As filed with the Securities and Exchange Commission on February 29, 2000.
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. 13 /_X_/
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 15 /_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, Bruce G. Leto, Esq.
Inc. Stradley, Ronon, Stevens & Young,
3201-B Millcreek Road LLP
Wilmington, DE 19808 2600 One Commerce Square
(Name and Address of Agent for Philadelphia, PA 19103-7098
Service)
It is proposed that this filing will become effective
/_X_/ immediately upon filing pursuant to paragraph (b)
/___/ on (_____________) pursuant to paragraph (b)
/___/ 60 days after filing pursuant to paragraph (a)(1)
/___/ on (date) 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.
<PAGE>
THE CROWLEY PORTFOLIO GROUP, INC.
PROSPECTUS
February 29, 2000
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
The Securities and Exchange Commission has not approved or disapproved these
securities or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
<PAGE>
TABLE OF CONTENTS
Page
SUMMARY OF THE FUND..................................................3
Investment Objectives and Strategies..............................3
Principal Investment Risks........................................4
PAST PERFORMANCE.....................................................5
The Crowley Income Portfolio......................................5
The Crowley Diversified Management Portfolio......................6
FEES AND EXPENSES OF THE PORTFOLIOS..................................7
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE..........................8
The Crowley Income Portfolio......................................8
The Crowley Diversified Management Portfolio......................9
INVESTMENT OBJECTIVES AND POLICIES..................................11
The Crowley Income Portfolio.....................................11
The Crowley Diversified Management Portfolio.....................12
MAIN RISKS..........................................................14
Lower-Rated, High Risk Securities................................14
Risks of Investing in Other Investment Companies.................14
Underlying Funds.................................................15
Illiquid and Restricted Securities............................15
Foreign Securities............................................15
Foreign Currency Transactions.................................15
Industry Concentration........................................15
Loans Of Portfolio Securities.................................15
Short Sales...................................................15
Risk Factors Regarding Options, Futures and Options on Futures16
Leverage Through Borrowing....................................16
Year 2000 Issues.................................................16
MANAGEMENT OF THE FUND..............................................16
Investment Advisor...............................................16
Portfolio Manager................................................17
GENERAL OPERATIONS..................................................18
SHAREHOLDERS'INFORMATION............................................18
Pricing of Portfolio Shares......................................18
Purchasing Shares................................................19
Purchase Price................................................19
Minimum Investments...........................................19
How to Purchase Shares........................................19
Redeeming Shares.................................................19
Redemption Requirements..........................................20
When Signature Guarantees Are Required...........................20
Redemptions In-Kind..............................................21
SPECIAL PLANS.......................................................21
Retirement Plans.................................................21
Exchange Privilege...............................................21
DIVIDENDS, DISTRIBUTIONS AND TAXES..................................21
FINANCIAL HIGHLIGHTS................................................23
The Crowley Income Portfolio.....................................23
The Crowley Diversified Management Portfolio.....................24
ADDITIONAL INFORMATION..............................................25
<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 Crowley Income Portfolio (the "Portfolio") is to
maximize current income, consistent with prudent risk.
Strategy: The Portfolio invests primarily in a diversified portfolio of
fixed-income securities. The Portfolio also may invest its assets in all classes
of securities including dividend paying 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 trends are determined by the Investment 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 Portfolio's policy is to invest in
fixed-income securities which are short to intermediate term (generally 1 to 10
years) when interest rates are historically lower and intermediate to long term
(generally 10 to 15 years) when interest rates are historically higher. It is
generally expected that the range of maturities of obligations to be held by the
Portfolio will be intermediate to long-term (approximately 10 to 15 years). The
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) (securities rated below Baa or BBB
are commonly referred to as high-yield or "junk bonds").
THE CROWLEY DIVERSIFIED MANAGEMENT PORTFOLIO
Objective: The objective of The Crowley Diversified Management Portfolio (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. In choosing from among the available
investment companies, the Investment 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. To achieve its objective, the
Portfolio's holdings may include investments in open-end 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 Investment Advisor may invest in so-called
"sector funds" which, in general, concentrate their assets in one segment of the
equity market. At year end, the three categories of investment companies in
which the Portfolio was most heavily invested were Growth (31.99%),
Growth/Income (18.31%) and Balanced (8.29%).
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:
* Stock Market Risk. Stock prices are subject to market,
economic and business risks which may influence the value of
the stock. Therefore, there is a risk that stock prices may
decline in value causing an investor to lose money.
* Management Risk. The Investment Advisor makes all decisions
regarding both Portfolios' investments. Therefore, the success
of each Portfolio depends on the success of the Investment
Advisor 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 Advisor may not perform as
anticipated.
* Bond Market Risk. The Crowley Income Portfolio primarily
invests in bonds. The underlying funds in which The Crowley
Diversified Portfolio invests may also invest in bonds. The
value of bonds are affected by changes in interest rates. When
interest rates rise, bond prices fall (interest-rate risk).
Conversely, when interest rates fall, bond prices rise. The
length of a bond's maturity generally effects its level of risk
and amount of yield. Usually, the longer a bond's maturity,
the higher the risk and yield (maturity risk). A bond's value
may also be affected by changes in an issuer's financial
strength or on changes in the bond's credit rating
(credit-quality risk).
* Lower-Rated, High-Risk Fixed-Income Securities. Both
Portfolios may invest in lower-rated, high-risk fixed-income
securities, which have speculative characteristics. The
underlying funds in which The Crowley Diversified Portfolio
invests may also invest in these securities. These securities
(commonly referred to as "junk bonds") are more sensitive to
changes in economic and other conditions. Such changes would
more readily affect the issuer's ability to make principal and
interest payments than the issuer of higher-rated securities.
These securities are subject to greater interest-rate risk and
credit-quality risk than higher-rated fixed-income securities.
Economic conditions, such as a period of rising interest rates,
could adversely affect the market for these securities making
it difficult for a Portfolio to sell them (liquidity risk).
The absence of a market to sell these securities could decrease
a Portfolio's share price.
* Expenses of Investing in Investment Companies. 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.
PAST PERFORMANCE
The Crowley Income Portfolio.
The bar chart and table below show the Portfolio's annual return and its
long-term performance. The bar chart shows how the Portfolio's return has
changed from year to year. The second table shows how the Portfolio's average
annual returns for certain periods compare with those of a broad-based
securities market index. The Portfolio is compared to the Lehman Brothers
Intermediate Government/Corporate Index ("Lehman GC Index"). The bar chart and
table assumes that all dividends and capital gain distributions have been
reinvested in new shares of the Portfolios. This information indicates the risks
of investing in the Portfolio. Past performance is not necessarily an indication
of how the Portfolio will perform in the future.
THE CROWLEY INCOME PORTFOLIO
TOTAL RETURN
FOR EACH CALENDAR YEAR ENDED DECEMBER 31
[BAR CHART DEPICTED HERE]
1990 9.48%
1991 11.36%
1992 7.24%
1993 9.60%
1994 -1.83%
1995 10.60%
1996 3.04%
1997 8.42%
1998 7.03%
1999 -0.38%
During the ten year period shown in the bar chart, the highest return for a
quarter was 4.44% (quarter ending 9/30/91) and the lowest return for a quarter
was -1.83% (quarter ending 03/31/94).
Average Annual Total Returns (for the periods ending December 31, 1999)
Past 1 Year Past 5 years Past 10 years
----------- ------------ ------------
The Crowley Income -0.38% 5.67% 6.36%
Portfolio
Lehman GC Index1 -0.53% 6.66% 7.29%
1 The Lehman Brothers Intermediate Government Corporate Index is a
duration-weighted-fixed-income index comprised of U.S. Treasury, U.S. agency and
U.S. corporate securities with a range of maturities of five to ten years. The
index is used as a performance benchmark for fixed income securities portfolios
with like duration and diversity.
