57) Director Director of Creative
3933 Branches Lane Services, Lenox
Doylestown, PA 18901 Collections, 1986 to
Present.
Peter Veenema (49) Director Senior Research Engineer,
1211 Norbee Drive E.I. duPont de Nemours,
Wilmington, DE 19803 1989 to Present.
+Catherine Crowley (63) Assistant Secretary & Office Manager, Crowley &
3201-B Millcreek Road Assistant Treasurer Crowley Corp. (financial
Wilmington, DE 19808 planning and advisor)
(formerly Crowley
Management Corp.);
Secretary, The Crowley
Financial Group, Inc.
(financial management
firm and transfer agent)
from February, 1990
to present.
- -------------------
* "Interested" director as defined in the Investment Company Act of 1940
(the "1940 Act")
+ Robert A. Crowley and Frederick J. Crowley, Jr. are brothers,
and the sons of Catherine C. Crowley.
Compensation. For his or her service as Director, each non-affiliated director
of the Fund receives a $1,500 annual fee. The affiliated directors receive of
the Fund receive no compensation for their service as Directors. The table below
details the amount of compensation received by the Directors from the Fund for
the past fiscal year. Presently, none of the executive officers receive
compensation from the Fund.
- ---------------------------------------------------------------------
Name and Aggregate Pension or Estimated Total
Position Compensation Retirement Annual Compensation
from Fund Benefits Benefits from Trust
Accrued as Upon and Fund
Part of Fund Retirement Complex Paid
Expenses to Directors
- ---------------------------------------------------------------------
Robert A. None None None None
Crowley,
President,
Treasurer
and Director
- ---------------------------------------------------------------------
Frederick None None None None
J. Crowley,
Jr., Vice
President,
Secretary
and Director
- ---------------------------------------------------------------------
William O. $1,500 None None $1,500
Cregar,
Director
- ---------------------------------------------------------------------
Bruce A. $1,500 None None $1,500
Humphries,
Director
- ---------------------------------------------------------------------
Daniel J. $1,500 None None $1,500
Piscitello,
Director
- ---------------------------------------------------------------------
Peter $1,500 None None $1,500
Veenema,
Director
* The "Fund Complex" presently consists of two investment companies,
each an individual series of the Registrant.
<PAGE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Control Persons
As of _____________________, there were no control persons of the
Fund. "Control" means:
(a) the beneficial ownership, either directly or through one or more
controlled companies, of more than 25% of the voting securities of
a company;
(b) the acknowledgment or assertion by either the
controlled or controlling party of the existence of
control; or
(c) a final adjudication under section 2(a)(9) of the 1940 Act that
control exists.
Principal Holders
As of ____________________, the following shareholders were known to own of
record more than 5% of the outstanding shares of the Fund:
Portfolio Shareholder/Address Percentage of the
Portfolio
Management Ownership
The Fund's officers, directors and members of the Investment Manager as a group
own _______% of the shares outstanding of The Crowley Income Portfolio and
______% of the shares outstanding of The Crowley Diversified Management
Portfolio.
INVESTMENT ADVISOR
The investment advisor for each portfolio is Crowley & Crowley Corp.("Advisor"),
3201-B Millcreek Road, Suite H, Wilmington, DE 19808. The Advisor manages each
Portfolio under separate management contracts. The Management Contract for The
Crowley Income Portfolio became effective on December 6, 1989 for an initial
term of two years. Shareholders of the Fund approved those Management Contracts
on November 29, 1990. The Management Contract for The Crowley Diversified
Management Portfolio initially became effective on April 1, 1995. The Management
Contracts are initially effective for a two-year term, and, thereafter, continue
in effect from year-to-year only if such continuance is approved annually by
either: (i) the Portfolio's Board of Directors; or (2) by a vote of a majority
of the outstanding voting securities of the respective Portfolio of the Fund
and, in either case, by the vote of a majority of the directors who are not
parties to the Management Contract or interested persons (as such term is
defined in the Investment Company Act of 1940, as amended) of any party to the
Management Contract, voting in-person at a meeting called for the purpose of
voting on such approval. The Agreements may be terminated at any time without
penalty by: (i) the Fund's Board of Directors; or (ii) by a majority vote of the
outstanding shares of the Fund, or by the Investment Advisor, in each instance
on not less than 60 days' written notice and shall automatically terminate in
the event of its assignment.
The management fees for each Portfolio are paid monthly at the annual rate of
0.60% and 1.00% of the average daily net assets of The Crowley Income Portfolio
and The Crowley Diversified
Management Portfolio, respectively.
For the fiscal years ended November 30, 1996, 1997 and 1998, the adviser
received fees of $55,642, $55,578 and _______, respectively, for The Crowley
Income Portfolio. With regard to The Crowley Diversified Management Portfolio,
for the fiscal years ended November 30, 1996, 1997 and 1998, the adviser
received fees of $12,059, $19,044 and _______, respectively.
The Advisor has committed to the Fund to offset the management fees payable by
The Crowley Diversified Management Portfolio by the fees that Crowley
Securities, the Portfolios' Distributor and an affiliate of the Advisor,
receives in connection with the purchase and sale of investment company
securities for such Portfolio for which Crowley Securities is the dealer of
record and which have an associated sales charge, 12b-1 or shareholder servicing
fee. The Advisor will offset management fees on a monthly basis, consistent with
its receipt of such fees.
Frederick J. Crowley, Jr., Vice President of the Fund, and Robert A. Crowley,
President of the Fund, each own 50% of the voting common stock of the Advisor.
The Advisor was organized in 1986 and principally provides investment advice to
individuals. The Advisor does not provide investment advice to any other
investment companies.
Each Management Contract also identifies the right of the Advisor to the use of
the name "Crowley," and the Fund may be required to change its name if the
Advisor ceases to act as advisor to the Portfolios.
DISTRIBUTOR
Crowley Securities (the "Distributor") is each Portfolio's distributor under
separate Distribution Agreements for each Portfolio dated December 6, 1989 for
The Crowley Income Portfolio and April 1, 1995 for The Crowley Diversified
Management Portfolio. Each Distribution Agreement is renewed annually by either
the Fund's Board of Directors or by a vote of a majority of the outstanding
voting securities of the respective Portfolio of the Fund and, in either case,
by the vote of a majority of the Fund's disinterested directors, voting
in-person at a meeting called for the purpose of voting on such approval. The
Agreement will terminate automatically in the event of its assignment. Pursuant
to the Fund's Distribution Agreement, the expenses of printing all sales
literature, including prospectuses used as sales material, are to be borne by
the Distributor. The Distributor is also the exclusive agent for the Portfolio's
shares, and has the right to select selling dealers to offer the shares to
investors. Frederick J. Crowley, Jr. and Robert A. Crowley, officers of the
Advisor, are also equal general partners and registered representatives of the
Distributor, which is, therefore, an affiliated person of the Fund. The
Distributor's offices are at 3201-B Millcreek Road, Suite H, Wilmington, DE
19808.
