CRABBE HUSON SMALL CAP FUND, 485APOS, 1996-07-16

CRABBE HUSON SMALL CAP FUND
485APOS, 1996-07-16

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<PAGE>

As filed with the Securities and Exchange Commission on July 16, 1996

File No.33-64363
811-7427

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 1 [X]

and/or

REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [ ]
Post-Effective Amendment No. 1 [X]

(Check appropriate box or boxes.)

CRABBE HUSON FUNDS
(Exact Name of Registrant as Specified in Charter)

121 S.W. Morrison, Suite 1425
Portland, Oregon 97204
(Address, including Zip Code, of Principal Executive Offices)

(503) 295-0919
1-800-541-9732
(Registrant's Telephone Number, including Area Code)

Richard S. Huson
121 S.W. Morrison, Suite 1425
Portland, Oregon 97204
(Name and Address, including Zip Code, of Agent for Service)

Approximate Date of Proposed Public Offering: As soon as practicable after the
effectiveness of the registration under the Securities Act of 1933

It is proposed that this filing will become effective (check appropriate box)

immediately upon filing pursuant to paragraph (b)
- ----
on (date) pursuant to paragraph (b)
- ----
X 75 days after filing pursuant to paragraph (a)
- ----
on (date) pursuant to paragraph (a) of Rule 485
- ----

<PAGE>

The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay the effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Securities and Exchange
Commission, acting pursuant to Section 8(a), may determine.

Please forward copies of communications to:

Mark A. Wentzien
Davis Wright Tremaine
2300 First Interstate Tower
1300 S.W. Fifth Avenue
Portland, Oregon 97201

__________________________

An indefinite number of shares of Common Stock have been registered by the
issuer pursuant to Rule 24f-2 of the Investment Company Act of 1940.

<PAGE>

CRABBE HUSON FUNDS
(Primary Class)

Cross-Reference Sheet Showing Location in Prospectus and
Statement of Additional Information of
Information Required by Items of the Registration Form

Form N-1A Item Number and Caption Location
- --------------------------------- ---------
Part A
- ------
1 Cover Page . . . . . . . . . . . . . . . . . . . . . . . . Cover Page

2 Synopsis

2(a) Shareholder Transaction Expenses . . . . . . . . . . . . Expense Data

2(b)+(c) Synopsis of Prospectus . . . . . . . . . . Summary of Key Information

3 Condensed Financial Information

3(a) Per Share Income & Capital Changes . . . . . . . . . . Not Applicable

3(b) Debt History . . . . . . . . . . . . . . . . . . . . . Not Applicable

3(c) Performance Data . . . . . . . . . . . Performance Comparisons; Yield

4 General Description of Registrant

4(a)(i) Organization . . . . . Investment Objectives and Policies; Fundamental
Policies

4(a)(ii) Investment Objectives and Policies . . . . . Investment Objectives and
Policies; Fundamental Policies

4(b) Other Investments . . . . . . . . . . . . . . . . . . . Not Applicable

4(c) Risk Factors . . . Characteristics, Risks of Securities and Investment
Techniques

5 Management of the Fund

5(a) Board of Directors . . . . . . . . . . . . . . Management of the Funds

5(b)(i) Investment Advisor . . . . . . . . . . . . . . Management of the Funds

5(b)(ii) Services of Investment Advisor . . . . . . . . Management of the Funds

<PAGE>

Form N-1A Item Number and Caption Location
- --------------------------------- ---------
5(b)(iii) Compensation of Advisor . . . . . . . . . . . Management of the Funds

5(c) Portfolio Manager(s). . . . . . . . . . . . . Management of the Funds

5(d) Other Management Services . . . . . . . . . . . . . . . Not Applicable

5(e) Transfer Agent, Dividend Paying Agent . . . . Management of the Funds

5(f) Expenses. . . . . . . . . . . . . . . . . . . Management of the Funds

5(g)(i) Brokerage Commissions . . . . . . . . . . . . Allocation of Brokerage

5(g)(ii) Allocation of Brokerage . . . . . . . . . . . Allocation of Brokerage

5A Management's Discussion of Fund Performance . . . . . . Not Applicable

6 Capital Stock and Other Securities

6(a) Rights and Restrictions . . . . . . . . . . . . . . Capital Structure

6(b) Control Persons . . . . . . . . . . . . . . . . . . . Control Persons

6(c) Changes in Rights of Holders. . . . . . . . . . . . Capital Structure

6(d) Other Classes of Securities . . . . . . . . . . . . . . Not Applicable

6(e) Shareholder Inquiries . . . . . . . . . . . . . . . Investor Services;
Special Services - Crabbe Huson "Instant Access"

6(f) Dividends and Distributions . . . . . . . . . . . . Capital Structure

6(g) Taxes . . . . . . . . . . . . . . . . Dividends, Capital Gains, Taxes

7 Purchase of Securities Being Offered

7(a) Underwriter . . . . . . . . . . . . . . . How to Purchase Your Shares

7(b) Determination of Offering Price . . . . . . . . . . . Net Asset Value

7(c) Special Plans . . . . . . . . . . . . . . How to Purchase Your Shares;
Investor Services;
Special Services;

<PAGE>

Form N-1A Item Number and Caption Location
- --------------------------------- ---------
7(d) Minimum Investment . . . . Investor Services - Information You Need to
Know to Purchase, Redeem or Exchange Shares - Minimum Investments

7(e) Trail Fee . . . . . . . . . . . . . . . . . . . . . . . Not Applicable

7(f) 12b-1 Fees . . Statement of Additional Information - Distribution Plan

8 Redemption or Repurchase

8(a) Redemption Procedures and Charges . . . . . How to Redeem Your Shares;
How to Exchange Your Shares;
Special Services - Crabbe Huson "Instant Access"

8(b) Repurchase through Broker-Dealer. . . . . . How to Redeem Your Shares
How to Exchange Your Shares;
Special Services - Crabbe Huson "Instant Access"

8(c) Involuntary Redemption . .Special Situations - Involuntary Redemptions

8(d) Delay of Redemption . . . . . . . . . . . . How to Redeem Your Shares

9 Pending Legal Proceedings . . . . . . . . . . . . . . . Not Applicable

Part B
- ------

10 Cover Page . . . . . . . . . . . . . . . . . . . . . . . . Cover Page

11 Table of Contents . . . . . . . . . . . . . . . . . Table of Contents

12 General Information and History . . . . . . . . . General Information

13 Investment Objectives and Policies. . . . . . .Prospectus - Investment
Objectives and Policies; Fundamental Policies; Statement of Additional
Information - Investment Restrictions

13(a) Description . . . . . Prospectus - Investment Objectives and Policies;
Fundamental Policies;
Statement of Additional Information - Investment Restrictions

13(b) Fundamental Policies . . . . . . . . . . . . Investment Restrictions;
Loans of Portfolio Securities

<PAGE>

Form N-1A Item Number and Caption Location
- --------------------------------- ---------
13(c) Significant Policies . . . . . Prospectus - Investment Objectives and
Policies; Fundamental Policies
13(d) Portfolio Turnover . . . . Portfolio Transactions - Portfolio Turnover

14 Management of the Fund

14(a) Directors and Officers . . . . . . . . . . . . . . . . . . Management

14(b) Positions with Affiliates. . . . . . . . . . . . . . . . . Management

14(c) Compensation . . . . . . . . . . . . . . . . . . . . . . . Management

15 Control Persons and Principal Holders of Securities

15(a) Names and Addresses of Control Persons . . . . . . Control Persons and
Principal Holders of Securities

15(b) Ownership of Fund. . . . . . . . . . . . . . . . . Control Persons and
Principal Holders of Securities

15(c) Stock Holdings of Officers and Directors . . . . . Control Persons and
Principal Holders of Securities

16 Investment Advisory and Other Services . . . . Prospectus - Management
of the Funds; Statement of Additional
Information - Services Provided
by the Advisor

16(a)(i) Control Persons of the Advisor . . . . Prospectus - Management of the
Funds; Statement of Additional
Information - Services Provided
by the Advisor

16(a)(ii) Affiliates of Registrant and Advisor . .Prospectus - Management of the
Funds; Statement of Additional
Information - Services Provided
by the Advisor

16(a)(iii)Advisory Fee . . . . . . . . . . Prospectus - Management of the Funds;
Statement of Additional
Information - Services Provided
by the Advisor

16(b) Services of Advisor . . . . . . . . . Services Provided by the Advisor

16(c) Fees and Expenses . . . . . . . . . . Services Provided by the Advisor

16(d) Other Management-Related Contracts . . . . . . Administration Contract

16(e) Other Persons Furnishing Advice for Compensation . . . Not Applicable

<PAGE>

Form N-1A Item Number and Caption Location
- --------------------------------- ---------
16(f) Expenses of Distribution of Shares
Borne by Registrant . . . . . . . . Services Provided by the Advisor;
Distribution Plan

16(g) Nonbank or Nontrust Custodial Services . . . . . . . . Not Applicable

16(h) Custodian; Independent Public Accountant;
Transfer Agent . . . . . . . . . Auditors; Custodian, Transfer Agent,
and Dividend - Disbursing Agent

17 Brokerage and other Allocations

17(a) Effecting Transactions in Portfolio Securities . . . . . . . Portfolio
Transactions

17(b) Payments of Commissions to Affiliates . . . . . . . . . Not Applicable

17(c) Selection of Brokers . . . . . . . . . . . . . .Portfolio Transactions

17(d) Allocation . . . . . . . . . . . . . . . . . . . . . . Not Applicable

17(e) Acquisition of Broker's Securities . . . . . . . . . . Not Applicable

18 Capital Stock and Other Securities

18(a) Right of Each Class of Stock . . . . . . . . . . . General Information

18(b) Securities Other than Capital Stock . . . . . . . . . . Not Applicable

18(f) Exemption . . . . . . . . . . . . . . . . . . . . . . . Not Applicable

19 Purchase, Redemption and Pricing of Securities Being Offered

19(a) Manner of Offering . . . . . . Purchase and Redemption of Fund Shares

19(b) Valuation of Securities and Assets . . . . . . . Pricing of Securities
Being Offered

19(c)

20 Tax Status . . . . . . . Prospectus - Dividends, Capital Gains, Taxes

21 Underwriters

<PAGE>

Form N-1A Item Number and Caption Location
- --------------------------------- ---------
21(a)(i) Nature of Underwriting Obligation . .Prospectus - How to Purchase Your
Shares

21(a)(ii) Continuous Offering . . . . . Prospectus - How to Purchase Your Shares

21(a)(iii)Prior Compensation of Underwriter . . . . . . . . . . . Not Applicable

21(b) Compensation to Affiliated Underwriters . . . . . . . . Not Applicable

21(c) Other Payments to Underwriters and Dealers . . . . . . Not Applicable

22 Calculation of Performance Data

22(a) Money Market Funds . . . . . . . . . . . . . . . . . . Not Applicable

22(b)(i) Total Return . . . . . . . . . . . . . . . . . . Yield and Performance

22(b)(ii) Yield. . . . . . . . . . . . . . . . . . . . . . Yield and performance

22(b)(iii)Tax Equivalent Yield . . . . . . . . . . . . . . Yield and Performance

23 Financial Statements . . . . . . . . . . . . . . Financial Statements

<PAGE>
__________________________________________________

CRABBE HUSON
FUNDS
___________________________________________________

MAILING ADDRESS
CRABBE HUSON FUNDS
P.O. Box 8413
Boston, MA 02266-8413

INVESTMENT ADVISER
The Crabbe Huson Group, Inc.
121 S.W. Morrison, Suite 1400
Portland, OR 97204

DISTRIBUTOR
Crabbe Huson Securities, Inc.
121 S.W. Morrison, Suite 1400
Portland, OR 97204

LEGAL COUNSEL
Davis Wright Tremaine
1300 S.W. Fifth Avenue, Suite 2300
Portland, OR 97201

INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
1211 S.W. Fifth Avenue, Suite 2000
Portland, OR 97204

TRANSFER AGENT & INVESTOR SERVICES
State Street Bank and Trust Company
P.O. Box 8413
Boston, MA 02266-8413

FUND DIRECTORS/TRUSTEES
Gary L. Capps
James E. Crabbe
Richard S. Huson
Louis Scherzer
Bob L. Smith
Craig P. Stuvland
Richard P. Wollenberg
William W. Wyatt, Jr.

<PAGE>

------------------
PROSPECTUS
AUGUST __, 1996
------------------

Shares of the Primary class of the following nine mutual funds
(individually, a "Fund" and, collectively, the "Funds") are offered in this
Prospectus:

- Crabbe Huson Special Fund
- Crabbe Huson Small Cap Fund
- Crabbe Huson Real Estate Investment Fund
- Crabbe Huson Equity Fund
- Crabbe Huson Asset Allocation Fund
- Crabbe Huson Oregon Tax-Free Fund
- Crabbe Huson Income Fund
- Crabbe Huson U.S. Government Income Fund
- Crabbe Huson U.S. Government Money Market Fund

Each Fund's shares offered in this Prospectus are sold at net asset value
with no sales load.

This Prospectus concisely sets forth information about the Funds you
should consider before investing, including information about the investment
objective of each Fund, along with a detailed description of the types of
securities in which each Fund may invest, and of investment policies and
restrictions applicable to each Fund. Please read it carefully and keep it
for future reference.

Additional information about each Fund contained in a Statement of
Additional Information dated __________, 1996 has been filed with the
Securities and Exchange Commission (the "SEC"). It may be obtained free of
charge by calling Crabbe Huson Funds at (800) 541-9732. The Statement of
Additional Information, as it may be supplemented from time to time, is
incorporated by reference in this Prospectus.

SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FINANCIAL INSTITUTION, AND THE SHARES ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD, OR ANY OTHER AGENCY.

AN INVESTMENT IN THE U.S. GOVERNMENT MONEY MARKET FUND (OR IN ANY OTHER
FUND) IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT, AND THERE CAN
BE NO ASSURANCE THAT THE U.S. GOVERNMENT MONEY MARKET FUND WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.

THE SPECIAL FUND CAN ENTER INTO LEVERAGE TRANSACTIONS. THIS ACTIVITY
COULD BE CONSIDERED SPECULATIVE AND COULD RESULT IN GREATER COST TO THE FUND.
SEE PAGE __.

- -------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------

<PAGE>

A COPY OF THIS PROSPECTUS MUST BE DELIVERED TO RESIDENTS OF CERTAIN
STATES PRIOR TO CONSUMMATION OF A SALE OF SHARES IN THE FUND.

- -------------------------------------------------------------------------------

SHARES OF THE OREGON TAX-FREE FUND ARE ONLY AVAILABLE FOR SALE TO
RESIDENTS OF OREGON.

<PAGE>

SUMMARY OF KEY INFORMATION

The information below is qualified in its entirety by the detailed
information appearing elsewhere in this Prospectus and in the Funds'
Statement of Additional Information.

CRABBE HUSON SPECIAL FUND (the "Special Fund") seeks to provide
long-term capital appreciation. It pursues this objective through a flexible
policy of investing in a diversified portfolio of carefully selected stocks
that have small to medium market capitalization.

CRABBE HUSON SMALL CAP FUND (the "Small Cap Fund") seeks to provide
long-term capital appreciation. It pursues this objective by investing in a
diversified portfolio of carefully selected stocks that have small market
capitalization.

CRABBE HUSON REAL ESTATE INVESTMENT FUND (the "Real Estate Fund") seeks
to provide growth of capital and current income. It pursues this objective
by investing primarily in equity securities of real estate investment trusts
("REITs") and other real estate industry companies.

CRABBE HUSON EQUITY FUND (the "Equity Fund") seeks to provide long-term
capital appreciation. It pursues this objective by investing in a
diversified portfolio of common stocks which are widely and actively traded
and that have large market capitalizations.

CRABBE HUSON ASSET ALLOCATION FUND (the "Asset Allocation Fund") seeks
preservation of capital, capital appreciation and income. It pursues these
objectives by investing in stocks, fixed income securities, cash and cash
equivalents.

CRABBE HUSON OREGON TAX-FREE FUND (the "Oregon Tax-Free Fund") seeks to
provide as high a level of income exempt from federal and Oregon income taxes
as is consistent with prudent investment management and the preservation of
capital. It pursues this objective by investing at least 80% of its assets
in tax-exempt municipal bonds issued by the State of Oregon and its political
subdivisions.

CRABBE HUSON INCOME FUND (the "Income Fund") seeks to provide the
highest level of current income that is consistent with preservation of
capital. It pursues this objective by investing primarily in a diversified
portfolio of fixed income securities, including convertible bonds and
debentures.

CRABBE HUSON U.S. GOVERNMENT INCOME FUND (the "U.S. Government Income
Fund") seeks to provide a high level of current income and the preservation
of capital. It pursues this objective by investing substantially all of its
assets in short- and intermediate-term debt obligations of the United States
Government and its agencies or instrumentalities.

CRABBE HUSON U.S. GOVERNMENT MONEY MARKET FUND (the "U.S. Government
Money Market Fund") seeks to provide a high level of current income and
preservation of capital while maintaining shareholder liquidity. It pursues
this objective by investing in short-term money market instruments that are
direct or indirect obligations of the United States Government or its
agencies or instrumentalities, and repurchase agreements with respect to such
obligations.

Each of the Funds (other than the Special Fund) is a separate series of
the Crabbe Huson Funds, a Delaware business trust operating as an open-end
management investment company. The Special Fund is an Oregon corporation.
Each Fund operates as a diversified fund, with the exception of the Oregon
Tax-Free Fund, which is non-diversified. The Funds are managed by The Crabbe
Huson Group, Inc. (the "Adviser").

-3-

<PAGE>

Shares of the Funds are distributed by Crabbe Huson Securities, Inc., an
affiliate of the Adviser. There is no sales load payable in connection with
the sale of shares of any of the Funds. Additionally, certain
broker-dealers, financial institutions, depository institutions, and other
financial intermediaries (individually, a "Financial Intermediary" and
collectively, "Financial Intermediaries") have entered into agreements with
the Distributor of the Funds to purchase shares on behalf of their customers.
For information about how to purchase, redeem or exchange shares of the
Funds, see "INVESTOR SERVICES" in this Prospectus.

The Primary Class of shares of each Fund is offered pursuant to this
Prospectus. Some of the Funds offer or intend to offer additional classes of
shares to investors eligible to purchase those shares, including shares of an
Institutional Class to be offered by the Small Cap, Equity and Asset
Allocation Fund. Each class of shares has or will have different fees and
expenses than the class of shares offered by this Prospectus and those
different fees and expenses may affect performance. To obtain information
concerning the other class of shares not offered in this Prospectus, call
(800) 541-9732 or contact your Financial Intermediary.

Because the Funds have the same adviser, officers and directors or
trustees and have similar investment privileges, the Funds believe you will
find this combined Prospectus useful and informative in understanding the
important features of the Funds and their similarities and differences.
Although each Fund is offering only its own shares and is not participating
in the sale of the shares of the other Funds, it is possible that a Fund
might become liable for any misstatement, inaccuracy or incomplete disclosure
in the Prospectus concerning the Funds.

The Special, Small Cap, Equity and Asset Allocation Funds are subject to
the risks of investments in common stock, principally that the prices of
stocks can fluctuate dramatically in response to company, market, or economic
news. The Special, Equity, Asset Allocation, Income and U.S. Government
Income Funds historically have had turnover rates in their portfolios in
excess of 75% per year, resulting in potentially higher brokerage costs and
the potential loss of advantageous long-term capital gain treatment for tax
purposes. See "Taxes" and "Allocation of Brokerage." In addition, the
Special, Small Cap, Equity, Asset Allocation and Income Funds may each invest
up to 35% of its total assets in securities issued by foreign issuers. Both
the Small Cap Fund and Real Estate Fund have a limited operating history. In
addition, the Real Estate Fund invests primarily in real estate equity
securities, and investments in that Fund are subject to certain risks
associated with the direct ownership of real estate. A significant risk
associated with investments in the Oregon Tax-Free, Income and U.S.
Government Income Funds is that of increasing interest rates causing a
decline in the net asset value of the Fund. The Oregon Tax-Free Fund may be
subject to greater risks resulting from economic difficulties unique to the
State of Oregon, where most of its securities are originated. The Special
Fund may, from time to time, leverage its assets by using borrowed money to
increase its portfolio positions. For additional information about specific
risk factors associated with an investment in each of the Funds, see
"CHARACTERISTICS AND RISKS OF SECURITIES AND INVESTMENT TECHNIQUES."

EXPENSE DATA

The following information is provided in order to help you understand the
various costs and expenses that you as an investor in the Funds, will bear,
directly or indirectly.

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<PAGE>

SHAREHOLDER TRANSACTION EXPENSES

Maximum Sales Load Imposed NONE
on Purchases

Maximum Sales Load Imposed on NONE
Reinvested Dividends

Deferred Sales Load NONE

Redemption Fees NONE

Exchange Fees NONE

ANNUAL FUND OPERATING EXPENSES(1)
(as a percentage of average net assets)

U.S.
U.S. Government
Small Real Asset Oregon Government Money
Special Cap Estate Equity Allocation Tax-Free Income Income Market
Fund Fund Fund Fund Fund Fund Fund Fund Fund

Management Fees (after waiver)(2) .79% .75% .61% .90% .96% .42% 0% 0% .05%

12b(1) Fees(3) .25% .25% .25% .23% .25% .23% .25% .25% .25%

Other Expenses (after
reimbursement)(4) .36% .50% .64% .27% .27% .33 .55% .50% .40%

Total Fund Operating Expenses
(after reimbursement
or waiver)(5) 1.40% 1.50% 1.50% 1.40% 1.48% .98% .80% .75% .70%
</TABLE>

Example: Assuming, hypothetically, that each Fund's annual return is 5% and
that its operating expenses are as set forth above, an investor buying
$1,000 of a Fund's shares would have paid the following total expenses
upon redeeming such shares:(6)

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Special Fund 14 45 77 169
Small Cap Fund 15 48 82 180
Real Estate Fund 15 48 82 180
Equity Fund 14 45 77 169
Asset Allocation Fund 15 47 81 177
Oregon Tax-Free Fund 10 31 54 121
Income Fund 8 26 45 99
U.S. Government Income Fund 8 24 42 93
U.S. Government Money Market Fund 7 22 39 87

The purpose of the above table is to assist the investor in
understanding the various costs and expenses that an investor in the Funds
will bear directly or indirectly. Certain broker dealers, financial
institutions and financial advisers also may charge their clients fees in
connection with investment in the Funds, which fees are not reflected in the
above table. A long-term shareholder may pay more than the economic
equivalent of the maximum front-end sales charge permitted by the rules and
regulations of the National Association of Securities Dealers due to 12b-1
fees. See "Distribution Expenses" in this Prospectus.

(1) Except for the Small Cap Fund, the expenses specified in the table above
are based on actual expenses incurred for the year ended October 31, 1995.
Since the Small Cap Fund is new and did not commence operations until
February 16, 1996, "Other Expenses" have been estimated.

(2) Reflects a waiver of fees by the Adviser of $697; $75,190; $14,567;
$20,866; $49,011; $43,576; and $230,305 for the Special Fund, the Real
Estate Fund, the Asset Allocation Fund, the Oregon Tax-Free Fund, the
Income Fund, the U.S. Government Income Fund, and the U.S. Government
Money Market

-5-

<PAGE>

Fund, respectively. If the waiver had not been made these percentages
would have been .79%, 1.00%, .97%, .50%, .75%, .50%, and .50%,
respectively. With respect to the Small Cap Fund, for the fiscal year
ending October 31, 1996, the Adviser has agreed to waive its advisory fee
to the extent that Total Fund Operating Expenses exceed 1.50%. Under this
arrangement, the Adviser will not impose any management fee in order to
limit Total Fund Operating Expenses to 1.50% of the Fund's average daily
net assets. If the Adviser did not agree to limit its fee, the Total Fund
Operating Expenses are estimated to be 1.75%, of which the management fee
would be 1.00%.

(3) The maximum 12b-1 distribution fee that can be charged is .25% of a Fund's
average annual net assets.

(4) Reflects a reimbursement of Fund expenses by the Adviser of $33,287 and
$26,493 for the Income and the U.S. Government Income Funds, respectively.
If the reimbursement had not been made, these percentages would have been
1.06% and .80%, respectively.

(5) As noted in footnotes 1 and 3, the Adviser voluntarily waived its fees
and/or reimbursed the Funds' expenses to the extent total operating
expenses exceeded 1.50% for the Special, Real Estate, Equity and Asset
Allocation Funds, .98% for the Oregon Tax-Free Fund, .80% for the Income
Fund, .75% for the U.S. Government Income Fund and .70% for the U.S.
Government Money Market Fund per annum of the Fund's net asset value. If
the waivers had not been made, total fund operating expenses would have
been 1.40%, 1.89%, 1.40%, 1.49%, 1.08%, 1.95%, 1.46% and 1.16% for the
Special Fund, the Real Estate Fund, the Equity Fund, the Asset Allocation
Fund, the Oregon Tax-Free Fund, the Income Fund, the U.S. Government
Income Fund and the U.S. Government Money Market Fund, respectively. For
all Funds other than the Small Cap Fund, the Adviser has terminated its
agreement to waive its advisory fee or reimburse Fund expenses. From
time to time the Adviser may voluntarily waive its advisory fees or
reimburse a Fund's expenses, but it is under no legal obligation to do so.

(6) THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
FUND EXPENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESSER
THAN THOSE SHOWN. MOREOVER, WHILE THE TABLE ASSUMES A 5% ANNUAL RETURN,
THE FUNDS' ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL RETURN
GREATER OR LESSER THAN 5%.

-6-

<PAGE>

FINANCIAL HIGHLIGHTS

CONDENSED FINANCIAL INFORMATION

FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)

The following information has been audited by KPMG Peat Marwick LLP,
independent auditors, whose report dated December 8, 1995 appears in the
relevant Fund's Statement of Additional Information. The calculations are
based on average number of shares outstanding for each period. The Financial
Highlights for the Small Cap Fund is not provided because it did not commence
operations until February, 1996. Further information about the performance of
the Funds is contained in the Funds' annual report, dated October 31, 1995,
copies of which may be obtained free of charge by calling (800) 541-9732.

<TABLE>
<CAPTION>
NET ASSET NET REALIZED DIVIDENDS DIVIDENDS IN
VALUE NET & UNREALIZED TOTAL FROM FROM NET EXCESS OF NET
PERIOD BEGINNING OF INVESTMENT GAIN (LOSS) INVESTMENT INVESTMENT INVESTMENT
ENDING PERIOD INCOME (LOSS) ON SECURITIES OPERATIONS INCOME INCOME
_____________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
THE CRABBE HUSON SPECIAL FUND, INC.
10-31-95 $14.08 $ 0.2704 $(0.2894) $(0.0190) $0.0226 $0.0000
10-31-94 11.82 0.0513 2.3026 2.3539 0.0000 0.0000
10-31-93 8.36 (0.0774) 3.5374 3.4600 0.0000 0.0000
10-31-92 12.05 (0.0211) (1.6211) (1.6422) 0.0260 0.0000
10-31-91 8.78 0.0353 4.0155 4.0508 0.1453 0.0000
10-31-90 11.49 0.1546 (1.4317) (1.2771) 0.2240 0.0000
10-31-89 9.69 0.2100 1.5900 1.8000 0.0000 0.0000
10-31-88 8.13 (0.0515) 1.6115 1.5600 0.0000 0.0000
10-31-87(a) 10.00 (0.0409) (1.8300) (1.8709) 0.0000 0.0000
_______________________________________________________________________________________________
THE CRABBE HUSON REAL ESTATE INVESTMENT FUND, INC.

10-31-95 $ 9.50 $ 0.4436 $ 0.3065 $ 0.7501 $0.4379 $0.0000
10-31-94(c) 10.00 0.3664 (0.6394) (0.2730) 0.2287 0.0000
_________________________________________________________________________________________________
THE CRABBE HUSON EQUITY FUND, INC.

10-31-95 $16.44 $ 0.2185 $ 1.7476 $ 1.9661 $0.0880 $0.0000
10-31-94 16.08 0.1900 0.5668 0.7568 0.0344 0.0000
10-31-93 13.03 0.0981 3.4476 3.5457 0.1099 0.0000
10-31-92 12.57 0.1980 0.9186 1.1166 0.0937 0.0000
10-31-91 8.54 0.1861 4.1511 4.3372 0.3072 0.0000
10-31-90 10.50 0.2533 (1.6764) (1.4231) 0.3918 0.0000
10-31-89(d) 10.00 0.3146 0.1854 0.5000 0.0000 0.0000
_________________________________________________________________________________________________
THE CRABBE HUSON ASSET ALLOCATION FUND, INC.

10-31-95 $12.87 $ 0.3361 $ 1.2090 $ 1.5451 $0.3321 $0.0000
10-31-94 13.52 0.2990 (0.0817) 0.2173 0.2879 0.0000
10-31-93 11.68 0.2323 2.0889 2.3212 0.2373 0.0000
10-31-92 11.00 0.3468 0.8175 1.1643 0.3463 0.0000
10-31-91 9.24 0.4143 1.8208 2.2351 0.4335 0.0000
10-31-90 10.69 0.4561 (1.1200) (0.6639) 0.7159 0.0000
10-31-89(d) 10.00 0.3990 0.2910 0.6900 0.0000 0.0000
_________________________________________________________________________________________________

-7-

DISTRIBU- NET ASSET
TIONS FROM TOTAL VALUE, NET ASSETS, PORTFOLIO
CAPITAL DISTRIBU- END OF TOTAL END OF TURNOVER
GAINS TIONS PERIOD RETURN PERIOD RATE
_________________________________________________________________________________________________
<C> <C> <C> <C> <C> <C>
10-31-95 $0.2384 $0.2610 $13.80 1.78% $878,559,834 122.97%
10-31-94 0.0892 0.0892 14.08 22.40% 319,810,853 146.44%
10-31-93 0.0000 0.0000 11.82 41.39% 23,816,912 73.29%
10-31-92 2.0218 2.0478 8.36 8.11% 5,857,434 102.27%
10-31-91 0.6355 0.7808 12.05 49.58% 3,541,797 256.68%
10-31-90 1.2089 1.4329 8.78 -10.90% 2,926,457 314.73%
10-31-89 0.0000 0.0000 11.49 18.68% 3,356,417 275.62%
10-31-88 0.0000 0.0000 9.69 19.63% 4,392,920 155.12%
10-31-87(a) 0.0000 0.0000 8.13 -30.32%(b) 1,892,038 3.90%
_________________________________________________________________________________________________

10-31-95 $0.1222 $0.5601 $ 9.69 8.31% $ 18,985,514 59.53%
10-31-94(c) 0.0000 0.2287 9.50 -3.25% 18,279,500 43.30%
_________________________________________________________________________________________________

10-31-95 $0.1481 $0.2361 $18.17 13.37% $387,184,080 92.43%
10-31-94 0.3638 0.3982 16.44 7.89% 153,105,296 106.49%
10-31-93 0.3858 0.4957 16.08 29.90% 34,520,166 114.38%
10-31-92 0.5629 0.6566 13.03 12.48% 13,429,315 180.72%
10-31-91 0.0000 0.3072 12.57 52.44% 5,929,590 171.82%
10-31-90 0.1451 0.5369 8.54 -14.97% 2,944,344 265.25%
10-31-89(d) 0.0000 0.0000 10.50 6.72%(b) 5,018,337 90.54%
_________________________________________________________________________________________________

10-31-95 $0.4430 $0.7751 $13.64 13.00% $136,530,057 225.70%
10-31-94 0.5829 0.8708 12.87 2.66% 110,151,785 149.19%
10-31-93 0.2439 0.4812 13.52 20.93% 85,390,017 116.10%
10-31-92 O.1380 0.4843 11.68 11.25% 55,098,981 155.26%
10-31-91 0.0415 0.4750 11.00 24.55% 23,892,664 157.89%
10-31-90 0.0702 0.7861 9.24 -6.40% 13,173,923 161.72%
10-31-89(d) 0.0000 0.0000 10.69 9.30%(b) 12,577,962 88.14%
_________________________________________________________________________________________________

</TABLE>

-8-

<PAGE>

FINANCIAL HIGHLIGHTS (CONTINUED)

NET ASSET NET REALIZED DIVIDENDS DIVIDENDS IN
VALUE, NET & UNREALIZED TOTAL FROM FROM NET EXCESS OF NET
PERIOD BEGINNING OF INVESTMENT GAIN (LOSS) INVESTMENT INVESTMENT INVESTMENT
ENDING PERIOD INCOME (LOSS) ON SECURITIES OPERATIONS INCOME INCOME
__________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>

THE OREGON MUNICIPAL BOND FUND, INC.
10-31-95 $11.99 $0.5480 $ 0.6998 $ 1.2478 $0.5480 $0.0000
10-31-94 12.80 0.5418 (0.8001) (0.2583) 0.5419 0.0003
10-31-93 12.20 0.5683 0.6880 1.2563 0.5647 0.0000
10-31-92 12.14 0.6168 0.1521 0.7689 0.6158 0.0000
10-31-91 11.74 0.6385 0.4831 1.1216 0.6562 0.0000
10-31-90 11.72 0.6316 0.0522 0.6838 0.6401 0.0000
10-31-89 11.72 0.6794 0.0842 0.7636 0.6711 0.0000
10-31-88 11.08 0.6386 0.6411 1.2797 0.6386 0.0000
10-31-87(e) 12.15 0.7311 (0.9983) (0.2672) 0.7311 0.0000
9-30-87 11.93 0.7319 (0.8051) (0.0732) 0.7319 0.0000
9-30-86 10.43 0.7720 1.5265 2.2985 0.7720 0.0000
__________________________________________________________________________________________________
THE CRABBE HUSON INCOME FUND, INC.
10-31-95 $ 9.71 $0.5329 $ 0.5754 $ 1.1083 $0.5329 $0.0254
10-31-94 10.75 0.4995 (0.7669) (0.2674) 0.4995 0.0080
10-31-93 10.90 0.4637 0.3265 0.7902 0.4879 0.0000
10-31-92 10.63 0.6583 0.3569 1.0152 0.6588 0.0000
10-31-91 10.01 0.7038 0.6218 1.3256 0.7056 0.0000
10-31-90 10.27 0.6869 (0.2407) 0.4462 0.6840 0.0000
10-31-89(d) 10.00 0.5545 0.2761 0.8306 0.5606 0.0000
__________________________________________________________________________________________________
THE CRABBE HUSON U.S. GOVERNMENT INCOME FUND, INC.
10-31-95 $10.27 $0.5097 $ 0.4013 $0.9110 $0.5097 $0.0113
10-31-94 11.04 0.4648 (0.6515) (0.1867) 0.4647 0.0035
10-31-93 10.91 0.4755 0.2159 0.6914 0.4848 0.0000
10-31-92 10.69 0.5801 0.2921 0.8722 0.5839 0.0000
10-31-91 10.24 0.6722 0.4542 1.1264 0.6746 0.0000
10-31-90 10.28 0.6768 (0.0326) 0.6442 0.6736 0.0000
10-31-89(d) 10.00 0.5637 0.2852 0.8489 0.5689 0.0000
__________________________________________________________________________________________________
THE CRABBE HUSON U.S. GOVERNMENT MONEY MARKET FUND, INC.
10-31-95 $1.00 $0.0521 $ 0.0000 $0.0521 $0.0521 $0.0000
10-31-94 1.00 0.0339 0.0000 0.0339 0.0339 0.0000
10-31-93 1.00 0.0250 0.0000 0.0250 0.0250 0.0000
10-31-92 1.00 0.0332 0.0000 0.0332 0.0332 0.0000
10-31-91 1.00 0.0576 0.0000 0.0576 0.0576 0.0000
10-31-90 1.00 0.0737 0.0000 0.0737 0.0737 0.0000
10-31-89(d) 1.00 0.0633 0.0000 0.0633 0.0633 0.0000
__________________________________________________________________________________________________
</TABLE>