The Crowley Diversified Management Portfolio.
The bar chart and table below show the Portfolio's annual return and its
long-term performance. The bar chart shows how the Portfolio's return has
changed from year to year. The second table shows how the Portfolio's average
annual returns for certain periods compare with those of a broad-based
securities market index. The Crowley Diversified Management Portfolio is
compared to Standard & Poor's 500 Index (S&P 500 Index). The bar chart and table
assumes 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 Portfolio. Past performance is not necessarily an indication of
how the Portfolio will perform in the future.
THE CROWLEY DIVERSIFIED MANAGEMENT PORTFOLIO
TOTAL RETURN
FOR EACH CALENDAR YEAR ENDED DECEMBER 31
[BAR CHART DEPICTED HERE]
1996 12.33%
1997 12.96%
1998 7.86%
1999 18.69%
During the four-year period shown in the bar chart, the highest return for a
quarter was 15.41% (quarter ending 12/31/99) and the lowest return for a quarter
was -13.41% (quarter ending 09/30/98).
Average Annual Total Return (for the periods ending December 31, 1999)
Since Inception
Past 1 Year (Apr., 1995)
The Crowley Diversified 18.69% 12.51%
Management Portfolio
Standard & Poor's 500 Index1 21.15% 27.41%
1 The S&P 500 Index is a capitalization weighted index of five hundred large
capitalization stocks which is designed to measure broad domestic securities
markets. The performance of the S&P 500 Index reflects the reinvestment of
dividends and capital gains but does not reflect the deduction of any investment
management fees.
FEES AND EXPENSES OF THE PORTFOLIOS
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Portfolios.
Shareholder Fees (fees paid directly from your investment): None
Annual Fund Operating Expenses (expenses deducted from Fund assets)*
The Crowley Income The Crowley Diversified
Portfolio Management Portfolio
Management Fees 0.60% 1.00%
Distribution (12b-1) None None
Fees
Other Expenses 0.76% 0.82%
- -------------- ---- ----
Total Annual Fund 1.36% 1.82%
Operating Expenses ==== ====
* As a percentage of average annual net assets.
Examples
The Examples below 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
Portfolio'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
------ ------- ------- --------
The Crowley Income $138 $431 $745 $1,635
Portfolio
The Crowley $185 $572 $985 $2,137
Diversified
Management Portfolio
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
The Crowley Income Portfolio.
The line graph depicted below for The Crowley Income Portfolio illustrates the
performance of $10,000 in the Portfolio from inception on November 30, 1989 as
compared to a broad-based index. The calculations depicted in the line graph
assume a reinvestment of all distributions.
THE CROWLEY INCOME PORTFOLIO
$10,000 INVESTMENT 11-30-89 THROUGH 11-30-99
THOUSANDS
$20,000 | Ending Values
| o T.C.I.P. $18,608
$18,000 | # Lehman Gov./
| Corp. Index $20,287
$16,000 |
|
$14,000 | [TW0 LINE GRAPHS DEPICTED HERE]
|
$12,000 |
|
$10,000 |
|--------------------------------------------------------------------
11/89 11/90 11/91 11/92 11/93 11/94 11/95 11/96 11/97 11/98 11/99
o T.C.I.P. # Lehman Gov./Corp. Index
PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE
Average Annual Total Returns (for the periods ending November 30, 1999)
Past 1 Year Past 5 years Past 10 years
The Crowley 0.92% 5.87% 6.41%
Income Portfolio
The line graph illustrates the past performance of The Crowley Income Portfolio
as compared to the Lehman Brothers Intermediate Government/Corporate Index
("Lehman GC Index"). The chart illustrates that a $10,000 investment in November
of 1990 would be worth $18,608 for The Crowley Income Portfolio. The same
investment would be worth $20,287 for the Lehman Brothers Intermediate
Government/Corporate Index through November 30, 1999. The average annual total
return table for The Crowley Income Portfolio appears below the line graph.
Similarly, this table illustrates that the average annual total return for The
Crowley Income Portfolio was 0.92%, 5.87% and 6.41% for the one, five, and ten
year time periods, respectively.
Source: LEHMAN BROTHERS 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 ten 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 ten years, the Investment Advisor has taken a short to
intermediate approach to maturities (approximately 1 to 10 years). By selecting
bonds that mature or are callable in several years, the Investment 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, 1999, the dollar weighted average maturity was 13.1 years, as
compared to 12.7 years as of November 30, 1998. The Investment Advisor has
continued to maintain an investment position in preferred stocks. The Portfolio
had a total return of 0.92% for the fiscal year ended November 30, 1999. By
comparison, The Lehman GC Index had an investment return of -0.20% for the same
period. This index may be comparable to the Portfolio, depending on maturity and
duration during a given period.
Since inception, the Portfolio produced an investment value of $18,608. The
investment value of the Lehman GC would have been $20,287. Over the first six
years, the Investment Advisor continued to maintain a shorter weighted average
maturity and has over the last four years increased the weighted average
maturity.
The Crowley Diversified Management Portfolio.
The line graph depicted below for The Crowley Diversified Management Portfolio,
illustrates the performance of $10,000 in the Portfolio from its inception on
April 3, 1995, as compared to a broad-based index. The calculations depicted in
the line graph assume a reinvestment of all distributions.
THE CROWLEY DIVERSIFIED MANAGEMENT PORTFOLIO
$10,000 INVESTMENT 4-1-95 THROUGH 11-30-99
THOUSANDS
$20,000 | Ending Values
| o T.C.D.M.P. $16,419
$18,000 | + S&P 500 Index $28,095
|
$14,000 | [TWO LINE GRAPHS DEPICTED HERE]
|
$10,000 |
|--------------------------------------------------------------------
4/95 11/95 11/96 11/97 11/98 11/99
o T.C.D.M.P. + S&P 500 Index
PAST PERFORMANCE DOES NOT PREDICT FUTURE PERFORMANCE
Average Annual Total Return (for the periods ending November 30, 1999)
Since Inception
Past 1 Year (Apr., 1995)
----------- ------------
The Crowley Diversified
Management Portfolio 14.74% 11.18%
The line graph illustrates the past performance for The Crowley Diversified
Management Portfolio as compared to the S&P 500 Index. The chart illustrates
that a $10,000 investment in April of 1995 would have been worth $16,419 for The
Crowley Diversified Management Portfolio and $28,095 for the S&P 500 Index
through November 30, 1999. The average annual total return table for the one
year period and since inception to November 30, 1999 for The Crowley Diversified
Management Portfolio appears below. The Portfolio's average annual total returns
for the one year and since inception to November 30, 1999 time periods were
14.74% and 11.18%, respectively.
Source: STANDARD AND POOR'S CORPORATION
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 $16,419. Although there is not a readily available
index for similar portfolios, which might be labeled a "Flexible Portfolio Funds
Index," the Portfolio is being compared to the S&P 500 Index. During the same
period (April 3, 1995 through November 30, 1999), the S&P 500 Index produced an
investment value of $28,095. During the fiscal year ended November 30, 1999, the
Portfolio had a total return of 14.74%. During the same period, the S&P 500
Index had a total return of 20.89%.
At year end the Portfolio had investments in 27 mutual funds in 7 different fund
groups. The greatest weighting was that of the Growth category (31.99%),
followed by Growth/Income (18.31%), Balanced (8.29%), Aggressive Growth (7.39%),
Global Equity (6.57%), Foreign Equity (5.16%), and Technology (1.90%). The
International portion of the Portfolio was at 11.73% as of November 30, 1999.