<PAGE>
ALLOCATION OF PORTFOLIO BROKERAGE
The Crowley Portfolio Group, Inc., in effecting the purchases and sales of
portfolio securities for the account of the Fund, will seek execution of trades
either: (i) at the most favorable and competitive rate of commission charged by
any broker, dealer or member of an exchange; or (ii) at a higher rate of
commission charges if reasonable in relation to brokerage and research services
provided to the Fund or the Investment Advisor by such member, broker, or
dealer. Such services may include, but are not limited to, any one or more of
the following: Information as to the availability of securities for purchase or
sale; statistical or factual information or opinions pertaining to investments.
The Fund's Investment Advisor may use research and services provided to it by
brokers and dealers in servicing all its clients, however, not all such services
will be used by the Investment Advisor in connection with the Fund. Brokerage
may also be allocated to dealers in consideration of the Fund's share
distribution, but only when execution and price are comparable to that offered
by other brokers.
The Investment Advisor is responsible for making the Fund's portfolio decisions
subject to instructions described in the prospectus. The Board of Directors may,
however, impose limitations on the allocation of portfolio brokerage. For the
fiscal years ended November 30, 1996, 1997 and 1998, aggregate brokerage
commissions for The Crowley Income Portfolio, amounted to $515, $0 and _____,
respectively. The aggregate brokerage commissions for The Crowley Diversified
Management Portfolio for the fiscal years ended November 30, 1996, 1997 and
1998, amounted to $0, $0 and _____, respectively.
TRANSFER AND DIVIDEND DISBURSING AGENT
The Crowley Financial Group, Inc. ("CFG") serves as the Fund's transfer agent,
dividend disbursing agent and redemption agent for redemptions, performing all
the usual or ordinary services required, including: receiving and processing
orders and payments for purchases of shares, opening stockholder accounts,
preparing annual stockholder meeting lists, mailing proxy material, receiving
and tabulating proxies, mailing stockholder reports and prospectuses,
withholding certain taxes on nonresident alien accounts, disbursing income
dividends and capital distributions, preparing and filing U.S. Treasury
Department Form 1099 (or equivalent) for all stockholders, preparing and mailing
confirmation forms to stockholders for all purposes and redemption of the Fund's
shares and all other confirmable transactions in stockholders' accounts,
recording reinvestment of dividends and distributions of the Fund's shares and
causing redemption of shares for and disbursements of proceeds to withdrawal
plan stockholders. CFG is under common control with the Advisor and the
Distributor and, as compensation for its services, receives an asset-based fee.
CUSTODIAN
Wilmington Trust Company, Rodney Square North, Wilmington, DE, 19890, acts as
the Custodian of the securities and cash of each Portfolio.
<PAGE>
PURCHASE, REDEMPTION AND PRICING OF SHARES
The shares of each Portfolio of the Fund are continuously offered by the
Distributor. Orders will not be considered complete until receipt by the
Distributor of a completed account application form, and receipt by the
Custodian of payment for the shares purchased. Once both are received, such
orders will be confirmed at the next determined net asset value (based upon
valuation procedures described in the prospectus) as of the close of business of
the business day on which the completed order is received, normally 4:00 p.m.
Eastern Standard Time. Completed orders received by the Fund after 4:00 p.m.,
Eastern Standard Time will be confirmed at the next day's price.
Investments in any Portfolio may also be made through investment dealers that
have sales agreements with Crowley Securities, the principal underwriter of the
Fund's shares. Such dealers should send the investor's Investment Application
and payment for the shares to the Fund. Payment should be made by check.
Purchase orders placed by dealers will be confirmed at the public offering price
calculated next after receipt of the properly completed Investment Application
and payment by Wilmington Trust, the Custodian. It is the responsibility of
dealers to transmit purchase orders so that they will be received by the
Custodian by 4:00 p.m. Eastern Standard Time. Orders received by Wilmington
Trust after 4:00 p.m. Eastern Standard Time will be priced at the public
offering price in effect at 4:00 p.m. Eastern Standard Time on the next business
day. To date, Crowley Securities has not retained any selling dealers.
Money market securities with less than sixty days remaining to maturity when
acquired by a Portfolio will be valued on an amortized cost basis by a
Portfolio, excluding unrealized gains or losses thereon from the valuation. This
is accomplished by valuing the security at cost and then assuming a constant
amortization to maturity of any premium or discount. If the Portfolio acquires a
money market security with more than sixty days remaining to its maturity, it
will be valued at current market value until the 60th day prior to maturity, and
will then be valued on an amortized cost basis based upon the value on such date
unless the Board determines during such 60 day period that this amortized cost
value does not represent fair market value.
Tax-Sheltered Retirement Plans. Shares of each Portfolio of the Fund are
available to all types of tax-deferred retirement plans including IRA's, Keogh
Plans and tax-sheltered custodial accounts described in Section 403(b)(7) of the
Internal Revenue Code. Qualified investors benefit from the tax-free compounding
of income dividends and capital gains distributions.
Individual Retirement Accounts (IRA) -- Individuals, who are not active
participants (and, when a joint return is filed, who do not have a spouse who is
an active participant) in an employer maintained retirement plan are eligible to
contribute on a deductible basis to an IRA account. The IRA deduction is also
retained for individual taxpayers and married couples with adjusted gross
incomes not in excess of certain specified limits. All individuals who have
earned income may make nondeductible IRA contributions to a separate account to
the extent that they are not eligible for a deductible contribution. Income
earned by an IRA account will continue to be tax deferred. A special IRA program
is available for employers under which the employers may establish IRA accounts
for their employees in lieu of establishing tax qualified retirement plans.
Known as SEP-IRAs (Simplified Employee Pension- IRA), they free the employer of
many of the record keeping requirements of establishing and maintaining a
tax-qualified retirement plan trust.
If you have received a lump sum distribution from another qualified retirement
plan, you may rollover all or part of that distribution into the Fund's IRA.
Your rollover contribution is not subject to the limits on annual IRA
contributions. By acting within applicable time limits, you can continue to
defer Federal income taxes on your lump sum contribution and on any income that
is earned on that contribution.
Keogh Plans for Self-Employed -- If you are a self-employed individual, you may
establish a Self-Employed Retirement (Keogh) Plan and contribute up to the
maximum amounts permitted for your plan under current tax laws. Under a Defined
Benefit Keogh Plan, you may establish a program with a specific amount of
retirement income as your objective. The annual contributions needed to achieve
this goal are calculated actuarially and can sometimes exceed the tax-deductible
contributions allowed under a regular Keogh Plan.
Tax-Sheltered Custodial Accounts -- If you are an employee of a public school,
state college or university, or a nonprofit organization exempt from tax under
Section 501(c)(3) of the Internal Revenue Code, you may be eligible to make
contributions into a custodial account (pursuant to section 403(b)(7) of the
IRC) which invests in Fund shares. Such contributions, to the extent that they
do not exceed certain limits, are excludable from the gross income of the
employee for federal income tax purposes.