-9-

<PAGE>

DISTRIBU-
TIONS FROM TOTAL NET ASSET, NET ASSETS PORTFOLIO
PERIOD CAPITAL DISTRIBU- END OF TOTAL END OF TURNOVER
ENDING GAINS TIONS PERIOD RETURN PERIOD RATE
__________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
10-31-95 $0.0698 $0.6178 $12.62 10.66% $28,070,371 22.91%
10-31-94 0.0090 0.5512 11.99 -2.06% 29,045,728 20.58%
10-31-93 0.0916 0.6563 12.80 10.71% 29,408,110 11.62%
10-31-92 0.0921 0.7089 12.20 6.51% 20,295,896 25.30%
10-31-91 0.0654 0.7216 12.14 9.85% 18,382,636 53.40%
10-31-90 0.0237 0.6638 11.74 6.00% 18,766,449 58.52%
10-31-89 0.0925 0.7636 11.72 6.67% 19,173,145 45.25%
10-31-88 0.0000 0.6386 11.72 12.02% 20,058,295 31.44%
10-31-87(e) 0.0760 0.8071 11.08 -1.95% 14,276,600 19.18%
10-31-86 0.0760 0.8079 11.05 -0.95% 14,165,161 18.73%
10-31-85 0.0255 0.7975 11.93 22.83% 8,861,258 24.20%
__________________________________________________________________________________________________

10-31-95 $0.0000 $0.5583 $10.26 11.92% $7,190,125 543.15%
10-31-94 0.2710 0.7785 9.71 -2.71% 5,273,407 306.79%
10-31-93 0.4523 0.9402 10.75 7.73% 5,696,555 260.22%
10-31-92 0.0864 0.7452 10.90 9.74% 5,634,372 227.45%
10-31-91 0.0000 0.7056 10.63 13.51% 5,485,830 115.76%
10-31-90 0.0222 0.7062 10.01 4.43% 2,123,203 73.76%
10-31-89(d) 0.0000 0.5606 10.27 10.43%(b) 1,356,008 86.60%
__________________________________________________________________________________________________

10-31-95 $0.0000 $0.5210 $10.66 9.12% $8,426,199 230.43%
10-31-94 0.1120 0.5802 10.27 -1.78% 9,249,212 76.09%
10-31-93 0.0766 0.5614 11.04 6.71% 11,217,912 81.74%
10-31-92 0.0683 0.6522 10.91 8.70% 8,958,757 105.52%
10-31-91 0.0018 0.6764 10.69 11.17% 3,748,244 114.81%
10-31-90 0.0106 0.6842 10.24 6.40% 2,069,435 87.71%
10-31-89(d) 0.0000 0.5689 10.28 11.15%(b) 1,717,128 40.42%
_________________________________________________________________________________________________

10-31-95 $0.0000 $0.0521 $1.00 5.30% $54,714,219 N/A
10-31-94 0.0000 0.0339 1.00 3.28% 32,382,552 N/A
10-31-93 0.0000 0.0250 1.00 2.53% 14,784,493 N/A
10-31-92 0.0000 0.0332 1.00 3.36% 12,395,326 N/A
10-31-91 0.0000 0.0576 1.00 13.76% 14,906,733 N/A
10-31-90 0.0000 0.0737 1.00 7.62% 21,405,713 N/A
10-31-89(d) 0.0000 0.0633 1.00 10.05%(b) 10,735,032 N/A
__________________________________________________________________________________________________
</TABLE>

-10-

<PAGE>

FINANCIAL HIGHLIGHTS (CONTINUED)

RATIOS AND SUPPLEMENTAL DATA

RATIOS IF FEES HAD NOT BEEN
WAIVED AND/OR REIMBURSED
---------------------------
RATIO OF NET RATIO OF NET
RATIO OF INVESTMENT RATIO OF INVESTMENT
EXPENSES INCOME TO EXPENSES INCOME TO
PERIOD TO AVERAGE AVERAGE TO AVERAGE AVERAGE
ENDING NET ASSETS NET ASSETS NET ASSETS NET ASSETS
_______________________________________________________________________________
<S> <C> <C> <C> <C>
THE CRABBE HUSON SPECIAL FUND, INC.
10-31-95 1.40% 1.95% 1.40% 1.95%
10-31-94 1.44% 0.39% 1.54% 0.29%
10-31-93 1.57% -0.73% 1.59% -0.75%
10-31-92 1.74% -0.25% 2.18% -0.69%
10-31-91 1.92% 0.32% 2.40% -0.15%
10-31-90 2.00% 1.55% 2.86% 0.70%
10-31-89 2.00% 1.96% 2.44% 1.53%
10-31-88 3.94% 3.34% N/A N/A
10-31-87(a) 2.60%(b) 0.05%(b) N/A N/A
_______________________________________________________________________________
THE CRABBE HUSON REAL ESTATE INVESTMENT FUND, INC.
10-31-95 1.50% 4.59% 1.89% 4.19%
10-31-94(c) 1.01%(b) 6.30%(b) 2.03%(b) 5.28%(b)
_______________________________________________________________________________
THE CRABBE HUSON EQUITY FUND, INC.
10-31-95 1.40% 1.30% N/A N/A
10-31-94 1.45% 1.18% 1.56% 1.06%
10-31-93 1.49% 0.67% 1.64% 0.52%
10-31-92 1.55% 1.57% 1.93% 1.18%
10-31-91 1.84% 1.60% 2.41% 1.03%
10-31-90 1.93% 2.56% 2.66% 1.83%
10-31-89(d) 1.69%(b) 3.98%(b) 1.97%(b) 3.68%(b)
_______________________________________________________________________________
THE CRABBE HUSON ASSET ALLOCATION FUND, INC.
10-31-95 1.48% 2.57% 1.49% 2.56%
10-31-94 1.44% 2.30% 1.52% 2.22%
10-31-93 1.46% 1.85% 1.54% 1.77%
10-31-92 1.52% 3.02% 1.62% 2.92%
10-31-91 1.76% 3.97% 1.79% 3.94%
10-31-90 1.90% 4.51% 1.93% 4.49%
10-31-89(d) 1.91%(b) 5.02%(b) 1.93%(b) 5.00%(b)
_______________________________________________________________________________

</TABLE>

NOTES TO FINANCIAL HIGHLIGHTS

(a) Commencement of operations - 4/9/87.
(b) Computed on an annualized basis.
(c) Commencemnt of operations - 4/4/94.
(d) Commencement of operations - 1/31/89.
(e) The Fund's Fiscal Year was changed from 9/30 to 10/31,
effective 10/31/87, which represents a conformed 12-month period.
N/A Not Applicable

-11-

<PAGE>

RATIO IF FEES HAD NOT BEEN
WAIVED AND/OR REIMBURSED
--------------------------
RATIO OF NET RATIO OF NET
RATIO OF INVESTMENT RATIO OF INVESTMENT
EXPENSES INCOME TO EXPENSES INCOME TO
PERIOD TO AVERAGE AVERAGE TO AVERAGE AVERAGE
ENDING NET ASSETS NET ASSETS NET ASSETS NET ASSETS
_______________________________________________________________________________
<S> <C> <C> <C> <C>
THE OREGON MUNICIPAL BOND FUND, INC.
10-31-95 0.98% 4.45% 1.08% 4.35%
10-31-94 0.98% 4.37% 1.08% 4.26%
10-31-93 1.05% 4.51% 1.09% 4.46%
10-31-92 1.11% 5.04% 1.13% 5.01%
10-31-91 1.21% 5.36% 1.24% 5.34%
10-31-90 1.38% 5.41% 1.55% 5.23%
10-31-89 1.04% 5.82% 1.16% 5.71%
10-31-88 1.21% 5.53% 1.32% 5.42%
10-31-87(e) 1.14% 5.66% N/A N/A
9-30-87 1.31% 8.43% N/A N/A
9-30-86 1.06% 6.34% N/A N/A
_______________________________________________________________________________
THE CRABBE HUSON INCOME FUND, INC.
10-31-95 0.80% 5.47% 1.95% 4.32%
10-31-94 0.80% 4.92% 2.16% 3.56%
10-31-93 0.81% 4.34% 1.96% 3.19%
10-31-92 0.90% 6.09% 1.94% 5.06%
10-31-91 0.98% 6.82% 2.42% 5.38%
10-31-90 1.51% 6.89% 3.07% 5.33%
10-31-89(d) 1.15%(b) 7.23%(b) 4.56%(b) 3.81%(b)
_______________________________________________________________________________
THE CRABBE HUSON U.S. GOVERNMENT INCOME FUND, INC.
10-31-95 0.75% 4.85% 1.46% 4.14%
10-31-94 0.75% 4.39% 1.47% 3.66%
10-31-93 0.75% 4.33% 1.26% 3.81%
10-31-92 0.80% 5.35% 1.52% 4.63%
10-31-91 0.96% 6.44% 2.15% 5.25%
10-31-90 1.42% 6.72% 2.84% 5.31%
10-31-89(d) 1.14%(b) 7.35%(b) 3.40%(b) 5.09%(b)
_______________________________________________________________________________
THE CRABBE HUSON U.S. GOVERNMENT MONEY MARKET FUND, INC.
10-31-95 0.70% 5.21% 1.16% 4.75%
10-31-94 0.70% 3.39% 1.29% 2.81%
10-31-93 0.70% 2.51% 1.32% 1.88%
10-31-92 0.75% 3.32% 1.09% 2.98%
10-31-91 0.81% 5.76% 1.18% 5.38%
10-31-90 0.80% 7.57% 1.33% 7.04%
10-31-89(d) 0.60%(b) 8.43%(b) 1.34%(b) 7.69%(b)
_______________________________________________________________________________

</TABLE>

-12-

<PAGE>

INVESTMENT OBJECTIVE AND POLICIES

Each Fund's investment objective is discussed below in connection with
the Fund's investment policies. The descriptions are designed to help you
choose the Fund that best fits your investment objective. You may want to
pursue more than one objective by investing in more than one of the Funds.
Because of the risks inherent in all investments, there can be no assurance
that the Funds will meet their objectives.

Each Fund that invests in stock and preferred stock (the Equity, Small
Cap, Special and Asset Allocation Funds) follows a basic value, contrarian
approach in selecting stocks for its portfolio. This approach puts primary
emphasis on balance sheet and cash flow analysis and on the relationship
between the market price of a security and its value as a share of an ongoing
business. These investments represent "special" situations or opportunities
that arise when companies, whose long-term financial structure is intact, run
into short-term difficulties that present an opportunity to buy these
companies' stocks at substantial discounts. The basic value approach is
based on the Adviser's belief that the securities of many companies often
sell at a discount from the securities' estimated theoretical (intrinsic)
value. These Funds attempt to identify and invest in such undervalued
securities, anticipating that capital appreciation will be realized as the
securities' prices rise to their estimated intrinsic value. This approach,
while not unique, contrasts with certain other methods of investment
analysis, which rely upon market timing, technical analysis, earnings
forecasts, or economic predictions.

CRABBE HUSON SPECIAL FUND seeks long-term growth of capital through a
flexible policy of investing in a diversified portfolio of selected domestic
and foreign securities representing "special" situations (principally, common
stocks and, secondarily, preferred stocks and bonds). The production of
current income is secondary to the primary objective. The Fund seeks to
invest up to 100%, and under normal conditions at least 75%, of its assets in
securities of companies that have small (under $1,000,000,000) to medium
(from $1,000,000,000 to $3,000,000,000) market capitalization.

The Fund's investment policies are adapted to changing market
conditions. The Adviser believes that common stock will generally, over the
long-term, offer the greatest potential for capital appreciation and
preservation of purchasing power, and common stocks will usually constitute
at least 75% of the Fund's investment portfolio.

By itself, the Fund does not constitute a balanced investment plan.
Securities that the Adviser believes have the greatest growth potential may be
regarded as speculative, and an investment in the Fund may involve greater risk
than is inherent in other mutual funds. The Fund's focus on small to medium
market capitalization stocks may cause it to be more volatile than other funds
with different strategies. Because the Fund invests primarily in common stocks,
it may be appropriate only for investors who have a longer term investment
horizon or perspective. For a further description of the risks associated with

-13-

<PAGE>

an investment in the Fund, see "CHARACTERISTICS AND RISKS OF SECURITIES AND
INVESTMENT TECHNIQUES."

The Special Fund also intends to sell securities "short." The technique of
selling short is subject to certain restrictions, and involves certain risks.
See "CHARACTERISTICS AND RISKS OF SECURITIES AND INVESTMENT TECHNIQUES--Short
Sales."

CRABBE HUSON SMALL CAP FUND seeks to provide its investors long-term growth of
capital by investing in a diversified portfolio of selected domestic and foreign
securities. The Fund will invest principally in common stocks and, secondarily,
preferred stocks and bonds. The production of current income is secondary to
the primary objective. The Fund seeks to invest up to 100%, and under normal
conditions at least 65%, of its total assets in securities of companies that
have small market capitalization (under $1,000,000,000).

The Adviser believes that common stock will generally, over the long-term,
offer the greatest potential for capital appreciation and preservation of
purchasing power. Investments in small growth companies may involve greater
risks and volatility than more traditional equity investments due to some of
these companies potentially having limited product lines, reduced market
liquidity for the trading of their shares and less depth in management than more
established companies. For this reason, the Small Cap Fund is not intended as a
complete investment vehicle, but rather as an investment for persons who are in
a financial position to assume above average risk and share price volatility
over time. The Small Cap Fund may be appropriate only for investors who have a
longer term investment horizon or perspective. For a further description of the
risks associated with an investment in the Fund, see "CHARACTERISTICS AND RISKS
OF SECURITIES AND INVESTMENT TECHNIQUES."

CRABBE HUSON REAL ESTATE INVESTMENT FUND seeks to provide for its shareholders
capital appreciation and income. The Fund seeks to achieve this objective
through a policy of investing in a diversified portfolio consisting primarily of
equity securities of REITs and other real estate industry companies, in
mortgage-backed securities and, to a lesser extent, in debt securities of such
companies.

The Fund's investment policies will be adapted to changing market
conditions, but under normal circumstances, at least 75% of the Real Estate
Fund's total assets will be invested in equity securities of REITs and other
real estate industry companies. For purposes of the Fund's investments, a "real
estate industry company" is a company that derives at least 50% of its gross
revenues or net profits from either (a) the ownership, development,
construction, financing, management or sale of commercial, industrial or
residential real estate or (b) products or services related to the real estate
industry, like building supplies or mortgage servicing. The equity securities
of real estate industry companies in which the Fund will invest consist of
common stock, shares of beneficial interests of real estate investment trusts
and securities with common stock characteristics, such as preferred stock and
debt securities convertible into common stock ("Real Estate

-14-

<PAGE>

Equity Securities"). Real Estate Equity Securities are subject to unique
risks. See "CHARACTERISTICS AND RISKS OF SECURITIES AND INVESTMENT
TECHNIQUES" for a discussion of these risks.

The Fund may also invest up to 25% of its total assets in (a) debt
securities of real estate industry companies, (b) mortgage-backed securities,
such as mortgage pass-through certificates, real estate mortgage investment
conduit ("REMIC") certificates and collateralized mortgage obligations
("CMOs"), and (c) short-term investments (as defined below). Investing in
mortgage-backed securities involves certain unique risks in addition to those
associated with investing in the real estate industry in general. For a more
complete discussion concerning the risks of investing in mortgage-backed
securities, see "CHARACTERISTICS AND RISKS OF SECURITIES AND INVESTMENT
TECHNIQUES."

Short-term investments that the Fund may invest in consist of the
following: (1) corporate commercial paper and other short-term commercial
obligations, in each case rated or issued by companies with similar
securities outstanding that are rated Prime-1, Aa or better by Moody's or
A-1, AA or better by S&P; (2) obligations (including certificates of deposit,
time deposits, demand deposits and banker's acceptances) of banks with
securities outstanding that are rated Prime-1, Aa or better by Moody's, or
A-1, AA or better by S&P; (3) obligations issued or guaranteed by the U.S.
Government or its agencies or instrumentalities with remaining maturities not
exceeding 18 months; and (4) repurchase agreements.

A more complete discussion concerning the investment objectives and
policies of the Fund is included under "CHARACTERISTICS AND RISKS OF
SECURITIES AND INVESTMENT TECHNIQUES" and in the Statement of Additional
Information.

CRABBE HUSON EQUITY FUND seeks long-term capital appreciation. The Fund will
seek to achieve this objective by investing in a carefully chosen portfolio
consisting primarily of common stock. It will focus its investments in
widely and actively traded stocks with medium (from $1,000,000,000 to
$3,000,000,000) and large market capitalizations (in excess of
$3,000,000,000).

Under normal market conditions, the Fund intends to have at least 65% of
its total assets invested in common stock. The Fund will purchase and hold
for investment common stock, and may also purchase convertible and
nonconvertible preferred stocks and bonds or debentures. The Fund may invest
up to 35% of its total assets in foreign securities. Although the Fund
intends to adapt to changing market conditions, the Adviser believes that
common stock will generally, over the long-term, offer the greatest potential
for capital appreciation. Therefore, the Fund may be appropriate for
investors who have a longer term investment horizon or perspective.

CRABBE HUSON ASSET ALLOCATION FUND seeks to provide for its shareholders
preservation of capital, capital appreciation and income. The Fund seeks to
achieve these

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<PAGE>

objectives by a flexible policy of investing in a select portfolio of common
stocks, fixed income securities, cash or cash equivalents. Depending upon
economic and market conditions, the Fund may invest as little as 20%, or as
much as 75%, of its entire portfolio in common stocks. The Adviser will
purchase common stocks which, in its opinion, have the greatest potential for
capital appreciation. The remaining portion of the portfolio will be
invested in fixed income securities, cash or cash equivalents. The fixed
income securities that the Fund will invest in consist of corporate debt
securities (bonds, debentures and notes), asset-backed securities, bank
obligations, collateralized bonds, loan and mortgage obligations, commercial
paper, preferred stocks, repurchase agreements, savings and loan obligations
and U.S. Government and agency obligations. There are no limitations on the
average maturity of the Fund's portfolio of fixed income securities.
Securities will be selected on the basis of the Adviser's assessment of
interest rate trends and the liquidity of various instruments under
prevailing market conditions. For a discussion of the ratings of the fixed
income securities to be held by the Fund see "CHARACTERISTICS AND RISKS OF
SECURITIES AND INVESTMENT TECHNIQUES."

Many factors will be considered in determining what portion of the
portfolio will be invested in stocks, fixed income securities, or cash and
cash equivalents. The Adviser will constantly monitor and adjust its
weighting of investments in any particular area to adapt to changing market
and economic conditions. Since its inception, the Fund has generally
invested its net assets 45% to 55% in fixed income securities, 25% to 55% in
common stocks, and 5% to 30% in cash, cash equivalents or other money market
instruments. Furthermore, the Fund may take advantage of opportunities to
earn short-term profits if the Adviser believes that such a strategy will
benefit the Fund's overall objective in light of the increased tax and
brokerage expenses associated with such a strategy.

CRABBE HUSON OREGON TAX-FREE FUND seeks to provide its shareholders with as
high a level of income exempt from federal and Oregon income taxes as is
consistent with prudent investment management and preservation of capital.
The Fund seeks to achieve this objective by investing primarily in a
portfolio of municipal securities (including private activity bonds), the
interest on which, in the opinion of counsel for the issuer, is exempt from
federal and Oregon income taxes. It is the Fund's general policy to avoid
purchasing bonds on which the interest is subject to the federal alternative
minimum tax. The Fund may, however, purchase such bonds when their yield is
sufficiently above the yield on bonds not so taxed to compensate for the
adverse tax consequences. For purposes of its investment policy, the Fund
considers a "bond" to be any municipal debt security.

Under normal market conditions, at least 80% of the Fund's total assets
will be invested in municipal securities, and at least 65% of its total
assets will be invested in municipal bonds issued by the State of Oregon and
its political subdivisions, agencies, authorities and instrumentalities.
Securities that are subject to the federal alternative minimum tax will not
be included in this calculation.

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<PAGE>

Municipal securities purchased for the Fund's portfolio must, at the
time of purchase, be "investment-grade" municipal securities, rated no lower
than Baa by Moody's or BBB by S&P, or unrated municipal securities which
management believes to be comparable in quality to investment-grade municipal
securities. If any of the Fund's securities fall below "investment grade,"
the Fund will typically dispose of such securities, but it is not required to
do so. For a discussion concerning the risk factors associated with
municipal securities to be purchased by the Fund, see "CHARACTERISTICS AND
RISKS OF SECURITIES AND INVESTMENT TECHNIQUES" in this Prospectus.

Under normal market conditions, the Oregon Tax-Free Fund may invest up
to 20% of its net assets in the following categories of investments:

1. Municipal securities issued by entities other than the State of
Oregon or its political subdivisions, agencies, authorities, and
instrumentalities.

2. Notes of municipal issuers which have, at the time of purchase, an
issue of outstanding municipal bonds rated within the four highest
grades by Moody's or S&P and which are, if unrated, in the opinion of
the Adviser, of a quality comparable to municipal bonds rated in one
of the four highest categories by Moody's or S&P.

3. Temporary investments in fixed income obligations, the interest on
which is subject to federal income tax and which may be subject to
Oregon income tax. Investments in such taxable obligations will be in
short-term (less than one year) securities and may consist of
obligations issued or guaranteed by the United States Government, its
agencies, instrumentalities or authorities; commercial paper rated
Prime-1 by Moody's; certificates of deposit of United States banks
(including commercial banks and savings and loan associations) with
assets of at least $1 billion or more; and repurchase agreements in
respect of any of the foregoing with securities dealers or banks.

Where market conditions, due to rising interest rates or other adverse
factors, would cause serious erosion of portfolio value, the Fund's assets
may, on a temporary basis, as a defensive measure to preserve net asset
value, be substantially invested in temporary investments of the types
described above. There are specific risks involved in investments in
municipal securities, particularly those concentrated among issuers in a
specific geographic location. See "CHARACTERISTICS AND RISKS OF SECURITIES
AND INVESTMENT TECHNIQUES" in this Prospectus and "ADDITIONAL INFORMATION
REGARDING CERTAIN INVESTMENTS BY THE FUNDS" in the Statement of Additional
Information.

In the last fiscal year, the average percentage of the Fund's assets
invested in bonds of each rating was:

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<PAGE>

AAA 58.74% Non-rated 14.60%
AA 18.77% Cash 1.37%
A 6.52%

CRABBE HUSON INCOME FUND seeks to provide shareholders a high level of
current income by investing in a diversified portfolio of fixed income
securities (such as bonds and notes of corporate and government issuers) and
preferred or convertible preferred stock while, at the same time, attempting
to preserve capital by varying the overall average maturity of the Fund's
portfolio.

There are no limitations on the average maturity of the Fund's
portfolio. In general, the Fund will seek to lengthen the average maturity of
its portfolio as interest rates rise, and will shorten the average maturity
as interest rates decline.

The Income Fund invests in a variety of fixed income securities,
including domestic and foreign corporate bonds, debentures, convertible bonds
and debentures, foreign and U.S. Government securities, preferred and
convertible preferred stock, and short-term money market instruments.

At least 80% of the Fund's total assets must be invested in (1) debt
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities; (2) investment-grade debt securities, including
convertible securities and preferred or convertible preferred stock, which
are rated "A" or higher by the major recognized bond services (for a
description of ratings, see Appendix A); or (3) cash and cash equivalents
(such as certificates of deposit, repurchase agreements maturing in one week
or less, and bankers' acceptances).

For a discussion of the fixed income securities and convertible
securities to be held by the Income Fund and the risks associated with
holding these securities, see "CHARACTERISTICS AND RISKS OF SECURITIES AND
INVESTMENT TECHNIQUES" in this Prospectus.

CRABBE HUSON U.S. GOVERNMENT INCOME FUND seeks to provide shareholders with a
high level of current income and safety of principal. Shares of the Fund are
not issued or guaranteed by the U.S. Government.

The Fund intends to concentrate its investments in direct obligations of
the U.S. Government (treasury bills, treasury notes and treasury bonds), which
are supported by the full faith and credit of the United States. The Fund may
also invest in indirect obligations of the U.S. Government which are debt
obligations of various agencies or instrumentalities of the U.S. Government,
such as debt obligations issued by the Government National Mortgage Association
("GNMA"), which are supported by the full faith and credit of the United States,
or debt obligations issued by the Federal National Mortgage Association
("FNMA"), which are supported only by the credit of the issuing

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<PAGE>

agency or instrumentality. Under normal circumstances, at least 65% of the
value of the Fund's assets will be invested in these U.S. Government
securities. The Fund may invest up to 10% of its total assets in repurchase
agreements whereby the Fund acquires a U.S. Government security from a
financial institution that simultaneously agrees to repurchase the same
security at a specified time and price.

The Fund may not invest more than 25% of its total assets in U.S.
Government securities with maturities in excess of five years. The Fund will
purchase securities based generally on the Adviser's assessment of interest
rate trends. If the Adviser expects interest rates to rise, the Fund may
purchase securities with shorter maturities. Conversely, if interest rates
are expected to decline, the Fund may purchase securities with longer
maturities.

CRABBE HUSON U.S. GOVERNMENT MONEY MARKET FUND seeks to provide investors
with a high level of current income while, at the same time, preserving
capital and allowing liquidity by investing in obligations of the United
States Government, or its agencies or instrumentalities, and repurchase
agreements with respect to those obligations. Shares of the Fund are not
issued or guaranteed by the U.S. Government. It is the Fund's intent to
maintain a constant one dollar per share net asset value, but there is no
assurance the Fund will be able to do so.

The dollar weighted, average maturity of the Fund's portfolio may not
exceed 90 days and the Fund will not purchase any security with a maturity in
excess of one year from the date of purchase. The Fund intends to hold most
of the securities in its portfolio until maturity. However, securities may
be traded if, in the opinion of the Adviser, increases in current income can
be achieved consistent with the objectives and restrictions of the Fund.

Due to its nature of maintaining a stable net asset value, the fixed
income securities selected by the U.S. Government Money Market Fund must be
deemed to be of the highest quality. An instrument will be considered to be
highest quality (1) if rated in the highest rating category (i) by any two
nationally recognized statistical rating organizations (NRSROs) (e.g., Aaa or
Prime -1 by Moody's, AAA or A-1 by S&P) or (ii) if rated by only one NRSRO,
by that NRSRO, and whose acquisition is approved or ratified by the Board of
Trustees; (2) if unrated but issued by an issuer that has short-term debt
obligations of comparable, priority, and security, and that are rated in the
highest rating category by (i) any two NRSROs or (ii) if rated by only one
NRSRO, by that NRSRO, and whose acquisition is approved or ratified by the
Board of Trustees; or (3) an unrated security that is of comparable quality
to a security rated in the highest rating category as determined by the
Adviser and whose acquisition is approved or ratified by the Board of
Trustees. A description of the ratings assigned to securities by Moody's and
S&P is included in Appendix A to this Prospectus.

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<PAGE>

FUNDAMENTAL POLICIES

Unless set forth below as a "Fundamental Policy," each Fund's investment
policies, including its investment objective discussed previously, may be
changed without shareholder approval. A Fundamental Policy may not be
changed without a vote of the holders of "a majority of the outstanding
voting securities" of the Fund, as such term is defined in the 1940 Act. For
further discussion concerning these Fundamental Policies, see "INVESTMENT
RESTRICTIONS" in the Statement of Additional Information.

ISSUER AND INDUSTRY RESTRICTIONS. Each Funds' investment restrictions
(other than those of the Real Estate Fund and the Oregon Tax-Free Fund)
include a prohibition on it investing more than 5% of its total assets (at
the time of the purchase) in the securities of any one issuer. This policy,
however, does not include investments in U.S. Government securities. The
Real Estate Fund's investment restrictions prohibit the Fund, with respect to
at least 75% of its total assets, from investing more than 5% of its total
assets in a single issuer. Each Fund (other than the Real Estate Fund) is
also prohibited from investing more than 25% of its total assets in any one
industry.

BORROWING RESTRICTIONS. Each Fund may borrow up to one-third of the
value of its total assets, although each Fund, other than the Special and the
Small Cap Funds, can only borrow in the case of an emergency. If, for any
reason, the current value of the Fund's total assets falls below an amount
equal to three times the amount of its indebtedness from money borrowed, the
Fund will, within three days (not including Saturdays, Sundays and holidays),
reduce its indebtedness to the extent necessary to satisfy the one-third
test. Further, each Fund (except the Special and Small Cap Fund) is
prohibited from purchasing securities when the total borrowings of the Fund
exceed 5% of its total assets.

FIXED INCOME SECURITIES. The Real Estate Fund may not invest in debt
securities that are unrated or that are rated below Baa by Moody's or BBB by
S&P. In the event a debt security purchased by the Real Estate Fund is
subsequently downgraded below Baa by Moody's or BBB by S&P, the Adviser will
consider whether the Fund should continue to hold the security. The Special,
Small Cap, Equity, Asset Allocation, Income, U.S. Government Income and U.S.
Government Money Market Funds may each invest up to 20% of its total assets
in fixed income securities that are either unrated or are rated less than Baa
by Moody's or BBB by S&P, or in commercial paper that is rated less than B-1
by Moody's or A- by S&P. However, not more than 5% of these Fund's total
assets may be invested in fixed income securities that are unrated (including
convertible stock). The Oregon Tax-Free Fund may invest in fixed income
securities that are rated Baa and above by Moody's or BBB and above by S&P
and in unrated securities which the Adviser believes to be of comparable
investment quality. See "CHARACTERISTICS AND RISKS OF SECURITIES AND
INVESTMENT TECHNIQUES" for a discussion concerning the purchase of below
investment grade securities.

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<PAGE>

Funds that are permitted to purchase cash equivalents, bank obligations,
and money market instruments will apply the same investment criteria to these
instruments as are applied to fixed income securities. Bank obligations will
be purchased only with respect to banks: (1) that have total assets in
excess of one billion dollars; (2) that are rated A or better by either
Moody's or S&P (AA or better with respect to purchases made by the U.S.
Government Money Market Fund; or (3) whose deposits are insured by the
Federal Depository Insurance Corporation. Each Fund will only invest in
securities permitted by the SEC.

ILLIQUID SECURITIES/UNSEASONED ISSUERS. Each of the Special, Equity,
Asset Allocation, Oregon Tax-Free, Income, U.S. Government Income and
U.S. Government Money Market Funds may not invest more than 10% of its total
assets in illiquid securities. The Real Estate Fund may not invest more than
15% in such securities. The Small Cap Fund may not invest more than 5% of
its total assets in a combination of illiquid securities and/or securities of
issuers, including their predecessors, which have been in existence less than
three years. Finally, the Oregon Tax-Free Fund may not invest more than 10%
of its total assets in the securities of issuers, including their
predecessors, which have been in existence less than three years.

The following securities in which a Fund may invest will be considered
illiquid: (1) repurchase agreements maturing in more than seven days; (2)
restricted securities (securities whose public resale is subject to legal
restrictions); (3) any other securities in which a Fund may invest that are
not readily marketable. Within the 15% limitation set for the Real Estate
Fund, no more than 5% of such securities may be restricted securities. The
Board of Trustees may adopt guidelines and delegate to the Adviser the daily
function of determining and monitoring the liquidity of securities. The
Board, however, will retain sufficient oversight and be ultimately
responsible for the determinations. In determining whether a security is
liquid, the Board shall consider whether the security can be disposed of
promptly in the ordinary course of business at a value reasonably close to
that used in the calculation of the net asset value per share.

Securities eligible for resale to certain institutional investors
pursuant to Rule 144A of the Securities Act of 1933 shall not be considered
illiquid. Since it is not possible to predict with assurance how the market
for restricted securities sold and offered under Rule 144A will develop, the
Board will carefully monitor a Fund's investments in these securities,
focusing on such important factors, among others, as valuation, liquidity,
and availability of information. This practice could have the effect of
increasing the level of illiquidity in a Fund to the extent that qualified
institutional buyers become for a time uninterested in purchasing these
restricted securities.

OPTIONS AND FUTURES TRANSACTIONS. Each of the Special, Small Cap, Real
Estate, Equity, Asset Allocation and Income Funds may invest up to 10% of its
total assets in both put or call options and futures contracts.

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FUNDAMENTAL INVESTMENT POLICY OF REAL ESTATE FUND. Under normal
circumstances, the Real Estate Fund intends to invest at least 75% of its
total assets in equity securities of REITs and other real estate industry
companies; under all circumstances, at least 25% of the Fund's total assets
will be invested in such securities.

INVESTMENT IN ISSUERS OF WHICH SHAREHOLDERS AND DIRECTORS OWN SHARES.
The Small Cap and Oregon Tax-Free Funds may not invest in securities of
issuers of which the officers and Trustees of the Fund, as a group, own
beneficially more than five percent of the securities of that issuer.

OTHER INVESTMENT COMPANIES. Each of the Funds (other than the U.S.
Government Income Fund and the U.S. Government Money Market Fund) may invest
in the securities of other registered investment companies under the
circumstances described under "SECURITIES OF OTHER INVESTMENT COMPANIES" in
the Statement of Additional Information, and to the extent permitted under
Section 12 of the 1940 Act (currently, no more than 10% of the total assets
of a Fund may be so invested, no more than 5% of total assets of a Fund may
be invested in the securities of any other single investment company, and no
more than 3% of the total outstanding voting stock of an investment company
may be purchased). Investments in the securities of other registered
investment companies are or may be subject to duplicate expenses resulting
from the management of the portfolio investment company as well as those of
the Fund.

FUNDAMENTAL INVESTMENT OBJECTIVE OF REAL ESTATE FUND. The Real Estate
Fund's investment objective is to provide for its shareholders capital
appreciation and income.

CHARACTERISTICS, RISKS OF SECURITIES AND INVESTMENT TECHNIQUES

The following describes in greater detail different types of securities
and investment techniques used by the Funds, and discusses certain concepts
relevant to the investment policies of the Funds. Additional information
about the Funds' investments and investment practices may be found in the
Statement of Additional Information.

FOREIGN SECURITIES. Each of the Special, Small Cap, Equity, Asset
Allocation and Income Funds may invest up to 35% of its total assets in
foreign securities, which may or may not be traded on an exchange. The Funds
may purchase securities issued by issuers in any country. Securities of
foreign companies are frequently denominated in foreign currencies, and the
Funds may temporarily hold uninvested reserves in bank deposits in foreign
currencies. As a result, the Funds will be affected favorably or unfavorably
by changes in currency rates and in exchange control regulations, and they
may incur expenses in connection with conversion between various currencies.
Subject to its

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<PAGE>

investment restrictions, the Funds may invest in other investment companies
that invest in foreign securities.

Foreign securities may be subject to foreign government taxes that would
reduce the income yield on such securities. Certain foreign governments levy
withholding taxes against dividend and interest income. Although in some
countries a portion of these taxes is recoverable, the non-recovered portion
of any foreign withholding taxes would reduce the income a Fund received from
any foreign investments.

Foreign investments involve certain risks, such as political or economic
instability of the issuer or of the country of the issuer, difficulty of
predicting international trade patterns, and the possibility of imposition of
exchange controls. Such securities may also be subject to greater
fluctuations in price than securities of domestic corporations or of the
United States government. In addition, the net asset value of a Fund is
determined and shares of a Fund can be redeemed only on days during which
securities are traded on the New York Stock Exchange ("NYSE"). However,
foreign securities held by a Fund may be traded on Saturdays or other
holidays when the NYSE is closed. Accordingly, the net asset value of a Fund
may be significantly affected on days when an investor has no access to the
Fund.

In addition, there may be less publicly available information about a
foreign company than about a domestic company. Foreign companies generally
are not subject to uniform accounting, auditing and financial reporting
standards comparable to those applicable to domestic companies. There is
generally less government regulation of stock exchanges, brokers and listed
companies abroad than in the United States, and the absence of negotiated
brokerage commissions in certain countries may result in higher brokerage
fees. With respect to certain foreign countries, there is a possibility of
expropriation, nationalization, or confiscatory taxation, which could affect
investment in those countries.

Each of the Funds may invest a portion of its assets in developing
countries or in countries with new or developing capital markets, such as
countries in Eastern Europe and the Pacific Rim. The considerations noted
above regarding the risks of investing in foreign securities are generally
more significant for these investments. These countries may have relatively
unstable governments and securities markets in which only a small number of
securities trade. Markets of developing countries may be more volatile than
markets of developed countries. Investments in these markets may involve
significantly greater risks, as well as the potential for greater gains.

STRIPPED SECURITIES. The U.S. Government Money Market Fund may invest
in "Stripped Securities." A Stripped Security is a security consisting of
the separate income or principal components of a debt security. Stripped
Securities are issued at a discount to their face value and generally
experience greater price volatility than ordinary debt securities because of
the manner in which the principal and interest components of the underlying
U.S. Government obligation are separated.