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, preferred
stock, United States government securities, bankers' acceptances and
certificates of deposit, repurchase agreements and convertible securities. From
time to time, the Portfolio may also purchase dividend paying common stocks
which the Investment Advisor believes, based upon historical returns, 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 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 Investment 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 Investment Advisor anticipates a generally declining trend in
fixed-income securities markets, the Investment Advisor will begin to move more
funds into cash and cash equivalents (high-quality, short-term debt securities
or instruments issued by corporations, financial institutions, or the U.S.
government). If the Investment 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 may not achieve its objective during periods
when a temporary defensive position is taken.
The Portfolio's Investment 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 Investment 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 Portfolio's policy is to invest in fixed-income securities which are short
to intermediate term (generally 1 to 10 years) when interest rates are
historically lower and intermediate to long term (generally 10 to 15 years) when
interest rates are historically higher. It is generally expected that the range
of maturities of obligations to be held by the Portfolio will be intermediate to
long term (approximately 10 to 15 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
obligations. 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 that 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 Investment 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 Investment 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 Investment
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 Investment Advisor attempts to monitor and respond to changing economic and
market conditions as well as monitor the performance of the investments. When
the Investment 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. As of November 30, 1999, The
Crowley Income Portfolio had 12.71% of its assets invested in bonds rated below
BBB. 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 more
diversified investment companies that have a broader range of investments. If
the industry that a concentrated investment company invests in experiences a
decline, the value of the concentrated investment company may decline, which may
in turn negatively effect the price of the Portfolio's shares.
Underlying Funds.
The Crowley Diversified Management Portfolio may invest in underlying funds
which 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. There is generally less government regulation and
supervision of foreign stock exchanges, brokers and listed companies. Foreign
companies are not subject to uniform global accounting, auditing and financial
reporting standards, practices and requirements. Securities of some foreign
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 foreign 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. 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.
At this time, it appears that the Fund, its service providers (Investment
Advisor and distributor, transfer agent, custodian, administrator and others),
and the issuers of its portfolio securities have not been negatively affected by
year 2000 issues. If any of the companies that The Crowley Income Portfolio and
The Crowley Diversified Management Portfolio invest in develop year 2000
problems, the price of that company's securities may be adversely affected, and
this could result in the portfolio holding the securities to lose value.
MANAGEMENT OF THE FUND
Investment Advisor.
The investment advisor for each Portfolio is Crowley & Crowley Corp. (Investment
Advisor), a corporation organized on August 28, 1989 under the laws of the state
of Delaware, 3201-B Millcreek Road, Suite H, Wilmington, DE 19808. Since its
inception in 1989, the principal business of the Investment Advisor has been to
provide investment counsel and advice to investors. The Management Contracts
provide that the Investment Advisor 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 Investment
Advisor is responsible for selecting brokers and dealers to execute transactions
for the Portfolios. The Board has also authorized the Investment 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 Investment 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 Investment 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 Investment 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 Investment Advisor under the contracts may be furnished through
the medium of any such directors and officers.
As compensation for its services as Investment Advisor, the Investment Advisor
receives a fee, computed daily and payable monthly, at the annualized rate of
0.60% of the average daily net assets of The Crowley Income Portfolio and 1.00%
of the average daily net assets of The Crowley Diversified Management Portfolio.
For the fiscal year, ended November 30, 1999, The Crowley Income Portfolio and
The Crowley Diversified Management Portfolio paid fees of $71,535 and $66,941,
respectively. The Investment 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 Investment 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 Investment Advisor under the Management Contracts. For
the fiscal year ending November 30, 1999, The Crowley Income Portfolio and The
Crowley Diversified Management Portfolio incurred expenses equal to 1.36%, and
1.82%, respectively, of average net assets.
The Investment Advisor, pursuant to the Management Contracts, also serves as the
Portfolios' administrator. The Management Contracts provide that the Investment
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 Investment 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 Robert A. Crowley, who has been
managing the Portfolios since their inception, (1989 for The Crowley Income
Portfolio and 1995 for The Crowley Diversified Management Portfolio). Mr.
Crowley 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 day-to-day responsibilities in managing the
Portfolios, he is a financial planner with the Investment Advisor. 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, each Portfolio of the Fund is
responsible for the payment of its expenses, including: (a) the fees payable to
the Investment Advisor, the Distributor and the Transfer Agent; (b) the fees and
expenses of directors who are not affiliated with the Investment Advisor or the
Distributor; (c) the fees and certain expenses of the Custodian; (d) the charges
and expenses of 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 to governmental agencies; (g) membership fees to any trade association;
(h) the cost of stock certificates, if any, representing shares of a Portfolio;
(i) reimbursements of the organizational expenses and the fees and expenses
involved in registering and maintaining registration of the Fund and its shares
with individual states and 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 business; and (l) compensation for employees.
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 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 NAV is determined 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 a
Portfolio, including the advisory and the distributor fees, are accrued daily
and taken into account for the purpose of determining the NAV.
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
Independent pricing services may be used to assist in calculating the NAV.
The SAI contains additional information regarding the pricing of a Portfolio's
shares.
Purchasing Shares.
Purchase Price. Shares of each of the Portfolios are offered for sale to the
public through the Fund's distributor, Crowley Securities (Distributor) and
selected dealers. The purchase price of shares is the first NAV computed after
the Distributor receives the purchase order and the Custodian receives payment
in federal funds for such shares. However, the NAV is only calculated when there
is adequate trading in a Portfolio's individual 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
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 these limitations.
How to Purchase Shares. Initial or subsequent investments in a Portfolio may be
made by completing the application form and mailing it together with a check
made payable to The Crowley Portfolio Group, Inc.
Send your checks and completed application forms to:
Crowley Securities
3201-B Millcreek Road
Wilmington, DE 19808
Your purchase will be made in full and fractional shares of a Portfolio,
calculated to three decimal places. Shares are normally held in an open account
for shareholders by each Portfolio. Each Portfolio will send a statement to
shareholders detailing the amount of shares owned at the time of each
transaction. Share certificates for full shares are available at any time by
written request. There is no additional cost to the shareholder for such
certificate. 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 a 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 which meets the requirements described
below. The Portfolios normally send redemption proceeds to their shareholders on
the next business day, and no later than seven calendar days after receiving a
proper (complete) redemption request.
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
Securities and Exchange Commission, exists during which time the sale of
Portfolio securities or valuation of securities held by a 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. A 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: (1) in an amount
greater than $10,000; (2) a redemption to be paid to someone other than to the
shareholder of record (regardless of the dollar amount); or (3) 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 completed until the Transfer Agent
receives all required documents in proper form. Any questions in connection with
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 amount of the redemption 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 using 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 a Portfolio. A Portfolio will not recognize a 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 Fund's Distributor or by reviewing the
Statement of Additional Information.
Exchange Privilege.
Shareholders of a 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 Fund's
Distributor. A shareholder requesting an exchange will be sent a current
Prospectus and an exchange authorization form which must be completed to
authorize the exchange. Exchanges may not be made by telephone. The Fund retains
the right to modify or terminate the terms of its exchange 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. You may elect to
change the form of your distributions (i.e. cash or shares) by notifying the
Transfer Agent in writing thirty days before the record date.
In general, distributions from 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 a Portfolio 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
Internal Revenue 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 may result in a capital gain or loss to
shareholders, and consequently, may be subject to tax. Capital gains or losses
may also be realized from an ordinary redemption of shares or an exchange of
shares between the Portfolios. In addition to federal taxes, shareholders may be
subject to state and local taxes on distributions.
Each year, you will be mailed information on the tax status of a Portfolio's
dividends and distributions.
By law, each Portfolio is required to withhold 31% of your distributions and
proceeds if you: (1) do not provide your correct taxpayer identification number;
or (2) do not certify that such number is correct; or (3) if the Portfolio has
been instructed by the IRS 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 financial highlights table is intended to help you understand The Crowley
Income Portfolio's financial performance for the past five years. Certain
information reflects financial results of a single Portfolio share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in the Portfolio (assuming reinvestment of all dividends
and distributions). This information has been audited by Tait, Weller & Baker,
independent auditors, whose report, along with the Portfolio's financial
statements, is 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.