How to Establish Retirement Accounts -- All the foregoing retirement plan
options require special plan documents. Please call us to obtain information
regarding the establishment of retirement plan accounts. In the case of IRA and
Keogh Plans,
Delaware Charter Guarantee and Trust Company acts as the plan custodian with
regard to plan establishment and maintenance. You should consult with your
attorney or other tax advisor for specific advice prior to establishing a plan.
CAPITAL STOCK
The authorized capital stock of The Crowley Portfolio Group, Inc. consists of
500,000,000 shares of common stock with a par value of $0.01 each. At the
present time, 150,000,000 shares of such stock have been allocated to each of
The Crowley Growth and Income Portfolio, The Crowley Income Portfolio and The
Crowley Diversified Management Portfolio. Each share has equal dividend, voting,
liquidation and redemption rights. There are no conversion or preemptive rights.
Shares, when issued, will be fully-paid and non-assessable. Fractional shares
have proportional voting rights. Shares of the Portfolios do not have cumulative
voting rights, which means that the holders of more than 50% of the shares
voting for the election of directors can elect all of the directors if they
choose to do so and, in such event, the holders of the remaining shares will not
be able to elect any person to the Board of Directors. The Portfolios'
shareholders will vote together to elect directors and on other matters
affecting the entire corporation, but will vote separately on matters affecting
separate series, such as changing the investment objective or restrictions
governing a Portfolio.
Shareholder inquiries should be made directly to the Distributor at (302)
994-4700.
DIVIDENDS, DISTRIBUTION AND TAXES
The Portfolios' investments in options and futures contracts are subject to many
complex and special tax rules. For example, over-the-counter options on debt and
equity securities will generally produce a long-term or short-term capital gain
or loss upon exercise, lapse, or closing out of the option or sale of the
underlying stock or security. By contrast, the Funds' positions in put or call
options (including options it has written as well as options it has purchased)
which are "listed" (traded on or subject to the rules of a qualified board of
Exchange) and which include non-equity options, regulated futures contracts and
options on futures contracts will be required to be "marked to market" at the
end of a Portfolio's fiscal year -- that is, treated as closed out or sold at
their fair market value -- for Federal income tax purposes. This means that the
unrealized appreciation or depreciation in such positions will be treated as
having been realized on that date. Sixty percent of such gain or loss and sixty
percent of any gain or loss from the actual closing out or exercise of such
positions, will be treated as long-term capital gain or loss and the remainder
will be treated as short-term capital gain or loss. In addition, on the
stipulated expiration date sixty percent of any gain realized on the expiration
of a listed option which the Fund has written and sixty percent of any loss
realized on the expiration of such an option it has purchased will also be
treated as long-term capital gain or loss, as the case may be, and the balance
as short-term capital gain or loss. Under legislation pending in technical
corrections to the 1997 Act, the 60% long-term capital gain portion will qualify
as 20% rate gain and will be subject to tax to individual investors at a maximum
rate of 20% for investors in the 28% or higher federal income tax brackets, or
at a maximum rate of 10% for investors in the 15% federal income tax bracket.
Also, for those investors subject to tax, if purchases of shares in a Portfolio
are made shortly before the record date for a dividend or capital gains
distribution, a portion of the investment will be returned as a taxable
distribution.
Information on the tax character of distributions. The fund will inform you of
the amount of your ordinary income dividends and capital gains distributions at
the time they are paid, and will advise you of their tax status for federal
income tax purposes shortly after the close of each calendar year. If you have
not held fund shares for a full year, the fund may designate and distribute to
you, as ordinary income or capital gain, a percentage of income that is not
equal to the actual amount of such income earned during the period of your
investment in the fund.
Election to be taxed as a regulated investment company. The fund has elected to
be treated as a regulated investment company under Subchapter M of the Internal
Revenue code, has qualified as such for its most recent fiscal year, and intends
to so qualify during the current fiscal year. As a regulated investment company,
the fund generally pays no federal income tax on the income and gains it
distributes to you. The board reserves the right not to maintain the
qualification of the fund as a regulated investment company if it determines
such course of action to be beneficial to shareholders. In such case, the fund
will be subject to federal, and possibly state, corporate taxes on its taxable
income and gains, and distributions to you will be taxed as ordinary dividend
income to the extent of the fund's earnings and profits.
Excise tax distribution requirements. to avoid federal excise taxes, the
Internal Revenue Code requires the fund to distribute to you by December 31 of
each year, at a minimum, the following amounts: 98% of its taxable ordinary
income earned during the calendar year; 98% of its capital gain net income
earned during the twelve month period ending October 31; and 100% of any
undistributed amounts from the prior year. The fund intends to declare and pay
these amounts in December (or in January that are treated by you as received in
December) to avoid these excise taxes, but can give no assurances that its
distributions will be sufficient to eliminate all taxes.
Redemption of fund shares. Redemptions and exchanges of fund shares are taxable
transactions for federal and state income tax purposes. If you redeem your fund
shares, or exchange your fund shares for shares of a different Franklin
Templeton Fund, the IRS will require that you report a gain or loss on your
redemption or exchange. If you hold your shares as a capital asset, the gain or
loss that you realize will be capital gain or loss and will be long-term or
short-term, generally depending on how long you hold your shares. Any loss
incurred on the redemption or exchange of shares held for six months or less
will be treated as a long-term capital loss to the extent of any long-term
capital gains distributed to you by the fund on those shares.
U.S. Government obligations. May states grant tax-free status to dividends paid
to you from interest earned on direct obligations of the U.S. government,
subject in some states to minimum investment requirements that must be met by
the fund. Investments in Government National Mortgage Association or Federal
National Mortgage Association securities, bankers' acceptances, commercial paper
and repurchase agreements collateralized by U.S. government securities do not
generally qualify for tax-free treatment. The rules on exclusion of this income
are different for corporations.
GENERAL INFORMATION
Audits and Reports. The accounts of the Fund are audited each year by Tait,
Weller & Baker of Philadelphia, PA, independent certified public accountants
whose selection must be ratified annually by the shareholders. Shareholders
receive semi-annual and annual reports of the Fund including the annual audited
financial statements and a list of securities owned.
Custodian. The Fund has retained Wilmington Trust Company, Rodney Square North,
Wilmington, DE 19890 (the "Custodian Bank"), to act as custodian of the
securities and cash of the Fund.
<PAGE>
PERFORMANCE
Current yield and total return may be quoted in advertisements, shareholder
reports or other communications to shareholders. Yield is the ratio of income
per share derived from a Portfolio's investments to a current maximum offering
price expressed in terms of percent. The yield is quoted based on earnings after
expenses have been deducted. Total return is the total of all income and capital
gains paid to shareholders, assuming reinvestment of all distributions, plus (or
minus) the change in the value of the original investment, expressed as a
percentage of the purchase price. Occasionally, the Fund may include its
distribution rate in advertisements. The distribution rate is the amount of
distributions per share made by the Fund over a 12-month period divided by the
current maximum offering price.
U.S. Securities and Exchange Commission rules require the use of standardized
performance quotations or, alternatively, that every non-standardized
performance quotation furnished by the Fund be accompanied by certain
standardized performance information computed as required by the Commission.