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LEVERAGE. The Special Fund may, from time to time, use borrowed money
to increase its portfolio positions. This practice is known as leverage.
Investment gains realized with borrowed funds that exceed the cost of such
borrowings (including interest costs) will cause the net asset value of Fund
shares to increase more dramatically than would otherwise be the case. On
the other hand, leverage can cause the net asset value of Fund shares to
decrease more rapidly than normal if the securities purchased with borrowed
money decline in value or if the investment performance of such securities
does not cover the cost of borrowing.

PUT, CALL OPTIONS, FUTURES CONTRACTS. The Special, Small Cap, Real
Estate, Equity, Asset Allocation, Oregon Tax-Free and Income Funds may use
options and futures contracts to attempt to enhance income, and to reduce the
overall risk of its investments ("hedge"). These instruments are commonly
referred to as "derivative instruments" due to the fact that their value is
derived from or related to the value of some other instrument or asset. Each
Fund's ability to use these strategies may be limited by market conditions,
regulatory limits, and tax considerations. Appendix B to this prospectus
describes the instruments that the Funds may use and the way the Funds may
use the instruments for hedging purposes.

Each of these Funds (other than the Oregon Tax-Free Fund) may invest up
to 10% of its total assets in premiums on put and call options, both
exchange-traded and over-the-counter, and write call options on securities
the Fund owns or has a right to acquire. Each of these Funds may also
purchase options on securities indices, foreign currencies, and futures
contracts. Besides exercising its option or permitting the option to expire,
prior to expiration of the option, a Fund may sell the option in a closing
transaction. Other than the Special Fund, the Funds may only write call
options that are covered. A call option is covered if written on a security
a Fund already owns.

The Special, Small Cap, Real Estate, Equity, Asset Allocation, Oregon
Tax-Free and Income Funds may invest in interest rate futures contracts and
the Special, Small Cap, Real Estate, Equity and Asset Allocation may invest
in stock index futures provided that the aggregate initial margin of all
futures contracts in which the Fund invests shall not exceed 10% of the total
assets of the Fund after taking into account unrealized profits and
unrealized losses on any such transactions it has entered into. Upon
entering into a futures contract, the Fund will set aside liquid assets, such
as cash, U.S. Government securities, or other high grade debt obligations in
a segregated account with the Fund's custodian to secure its potential
obligation under such contract.

<PAGE>

certain options or future contracts in order to continue to qualify for
beneficial tax treatment afforded "regulated investment companies" under the
Internal Revenue Code of 1986, as amended (the "Code"). For a further
discussion of put and call options and futures contracts, see the Statement
of Additional Information.

FIXED INCOME SECURITIES. Each of the Special, Small Cap, Equity, Asset
Allocation, Income, and U.S. Government Income Funds may invest up to 20% of
its total assets in fixed income securities, including convertible
securities, that are either unrated or rated below the fourth highest
category by Moody's or S&P, although not more than 5% of the Fund's total
assets may be invested in fixed income securities that are unrated. The
Oregon Tax-Free Fund may invest an unlimited amount in unrated fixed income
securities, provided the Adviser believes such securities to be comparable in
quality to investment-grade securities (securities rated in the fourth
highest category or better by Moody's or S&P). Securities rated below the
fourth highest category are commonly referred to as "junk bonds." Such
securities are predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal. Investment in such securities
normally involves a greater degree of investment and credit risk than does
investment in a high-rated security. In addition, the market for such
securities is usually less broad than the market for higher-rated securities,
which could affect their marketability. The market prices of such securities
may fluctuate more than the market prices of higher-rated securities in
response to changes in interest rates and economic conditions. Moreover, with
such securities, there is a greater possibility that an adverse change in the
financial condition of the issuer, particularly a highly leveraged issuer,
may affect its ability to make payments of principal and interest.

INVESTMENT IN REITS. Each of the Special, Small Cap, Real Estate,
Equity and Asset Allocation Funds may invest in real estate investment trusts
("REITS"). For the Special, Small Cap, Equity and Asset Allocation Funds,
such investment may not exceed 25% of the Fund's total assets. The Real
Estate Fund may invest without limitation in shares of REITs. REITs are
pooled investment vehicles that invest primarily in income producing real
estate or real estate related loans or interests. REITs are generally
classified as equity REITs, mortgage REITs or a combination of equity and
mortgage REITs. Equity REITs invest the majority of their assets directly in
real property and derive income primarily from the collection of rents.
Equity REITs can also realize capital gains by selling properties that have
appreciated in value. Mortgage REITs invest the majority of their assets in
real estate mortgages and derive income from the collection of interest
payments. For federal income tax purposes, REITs qualify for beneficial tax
treatment by distributing 95% of their taxable income. If a REIT is unable
to qualify for such beneficial tax treatment, it would be taxed as a
corporation and distributions to its shareholders would therefore be reduced.

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<PAGE>

management skills, are not diversified, and are subject to the risks of
financing projects. REITs are subject to heavy cash flow dependency, default
by borrowers, self-liquidation, and the possibilities of failing to qualify
for the exemption from tax for distributed income under the Code and failing
to maintain their exemptions from the 1940 Act.

INVESTMENTS IN REAL ESTATE EQUITY SECURITIES. The Real Estate Fund does
not invest directly in real estate, but does invest primarily in Real Estate
Equity Securities. Therefore, an investment in the Fund may be subject to
certain risks associated with the direct ownership of real estate. These
risks include, among others: possible declines in the value of real estate;
risks related to general and local economic conditions; possible lack of
availability of mortgage funds; overbuilding, extended vacancies of
properties; increases in competition; property taxes and operating expenses;
changes in zoning laws; costs resulting from the clean-up of, and liability
to third parties for damages resulting from environmental problems; casualty
or condemnation losses, uninsured damages from floods, earthquakes or other
natural disasters; limitations on and variations in rents; and changes in
interest rates.

REPURCHASE AGREEMENTS. Each of the Funds may engage in repurchase
agreements. Repurchase agreements are agreements under which a person
purchases a security and simultaneously commits to resell that security to
the seller (a commercial bank or recognized securities dealer) at an agreed
upon price on an agreed upon date within a number of days (usually not more
than seven) from the date of purchase. The resale price reflects the
purchase price plus an agreed upon market rate of interest that is unrelated
to the coupon rate or maturity of the purchased security. A Fund will engage
in repurchase agreements only with banks or broker-dealers whose obligations
would qualify for direct purchase by that Fund. A repurchase agreement
involves the obligation of the seller to pay an agreed-upon price, which
obligation is, in effect, secured by the value of the underlying security.
All repurchase agreements are fully collateralized and marked to market
daily, and may therefore be viewed by the SEC or the courts as loans
collateralized by the underlying security. There are some risks associated
with repurchase agreements. For instance, in the case of default by the
seller, a Fund could incur a loss or, if bankruptcy proceedings are commenced
against the seller, the Fund could incur costs and delays in realizing upon
the collateral.

MORTGAGE-BACKED SECURITIES. The Real Estate, Asset Allocation and
Income Funds may invest in mortgage pass-through certificates and
multiple-class pass-through securities, such as Collateralized Mortgage
Obligations ("CMOs") and Stripped Mortgage Back Securities ("SMBS"), and
other types of mortgage-backed securities that may be available in the future
(collectively, "Mortgage-Backed Securities").

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<PAGE>

through" monthly payments made by the individual borrowers on the mortgage
loans which underlie the securities (net of fees paid to the issuer or
guarantor of the securities).

Payment of principal and interest on some mortgage pass-through
securities, but not the market value of the securities themselves) may be
guaranteed by the full faith and credit of the U.S. Government (in the case
of securities guaranteed by GNMA); or guaranteed by the agency or
instrumentality of the U.S. Government issuing the security (in the case of
securities guaranteed by FNMA or the Federal Home Loan Mortgage Corporation
("FHLMC"), which are supported only by the discretionary authority of the
U.S. Government to purchase the agencies' obligations). Mortgage
pass-through securities created by non-governmental issuers (such as
commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers) may be
supported by various forms of insurance or guarantees, including individual
loan, title, pool and hazard insurance and letters of credit, which may be
issued by governmental entities, private insurers or the mortgage poolers.

CMOs are hybrid mortgage related instruments. Similar to a bond,
interest and prepaid principal on a CMO are paid, in most cases,
semi-annually. CMOs may be collateralized by whole mortgage loans but are
more typically collateralized by portfolios of mortgage pass-through
securities guaranteed by GNMA, FHLMC or FNMA. CMOs are structured into
multiple classes, with each class bearing a different stated maturity.
Monthly payments of principal, including prepayments, are first returned to
investors holding the shortest maturity class and investors holding the
longer maturity classes receive principal only after the first class has been
retired. CMOs that are issued or guaranteed by the U.S. Government or by any
of its agencies or instrumentalities will be considered U.S. Government
securities by the Fund, while other CMOs, even if collateralized by U.S.
Government securities, will have the same status as other privately issued
securities for purposes of applying the Fund's diversification test.

SMBS are derivative multiple-class mortgage-backed securities usually
structured with two classes that receive different proportions of interest
and principal distributions on a pool of mortgage assets. A typical SMBS
will have one class receiving some of the interest and most of the principal,
while the other class will receive most of the interest and the remaining
principal. In the most extreme case, one class will receive all of the
interest (the "interest only" class), while the other class will receive all
of the principal (the "principal only" class).

Investing in Mortgage-Backed Securities involves certain unique risks in
addition to those risks associated with investing in the real estate industry
in general. These risks include the failure of a counter-party to meet its
commitments, adverse interest rate changes and the effects of prepayment on
mortgage cash flows. In addition, investing in the lowest tranche of CMOs
involves risks similar to those associated with investing in equity
securities.

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<PAGE>

Further, the yield characteristics of Mortgage-Backed Securities differ
from those of traditional fixed income securities. The major differences
typically include more frequent interest and principal payments (usually
monthly), the adjustability of interest rates, and the possibility that
prepayments of principal may be made substantially earlier than their final
distribution dates.

If the Mortgage-Backed Security is a fixed-income security, when
interest rates decline, the value of an investment in fixed rate obligations
can be expected to rise. Conversely, when interest rates rise, the value of
an investment in fixed rate obligations can be expected to decline. In
contrast, if the Mortgage-Backed Security represents an interest in a pool of
loans with adjustable interest rates, as interest rates on adjustable rate
mortgage loans are reset periodically, yields on investments in such loans
will gradually align themselves to reflect changes in market interest rates,
causing the value of such investments to fluctuate less dramatically in
response to interest rate fluctuations than would investments in fixed rate
obligations.

If a security subject to prepayment has been purchased at a premium, in
the event of prepayment the value of the premium would be lost. Prepayment
rates are influenced by changes in current interest rates and a variety of
economic, geographic, social and other factors, and cannot be predicted with
certainty. Both adjustable rate mortgage loans and fixed rate mortgage loans
may be subject to a greater rate of principal prepayments in a declining
interest rate environment, and to a lesser rate of principal prepayments in
an increasing interest rate environment. Under certain interest rate and
prepayment rate scenarios, the Fund may fail to recoup fully its investment
in Mortgage-Backed Securities, notwithstanding any direct or indirect
governmental or agency guarantee. When the Fund reinvests amounts
representing payments and unscheduled prepayments of principal, it may
receive a rate of interest that is lower than the rate on existing adjustable
rate mortgage pass-through securities. Thus, Mortgage-Backed Securities, and
adjustable rate mortgage pass-through securities in particular, may be less
effective than other types of U.S. Government securities as a means of
"locking in" interest rates.

SHORT SALES. The Special Fund intends from time to time to sell
securities short. A short sale is effected when it is believed that the
price of a particular security will decline, and involves the sale of a
security which the Fund does not own in the hope of purchasing the same
security at a later date at a lower price. To make delivery to the buyer,
the Special Fund must borrow the security. The Fund is then obligated to
return the security to the lender, and therefore it must subsequently
purchase the same security.

When the Special Fund makes a short sale, it must leave the proceeds
from the short sale with the broker, and it must deposit with the broker a
certain amount of cash or government securities to collateralize its
obligation to replace the borrowed securities which have been sold. In
addition, the Fund must put in a segregated account (with the Fund's
custodian) an amount of cash or U.S. Government securities equal to the
difference between the market value of the securities sold short at the time
they were sold short and

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<PAGE>

any cash or government securities deposited as collateral with the broker in
connection with the short sale (not including the proceeds from the short
sale). Furthermore, until the Fund replaces the borrowed security, it must
daily maintain the segregated account at a level so that (1) the amount
deposited in it plus the amount deposited with the broker (not including the
proceeds from the short sale) will equal the current market value of the
securities sold short, and (2) the amount deposited in it plus the amount
deposited with the broker (not including the proceeds from the short sale)
will not be less than the market value of the securities at the time they
were sold short. As a result of these requirements, the Special Fund will
not gain any leverage merely by selling short, except to the extent that it
earns interest on the immobilized cash or government securities while also
being subject to the possibility of gain or loss from the securities sold
short. The amount of the Fund's net assets that will at any time be in the
type of deposits described above (that is, collateral deposits or segregated
accounts) will not exceed 25%. These deposits do not have the effect of
limiting the amount of money that the Fund may lose on a short sale, as the
Fund's possible losses may exceed the total amount of deposits.

The Special Fund will realize a gain if the price of a security declines
between the date of the short sale and the date on which the Fund purchases a
security to replace the borrowed security. On the other hand, the Special
Fund will incur a loss if the price of the security increases between those
dates. The amount of any gain will be decreased and the amount of any loss
increased by any premium or interest that the Fund may be required to pay in
connection with a short sale. It should be noted that possible losses from
short sales differ from those that could arise from a cash investment in a
security in that the former may be limitless, while the latter cannot exceed
the total amount of the Fund's investment in the security. For example, if
the Fund purchases a $10 security, potential loss is limited to $10.
However, if the Fund sells a $10 security short, it may have to purchase the
security for return to the lender when the market value of that security is
$50, thereby incurring a loss of $40.

The Special, Small Cap, Real Estate, Equity, and Asset Allocation Fund
may also engage in short sales "against the box." While a short sale is made
by selling a security the Fund does not own, a short sale is "against the
box" to the extent that the Fund contemporaneously owns or has the right to
obtain at no added cost securities identical to those sold short.

MUNICIPAL SECURITIES. Because the Oregon Tax-Free Fund intends to focus
its investments in Oregon municipal securities, the Fund and the value of its
shares will be significantly affected by any economic, political, or
regulatory developments that affect the ability of Oregon issuers to pay
interest or repay principal on their obligations.

Certain municipal securities purchased by the Oregon Tax-Free Fund from
Oregon issuers may rely in whole or in part on ad valorem real property taxes
as a source of revenue for the payment of principal and interest. There are
constitutional and statutory limitations on the issuance of securities
payable from tax revenues. In 1990, a voter

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initiative in Oregon was passed which restricts the ability of taxing
entities to increase real property taxes by placing a limit on the property
tax rate. This initiative did, however, exempt from the property tax rate
limit assessments to pay bonded indebtedness. However, implementation of this
limit has adversely affected the property tax revenues of certain issuers of
Oregon municipal securities.

NONDIVERSIFIED PORTFOLIO; TRADING MARKET FOR PORTFOLIO SECURITIES. The
Oregon Tax-Free Fund is a nondiversified investment company, meaning that it
is not subject to the provisions of the 1940 Act with respect to
diversification of its investments. However, as a matter of fundamental
policy, the Fund will not (1) invest more than 25% of its total assets in the
securities of any one issuer, or (2) with respect to at least 50% of its
total assets, invest in individual issuers (excluding United States
Government securities) in which it has invested 5% of the value of its total
assets. For purposes of these limitations, each governmental subdivision
(i.e., state, territory or possession of the United States or any political
subdivision of any of the foregoing, including agencies, authorities,
instrumentalities or similar entities) will be considered a separate issuer
if its assets and revenues are separate from those of the government body
creating it and if the securities are backed only by its own assets and
revenues. In the case of a private activity bond, if the security is backed
only by the assets and revenues of a nongovernmental user, then such
nongovernmental user will be deemed to be the sole issuer. However, if a
private activity bond or governmental issue is guaranteed by a governmental
or some other entity, such guarantee will be considered a separate security
issued by the guarantor as well as the nongovernmental user, subject to
limited exclusions allowed by the 1940 Act.

Because the Fund's "nondiversified status" permits the investment of a
greater portion of the Fund's assets in the securities of individual issuers
than would be permissible under a "diversified status," the Fund's
shareholders are considered to be subject to a greater degree of risk. The
Fund reserves the right to operate as a diversified investment company if
such a course appears desirable in the opinion of the Board of Directors; in
that event, 75% of the Fund's total assets would have to be invested in
securities issued by entities in which the Fund had not invested 5% or more
of its total assets.

With the exception of general obligation securities issued by the State
of Oregon, most issues of municipal securities in Oregon are relatively small
in size. Due to the small size of some issues, only a limited trading market
in the securities develops following their issuance. When there is only a
limited trading market for a particular security, a small change in the
supply of or demand for that security can result in a relatively large change
in the market price of the security. If the Oregon Tax-Free Fund is required
to sell portfolio securities for which there is only a limited trading
market, the market value of such securities (and of securities which are part
of the same issue which are retained in the Fund's portfolio) could be
adversely affected, which could result in a decrease in the net asset value
of the Fund's shares. In order to enhance the liquidity of the Fund's
portfolio, a portion of its assets will be maintained in general obligation
securities of the state of Oregon and in other issues for which an active
trading market is expected to be

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<PAGE>

maintained. The Fund expects that approximately 25% of its net assets will
normally be invested in general obligation securities of the state of Oregon.
A portion of the Oregon Tax-Free Fund's assets may also be invested, on a
temporary basis, in assets other than municipal securities in order to
increase the liquidity of the Fund's portfolio. However, there is no
assurance that these strategies will completely eliminate the risks
associated with investing in municipal securities for which only a limited
trading market exists.

WHEN ISSUED AND/OR DELAYED DELIVERY. Each of the Funds may purchase and
sell securities on a when-issued or delayed-delivery basis. When-issued or
delayed-delivery transactions arise when securities are purchased or sold by
the Fund, with payment and delivery taking place in the future in order to
secure what is considered to be an advantageous price and yield to the Fund
at the time of entering into the transaction. Such securities are subject to
market fluctuations, and no interest accrues to a Fund until the time of
delivery. The value of the securities may be less at the time of delivery
than the value of the securities when the commitment was made. When a Fund
engages in when-issued and delayed-delivery transactions, it relies on the
buyer or seller, as the case may be, to consummate the sale. Failure to do
so may result in the Fund missing the opportunity of obtaining a price or
yield considered to be advantageous. To the extent any Fund engages in
when-issued and delayed-delivery transactions, it will do so for the purpose
of acquiring portfolio securities consistent with its investment objective
and policies, and not for the purpose of investment leverage. No Fund may
commit more than 25% of its total assets to the purchase of when-issued and
delayed-delivery securities. A separate account of liquid assets consisting
of cash, U.S. Government securities or other high grade debt obligations
equal to the value of any purchase commitment of a Fund shall be maintained
by the Fund's custodian until payment is made.

ILLIQUID SECURITIES. The Funds may invest in illiquid securities, which
may be difficult to sell promptly at an acceptable price. This difficulty
may result in a loss or be costly to a Fund.

INTEREST RATES. Each Fund may invest in debt securities. The market
value of debt securities that are sensitive to prevailing interest rates is
inversely related to actual changes in interest rates. That is, an interest
rate decline produces an increase in a security's market value and an
interest rate increase produces a decrease in value. The longer the
remaining maturity of a security, the greater the effect of an interest rate
change. Changes in the ability of an issuer to make payments of interest and
principal and in the market's perception of its creditworthiness also affect
the market value of that issuer's debt securities.

U.S. GOVERNMENT SECURITIES. Although U.S. Government securities and high-
quality debt securities are issued or guaranteed by the U.S. Treasury or an
agency or instrumentality of the U.S. Government, not all U.S. Government
securities are backed by the full faith and credit of the United States. For
example, securities issued by the General Farm Credit Bank or by the Federal
National Mortgage Association are supported by the

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<PAGE>

instrumentality's right to borrow money from the U.S. Treasury under certain
circumstances. On the other hand, securities issued by the Student Loan
Marketing Association are supported only by the credit of the instrumentality.

LIMITED OPERATING HISTORY OF FUND. The Small Cap Fund commenced
operations on February 16, 1996 and the Real Estate Fund commenced operations
April 4, 1994 and thus have limited operating histories.

SMALL COMPANIES. Both the Special and Small Cap Fund intend to invest
in small market capitalization companies. Investing in such securities may
involve greater risks since these securities may have limited marketability
and, thus, may be more volatile. Because small-sized companies normally have
fewer outstanding shares than larger companies, it may be difficult for a
Fund to buy or sell significant amounts of such shares without an unfavorable
impact on prevailing prices. In addition, small companies are typically
subject to a greater degree of changes in earnings and business prospects
than are larger, more established companies.

LENDING OF PORTFOLIO SECURITIES. The Funds may loan portfolio
securities to broker-dealers or other institutional investors if at least
100% cash (or cash equivalent) collateral is pledged and maintained by the
borrower. The Funds believe that the cash collateral minimizes the risk of
lending their portfolio securities. Such loans of portfolio securities may
not be made if the aggregate of such loans would exceed 20% (10% in the case
of the Oregon Tax-Free Fund) of the value of a Fund's total assets. If the
borrower defaults, there may be delays in recovery of loaned securities or
even a loss of the securities loaned, in which case the Fund would pursue the
cash (or cash equivalent) collateral. While there is some risk in loaning
portfolio securities, loans will be made only to firms or broker-dealers
deemed by the Adviser to be of good standing and will not be made unless, in
the judgment of the Adviser, the consideration to be earned from such loans
would justify the risk. For additional disclosure, see "INVESTMENT
RESTRICTIONS - LOANS OF PORTFOLIO SECURITIES" in the Statement of Additional
Information.

PORTFOLIO TURNOVER. The Funds generally do not trade in securities with
the goal of obtaining short-term profits, but when circumstances warrant,
securities will be sold without regard to the length of time the security has
been held. A higher portfolio turnover rate may involve correspondingly
greater transaction costs, which will be borne directly by the Funds, as well
as additional realized gains and/or losses to shareholders. See "ALLOCATION
OF BROKERAGE," and "TAXES" in the Prospectus. The annual portfolio turnover
rate of the Funds may at times exceed 100%. The portfolio turnover rates are
shown in the Condensed Financial Information section of this Prospectus.

TEMPORARY DEFENSIVE INVESTMENTS. For temporary defensive purposes, the
Special, Small Cap, Real Estate, Equity and Asset Allocation Funds may invest up
to 100% of their assets in fixed income securities, cash and cash equivalents.
The fixed income securities in which each Fund will invest in such a situation
shall consist of corporate debt securities

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(bonds, debentures and notes), asset-backed securities, bank obligations,
collateralized bonds, loan and mortgage obligations, commercial paper,
preferred stocks, repurchase agreements, savings and loan obligations, and
U.S. Government and agency obligations. The fixed income securities will be
rated investment grade or higher (BBB by S&P and Baa by Moody's) and will
have maturities of three years or less. When the Fund assumes a temporary
defensive position, it may not be investing in securities designed to achieve
its investment objective.

MANAGEMENT OF THE FUNDS

The Funds (other than the Special Fund) are managed by the Trust's Board
of Trustees, and all powers and authorities are exercised by or under the
direction of the Board of Trustees. The Special Fund is managed by its Board
of Directors, and all powers and authorities are exercised by or under the
direction of the Board of Directors.

ADVISER. Subject to the policies of, review by, and overall control of
the Board of Trustees of the Trust, and the Board of Directors of the Special
Fund, the Adviser has been retained by each Fund to act as its manager and
investment adviser pursuant to investment advisory agreements.

The Adviser was incorporated in 1980 and has been engaged in the
business of providing investment advice since July 1, 1980 to individual and
institutional accounts, such as corporate pension and profit sharing plans,
as well as mutual funds. The Adviser currently has over $4 billion in assets
under management. The address of the Adviser is 121 S.W. Morrison, Suite
1400, Portland, Oregon 97204.

James E. Crabbe and Richard S. Huson are controlling shareholders of the
Adviser. In addition, together they own 100% of the stock of the Distributor
for the Funds. Mr. Crabbe and Mr. Huson are primarily responsible for the
day-to-day management of the Adviser. Mr. Crabbe is President and a Director
of the Adviser and Mr. Huson is Vice President, Secretary and a Director.

Each Fund pays the Adviser a fee for its services that accrues daily and
is payable bi-monthly. Fees are based on a percentage of the average daily
net assets of each Fund, as set forth below:

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SPECIAL FUND
SMALL CAP FUND
REAL ESTATE FUND
EQUITY FUND
ASSET ALLOCATION FUND

Net Asset Value Annual Rate
--------------- -----------
First $100 million 1.00%
Next $400 million 0.85%
Amounts over $500 million 0.60%

INCOME FUND

First $100 million 0.75%
Next $400 million 0.60%
Amounts over $500 million 0.50%

OREGON TAX-FREE FUND
U.S. GOVERNMENT INCOME FUND
U.S. GOVERNMENT MONEY MARKET FUND

First $100 million 0.50%
Next $400 million 0.45%
Amounts over $500 million 0.40%

Fees paid by the Special, Small Cap, Real Estate, Equity, Asset Allocation
and Income Funds are higher than those paid by most other mutual funds,
although the fees paid by these Funds are comparable to mutual funds with
similar objectives and policies. From time to time, the Adviser may
voluntarily waive all or a portion of its management fee and/or reimburse a
Fund for certain expenses without further notification of the commencement or
termination of such waiver or reimbursement. Any such waiver or
reimbursement will temporarily lower a Fund's overall expense ratio and
increase a Fund's overall return to investors. Additionally, many states
require that mutual funds meet certain expense limitations. The Funds, their
Adviser, Distributor, and Transfer Agent intend to qualify, meet, or conform
to any individual state requirements while the Funds are registered in that
state.

The Real Estate Fund has entered into a Subadvisory Agreement with the
Adviser and Aldrich, Eastman & Waltch, L.P. ("AEW"). Pursuant to the
Subadvisory Agreement, AEW is responsible for the day-to-day investment
management of the Real Estate Fund, subject to the overall supervision of the
Adviser and the Board of Trustees.

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AEW is a registered investment adviser founded in 1981. AEW is
dedicated to managing real estate investment portfolios for institutional
investors. AEW currently manages approximately $4.4 billion in assets.

The general partner of AEW is AEW Holdings L.P. ("AEW Holdings"). The
general partner of AEW Holdings is Aldrich, Eastman & Waltch, Inc. ("AEW
INC"). The Shareholders of AEW INC include certain current and former
executive employees of AEW. AEW's business address is 225 Franklin Street,
Boston, MA 02110-2803.

As compensation for its services, the Adviser will pay to AEW, at the
end of each calendar month, a annualized fee equal to the greater of (a)
37.5% of one percent of the average daily net asset value of the Fund (the
"ADNAV") up to the first $100 million of net asset value, 31.88% of one
percent of the ADNAV for the next $400 million of net asset value, and 22.5%
of one percent of the ADNAV for amounts in excess of $500 million of net
asset value, or (b) 50% of the actual fees paid by the Fund to the Adviser.
The fee paid by the Adviser will not increase any of the fees incurred by the
Fund.

The Funds' Distributor pays the marketing expenses of the Funds. A
certain portion of these expenses may be borne by the Funds under a
distribution plan adopted pursuant to Rule 12b-1 under the 1940 Act. See
"DISTRIBUTION EXPENSES" in this Prospectus. The Funds bear all other
expenses incurred in their operation as they are incurred, other than those
assumed by the Adviser or Distributor.

Management of the Special and Small Cap Fund portfolios is handled on a
day-to-day basis by a team consisting of Mr. Crabbe and John W. Johnson. Mr.
Crabbe is coordinator of the team. Mr. Crabbe has served in various
management positions with the Adviser since 1980 and has managed the Special
Fund's portfolio since January 1, 1990. Prior to joining the Adviser, Mr.
Johnson was a private investment banker from November, 1991 to May, 1995.
Between August, 1988 and November, 1991, Mr. Johnson was Director of Equity
Investments for Kennedy Associates.

Management of the Real Estate Fund is handled on a day to day basis by
Jay Willoughby, who is currently a Director and real estate securities
portfolio manager for AEW. Prior to joining AEW in January, 1995. Mr.
Willoughby was a portfolio manager for the Adviser.

The Oregon Tax-Free, Income, U.S. Government Income and U.S. Government
Money Market Funds are managed on a day to day basis by a team consisting of
Mr. Huson and Garth R. Nisbet. Mr. Huson is coordinator of the team. Mr.
Huson has served in various management positions with the Adviser since 1980.
Mr. Nisbet joined the Adviser in April, 1995. Between February, 1993 and
March, 1995 Mr. Nisbet worked for Capital Consultants, Inc. as a portfolio
manager of its fixed income portfolio. Prior to joining Capital Consultants,
Inc., Mr. Nisbet was a Vice President and the fixed income portfolio manager
at Lincoln National Investment Management.

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The portfolios of the Equity and Asset Allocation Funds are managed on a
day-to-day basis by a team consisting of John E. Maack, Jr., Marian L.
Kessler, Robert E. Anton, Mr. Nisbet and Mr. Huson. Mr. Huson is coordinator
of the team. Mr. Maack has been employed as a portfolio manager and
securities analyst by the Adviser since 1988. Ms. Kessler joined the Adviser
in August, 1995. From September, 1993 until July, 1995, Ms. Kessler was a
portfolio manager with Safeco Asset Management. Between August, 1986 and
June, 1993, Ms. Kessler was an equity analyst for IDS Financial Services.
Mr. Anton joined the Adviser in June, 1995. Prior to joining the Adviser,
Mr. Anton served 17 years as Chief Investment Officer, portfolio manager at
Financial Aims Corporation.

ADMINISTRATORS. The Funds have retained State Street Bank and Trust
Company ("State Street") to provide administrative services to the Funds.
Such services relate to administration, operations and compliance. For such
services, the Funds have agreed to pay State Street a fee based on the total
assets of the Funds managed by the Adviser. The fee shall be as follows:
first $500 million managed by Adviser - .06%; next $500 million - .03%;
thereafter -.01%. Each Fund pays its pro rata share of such fee.

CUSTODIAN, TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND SHAREHOLDER
SERVICING. Investors Fiduciary Trust Company, 127 West 10th Street, Kansas
City, Missouri 64105, acts as Custodian of the cash and securities of each
Fund.

State Street Bank and Trust Company, 225 Franklin Street, Boston, MA
02110, 800-541-9732, acts as Transfer Agent and Dividend Disbursing Agent for
the Fund. The Transfer Agent uses Boston Financial Data Services, a 50% owned
subsidiary, as its servicing agent in carrying out the Transfer Agent's
responsibilities to the Fund and accounting agent.

The Funds and Crabbe Huson Securities, Inc., the Funds Distributor, have
also entered into agreements with various Financial Intermediaries, whereby
the Financial Intermediary agrees to perform various sub-transfer agency
services, subaccounting services and administrative services for their
clients and customers who may be deemed to be beneficial owners of the Funds'
shares. The Financial Intermediaries may also perform ongoing servicing and
maintenance tasks. Fees paid vary depending upon the level of services
provided.

DISTRIBUTOR. The class of shares of each Fund sold pursuant to this
Prospectus has adopted a distribution plan pursuant to rule 12b-1 under the 1940
Act (the "Plan"). Under the Plan, the Distributor is entitled to reimbursement
for its actual expenses incurred in the distribution and promotion of the shares
of each Fund. Total reimbursement by the Fund to the Distributor pursuant to
the Plan may not exceed an annual rate of .25% of such class

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average daily net assets. These expenses include, but are not limited to,
expenses incurred in the printing of the Funds' prospectuses and statements
of additional information for persons other than then-current shareholders,
expenses related to preparation and printing of sales literature, and other
distribution-related expenses. A portion of the expenses reimbursed and paid
to the Distributor will be paid by the Distributor on a quarterly basis to
broker-dealers, financial institutions, depository institutions, retirement
plans, and financial intermediaries (collectively, "Financial
Intermediaries") that have entered into sales agreements with the Distributor
to actively promote the sale of the shares, and may be paid to investment
executives of the Distributor. Each Fund will participate in joint
distribution activities with other funds managed by the Adviser.
Distribution expenses that are not allocable to a specific Fund are allocated
to a fund on the basis of their respective net assets.

In the event distribution expenses for any Fund in any one year exceed
the maximum reimbursable under the Plan, such expenses may not be carried
forward to the following year. The Funds will not be charged for any
financing charges on any unreimbursed expenses payable pursuant to the Plan.

The Adviser may, at its own expense, make payments from its management
fee revenue, past profits, or other resources to Financial Intermediaries who
promote the sale of the Funds' shares.

CONTROL PERSONS

As of June 3, 1996, Enele Co. owned 68.60% of the outstanding shares of
the Real Estate Fund, 30.92% of the outstanding shares of the Small Cap fund,
and 30.52% of the outstanding shares of the U.S. Government Money Market
Fund, Charles Schwab & Co. Inc. owned 31.30% of the outstanding shares of the
Special Fund and 25.84% of the outstanding shares of the Equity Fund. No
person owned, directly or indirectly, 25% or more of the outstanding shares
of any other Fund. Enele Co. and Charles Schwab & Co. Inc. hold these shares
as nominee for independent investors. These independent investors, who are
the beneficial owners of the shares, exercise complete voting control over
the shares. The Funds have no record concerning the actual beneficial share
ownership of these shares.

NET ASSET VALUE

The net asset value ("NAV") of a share is determined as of 4 p.m.
Eastern Time, or the close of the NYSE, whichever is earlier, on each day
during which securities are traded on the NYSE. A class's NAV is the value
of a single share. The value of a single share of a class is computed by
adding that class's pro rata share of the value of the applicable Fund's
investments, cash and other assets, subtracting that class's pro rata share
of the value of the applicable Fund's liabilities, subtracting the liabilities
allocated to that class, and dividing the result by the number of shares of
that class that are outstanding.

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<PAGE>

Each Fund's assets are valued on the basis of market quotations, if
available. Foreign securities are valued on the basis of quotations from the
primary market in which they are traded, and are translated from the local
currency into U.S. dollars using current exchange rates. If quotations are
not readily available, or if the values have been materially affected by
events occurring after the closing of a foreign market, assets are valued by
a method that the Board of Trustees believes accurately reflects fair value.

The U.S. Government Money Market Fund will value its assets using the
amortized cost method by adjusting the cost of each debt security for
amortization of discount or premium and accrued interest (unless unusual
circumstances indicate that another method of determining fair value should
be considered by the Trustees.) The Trustees have established procedures
designed to stabilize, to the extent reasonably possible, the net asset value
of the shares of the U.S. Government Money Market Fund at one dollar per
share. There is no assurance that the Fund will be able to maintain a
constant one dollar per share value. See "U.S. GOVERNMENT MONEY MARKET FUND"
in the Statement of Conditional Information.

PERFORMANCE COMPARISONS

The Funds may compare their performance to other mutual funds with
similar investment objectives and to the mutual fund industry as a whole, as
quoted by ranking services and publications of general interest. For
example, these services or publications may include Lipper Analytical
Services, Inc., Schabacker's Total Investment Service, CDA Technologies, SEI,
Frank Russell Trust, BARRON'S BUSINESS WEEK, CHANGING TIMES, THE FINANCIAL
TIMES, FINANCIAL WORLD, FORBES, INVESTOR'S DAILY, MONEY, MORNINGSTAR MUTUAL
FUNDS, PERSONAL INVESTOR, THE ECONOMIST, THE WALL STREET JOURNAL, INDIVIDUAL
INVESTOR, LOUIS RUKEYSER'S WALL STREET, FINANCIAL WORLD, and USA TODAY.
These ranking services and publications rank the performance of the Funds
against all other funds over specified periods and against funds in specified
categories. The Funds may also either include presentations of, or may
compare their performance or the performance of the Funds' Adviser to a
recognized stock or bond index, including the Standard & Poor's 500, Standard
& Poor's Mid-Cap 400 Index, Value Line Composite Index, Dow Jones Industrial
Average, NASDAQ/OTC Price Index, Russell 2000 Index, Wilshire 5000 Equity
Index, Morgan Stanley REIT Index, the Lehman Brothers Government/Corporate
Bond Index and Salomon Bond indices. The comparative material found in
advertisements, sales literature, or in reports to shareholders may contain
past or present performance ratings. This is not to be considered
representative or indicative of future results or future performance.