The Crowley Income Portfolio
12/01/94
1999 1998 1997 1996 to 11/30/85
---- ---- ---- ---- ----------
Net Asset Value, $11.05 $11.00 $10.90 $11.08 $10.69
----- ----- ----- ----- -----
Beginning of Period
Income from
Investment Operations:
Net Investment Income .69 .59 .69 .59 .65
Net Gains or Losses
on Securities (both (.59) .14 .06 (.15) .37
realized & unrealized) ----- ----- ----- ----- -----
Total from Investment
Operations $ .10 $ .73 $ .75 $ .44 $1.02
===== ===== ===== ===== =====
Less Distributions:
- ------------------
Dividends (from net
investment income) $( .59) $( .68) $( .65) $( .62) $( .63)
Distributions (from
capital gains) --- --- --- --- ---
Total Distributions ( .59) ( .68) ( .65) ( .62) ( .63)
------ ------ ------ ------ ------
Net Asset Value, End
of Period $10.56 $11.05 $11.00 $10.90 $11.08
===== ===== ===== ===== =====
Total Return 0.92% 7.03% 7.34% 4.16% 10.12%
Ratios/Supplemental
Data:
Net Assets, End of $11,313 $11,980 $9,373 $9,529 $8,940
Period (000s omitted)
Ratio of Expenses to 1.36% 1.35% 1.39% 1.39% 1.43%
Average Net Assets
Ratio of Net Income 6.17% 5.70% 6.22% 5.62% 6.43%
to Average Net Assets
Portfolio Turnover 27.13% 44.77% 22.81% 66.18% 31.60%
Rate
<PAGE>
The financial highlights table is intended to help you understand The Crowley
Diversified Management Portfolio's financial performance from April 3, 1995
(commencement of operations) through November 30, 1999. Certain information
reflects financial results of a single Portfolio share. The total returns in the
table represent the rate that an investor would have earned (or lost) on an
investment in the Portfolio (assuming reinvestment of all dividends and
distributions). This information has been audited by Tait, Weller & Baker,
independent auditors, whose report, along with the Portfolio's financial
statements, is 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.
The Crowley Diversified Management Portfolio
04/03/95(a)
to
1999 1998 1997 1996 11/30/95
---- ---- ---- ---- --------
Net Asset Value, $13.11 $12.87 $12.15 $10.71 $10.00
----- ----- ----- ----- ------
Beginning of Period
Income from
Investment Operations:
Net Investment Income .08 .16 .17 .05 --
Net Gains or Losses
on Securities (both
realized & unrealized 1.79 .48 1.17 1.43 .71
---- ----- ----- ----- -----
Total from Investment
Operations $1.87 $ .64 $1.34 $1.48 $ .71
===== ===== ===== ===== =====
Less Distributions:
Dividends (from net
investment income) ( .13) ( .08) ( .18) ( .04) --
Distributions (from
capital gains) ( .45) ( .32) ( .44) -- --
Total Distributions ( .58) (0.40) ( .62) ( .04) --
---- ----- ----- ----- -----
Net Asset Value, End
of Period $14.40 $13.11 $12.87 $12.15 $10.71
===== ===== ===== ===== =====
Total Return 14.74% 5.10% 11.64% 13.87% 7.10%
Ratios/Supplemental
Data:
Net Assets, End of $7,109 $6,245 $2,240 $1,500 $962
Period (000s omitted)
Ratio of Expenses to 1.82% 1.88% 1.87% 2.22% 2.06%(b)
Average Net Assets
Ratio of Net Income 0.57% 1.11% 1.08% 0.46% (0.09%)(b)
(Loss) to Average Net
Assets
Portfolio Turnover 23.81% 4.51% ----- 20.69% -----
Rate
(a) Effective date of the Fund's initial registration under the Securities Act
of 1933, as amended.
(b) Annualized.
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.
Free copies of these materials and other information about the Portfolios may be
obtained by:
o Calling collect or writing to The Crowley Portfolio Group, Inc.
at the address listed below.
o Visiting the SEC's Public Reference Room in Washington, DC. Information on
the operation of the Public Reference Room may be obtained by calling the
Commission at (1-800-SEC-0330).
o Requesting copies of this information by writing to the Public Reference
Section of the SEC, Washington, DC 20549-6009 (a copying fee may be
charged).
o Visiting the SEC's Internet site at http://www.sec.gov.
THE CROWLEY PORTFOLIO GROUP, INC.
3201-B Millcreek Road
Wilmington, DE 19808
(302) 997-4700
811-5875
<PAGE>
THE CROWLEY PORTFOLIO GROUP, INC.
STATEMENT OF ADDITIONAL INFORMATION
February 29, 2000
The Crowley Income Portfolio
The Crowley Diversified Management Portfolio
This Statement of Additional Information is not a Prospectus. Information about
the Fund and its Portfolios is included in the Prospectus dated February 29,
2000. 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 at the following telephone number.
INVESTMENT ADVISOR
AND DISTRIBUTOR
THE CROWLEY PORTFOLIO GROUP, INC.
3201-B Millcreek Road
Wilmington, DE 19808
(302) 994-4700
<PAGE>
TABLE OF CONTENTS
Page
FUND HISTORY AND CLASSIFICATION...............................1
INVESTMENT STRATEGIES AND RISKS...............................1
Fixed Income Securities.....................................1
Money Market Securities.....................................2
Repurchase Agreements.......................................3
Foreign Investments.........................................4
Investment Company Securities...............................4
Portfolio Turnover..........................................5
Futures and Options.........................................6
Foreign Securities and Currency Considerations..............8
INVESTMENT RESTRICTIONS.......................................8
Fundamental Policies........................................9
MANAGEMENT OF THE FUND........................................10
Board of Directors and Officers of the Fund.................10
Compensation................................................12
Code of Ethics..............................................13
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES...........14
Control Persons.............................................14
Principal Holders...........................................14
Management Ownership........................................14
INVESTMENT ADVISOR............................................14
DISTRIBUTOR...................................................15
ALLOCATION OF PORTFOLIO BROKERAGE.............................16
TRANSFER AND DIVIDEND DISBURSING AGENT........................16
CUSTODIAN.....................................................16
PURCHASE, REDEMPTION AND PRICING OF SHARES....................16
Tax-Sheltered Retirement Plans..............................17
CAPITAL STOCK.................................................18
DIVIDENDS, DISTRIBUTION AND TAXES.............................18
GENERAL INFORMATION...........................................20
Audits and Reports..........................................20
PERFORMANCE...................................................20
Comparisons and Advertisements..............................21
FINANCIAL STATEMENTS..........................................22
APPENDIX A - RATINGS..........................................
APPENDIX B - INVESTMENT POLICIES AND PRACTICES OF
UNDERLYING FUNDS............................................
<PAGE>
FUND HISTORY AND CLASSIFICATION
The Crowley Portfolio Group, Inc. ("Fund") is an open-end diversified investment
company. It was organized as a 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' objectives may not be changed without shareholder approval. 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 a 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 the Investment Advisor deems appropriate 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
Investors Service, Inc. (Moody's) or BBB or lower by Standard & Poor's
Corporation (S&P). The Portfolios intend to invest in these securities in order
to take advantage of investment opportunities. 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 Portfolio 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).
Government Securities. 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. U.S. Treasury bills have a maturity of one year or less;
U.S. Treasury notes have maturities of one to ten years; U.S. 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. 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. 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 a 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, a 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 United States Bankruptcy Code or other laws, a
bankruptcy court may determine that the underlying securities are collateral not
within the control of Portfolio and therefore subject to sale by the trustee in
bankruptcy. Finally, it is possible that a Portfolio may not be able to
substantiate its interest in the underlying securities. While management of a
Portfolio acknowledges these risks, it is expected that they can be controlled
through stringent security selection and careful monitoring procedures. A
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 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 ADRs
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 (The Crowley Diversified Management
Portfolio ONLY).