Current yield and total return quotations used by the Fund are based on the
standardized methods of computing performance mandated by the Commission. An
explanation of those and other methods used by the Fund to compute or express
performance follows.
[The average annual total return figures for The Crowley Income Portfolio for
the one year period ending November 30, 1997, the five year period ending
November 30, 1997, and the period from inception to November 30, 1997, were
7.34%, 5.94%, and 7.07%, respectively; for The Crowley Growth and Income
Portfolio for the one year period ending November 30, 1997, the five year period
ending November 30, 1997, and the period from inception to November 30, 1997,
were 8.08%, 7.11% and 6.84%, respectively. The average total return figures for
The Crowley Diversified Management Portfolio for the one year period ending
November 1, 1997 and the period from April 5, 1995 (commencement of operations)
to November 30, 1995 (not annualized) were 11.64% and 12.19%, respectively.
As the following formula indicates, the average annual total return is
determined by multiplying a hypothetical initial purchase order of $1,000 by the
average annual compound rate of return (including capital
appreciation/depreciation and dividends and distributions paid and reinvested)
for the stated period less any fees charged to all shareholder accounts and
annualizing the result. The calculation assumes the maximum sales load is
deducted from the initial $1,000 purchase order and that all dividends and
distributions are reinvested at the public offering price on the reinvestment
dates during the period. The quotation assumes the account was completely
redeemed at the end of each one, five and ten-year period and assumes the
deduction of all applicable charges and fees. According to the SEC formula:
n
P(1+T) = ERV
where:
P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000 payment made
at the beginning of the 1, 5 or 10-year periods, determined at
the end of the 1, 5 or 10- year periods (or fractional portion
thereof).
Regardless of the method used, past performance is not necessarily indicative of
future results, but is an indication of the return to shareholders only for the
limited historical period used.
Comparisons and Advertisements
To help investors better evaluate how an investment in a Portfolio of the Fund
might satisfy their investment objective, advertisements regarding the Fund's
Portfolios may discuss yield or total return for a Portfolio as reported by
various financial publications. Advertisements may also compare yield or total
return to yield or total return as reported by other investments, indices, and
averages. The following publications, indices, and averages may be used:
Lipper Mutual Fund Performance Analysis
Lipper Fixed Income Analysis
Lipper Mutual Fund Indices
Morgan Stanley World Index
Shearson Lehman Hutton Treasury Index
Salomon Bros. Corporate Bond Index
FINANCIAL STATEMENTS
The Fund's audited financial statements, related notes and the report of Tait,
Weller & Baker for the fiscal year ended November 30, 1998, as set forth in the
Fund's Annual Report to Stockholders dated November 30, 1998, are incorporated
herein by reference. A shareholder may obtain a copy of the Annual Report to
Stockholders upon request and without charge by contacting the Fund at the
address or telephone number appearing on the cover of the Statement of
Additional Information.
<PAGE>
APPENDIX A
RATINGS
General Rating Information
Bonds
Excerpts from Moody's description of its bond ratings: Aaa judged to be the best
quality. They carry the smallest degree of investment risk; Aa - judged to be of
high quality by all standards; A - possesses favorable attributes and are
considered "upper medium" grade obligations; Baa - considered as medium grade
obligations. Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time; Ba - judged to have
speculative elements; their future cannot be considered as well assured. Often
the protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class; B - generally lack
characteristics of the desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any long period
of time may be small; Caa - are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest; Ca represent obligations which are speculative in a high degree. Such
issues are often in default or have other marked shortcomings; C - the lowest
rated class of bonds and issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment standing.
Excerpts from S&P's description of its bond ratings: AAA highest grade
obligations. They possess the ultimate degree of protection as to principal and
interest. AA - also qualify as high grade obligations, and in the majority of
instances differ from AAA issues only in a small degree. A - strong ability to
pay interest and repay principal although more susceptible to changes in
circumstances. BBB - regarded as having an adequate capacity to pay interest and
repay principal. BB, B, CCC, CC regarded, on balance, as predominately
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and CC the highest degree of speculation. While such debt will
likely have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions. C - reserved
for income bonds on which no interest is being paid. D - in default, and payment
of interest and/or repayment of principal is in arrears.
<PAGE>
APPENDIX B
INVESTMENT POLICIES AND PRACTICES OF UNDERLYING FUNDS
Convertible Securities
Certain preferred stocks and debt securities that may be held by an underlying
fund have conversion features allowing the holder to convert securities into
another specified security (usually common stock) of the same issuer at a
specified conversion ratio (e.g., two shares of preferred for one share of
common stock) at some specified future date or period. The market value of
convertible securities generally includes a premium that reflects the conversion
right. That premium may be negligible or substantial. To the extent that any
preferred stock or debt security remains unconverted after the expiration of the
conversion period, the market value will fall to the extent represented by that
premium.
Foreign Investments
The Crowley Diversified Management Portfolio (the "Portfolio") may invest in
certain underlying funds which invest all or a portion of their assets in
foreign securities. Investing in securities of non-U.S. companies, which are
generally denominated in foreign currencies, and utilization of forward foreign
currency exchange contracts and other currency hedging techniques involve
certain considerations comprising both opportunity and risk not typically
associated with investing in U.S. dollar-denominated securities. Risks unique to
international investing include: (1) restrictions on foreign investment and on
repatriation of capital; (2) fluctuations in currency exchange rates; (3) costs
of converting foreign currency into U.S. dollars; (4) price volatility and less
liquidity; (5) settlement practices, including delays, which may differ from
those customary in U.S. markets; (6) exposure to political and economic risks,
including the risk of nationalization, expropriation of assets, and war; (7)
possible imposition of foreign taxes and exchange control and currency
restrictions; (8) lack of uniform accounting, auditing, and financial reporting
standards; (9) less governmental supervision of securities markets, brokers and
issuers of securities; (10) less financial information available to investors;
(11) difficulty in enforcing legal rights outside the U.S.; and (12) higher
costs, including custodial fees. These risks are often heightened for
investments in emerging or developing countries.
Foreign Currency Transactions
Foreign securities in which the underlying funds invest are subject to currency
risk, (i.e., the risk that the U.S. dollar value of these securities may be
affected favorably or unfavorably by changes in foreign currency exchange rates
and exchange control regulations.) To manage this risk and facilitate the
purchase and sale of foreign securities, these underlying funds may engage in
foreign currency transactions involving the purchase and sale of forward foreign
currency exchange contracts. Although foreign currency transactions will be used
primarily to protect the underlying funds from adverse currency movements, they
also involve the risk that anticipated currency movements will not be accurately
predicted and the underlying funds' total return could be adversely affected.
Futures Contracts
An underlying fund may enter into futures contracts for the purchase or sale of
debt securities and stock indexes. A futures contract is an agreement between
two parties to buy and sell a security or an index for a set price on a future
date. Futures contracts are traded on designated "contract markets" which,
through their clearing corporations, guarantee performance of the contracts.