The Funds may also compare their performance to other income-producing
securities such as (i) money market funds; (ii) various bank products (based
on average rates of bank and thrift institution certificates of deposit,
money market deposit accounts, and NOW accounts as reported by the Bank Rate
Monitor and other financial reporting services, including newspapers); and
(iii) U.S. treasury bills or notes.

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<PAGE>

The performance of a specific Fund will be calculated as required by the
rules of the SEC. Current yield for the U.S. Government Money Market Fund is
calculated by dividing the net change in the value of an account of one share
during an identified seven-calendar day period by the value of the one share
account at the beginning of the same period and multiplying that base return
by 365/7. Current yield for the Real Estate, Income, U.S. Government Income
and Oregon Tax-Free Funds is calculated by dividing the net investment income
per share earned during an identified 30-day period by the maximum offering
price per share on the last day of the same period. The Funds may also
publish average annual total return quotations for recent one, five and
ten-year periods and will, at times, graphically portray the redeemable value
of an initial investment over an established period of time. These
standardized calculations do not reflect the impact of federal or state
income taxes. Such performance data will include the effect of any sales or
distribution charges.

The yields of each of the Funds are not fixed and will fluctuate. The
principal value of an investment in each Fund (except, under normal
circumstances, the U.S. Government Money Market Fund) at redemption may be
more or less than its original cost. In addition, investments in the Funds
are not insured and an investor's yield is not guaranteed.

The Fund's investment results will vary from time to time depending on
market conditions, the composition of the Fund's portfolio, and operating
expenses of the Fund. These factors and possible differences in the methods
used in calculating investment results should be considered when comparing
performance information regarding the Fund to information published for other
investment companies and other investment vehicles. You should also consider
return quotations relative to changes in the value of the Fund's shares and
the risks associated with the Fund's investment objectives and policies. At
any time in the future, return quotations may be higher or lower than past
return quotations, and there may be no assurance that any historical
return-quotation will continue in the future.

For more information about the calculation methods used to compute the
Fund's investment results, see "YIELD AND PERFORMANCE" in the Statement of
Additional Information. The annual report for the Funds contains information
about the performance of the Funds, and is available upon request, without
charge, by calling Investor Services at (800) 541-9732.

ALLOCATION OF BROKERAGE

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<PAGE>

services to the Funds pursuant to a written agreement. Under these
arrangements, participating Funds direct the Adviser to execute a portion of
the Funds transactions to a broker-dealer in return for a credit which
represents a percentage of the total commissions generated through the broker
dealer. The Fund uses the credit to reduce transfer agent, custodian,
shareholder servicing and other expenses of the Fund. Provided the Funds
receive prompt execution at competitive prices, the Adviser may execute
portfolio transactions through broker-dealers who also sell the Funds'
shares. Additional information about portfolio brokerage is included in the
Statement of Additional Information.

CAPITAL STRUCTURE

Beneficial interests in the Trust are divided into shares, all without
par value and of one class. The shares may be divided in separate series,
with each series representing investments in a particular portfolio and
sub-series of each series, all at the discretion of the Board of Trustees.
Shareholders of each of the Funds are entitled to one vote for each dollar of
net asset value held. Shareholders shall have the power to vote only on the
following matters: (1) the election of the initial trustees of the Trust,
the removal of trustees, and to the extent required by the 1940 Act, the
subsequent election of any trustee to fill any vacancy (although trustees may
be elected to fill vacancies or be removed by the Board of Trustees without a
vote of Shareholders, subject to certain restrictions in the 1940 Act); (2)
any contract entered into by the Trust to the extent Shareholders' approval
is required by the 1940 Act; (3) with respect to any termination or
reorganization of the Trust or any series thereof to the extent and as
provided in the Declaration of Trust; (4) with respect to any amendment of
the Declaration of Trust that adversely affects the rights of the
shareholder; (5) with respect to derivative actions whether or not a court
action, proceeding or claim should or should not be brought or maintained
derivatively or as a class action on behalf of the Trust or any series of the
Trust or the Trust shareholders; (6) an amendment of the Fund's Fundamental
Policies as set forth in the Trust's By-laws; and (7) with respect to such
additional matters relating to the Trust as may be required by the 1940 Act,
the Declaration of Trust, the By-laws of the Trust, any registration of the
Trust with the SEC (or any successor agency) or any state, or as the Trustees
may consider necessary or desirable. Separate votes are taken by each class
of shares, fund or trust, if a matter affects that class of shares, the Fund
or the Trust, respectively. Shares issued are fully paid and nonassessable
and have no preemptive or conversion rights. Each share is entitled to
participate equally in dividends and distributions declared by its respective
Fund and in the net assets of that Fund upon liquidation or dissolution after
satisfaction of outstanding liabilities. Amendment to the Declaration of
Trust may be made upon approval by shareholders holding the lesser of (i) 67%
or more of the shares entitled to vote on the matter, present in person at
the meeting or represented by proxy, if holders of more than 50% of the
shares entitled to vote on the matter are present, in person or by proxy, or
(ii) a majority of the shares issued and outstanding.

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<PAGE>

YIELD

The SEC has imposed a number of rules and policies regarding the
calculation of yield. The Fund intends to continually comply with these
rules and policies in their quotation of yield. For an explanation of the
method of yield calculation, see "CALCULATION OF PERFORMANCE DATA" in the
Statement of Additional Information.

INVESTOR SERVICES

INFORMATION YOU NEED TO KNOW TO PURCHASE, REDEEM OR
EXCHANGE SHARES

Investor Services Telephone: (800) 541-9732 Mail: Crabbe Huson Funds
P.O. Box 8413
Boston, MA 02266-8413

Crabbe Huson "Instant Access": (800) 235-2442 Express Mail: Crabbe Huson Funds
Two Heritage Drive
Quincy, MA 02171

Internet: http://www.contrarian.com

The Fund's shares are offered to the public with no sales load. Crabbe
Huson Securities, Inc. (the "Distributor"), Portland, Oregon, an affiliate of
the Adviser and a corporation organized under the laws of Oregon, is the
distributor of the Fund's shares. The shares are offered by the Distributor
directly to the public or through Financial Intermediaries who have entered
into sales agreements with the Distributor.

If there is no account application accompanying this Prospectus, you may
obtain one by calling your Financial Intermediary or by calling Investor
Services. If you are investing through a tax-sheltered retirement plan, such
as an IRA, for the first time, you will need a special application. Contact
Investor Services for more information on retirement accounts.

TYPES OF ACCOUNTS AVAILABLE:

- Individual, Joint Tenants, Tenants in Common
- Trusts
- Businesses or Organizations (corporations, partnerships or other
groups)
- Gifts or Transfers to Minors
- Retirement Accounts (Individual Retirement Accounts (IRA),
Spousal IRA, Simplified Employee Pension

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<PAGE>

IRA (SEP-IRA), Salary Reduction-SEP IRA
(SAR-SEPIRA) or 403(b) Tax Sheltered
Accounts)

- Others (contact Investor Services for information regarding other
accounts)

Retirement accounts are not available to those investing in the Oregon
Tax-Free Fund. Note, if you are considering adopting any type of retirement
plan, you should consult with your own legal or tax adviser, with respect to
the establishment and maintenance of such a plan.

MINIMUM INVESTMENTS: The minimum investment in any Fund is $2,000.
Additional Investments in any Fund must be in amounts of at least $500,
unless you are enrolled in the Invest-O-Matic program described below in
"SPECIAL SERVICES." Investments as small as $100 can be accepted from
investors participating in the Invest-O-Matic program. The Adviser, in its
sole discretion, may waive any minimum purchase requirements. The Funds
reserve the right to vary the initial and subsequent investment minimums at
any time. The Funds will provide you with written notice of any such change.

HOW TO PURCHASE YOUR SHARES

HOW TO OPEN AN ACCOUNT

- Mail: Complete and sign the account application, indicating
the Fund, class and dollar amount you want to invest.
Mail or express mail your check with your completed
application to the appropriate address listed above
under "INFORMATION YOU NEED TO KNOW TO PURCHASE, REDEEM
OR EXCHANGE SHARES."

- Exchange: You may exchange your shares for shares of another
Crabbe Huson Fund, provided the dollar value of
the shares you desire to exchange meet the minimum
investment requirement of the new Fund. Call
Investor Services for more information about this
option.

- Financial
Intermediaries: You may purchase shares in a Fund by contacting
your Financial Intermediary. See "WHAT YOU SHOULD
KNOW ABOUT BUYING SHARES THROUGH A FINANCIAL
INTERMEDIARY."

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<PAGE>

HOW TO PURCHASE ADDITIONAL SHARES

- Mail: Detach and complete the stub attached to your
statement. Make a check payable to Crabbe Huson Funds,
write your shareholder account number on your check,
and include your investment stub(s) or a note
designating how the amount of your check is to be
invested by Fund and class. Mail or express mail the
above to the appropriate address listed above under
"INFORMATION YOU NEED TO KNOW TO PURCHASE, REDEEM OR
EXCHANGE SHARES."

- Telephone: As an existing shareholder, you may purchase additional
shares by calling (800) 235-2442 and using the Funds
Crabbe Huson "Instant Access" System. See "Special
Investor Services-Crabbe Huson 'Instant Access.'" You
may also purchase shares by calling Investor Services
at the telephone number listed above under "INFORMATION
YOU NEED TO KNOW TO PURCHASE, REDEEM OR EXCHANGE
SHARES."

- Wire: You may purchase shares by wiring funds from your bank
account. In order to purchase additional shares by
wire transfer, you need to call Investor Services to
place your order and then wire transfer your funds to
the following wire transfer address: State Street Bank
& Trust Co., 225 Franklin Street, Boston, MA 02110, ABA
No. 011 000 28, FOR CREDIT: Crabbe Huson, DDA No.
99051039, Shareholder Name, Name of Fund and Class,
Shareholder Account Number.

WHAT YOU SHOULD KNOW ABOUT BUYING SHARES BY MAIL

If payment and an account application is received in proper form by the
close of regular trading on the NYSE (currently 4:00 p.m., Eastern Time) on a
day that the Fund calculates its net asset value (a "business day"), the
purchase will be made at the Fund's net asset value calculated at the end of
that day. If payment is received after the close of regular trading on the
NYSE, the purchase will be effected at the Fund's net asset value determined
for the next business day after payment has been received.

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<PAGE>

purchase and the investor may be liable for any losses or fees incurred. In
order to prevent lengthy processing delays caused by the clearing of foreign
checks, the Funds will only accept a foreign check drawn in U.S. dollars
issued by a foreign bank with a U.S. correspondent bank. The name of the U.S.
correspondent bank must be printed on the face of the check. Further
documentation may be requested from corporations, executors, administrators,
trustees, guardians, agents, or attorneys in fact.

WHAT YOU SHOULD KNOW ABOUT BUYING ADDITIONAL SHARES BY TELEPHONE

The Funds may, at their discretion, accept purchase orders from existing
shareholders by telephone, although the order is not accompanied by payment
for the shares being purchased. To receive the net asset value for a
specific day, a telephone purchase request must be received before the close
of the NYSE on that day. Payment for shares ordered in this way must be
received by the Funds' Transfer Agent within three business days after
acceptance of the order. If payment is not received on time, a Fund may
cancel the order and redeem the shares held in the shareholder's account to
compensate the Fund for any decline in the value of the purchased shares.

WHAT YOU SHOULD KNOW ABOUT BUYING SHARES THROUGH A FINANCIAL INTERMEDIARY

Shares of each Fund are offered through Financial Intermediaries,
including the following broker dealers: Charles Schwab & Company, Inc.
Mutual Fund OneSource-TM- Program; Fidelity Brokerage Services, Inc.
Funds-Network-TM-Program; Jack White & Company, Inc.; and Waterhouse
Securities, Inc. Some of the programs offered by these Financial
Intermediaries may impose certain conditions on your investment in the Funds
which are in addition to or different than those in this Prospectus, and may
charge you direct fees. Certain features described in this Prospectus, such
as initial and subsequent investment minimums, redemption fees and certain
trading restrictions, may be modified or waived in these programs, and
administrative charges may be imposed for the services rendered. Therefore,
you should contact your Financial Intermediary concerning the fees (if any)
charged in connection with a purchase or redemption of Fund shares and should
read this prospectus in light of the terms governing your account with the
Financial Intermediary.

Financial Intermediaries that have entered into agreements with the Fund
and/or its Distributor may enter confirmed purchase orders on behalf of
clients and customers, with payment to follow no later than the Funds'
pricing on the following business day. If payment is not received by such
time, the Financial Intermediary could be held liable for resulting fees and
losses.

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<PAGE>

HOW TO REDEEM YOUR SHARES

You may arrange to take money out of your account at any time by selling
(redeeming) some or all of your shares. Shares may be redeemed at any time,
without charge, at the net asset value per share next determined after receipt
by the Transfer Agent of a redemption request in proper form from the investor.
Payment for all shares redeemed will be made within three business days after
receipt of a redemption request in proper form except (as outlined by the 1940
Act) during a period when 1) trading on the NYSE is restricted or the NYSE is
closed for other than customary weekends and holidays, 2) the SEC has by order
permitted such suspension for the protection of the Fund's shareholders, or 3)
an emergency exists making disposal of portfolio securities or valuation of net
assets of the applicable class not reasonably practicable.

When a request for redemption is made shortly after the purchase of
shares, you will not receive the redemption proceeds until the check(s)
received for the shares purchased has cleared. Under such circumstances, it
may take as long as 15 days for a shareholder to receive the proceeds of a
redemption. You may avoid such delays by purchasing shares with a certified or
cashier's check, or by federal funds wire.

To redeem your shares in a non-retirement account, you may use any of the
methods described below. To sell shares in a retirement account, you should
contact Investor Services or your Financial Intermediary for special
instructions. For your protection, certain redemption requests may require a
signature guarantee. See "Special Situations-Signature Guarantee." You may
redeem shares in the following ways:

- Mail: To be in proper form, written requests for
redemption must include 1) the total dollar
value of shares or the total number of shares
to be redeemed, 2) theinvestor's account number,
3) the Fund's name and applicable class name,
and 4) the signature of each registered owner
exactly as the shares are registered, and 5) in
certain situations, a signature guarantee.
See "Special Situations-Signature Guarantee." The
Transfer Agent may require additional supporting
documents for redemptions made by corporations,
executors, administrators, trustees, or guardians.
A redemption request will not be deemed to have
been submitted until the Transfer Agent
receives all required documents in proper
form. All documents and correspondence
concerning redemptions should be sent to
Investor Services at the address listed
above under"INFORMATION YOU NEED TO KNOW TO
PURCHASE, REDEEM OR EXCHANGE SHARES."

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<PAGE>

- Telephone: Telephone redemptions may be made by calling the
Crabbe Huson "Instant Access" number, (800)
235-2442. See "Special Investor Services-Crabbe
Huson 'Instant Access.'" You may also redeem
shares by calling Investor Services at the
telephone number listed above under "INFORMATION
YOU NEED TO KNOW TO PURCHASE, REDEEM OR EXCHANGE
SHARES."

- Wire: Should you wish to receive instructions on how to
obtain your funds by wire, please call Investor
Services.

- Financial
Intermediaries: Shares may also be redeemed by telephone from
Financial Intermediaries who have entered into
sales agreements with the Distributor and/or the
Funds. Such redemption orders should be placed by
the Financial Intermediary with the Transfer
Agent. Shares will be redeemed at the net asset
value determined on a shareholder's trade date.
The three-day period within which the proceeds of
the redemption will be sent to the shareholder or
shareholder's Financial Intermediary will begin on
the day of the net asset value calculation, unless
the Transfer Agent has not received a written
request in proper form from the Financial
Intermediary by the third day. In that event, the
proceeds of the redemption will be sent to the
shareholder or the shareholder's Financial
Intermediary immediately upon the Transfer Agent's
receipt of the written request in proper form.
Financial Intermediaries are responsible for the
prompt transmittal of redemption orders to the
Transfer Agent. Financial Intermediaries not
affiliated with a Fund may charge a fee for
handling redemptions.

- Check Writing: If you have a checkbook for your account in the
U.S. Government Money Market Fund, you may write
checks on your account. The minimum amount of a
check is $500 and be sure that check is signed by
all required signatures as noted on the signature
card on file with the Transfer Agent.

If you are selling some but not all of your account shares, leave at least
$2,000 worth of shares in the account to keep it open (account minimums do not
apply to retirement accounts). See "Special Situations" in this prospectus.

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<PAGE>

HOW TO EXCHANGE YOUR SHARES

BEFORE MAKING AN EXCHANGE TO ANOTHER FUND, THE INVESTOR SHOULD READ THE
PROSPECTUS RELATING TO THE FUND OR FUNDS INTO WHICH SHARES ARE BEING EXCHANGED.

The proceeds from the redemption of your shares may be used to purchase
shares of any other Fund in every state in which the exchange may be made
legally, provided you may only exchange if the dollar value of the exchange is
sufficient to satisfy any minimum investment requirements in the new Fund. You
may only exchange between accounts that are registered in the same name,
address, and taxpayer identification number. The exchange privilege is a
standard option on all accounts. If you do not want this option, please mark
the appropriate box on the application. You may exchange shares in the
following ways:

- Exchange by
Mail: Any written exchange request, in proper form, may be
mailed or express mailed to the Transfer Agent to the
appropriate address listed above under "INFORMATION YOU
NEED TO KNOW TO PURCHASE, REDEEM OR EXCHANGE YOUR
SHARES."

- Exchange by
Telephone: Telephone exchanges may be made by calling the Crabbe
Huson "Instant Access" number, (800) 235-2442. See
"Special Investor Services-Crabbe Huson 'Instant
Access.'" You may also exchange shares by telephone by
contacting Investor Services at the number listed above
under "INFORMATION YOU NEED TO KNOW TO PURCHASE, REDEEM
OR EXCHANGE YOUR SHARES."

The exchange of shares of the Fund for shares of another fund is treated
for federal and state income tax purposes as a sale on which an investor may
realize a capital gain or loss.

Excessive trading can hurt Fund performance. Each Fund reserves the right
to terminate or modify the exchange privilege applicable to all shareholders at
any time upon 60 days' notice. This exchange privilege may be temporarily or
permanently suspended with respect to any shareholder that engages in more than
ten exchanges in any 12-month period.

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<PAGE>

WHAT YOU SHOULD KNOW ABOUT TELEPHONE TRANSACTIONS

Each Fund, the Adviser and the Transfer Agent will employ reasonable
procedures to confirm that instructions communicated by telephone are properly
authorized. The failure of a Fund to do so may result in the Fund being liable
for losses due to unauthorized or fraudulent telephone transactions. However,
a Fund, the Adviser and the Transfer Agent will not be liable for executing
telephonic instructions that are deemed to be authorized after following
reasonable procedures. Such reasonable procedures include providing written
confirmation of telephone transactions, tape recording telephone instructions,
and requiring specific personal information prior to acting upon telephone
instructions. Furthermore, in order to use the Instant Access Automated
Information Service instituted by the Funds you must provide a 4-digit Personal
Identification Number.

WHEN TRANSACTIONS ARE RECORDED IN YOUR ACCOUNT

Your trade date is the date when transactions are recorded in your
account. Your shares are purchased, redeemed or exchanged at the net asset
value determined on your trade date.

STATEMENTS

You will receive a quarterly summary of all account activity for the most
recent calendar quarter and an annual statement which includes all activity
during the most recent year. You will also receive a statement of account after
any transaction that affects your share balance or share registration, other
than for the reinvestment of dividends or distributions or investments made
through the Systematic Exchange or Invest-O-Matic programs discussed below. See
"SPECIAL SERVICES." These transactions will be included in your next quarterly
or annual statement. In addition to the annual statement, you will also
receive, in January, a full report of your account activity during the prior
year for tax reporting purposes.

SPECIAL SITUATIONS

SIGNATURE GUARANTEE. A signature guarantee is designed to protect you and
the Funds from fraudulent transactions by unauthorized persons. In the
following instances, the Funds will require a signature guarantee for all
authorized owners of an account:

- you wish to redeem more than $15,000 worth of shares;

- the redemption proceeds are to be sent to a different name or address
than is registered on your account;

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<PAGE>

- you wish to add the check writing feature, the Systematic Withdrawal
program or make a change in your bank information after you have
opened an account.

A signature guarantee may be obtained from any eligible guarantor
institution, as defined by the SEC. These institutions include banks, savings
associations, credit unions, brokerage firms and others. A notary public stamp
or seal is not acceptable.

INVOLUNTARY REDEMPTIONS. In order to reduce expenses, if the shares in
your account other than a tax-deferred retirement account, are worth less than
$2,000, the Fund may elect to redeem such shares and close the account. You
will receive 60 days' prior written notice in which to purchase additional
shares to avoid such redemption. Additionally, any Fund may compel the
redemption of shares if, in its opinion, such action would prevent the fund
from becoming a personal holding company, as defined by the Code.

SPECIAL SERVICES

INVEST-O-MATIC: With Invest-O-Matic, you may make regular monthly
purchases of shares in amounts as little as $100 via an automatic debit to a
bank account. Invest-O-Matic accounts may be modified or terminated by you at
any time.

SYSTEMATIC EXCHANGE: Systematic Exchange allows you to make regular,
systematic exchanges of at least $100 from one Crabbe Huson Fund into another
Crabbe Huson account. When you establish a systematic exchange program, you
authorize the Fund, the Transfer Agent and their agents to sell shares at a set
dollar amount or number of shares from the first account and purchase shares of
a second Crabbe Huson Fund. An exchange transaction is a sale and purchase of
shares for federal income tax purposes and may result in a gain or loss. To
establish this program, you may call your Financial Intermediary or Investor
Services at (800) 541-9732. For further details concerning this program, see
the Statement of Additional Information.

CRABBE HUSON "INSTANT ACCESS": By calling (800) 235-2442, you can receive
account information, purchase, redeem and exchange Fund Shares. If you desire
to purchase additional shares or to redeem through the "Instant Access" system,
you must provide the Fund with current A.C.H. (automated clearing house)
information. The daily maximum redemption through use of the "Instant Access"
system is $100,000. If you purchase shares through the "Instant Access" system
and your purchase is made prior to 4:00 p.m. Eastern time, your purchase shall
take place on the following business day at the net asset value as determined
on that day. If your purchase occurs after 4:00 p.m. Eastern time, your
purchase shall take place on the second business day at the net asset value as
determined on that day.

SYSTEMATIC WITHDRAWAL PLAN: If you own shares with a total value of not
less than $5,000 you may participate in a systematic withdrawal plan providing
for fixed

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<PAGE>

payments to you of $100 or more at regular monthly intervals (the "Systematic
Withdrawal Plan"). You may realize a capital gain or loss on each fixed-amount
payment. Additional information concerning the Systematic Withdrawal Plan is
set forth in the Statement of Additional Information. If you desire to
participate in the Systematic Withdrawal Plan, you may do so by completing and
submitting the appropriate application to the Transfer Agent. The Systematic
Withdrawal Plan is voluntary and may be terminated at any time by the
shareholder.

CHECK WRITING: The U.S. Government Money Market Fund offers check
writing. You may write checks of not less than $500 per check. A check must be
signed by all parties listed on the signature card as required signatures.

DIVIDENDS, CAPITAL GAINS, TAXES

Each Fund distributes substantially all of its net investment income and
capital gains (if any) to shareholders each year. Each Fund declares and
distributes realized capital gains, if any, to shareholders in December.
Dividends for the Special, Small Cap, and Equity Funds are distributed in
December. Dividends for the Real Estate and Asset Allocation Funds are
distributed on the last business day of each fiscal quarter. Dividends for the
Income and U.S. Government Income Funds are distributed on the last business
day of each month. Dividends on the Oregon Tax-Free and U.S. Government Money
Market Funds are declared daily and paid monthly. With respect to the Oregon
Tax-Free Fund and the U.S. Government Money Market Fund, when the last day of
the month occurs on a Saturday, Sunday or holiday, dividends are accrued
through the last day of the month and paid on the last business day of the
month.

On the date the dividends or capital gains are declared, they will
automatically be reinvested in additional shares of the same class of your Fund
unless you have elected to receive payments in cash. You may elect the option
to receive your distributions in cash by so specifying on your application.

Each Fund intends to qualify each year as a "regulated investment company"
under the Code so it will not pay federal taxes on either income or capital
gains distributed to shareholders, although there can be no assurance that they
will so qualify.

Each Fund will be subject to a 4% excise tax on a portion of its
undistributed income if they fail to meet certain annual distribution
requirements. Each Fund intends to make distributions in a timely manner and,
accordingly, does not expect to be subject to the excise tax.

For federal income tax purposes, all distributions are reportable as
taxable income whether a shareholder elects to take them in cash or reinvest
them in additional shares of a Fund.

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<PAGE>

Distributions representing net investment income (including short-term
capital gains) are taxable as ordinary income. Distributions derived from net
long-term capital gains that are properly designated by a Fund as such will be
taxable to shareholders as long-term capital gains, regardless of how long the
shareholder has held the shares.

Under the Revenue Reconciliation Act of 1993 (the "Act"), potentially
favorable income tax treatment on distributions representing long-term capital
gains has been restored, effective for tax years beginning after 1992. Under
the Act, ordinary income may be taxed at marginal rates significantly (up to
11.6%) higher than the marginal rate at which long-term capital gains are
taxed. Accordingly, distributions representing net long-term capital gains may
be subject to a reduced rate of tax to shareholders.

The Special Fund may engage in short sales of securities. In general, a
short sale is a contract for the sale of a security that the seller does not
own or does not desire to transfer. The seller, therefore, borrows the
security to be delivered to the buyer. At a later date, the seller either (i)
purchases an identical quantity of the same security previously sold by him so
that he can "cover" the sale and delivers the security to the lender or (ii)
delivers the security which he already held but did not desire to transfer at
the earlier date. A short sale is consummated, or closed, upon the seller's
delivery of the security to the lender. The seller's gain or loss will be
measured by the difference between the amount he received upon his short sale
of the security and the amount he paid for the security ultimately used to
cover the sale. The seller's gain/loss will be realized when the short sale is
closed, not when the seller sells short and is paid by the purchaser of the
security. The Code contains various provisions governing, among other things,
the characterization of short sale gain/loss as ordinary gain/loss or capital
gain/loss and the treatment of short sale capital gain/loss as long-term
gain/loss or short-term gain/loss. The Special Fund will annually provide
shareholders with a statement concerning the appropriate characterization of
any distributions of gains or losses. Shareholders are therefore urged to
consult their own tax advisers.

Shareholders may be subject to a $50 penalty under the Internal Revenue
Code and the Funds may be required to withhold and remit to the U.S. Treasury a
portion (31%) of any redemption or repurchase proceeds (including the value of
shares exchanged into another fund for whom the Adviser acts as Adviser) and of
any dividend or distribution on any account, where the shareholder failed to
provide a correct taxpayer identification number or to make certain required
certifications.

The foregoing relates only to federal income tax consequences for
shareholders who are U.S. citizens or corporations. Shareholders should
consult their own tax advisers regarding these matters, and regarding state,
local, and other applicable tax laws.

Each Fund will issue annually, in January, a full report to each
shareholder detailing the tax status of each distribution to the shareholder
during the calendar year. The Funds do not assume any responsibility for the
calculation of any taxable gain (or loss) from the

-51-

<PAGE>

purchase and sale of Fund shares, including purchases made with reinvested
dividends and/or capital gains. Every shareholder should consult with their tax
adviser concerning such calculations and tax consequences.

Each Fund will be treated as a separate entity and thus the provisions of
the Code applicable to registered investment companies generally will be
applied to each fund separately instead of the Trust as a whole. Net capital
gains, net investment income and operating expenses will be determined
separately for each Fund.

OREGON TAX-FREE FUND

The Oregon Tax-Free Fund intends to qualify under Subchapter M of the Code
each fiscal year to allow it to pay "exempt interest dividends" to its
shareholders. Shareholders receiving distributions properly designated by the
Oregon Tax-Free Fund as exempt interest dividends representing net tax-exempt
interest received on municipal securities will not be required to include such
distributions in their gross income for federal income tax purposes. However,
a portion of the interest dividends earned by the Oregon Tax-Free Fund may be
subject to the federal alternative minimum tax. Distributions representing net
taxable income of the Oregon Tax-Free Fund from sources other than municipal
securities, such as temporary investments and income from securities loans, or
capital gains, will be taxable to shareholders as ordinary income.

The Oregon Tax-Free Fund anticipates that distributions which represent
tax-exempt interest on municipal securities issued by the state of Oregon and
its political subdivisions, agencies, authorities and instrumentalities will
not be subject to the Oregon personal income tax. However, it is expected that
other types of income received from the Oregon Tax-Free Fund will be subject to
the Oregon personal income tax. The Oregon Tax-Free Fund anticipates that
corporations which are subject to the Oregon corporation excise tax will be
subject to that tax on all income from the Oregon Tax-Free Fund, including
income that is exempt from federal income taxes.

Shareholders of the Oregon Tax-Free Fund that are obligated to pay state
or local taxes outside Oregon may be required to pay such taxes on
distributions from the Oregon Tax-Free Fund, even if such distributions are
exempt from federal and Oregon income taxes.

Statements regarding the federal income tax status of each shareholder's
dividends and distributions will be mailed annually.

Interest on indebtedness incurred or continued by a shareholder to
purchase or carry shares of the Oregon Tax-Free Fund will not be deductible for
federal income tax purposes.

-52-

<PAGE>

APPENDIX A

BOND RATING AGENCIES

The following is a description of the bond ratings employed by Moody's
Investors Service, Inc. ("Moody's").

Aaa: Bonds rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or exceptionally stable
margin, and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are unlikely to impair the
fundamentally strong position of such issues.

Aa: Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present that make the long-term risks appear somewhat larger than in Aaa
securities.

A: Bonds rated A possess many favorable investment attributes and are to
be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
that suggest a susceptibility to impairment sometime in the future.

Baa: Bonds rated Baa are considered as medium-grade obligations (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well.

Ba: Bonds rated Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often ~the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.

B: Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.

Caa: Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.

Ca: Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.

C: Bonds rated C are the lowest rated class of bonds and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.

Moody's applies the numerical modifiers "1", "2", and "3" in each generic
rating classification from Aa through B. The modifier "1" indicates that the
security ranks in the higher end of its generic rating category; the modifier
"2" indicates a mid-range ranking; and the modifier "3" indicates that the
issue ranks in the lower end of its generic rating category.

The following is a description of the bond ratings employed by Standards &
Poor's Corporation ("S&P").

AAA: Bonds rated AAA are highest-grade obligations. Capacity to pay
interest and repay principal is extremely strong.

AA: Bonds rated AA have a very strong capacity to pay interest and repay
principal, and differ from the highest rated issues only in small degree.

-53-

<PAGE>

A: Bonds rated A have a strong capacity to pay interest and repay
principal, although they are somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than debt in higher rated
categories.

BBB: Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds
in this category than for bonds in higher rated categories.

BB, B, CCC, CC, C: Debt rated BB, B, CCC, CC, and C is regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and C the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.

BB: Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.

B: Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
BB or BB- rating.

CCC: Debt rated CCC has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial and economic
conditions to meet timely payment of interest and repayment of principal. In
the event of adverse business, financial, or economic conditions, it is not
likely to have the capacity to pay interest and repay principal. The CCC
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied B or B- rating.

CC: The rating CC is typically applied to debt subordinated to senior
debt that is assigned an actual or implied CCC rating.

C: The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating. The C rating may be
used to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.

C1: The rating C1 is reserved for income bonds on which no interest is
being paid.

D: Debt rated D is in payment default. The D rating category is used
when interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The D rating also will be used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.

C: Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarding as having extremely poor prospects of ever
attaining any real investment standing.

The S&P letter rating may be modified by the addition of a plus (+) or
minus sign (-), which is used to show relative standing within rating
categories between AA to CCC.

From time to time a bond rating agency may adjust its rating of a
particular bond issue. Subsequent to a Fund's purchase of a bond, such a bond
may have its rating reduced (down graded) to a category not permitted to be
owned by that Fund, or it may cease to be rated. Neither case would require
that a Fund eliminate such a bond from its portfolio. However, the Fund's
Adviser will consider such an event in determining whether or not the Fund
should continue to hold such a security.

-54-

<PAGE>

APPENDIX B

HEDGING INSTRUMENTS:

OPTIONS ON EQUITY AND DEBT SECURITIES -- A call option is a short-term
contract pursuant to which the purchaser of the option, in return for a
premium, has the right to buy the security underlying the option at a specified
price at any time during the term of the option. The writer of the call
option, who receives the premium, has the obligation, upon exercise of the
option during the option term, to deliver the underlying security against
payment of the exercise price. A put option is a similar contract that gives
its purchaser, in return for a premium, the right to sell the underlying
security at a specified price during the option term. The writer of the put
option, who receives the premium, has the obligation, upon exercise of the
option during the option term, to buy the underlying security at the exercise
price.

OPTIONS ON SECURITIES INDICES -- A securities index assigns relative
values to the securities included in the index and fluctuates with changes in
the market values of those securities. An index option operates in the same
way as a more traditional stock option, except that exercise of an index option
is effected with cash payment and does not involve delivery of securities.
Thus, upon exercise of an index option, the purchase will realize, and the
writer will pay, an amount based on the difference between the exercise price
and the closing price of the index.

STOCK INDEX FUTURES CONTRACTS -- A stock index futures contract is a
bilateral agreement pursuant to which one party agrees to accept, and the other
party agrees to make, delivery of an amount of cash equal to a specified dollar
amount times the difference between the stock index value at the close of
trading of the contract and the price at which the futures contract is
originally struck. No physical delivery of the stocks comprising the index is
made. Generally, contracts are closed out prior to the expiration date of the
contract.

INTEREST RATE FUTURES CONTRACTS -- Interest rate futures contracts are
bilateral agreements pursuant to which one party agrees to make, and the other
party agrees to accept, delivery of a specified type of debt security at a
specified future time and at a specified price. Although such futures
contracts by their terms call for actual delivery or acceptance of debt
securities, in most cases the contracts are closed out before the settlement
date without the making or taking of delivery.

OPTIONS ON FUTURES CONTRACTS -- Options on futures contracts are similar
to options on securities or currency, except that an option on a futures
contract gives the purchaser the right, in return for the premium, to assume a
position in a futures contract (a long position if the option is a call and a
short position if the option is a put), rather than to purchase or sell a
security or currency, at a specified price at any time during the option term.
Upon exercise of the option, the delivery of the futures position to the holder
of the option will be accompanied by delivery of the accumulated balance that
represents the amount by which the market price of the futures contract
exceeds, in the case of a call, or is less than, in the case of a put, the
exercise price of the option on the future. The writer of an option, upon
exercise, will assume a short position in the case of a call and a long
position in the case of a put.

Purchase of these financial instruments allows the Adviser to hedge
against changes in market conditions. For example, the Adviser may purchase a
put option in a securities index or when it believes that the stock prices will
decline. Conversely, the Adviser may purchase a call option in a securities
index when it anticipates that stock prices will increase.

f:\77\773126\47\prosp-08.doc

-55-

<PAGE>

No person has been authorized to
give any information or make any
representations not contained in
this Prospectus, or in the
Statement of Additional
Information incorporated herein by
reference, in connection with the
offering made by this Prospectus
and, if given or made, such
representations must not be relied
upon as having been authorized by
the Funds or their Distributor.
This Prospectus does not
constitute an offering by the
Funds or by their Distributor in
any jurisdiction in which such
offering may not lawfully be made.