Each investment company in which the 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
Investment 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 pays 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 Investment 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 may sell securities to recognize
gains or avoid potential for loss. A Portfolio will, however, sell any portfolio
security (without regard to the time it has been held) when the Investment
Advisor believes that market conditions, creditworthiness 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, 1998 and 1999, the portfolio turnover rates for The Crowley
Income Portfolio were 44.77% and 27.13%, respectively. For the fiscal years
ended November 30, 1998 and 1999, the portfolio turnovers for The Crowley
Diversified Management Portfolio were 4.51% and 23.81%, respectively.
Futures and Options.
Although they do not currently do so, each Portfolio may seek to protect itself
from anticipated market action by using "hedging" techniques that it 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 Portfolio. The Investment Advisor would select the
specific technique(s) to be used, based upon analysis of each Portfolio's
holdings, 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 Portfolio achieves by its hedging relative to
losses or gains on the hedged investments. A 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 may purchase and/or write ("sell") call and put options
that are traded on U.S. securities exchanges. Each Portfolio may enhance its
objective by receiving premiums for writing covered call and put options.
Although each Portfolio would receive premium income from these techniques, any
appreciation realized would 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 respective portfolio securities against a decline in market value.
Stock Index Futures. Each Portfolio may purchase and sell stock index futures
contracts. Each 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 may purchase
and/or write call and put options on stock indexes that are traded on U.S.
Exchanges. The Portfolios may also 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.
If used, 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 Futures, Options on Stock
Indexes 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 Investment 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 or futures contract. In such event, it might not
be possible to effect closing transactions in particular options or futures
contracts. As a result, a 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 or futures could have an adverse effect on a Portfolio's ability
to effectively hedge its securities and could 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 or futures 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 Investment Advisor's officer who will be
responsible for hedging does not have experience in managing portfolios that
trade in such hedging instruments. If the Investment 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.
In addition, adverse market movements could cause a Portfolio to lose up to its
full investment in a call or option contract and/or to experience substantial
losses on an investment in a futures contract. A Portfolio also risks a loss of
margin deposits in the event of bankruptcy of a broker with whom the Portfolio
has an open position in a futures contract or option.
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, a 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 ONLY).
The 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 Investment 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 Investment 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 Portfolio will not
o 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.
o 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 Occupation(s)
Positions Held with During the Past Five
Name, Address and Age the Fund Years
+*Robert A. Crowley President, Treasurer Vice President, Crowley
(41) and Director & Crowley (financial
3201-B Millcreek Rd. planning and registered
Wilmington, DE 19808 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, Vice President, President, Crowley &
Jr. (43) Secretary and Director Crowley Corp.
3201-B Millcreek Rd. (financial planning and
Wilmington, DE 19808 registered 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 (74) Director Retired. Formerly
4556 Simon Road Security Director, E.I.
Wilmington, DE 19803 duPont de Nemours &
Co., until December, 1990.
Bruce A. Humphries (52)Director Operations Senior
2 Radburn Lane Management, Data
Newark, DE 19711 International, Inc.,
1998 to Present;
Operations Planning
Manager for Virology
Business, E.I. duPont
de Nemours & Co., 1986
to 1997.
Daniel J. Piscitello Director Director of Creative
(58) Services, Lenox
3933 Branches Lane Collections, 1986 to
Doylestown, PA 18901 Present.
Peter Veenema (50) Director Senior Research
1211 Norbee Drive Engineer, E.I. duPont
Wilmington, DE 19803 de Nemours, 1989 to
Present.
+Catherine Crowley (64)Assistant Secretary & Officer Manager,
3201-B Millcreek Road Assistant Treasurer Crowley & Crowley
Wilmington, DE 19808 Corp.(financial
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.
<PAGE>
- -------------------------------------------------------------------------
Pension or Total
Retirement Estimated Compensation
Name and Aggregate Benefits Annual from Trust
Position Compensation Accrued as Benefits and Fund
from Fund Part of Fund Upon Complex Paid
Expenses Retirement to Directors
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Robert A. None None None None
Crowley,
President,
Treasurer and
Director
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Frederick J. None None None None
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 Veenema, $1,500 None None $1,500
Director
- -------------------------------------------------------------------------
* The "Fund Complex" presently consists of two investment companies, each an
individual series of the Registrant.
Code of Ethics.
The Fund has adopted a Code of Ethics for certain access persons of the Fund,
which includes its Directors and certain officers and employees of the Fund and
the Investment Advisor. The Code of Ethics is designed to ensure that Fund
insiders act in the interest of the Fund and its shareholders with respect to
any personal trading of securities. Under the Code of Ethics, access persons are
prohibited from knowingly buying or selling securities which are being
purchased, sold or considered for purchase or sale by the Portfolios. The Code
of Ethics contains even more stringent investment restrictions and prohibitions
for insiders who participate in the Portfolios' investment decisions. The Code
of Ethics also contains certain reporting requirements and securities trading
clearance procedures.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Control Persons.
As of January 31, 2000 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 January 31, 2000 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
The Crowley Income Ronald E. Cooney 10.0%
Portfolio Wilmington, DE
Albert R. & Patricia 6.7%
A. Forster
Glendale, AZ
The Crowley Diversified David J. (Jr.) &
Portfolio Brenda B. Jones 5.4%
Rehoboth Beach, DE
Management Ownership.
As of January 31, 2000, the Fund's officers, directors and members of the
Investment Advisor as a group own 6.9% of the shares outstanding of The Crowley
Income Portfolio and 10.0% of the shares outstanding of The Crowley Diversified
Management Portfolio.
INVESTMENT ADVISOR
The investment advisor for each portfolio is Crowley & Crowley Corp.("Investment
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 ("Agreements"). The Management Contracts for each Portfolio 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
Fund's Board of Directors; or (ii) 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, 1997, 1998 and 1999, the Investment
Advisor received fees of $55,578, $64,393 and $71,535, respectively, for The
Crowley Income Portfolio. With regard to The Crowley Diversified Management
Portfolio, for the fiscal years ended November 30, 1997, 1998 and 1999, the
Investment Advisor received fees of $19,044, $45,644 and $66,941, respectively.
The Investment Advisor has committed to offset the management fees payable by
The Crowley Diversified Management Portfolio by the fees that Crowley
Securities, the Fund's Distributor and an affiliate of the Investment Advisor,
receives in connection with the purchase and sale of investment company
securities for each Portfolio for which Crowley Securities is the dealer of
record and which have an associated sales charge, 12b-1 or shareholder servicing
fee. The Investment Advisor will offset management fees on a monthly basis,
consistent with its receipt of such fees.
Both Frederick J. Crowley, Jr. and Robert A, Crowley are affiliates of both the
Fund and the Advisor. 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 Investment Advisor. The Investment Advisor was organized in 1986
and principally provides investment advice to individuals. The Investment
Advisor does not provide investment advice to any other investment companies.
Each Management Contract also identifies the right of the Investment 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 ("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 (the "Agreements"). 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 Agreements will terminate automatically in the event of their assignment.
Pursuant to the Agreements, the expenses of printing each Portfolio's sales
literature, including prospectuses used as sales material, are to be borne by
the Distributor. The Distributor is also the exclusive agent for each
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.
ALLOCATION OF PORTFOLIO BROKERAGE
The Crowley Portfolio Group, Inc., in effecting the purchases and sales of
portfolio securities for the account of each Portfolio 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 Portfolio 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 Investment Advisor may use research and services
provided to it by brokers and dealers in servicing all of its clients, however,
not all such services will be used by the Investment Advisor. Brokerage may also
be allocated to dealers in consideration of each Portfolio's share distribution,
but only when execution and price are comparable to that offered by other
brokers.