Generally, if market interest rates increase, the value of outstanding debt
securities declines (and vice versa). Entering into a futures contract for the
sale of securities has an effect similar to the actual sale of securities,
although sale of the futures contract might be accomplished more easily and
quickly. For example, if a fund holds long-term U.S. Government securities and
it anticipates a rise in long-term interest rates, it could, in lieu of
disposing of its portfolio securities, enter into futures contracts for the sale
of similar long-term securities. If rates increased and the value of the fund's
portfolio securities declined, the value of the fund's futures contracts would
increase, thereby protecting the fund by preventing the net asset value from
declining as much as it otherwise would have. Similarly, entering into futures
contracts for the purchase of securities has an effect similar to the actual
purchase of the underlying securities but permits the continued holding of
securities other than the underlying securities. For example, if the fund
expects long-term interest rates to decline, it might enter into futures
contracts for the purchase of long-term securities so that it could gain rapid
market exposure that may offset anticipated increases in the cost of securities
it intends to purchase while continuing to hold higher-yield short-term
securities or waiting for the long-term market to stabilize.
A stock index futures contract may be used to hedge an underlying fund's
portfolio with regard to market risk as distinguished from risk relating to a
specific security. A stock index futures contract does not require the physical
delivery of securities but merely provides for profits and losses resulting from
changes in the market value of the contract to be credited or debited at the
close of each trading day to the respective accounts of the parties to the
contract. On the contract's expiration date, a final cash settlement occurs.
Changes in the market value of a particular stock index futures contract reflect
changes in the specified index of equity securities on which the future is
based.
There are several risks in connection with the use of futures contracts. In the
event of an imperfect correlation between the futures contract and the portfolio
position that is intended to be protected, the desired protection may not be
obtained, and the fund may be exposed to risk of loss. Further, unanticipated
changes in interest rates or stock price movements may result in a poorer
overall performance for the fund than if it had not entered into futures
contracts on debt securities or stock indexes.
In addition, the market prices of futures contracts may be affected by certain
factors. First, all participants in the futures market are subject to margin
deposit and maintenance requirements. Rather than meeting additional margin
deposit requirements, investors may close futures contracts through offsetting
transactions, which could distort the normal relationship between the securities
and futures markets. Second, from the point of view of speculators, the deposit
requirements in the futures market are less onerous than margin requirements in
the securities market. Therefore, increased participation by speculators in the
futures market may also cause temporary price distortions.
Finally, positions in futures contracts may be closed out only on an exchange or
board of trade that provides a secondary market for such futures. There is no
assurance that a liquid secondary market on an exchange or board of trade will
exist for any particular contract or at any particular time.
Options on Futures Contracts
A fund also may purchase and sell listed put and call options on futures
contracts. An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the option period. When an option
on a futures contract is exercised, delivery of the futures position is
accompanied by cash representing the difference between the current market price
of the futures contract and the exercise price of the option. The fund may
purchase put options on futures contracts in lieu of, and for the same purpose
as, a sale of a futures contract. It also may purchase such put options in order
to hedge a long position in the underlying futures contract in the same manner
as it purchases "protective puts" on securities.
As with options on securities, the holder of an option may terminate a position
by selling an option of the same series. There is no guarantee that such closing
transactions can be effected. The fund is required to deposit initial margin and
maintenance margin with respect to put and call options on futures contracts
written by it pursuant to brokers' requirements similar to those applicable to
futures contracts described above, and, in addition, net option premiums
received will be included as initial margin deposits.
In addition to the risks that apply to all options transactions, there are
several special risks relating to options on futures contracts. The ability to
establish and close out positions on such options will be subject to the
development and maintenance of a liquid secondary market. It is not certain that
this market will develop. Compared to the use of futures contracts, the purchase
of options on futures contracts involves less potential risk to the fund,
because the maximum amount at risk is the premium paid for the options (plus
transaction costs). However, there may be circumstances when the use of an
option on a futures contract would result in a loss to the fund when the use of
a futures contract would not, such as when there is no movement in the prices of
the underlying securities. Writing an option on a futures contract involves
risks similar to those arising in the sale of futures contracts as described
above.
Options Activities
An underlying fund may write (i.e., sell) listed call options ("calls") if the
calls are "covered" throughout the life of the option. A call is "covered" if
the fund owns the optioned securities. When a fund writes a call, it receives a
premium and gives the purchaser the right to buy the underlying security at any
time during the call period (usually not more than nine months in the case of
common stock) at a fixed exercise price regardless of market price changes
during the call period. If the call is exercised, the fund will forgo any gain
from an increase in the market price of the underlying security over the
exercise price.
A fund may purchase a call on securities only to effect a "closing purchase
transaction" which is the purchase of a call covering the same underlying
security and having the same exercise price and expiration date as a call
previously written by the fund on which it wishes to terminate its obligation.
If the fund is unable to effect a closing purchase transaction, it will not be
able to sell the underlying security until the call previously written by the
fund expires (or until the call is exercised and the fund delivers the
underlying security).
An underlying fund also may write and purchase put options ("puts"). When a fund
writes a put, it receives a premium and gives the purchaser of the put the right
to sell the underlying security to the fund at the exercise price at any time
during the option period. When a fund purchases a put, it pays a premium in
return for the right to sell the underlying security at the exercise price at
any time during the option period. An underlying fund also may purchase stock
index puts which differ from puts on individual securities in that they are
settled in cash based on the values of the securities in the underlying index
rather than by delivery of the underlying securities. Purchase of a stock index
put is designed to protect against decline in the value of the portfolio
generally rather than an individual security in the portfolio. If any put is not
exercised or sold, it will become worthless on its expiration date.
A fund's option positions may be closed out only on an exchange which provides a
secondary market for options of the same series, but there can be no assurance
that a liquid secondary market will exist at a given time for any particular
option. In this regard, trading in options on certain securities (such as U.S.
Government securities) is relatively new so that it is impossible to predict to
what extent liquid markets will develop or continue.
The underlying fund's custodian, or a securities depository acting for it,
generally acts as escrow agent for the securities on which the fund has written
puts or calls or for other securities acceptable for such escrow, so that no
margin deposit is required of the fund. Until the underlying securities are
released from escrow, they cannot be sold by the fund.
In the event of a shortage of the underlying securities deliverable on exercise
of an option, the Options Clearing Corporation has the authority to permit
other, generally comparable securities to be delivered in fulfillment of option
exercise obligations. If the Options Clearing Corporation exercises its
discretionary authority to allow such other securities to be delivered, it may
also adjust the exercise prices of the affected options by setting different
prices at which otherwise ineligible securities may be delivered. As an
alternative to permitting such substitute deliveries, the Options Clearing
Corporation may impose special exercise settlement procedures.
Hedging
An underlying fund may employ many of the investment techniques described in
this APPENDIX not only for investment purposes, but also for hedging purposes.
For example, an underlying fund may purchase or sell put and call options on
common stocks to hedge against movements in individual common stock prices or
purchase and sell stock index futures and related options to hedge against
market wide movements in common stock prices. Although such hedging techniques
generally tend to minimize the risk of loss that is hedged against, they also
may limit commensurately the potential gain that might have resulted had the
hedging transaction not occurred. Also, the desired protection generally
resulting from hedging transactions may not always be achieved.