TABLE OF CONTENTS
Page
----

SUMMARY OF KEY INFORMATION. . .-3-

EXPENSE DATA. . . . . . . . . .-4-

FINANCIAL HIGHLIGHTS. . . . . .-7-

INVESTMENT OBJECTIVE AND
POLICIES . . . . . . . . -13-

FUNDAMENTAL POLICIES. . . . . -20-

CHARACTERISTICS, RISKS OF
SECURITIES AND
INVESTMENT TECHNIQUES. . -22-

MANAGEMENT OF THE FUNDS . . . -33-

CONTROL PERSONS . . . . . . . -37-

NET ASSET VALUE . . . . . . . -37-

PERFORMANCE COMPARISONS . . . -38-

ALLOCATION OF BROKERAGE . . . -39-

CAPITAL STRUCTURE . . . . . . -40-

YIELD . . . . . . . . . . . . -41-

INVESTOR SERVICES . . . . . . -41-

WHEN TRANSACTIONS ARE
RECORDED IN YOUR ACCOUNT -48-

STATEMENTS. . . . . . . . . . -48-

SPECIAL SITUATIONS. . . . . . -48-

SPECIAL SERVICES. . . . . . . -49-

DIVIDENDS, CAPITAL GAINS,
TAXES. . . . . . . . . . -50-

APPENDIX A. . . . . . . . . . -53-

APPENDIX B. . . . . . . . . . -55-

CRABBE HUSON FUNDS

Crabbe Huson Special Fund

Crabbe Huson Small Cap Fund

Crabbe Huson Real Estate Fund

Crabbe Huson Equity Fund

Crabbe Huson Asset Allocation Fund

Crabbe Huson Oregon Tax-Free Fund

Crabbe Huson Income Fund

Crabbe Huson U.S. Government
Income Fund

Crabbe Huson Money Market Fund, Inc.

Prospectus

August, 1996

<PAGE>

CRABBE HUSON FUNDS
(Institutional Class)

Cross-Reference Sheet Showing Location in Prospectus and
Statement of Additional Information of
Information Required by Items of the Registration Form

<TABLE>
<CAPTION>
Form N-1A Item Number and Caption Location
- --------------------------------- --------
<S> <C> <C>
Part A
- ------
1 Cover Page . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cover Page

2 Synopsis

2(a) Shareholder Transaction Expenses . . . . . . . . . . . . . . . . . . . . . Expense Data

2(b)+(c) Synopsis of Prospectus . . . . . . . . . . . . . . . . . . . Summary of Key Information

3 Condensed Financial Information

3(a) Per Share Income & Capital Changes . . . . . . . . . . . . . . . . . . . Not Applicable

3(b) Debt History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable

3(c) Performance Data . . . . . . . . . . . . . . . . . . . . Performance Comparisons; Yield

4 General Description of Registrant

4(a)(i) Organization . . . . . . . . . Investment Objectives and Policies; Fundamental Policies

4(a)(ii) Investment Objectives and Policies . . . . . . . . Investment Objectives and Policies;
Fundamental Policies

4(b) Other Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable

4(c) Risk Factors . . . . . . Characteristics, Risks of Securities and Investment Techniques

5 Management of the Fund

5(a) Board of Directors . . . . . . . . . . . . . . . . . . . . . . .Management of the Funds

5(b)(i) Investment Advisor . . . . . . . . . . . . . . . . . . . . . . .Management of the Funds

5(b)(ii) Services of Investment Advisor . . . . . . . . . . . . . . . . .Management of the Funds

<PAGE>

Form N-1A Item Number and Caption Location
- --------------------------------- --------
<S> <C> <C>

5(b)(iii) Compensation of Advisor . . . . . . . . . . . . . . . . . . . . Management of the Funds

5(c) Portfolio Manager(s) . . . . . . . . . . . . . . . . . . . . . .Management of the Funds

5(d) Other Management Services. . . . . . . . . . . . . . . . . . . . . . . . Not Applicable

5(e) Transfer Agent, Dividend Paying Agent. . . . . . . . . . . . . .Management of the Funds

5(f) Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .Management of the Funds

5(g)(i) Brokerage Commissions. . . . . . . . . . . . . . . . . . . . . .Allocation of Brokerage

5(g)(ii) Allocation of Brokerage . . . . . . . . . . . . . . . . . . . . Allocation of Brokerage

5A Management's Discussion of Fund Performance. . . . . . . . . . . . . . . Not Applicable

6 Capital Stock and Other Securities

6(a) Rights and Restrictions. . . . . . . . . . . . . . . . . . . . . . . .Capital Structure

6(b) Control Persons. . . . . . . . . . . . . . . . . . . . . . . . . . . . .Control Persons

6(c) Changes in Rights of Holders . . . . . . . . . . . . . . . . . . . . .Capital Structure

6(d) Other Classes of Securities. . . . . . . . . . . . . . . . . . . . . . . Not Applicable

6(e) Shareholder Inquiries. . . . . . . . . . . . . . . . . . . . . . . . .Investor Services

6(f) Dividends and Distributions . . . . . . . . . . . . . . . . . . . . . Capital Structure

6(g) Taxes. . . . . . . . . . . . . . . . . . . . . . . . . .Dividends, Capital Gains, Taxes

7 Purchase of Securities Being Offered

7(a) Underwriter . . . . . . . . . . . . . . . . . . . . . . . . How to Purchase Your Shares

7(b) Determination of Offering Price. . . . . . . . . . . . . . . . . . . . .Net Asset Value

7(c) Special Plans. . . . . . . . . . . . . . . . . . . . . . . How to Purchase Your Shares;
Investor Services;
Special Services - Systematic Exchange

<PAGE>

Form N-1A Item Number and Caption Location
- --------------------------------- --------
<S> <C> <C>

7(d) Minimum Investment. . . . .Investor Services--Information You Need to Know to Purchase,
Redeem or Exchange Shares--Minimum Investment

7(e) Trail Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable

7(f) 12b-1 Fees . . . . . . . . . . . Statement of Additional Information--Distribution Plan

8 Redemption or Repurchase

8(a) Redemption Procedures and Charges. . . . . . . . . . . . . . How to Redeem Your Shares;
How to Exchange Your Shares;
Redemption or Exchange by Telephone

8(b) Repurchase through Broker-Dealer . . . . . . . . . . . . . . . How to Sell Your Shares;
How to Exchange Your Shares

8(c) Involuntary Redemption . . . . . . . . . . Special Situations--Involuntary Conversion;
Involuntary Redemption

8(d) Delay of Redemption . . . . . . . . . . . . . . . . . . . . . How to Redeem Your Shares

9 Pending Legal Proceeding . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable

Part B
- ------

10 Cover Page . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cover Page

11 Table of Contents. . . . . . . . . . . . . . . . . . . . . . . . . . .Table of Contents

12 General Information and History. . . . . . . . . . . . . . . . . . .General Information

13 Investment Objectives and Policies . . Prospectus - Investment Objectives and Policies;
Fundamental Policies;
Statement of Additional Information - Investment Restrictions

13(a) Description. . . . . . . . . . . . . . Prospectus - Investment Objectives and Policies;
Fundamental Policies;
Statement of Additional Information - Investment Restrictions

13(b) Fundamental Policies . . . . . . . . . . . . . . . . . . . . . Investment Restrictions;
Loans of Portfolio Securities

<PAGE>

Form N-1A Item Number and Caption Location
- --------------------------------- --------
<S> <C> <C>

13(c) Significant Policies . . . . . . . . . Prospectus - Investment Objectives and Policies;
Fundamental Policies

13(d) Portfolio Turnover . . . . . . . . . . . . .Portfolio Transactions - Portfolio Turnover

14 Management of the Fund

14(a) Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . Management

14(b) Positions with Affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . Management

14(c) Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Management

15 Control Persons and Principal Holders of Securities

15(a) Names and Addresses of Control Persons . . . . . . . . . . . . . . .Control Persons and
Principal Holders of Securities

15(b) Ownership of Fund. . . . . . . . . . . . . . . . . . . . . . . . . .Control Persons and
Principal Holders of Securities

15(c) Stock Holdings of Officers and Directors . . . . . . . . . . . . . .Control Persons and
Principal Holders of Securities

16 Investment Advisory and Other Services . . . . . .Prospectus - Management of the Funds;
Statement of Additional Information - Services Provided by the Advisor

16(a)(i) Control Persons of the Advisor . . . . . . . . . .Prospectus - Management of the Funds;
Statement of Additional Information - Services Provided by the Advisor

16(a)(ii) Affiliates of Registrant and Advisor . . . . . . .Prospectus - Management of the Funds;
Statement of Additional Information - Services Provided by the Advisor

16(a)(iii) Advisory Fee . . . . . . . . . . . . . . . . . . .Prospectus - Management of the Funds;
Statement of Additional Information - Services Provided by the Advisor

16(b) Services of Advisor . . . . . . . . . . . . . . . . . .Services Provided by the Advisor

16(c) Fees and Expenses. . . . . . . . . . . . . . . . . . . Services Provided by the Advisor

16(d) Other Management-Related Contracts . . . . . . . . . . . . . . .Administration Contract

16(e) Other Persons Furnishing Advice for Compensation . . . . . . . . . . . . Not Applicable

<PAGE>

Form N-1A Item Number and Caption Location
- --------------------------------- --------
<S> <C> <C>

16(f) Expenses of Distribution of Shares
Borne by Registrant . . . . . . . . . . . . . . . . .Services Provided by the Advisor;
Distribution Plan

16(g) Nonbank or Nontrust Custodial Services . . . . . . . . . . . . . . . . .Not Applicable

16(h) Custodian; Independent Public Accountant;
Transfer Agent . . . . . . . . . . . . . . . . . .Auditors; Custodian, Transfer Agent,
and Dividend - Disbursing Agent

17 Brokerage and other Allocations

17(a) Effecting Transactions in Portfolio Securities . . . . . . . . .Portfolio Transactions

17(b) Payments of Commissions to Affiliates . . . . . . . . . . . . . . . . . Not Applicable

17(c) Selection of Brokers . . . . . . . . . . . . . . . . . . . . . .Portfolio Transactions

17(d) Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable

17(e) Acquisition of Broker's Securities . . . . . . . . . . . . . . . . . . .Not Applicable

18 Capital Stock and Other Securities

18(a) Right of Each Class of Stock . . . . . . . . . . . . . . . . . . . General Information

18(b) Securities Other than Capital Stock. . . . . . . . . . . . . . . . . . .Not Applicable

18(f) Exemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable

19 Purchase, Redemption and Pricing of Securities Being Offered

19(a) Manner of Offering . . . . . . . . . . . . . . .Purchase and Redemption of Fund Shares

19(b) Valuation of Securities and Assets . . . . . . . . . . . . . . . Pricing of Securities
Being Offered

19(c)

20 Tax Status . . . . . . . . . . . . . . . .Prospectus - Dividends, Capital Gains, Taxes

21 Underwriters

<PAGE>

Form N-1A Item Number and Caption Location
- --------------------------------- --------
<S> <C> <C>

21(a)(i) Nature of Underwriting Obligation . . . . . . Prospectus - How to Purchase Your Shares

21(a)(ii) Continuous Offering . . . . . . . . . . . . . Prospectus - How to Purchase Your Shares

21(a)(iii) Prior Compensation of Underwriter . . . . . . . . . . . . . . . . . . . Not Applicable

21(b) Compensation to Affiliated Underwriters. . . . . . . . . . . . . . . . Not Applicable

21(c) Other Payments to Underwriters and Dealers . . . . . . . . . . . . . . Not Applicable

22 Calculation of Performance Data

22(a) Money Market Funds . . . . . . . . . . . . . . . . . . . . . . . . . . .Not Applicable

22(b)(i) Total Return . . . . . . . . . . . . . . . . . . . . . . . . . . Yield and Performance

22(b)(ii) Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Yield and performance

22(b)(iii) Tax Equivalent Yield . . . . . . . . . . . . . . . . . . . . . . Yield and Performance

23 Financial Statements . . . . . . . . . . . . . . . . . . . . . . .Financial Statements

</TABLE>

<PAGE>
__________________________________________________

CRABBE HUSON
FUNDS
(Institutional Class)
___________________________________________________

Crabbe Huson Small Cap Fund
Crabbe Huson Asset Allocation Fund
Crabbe Huson Equity Fund

MAILING ADDRESS
CRABBE HUSON FUNDS
P.O. Box 8413
Boston, MA 02266-8413

INVESTMENT ADVISER
The Crabbe Huson Group, Inc.
121 S.W. Morrison, Suite 1400
Portland, OR 97204

DISTRIBUTOR
Crabbe Huson Securities, Inc.
121 S.W. Morrison, Suite 1400
Portland, OR 97204

LEGAL COUNSEL
Davis Wright Tremaine
1300 S.W. Fifth Avenue, Suite 2300
Portland, OR 97201

INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
1211 S.W. Fifth Avenue, Suite 2000
Portland, OR 97204

TRANSFER AGENT & INVESTOR SERVICES
State Street Bank and Trust Company
P.O. Box 8413
Boston, MA 02266-8413

FUND TRUSTEES
Gary L. Capps
James E. Crabbe
Richard S. Huson
Louis Scherzer
Bob L. Smith
Craig P. Stuvland
Richard P. Wollenberg
William W. Wyatt, Jr.

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___________________

PROSPECTUS
AUGUST __, 1996
___________________

Shares of the Institutional Class of the following three mutual funds
(individually, a "Fund" and, collectively, the "Funds") are offered in this
Prospectus:

- Crabbe Huson Small Cap Fund
- Crabbe Huson Equity Fund
- Crabbe Huson Asset Allocation Fund

Each Fund's shares offered in this Prospectus are sold at net asset value with
no sales load.

This Prospectus concisely sets forth information about the Funds an
investor ought to know, and should be retained for future reference. A
Statement of Additional Information dated August _____, 1996 has been filed
with the Securities and Exchange Commission (the "SEC"). It may be obtained
free of charge by calling (800) 541-9732. The Statement of Additional
Information, as it may be supplemented from time to time, is incorporated by
reference in this Prospectus. Each Fund has its own investment objectives and
policies designed to meet different investment goals. As is the case for all
mutual funds, attainment of each Fund's investment objective cannot be assured.

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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

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A COPY OF THIS PROSPECTUS MUST BE DELIVERED TO RESIDENTS OF CERTAIN STATES
PRIOR TO CONSUMMATION OF A SALE OF SHARES IN THE FUND.

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SUMMARY OF KEY INFORMATION

The information below is qualified in its entirety by the detailed
information appearing elsewhere in this Prospectus and in the Funds' Statement
of Additional Information.

CRABBE HUSON SMALL CAP FUND (the "Small Cap Fund") seeks to provide
long-term capital appreciation. It pursues this objective through a flexible
policy of investing in a diversified portfolio of carefully selected stocks
that have small market capitalization.

CRABBE HUSON EQUITY FUND (the "Equity Fund") seeks to provide long-term
capital appreciation. It pursues this objective by investing in a diversified
portfolio of common stocks which are widely and actively traded and that have
large market capitalizations.

Each of the Funds is a separate series of the Crabbe Huson Funds, a
Delaware business trust operating as an open-end management investment company.
Each fund operates as a diversified fund. The Funds are managed by The Crabbe
Huson Group, Inc. (the "Adviser").

Shares of the Funds may be purchased directly from the Funds by investors
such as pension and profit sharing plans, employee benefit trusts, endowments,
foundations, corporations and high net worth individuals, or through certain
broker-dealers, financial institutions, and other financial intermediaries who
have entered into agreements with the Fund (collectively, "Financial
Intermediaries"). For information about how to purchase, redeem or exchange
shares of the Funds, see "INVESTOR SERVICES" in this Prospectus.

The Institutional Class of shares of each Fund is offered pursuant to this
Prospectus. Each of the Funds offer or intend to offer additional classes of
shares to investors eligible to purchase those shares, including shares of a
Primary Class, currently offered by each Fund. Each class of shares has or
will have different fees and expenses than the class of shares offered by this
Prospectus and those different fees and expenses may affect performance. To
obtain information concerning the other class of shares not offered in this
Prospectus, call (800) 541-9732 or contact your Financial Intermediary.

Because the Funds have the same adviser, officers and trustees and have
similar investment privileges, the Funds believe you will find this combined
Prospectus useful and informative in understanding the important features of
the Funds and their similarities and differences. Although each Fund is
offering only its own shares and is not participating in the sale of the shares
of the other Funds, it is possible that a Fund might become liable for any
misstatement, inaccuracy or incomplete disclosure in the Prospectus concerning
the Funds.

Each of the Funds is subject to the risks of investments in common stock,
principally that the prices of stocks can fluctuate dramatically in response to
company, market, or economic news. The Equity and Asset Allocation Funds
historically have had turnover rates in their portfolios in excess of 75% per
year, resulting in potentially higher brokerage costs and the potential loss of
advantageous long-term capital gain treatment for tax purposes. See "Taxes"
and "Allocation of Brokerage." In addition, each of the Funds may invest up to
35% of its total assets in securities issued by foreign issuers. The Small Cap
Fund has a limited operating history. For additional information about
specific risk factors associated with an investment in each of the Funds, see
"CHARACTERISTICS AND RISKS OF SECURITIES AND INVESTMENT TECHNIQUES."

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EXPENSE DATA

The following information is provided in order to help you understand the
various costs and expenses that you as an investor in the Funds, will bear,
directly or indirectly.

SHAREHOLDER TRANSACTION EXPENSES

Maximum Sales Load Imposed NONE
on Purchases

Maximum Sales Load Imposed on NONE
Reinvested Dividends

Deferred Sales Load NONE

Redemption Fees NONE

Exchange Fees NONE

ANNUAL FUND OPERATING EXPENSES(1)
(as a percentage of average net assets)

Small Asset
Cap Equity Allocation
Fund(1) Fund Fund
Management Fees (after waiver) .95% .90% .96%

12b(1) Fees none none none

Other Expenses (after .40% .25% .19%
reimbursement)

Total Fund Operating Expenses 1.15% 1.15% 1.15%
(after reimbursement
or waiver)(2)

EXAMPLE: Assuming, hypothetically, that each Fund's annual return is 5% and
that its operating expenses are as set forth above, an investor buying
$1,000 of a Fund's shares would have paid the following total expenses
upon redeeming such shares:(3)

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Small Cap Fund $12 37 64 140
Equity Fund 12 37 64 140
Asset Allocation Fund 12 37 64 140

(1) The percentages as set forth in the table under the caption "Other
Expenses" have been estimated based upon the expected asset levels and the
amount of expenses to be incurred during the current fiscal period ending
October 31, 1996.

(2) For the fiscal year ending October 31, 1997, the Adviser has agreed to
reimburse "Other Expenses" of each Fund to the extent Total Fund Operating
Expenses exceed 1.15%. Under this arrangement, the Adviser will reimburse
"Other Expenses" in order to limit Total Fund Operating expenses to 1.15%
of the Funds' average daily net assets.

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(3) THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
FUND EXPENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESSER
THAN THOSE SHOWN. MOREOVER, WHILE THE TABLE ASSUMES A 5% ANNUAL RETURN,
THE FUNDS' ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL RETURN
GREATER OR LESSER THAN 5%.

INVESTMENT OBJECTIVE AND POLICIES

Each Fund's investment objective is discussed below in connection with the
Fund's investment policies. The descriptions are designed to help you choose
the Fund that best fits your investment objective. You may want to pursue more
than one objective by investing in more than one of the Funds. Because of the
risks inherent in all investments, there can be no assurance that the Funds
will meet their objectives.

Each Fund follows a basic value, contrarian approach in selecting stocks
for its portfolio. The Funds put primary emphasis on balance sheet and cash
flow analysis and on the relationship between the market price of a security
and its value as a share of an ongoing business. These investments represent
"special" situations or opportunities that arise when companies, whose
long-term financial structure is intact, run into short-term difficulties that
present an opportunity to buy these companies' stocks at substantial discounts.
The Funds' basic value approach is based on the Adviser's belief that the
securities of many companies often sell at a discount from the securities'
estimated theoretical (intrinsic) value. The Funds attempt to identify and
invest in such undervalued securities, anticipating that capital appreciation
will be realized as the securities' prices rise to their estimated intrinsic
value. This approach, while not unique, contrasts with certain other methods
of investment analysis, which rely upon market timing, technical analysis,
earnings forecasts, or economic predictions.

CRABBE HUSON SMALL CAP FUND seeks to provide its investors long-term growth of
capital by investing in a diversified portfolio of selected domestic and
foreign securities. The Fund will invest principally in common stocks and,
secondarily, preferred stocks and bonds. The production of current income is
secondary to the primary objective. The Fund seeks to invest up to 100%, and
under normal conditions at least 65%, of its total assets in securities of
companies that have small market capitalization (under $1,000,000,000).

The Adviser believes that common stock will generally, over the long-term,
offer the greatest potential for capital appreciation and preservation of
purchasing power. Investments in small growth companies may involve greater
risks and volatility than more traditional equity investments due to some of
these companies potentially having limited product lines, reduced market
liquidity for the trading of their shares and less depth in management than
more established companies. For this reason, the Small Cap Fund is not
intended as a complete investment vehicle, but rather as an investment for
persons who are in a financial position to assume above average risk and share
price volatility over time. The Small Cap Fund may be appropriate only for
investors who have a longer term investment horizon or perspective. For a
further description of the risks associated with

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an investment in the Fund, see "CHARACTERISTICS AND RISKS OF SECURITIES AND
INVESTMENT TECHNIQUES."

CRABBE HUSON EQUITY FUND seeks long-term capital appreciation. The Fund will
seek to achieve this objective by investing in a carefully chosen portfolio
consisting primarily of common stock. It will focus its investments in widely
and actively traded stocks with medium (from $1,000,000,000 to $3,000,000,000)
and large market capitalizations (in excess of $3,000,000,000).

Under normal market conditions, the Fund intends to have at least 65% of
its total assets invested in common stock. The Fund will purchase and hold for
investment common stock, and may also purchase convertible and nonconvertible
preferred stocks and bonds or debentures. The Fund may invest up to 35% of its
total assets in foreign securities. Although the Fund intends to adapt to
changing market conditions, the Adviser believes that common stock will
generally, over the long-term, offer the greatest potential for capital
appreciation. Therefore, the Fund may be appropriate for investors who have a
longer term investment horizon or perspective.

CRABBE HUSON ASSET ALLOCATION FUND seeks to provide for its shareholders
preservation of capital, capital appreciation and income. The Fund seeks to
achieve these objectives by a flexible policy of investing in a select
portfolio of common stocks, fixed income securities, cash or cash equivalents.
Depending upon economic and market conditions, the Fund may invest as little as
20%, or as much as 75%, of its entire portfolio in common stocks. The Adviser
will purchase common stocks which, in its opinion, have the greatest potential
for capital appreciation. The remaining portion of the portfolio will be
invested in fixed income securities, cash or cash equivalents. The fixed
income securities that the Fund will invest in consist of corporate debt
securities (bonds, debentures and notes), asset-backed securities, bank
obligations, collateralized bonds, loan and mortgage obligations, commercial
paper, preferred stocks, repurchase agreements, savings and loan obligations
and U.S. Government and agency obligations. There are no limitations on the
average maturity of the Fund's portfolio of fixed income securities.
Securities will be selected on the basis of the Adviser's assessment of
interest rate trends and the liquidity of various instruments under prevailing
market conditions. For a discussion of the ratings of the fixed income
securities to be held by the Fund see "CHARACTERISTICS AND RISKS OF SECURITIES
AND INVESTMENT TECHNIQUES."

Many factors will be considered in determining what portion of the
portfolio will be invested in stocks, fixed income securities, or cash and cash
equivalents. The Adviser will constantly monitor and adjust its weighting of
investments in any particular area to adapt to changing market and economic
conditions. Since its inception, the Fund has generally invested its net assets
45% to 55% in fixed income securities, 25% to 55% in common stocks, and 5% to
30% in cash, cash equivalents or other money market instruments. Furthermore,
the Fund may take advantage of opportunities to earn short-term profits if the
Adviser believes that such a strategy will benefit the Fund's overall

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objective in light of the increased tax and brokerage expenses associated with
such a strategy.

FUNDAMENTAL POLICIES

Unless set forth below as a "Fundamental Policy," each Fund's investment
policies, including its investment objective discussed previously, may be
changed without shareholder approval. A Fundamental Policy may not be changed
without a vote of the holders of "a majority of the outstanding voting
securities" of the Fund, as such term is defined in the 1940 Act. For further
discussion concerning these Fundamental Policies, see "INVESTMENT RESTRICTIONS"
in the Statement of Additional Information.

ISSUER AND INDUSTRY RESTRICTIONS. Each Fund's investment restrictions
include a prohibition on investing more than 5% of its total assets (at the
time of the purchase) in the securities of any one issuer. This policy,
however, does not include investments in U.S. Government securities.

BORROWING RESTRICTIONS. Each Fund may borrow up to one-third of the value
of its total assets, although the Equity Fund and the Asset Allocation Fund may
only borrow in the case of an emergency. If, for any reason, the current value
of a Fund's total assets falls below an amount equal to three times the amount
of its indebtedness from money borrowed, the Fund will, within three days (not
including Saturdays, Sundays and holidays), reduce its indebtedness to the
extent necessary to satisfy the one-third test. Further, the Equity Fund and
the Asset Allocation Fund are both prohibited from purchasing securities when
the Fund's total borrowings exceed 5% of its total assets.

FIXED INCOME SECURITIES. The Small Cap, Equity and Asset Allocation Funds
may each invest up to 20% of its total assets in fixed income securities that
are either unrated or are rated less than Baa by Moody's or BBB by S&P, or in
commercial paper that is rated less than B-1 by Moody's or A- by S&P. However,
not more than 5% of these Fund's total assets may be invested in fixed income
securities that are unrated (including convertible stock). See
"CHARACTERISTICS AND RISKS OF SECURITIES AND INVESTMENT TECHNIQUES" for a
discussion concerning the purchase of below investment grade securities.

ILLIQUID SECURITIES. Both the Equity and Asset Allocation Fund may not
invest more than 10% of their total assets in illiquid securities. The Small
Cap Fund may invest no more than 5% of its total assets in a combination of
illiquid securities and/or securities of issuers, including their predecessors,
which have been in existence less than three years. The following securities
in which a Fund may invest will be considered illiquid: (1) repurchase
agreements maturing in more than seven days; (2) restricted securities
(securities whose public resale is subject to legal restrictions); and (3) any
other securities in which a Fund may invest that are not readily marketable.
The Board of Trustees may adopt guidelines and delegate to the Adviser the
daily function of determining and

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monitoring the liquidity of securities. The Board, however, will retain
sufficient oversight and be ultimately responsible for the determinations. In
determining whether a security is liquid, the Board shall consider whether the
security can be disposed of promptly in the ordinary course of business at a
value reasonably close to that used in the calculation of the net asset value
per share.

Securities eligible for resale to certain institutional investors pursuant
to Rule 144A of the Securities Act of 1933 shall not be considered illiquid.
Since it is not possible to predict with assurance how the market for
restricted securities sold and offered under Rule 144A will develop, the Board
will carefully monitor a Fund's investments in these securities, focusing on
such important factors, among others, as valuation, liquidity, and availability
of information. This practice could have the effect of increasing the level of
illiquidity in a Fund to the extent that qualified institutional buyers become
for a time uninterested in purchasing these restricted securities.

OPTIONS AND FUTURES TRANSACTIONS. Each of the Funds may invest up to 10%
of its total assets in both put or call options and futures contracts.

INVESTMENT IN ISSUERS OF WHICH SHAREHOLDERS AND TRUSTEES OWN SHARES. The
Small Cap Fund may not invest in securities of issuers of which the officers
and trustees of the Fund, as a group, own beneficially more than five percent
of the securities of that issuer.

OTHER INVESTMENT COMPANIES. Each of the Funds may invest in the
securities of other registered investment companies under the circumstances
described under "SECURITIES OF OTHER INVESTMENT COMPANIES" in the Statement of
Additional Information, and to the extent permitted under Section 12 of the
1940 Act. Currently, no more than 10% of the total assets of a Fund may be so
invested, no more than 5% of total assets of a Fund may be invested in the
securities of any other single investment company, and no more than 3% of the
total outstanding voting stock of an investment company may be purchased.
Investments in the securities of other registered investment companies are or
may be subject to duplicate expenses resulting from the management of the
portfolio investment company as well as those of the Fund.

FOREIGN SECURITIES. Each of the Funds may invest up to 35% of its total
assets in foreign securities, which may or may not be traded on an exchange.

CHARACTERISTICS, RISKS OF SECURITIES AND INVESTMENT TECHNIQUES

The following describes in greater detail different types of securities
and investment techniques used by the Funds, and discusses certain concepts
relevant to the investment policies of the Funds. Additional information about
the Funds' investments and investment practices may be found in the Statement
of Additional Information.

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FOREIGN SECURITIES. Each of the Funds may invest up to 35% of its total
assets in foreign securities, which may or may not be traded on an exchange.
The Funds may purchase securities issued by issuers in any country. Securities
of foreign companies are frequently denominated in foreign currencies, and the
Funds may temporarily hold uninvested reserves in bank deposits in foreign
currencies. As a result, the Funds will be affected favorably or unfavorably
by changes in currency rates and in exchange control regulations, and they may
incur expenses in connection with conversion between various currencies.
Subject to its investment restrictions, the Funds may invest in other
investment companies that invest in foreign securities.

Foreign securities may be subject to foreign government taxes that would
reduce the income yield on such securities. Certain foreign governments levy
withholding taxes against dividend and interest income. Although in some
countries a portion of these taxes is recoverable, the non-recovered portion of
any foreign withholding taxes would reduce the income a Fund received from any
foreign investments.

Foreign investments involve certain risks, such as political or economic
instability of the issuer or of the country of the issuer, difficulty of
predicting international trade patterns, and the possibility of imposition of
exchange controls. Such securities may also be subject to greater fluctuations
in price than securities of domestic corporations or of the United States
government. In addition, the net asset value of a Fund is determined and
shares of a Fund can be redeemed only on days during which securities are
traded on the New York Stock Exchange ("NYSE"). However, foreign securities
held by a Fund may be traded on Saturdays or other holidays when the NYSE is
closed. Accordingly, the net asset value of a Fund may be significantly
affected on days when an investor has no access to the Fund.

In addition, there may be less publicly available information about a
foreign company than about a domestic company. Foreign companies generally are
not subject to uniform accounting, auditing and financial reporting standards
comparable to those applicable to domestic companies. There is generally less
government regulation of stock exchanges, brokers and listed companies abroad
than in the United States, and the absence of negotiated brokerage commissions
in certain countries may result in higher brokerage fees. With respect to
certain foreign countries, there is a possibility of expropriation,
nationalization, or confiscatory taxation, which could affect investment in
those countries.

Each of the Funds may invest a portion of its assets in developing
countries or in countries with new or developing capital markets, such as
countries in Eastern Europe and the Pacific Rim. The considerations noted
above regarding the risks of investing in foreign securities are generally more
significant for these investments. These countries may have relatively
unstable governments and securities markets in which only a small number of
securities trade. Markets of developing countries may be more volatile than
markets of developed countries. Investments in these markets may involve
significantly greater risks, as well as the potential for greater gains.

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PUT, CALL OPTIONS, FUTURES CONTRACTS. Each of the Funds may use options
and futures contracts to attempt to enhance income, and to reduce the overall
risk of its investments ("hedge"). These instruments are commonly referred to
as "derivative instruments" due to the fact that their value is derived from or
related to the value of some other instrument or asset. Each Fund's ability to
use these strategies may be limited by market conditions, regulatory limits,
and tax considerations. Appendix B to this prospectus describes the
instruments that the Funds may use and the way the Funds may use the
instruments for hedging purposes.

Each of the Funds may invest up to 10% of its total assets in premiums on
put and call options, both exchange-traded and over-the-counter and write call
options on securities the Fund owns or has a right to acquire. Each of these
Funds may also purchase options on securities indices, foreign currencies, and
futures contracts. Besides exercising its option or permitting the option to
expire, prior to expiration of the option, a Fund may sell the option in a
closing transaction. The Funds may only write call options that are covered.
A call option is covered if written on a security a Fund already owns.

Each of the Funds may invest in interest futures contracts and may invest
in stock index futures provided that the aggregate initial margin of all
futures contracts in which the Fund invests shall not exceed 10% of the total
assets of the Fund after taking into account unrealized profits and unrealized
losses on any such transactions it has entered into. Upon entering into a
futures contract, the Fund will set aside liquid assets, such as cash, U.S.
Government securities, or other high grade debt obligations in a segregated
account with the Fund's custodian to secure its potential obligation under such
contract.

The principal risks of options and futures transactions are: (a)
imperfect correlation between movements in the prices of options or futures
contracts and movements in the prices of the securities hedged or used for
cover; (b) lack of assurance that a liquid secondary market will exist for any
particular option or futures contract at any particular time; (c) the need for
additional skills and techniques beyond those required for normal portfolio
management; (d) losses on futures contracts, which may be unlimited, from
market movements not anticipated by the Adviser; (e) possible need to defer
closing out certain options or future contracts in order to continue to qualify
for beneficial tax treatment afforded "regulated investment companies" under
the Internal Revenue Code of 1986, as amended (the "Code"). For a further
discussion of Put, Call Options and Futures contract, see the Statement of
Additional Information "Special Investment Risks."

FIXED INCOME SECURITIES. Each Fund may invest up to 20% of its total
assets in fixed income securities, including convertible securities, that are
either unrated or rated below the fourth highest category by Moody's or S&P,
although not more than 5% of the Fund's total assets may be invested in fixed
income securities that are unrated. Such high-yielding, lower-rated securities
are commonly referred to as "junk bonds." Such securities are predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal. Investment in such securities normally involves a greater degree of
investment

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and credit risk than does investment in a high-rated security. In addition,
the market for such securities is usually less broad than the market for
higher-rated securities, which could affect their marketability. The market
prices of such securities may fluctuate more than the market prices of
higher-rated securities in response to changes in interest rates and economic
conditions. Moreover, with such securities, there is a greater possibility
that an adverse change in the financial condition of the issuer, particularly a
highly leveraged issuer, may affect its ability to make payments of principal
and interest.

INVESTMENT IN REITS. Each Fund may invest in real estate investment
trusts ("REITS"). Such investment may not exceed 25% of a Fund's total assets.
REITs are pooled investment vehicles that invest primarily in income producing
real estate or real estate related loans or interests. REITs are generally
classified as equity REITs, mortgage REITs or a combination of equity and
mortgage REITs. Equity REITs invest the majority of their assets directly in
real property and derive income primarily from the collection of rents. Equity
REITs can also realize capital gains by selling properties that have
appreciated in value. Mortgage REITs invest the majority of their assets in
real estate mortgages and derive income from the collection of interest
payments. For federal income tax purposes, REITs qualify for beneficial tax
treatment by distributing 95% of their taxable income. If a REIT is unable to
qualify for such beneficial tax treatment, it would be taxed as a corporation
and distributions to its shareholders would therefore be reduced.

Investing in REITs involves certain unique risks in addition to those
risks associated with investing in the real estate industry in general. Equity
REITs may be affected by changes in the value of the underlying property owned
by the REITs, while mortgage REITs may be affected by the quality of any credit
extended. All REITs are dependent upon management skills, are not diversified,
and are subject to the risks of financing projects. REITs are subject to heavy
cash flow dependency, default by borrowers, self-liquidation, and the
possibilities of failing to qualify for the exemption from tax for distributed
income under the Code and failing to maintain their exemptions from the 1940
Act.

REPURCHASE AGREEMENTS. Each of the Funds may engage in repurchase
agreements. Repurchase agreements are agreements under which a person
purchases a security and simultaneously commits to resell that security to the
seller (a commercial bank or recognized securities dealer) at an agreed upon
price on an agreed upon date within a number of days (usually not more than
seven) from the date of purchase. The resale price reflects the purchase price
plus an agreed upon market rate of interest that is unrelated to the coupon
rate or maturity of the purchased security. A Fund will engage in repurchase
agreements only with banks or broker-dealers whose obligations would qualify
for direct purchase by that Fund. A repurchase agreement involves the
obligation of the seller to pay an agreed-upon price, which obligation is, in
effect, secured by the value of the underlying security. All repurchase
agreements are fully collateralized and marked to market daily, and may
therefore be viewed by the SEC or the courts as loans collateralized by the
underlying security. There are some risks associated with repurchase
agreements. For instance, in the case of default by the seller, a Fund could
incur a loss or, if bankruptcy

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proceedings are commenced against the seller, the Fund could incur costs and
delays in realizing upon the collateral.

MORTGAGE-BACKED SECURITIES. The Asset Allocation Fund may invest in
mortgage pass-through certificates and multiple-class pass-through securities,
such as Collateralized Mortgage Obligations ("CMOs") and Stripped Mortgage Back
Securities ("SMBS"), and other types of mortgage-backed securities that may be
available in the future (collectively, "Mortgage-Backed Securities").