The Investment Advisor is responsible for making each Portfolio's investment
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, 1997, 1998 and 1999,
aggregate brokerage commissions for The Crowley Income Portfolio, amounted to
$0, $0 and $228, respectively. The aggregate brokerage commissions for The
Crowley Diversified Management Portfolio for the fiscal years ended November 30,
1997, 1998 and 1999, amounted to $0, $0 and $0, 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 each
Portfolio's shares and all other confirmable transactions in stockholders'
accounts, recording reinvestment of dividends and distributions of each
Portfolio's shares and causing redemption of shares for and disbursements of
proceeds to withdrawal plan stockholders. CFG is under common control with the
Investment 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.
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 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. Such dealers should send the investor's Investment Application and payment
for the shares of Portfolio 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 after 4:00 p.m.
Eastern Standard Time will be priced at the net asset value 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 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, 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 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 each Portfolio of 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. Each Portfolio of 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 shares. Redemptions and exchanges of shares of a portfolio are
taxable transactions for Federal and state income tax purposes. If you redeem or
exchange your shares, 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. Many 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 Portfolio of 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 each Portfolio of the Fund are audited each year by Tait, Weller
& Baker of Philadelphia, PA, independent certified public accountants.
Shareholders receive semi-annual and annual reports of the Fund including the
annual audited financial statements and a list of securities owned for each
Portfolio.
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, a Portfolio of the Fund may
include its distribution rate in advertisements. The distribution rate is the
amount of distributions per share made over a 12-month period divided by the
current net asset value.
U.S. Securities and Exchange Commission rules require the use of standardized
performance quotations or, alternatively, that every non-standardized
performance quotation furnished by a Portfolio be accompanied by certain
standardized performance information computed as required by the Securities and
Exchange Commission. Current yield and total return quotations used are based on
the standardized methods of computing performance mandated by the SEC. An
explanation of those and other methods used 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, 1999, the five year period ending November
30, 1999, and the ten year period ending November 30, 1989 were 0.92%, 5.87%
and 6.41%, respectively. The average total return figures for The Crowley
Diversified Management Portfolio for the one year period ending November 30,
1999 and the period from April 5, 1995 (commencement of operations) to November
30, 1999 (not annualized) were 14.74% and 11.18%, 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 that all dividends and
distributions are reinvested at the net asset value on the reinvestment dates
during the period from the initial $1,000 purchase order. 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
Lehman Brothers Treasury Index
Salomon Brothers 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, 1999, as set forth in the
Fund's Annual Report to Shareholders dated November 30, 1999, are incorporated
herein by reference. A shareholder may obtain a copy of the Annual Report to
Shareholders 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 egree of
investment risk and are generally referred to as "gilt-edged";
Aa -- judged to be of high quality by all standards and comprise part of the
group known as "high-grade" bonds;
A -- possesses many 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 -- are the lowest rated class of bonds and issues so rated can be regarded as
having extremely poor prospects of ever attaining any real investment standing.
Excerpts from S&P's description of its bond ratings:
AAA -- is the highest rating assigned and indicates an extremely strong capacity
to pay principal and interest.
AA -- qualify as high quality debt obligations. Capacity to pay principal and
interest is very strong and, in the majority of instances differ from AAA issues
only in a small degree;
A -- have a strong capacity to pay principal and interest, although they are
somewhat more susceptible to the adverse effects of changes in circumstances and
economic conditions;
BBB -- regarded as having an adequate capacity to pay principal and interest.
Normally, these bonds exhibit protection parameters; adverse economic conditions
or changing circumstances are more likely to lead to a weakened capacity to pay
principal and interest than bonds in the A category;
BB, B, CCC, CC -- regarded, on balance, as predominately speculative with
respect to the issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligations. 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 -- are typically subordinated debt to senior debt that is assigned an actual
or implied CCC- rating. This rating may also reflect the filing of a bankruptcy
petition under circumstances where debt service payments are continuing. The C1
rating is reserved for income bonds on which no interest is being paid;
D -- is in default, and payment of interest and/or repayment of principal is in
arrears.
(+) or (-): The ratings from "AA" to "CCC" may be modified by the addition of a
plus or minus sign to show relative standing within the major rating categories.
SHORT TERM INSTRUMENTS (Commercial Paper and Repurchase Agreements) Excerpts
from Moody's description of its short-term ratings:
Moody's employs three designations, all judged to be investment grade, to
indicate the relative repayment ability of rated issuers:
Prime-1 -- has a superior ability for repayment of senior short-term debt
obligations, and is often evidenced by many of the following characteristics:
o Leading market positions in well-established industries.
o High rates of return on funds employed.
o Conservative capitalization structure with moderate reliance on
debt and ample asset protection.
o Broad margins in earnings coverage of fixed financial charges
and high internal cash generation.
o Well-established access to a range of financial markets and
assured sources of alternate liquidity.
Prime-2 -- possesses a strong ability for repayment of senior short-term debt
obligations. This will normally be evidenced by many of the characteristics
cited above but to a lesser degree. Earnings trends and coverage ratios may be
more subject to variation and capitalization characteristics may be more
affected by external conditions. Ample alternate liquidity is maintained;
Prime-3 -- have an acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market compositions may
be more pronounced. Variability in earnings and profitability may result in
changes in the level of debt protection measurements and may require relatively
high financial leverage. Adequate alternate liquidity is maintained;
Not Prime -- Issuers rated Not Prime do not fall within any of the Prime rating
categories.
Excerpts from S&P's description of its short-term ratings:
A-1 -- rated in the highest category, with strong capacity to meet its financial
commitment on the obligation. Within this category, certain obligations are
designated with a plus sign (+), indicating the capacity to meet financial
commitments is extremely strong;
A-2 -- somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than obligations in higher rating
categories. However, the capacity to meet financial commitments is satisfactory;
A-3 --exhibits adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity of the obligor to meet its financial commitment on the obligation;
B -- regarded as having significant speculative characteristics. The obligor
currently has the capacity to meet its financial commitment on the obligation;
however, it faces major ongoing uncertainties which could lead to inadequate
capacity to meet financial commitments;
C -- is currently vulnerable to nonpayment and is dependent upon favorable
business, financial, and economic conditions for the obligor to meet its
financial commitment on the obligation;
D -- is in payment default. The category is used when payments on an obligation
are not made on the date due even if the applicable grace period has not
expired, unless S&P believes that such payments will be made during such grace
period. The rating also will be used upon the filing of a bankruptcy petition or
the taking of a similar action if payments on an obligation are jeopardized.
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 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 returns 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
The fund 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. A Portfolio 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 fund's 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 ("OCC") has the authority to
permit other, generally comparable securities to be delivered in fulfillment of
option exercise obligations. If the OCC 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 OCC may impose special exercise settlement
procedures.
Hedging
An underlying fund may employ many of the investment techniques described in
this APPENDIX B 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 S&P and Ba and below by Moody's (See
"INVESTMENT STRATEGIES AND RISKS - 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
("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.
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, Inc.
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
Eight Penn Center
Suite 800
Philadelphia, PA 19102-1707
<PAGE>
THE CROWLEY PORTFOLIO GROUP, INC.
PART C
OTHER INFORMATION
Item 23. EXHIBITS.
(a) Articles of Incorporation.
Registrant's Articles of Incorporation dated August 14, 1989 are
incorporated herein by reference to Item 24.(b)(1)(a) of Post-Effective
Amendment No. 8/10 to the Registrant's Registration Statement on Form N-1A (File
Nos. 33-30975 and 811-5875) as filed with the Securities and Exchange Commission
("SEC") on April 1, 1996.
(1) (AUTHORIZATION/CLASSIFICATION OF "THE CROWLEY
DIVERSIFIED MANAGEMENT PORTFOLIO").