Junk Bonds
Bonds which are rated BB and below by Standard & Poor's and Ba and below by
Moody's (See "RISK FACTORS - Fixed-income Securities" for a more detailed
explanation of bond ratings) are commonly known as "junk bonds." Investing in
junk bonds involves special risks in addition to the risks associated with
investments in higher rated debt securities. Junk bonds may be regarded as
predominately speculative with respect to the issuer's continuing ability to
meet principal and interest payments.
Junk bonds may be more susceptible to real or perceived adverse economic and
competitive industry conditions than higher grade securities. The prices of junk
bonds have been found to be less sensitive to interest rate changes than more
highly rated investments but more sensitive to adverse economic downturns or
individual corporate developments. A projection of an economic downturn or of a
period of rising interest rates, for example, could cause a decline in junk
bonds prices, because the advent of a recession could lessen the ability of a
highly leveraged company to make principal and interest payments on its debt
securities. If the issuer of junk bonds defaults, a fund may incur additional
expenses to seek recovery. In the case of junk bonds structured as zero coupon
or payment-in-kind securities, the market prices of such securities are affected
to a greater extent by interest rate changes and, therefore, tend to be more
volatile than securities which pay interest periodically and in cash.
The secondary markets on which junk bonds are traded may be less liquid than the
market for higher grade securities. Less liquidity in the secondary trading
markets could adversely affect and cause large fluctuations in the daily net
asset value of a fund's shares. Adverse publicity and investor perceptions,
whether or not based on fundamental analysis, may decrease the values and
liquidity of junk bonds, especially in a thinly traded market.
There may be special tax considerations associated with investing in junk bonds
structured as zero coupon or payment-in-kind securities. A fund records the
interest on these securities as income even though it receives no cash interest
until the security's maturity or payment date. A fund will be required to
distribute all or substantially all such amounts annually and may have to obtain
the cash to do so by selling securities which otherwise would continue to be
held. Shareholders will be taxed on these distributions.
The use of credit ratings as the sole method of evaluating junk bonds can
involve certain risks. For example, credit ratings evaluate the safety of
principal and interest payments, not the market value risk of junk bonds. Also,
credit rating agencies may fail to change credit ratings in a timely fashion to
reflect events since the security was last rated.
Illiquid and Restricted Securities
An underlying fund may invest not more than 15% of its net assets in securities
for which there is no readily available market ("illiquid securities") including
securities the disposition of which would be subject to legal restrictions
(so-called "restricted securities") and repurchase agreements having more than
seven days to maturity. A considerable period of time may elapse between an
underlying fund's decision to dispose of such securities and the time when the
fund is able to dispose of them, during which time the value of the securities
(and therefore the value of the underlying fund's shares held by the Portfolio)
could decline.
Industry Concentration
An underlying fund may concentrate its investments within one industry. Because
the scope of investment alternatives within an industry is limited, the value of
the shares of such an underlying fund may be subject to greater market
fluctuation than an investment in a fund which invests in a broader range of
securities.
Leverage through Borrowing
An underlying fund may borrow up to 33 1/3% of the value of its net assets on an
unsecured basis from banks to increase its holdings of portfolio securities.
Under the 1940 Act, a fund is required to maintain continuous asset coverage of
300% with respect to such borrowings and to sell (within three days) sufficient
portfolio holdings to restore such coverage if it should decline to less than
300% due to market fluctuations or otherwise, even if disadvantageous from an
investment standpoint. Leveraging will exaggerate the effect of any increase or
decrease in the value of portfolio securities on a fund's net asset value, and
money borrowed will be subject to interest costs (which may include commitment
fees and/or the cost of maintaining minimum average balances) which may or may
not exceed the interest and option premiums received from the securities
purchased with borrowed funds.
Loans of Portfolio Securities
An underlying fund may lend its portfolio securities provided that: (1) the loan
is secured continuously by collateral consisting of U.S. Government securities
or cash or cash equivalents maintained on a daily mark-to-market basis in an
amount at least equal to the current market value of the securities loaned; (2)
the fund may at any time call the loan and obtain the return of the securities
loaned; (3) the fund will receive any interest or dividends paid on the loaned
securities; and (4) the aggregate market value of securities loaned will not at
any time exceed one-third of the total assets of the fund. Loans of securities
involve a risk that the borrower may fail to return the securities or may fail
to provide additional collateral.
Master Demand Notes
Although the Portfolio itself will not do so, underlying funds (particularly
money market mutual funds) may invest up to 100% of their assets in master
demand notes. Master demand notes are unsecured obligations of U.S. corporations
redeemable upon notice that permit investment by a fund of fluctuating amounts
at varying rates of interest pursuant to direct arrangements between the fund
and the issuing corporation. Because they are direct arrangements between the
fund and the issuing corporation, there is no secondary market for the notes.
However, they are redeemable at face value plus accrued interest at any time.
Repurchase Agreements
Underlying funds, particularly money market funds, may enter into repurchase
agreements with banks and broker-dealers under which they acquire securities
subject to an agreement with the seller to repurchase the securities at an
agreed upon time and price. These agreements are considered under the 1940 Act
to be loans by the purchaser collateralized by the underlying securities. If the
seller should default on its obligation to repurchase the securities, the
underlying fund may experience delay or difficulties in exercising its rights to
realize upon the securities held as collateral and might incur a loss if the
value of the securities should decline.
Short Sales
An underlying fund may sell securities short. In a short sale, a fund sells
stock that it does not own, making delivery with securities "borrowed" from a
broker. The fund is then obligated to replace the security borrowed by
purchasing it at the market price at the time of replacement. This price may not
be less than the price at which the security was sold by the fund. Until the
security is replaced, the fund is required to pay to the lender any dividends or
interest which accrue during the period of the loan. In order to borrow the
security, the fund may also have to pay a premium, which would increase the cost
of the security sold. The proceeds of the short sale will be retained by the
broker to the extent necessary to meet margin requirements until the short
position is closed out.
The fund also must deposit in a segregated account an amount of cash or U.S.
Government securities equal to the difference between: (a) the market value of
the securities sold short at the time they were sold short; and (b) the value of
the collateral deposited with the broker in connection with the short sale (not
including the proceeds from the short sale). While the short position is open,
the fund must maintain daily the segregated account at such a level that: (1)
the amount deposited in it plus the amount deposited with the broker as
collateral equals the current market value of the securities sold short; and (2)
the amount deposited in it plus the amount deposited with the broker as
collateral is not less than the market value of the securities at the time they
were sold short. Depending upon market conditions, up to 80% of the value of a
fund's net assets may be deposited as collateral for the obligation to replace
securities borrowed to effect short sales and allocated to a segregated account
in connection with short sales.
The fund will incur a loss as a result of the short sale if the price of the
security increases between the date of the short sale and the date on which the
fund replaces the borrowed security. The fund will realize a gain if the
security declines in price between those dates. The amount of any gain will be
decreased and the amount of any loss increased by the amount of any premium,
dividends, or interest the fund may be required to pay in connection with a
short sale.