Mortgage pass-through securities represent participation interests in
pools of mortgage loans secured by residential or commercial real property in
which payments of both interest and principal on the securities are generally
made monthly, in effect "passing through" monthly payments made by the
individual borrowers on the mortgage loans which underlie the securities (net
of fees paid to the issuer or guarantor of the securities).

Payment of principal and interest on some mortgage pass-through
securities, but not the market value of the securities themselves) may be
guaranteed by the full faith and credit of the U.S. Government (in the case of
securities guaranteed by GNMA); or guaranteed by the agency or instrumentality
of the U.S. Government issuing the security (in the case of securities
guaranteed by FNMA or the Federal Home Loan Mortgage Corporation ("FHLMC"),
which are supported only by the discretionary authority of the U.S. Government
to purchase the agencies' obligations). Mortgage pass-through securities
created by non-governmental issuers (such as commercial banks, savings and loan
institutions, private mortgage insurance companies, mortgage bankers and other
secondary market issuers) may be supported by various forms of insurance or
guarantees, including individual loan, title, pool and hazard insurance and
letters of credit, which may be issued by governmental entities, private
insurers or the mortgage poolers.

CMOs are hybrid mortgage related instruments. Similar to a bond, interest
and prepaid principal on a CMO are paid, in most cases, semi-annually. CMOs
may be collateralized by whole mortgage loans but are more typically
collateralized by portfolios of mortgage pass-through securities guaranteed by
GNMA, FHLMC or FNMA. CMOs are structured into multiple classes, with each
class bearing a different stated maturity. Monthly payments of principal,
including prepayments, are first returned to investors holding the shortest
maturity class and investors holding the longer maturity classes receive
principal only after the first class has been retired. CMOs that are issued or
guaranteed by the U.S. Government or by any of its agencies or
instrumentalities will be considered U.S. Government securities by the Fund,
while other CMOs, even if collateralized by U.S. Government securities, will
have the same status as other privately issued securities for purposes of
applying the Fund's diversification test.

SMBS are derivative multiple-class mortgage-backed securities, usually
structured with two classes that receive different proportions of interest and
principal distributions on a pool of mortgage assets. A typical SMBS will have
one class receiving some of the

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<PAGE>

interest and most of the principal, while the other class will receive most of
the interest and the remaining principal. In the most extreme case, one class
will receive all of the interest (the "interest only" class), while the other
class will receive all of the principal (the "principal only" class).

If the Mortgage-Backed Security is a fixed-income security, when interest
rates decline, the value of an investment in fixed rate obligations can be
expected to rise. Conversely, when interest rates rise, the value of an
investment in fixed rate obligations can be expected to decline. In contrast,
if the Mortgage-Backed Security represents an interest in a pool of loans with
adjustable interest rates, as interest rates on adjustable rate mortgage loans
are reset periodically, yields on investments in such loans will gradually
align themselves to reflect changes in market interest rates, causing the value
of such investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.

If a security subject to prepayment has been purchased at a premium, in
the event of prepayment the value of the premium would be lost. Prepayment
rates are influenced by changes in current interest rates and a variety of
economic, geographic, social and other factors, and cannot be predicted with
certainty. Both adjustable rate mortgage loans and fixed rate mortgage loans
may be subject to a greater rate of principal prepayments in a declining
interest rate environment, and to a lesser rate of principal prepayments in an
increasing interest rate environment. Under certain interest rate and
prepayment rate scenarios, the Fund may fail to recoup fully its investment in
Mortgage-Backed Securities, notwithstanding any direct or indirect governmental
or agency guarantee. When the Fund reinvests amounts representing payments and
unscheduled prepayments of principal, it may receive a rate of interest that is
lower than the rate on existing adjustable rate mortgage pass-through
securities. Thus, Mortgage-Backed Securities, and adjustable rate mortgage
pass-through securities in particular, may be less effective than other types
of U.S. Government securities as a means of "locking in" interest rates.

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<PAGE>

SHORT SALES "AGAINST THE BOX." Each of the Funds may engage in short
sales "against the box." While a short sale is made by selling a security the
Fund does not own, a short sale is "against the box" to the extent that the
Fund contemporaneously owns or has the right to obtain at no added cost
securities identical to those sold short.

WHEN ISSUED AND/OR DELAYED DELIVERY. Each of the Funds may purchase and
sell securities on a when-issued or delayed-delivery basis. When-issued or
delayed-delivery transactions arise when securities are purchased or sold by
the Fund, with payment and delivery taking place in the future in order to
secure what is considered to be an advantageous price and yield to the Fund at
the time of entering into the transaction. Such securities are subject to
market fluctuations, and no interest accrues to a Fund until the time of
delivery. The value of the securities may be less at the time of delivery than
the value of the securities when the commitment was made. When a Fund engages
in when-issued and delayed-delivery transactions, it relies on the buyer or
seller, as the case may be, to consummate the sale. Failure to do so may
result in the Fund missing the opportunity of obtaining a price or yield
considered to be advantageous. To the extent any Fund engages in when-issued
and delayed-delivery transactions, it will do so for the purpose of acquiring
portfolio securities consistent with its investment objective and policies, and
not for the purpose of investment leverage. No Fund may commit more than 25%
of its total assets to the purchase of when-issued and delayed-delivery
securities. A separate account of liquid assets consisting of cash, U.S.
Government securities or other high grade debt obligations equal to the value
of any purchase commitment of a Fund shall be maintained by the Fund's
custodian until payment is made.

ILLIQUID SECURITIES. The Funds may invest in illiquid securities, which
may be difficult to sell promptly at an acceptable price. This difficulty may
result in a loss or be costly to a Fund.

INTEREST RATES. Each Fund may invest in debt securities. The market
value of debt securities that are sensitive to prevailing interest rates is
inversely related to actual changes in interest rates. That is, an interest
rate decline produces an increase in a security's market value and an interest
rate increase produces a decrease in value. The longer the remaining maturity
of a security, the greater the effect of an interest rate change. Changes in
the ability of an issuer to make payments of interest and principal and in the
market's perception of its creditworthiness also affect the market value of
that issuer's debt securities.

U.S. GOVERNMENT SECURITIES. Although U.S. Government securities and
high-quality debt securities are issued or guaranteed by the U.S. Treasury or
agency or instrumentality of the U.S. Government, not all U.S. Government
securities are backed by the full faith and credit of the United States. For
example, securities issued by the General Farm Credit Bank or by the Federal
National Mortgage Association are supported by the instrumentality's right to
borrow money from the U.S. Treasury under certain circumstances. On the other

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<PAGE>

hand, securities issued by the Student Loan Marketing Association are supported
only by the credit of the instrumentality.

LIMITED OPERATING HISTORY OF FUND. The Small Cap Fund commenced
operations on February 16, 1996 and thus has a limited operating history.

SMALL COMPANIES. The Small Cap Fund intends to invest in small market
capitalization companies. Investing in such securities may involve greater
risks since these securities may have limited marketability and, thus, may be
more volatile. Because small-sized companies normally have fewer outstanding
shares than larger companies, it may be difficult for a Fund to buy or sell
significant amounts of such shares without an unfavorable impact on prevailing
prices. In addition, small companies are typically subject to a greater degree
of changes in earnings and business prospects than are larger, more established
companies.

LENDING OF PORTFOLIO SECURITIES. The Funds may loan portfolio securities
to broker-dealers or other institutional investors if at least 100% cash (or
cash equivalent) collateral is pledged and maintained by the borrower. The
Funds believe that the cash collateral minimizes the risk of lending their
portfolio securities. Such loans of portfolio securities may not be made if
the aggregate of such loans would exceed 20% of the value of a Fund's total
assets. If the borrower defaults, there may be delays in recovery of loaned
securities or even a loss of the securities loaned, in which case the Fund
would pursue the cash (or cash equivalent) collateral. While there is some
risk in loaning portfolio securities, loans will be made only to firms or
broker-dealers deemed by the Adviser to be of good standing and will not be
made unless, in the judgment of the Adviser, the consideration to be earned
from such loans would justify the risk. For additional disclosure, see
"INVESTMENT RESTRICTIONS -LOANS OF PORTFOLIO SECURITIES" in the Statement of
Additional Information.

PORTFOLIO TURNOVER. The Funds generally do not trade in securities with
the goal of obtaining short-term profits, but when circumstances warrant,
securities will be sold without regard to the length of time the security has
been held. A higher portfolio turnover rate may involve correspondingly
greater transaction costs, which will be borne directly by the Funds, as well
as additional realized gains and/or losses to shareholders. See "ALLOCATION OF
BROKERAGE," and "TAXES" in the Prospectus. The annual portfolio turnover rate
of the Funds may at times exceed 100%. The portfolio turnover rates are shown
in the Condensed Financial Information section of this Prospectus.

TEMPORARY DEFENSIVE INVESTMENTS. For temporary defensive purposes, the
Funds may invest up to 100% of their assets in fixed income securities, cash
and cash equivalents. The fixed income securities in which each Fund will
invest in such a situation shall consist of corporate debt securities (bonds,
debentures and notes), asset-backed securities, bank obligations,
collateralized bonds, loan and mortgage obligations, commercial paper,
preferred stocks, repurchase agreements, savings and loan obligations, and U.S.

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<PAGE>

Government and agency obligations. The fixed income securities will be rated
investment grade or higher (BBB by S&P and Baa by Moody's) and will have
maturities of three years or less. When the Fund assumes a temporary
defensive position, it may not invest in securities designed to achieve its
investment objective.

MANAGEMENT OF THE FUNDS

The Funds are managed by the Trust's Board of Trustees, and all powers
and authorities are exercised by or under the direction of the Board of
Trustees.

ADVISER. Subject to the policies of, review by, and overall control of
the Board of Trustees of the Trust, the Adviser has been retained by each
Fund to act as its manager and investment adviser pursuant to investment
advisory agreements.

James E. Crabbe and Richard S. Huson are controlling shareholders of the
Adviser. Mr. Crabbe and Mr. Huson are primarily responsible for the
day-to-day management of the Adviser. Mr. Crabbe is President and a director
of the Adviser and Mr. Huson is Vice President, Secretary and a director.

Each Fund pays the Adviser a fee for its services that accrues daily and
is payable bi-monthly. Fees are based on a percentage of the average daily
net assets of each Fund, as set forth below:

Net Asset Value Annual Rate
--------------- -----------

First $100 million 1.00%
Next $400 million 0.85%
Amounts over $500 million 0.60%

Fees paid by each of the Funds are higher than those paid by most other
mutual funds, although the fees paid by these Funds are comparable to mutual
funds with similar objectives and policies. From time to time, the Adviser
may voluntarily waive all or a portion of its management fee and/or reimburse
certain Fund expenses without further notification of the commencement or
termination of such waiver or reimbursement. Any such waiver or
reimbursement will temporarily lower a Fund's overall expense ratio and
increase a Fund's overall return to investors. Additionally, many states
require that mutual funds meet certain expense limitations. The Funds, their
Adviser, Distributor, and Transfer Agent intend to qualify, meet, or conform
to any individual state requirements while the

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<PAGE>

Funds are registered in that state. The Funds bear all expenses incurred in
their operation as they are incurred, other than those assumed by the Adviser
or the Distributor.

Management of the Small Cap Fund portfolio is handled on a day-to-day
basis by a team consisting of Mr. Crabbe and John W. Johnson. Mr. Crabbe is
coordinator of the team. Mr. Crabbe has served in various management
positions with the Adviser since 1980 and has managed the portfolio of the
Crabbe Huson Special Fund since January 1, 1990. Prior to joining the
Adviser, Mr. Johnson was a private investment banker from November, 1991 to
May, 1995. Between August, 1988 and November, 1991, Mr. Johnson was Director
of Equity Investments for Kennedy Associates.

The portfolios of the Equity and Asset Allocation Funds are managed on a
day-to-day basis by a team consisting of John E. Maack, Jr., Marian L.
Kessler, Robert E. Anton, Garth R. Nisbet and Mr. Huson. Mr. Huson is
coordinator of the team. Mr. Huson has served in various management
positions with the Adviser since 1980. Mr. Maack has been employed as a
portfolio manager and securities analyst by the Adviser since 1988. Ms.
Kessler joined the Adviser in August, 1995. From September, 1993 until July,
1995, Ms. Kessler was a portfolio manager with Safeco Asset Management.
Between August, 1986 and June, 1993, Ms. Kessler was an equity analyst for
IDS Financial Services. Mr. Anton joined the Adviser in June, 1995. Prior
to joining the Adviser, Mr. Anton served 17 years as Chief Investment
Officer, Portfolio Manager at Financial Aims Corporation. Mr. Nisbet joined
the Adviser in April, 1995. From February, 1993 until March, 1995, Mr.
Nisbet worked for Capital Consultants, Inc. as a portfolio manager of its
fixed income portfolio. Prior to joining Capital Consultants, Mr. Nisbet was
a Vice President and the fixed income portfolio manager at Lincoln National
Investment Management.

ADMINISTRATORS. The Funds have retained State Street Bank and Trust
Company ("State Street") to provide administrative services to the Funds.
Such services relate to administration, operations and compliance. For such
services, the Funds have agreed to pay State Street a fee based on the total
assets of the funds managed by the Adviser. The fee shall be as follows:
first $500 million managed by Adviser - .06%; next $500 million - .03%;
thereafter -.01%. Each Fund pays its pro rata share of such fee.

DISTRIBUTOR. Shares of the Funds are distributed by Crabbe Huson
Securities, Inc. (the "Distributor"). Mr. Crabbe and Mr. Huson own 100% of
the stock of the Distributor.

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<PAGE>

CONTROL PERSONS

[TO BE COMPLETED BY AMENDMENT.]

NET ASSET VALUE

PERFORMANCE COMPARISONS

The Funds may compare their performance to other mutual funds with
similar investment objectives and to the mutual fund industry as a whole, as
quoted by ranking services and publications of general interest. These
services or publications may include Lipper Analytical Services, Inc.,
Schabacker's Total Investment Service, CDA Technologies, SEI, Frank Russell
Trust, BARRON'S BUSINESS WEEK, CHANGING TIMES, THE FINANCIAL TIMES, FINANCIAL
WORLD, FORBES, INVESTOR'S DAILY, MONEY, MORNINGSTAR MUTUAL FUNDS, PERSONAL
INVESTOR, THE ECONOMIST, THE WALL STREET JOURNAL, INDIVIDUAL INVESTOR, LOUIS
RUKEYSER'S WALL STREET, FINANCIAL WORLD, and USA TODAY. These ranking
services and publications rank the performance of the Funds against all other
funds over specified periods and against funds in specified categories. The
Funds may include presentations of, or may compare their performance or the
performance of the Funds' Adviser to a recognized stock index, including the
Standard & Poor's 500, Standard & Poor's Mid-Cap 400 Index, Value Line
Composite Index, Dow Jones Industrial Average, NASDAQ/OTC Price Index,
Russell 2000 Index, Wilshire 5000 Equity Index, the Lehman Brothers
Government/Corporate Bond Index and Salomon Bond indices. The comparative
material found in advertisements, sales literature, or in reports to
shareholders may contain past or present performance ratings. This is not to
be considered representative or indicative of future results or future
performance.

The performance of a specific Fund will be calculated as required by the
rules of the SEC. The Funds may also publish average annual total return
quotations for recent one,

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<PAGE>

five and ten-year periods and will graphically illustrate the redeemable
value of an initial investment over some given period of time. These
standardized calculations do not reflect the impact of federal or state
income taxes.

The yields of each of the Funds are not fixed and will fluctuate. The
principal value of an investment in each Fund at redemption may be more or
less than its original cost. In addition, investments in the Funds are not
insured and an investor's yield is not guaranteed.

ALLOCATION OF BROKERAGE

The Adviser is responsible for the overall management of the portfolio
of each Fund and determines which brokers will execute the purchase and sale
of the portfolio securities. The Adviser's foremost responsibility is to
place orders so as to achieve prompt execution at the most favorable price.
However, the Adviser is authorized, in recognition of the value of brokerage
and research services provided, to pay commissions to a broker in excess of
the amounts which another broker might have charged for effecting the same
transaction. The Adviser may also execute Fund portfolio transactions with
broker-dealers that provide services to the Funds pursuant to a written
agreement. Under these arrangements, participating Funds direct the Adviser
to execute a portion of the Fund's transactions to a broker-dealer in return
for a credit which represents a percentage of the total commissions generated
through the broker-dealer. The Fund uses the credit to reduce transfer
agent, custodian, shareholder servicing and other expenses of the Fund.
Provided the Funds receive prompt execution at competitive prices, the
Adviser may execute portfolio transactions through broker-dealers who also
sell the Funds' shares. Additional information about portfolio brokerage is
included in the Statement of Additional Information.

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<PAGE>

CAPITAL STRUCTURE

YIELD

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<PAGE>

INVESTOR SERVICES

INFORMATION YOU NEED TO KNOW TO PURCHASE, REDEEM OR
EXCHANGE SHARES

Investor Services Telephone: (800) 541-9732 Mail: Crabbe Huson Funds
P.O. Box 8413
Boston, MA 02266-8413

Crabbe Huson "Instant Access": (800) 235-2442
Express Mail: Crabbe Huson Funds
Two Heritage Drive
Quincy, MA 02171

Internet: http://www.contrarian.com

The Fund's shares are offered to the public with no sales load. Crabbe
Huson Securities, Inc. (the "Distributor"), Portland, Oregon, an affiliate of
the Adviser and a corporation organized under the laws of Oregon, is the
distributor of the Fund's shares. The shares are offered by the Distributor
directly to the public or through Financial Intermediaries that have
established a shareholder servicing relationship with the Fund or Distributor.

TYPES OF ACCOUNTS AVAILABLE:

- Others (contact Investor Services for information regarding
other accounts)

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<PAGE>

Note, if you are considering adopting any type of retirement plan, you should
consult with your own legal or tax adviser, with respect to the establishment
and maintenance of such a plan.

MINIMUM INVESTMENTS: The minimum investment in any Fund is $1,000,000.
Additional Investments in any Fund must be in amounts of at least $10,000.
The Adviser, in its sole discretion, may waive any minimum purchase
requirements. The Funds reserve the right to vary the initial and subsequent
investment minimums at any time. The Funds will provide you with written
notice of any such change.

HOW TO PURCHASE YOUR SHARES

HOW TO OPEN AN ACCOUNT

- Financial
Intermediaries: You may purchase shares in a Fund by contacting
your Financial Intermediary. See "WHAT YOU SHOULD
KNOW ABOUT BUYING SHARES THROUGH A FINANCIAL
INTERMEDIARY."

HOW TO PURCHASE ADDITIONAL SHARES

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<PAGE>

- Telephone: As an existing shareholder, you may also purchase
shares by calling Investor Services at the telephone
number listed above under "INFORMATION YOU NEED TO KNOW
TO PURCHASE, REDEEM OR EXCHANGE SHARES."

WHAT YOU SHOULD KNOW ABOUT BUYING SHARES BY MAIL

Make all checks or money orders payable to Crabbe Huson Funds. The
Funds will not accept purchases made by cash or credit card. Checks payable
to the investor and endorsed to the order of the Fund will not be accepted as
payment and will be returned to the sender. If a check used for purchase
does not clear, the Fund will cancel the purchase and the investor may be
liable for any losses or fees incurred. In order to prevent lengthy
processing delays caused by the clearing of foreign checks, the Funds will
only accept a foreign check drawn in U.S. dollars issued by a foreign bank
with a U.S. correspondent bank. The name of the U.S. correspondent bank must
be printed on the face of the check. Further documentation may be requested
from corporations, executors, administrators, trustees, guardians, agents, or
attorneys in fact.

WHAT YOU SHOULD KNOW ABOUT BUYING ADDITIONAL SHARES BY TELEPHONE

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<PAGE>

business days after acceptance of the order. If payment is not received on
time, a Fund may cancel the order and redeem the shares held in the
shareholder's account to compensate the Fund for any decline in the value of
the purchased shares.

WHAT YOU SHOULD KNOW ABOUT BUYING SHARES THROUGH A FINANCIAL INTERMEDIARY

Shares of each Fund are offered through Financial Intermediaries that
have established a shareholder servicing relationship with the Fund on behalf
of their customers. The Fund pays no compensation to such entities.
Financial Intermediaries may impose additional or different conditions on the
purchase or redemption of Fund shares by their customers and may charge their
customers transaction or account fees on the purchase and redemption of Fund
shares and on maintenance of such accounts. Each Financial Intermediary is
responsible for transmitting to its customers a schedule of any such fees and
information regarding any additional or different conditions regarding
purchases and redemptions. Shareholders who are customers of Financial
Intermediaries should consult their Financial Intermediary for information
regarding these fees and conditions.

HOW TO REDEEM YOUR SHARES

You may arrange to take money out of your account at any time by selling
(redeeming) some or all of your shares. Shares may be redeemed at any time,
without charge, at the net asset value per share next determined after
receipt by the Transfer Agent of a redemption request in proper form from the
investor. Payment for all shares redeemed will be made within three business
days after receipt of a redemption request in proper form except (as outlined
by the 1940 Act) during a period when 1) trading on the NYSE is restricted or
the NYSE is closed for other than customary weekends and holidays, 2) the SEC
has by order permitted such suspension for the protection of the Fund's
shareholders, or 3) an emergency exists making disposal of portfolio
securities or valuation of net assets of the applicable class not reasonably
practicable.

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<PAGE>

To redeem your shares in a non-retirement account, you may use any of
the methods described below. To sell shares in a retirement account, you
should contact Investor Services or your Financial Intermediary for special
instructions. For your protection, certain redemption requests may require a
signature guarantee. See "Special Situations-Signature Guarantee." You may
redeem shares in the following ways:

- Mail: To be in proper form, written requests for redemption
must include 1) the total dollar value of shares or the
total number of shares to be redeemed, 2) the
investor's account number, 3) the Fund's name and
applicable class name, and 4) the signature of each
registered owner exactly as the shares are registered,
and 5) in certain situations, a signature guarantee.
See "Special Situations-Signature Guarantee." The
Transfer Agent may require additional supporting
documents for redemptions made by corporations,
executors, administrators, trustees, or guardians. A
redemption request will not be deemed to have been
submitted until the Transfer Agent receives all
required documents in proper form. All documents and
correspondence concerning redemptions should be sent to
Investor Services at the address listed above under
"INFORMATION YOU NEED TO KNOW TO PURCHASE, REDEEM OR
EXCHANGE SHARES."

- Telephone: You may redeem shares by calling Investor Services at
the telephone number listed above under "INFORMATION
YOU NEED TO KNOW TO PURCHASE, REDEEM OR EXCHANGE
SHARES."

- Wire: Should you wish to receive instructions on how to
obtain your funds by wire, please call Investor
Services.

- Financial
Intermediaries: Shares may also be redeemed by telephone from
Financial Intermediaries who have established a
shareholder servicing relationship with the
Distributor and/or the Funds. Such redemption
orders should be placed by the Financial
Intermediary with the Transfer Agent. Shares will
be redeemed at the net asset value determined on a
shareholder's trade date. The three-day period
within which the proceeds of the redemption will
be sent to the shareholder or shareholder's
Financial Intermediary will begin on the day of
the net

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<PAGE>

asset value calculation, unless the Transfer Agent has
not received a written request in proper form from the
Financial Intermediary by the third day. In that event,
the proceeds of the redemption will be sent to the
shareholder or the shareholder's Financial Intermediary
immediately upon the Transfer Agent's receipt of the
written request in proper form. Financial Intermediaries
are responsible for the prompt transmittal of
redemption orders to the Transfer Agent. Financial
Intermediaries not affiliated with a Fund may charge a
fee for handling redemptions.

HOW TO EXCHANGE YOUR SHARES

BEFORE MAKING AN EXCHANGE TO ANOTHER FUND, THE INVESTOR SHOULD READ THE
PROSPECTUS RELATING TO THE FUND OR FUNDS INTO WHICH SHARES ARE BEING
EXCHANGED.

The proceeds from the redemption of your shares may be used to purchase
shares of any other Fund in every state in which the exchange may be made
legally, provided you may only exchange if the dollar value of the exchange
is sufficient to satisfy any minimum investment requirements in the new Fund.
You may only exchange between accounts that are registered in the same name,
address, and taxpayer identification number. The exchange privilege is a
standard option on all accounts. If you do not want this option, please mark
the appropriate box on the application. You may exchange shares in the
following ways:

- Exchange by
Telephone: You may exchange shares by telephone by contacting
Investor Services at the number listed above under
"INFORMATION YOU NEED TO KNOW TO PURCHASE, REDEEM OR
EXCHANGE YOUR SHARES."

The exchange of shares of the Fund for shares of another fund is treated
for federal and state income tax purposes as a sale on which an investor may
realize a capital gain or loss.

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<PAGE>

Excessive trading can hurt Fund performance. Each Fund reserves the
right to terminate or modify the exchange privilege applicable to all
shareholders at any time upon 60 days' notice. This exchange privilege may
be temporarily or permanently suspended with respect to any shareholder that
engages in more than ten exchanges in any 12-month period.

WHAT YOU SHOULD KNOW ABOUT TELEPHONE TRANSACTIONS

Each Fund, the Adviser and the Transfer Agent will employ reasonable
procedures to confirm that instructions communicated by telephone are
properly authorized. The failure of a Fund to do so may result in the Fund
being liable for losses due to unauthorized or fraudulent telephone
transactions. However, a Fund, the Adviser and the Transfer Agent will not
be liable for executing telephonic instructions that are deemed to be
authorized after following reasonable procedures. Such reasonable procedures
include providing written confirmation of telephone transactions, tape
recording telephone instructions, and requiring specific personal information
prior to acting upon telephone instructions.

WHEN TRANSACTIONS ARE RECORDED IN YOUR ACCOUNT

Your trade date is the date when transactions are recorded in your
account. Your shares are purchased, redeemed or exchanged at the net asset
value determined on your trade date.

STATEMENTS

You will receive a quarterly summary of all account activity for the
most recent calendar quarter and an annual statement which includes all
activity during the most recent year. You will also receive a statement of
account after any transaction that affects your share balance or share
registration, other than for the reinvestment of dividends or distributions
or investments made through the Systematic Exchange Program discussed below.
See "SPECIAL SERVICES." In addition to the annual statement, you will also
receive, in January, a full report of your account activity during the prior
year.

SPECIAL SITUATIONS

SIGNATURE GUARANTEE. A signature guarantee is designed to protect you
and the Funds from fraudulent transactions by unauthorized persons. In the
following instances, the Funds will require a signature guarantee for all
authorized owners of an account:

- you wish to redeem more than $15,000 worth of shares;

- the redemption proceeds are to be sent to a different name or address
than is registered on your account.

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<PAGE>

A signature guarantee may be obtained from any eligible guarantor
institution, as defined by the SEC. These institutions include banks,
savings associations, credit unions, brokerage firms and others. A notary
public stamp or seal is not acceptable.

INVOLUNTARY CONVERSION. In order to reduce expenses, if the shares in
your account other than a tax-deferred retirement account, are worth less
than $750,000, the Fund may, at its discretion, elect to convert the shares
into shares of that Fund's Primary Class. You will receive 60 days' prior
written notice in which to purchase additional shares, to avoid such a
conversion.

INVOLUNTARY REDEMPTION. Any Fund may compel the redemption of shares
if, in its opinion, such action would prevent the Fund from becoming a
personal holding company, as defined by the Code.

SPECIAL SERVICES

SYSTEMATIC EXCHANGE: Systematic Exchange allows you to make regular,
systematic exchanges of at least $10,000 from one Crabbe Huson Fund into
another Crabbe Huson account. When you establish a systematic exchange
program, you authorize the Fund, the Transfer Agent and their agents to sell
shares at a set dollar amount or number of shares from the first account and
purchase shares of a second Crabbe Huson Fund. An exchange transaction is a
sale and purchase of shares for federal income tax purposes and may result in
a gain or loss. To establish this program, you may call your Financial
Intermediary or Investor Services at (800) 541-9732. You may only make a
systematic exchange into shares of the Institutional Class of one of the
Funds. Further, both accounts must satisfy all investment minimums.

DIVIDENDS, CAPITAL GAINS, TAXES

On the date the dividends or capital gains are declared, they will
automatically be reinvested in additional shares of the same class of your
Fund unless you have elected to receive payments in cash. You may elect the
option to receive your distributions in cash by so specifying on your
application.

Each Fund intends to qualify each year as a "regulated investment
company" under the Code so it will not pay federal taxes on either income or
capital gains distributed to shareholders, although there can be no assurance
that they will so qualify.

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<PAGE>

Each Fund will be subject to a 4% excise tax on a portion of its
undistributed income if they fail to meet certain annual distribution
requirements. Each Fund intends to make distributions in a timely manner
and, accordingly, does not expect to be subject to the excise tax.

For federal income tax purposes, all distributions are reportable as
taxable income whether a shareholder elects to take them in cash or reinvest
them in additional shares of a Fund.

Distributions representing net investment income (including short-term
capital gains) are taxable as ordinary income. Distributions derived from
net long-term capital gains that are properly designated by a Fund as such
will be taxable to shareholders as long-term capital gains, regardless of how
long the shareholder has held the shares.

Under the Revenue Reconciliation Act of 1993 (the "Act"), potentially
favorable income tax treatment on distributions representing long-term
capital gains has been restored, effective for tax years beginning after
1992. Under the Act, ordinary income may be taxed at marginal rates
significantly (up to 11.6%) higher than the marginal rate at which long-term
capital gains are taxed. Accordingly, distributions representing net
long-term capital gains may be subject to a reduced rate of tax to
shareholders.

Shareholders may be subject to a $50 penalty under the Internal Revenue
Code and the Funds may be required to withhold and remit to the U.S. Treasury
a portion (31%) of any redemption or repurchase proceeds (including the value
of shares exchanged into another fund for whom the Adviser acts as Adviser)
and of any dividend or distribution on any account, where the shareholder
failed to provide a correct taxpayer identification number or to make certain
required certifications.

Each Fund will issue annually, in January, a full report to each
shareholder detailing the tax status of each distribution to the shareholder
during the calendar year. The Fund do not assume any responsibility for the
calculation of any taxable gain (or loss) from the purchase and sale of Fund
shares, including purchases made with reinvested dividends and/or capital
gains. Every shareholder should consult with their tax adviser concerning
such calculations and tax consequences.

Each Fund will be treated as a separate entity and thus the provisions
of the Code applicable to registered investment companies generally will be
applied to each fund separately instead of the Trust as a whole. Net capital
gains, net investment income and operating expenses will be determined
separately for each Fund.

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APPENDIX A

BOND RATING AGENCIES

The following is a description of the bond ratings employed by Moody's
Investors Service, Inc. ("Moody's").

Aa: Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present that make the long-term risks appear somewhat larger than in
Aaa securities.

A: Bonds rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be
present that suggest a susceptibility to impairment sometime in the future.

Baa: Bonds rated Baa are considered as medium-grade obligations (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any
great length of time. Such bonds lack outstanding investment characteristics
and, in fact, have speculative characteristics as well.

Ba: Bonds rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.

Caa: Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with respect to
principal or interest.

Ca: Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.

C: Bonds rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.

Moody's applies the numerical modifiers "1", "2", and "3" in each
generic rating classification from Aa through B. The modifier "1" indicates
that the security ranks in the higher end of its generic rating category; the
modifier "2" indicates a mid-range ranking; and the modifier "3" indicates
that the issue ranks in the lower end of its generic rating category.

The following is a description of the bond ratings employed by Standards
& Poor's Corporation ("S&P").

AAA: Bonds rated AAA are highest-grade obligations. Capacity to pay
interest and repay principal is extremely strong.

AA: Bonds rated AA have a very strong capacity to pay interest and
repay principal, and differ from the highest rated issues only in small
degree.

-30-

<PAGE>

BB, B, CCC, CC, C: Debt rated BB, B, CCC, CC, and C is regarded, on
balance, as predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the obligation.
BB indicates the lowest degree of speculation and C the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.

BB: Debt rated BB has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
The BB rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied BBB- rating.

B: Debt rated B has a greater vulnerability to default but currently
has the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied BB or BB- rating.

CC: The rating CC is typically applied to debt subordinated to senior
debt that is assigned an actual or implied CCC rating.

C: The rating C is typically applied to debt subordinated to senior
debt which is assigned an actual or implied CCC- debt rating. The C rating
may be used to cover a situation where a bankruptcy petition has been filed,
but debt service payments are continued.

C1: The rating C1 is reserved for income bonds on which no interest is
being paid.

D: Debt rated D is in payment default. The D rating category is used
when interest payments or principal payments are not made on the date due
even if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period. The D rating also will
be used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.

C: Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarding as having extremely poor prospects of ever
attaining any real investment standing.

The S&P letter rating may be modified by the addition of a plus (+) or
minus sign (-), which is used to show relative standing within rating
categories between AA to CCC.

From time to time a bond rating agency may adjust its rating of a
particular bond issue. Subsequent to a Fund's purchase of a bond, such a
bond may have its rating reduced (down graded) to a category not permitted to
be owned by that Fund, or it may cease to be rated. Neither case would
require that a Fund eliminate such a bond from its portfolio. However, the
Fund's Adviser will consider such an event in determining whether or not the
Fund should continue to hold such a security.

-31-

<PAGE>
APPENDIX B

HEDGING INSTRUMENTS:

OPTIONS ON EQUITY AND DEBT SECURITIES -- A call option is a short-term
contract pursuant to which the purchaser of the option, in return for a
premium, has the right to buy the security underlying the option at a
specified price at any time during the term of the option. The writer of the
call option, who receives the premium, has the obligation, upon exercise of
the option during the option term, to deliver the underlying security against
payment of the exercise price. A put option is a similar contract that gives
its purchaser, in return for a premium, the right to sell the underlying
security at a specified price during the option term. The writer of the put
option, who receives the premium, has the obligation, upon exercise of the
option during the option term, to buy the underlying security at the exercise
price.

OPTIONS ON SECURITIES INDICES -- A securities index assigns relative
values to the securities included in the index and fluctuates with changes in
the market values of those securities. An index option operates in the same
way as a more traditional stock option, except that exercise of an index
option is effected with cash payment and does not involve delivery of
securities. Thus, upon exercise of an index option, the purchase will
realize, and the writer will pay, an amount based on the difference between
the exercise price and the closing price of the index.

STOCK INDEX FUTURES CONTRACTS -- A stock index futures contract is a
bilateral agreement pursuant to which one party agrees to accept, and the
other party agrees to make, delivery of an amount of cash equal to a
specified dollar amount times the difference between the stock index value at
the close of trading of the contract and the price at which the futures
contract is originally struck. No physical delivery of the stocks comprising
the index is made. Generally, contracts are closed out prior to the
expiration date of the contract.

INTEREST RATE FUTURES CONTRACTS -- Interest rate futures contracts are
bilateral agreements pursuant to which one party agrees to make, and the
other party agrees to accept, delivery of a specified type of debt security
at a specified future time and at a specified price. Although such futures
contracts by their terms call for actual delivery or acceptance of debt
securities, in most cases the contracts are closed out before the settlement
date without the making or taking of delivery.

OPTIONS ON FUTURES CONTRACTS -- Options on futures contracts are similar
to options on securities or currency, except that an option on a futures
contract gives the purchaser the right, in return for the premium, to assume
a position in a futures contract (a long position if the option is a call and
a short position if the option is a put), rather than to purchase or sell a
security or currency, at a specified price at any time during the option
term. Upon exercise of the option, the delivery of the futures position to
the holder of the option will be accompanied by delivery of the accumulated
balance that represents the amount by which the market price of the futures
contract exceeds, in the case of a call, or is less than, in the case of a
put, the exercise price of the option on the future. The writer of an
option, upon exercise, will assume a short position in the case of a call and
a long position in the case of a put.

Purchase of these financial instruments allows the Adviser to hedge
against changes in market conditions. For example, the Adviser may purchase
a put option in a securities index or when it believes that the stock prices
will decline. Conversely, the Adviser may purchase a call option in a
securities index when it anticipates that stock prices will increase.