Articles Supplementary dated March 16, 1995 as
filed with the Maryland State Department of Assessments and Taxation on March
22, 1995 are incorporated herein by reference to Item 24.(b)(1)(b) of
Post-Effective Amendment No. 8/10 to the Registrant's Registration Statement on
Form N-1A (File Nos. 33-30975 and 811-5875) as filed with the SEC on April 1,
1996.
(2) (CHANGE OF NAME OF "THE CROWLEY GROWTH PORTFOLIO" AS "THE
CROWLEY GROWTH AND INCOME PORTFOLIO").
Articles of Amendment dated March 7, 1996 to the
Registrant's Articles of Incorporation dated August 14, 1989 as filed with the
Maryland State Department of Assessments and Taxation on March 29, 1996 are
incorporated herein by reference to Item 24.(b)(c) of Post-Effective Amendment
No. 8/10 to the Registrant's Registration Statement on Form N-1A (File Nos.
33-30975 and 811-5875) as filed with the SEC on April 1, 1996.
(3) (CHANGE OF ADDRESS OF RESIDENT AGENT).
Change of Address of Resident Agent effective
November 12, 1997 as filed with the Maryland Department of Assessments and
Taxation is filed herewith as Exhibit EX-99.a.1.
(4) (DELETION OF THE CROWLEY GROWTH AND INCOME
PORTFOLIO/RECLASSIFICATION OF SHARES).
Articles Supplementary dated November 23, 1998
to the Registrant's Articles of Incorporation dated August 14, 1989 as filed
with the Maryland Department of Assessments and Taxation on November 25, 1998
are filed herewith as Exhibit EX-99.a.2.
(b) By-Laws.
By-Laws of the Registrant are incorporated herein by reference
to Item 24.(b)(2) of Post-Effective Amendment No. 8/10 to the Registrant's
Registration Statement on Form N-1A (File Nos. 33-30975 and 811-5875) as filed
with the SEC on April 1, 1996.
(c) Instruments Defining the Rights of Security Holders:
(1) Specimens.
a. The Crowley Income Portfolio.
Specimen certificate is incorporated herein by
reference to Item 24.(b)(4)(b) of Post-Effective Amendment No. 8/10 to the
Registrant's Registration Statement on Form N-1A (File Nos. 33-30975 and
811-5875) as filed with the SEC on April 1, 1996.
b. The Crowley Diversified Management Portfolio.
Specimen certificate is incorporated herein
by reference to Item 24.(b)(4)(c) of Post-Effective Amendment No.
8/10 to the Registrant's Registration Statement on Form N-1A (File
Nos. 33-30975 and 811-5875) as filed with the Securities and
Exchange Commission ("SEC") on April 1, 1996.
(2) Articles of Incorporation.
a. Articles of Incorporation effective 8/15/89.
Article FIFTH;
Article SEVENTH; and
Article TENTH
- The Crowley Growth Portfolio and The Crowley Income
Portfolio.
b. Articles Supplementary effective 3/22/95.
Article SECOND - The Crowley Diversified Management
Portfolio.
c. Articles Supplementary effective 3/29/96.
Article FIRST - "The Crowley Growth and
Income Portfolio" (f/k/a "The Crowley Growth
Portfolio").
d. Articles Supplementary effective 11/25/98.
Article FOURTH - The Crowley Growth and Income
Portfolio, The Crowley Diversified Management
Portfolio and The Crowley Income Portfolio.
(3) By-Laws.
a. Article II, "Stockholders and Stock Certificates;"
Article III, "Meetings of Stockholders;"
Article IV, "Directors," Sections 2. and 4.;
Article X, "Dividends"; and
Article XII, "Notices."
(d) Investment Advisory Contracts.
(1) Management Contract dated December 6, 1989 between
Crowley & Crowley Corp. and the Registrant on behalf of The Crowley Income
Portfolio is incorporated herein by reference to Item 24.(b)(5)(b)
of Post-Effective Amendment No. 8/10 to the Registrant's Registration Statement
on Form N-1A (File Nos. 33-30975 and 811-5875) as filed with the SEC on April 1,
1996.
(2) Management Contract dated March 31, 1995 between
Crowley & Crowley Corp. and the Registrant on behalf of The Crowley Diversified
Management Portfolio is incorporated herein by reference to Item
24.(b)(5)(c) of Post-Effective Amendment No. 8/10 to the Registrant's
Registration Statement on Form N-1A (File Nos. 33-30975 and 811-5875)
as filed with the SEC on April 1,
1996.
(e) Underwriting or Distribution Contract Between the Registrant and
a Principal Underwriter.
(1) Distribution Agreement dated December 6, 1989 between
Crowley Securities and the Registrant on behalf of The Crowley Income
Portfolio is incorporated herein by reference to Item 24.(b)(6)(b) of
Post-Effective Amendment No. 8/10 to the Registrant's Registration Statement on
Form N-1A (File Nos. 33-30975 and 811-5875) as filed with the SEC on April 1,
1996.
(2) Distribution Agreement dated March 31, 1995 between
Crowley Securities and the Registrant on behalf of The Crowley Diversified
Management Portfolio is incorporated herein by reference to Item
24.(b)(6)(c) of Post-Effective Amendment No. 8/10 to the Registrant's
Registration Statement on Form N-1A (File Nos. 33-30975 and 811-5875) as filed
with the SEC on April 1, 1996.
(3) FORM OF Selling Dealer Agreement between Crowley
Securities and Selected Dealers is incorporated herein by reference to Item
24.(b)(6)(d) of Post-Effective Amendment No. 8/10 to the Registrant's
Registration Statement on Form N-1A (File Nos. 33-30975 and 811-5875) as
filed with the SEC on April 1, 1996.
(f) Bonus of Profit Sharing Contracts.
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 is incorporated herein by reference to Item 24.(b)(8)(b) of
Post-Effective Amendment No. 8/10 to the Registrant's Registration Statement on
Form N-1A (File Nos. 33-30975 and 811-5875) as filed with the SEC on April 1,
1996.
(2) Custodian Agreement dated March 31, 1995 between the Registrant
and Wilmington Trust Company on behalf of The Crowley Diversified Management
Portfolio is incorporated herein by reference to Item 24.(b)(8)(c) to
Post-Effective Amendment No. 8/10 to the Registrant's Registration Statement on
Form N-1A (File Nos. 33-30975 and 811-5875) as filed with the SEC on April 1,
1996.
(h) Other Material Contracts.
(1) Shareholder Services Agreement dated August 1, 1993 between the
Registrant and The Crowley Financial Group, Inc. (the "Agreement") on behalf of
The Crowley Growth and Income Portfolio (f/k/a "The Crowley Growth Portfolio")
and The Crowley Income Portfolio is incorporated herein by reference to Item
24.(b)(9)(a) to Post-Effective Amendment No. 8/10 to the Registrant's
Registration Statement on Form N-1A (File Nos. 33-30975 and 811-5875) as filed
with the SEC on April 1, 1996.
(a) Amendment I dated March 31, 1995 to the Agreement on behalf
of The Crowley Diversified Management Portfolio is incorporated herein by
reference to Item 24.(b)(9)(b) of Post-Effective Amendment No. 8/10 to the
Registrant's Registration Statement on Form N-1A (File Nos. 33-30975 and
811-5875) as filed with the SEC on April 1, 1996.
. (b) Amendment II dated [*BCROWLEY TO PROVIDE*] to the Agreement
regarding the deletion of The Crowley Growth and Income Portfolio to the
Agreement is filed herewith as Exhibit EX-99.h.
(i) Opinion and Consent of Counsel.
Opinion of Stradley, Ronon, Stevens & Young, LLP dated March 29,1999
is herein incorporated by reference to Item 23.(i) of Post-Effective Amendment
No. 12/14 to the Registrant's Registration Statement on Form N-1A (File Nos.