A short sale is "against the box" if at all times when the short position is
open the fund owns an equal amount of the securities or securities convertible
into, or exchangeable without further consideration for, securities of the same
issue as the securities sold short. Such a transaction serves to defer a gain or
loss for federal income tax purposes.
Warrants
An underlying fund may invest in warrants, which are options to purchase equity
securities at specific prices valid for a specific period of time. The prices do
not necessarily move parallel to the prices of the underlying securities.
Warrants have no voting rights, receive no dividends, and have no rights with
respect to the assets of the issuer. If a warrant is not exercised within the
specified time period, it will become worthless and the fund will lose the
purchase price and the right to purchase the underlying security.
<PAGE>
INVESTMENT ADVISOR
Crowley & Crowley Corp.
3201-B Millcreek Road
Wilmington, DE 19808
DISTRIBUTOR
Crowley Securities
3201-B Millcreek Road
Wilmington, DE 19808
TRANSFER AGENT
Crowley Financial Group
3201-B Millcreek Road
Wilmington, DE 19808
CUSTODIAN
Wilmington Trust Company
Rodney Square North
Wilmington, DE 19890
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, PA 19103-7098
AUDITORS
Tait, Weller & Baker
Two Penn Center
Suite 700
Philadelphia, PA 19102-1707
THE CROWLEY PORTFOLIO GROUP, INC.
PART C
OTHER INFORMATION
Item 23. EXHIBITS
(a) Registrant's Articles of Incorporation dated August 15,
1989.*
(1) Articles Supplementary effective March 22,
1995 to Registrant's Articles of
Incorporation dated August 15, 1989.*
(2) Articles of Amendment effective March 29, 1996 to
Registrant's Articles of Incorporation dated August 15,
1989.*
(3) FORM OF Articles Supplementary effective November 25, 1998
to Registrant's Articles of Incorporation dated
August 15, 1989 is electronically filed herewith as
Exhibit EX-99.B1.
(b) By-Laws of Registrant.*
(c) Instruments Defining the Rights of Holders:
(1) Specimen copy of The Crowley Income Portfolio certificate
denoting securities to be issued by the Registrant.*
(2) Specimen copy of The Crowley Diversified Management
Portfolio certificate denoting securities to be issued by
the Registrant.*
(d) Investment Advisory Contracts Relating to the Management
of the Assets of the Registrant.
(1) Management Contract dated December 6, 1989 between Crowley
& Crowley Corp. and the Registrant on behalf of The Crowley
Income Portfolio.*
(2) Management Contract dated March 31, 1995 between Crowley &
Crowley Corp. and the Registrant on behalf of The Crowley
Diversified Management Portfolio.*
(e) Underwriting or Distribution Contract Between the
Registrant and a Principal Underwriter.
(1) Underwriting Agreement dated December 6, 1989 between
Crowley Securities and the Registrant on behalf of The
Crowley Income Portfolio.*
(2) Underwriting Agreement dated March 31, 1995 between Crowley
Securities and the Registrant on behalf of The Crowley
Diversified Management Portfolio *
(3) Specimens or Copies of All Agreements Between Principal
Underwriters and Dealers.
(a) Form of Dealer Selling Agreement.*
(f) Bonus, Profit Sharing, Pension or Other Similar
Not Applicable.
(g) Custodian Agreements.
(1) Custodian Agreement dated November 29, 1989 between the
Registrant and Wilmington Trust Company on behalf of The
Crowley Income Portfolio.*
(2) Custodian Agreement dated March 31, 1995
between the Registrant and Wilmington Trust
Company on behalf of The Crowley Diversified
Management Portfolio *
(h) Other Material Contracts.
(1) Shareholder Services Agreement dated August
1, 1993 between the Registrant and The
Crowley Financial Group, Inc. (the
"Agreement").*
(a) Amendment I to the Agreement dated March 31, 1995.*
(i) Opinion and Consent of Counsel. Opinion of Stradley, Ronon,
Stevens & Young, LLP will be filed by amendment.
(j) Other Opinions and Consents.
(1) Consent of Tait, Weller & Baker, Independent Public Accountants
will be filed by amendment.
(k) Financial Statements Omitted form Item 22.
Not Applicable.
(l) Letter dated from contributors of initial capital
to the Registrant*.
(m) 12b-1 Plans.
Not Applicable.
(n) Financial Data Schedules.
(1) On behalf of The Crowley Income Portfolio will be filed
by Amendment.
(2) On behalf of The Crowley Diversified Management
Portfolio will be filed by Amendment.
(o) Multiple Class Plans Under Rule 18f-3.
Not Applicable.
* Previously filed with the Securities and Exchange Commission on
Post-Effective Amendment No. 8/10 to Registrant's Registration
Statement on Form N-1A (File Nos. 33-30975 and 811-5875) SEC on
March 29, 1996.
Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL OF THE REGISTRANT.
None.
Item 25. INDEMNIFICATION.
Under the terms of the Maryland General Corporation Law and the
Registrant's Articles of Incorporation, the Registrant shall
indemnify any person who was or is a director, officer or employee of
the Registrant to the maximum extent permitted by the Maryland
General Corporation Law; provided however, that any such
indemnification (unless ordered by a court) shall be made by the
Registrant only as authorized in the specific case upon a
determination that indemnification of such persons is proper in the
circumstances. Such determination shall be made:
(i) by the Board of Directors by a majority vote of a quorum which
consists of the directors who are neither "interested persons"
of the Registrant as defined in Section 2(a)(19) of the 1940
Act, nor parties to the proceedings; or
(ii) if the required quorum is not obtainable or if a quorum of such
Directors so directs, by independent legal counsel in a written
opinion.
No indemnification will be provided by the Registrant to any
Director or officer of the Registrant for any liability to the
Registrant or shareholders to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of duty.
As permitted by Article EIGHTH of the Registrant's Articles of
Incorporation:
(a) To the fullest extent that limitations on the liability of
directors and officers are permitted by the Maryland General
Corporation Law, no director or officer of the Corporation
shall have any liability to the Corporation or its
stockholders for money damages. This limitation on liability
applies to events occurring at the time a person serves as a
director or officer of the Corporation whether or not such
person is a director or officer at the time of any
proceeding in which liability is asserted.
(b) The Corporation shall indemnify and advance expenses to
its currently acting and its former directors to the
fullest extent that indemnification of directors is
permitted by the Maryland General Corporation Law. The
Corporation shall indemnify and advance expenses to its
officers to the same extent as its directors and to
such further extent as is consistent with law. The Board of
Directors may by By-Law, resolution or agreement make
further provisions for indemnification of directors,
officers, employees and agents to the fullest extent
permitted by the Maryland General Corporation Law.
(c) No provision of this Articles shall be effective to protect
or purport to protect any director or officer of the
Corporation against any liability to the Corporation or its
security holders to which he would otherwise be subject
by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved
in the conduct of his office.
Item 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
The principal business of Crowley & Crowley Corp. is to provide
investment counsel and advice to individual investors.