-32-

<PAGE>

TABLE OF CONTENTS
Page
----
CRABBE HUSON FUNDS
(Institutional Class)
SUMMARY OF KEY INFORMATION. . .-3- Crabbe Huson Small Cap Fund

EXPENSE DATA. . . . . . . . . .-4- Crabbe Huson Equity Fund

INVESTMENT OBJECTIVE AND Crabbe Huson Asset Allocation Fund
POLICIES . . . . . . . . .-5-

FUNDAMENTAL POLICIES. . . . . .-7-

CHARACTERISTICS, RISKS OF
SECURITIES AND
INVESTMENT TECHNIQUES. . .-8-

MANAGEMENT OF THE FUNDS . . . -16-

CONTROL PERSONS . . . . . . . -18-

NET ASSET VALUE . . . . . . . -18-

PERFORMANCE COMPARISONS . . . -18-

ALLOCATION OF BROKERAGE . . . -19-

CAPITAL STRUCTURE . . . . . . -20-

YIELD . . . . . . . . . . . . -20-

INVESTOR SERVICES . . . . . . -21-

WHEN TRANSACTIONS ARE
RECORDED IN YOUR ACCOUNT -27-

STATEMENTS. . . . . . . . . . -27-

SPECIAL SITUATIONS. . . . . . -27- Prospectus

SPECIAL SERVICES. . . . . . . -28- August ___,1996

DIVIDENDS, CAPITAL GAINS,
TAXES. . . . . . . . . . -28-

APPENDIX A. . . . . . . . . . -30-

APPENDIX B. . . . . . . . . . -32-

<PAGE>

------------------
CRABBE HUSON FUNDS
------------------

Crabbe Huson Special Fund, Inc.
Crabbe Huson Small Cap Fund
Crabbe Huson Real Estate Investment Fund
Crabbe Huson Equity Fund
Crabbe Huson Asset Allocation Fund
Crabbe Huson Oregon Tax-Free Fund
Crabbe Huson Income Fund
Crabbe Huson U.S. Government Income Fund
Crabbe Huson U.S. Government Money Market Fund

(collectively, the "Funds")

-----------------------------------
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------

August _____, 1996

This Statement of Additional Information is meant to be read in
conjunction with the combined Prospectus for the Primary Class of
Shares of the Funds, the combined Prospectus of the Institutional
Class of shares of the Crabbe Huson Small Cap Fund, the Crabbe Huson
Equity Fund and the Crabbe Huson Asset Allocation Fund and the
Prospectus for the shares of the Crabbe Huson Special Fund, Inc., each
dated August _____, 1996, as amended or supplemented from time to
time, and is incorporated by reference in its entirety into those
Prospectuses. Because this Statement of Additional Information is not
itself a prospectus, no investment in shares of any of the Funds
should be made solely upon the information contained herein. Copies
of each Prospectus may be obtained by calling (800) 541-9732 or
writing the Funds at the Crabbe Huson Funds, P.O. Box 8413, Boston, MA
02266-8413.

<PAGE>

-----------------
TABLE OF CONTENTS
-----------------

Page
----

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

TRUSTEES, DIRECTORS AND OFFICERS OF THE FUNDS. . . . . . . . . . . . . . . . 3

SERVICES PROVIDED BY THE ADVISER . . . . . . . . . . . . . . . . . . . . . . 6

ADMINISTRATIVE SERVICES. . . . . . . . . . . . . . . . . . . . . . . . . . . 8

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES. . . . . . . . . . . . . 9

DISTRIBUTION PLAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 18

LOANS OF PORTFOLIO SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . 34

PURCHASE AND REDEMPTION OF FUND SHARES . . . . . . . . . . . . . . . . . . . 35

U.S. GOVERNMENT MONEY MARKET FUND. . . . . . . . . . . . . . . . . . . . . . 35

PRICING OF SECURITIES BEING OFFERED. . . . . . . . . . . . . . . . . . . . . 36

YIELD AND PERFORMANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

DIVIDENDS, DISTRIBUTIONS AND TAXES . . . . . . . . . . . . . . . . . . . . . 43

SPECIAL INVESTOR SERVICES. . . . . . . . . . . . . . . . . . . . . . . . . . 48

GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

COUNSEL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

CUSTODIAN, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT. . . . . . . . . . . 51

ADDITIONAL INFORMATION REGARDING
CERTAIN INVESTMENTS BY THE FUNDS. . . . . . . . . . . . . . . . . . . . 52

SPECIAL INVESTMENT RISKS . . . . . . . . . . . . . . . . . . . . . . . . . . 53

FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

<PAGE>

------------
INTRODUCTION
------------

This Statement of Additional Information sets forth information
concerning the Funds, including information regarding the Funds' Primary
Class and the Institutional Class offered by certain Funds. Information
concerning each class is also set forth in the Prospectus for each class.

----------
MANAGEMENT
----------

The Trustees, Directors and officers of the Funds are listed below,
together with information about their principal business occupations during
the last five years.

TRUSTEES, DIRECTORS AND OFFICERS OF THE FUNDS
- ---------------------------------------------

RICHARD S. HUSON,* 56, is a Trustee or Director and President of each
----------------
of the Funds. Mr. Huson is a chartered financial analyst. Mr. Huson is a
director and Secretary of the Crabbe Huson Group, Inc., the Funds' Adviser (the
"Adviser"). Mr. Huson has, since 1980, served in various positions with the
Adviser, and is currently its Vice President/Secretary and is a portfolio
managers. His business address is 121 S.W. Morrison, Suite 1400, Portland,
Oregon 97204.

JAMES E. CRABBE,* 50, is a Trustee or Director and Vice President of each
---------------
of the Funds. He is a director and President of the Adviser. Mr. Crabbe has,
since 1980, served in various positions with the Adviser, and is currently it
President and a portfolio manager. His business address is 121 SW Morrison,
Suite 1400, Portland, Oregon 97204.

GARY L. CAPPS, 60, is a Trustee or Director of each of the Funds. Mr.
-------------
Capps has been the Executive Director of the Bend Chamber of Commerce since July
1992. Mr. Capps was the owner and Chief Executive Officer of ten radio stations
in Oregon, Idaho and Washington from 1964 until 1986. He has been a director of
Bank of the Cascades in Bend, Oregon since 1980, and has served as Chairman
since 1983. His business address is 63085 N. Hwy 97, Bend, Oregon 97701.

CHERYL BURGERMEISTER,* 45, is Treasurer of the Funds. Ms. Burgermeister
--------------------
has been employed by the Adviser for the past nine years, and has been the chief
financial officer of the Adviser since 1989. Ms. Burgermeister's business
address is 121 SW Morrison, Suite 1400, Portland, Oregon 97204. Ms.

- ------------------------------
*The persons indicated are "interested persons" of the Fund, as defined in the
Investment Company Act of 1940 (the "1940 Act") as amended. They receive no
trustees' or directors' fees or salaries from any of the Funds.

<PAGE>

Burgermeister is Treasurer of Crabbe Huson Securities, Inc., the Funds'
Distributor.

LOUIS SCHERZER, 75, is a Trustee or Director of each of the Funds. Mr.
--------------
Scherzer is an officer of Scherzer Partners, Inc., a real estate development
and management firm located at 5440 SW Westgate Drive, Suite 222, Portland,
Oregon 97221. Mr. Scherzer has been an independent real estate developer and
manager for more than 10 years.

ROBERT L. SMITH, 57, is a Trustee or Director of each of the Funds. Mr.
---------------
Smith has been President of VIP's Industries since 1968, and has been a
Director of Western Security Bank since 1980, a Director of KeyCorp since
1988 and a Director of Blue Cross/Blue Shield of Oregon since 1984. His
business address is 280 Liberty Street S.E., Salem, Oregon 97301.

CRAIG P. STUVLAND,* 40, is a Trustee or Director and Secretary of each
-----------------
of the Funds. Mr. Stuvland has been employed by the Adviser since June,
1987; he is currently an Executive Vice President and a Director. Mr.
Stuvland's business address is 121 S.W. Morrison, Suite 1400, Portland,
Oregon 97204. Mr. Stuvland is President and a director of the Funds'
Distributor.

RICHARD P. WOLLENBERG, 79, is a Trustee or Director of each of the
---------------------
Funds. Mr. Wollenberg has been Chairman and Chief Executive Officer of
Longview Fibre Company since 1978, and a Trustee of Reed College since 1962.
His business address is Longview Fibre Company, P.O. Box 606, Longview,
Washington 98632.

WILLIAM WENDELL WYATT, JR., 45, is a Trustee or Director of each of the
-------------------------
Funds. Mr. Wyatt has been Chief of Staff, Office of the Governor, State of
Oregon, since April, 1995. From 1987 to 1995, he was President of the Oregon
Business Council. His business address is 254 State Capitol, Salem, Oregon
97310-0370.

All funds (other than the Special Fund) are separate series of Crabbe Huson
Funds, a Delaware Business Trust (the "Trust"). The Special Fund is an Oregon
corporation. In this Statement of Additional Information, a reference to
"Board" shall be to each Fund's Board of Trustees or Board of Directors, as the
case may be. For all Funds (other than the Special Fund), no annual or regular
meeting is required. Thus, there will not ordinarily be an annual shareholder's
meeting (including a meeting for the purpose of electing trustees) unless
holding a meeting is required by the Investment Company Act of 1940, as amended
(the "Act"), or unless a request to hold a meeting is properly made by at least
10 percent of the shareholders of the Trust if all shareholders of the Trust are
entitled to vote on the matter or 10 percent of the affected series or class of
a series if such vote is on a series by series or class by class basis.

<PAGE>

In the case of the Special Fund, the Board is elected annually by the Fund's
shareholders.

Each Fund's Board is responsible for the overall management of the Fund,
including general supervision and review of their investment policies and
activities. The Board of the Trust and the Board of the Special Fund elect
the officers who are responsible for supervising and administering the Funds'
day-to-day operations. The Funds have an audit committee that reviews the
auditor's report and management letters, reviews the terms of the auditor's
engagement and makes recommendations to the Boards concerning the terms of
the auditor's engagements. The audit committees currently consist of Messrs.
Scherzer, Smith and Wyatt.

COMPENSATION OF OFFICERS AND DIRECTORS

The following table sets forth compensation received by the
disinterested directors of the Funds during the fiscal year ended October 31,
1995. No officer of any of the Funds received compensation in excess of
$60,000.

COMPENSATION TABLE
------------------

Total
Compensation
From Fund
Complex Paid
Aggregate Compensation from to Each
Name of Person, Position Fund, per Director Trustee/Director
- ------------------------ --------------------------- ----------------
<S> <C> <C>

Wollenberg, Smith, Special Fund - $1,800 $7,200
Capps, Scherzer, Real Estate Fund - $600
Directors Equity Fund - $1,600
Asset Allocation Fund -$1,600
Oregon Tax-Free Fund - $600
Income Fund - $200
U.S. Government Income
Fund - $200
U.S. Government Money
Market Fund - $600
Small Cap Fund*

Wyatt, Director Special Fund - $1,400 $5,450
Real Estate Fund - $450
Equity Fund - $1,200
Asset Allocation Fund - $1,200
Oregon Tax-Free Fund - $450
Income Fund - $150
U.S. Government Income
Fund - $150
U.S. Government Money Fund - $450
Small Cap Fund*

* The Small Cap fund commenced operations February 16, 1996. For the
current fiscal year, each Trustee has received $100 as their pro rata
share of trustee fees

<PAGE>

for the Small Cap Fund and would expect to receive $200 for
the remainder of the fiscal year.

</TABLE>

The Funds also reimburse trustees/directors' expenses for attending
shareholder and director meetings for directors who are not officers,
directors, or employees of the Adviser or the Distributor.

See "Control Persons and Principal Holders of Securities" in this
Statement of Additional Information.

--------------------------------
SERVICES PROVIDED BY THE ADVISER
--------------------------------

Each Fund employs the Adviser to furnish investment advice and other
services pursuant to advisory agreements (the "Advisory Agreements"). The
Adviser was incorporated in 1980 and has been engaged in the business of
providing investment advice since July 1, 1980. The address of the Adviser
is 121 SW Morrison, Suite 1400, Portland, Oregon 97204, mailing address:
P.O. Box 6559, Portland, Oregon 97228-6559. Crabbe Huson Securities, Inc.,
the Distributor of the Funds, is affiliated with the Adviser.

James E. Crabbe and Richard S. Huson are controlling shareholders of the
Adviser and together own 100% of the stock of the Distributor of the Funds.

James E. Crabbe and Richard S. Huson are primarily responsible for the
day-to-day management of the Adviser. Mr. Crabbe is President and a Director
of the Adviser and Mr. Huson is Vice President/Secretary and a Director. Mr.
Crabbe and Mr. Huson have been primarily responsible since the inception of
the Adviser. Both Mr. Crabbe and Mr. Huson have served in various management
positions with the Adviser since 1980.

The Adviser may, from time to time, voluntarily waive its fee and or
reimburse each Fund for certain expenses incurred by the Fund. While the
Adviser has in the past and may in the future determine to waive its fee
and/or reimburse Fund expenses, it is not obligated to waive fees and/or
reimburse expenses. Even in the event of discontinuance of this agreement,
the Funds may still be subject to the laws of certain states, which require
that if a mutual fund's expenses (including advisory fees but excluding
interest, taxes, brokerage commissions and extraordinary expenses) exceed
certain percentages of average net assets, the Fund must be reimbursed for
such excess expenses.

Under the Advisory Agreements, the Adviser determines the structure of the
Funds' portfolios, the nature and timing of the changes in it, and the manner of
implementing such changes (subject to any directions it may receive from the
Funds' Board); provides the Funds with investment advisory

<PAGE>

research and related services for the investment of assets; furnishes
(without expense to the Funds) the services of such members of its
organization as may be duly elected officers or directors of the Funds; and
pays all executive officers' salaries and expenses. Additional information
about the services provided by the Adviser is described under "MANAGEMENT OF
THE FUNDS" in the Prospectus.

As compensation for its services under the Advisory Agreements, the Adviser
receives a bi-monthly fee based on the annual schedule of fees outlined in the
Prospectus. For the year ended October 31, 1993, the Funds paid the following
investment advisory fees to the Adviser:

Amount
Fee Waived Total
--- ------ -----

Special Fund $ 129,227 $ 2,238 $ 126,989
Equity Fund 217,212 32,826 184,386
Asset Allocation Fund 683,280 54,592 628,688
Oregon Tax-Free Fund 120,660 11,421 109,239
Income Fund 40,195 40,195 -0-
U.S. Government
Income Fund 54,023 54,023 -0-
U.S. Government
Money Market Fund 53,882 53,882 -0-

For the year ended October 31, 1994, the Funds paid the following
investment advisory fees to the Adviser:

Amount
Fee Waived Total
--- ------ -----
Special Fund $ 963,723 $ 85,038 $878,685
Real Estate Fund 94,916 50,426 44,490
Equity Fund 782,419 68,033 714,386
Asset Allocation Fund 1,034,183 53,227 980,956
Oregon Tax-Free Fund 152,868 31,708 121,160
Income Fund 43,957 43,957 -0-
U.S. Government
Income Fund 51,245 51,245 -0-
U.S. Government
Money Market Fund 107,853 107,853 -0-

For the year ended October 31, 1995, the Funds paid the following
investment advisory fees to the Adviser:

<PAGE>

Amount
Fee Waived Total
--- ------ -----
Special Fund $5,398,048 $ 697 $5,397,351
Real Estate Fund 190,619 75,190 115,429
Equity Fund 2,471,465 -0- 2,471,465
Asset Allocation Fund 1,183,215 14,567 1,168,648
Oregon Tax-Free Fund 134,042 20,866 113,176
Income Fund 49,011 49,011 -0-
U.S. Government
Income Fund 43,576 43,576 -0-
U.S. Government
Money Market Fund 253,198 230,305 22,893

The Real Estate Fund entered into a subadvisory agreement with Aldrich
Eastman Waltch, L.P. on September 6, 1995, and in the year ending October 31,
1995, paid advisory fees of $11,560.07 out of the advisory fees collected
from that Fund.

-----------------------
ADMINISTRATIVE SERVICES
-----------------------

State Street Bank and Trust Company has been hired by the Funds to
provide a number of administrative and compliance services to the Funds,
including maintenance of certain Fund books and records, preparation of Fund
tax returns, expense allocation and payment of expenses, preparation of
reports to shareholders, preparation of Fund financial statements,
preparation of reports to the directors of the Funds, maintaining state
registration of Fund shares, and monitoring compliance with investment
restrictions and Internal Revenue Code requirements for registered investment
company status. The Funds paid State Street Bank and Trust Company the
following fees under the Administration Agreement during the fiscal year
ended October 31, 1995:

Special Fund $ 62,430
Equity Fund $ 26,144
Asset Allocation Fund $ 9,297
Real Estate Fund $ 1,353
Oregon Tax-Free Fund $ 1,889
Income Fund $ 482
U.S. Government Income Fund $ 569
U.S. Government Money Market Fund $ 3,767
--------

Total: $105,935

Additionally, the Adviser receives a fee for certain shareholder liaison
services it provides to the Funds, including responding to shareholder
inquiries, providing information on shareholder investments and performing
certain clerical tasks. In the last three years, for such services, the
Adviser has been paid by the Funds $100,000 a year. The Funds paid their pro
rata share of such fee based upon their net asset value.

<PAGE>

In future years, the Adviser intends to charge the Funds a fee
calculated at an annual rate of .10% of a Fund's average daily net assets.

---------------------------------------------------
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
---------------------------------------------------

The following table shows the persons known by the Funds to beneficially
own 5% or more of any class of any of the Funds' voting securities, and the
ownership of the officers and directors of each Fund, as a group, as of June
3, 1996. Those shareholders marked with an asterisk are nominees holding
shares for beneficial owners and the Funds have no records concerning the
actual beneficial owners. The Oregon Tax-Free Fund has no shareholders of
record of more than 5% of the outstanding Shares of that Fund, or who are
officers or directors of that Fund as of June 3, 1996. On June 3, 1996, the
trustees, directors and officers owned in the aggregate less than 1% of each
Fund's outstanding shares.

SPECIAL FUND

Approximate Approximate
Number of Shares Percent of
Beneficial Owners Beneficially Owned Shares
- ----------------- ------------------ ----------
<S> <C> <C>
Charles Schwab 15,821,028 31.30%
& Co. Inc.*
Special Custody A/C
Attn: Mutual Funds
101 Montgomery Street
San Francisco, California 94104-4122

National Financial
Services Corp.* 2,591,986 5.1%
Attn: Mutual Funds
200 Liberty Street, 5th Floor
One World Financial Center
New York, New York 10281-0095

</TABLE>
9

<PAGE>

SMALL CAP FUND

Approximate Approximate
Number of Shares Percent of
Beneficial Owners Beneficially Owned Shares
- ----------------- ------------------ -----------
<S> <C> <C>

Enele Co. 232,961 30.92%
Dividend Reinvestment
1211 S.W. Fifth Avenue, Suite 1900
Portland, Oregon 97204-3713

Colorado National Bank of 183,754 24.39%
Denver C/F ILIFF School
of Theology
Mutual Funds a/c 89589810
P.O. Box 64010
St. Paul, Minnesota 55164-0010

U.S National Bank of Oregon 39,803 5.28%
Cust. for Oregon Shakespearean
Festival Endowment
P.O. Box 3168
Portland, Oregon 97208-3168

</TABLE>

REAL ESTATE INVESTMENT FUND

Approximate Approximate
Number of Shares Percent of
Beneficial Owners Beneficially Owned Shares
- ----------------- ------------------ -----------
<S> <C> <C>

Enele Co. C/F* 568,014 39.42%
Dividend Reinvestment
1211 S.W. Fifth Avenue, Suite 1900
Portland, Oregon 97204

</TABLE>

EQUITY FUND

Approximate Approximate
Number of Shares Percent of
Beneficial Owners Beneficially Owned Shares
- ----------------- ------------------ -----------
<S> <C> <C>

Charles Schwab 6,495,499 25.84%
& Co., Inc.*
Special Custody A/C
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104-4122

National Financial Services 1,283,075 5.1%
Corp.*
FBO Our Customers
Attn: Mutual Funds
200 Liberty Street, 5th Floor
One World Financial Center
New York, New York 10281-0095

</TABLE>
10

<PAGE>

ASSET ALLOCATION FUND

Approximate Approximate
Number of Shares Percent of
Beneficial Owners Beneficially Owned Shares
- ----------------- ------------------ -----------
<S> <C> <C>

Enele Co. 1,092,077 9.89%
FBO Wealthtrack Operations
Attn: Wealthtrack Opers.
1211 S.W. Fifth Avenue, Suite 1900
Portland, Oregon 97204-3713

Enele Co. C/F* 1,040,703 9.42%
Pacific Northwest Trust Company
1211 S.W. Fifth Avenue, Suite 1900
Portland, Oregon 97204

Enele Co. 730,312 6.61%
Dividend Reinvestment
1211 S.W. Fifth Avenue, Suite 1900
Portland, Oregon 97204-3713

</TABLE>

INCOME FUND

Approximate Approximate
Number of Shares Percent of
Beneficial Owners Beneficially Owned Shares
- ----------------- ------------------ -----------
<S> <C> <C>

Enele Co. 141,594 24.33%
FBO Wealthtrack Operations
Attn: Wealthtrack Opers.
1211 S.W. Fifth Avenue, Suite 1900
Portland, Oregon 97204-3713

Enele Co. 80,286 14.08%
Dividend Reinvestment
1211 S.W. Fifth Avenue, Suite 1900
Portland, Oregon 97204-3713

Enele Co. 47,752 8.37%
Cash Dividend Acct.
1211 S.W. Fifth Avenue, Suite 1900
Portland, Oregon 97204-3713

Klamath Medical Service Bureau 37,734 6.62%
2500 Daggett Street
Klamath Falls, Oregon 97601

</TABLE>
11

<PAGE>

U.S. GOVERNMENT INCOME FUND

Approximate Approximate
Number of Shares Percent of
Beneficial Owners Beneficially Owned Shares
- ----------------- ------------------ -----------
<S> <C> <C>

Enele Co. C/F* 117,236 16.62%
Dividend Reinvestment
1211 S.W. Fifth Avenue, Suite 1900
Portland, Oregon 97204

Enele Co. 86,710 12.28%
FBO Wealthtrack Operations
Attn: Wealthtrack Opers.
1211 S.W. Fifth Avenue, Suite 1900
Portland, Oregon 97204-3713

Enele Co. 59,144 8.38%
Cash Dividend Acct.
1211 S.W. Fifth Avenue, Suite 1900
Portland, Oregon 97204-3713

State Street Bank and Trust Co. 52,777 7.48%
C/F Beverly M. Hodge
369 Kubli Road
Grants Pass, Oregon 97527

Klamath Medical Service 52,736 7.47%
Bureau
2500 Daggett Street
Klamath Falls, Oregon 97601

Tillamook County 41,537 5.38%
Smoker, Inc.
15500 Miami Foley Road
Bay City, Oregon 97107-9708

</TABLE>

U.S. GOVERNMENT MONEY MARKET FUND

Approximate Approximate
Number of Shares Percent of
Beneficial Owners Beneficially Owned Shares
- ----------------- ------------------ -----------
<S> <C> <C>

Enele Co. 12,661,595 30.52%
c/o Copper Mountain
Financial Group, Inc.
1211 S.W. Fifth Avenue, Suite 1900
Portland, Oregon 97204

</TABLE>

-----------------
DISTRIBUTION PLAN
-----------------

The Primary Class of each of the Funds and the Special Fund have adopted
a Rule 12b-1 Plan under the Investment

<PAGE>

Company Act of 1940 (the "1940 Act"). Under Rule 12b-1, any payments made by
the Funds in connection with financing the distribution of their shares may
only be made pursuant to a written plan describing all aspects of the
proposed financing of distribution, and also requires that all agreements
with any person relating to the implementation of the plan must be in
writing. Because some of the payments described below to be made by the
Funds are distribution expenses within the meaning of Rule 12b-1, the Funds
have entered into distribution agreements with Crabbe Huson Securities, Inc.
(the "Distributor") that provides for certain payments to the Distributor
pursuant to a distribution plan (the "Plan") adopted in accordance with such
Rule.

Rule 12b-1 requires that the Plan be approved by a majority of each
Fund's outstanding Primary Class shares, or, in the case of the Special Fund,
the Special Fund's outstanding shares, and requires that the Plan, together
with any related agreements, be approved by a vote of the Trustees/Directors
of the Funds who are not interested persons of the Funds and who have no
direct or indirect financial interest in the operation of the Plan or in the
agreements related to the Plan, cast in person at a meeting called for the
purpose of voting on such plan or agreement. The Plan and any agreement
related to it must provide, in substance:

(a) that it shall continue in effect for a period of more
than one year from the date of its execution or adoption only
so long as such continuance is specifically approved at least
annually in the manner described in the Rule;

(b) that any person authorized to direct the disposition
of moneys paid or payable by the Funds pursuant to the Plan or
any related agreement shall provide to the Funds' Board of
Trustees/Directors, and the Trustees/Directors shall review, at
least quarterly, a written report of the amounts so expended
and the purposes for which such expenditures were made; and

(c) in the case of the Plan, that it may be terminated at
any time by a vote of a majority of the members of the Board of
Trustees/Directors of the Fund who are not interested persons
of the Fund and who have no Direct or indirect financial
interest in the operation of the Plan or in any agreements
related to the Plan, or by a vote of a majority of the
outstanding Primary Class voting securities of a Fund.

The Plan may not be amended to increase materially the amount
to be spent for distribution without shareholder approval, and all material
amendments to the Plan must be approved in the manner described in the Rule.

<PAGE>

The Funds may rely upon Rule 12b-1 only if the selection and nomination
of the Funds' disinterested Trustees/Directors is committed to the discretion
of the disinterested Trustees/Directors. Each Fund may implement or continue
a plan pursuant to Rule 12b-1 only if the Trustee/Directors who vote to
approve such implementation or continuation conclude, in the exercise of
reasonable business judgment and in light of their fiduciary duties under
state law, and under Sections 36(a) and (b) of the 1940 Act, that there is a
reasonable likelihood that the plan will benefit the Fund and its
shareholders. The Board of Trustees and the Board of Directors have concluded
that there is a reasonable likelihood that a distribution plan will benefit
each Fund.

Pursuant to the provisions of the Plan, each participating Fund may pay
up to .25% of the average daily net assets of its Primary Class to the
Distributor to reimburse the Distributor for actual expenses incurred in the
distribution and promotion of such Fund's shares.

Expenses for which the Distributor will be reimbursed under the Plan
include, but are not limited to, expenses incurred in the printing of
prospectuses and statements of additional information for persons other than
then-current shareholders, expenses related to preparation and printing of
sales literature, and other distribution-related expenses. Compensation will
be paid out as incurred, on a monthly basis, to the Distributor, and to
broker-dealers, investment advisers, and other financial institutions that
have entered into sales agreements with the Distributor to actively promote
the sale of the Funds shares, and may be paid to investment executives of the
Distributor.

Pursuant to Rule 12b-1 of the Plan, the Funds have entered into
distribution agreements with the Distributor. These agreements obligate the
Distributor to pay certain expenses in connection with the offering of shares
of the Funds, including expenses related to the printing of prospectuses and
statements of additional information, the preparation and printing of sales
literature, and other distribution-related expenses. Shares of the Funds are
offered continuously to the public by the Distributor and broker-dealers who
enter into sales agreements with the Distributor.

During the fiscal year ended October 31, 1995, the Funds paid the
following amounts under the Funds' 12b-1 plan:

<PAGE>

Financial To Adviser for
Printing/Mailing Broker/Dealer Salesperson Institution Literature
Fund Total Advertising Prospectus Payments Payments Payments Expenses
---- ----- ----------- ---------------- ------------ ----------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>

Special Fund $1,701,991 $ 68,080 $919,075 $612,717 $17,020 $85,100 $ --

Real Estate 47,655 1,430 19,539 24,781 -- -- 1,906
Fund

Equity Fund 621,908 18,657 242,544 323,392 12,438 -- 24,876

Asset 303,887 3,039 51,661 243,110 -- -- 6,078
Allocation
Fund

Oregon Tax- 61,567 616 6,772 53,563 -- -- 616
Free Fund

Income Fund 16,337 163 9,475 6,698 -- -- --

U.S. 21,788 654 8,933 11,330 -- -- 872
Government
Income Fund

U.S. 126,599 5,064 63,300 51,906 -- -- 6,330
Government
Money Market
Fund

</TABLE>

----------------------
PORTFOLIO TRANSACTIONS
----------------------

GENERAL CONSIDERATIONS
- ----------------------

The Adviser is responsible for decisions to buy and sell securities for
the Funds, the selection of brokers and dealers to effect the transactions
and the negotiation of brokerage commissions, if any. Purchases and sales of
securities on a securities exchange are effected through brokers who charge a
negotiated commission for their services. Orders may be directed to any
broker. If the Adviser grants investment management authority to a
sub-adviser, the sub-advisers are authorized to place orders for the purchase
and sale of portfolio securities, and will do so in accordance with the
policies described below.

In the over-the-counter market, debt securities are generally traded on
a "net" basis with dealers acting as principal for their own accounts without
a stated commission, although the price of a security usually includes a
profit to the dealer. A Fund may also pay a mark-up (sometimes referred to
as a dealer's "turn") in principal transactions and in transactions in the
over-the-counter market. In underwritten offerings, securities are purchased
at a fixed price which includes an amount of compensation to the underwriter,
generally referred to as the underwriter's concession or discount. On
occasion, certain money market instruments may be purchased directly from an
issuer, in which case no commissions or discounts are paid.

15
<PAGE>

The primary considerations in the selection of a broker or dealer for
portfolio transactions, subject to applicable limitations of the federal
securities laws, are (1) the availability of the desired security, (2) the
prompt execution of orders in an effective manner at the most favorable
prices, (3) the financial condition of the broker-dealer firm and (4)
arrangements for payment of Fund expenses. Subject to those considerations,
dealers that provide supplemental investment research and statistical or
other services to the Adviser may receive orders for portfolio transactions
by the Funds. Such services may include advice concerning the value of
securities; the advisability of purchasing or selling securities; the
availability of securities; purchasers or sellers of securities; and the
furnishing of analysis and reports concerning industries, economic facts and
trends, and portfolio strategies. There is no formula for such allocation.
The research information received from brokers or dealers may or may not be
useful to the Funds and the Adviser in a number of ways. The information may
be in written form or may be obtained through direct contact with
individuals, and may include information on particular issuers as well as
market and general economic information. The Adviser will not be deemed to
have breached its obligations to the Funds solely by reason of having caused
the Funds to pay a broker or dealer an amount of commission for effecting a
securities transaction in excess of the amount of commission another broker
or dealer could have charged for effecting that transaction, if the Adviser
has determined in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services provided to the
Funds and to other accounts of the Adviser.

In addition to placing the Funds' brokerage business with firms that
provide the above research, market and statistical services to the Adviser,
the Funds' brokerage business may also be placed with firms that agree to pay
a portion of certain Fund expenses, consistent with achieving the best price
and execution. On November 29, 1995, the Special, Equity, Asset Allocation
and Real Estate Funds entered into an arrangement with State Street Brokerage
Services, Inc. ("SSBSI"), in which these Funds will receive credits to offset
transfer agency, administration and accounting fees by using SSBSI in their
portfolio transactions.

In the fiscal year ended October 31, 1993, the Special Fund paid $113,857,
the Equity Fund paid $115,701, the Asset Allocation Fund paid $225,228, the
Income Fund paid $603, and the U.S. Government Income Fund paid $384 in
brokerage commissions. None of these commissions were paid to the Funds'
Distributor. The Oregon Tax-Free Fund and the U.S. Government Money Market Fund
did not pay any brokerage commissions during the year ended October 31, 1993, as
these Funds executed all portfolio transactions on a principal

<PAGE>

basis. The Real Estate Fund began operations in 1994 and the Small Cap Fund
began operations in 1996.

In the fiscal year ended October 31, 1994, the Special Fund paid
$766,879, the Equity Fund paid $444,904, the Asset Allocation Fund paid
$309,181, the Income Fund paid $3,407, the U.S. Government Income Fund paid
$318, and the Real Estate Fund paid $71,851 in brokerage commissions. None
of these commissions were paid to the Funds' Distributor. The Oregon
Tax-Free Fund and the U.S. Government Money Market Fund did not pay any
brokerage commissions in the year ended October 31, 1994, as these Funds
executed all portfolio transactions on a principal basis. Of the commissions
paid in the fiscal year ending October 31, 1994 the Special Fund paid
$550,799, the Equity Fund paid $253,908, the Asset Allocation Fund paid
$183,915, and the Real Estate Fund paid $60,795 in commissions as a result of
research provided by the brokers. None of the other Funds directed brokerage
on the basis of research provided by a broker. The Small Cap Fund began
operations in 1996.

In the fiscal year ended October 31, 1995, the Special Fund paid
$4,610,652, the Equity Fund paid $1,228,492, the Asset Allocation Fund paid
$279,948, the Income Fund paid $416, the U.S. Government Fund paid $144, and
the Real Estate Fund paid $60,139 in brokerage commissions. None of these
commissions were paid to the Funds' Distributor. The Oregon Tax-Free Fund
and the U.S. Government Money Market Fund did not pay any brokerage
commissions in the year ended October 31, 1995, as these Funds executed all
portfolio transactions on a principal basis. Of the commissions paid in the
fiscal year ending October 31, 1995, the Special Fund paid $1,594,562, the
Equity Fund paid $754,846, the Asset Allocation Fund paid $180,671, and the
Real Estate Fund paid $44,614 in commissions as a result of research provided
by the brokers. None of the other Funds directed brokerage on the basis of
research provided by a broker. The Small Cap Fund began operations in 1996.

Under the 1940 Act, persons affiliated with the Funds are prohibited
from dealing with the Funds as principals in the purchase or sale of
securities. The Funds or broker-dealers affiliated with the Adviser will not
deal with affiliated parties, including the Distributor, in connection with
principal transactions.

The SEC has the authority to issue and amend regulations involving
transactions with affiliates of the Funds. The Funds' Boards of
Trustees/Directors will review all transactions with affiliates at least
quarterly and determine the overall reasonableness of any brokerage
commissions paid.

Even though investment decisions for the Funds are made independently from
those of the other accounts managed by the Adviser or its affiliates, securities
of the same issuer may

<PAGE>

be purchased, held, or sold by the Funds and the other accounts, because the
same security may be suitable for all of them. When the Funds and such other
accounts are simultaneously engaged in purchase or sale of the same security,
efforts will be made to allocate price and amounts in an equitable manner.
In some cases, this procedure may adversely affect the price paid or received
by the Funds or the size of the position purchased or sold by the Funds.

PORTFOLIO TURNOVER
- ------------------

The Funds generally do not trade in securities with the goal of
obtaining short-term profits, but when circumstances warrant, securities will
be sold without regard to the length of time the security has been held.

The Funds anticipate that, except in periods of unusual market
conditions, their annual portfolio turnover rate (the lesser of purchase or
sales of portfolio securities for the year divided by the monthly average of
the value of the portfolio securities owned by the Funds during the year)
will generally range between 20% and 150%, although Funds with smaller
portfolios may have portfolio turnover in excess of this range. However, the
rate of turnover will not be a limiting factor when the Funds deem it
desirable to purchase or sell securities. A higher portfolio turnover rate
may involve correspondingly greater transaction costs, which would be borne
directly by the Funds, as well as additional realized gains and/or losses to
shareholders. The portfolio turnover rates are shown in the financial
statements which are part of this Statement of Additional Information.

--------------------------------------------
INVESTMENT RESTRICTIONS/FUNDAMENTAL POLICIES
--------------------------------------------

The investment restrictions described below and in the Prospectus have
been adopted by the Funds as fundamental investment policies. These
fundamental investment policies may not be changed without the approval of
the holders of the lesser of a majority of a Fund's outstanding shares or 67%
of the shares represented at a meeting of shareholders at which the holders
of more than 50% of the shares are represented.

If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage beyond the specified limit resulting
from a change in values of assets will not be considered a violation of the
investment restrictions relating to purchases of portfolio securities.

Each Fund, except the Special Fund and the Small Cap Fund, is prohibited
from purchasing securities when the total borrowings of that Fund exceed 5%
of its total assets.