33-30975 and 811-5875) as filed with the SEC on March 30, 1999.
(j) Other Opinions and Consents.
Consent of Tait, Weller & Baker, Independent Public Accountants
dated January ___, 2000 is filed herewith as Exhibit EX-99.j.
(k) Omitted Financial Statements.
Not Applicable.
(l) Initial Capital Agreements.
(a) Letter of Initial Capital dated December 1, 1989 from William O.
and Elynor K. Cregar is incorporated herein by reference to Item 24.(b)13 of
Post-Effective Amendment No. 8/10 to the Registrant's Registration Statement on
Form N-1A (File Nos. 33-30975 and 811-5875) as filed with the SEC on April 1,
1996.
(m) Rule 12b-1 Plan.
Not Applicable.
(n) Rule 18f-3 Plan.
Not Applicable.
(o) Reserved.
(p) Code of Ethics.
Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
THE FUND.
None.
Item 25. INDEMNIFICATION.
Under the terms of the Maryland General Corporation Law and Article
EIGHTH of 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 dated August 14, 1989:
(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 Bylaw, 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 Article 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 THE INVESTMENT ADVISOR.
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 20 of Part B:
Name and Principal Positions and Offices Position and Offices
Business Address with Underwriter with Fund
Robert A. Crowley General Partner
3201-B Millcreek Road
Suite H
Wilmington, DE 19808
Frederick J. Crowley, General Partner Vice President
Jr.
3201-B Millcreek Road
Suite H
Wilmington, DE 19808
(c) Not Applicable.
Item 28. LOCATION OF ACCOUNTS AND RECORDS.
All records described in Section 31(a) [15 U.S.C.
80a-30(a)] of the Investment Company Act of 1940, as amended, and the Rules
under that Section, 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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness under Rule 485(b) under the Securities Act of
1933 and has duly caused this Registration Statement to be signed on its behalf
by the undersigned, duly authorized, in the City of Wilmington and State of
Delaware on the 25th day of February, 2000.
THE CROWLEY PORTFOLIO GROUP, INC.
By: /S/ ROBERT A. CROWLEY
Robert A. Crowley, President
Pursuant to the requirements of the Securities Act, this Registration Statement
has been signed below by the following persons in the capacities and on the
date(s) indicated.
Signature Title Date
/S/ ROBERT A. CROLWEY President, Treasurer February 25, 2000
Robert A. Crowley and Director
/S/ FREDERICK J. CROWLEY, JR. Vice President, Secretary February 25, 2000
Frederick J. Crowley, and Director
Jr.
/S/ WILLIAM O. CREGAR Director February 25, 2000
William O. Cregar
/S/ BRUCE A. HUMPHRIES Director February 14, 2000
Bruce A. Humphries
/S/ DANIEL J. PISCITELLO Director February 14, 2000
Daniel J. Piscitello
/S/ PETER VEENEMA Director February 14, 2000
Peter Veenema
<PAGE>
EXHIBIT INDEX
EX-99.a.1. Change of Resident Agent effective November 12, 1987.
EX-99.a.2. Articles of Amendment dated November 23, 1998.
EX-99.h. Amendment II dated ____________ to the Shareholder Services
Agreement.
EX-99.j. Consent of Tait, Weller & Baker, Independent Public Accountants
dated February 29, 2000.
CHANGE OF ADDRESS OF RESIDENT AGENT
The Corporation Trust Incorporated hereby submits the following for the purpose
of changing the address of the resident agent for the business entities on the
attached list:
1. The name of the resident agent is The Corporation Trust Incorporated.
2. The old address of the resident agent is:
32 South Street
Baltimore, Maryland 21202
3. The new address of the resident agent is:
300 East Lombard Street
Baltimore, Maryland 21202
4. Notice of the above changes are being sent to the business entities on
the attached list.
5. The above changes are effective when this document is filed with the
Department of Assessments and Taxation.
/S/ KENNETH J. UVA
Kenneth J. Uva
Assistant Secretary
- -----------------------------------------------------------------------------
STATE OF MARYLAND
I hereby certify that this is a true and complete copy of the 3 page document on
file in this office. DATED 3-26-98.
STATE DEPARTMENT OF ASSESSMENTS AND TAXATION APPROVED FOR
RECORD 11-17-97 at 8:30 A.M.
BY: /S/ ILLEGIBLE, Custodian
This stamp replaced our previous certification system.
Effective: 6/95
- -----------------------------------------------------------------------------
ID NO. CORPORATE NAME STATUS RESIDENT AGENT PRINCIPAL
NAME
D2848133 The Crowley Portfolio I Corporation Trust
Group, Inc. I Incorporated
32 South Street
THE CROWLEY PORTFOLIO GROUP, INC.
ARTICLES SUPPLEMENTARY
TO
THE ARTICLES OF INCORPORATION
THE CROWLEY PORTFOLIO 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.
- -------------------------------------------------------------------------------
STATE OF MARYLAND
I hereby certify that this is a true and complete copy of the 3 page
document on file in this office. DATED 11-25-98.
- -------------------------------------------------------------------------------
STATE DEPARTMENT OF ASSESSMENTS AND TAXATION
BY: /s/ DARLA D. SIMMS
Darla D. Simms, Custodian.
This stamp replaced our previous certification system. Effective:
6/95
- -------------------------------------------------------------------------------
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 23RD day of
NOVEMBER, 1998.
THE CROWLEY PORTFOLIO GROUP INC.
By: /S/ ROBERT A. CROWLEY
Robert A. Crowley
President
ATTEST:
/S/ FREDERICK J. CROWLEY, JR.
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.
/S/ ROBERT A. CROWLEY
Robert A. Crowley
President
AMENDMENT II
to the
SHAREHOLDER SERVICES AGREEMENT
of
THE CROWLEY PORTFOLIO GROUP, INC.
WHEREAS, The Crowley Portfolio Group, Inc. (the "Fund") entered into a
Shareholder Services Agreement (the "Agreement") with the Crowley Financial
Group, Inc. ("Crowley Financial") dated August 1, 1993, for the Crowley Growth
and Income Portfolio series (formerly, The Crowley Growth Portfolio series) and
The Crowley Income Portfolio series of the Fund, and amended the Agreement on
March 31, 1995 to add The Crowley Diversified Management Portfolio series of the
Fund to the Agreement; and
WHEREAS, The Crowley Growth and Income Portfolio ("Portfolio) series was
terminated by Articles Supplementary filed in the State of Maryland on November
25, 1998; and
WHEREAS, the Fund and Crowley Financial wish to amend the
Agreement to remove the Portfolio from the Agreement;
NOW, THEREFORE, in consideration of the mutual covenants herinafter set
forth, and intending to be legally bound, it is agreed that:
1. The Agreement is hereby amended to delete the Portfolio from the
Agreement, and Crowley Financial will continue to perform all the services and
obligations set forth in the Agreement for the remaining two series of the Fund,
The Crowley Income Portfolio series and The Crowley Diversified Management
Portfolio series (collectively, the "Series").
2. Crowley Financial is entitled to compensation as set forth in Article
VIII and on Schedule A of the Agreement, only with respect to the services
provided by it to the two remaining Series.
3. As amended herein, the Agreement shall continue in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the ____________ day of ____________, 1999.
THE CROWLEY FINANCIAL GROUP, INC.
ATTEST: ________________________ By: __________________________
THE CROWLEY PORTFOLIO GROUP, INC.
By: ________________________
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the referenceS to our firm in the Post-Effective Amendment No. 13
to the Registration Statement on Form N-1A, and related Statement of Additional
Information of The Crowley Portfolio Group, Inc. and to the inclusion of our
report dated January 5, 2000 to the Shareholders and Board of Directors of The
Crowley Portfolio Group, Inc.
/S/ TAIT, WELLER & BAKER
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 29, 2000