Item 27. PRINCIPAL UNDERWRITERS.
(a) Crowley Securities, Inc., the only principal underwriter of the
Registrant, does not act as principal underwriter, depositor or
investment advisor to any other investment company.
(b) Herewith is the information required by the following table with
respect to each director, officer or partner of the only
underwriter named in answer to Item 21 of Part B:
Position and Position and
Name and Principal Offices with Offices with
Business Address Underwriter Registrant
Robert A. Crowley General Partner President
3201-B Millcreek Road
Suite H
Wilmington, DE 19808
Frederick J. Crowley, Jr. General Partner Vice
3201-B Millcreek Road President
Suite H
Wilmington, DE 19808
(c) Not applicable.
Item 28. LOCATION OF ACCOUNTS AND RECORDS.
All records described in Section 31(a) of the Investment Company
Act of 1940, as amended, and the Rules [17 CFR 270.31a-1 to 31a-3]
promulgated thereunder, are maintained by the Registrant's Investment
Advisor, Crowley & Crowley Corp., except for those maintained by the
Registrant's custodian, Wilmington Trust Company, Rodney Square
North, Wilmington, DE 19890, and the Registrant's administrator,
transfer, redemption, dividend disbursing and accounting agent, The
Crowley Financial Group, Inc.
Item 29. MANAGEMENT SERVICES.
All management services are covered in the management agreement
between the Registrant and Crowley & Crowley Corp., as discussed in
Parts A and B.
Item 30. UNDERTAKINGS.
(1) Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to Directors, officers
and controlling persons of the Registrant, the Registrant has
been advised that in the opinion of the U.S. Securities and
Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of
expenses incurred or paid by a Director, officer or controlling
person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such Director,
officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(2) Registrant hereby undertakes, if requested to do so by the
holders of at least 10% of the Registrant's outstanding shares,
to call a meeting of shareholders for the purpose of voting upon
the question of removal of a trustee or trustees and to assist
in communication with other shareholders, as directed by Section
16(c) of the Investment Company Act of 1940.
(3) The Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
Annual Report to Shareholders, upon request and without change.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this amendment to its
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Wilmington and State of Delaware on the 29th day
of January, 1999.
THE CROWLEY PORTFOLIO GROUP, INC.
(Registrant)
By: ROBERT A. CROWLEY
Robert A. Crowley, President
(Signature and Title)
Pursuant to the requirements of the Securities Act of 1933, this amendment to
the Registrant's Registration Statement has been signed below by the following
persons in the capacities and on the date indicated.
Signature Title Date
ROBERT A. CROWLEY President, January 29, 1999
Robert A. Crowley Treasurer
and Director
FREDERICK J. CROWLEY, JR. Vice President, January 29, 1999
Frederick J. Crowley, Jr. Secretary
and Director
Director January __, 1999
William O. Cregar
BRUCE A. HUMPHRIES Director January 29, 1999
Bruce A. Humphries
DANIEL J. PISCITELLO Director January 29, 1999
Daniel J. Piscitello
PETER VEENEMA Director January 29, 1999
Peter Veenema
<PAGE>
<PAGE>
EXHIBIT INDEX
EX-99.B1 FORM OF Articles Supplementary effective November 25,
1998 to Registrant's Articles of Incorporation dated
August 15, 1989.
THE CROWLEY PORTFOLIO GROUP, INC.
ARTICLES SUPPLEMENTARY
TO
THE ARTICLES OF INCORPORATION
THE CROWLEY GROUP INC., a Maryland corporation having its principal office
in Baltimore, Maryland (hereinafter called the "Corporation") and registered
under the Investment Company Act of 1940, as amended, as an open-end management
investment company, hereby certifies, in accordance with the requirements of
Section 2-208 and Section 2-208.1 of the Maryland General Corporation Law, to
the State Department of Assessments and Taxation of Maryland that:
FIRST: The Corporation has authority to issue a total of Five Hundred
Million (500,000,000) shares of stock, with a par value of One Cent ($.01) per
share, having an aggregate par value of Five Million Dollars ($5,000,000) all of
which shall be considered common stock. Of such Five Hundred Million
(500,000,000) shares of the stock, Four Hundred Fifty Million (450,000,000)
shares have been classified and allocated to the three existing series of the
Corporation as follows: One Hundred Fifty Million (150,000,000) shares have been
classified and allocated to each of The Crowley Income Portfolio, The Crowley
Diversified Management Portfolio and The Crowley Growth and Income Portfolio.
Fifty Million (50,000,000) shares of the Corporation's authorized stock remain
unclassified and unallocated.
SECOND: The Board of Directors of the Corporation at a meeting held on
September 30, 1998, has adopted a resolution reclassifying One Hundred Fifty
Million (150,000,000) shares of the unissued stock (par value $.0l per share) of
the Corporation previously classified and allocated to the series of stock
designated "The Crowley Growth and Income Portfolio" and by such resolution
restoring such One Hundred Fifty Million (150,000,000) shares to the status of
authorized but unclassified and unallocated shares of Common Stock of the
Corporation.
THIRD: Following the aforesaid reclassification, the total number of
shares of stock which the Corporation has authority to issue remains Five
Hundred Million (500,000,000) shares, with a par value of One Cent ($.0l) per
share, having an aggregate par value of Five Million Dollars ($5,000,000), and
of such Five Hundred Million (500,000,000) shares of stock, Three Hundred
Million (300,000,000) shares have been allocated to the two existing series of
the Corporation as follows: One Hundred Fifty Million (150,000,000) shares have
been classified and allocated to each of The Crowley Income Portfolio and The
Crowley Diversified Management Portfolio. Two Hundred Million (200,000,000)
shares of the Corporation's stock remain authorized but unclassified and
unallocated.
FOURTH: A description of the shares of each series, with the preferences,
rights, voting powers, restrictions, limitations as to dividends, qualifications
and terms and conditions of redemption as set by the Board of Directors of the
Corporation is set forth in the Articles of Incorporation of the Corporation, as
amended.
FIFTH: The shares aforesaid have been duly reclassified by the Board of
Directors pursuant to authority contained in the Fifth Article of the Articles
of Incorporation of the Corporation, as amended.
SIXTH: These Articles Supplementary shall become effective
immediately upon filing.
IN WITNESS WHEREOF, The Crowley Portfolio Group, Inc. has
caused these Articles to be signed in its name and on its behalf on
this ____ day of _________________, 1998.
THE CROWLEY PORTFOLIO GROUP INC.
By: _________________
Robert A. Crowley
President
ATTEST:
________________________
Frederick J. Crowley, Jr.
Secretary
THE UNDERSIGNED, President of THE CROWLEY PORTFOLIO GROUP, INC., who
executed on behalf of the said Corporation the foregoing Articles Supplementary,
of which this instrument is made a part, hereby acknowledges, in the name of and
on behalf of said Corporation, said Articles Supplementary to be the corporate
act of said Corporation and further certifies that, to the best of his
knowledge, information and belief and under penalties of perjury, all matters
and facts contained therein with respect to the approval thereof are true in all
material respects.