The Special, Small Cap, Real Estate, Equity, Asset Allocation, Income and
the U.S. Government Income Funds are

<PAGE>

each prohibited from investing more than 20% of its total assets in fixed
income securities, including convertible stock, that are rated less than
Moody's Baa or S&P BBB, or in commercial paper that is rated less than B-1 by
Moody's or A- by S&P; not more than 5% of each of these Fund's total assets
may be invested in fixed income securities that are unrated. Securities rated
below the fourth highest grade and unrated fixed income securities have
speculative characteristics and additional risks. These are described in
"SPECIAL RISK FACTORS TO BE CONSIDERED" in the Prospectus. The Real Estate
Fund may not invest in securities unrated or rated below the fourth highest
grade. The Oregon Tax-Free Fund may invest in securities rated in the fourth
highest category and above and in unrated securities the Adviser believes to
be similar in investment quality to securities rated in the fourth category
and above.

SPECIAL FUND
- ------------
EQUITY FUND
- -----------
ASSET ALLOCATION FUND
- ---------------------

These Funds may not:

1. Invest an amount that exceeds 5% of the value of a Fund's total
assets in the securities of any one issuer. This restriction
does not apply to holdings of U.S. Government securities.

2. Invest more than 25% of their total assets in any one industry.
This restriction does not apply to holdings of U.S. Government
securities.

3. Issue any senior securities, as defined in the 1940 Act.

4. Purchase the securities of any issuer for the purpose of
exercising control of management, and a Fund may not acquire or
own more than 10% of any class of the securities of any issuer.

5. Sell securities short, except in the case of the Special Fund, as
permitted in the Prospectus.

6. Invest in any security that would subject a Fund to unlimited
liability, although the Special Fund may sell securities short
and the Special, Equity and Asset Allocation may invest in
interest rate and stock market futures.

<PAGE>

7. Underwrite the securities of other issuers or invest more than
10% of net assets in illiquid securities, such as repurchase
agreements with a maturity in excess of seven days.
Notwithstanding the above, these Funds may not invest in
restricted securities (including, but not limited to, nonpublicly
traded debt securities).

8. Invest in securities of other investment companies, except as set
forth in the Statement of Additional Information under
"SECURITIES OF OTHER INVESTMENT COMPANIES."

9. Purchase securities on margin.

10. Write uncovered put or uncovered call options.

11. Purchase portfolio securities from or sell securities directly to
any of a Fund's, or the Adviser's, officers, directors, or
employees as a principal for their own account.

12. Purchase or sell commodities or commodity contracts (stock index
and interest rate futures will not be considered commodity
contracts).

13. Purchase or sell real estate or real estate mortgages, provided
that the Fund may invest in marketable securities, such as
obligations of the Government National Mortgage Association, that
are secured by real estate or interests therein or are issued by
companies which invest in real estate or interests therein, such
as publicly traded real estate investment trusts.

14. Purchase or sell interests in oil, gas, or other mineral
exploration or development programs.

15. Lend portfolio securities, except as described in the Statement
of Additional Information under "LOANS OF PORTFOLIO SECURITIES."

16. Make loans to other persons, provided that, for purposes of this
restriction, the acquisition of bonds, debentures, or other
corporate debt securities and investment in government
obligations, short-term commercial paper, certificates of
deposit, bankers' acceptances, and repurchase agreements will not
be deemed to be the making of a loan.

<PAGE>

17. Borrow money, except in the case of an emergency or as set forth
in the Funds' Prospectus. In no case will a Fund's borrowing
exceed one-third of the value of a Fund's total assets
immediately after any such borrowing. If, for any reason, the
current value of a Fund's total assets falls below an amount
equal to three times the amount of its indebtedness for money
borrowed, a Fund will, within three days (not including
Saturdays, Sundays and holidays), reduce its indebtedness to the
extent necessary to satisfy the one-third test.

18. Invest more than 10% of a Fund's total assets in put or call
options.

19. Invest more than 35% of a Fund's total assets in foreign
securities.

20. Invest more than 10% of a Fund's total assets in stock index
futures.

21. Invest more than 10% of its total assets in interest rate futures
contracts.

SMALL CAP FUND
- --------------

The Fund may not:

1. Invest an amount that exceeds 5% of the value of the Fund's total
assets in the securities of any one issuer. This restriction
does not apply to holdings of U.S. Government securities.

2. Invest more than 25% of its total assets in any one industry.
This restriction does not apply to holdings of U.S. Government
securities.

3. Issue any senior securities, as defined in the 1940 Act.

4. Purchase the securities of any issuer for the purpose of
exercising control of management, and a Fund may not acquire or
own more than 10% of any class of the securities of any issuer.

5. Invest in any security that would subject the Fund to unlimited
liability, although the Fund may invest in interest rate and
stock market futures.

<PAGE>

6. Underwrite the securities of other issuers.

7. Invest more than 5% of its total assets in a combination of
illiquid securities and securities of issuers, including their
predecessors, which have been in existence less than three years.

8. Invest in securities of other investment companies, except as set
forth in the Statement of Additional Information under
"SECURITIES OF OTHER INVESTMENT COMPANIES."

9. Purchase securities on margin.

10. Write uncovered put or uncovered call options.

11. Purchase portfolio securities from or sell securities directly to
any of a Fund's or the Adviser's, officers, directors, or
employees as a principal for their own account.

12. Purchase or sell commodities or commodity contracts (stock index
and interest rate futures will not be considered commodity
contracts).

14. Purchase or sell interests in oil, gas, or other mineral
exploration or development programs.

15. Lend portfolio securities, except as described in the Statement
of Additional Information under "LOANS OF PORTFOLIO SECURITIES."

16. Make loans to other persons, provided that, for purposes of this
restriction, the acquisition of bonds, debentures, or other
corporate debt securities and investment in government
obligations, short-term commercial paper, certificates of deposit
and bankers' acceptances will not be deemed to be the making of a
loan.

<PAGE>

17. Borrow money, except as set forth in the Fund's Prospectus. In
no case will borrowing exceed one-third of the value of the
Fund's total assets immediately after any such borrowing. If,
for any reason, the current value of the Fund's total assets
falls below an amount equal to three times the amount of its
indebtedness for money borrowed, the Fund will, within three days
(not including Saturdays, Sundays and holidays), reduce its
indebtedness to the extent necessary to satisfy the one-third
test.

18. Invest more than 10% of the Fund's total assets in put or call
options.

19. Invest more than 35% of the Fund's total assets in foreign
securities.

20. Invest more than 10% of the Fund's total assets in any
combination of stock index futures and interest rate futures
contracts.

21. Sell securities short, unless such sales are made "against the
box."

22. Purchase or retain the securities of any issuer if the officers
or trustees of the Fund, its advisers or managers, owning
beneficially more than one-half of 1% of the securities of an
issuer together own beneficially more than 5% of the securities
of that issuer.

REAL ESTATE INVESTMENT FUND
- ---------------------------

This Fund may not:

1. With respect to at least 75% of the Fund's total assets, invest
an amount that exceeds 5% of the value of the Fund's total assets
in the securities of any one issuer or invest in more than 10% of
the outstanding voting securities of any one issuer. This
restriction does not apply to holdings of government securities.

2. Issue any senior securities, except as permitted by paragraph 13
below. For purposes of this restriction, the issuance of shares
of stock in multiple classes or series, the purchase or sale of
options, future contracts and options on future contracts,
forward commitments and repurchase agreements entered into in
accordance with the Fund's investment

<PAGE>

policy and the rules and regulations of the SEC, and the pledge,
mortgage or hypothecation of the Fund's assets within the meaning
of paragraph 18 below, are not deemed to be senior securities.

3. Purchase the securities of any issuer for the purpose of
exercising control of management, and the Fund may not acquire
or own more than 10% of any class of the securities of any
company.

4. Sell securities short, unless such sale are made "against the
box."

5. Invest in any security that would subject the Fund to unlimited
liability, although the Fund may invest in interest rate and
stock market futures.

6. Purchase securities on margin.

7. Write uncovered put or uncovered call options.

8. Purchase portfolio securities from or sell securities directly to
any of a Fund's or the Adviser's, officers, directors, or
employees as a principal for their own account.

9. Purchase or sell commodities or commodity contracts (stock index
and interest rate futures will not be considered commodity
contracts).

10. Purchase or sell real estate, real estate limited partnership
interests, or real estate mortgages, provided that the Fund may
invest in securities that are secured by real estate or interests
therein and may purchase and sell mortgage-related securities and
may hold and sell real estate acquired by the Fund as a result of
the ownership of securities.

11. Purchase or sell interests in oil, gas, or other mineral
exploration or development programs.

12. Make loans to other persons, other than loans resulting from the
acquisition of bonds, debentures, or other corporate debt
securities and investment in government obligations, short-term
commercial paper, certificates of deposit, bankers' acceptances,
repurchase agreements (in conformance with the Fund's investment
policy and the rules and

<PAGE>

regulations of the SEC) and the lendingof portfolio
securities, as described under "Loans of Portfolio
Securities" in the Statement of Additional Information as set
forth on the effective date of the Registration Statement.

13. Borrow money, except as set forth below. The Fund may borrow
money from a bank as a temporary measure for extraordinary
defensive purposes in amounts not to exceed 33-1/3% of the Fund's
total assets (including the amount borrowed) taken at market
value. The Fund shall not use leverage to increase income and
will not purchase securities while outstanding borrowings exceed
5% of the Fund's total assets. If, for any reason, the current
value of the Fund's total assets falls below an amount equal to
three times the amount of its indebtedness for money borrowed,
the Fund will, within three days (not including Saturdays,
Sundays and holidays), reduce its indebtedness to the extent
necessary to satisfy the one-third test.

14. Invest more than 10% of its total assets in put or call options.

15. Invest more than 10% of its total assets in stock index or
interest rate futures.

16. Pledge, mortgage or hypothecate its assets, except to secure
indebtedness permitted by paragraph 13, and then only if such
pledging, mortgaging or hypothecating does not exceed 33-1/3% of
the Fund's total assets taken at market value.

17. Invest more than 5% of its total assets in "restricted
securities" (I.E., securities that would be required to be
registered prior to distribution to the public), excluding
restricted securities eligible for resale to certain
institutional investors pursuant to Rule 144A of the Securities
Act of 1933; provided, however, that no more than 15% of the
Fund's total assets may be invested in restricted securities,
including securities eligible for resale under Rule 144A. In
addition, the Fund may invest up to 15% of its net assets in
illiquid investments, which includes securities that are not
readily marketable, repurchase agreements maturing in more than
seven days and privately issued SMBS, based upon a determination
by the Board

<PAGE>
that the SMBS is illiquid. The Board of Directors
shall adopt guidelines and delegate to the Adviser the daily
function of determining and monitoring the liquidity of its
investments. The Board, however, will retain sufficient
oversight and will be ultimately responsible for the
determinations.

18. Invest more than 25% of its total asset value in the purchase of
when-issued and delayed-delivery securities.

OREGON TAX-FREE FUND

This Fund may not:

1. Purchase common stocks, preferred stocks, warrants, or other
equity securities.

2. Purchase securities of any issuer (other than obligations of, or
guaranteed by, the United States Government, its agencies, or
instrumentalities) if, as a result, more than 25% of the value of
the Fund's total assets would be invested in securities of that
issuer. For purposes of this limitation, each governmental
subdivision (I.E., state, territory, possession of the United
States, or any political subdivision of any of the foregoing,
including agencies, authorities, instrumentalities, or similar
entities) will be considered a separate issuer if its assets and
revenues are separate from those of the government body creating
it and the securities are backed only by its own assets and
revenues. In the case of an industrial development bond, if the
security is backed only by the assets and revenues of a
nongovernmental user, then such nongovernmental user will be
deemed to be the sole issuer. However, if an industrial
development bond or governmental issue is guaranteed by a
governmental or some other entity, such guaranty shall be
considered a separate security issued by the guarantor as well as
the nongovernmental user, subject to limited exclusions allowed
by the 1940 Act.

3. With respect to at least 50% of the Fund's total assets, purchase
securities of any issuer (except securities issued or guaranteed
by the United States government or its agencies or
instrumentalities) if, as a result, more than 5% of the value of
the

<PAGE>

Fund's total assets would be invested in securities of that
issuer.

4. Invest more than 10% of the Fund's total assets in securities of
issuers that, with their predecessors, have a record of less than
3 years of continuous operation.

5. Lend its funds or other assets to others (except through the
purchase of debt obligations or repurchase agreements in
accordance with its investment objectives and policies).
Although such loans are not presently intended, this prohibition
will not preclude the Fund from loaning securities to broker-
dealers or other institutional investors if at least 100% cash
collateral is pledged and maintained by the borrower, provided
such security loans may not be made if, as a result, the
aggregate of such loans exceeds 10% of the value of the Fund's
total assets.

6. Borrow money, except from banks as a temporary measure for
extraordinary or emergency purposes, and then only in an amount
up to one-third of the value of its total assets, in order to
meet redemption requests without immediately selling any
portfolio securities. If, for any reason, the current value of
the Fund's total assets falls below an amount equal to three
times the amount of its indebtedness from money borrowed, the
Fund will, within three days (not including Saturdays, Sundays,
and holidays), reduce its indebtedness to the extent necessary to
satisfy the one-third test. The Fund will not borrow for
leverage purposes and will not make any additional investments
while borrowings exceed 5% of the value of its total assets.

7. Pledge, mortgage, or hypothecate its assets, except that, to
secure borrowing permitted by paragraph six above, the Fund may
pledge up to 10% of the value of its total assets.

8. Make short sales of securities, or purchase any securities on
margin except to obtain such short-term credits as may be
necessary for the clearance of transactions.

9. Write, purchase, or sell puts, calls, or combinations thereof,
except rights to resell municipal securities to the persons from
whom they are purchased.

<PAGE>

10. Concentrate more than 25% of the value of its total assets in any
one industry; PROVIDED HOWEVER, that, for purposes of this
limitation, tax-exempt municipal securities and United States
Government obligations are not considered to be part of any
industry. For purposes of this restriction, industrial
development bonds, where the payment of principal and interest is
the ultimate responsibility of companies within the same
industry, are grouped together as one "industry."

11. Purchase or retain the securities of any issuer if those
individual officers or directors of the Fund, the Adviser, each
owning beneficially more than 1/2 of 1% of the securities of such
issuer, together own more than 5% of the securities of such
issuer.

12. Invest in securities subject to legal or contractual restrictions
on resale or in repurchase agreements maturing in more than seven
days if, as a result of such investment, more than 10% of the net
assets of the Fund would be invested in such securities.

13. Invest in companies for the purpose of exercising control or
management.

14. Invest in commodities or commodity futures contracts or oil, gas,
or other mineral exploration or development programs or in real
estate or interests therein.

15. Invest in securities of other investment companies, except as set
forth in the Statement of Additional Information under
"Securities of Other Investment Companies."

16. Underwrite securities issued by others, except to the extent the
Fund may be deemed to be an underwriter under the federal
securities laws, in connection with the disposition of portfolio
securities.

17. Issue senior securities, as defined in the 1940 Act.

INCOME FUND

This Fund may not:

1. Buy or sell common stock.

<PAGE>

2. Issue any senior securities, as defined in the 1940 Act.

3. Sell securities short.

4. Purchase securities on margin.

5. Purchase or sell commodities or commodity contracts (except
interest rate futures contracts as defined in the Statement of
Additional Information).

6. Invest an amount that exceeds 5% of the value of the Fund's total
assets in the securities of any one issuer. This restriction
does not apply to holdings of U.S. Government securities.

7. Invest more than 25% of its total assets in any one industry
(except U.S. Government securities).

8. Purchase the securities of any issuer for the purpose of
exercising control of management, and the Fund may not acquire or
own more than 10% of any class of the securities of any issuer.

9. Invest in any security that would subject the Fund to unlimited
liability.

10. Underwrite the securities of other issuers or invest more than
10% of its net assets in illiquid securities, such as repurchase
agreements with a maturity in excess of seven days.
Notwithstanding the above, the Fund may not invest in restricted
securities (including, but not limited to, nonpublicly traded
debt securities).

11. Invest in securities of other investment companies, except as set
forth in the Statement of Additional Information under the
heading "SECURITIES OF OTHER INVESTMENT COMPANIES."

12. Write uncovered put or uncovered call options.

13. Purchase portfolio securities from or sell securities directly to
any of the Funds', or the Adviser's, officers, directors, or
employees as principal for their own account.

14. Purchase or sell real estate or real estate mortgages, provided
that the Fund may invest

<PAGE>

in marketable fixed income securities
that are secured by real estate or interests therein.

15. Purchase or sell interests in oil, gas, or other mineral
exploration or development programs.

16. Lend portfolio securities, except as described in the Statement
of Additional Information under "LOANS OF PORTFOLIO SECURITIES."

17. Make loans to other persons, provided that, for purposes of this
restriction, the acquisition of bonds, debentures, or other
corporate debt securities and investment in government
obligations, short-term commercial paper, certificates of
deposit, bankers' acceptances, and repurchase agreements will not
be deemed to be the making of a loan.

18. Invest more than 10% of the Fund's total assets in interest rate
futures.

19. Borrow money, except in an emergency. In no case will borrowing
exceed one-third of the value of the Fund's total assets
immediately after any such borrowing. If, for any reason, the
current value of a Fund's total assets falls below an amount
equal to 3 times the amount of its indebtedness for money
borrowed, a Fund will, within 3 days (not including Saturdays,
Sundays and holidays), reduce its indebtedness to the extent
necessary to satisfy the one-third test.

20. Invest more than 35% of the Fund's total assets in foreign
securities.

U.S. GOVERNMENT INCOME FUND

This Fund may not:

1. Buy or sell common stock.

2. Issue any senior securities, as defined in the 1940 Act.

3. Sell securities short.

4. Purchase securities on margin.

5. Invest in any security that would subject the Fund to unlimited
liability.

<PAGE>

6. Underwrite the securities of other issuers or invest more than
10% of its net assets in illiquid securities, such as repurchase
agreements with a maturity in excess of seven days.
Notwithstanding the above, the Fund may not invest in restricted
securities (including, but not limited to, nonpublicly traded
debt securities).

7. Invest in securities of other investment companies.

8. Write uncovered put or uncovered call options.

9. Purchase securities that are other than direct or indirect
obligations of the United States Government or its agencies or
instrumentalities and repurchase agreements with respect to those
obligations.

10. Borrow money, except in an emergency. In no case will borrowing
exceed one-third of the value of a Fund's total assets
immediately after any such borrowing. If, for any reason, the
current value of a Fund's total assets falls below an amount
equal to three times the amount of its indebtedness of money
borrowed, a Fund will, within three days (not including
Saturdays, Sundays and holidays), reduce its indebtedness to the
extent necessary to satisfy the one-third test.

11. Purchase portfolio securities from or sell securities directly to
any of the Funds', or the Adviser's, officers, directors, or
employees as principal for their own account.

12. Purchase or sell commodities or commodity contracts.

13. Lend portfolio securities, except as described in the Statement
of Additional Information under "Loans of Portfolio Securities."

14. Invest more than 10% of the Fund's total assets in repurchase
agreements.

15. Invest more than 25% of the Fund's total assets in government
securities maturing in more than five years.

16. Purchase or sell real estate or real estate mortgages, provided
that the Fund may invest in marketable fixed income securities
that are secured by real estate or interests therein.

<PAGE>

U.S. GOVERNMENT MONEY MARKET FUND

This Fund may not:

1. Buy or sell common stock.

2. Issue any senior securities, as defined in the 1940 Act.

3. Sell securities short.

4. Purchase securities on margin.

5. Purchase or sell commodities or commodity contracts.

6. Invest an amount that exceeds 5% of the value of the Fund's total
assets in the securities of any one issuer (excluding U.S.
Government securities).

7. Invest more than 25% of its total assets in any one industry
(excluding U.S. Government securities).

8. Purchase securities that are other than direct or indirect
obligations of the United States Government or its agencies or
instrumentalities and repurchase agreements with respect to those
obligations.

9. Purchase the securities of any issuer for the purpose of
exercising control of management, and the Fund may not acquire or
own more than 10% of any class of the securities of any issuer.

10. Invest in any security that would subject the Fund to unlimited
liability.

11. Underwrite the securities of other issuers or invest more than
10% of its net assets in illiquid securities, such as repurchase
agreements with a maturity in excess of seven days.
Notwithstanding the above, the Fund may not invest in restricted
securities (including, but not limited to, nonpublicly traded
debt securities).

12. Invest in securities of other investment companies.

13. Write uncovered put or uncovered call options.

<PAGE>

14. Purchase portfolio securities from or sell securities directly to
any of the Funds', or the Adviser's, officers, directors, or
employees as principal for their own account.

15. Purchase or sell real estate or real estate mortgages, provided
that the Fund may invest in marketable securities that are
secured by real estate or interests therein or are issued by
companies which invest in real estate or interests therein, such
as publicly traded real estate investment trusts.

16. Purchase or sell interests in oil, gas, or other mineral
exploration or development programs.

17. Lend portfolio securities, except as described in the Statement
of Additional Information under "LOANS OF PORTFOLIO SECURITIES."

18. Make loans to other persons, provided that, for purposes of this
restriction, the acquisition of bonds, debentures, or other
corporate debt securities and investment in government
obligations, short-term commercial paper, certificates of
deposit, bankers' acceptances, and repurchase agreements will not
be deemed to be the making of a loan.

19. Borrow money, except as set forth in the Funds' Prospectus. In
no case will borrowing exceed one third of the value of a Fund's
total assets immediately after any such borrowing. If, for any
reason, the current value of a Fund's total assets falls below an
amount equal to three times the amount of its indebtedness of
money borrowed, a Fund will, within three days (not including
Saturdays, Sundays and holidays), reduce its indebtedness to the
extent necessary to satisfy the one-third test.

20. Purchase any corporate debt security rated less than AA by S&P or
Aa by Moody's.

21. Purchase any debt security with a maturity in excess of one year
from the date of purchase.

22. Purchase any short-term, unsecured promissory notes of
corporations, including variable amount master demand notes,
which at the date of investment are rated less than A-1 by S&P or
B-1 by Moody's or, if not so rated, which

<PAGE>

the Board has determined are of comparable quality to such rated
securities.

SECURITIES OF OTHER INVESTMENT COMPANIES

The Funds (other than the U.S. Government Income Fund and the U.S.
Government Money Market Fund) may invest in securities of other investment
companies (I.E., mutual funds), provided such investment is in connection with a
merger, consolidation, reorganization, or acquisition of assets, and is
permitted by Section 12 of the 1940 Act (which currently provides that no more
than 10% of the total assets of a Fund may be invested in securities of other
investment companies, no more than 5% of the total assets of a Fund may be
invested in securities of any other single investment company, and no more than
3% of total outstanding voting stock of any one investment company may be
purchased). All such securities must be acquired by a Fund in the open market
in transactions involving no commissions or discounts to a sponsor or dealer
(other than customary brokerage commissions). The issuers of investment company
securities acquired by a Fund are not required to redeem such securities in an
amount exceeding 1% of such issuers' total outstanding securities during any
period of less than 30 days, and a Fund will vote all proxies with respect to
such securities in the same proportion as the vote of all other holders of such
securities.

LOANS OF PORTFOLIO SECURITIES

Loan transactions involve the lending of securities to a broker-dealer or
institutional investor for its use in connection with short sales, arbitrage or
other securities transactions. Loans of portfolio securities of the Funds will
be made, if at all, in strict conformity with applicable federal and state rules
and regulations. The term of any such loans will generally not exceed nine
months.

The Funds will engage in loan transactions only if the following conditions
are met: (1) a Fund must receive at least 100% collateral in the form of cash
or cash equivalents (e.g., U.S. Treasury bills or notes) from the borrower; (2)
the borrower must increase the collateral whenever the market value of the
securities loaned (determined on a daily basis) rises above the level of the
collateral; (3) a Fund must be able to terminate the loan after notice at any
time; (4) a Fund must receive reasonable interest on the loan or a flat fee from
the borrower, as well as amounts equivalent to any dividends, interest or other
distributions on the securities loaned and any increase in the market value of
the securities; (5) a Fund may pay only reasonable custodian fees in connection
with the loan; and (6) voting rights on the securities loaned may pass to the
borrower. If a material event affecting the investment occurs, the directors or

<PAGE>

trustees of a Fund must be able to terminate the loan and vote proxies or enter
into an alternative arrangement with the borrower to enable the directors or
trustees to vote proxies. Excluding items (1) and (2), these practices may be
amended from time to time as regulatory provisions dictate.

While there may be delays in recovery of loaned securities or even a loss
of the securities loaned should the borrower default, loans will be made only to
firms or broker-dealers deemed by the Adviser to be of good standing and will
not be made unless, in the judgment of the Adviser, the consideration to be
earned from such loans would justify the risk. Such loan transactions are
referred to in this section as "qualified loan transactions."

The purpose of a qualified loan transaction is to afford a Fund the
opportunity to continue to earn income on the securities loaned and, at the same
time, to earn income on the collateral held by it. In furtherance of this
purpose, the cash collateral acquired through qualified loan transactions may be
invested in any obligation in which a Fund is authorized to invest in accordance
with its investment objectives. The investment of the cash collateral in other
obligations subjects that investment, as well as the security loaned, to market
forces, I.E., capital appreciation or depreciation, just like any other
portfolio security.

PURCHASE AND REDEMPTION OF FUND SHARES

Information concerning the purchase and redemption of each Fund's shares is
set forth under "INVESTOR SERVICES" in the Funds' Prospectus. Each Fund is
authorized to effect specific redemptions by distributing assets of the
applicable Fund other than cash upon a determination by the Trustees or
Directors that redemption in kind would prevent harm to the Fund as a whole or
that an emergency situation is present.

U.S. GOVERNMENT MONEY MARKET FUND

The U.S. Government Money Market Fund uses the amortized cost method of
valuing its investments, which facilitates the maintenance of the Fund's per
share net asset value at $1.00. The U.S. Government Money Market Fund intends
to maintain its net asset value at a constant one dollar per share, although
there is no assurance that it will be able to do so.

The extent of deviation between the U.S. Government Money Market Fund's net
asset value based upon available market quotations or market equivalents and
$1.00 per share based on amortized cost will be periodically examined by the
Trustees. If such deviation exceeds 1/2 of 1%, the Trustees will promptly
consider what action, if any, will be initiated. In the event the Trustees
determine that a

<PAGE>

deviation exists which may result in material dilution or other unfair
results to investors or existing shareholders, they will cause the U.S.
Government Money Market Fund to take such corrective action as they regard to
be necessary and appropriate to eliminate or reduce to the extent reasonably
practicable such dilution or unfair results. Such action may include the
sale of U.S. Government Money Market Fund instruments prior to maturity to
realize capital gains or losses or to shorten average portfolio maturity;
withholding part or all of dividends or payment of distributions from capital
or capital gains; redemptions of shares in kind; or establishing a net asset
value per share by using available market quotations or equivalents. In
addition, in order to stabilize the net asset value per share at $1.00, the
Trustees have the authority (i) to reduce or increase the number of shares
outstanding on a pro rata basis, and (ii) to offset each shareholder's pro
rata portion of the deviation between the net asset value per share and $1.00
from the shareholder's accrued dividend account or from future dividends.

PRICING OF SECURITIES BEING OFFERED

The Funds are open for business each day the New York Stock Exchange is
open. Each class's offering price and net asset value ("NAV") is normally
calculated as of 4:00 p.m. Eastern Time.

A class's NAV is the value of a single share. The value of a single
share of a class is computed by adding that class's pro rata share of the
value of the applicable Fund's investments, cash and other assets,
subtracting that class's pro rata share of the value of the applicable Fund's
liabilities (including accrued expenses), subtracting the liabilities
allocated to that class, and dividing the result by the number of shares of
that class that are outstanding.

Dividends receivable are treated as assets from the date on which
securities go ex-dividend and interest on bonds is accrued daily.

The value of securities listed or traded on a registered securities
exchange are valued at the last sale price on the day of the computation. This
includes over-the-counter securities for which last sale information is
available. Where last sale information is not available, the best bid price
will be used. Foreign securities are valued on the basis of quotations from the
primary market in which they are traded, and are translated from the local
currency into U.S. Dollars using current exchange rates. Securities and assets
for which market quotations are not readily available are valued at fair value
as determined in good faith by or under the direction of the Board of the Fund.
Such valuations and

<PAGE>

procedures will be reviewed periodically by the Board of the Fund. Each Fund
may retain the services of an outside pricing service to value its portfolio
securities.

YIELD AND PERFORMANCE

The Funds will from time to time advertise or quote their respective yields
and total return performance. These figures are calculated according to SEC
rules standardizing such computations and represent historical data. The
investment return and principal value (except for the U.S. Government Money
Market Fund) will fluctuate so that shares when redeemed may be worth more or
less than their original cost.

The Funds may, from time to time, include in such advertisements or quotes
comparisons of a Fund's yield or total return performance against one or more
indices of stock or bond performance. Such indices include, for example, the
Standard & Poor's 500 Stock Index, Dow Jones Industrial, Value Line Rates, and
the Shearson Lehman Government/Corporate Bond Index.

U.S. GOVERNMENT MONEY MARKET FUND

Current yield is calculated by dividing the net change in the value of an
account of one share during an identified seven calendar-day period by the value
of the one share account at the beginning of the same period ($1.00) and
multiplying that base period return by 365/7, I.E.:

net change in value of account with one share x 365 = Current
- --------------------------------------------- --- Yield
value of account at beginning of period 7

Compounded effective yield is calculated by daily compounding of the base
period return referred to above. This calculation is made by adding 1 to the
base period return, raising the sum to a number equal to 365 divided by 7, and
subtracting 1 from the result, I.E.:

[(base period return + 1) 365/7] -1 = Compounded Effective Yield

The determination of net change in the value of an account for purposes of
the U.S. Government Money Market Fund yield calculations reflects the value of
additional shares purchased with income dividends from the original share, and
income dividends declared on both the original share and such additional shares.
The determination of net change does not reflect realized gains or losses from
the sale of securities or realized appreciation or depreciation. The U.S.
Government Money Market Fund includes unrealized appreciation or depreciation,
as well as unrealized gains or losses, in the determination of actual daily
dividends. Therefore, the

<PAGE>

quoted yields as calculated above may differ from the actual dividends paid.

The U.S. Government Money Market Fund's seven-day yield and effective yield
as of the date of the most recent statement of assets and liabilities included
in this registration statement is 4.98% and 5.11%, respectively.

YIELD

Current yield of the Oregon Tax-Free Fund, the Income Fund and the U.S.
Government Income Fund is calculated by dividing the net investment income per
share earned during an identified 30-day period by the maximum offering price
per share on the last day of the same period, according to the following
formula:

YIELD = 2 [( a-b + 1)6 -1]
---
cd

Where: a = dividends and interest earned during the period.

b = expenses accrued for the period (net of
reimbursements).

c = the average daily number of shares outstanding during
the period that were entitled to receive dividends.

d = the maximum offering price per share on the last day of
the period.

The Funds use generally accepted accounting principles in determining
actual income paid, which differ in some instances from SEC rules for computing
income for the above yield calculations. Therefore, the quoted yields as
calculated above may differ from the actual dividends paid.

The Oregon Tax-Free, Income and U.S. Government Income Funds' yields for
the 30-day period ended the date of the most recent statement of assets and
liabilities included in this registration statement were 7.41%, 5.60%, and
5.17%, respectively.

The Real Estate Fund's yield is computed by dividing the Fund's net
investment income per share during a base period of 30 days, or one month, by
the maximum offering price per share of the Fund on the last day of such base
period in accordance with the following formula:

<PAGE>

YIELD = 2 [( a-b + 1)6 -1]
---
cd

Where: a = interest earned during the period

b = net expenses accrued for the period
c = the average daily number of shares outstanding during
the period that were entitled to receive dividends

d = the maximum offering price per share on the last day of
the period

For purposes of calculating interest earned on debt obligations as provided
in item "a" above:

(i) The yield to maturity of each obligation held by the Fund is computed
based on the market value of the obligation (including actual accrued interest,
if any) at the close of business each day during the 30-day base period, or,
with respect to obligations purchased during the month, the purchase price (plus
actual accrued interest, if any) on settlement date, and with respect to
obligations sold during the month the sale price (plus actual accrued interest,
if any) between the trade and settlement dates.

(ii) The yield to maturity of each obligation is then divided by 360 and
the resulting quotient is multiplied by the market value of the obligation
(including actual accrued interest, if any) to determine the interest income on
the obligation for each day. The yield to maturity calculation has been made on
each obligation during the 30-day base period.

(iii) Interest earned on all debt obligations during the 30-day or one
month period is then totaled.

(iv) The maturity of an obligation with a call provision(s) is the next
call date on which the obligation reasonably may be expected to be called or, if
none, the maturity date.

With respect to the treatment of discount and premium on mortgage or other
receivables-backed obligations which are expected to be subject to monthly
payments of principal and interest ("pay downs"), the Fund accounts for gain or
loss attributable to actual monthly pay downs as an increase or decrease to
interest income during the period. In addition, the Fund may elect (i) to
amortize the discount or premium remaining on a security, based on the cost of
the security, to the weighted average maturity date, if such information is
available, or to the remaining term of the security, if the weighted average
maturity date is not available, or (ii) not to amortize the remaining discount
or premium on a security.

<PAGE>

The Fund's yield for the 30-day period ended the date of the most recent
statement of assets and liabilities included in this registration statement was
4.15%.

The Oregon Tax-Free Fund may publish a tax equivalent yield for Oregon
shareholders that represents the yield that an investor would have to receive on
a fully taxable investment to achieve the same after-tax results at the highest
then- existing marginal combined Oregon and Federal income tax rates, calculated
according to the following formula:

Tax Equivalent Yield = a + c + e + g
--- --- ---
1-b 1-d 1-f

Where: a = that portion of the current yield of the Fund that is exempt
from Federal and Oregon income tax.

b = highest then-existing marginal combined Federal and Oregon
income tax rate.

c = that portion of the current yield of the Fund that is only
exempt from Federal gross income tax.

d = highest then-existing Federal income tax rate.

e = that portion of the current yield of the Fund that is only
exempt from Oregon gross income tax.

f = highest then-existing Oregon income tax rate.

g = that portion of the current yield of the Fund that is not
tax exempt.

The tax equivalent yield for the 30-day period ended the date of the most
recent statement of assets and liabilities included in this registration
statement was 3.83%.

The Oregon Tax-Free Fund may also publish a tax equivalent yield for
residents of Oregon that represents the yield that an investor would have to
receive on a fully taxable investment to achieve the same after-tax results of
the highest then-existing marginal Federal income tax rate, calculated according
to the following formula:

<PAGE>

Tax Equivalent Yield = a + c
---
1-b

Where: a = that portion of the current yield of the Fund that is exempt
from Federal income tax.

b = highest then-existing marginal Federal income tax rate

c = that portion of the current yield of the Fund that is not
tax exempt.

The tax equivalent yield for the Oregon Tax-Free Fund, calculated according
to the above formula, for the 30-day period ended the date of the most recent
statement of assets and liabilities included in this registration statement was
6.34%.

The U.S. Government Income Fund may publish a tax equivalent yield for
residents of Oregon that represents the yield that an investor would have to
receive on a fully taxable investment to achieve the same after-tax results
of the highest then-existing marginal Oregon income tax rate, calculated
according to the following formula:

Tax Equivalent Yield = a + c
---
1-b

Where: a = that portion of the current yield of the Fund that is exempt
from Federal income tax.

b = highest then-existing marginal Oregon income tax rate

c = that portion of the current yield of the Fund that is not
tax exempt.

The tax equivalent yield for the U.S. Government Income Fund, calculated
according to the above formula, for the 30-day period ended October 31, 1995 was
5.17%.

TOTAL RETURN

Each class of the Funds may also publish average annual total return
quotations for recent one, five and ten year periods computed by finding the
average annual compounded rates of return over the one, five and ten year
periods that would equate the initial amount invested to the ending redeemable
value, according to the following formula:

<PAGE>

P(1+T)n = ERV

Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1, 5 or 10 year
periods (or fractional portion thereof)

Total return figures may also be published for recent one, five and ten
year periods where the total return figures represent the percentage return for
the one, five and ten year periods that would equate the initial amount invested
to the ending redeemable value. Total return percentages for periods of less
than one year are usually annualized.

If a class of a Fund has been in effect less than one, five or ten years,
the time period during which the registration statement has been in effect will
be substituted for the period stated.

The average annual total return for the one- and five-year periods and for
the life of the class ended the date of the most recent statement of assets and
liabilities included in this statement was, for the Special Fund, 1.78%, and
23.29%, respectively; for the Equity Fund, 13.37%, and 22.19%, respectively; for
the Asset Allocation Fund, 13.0% and 14.22%, respectively; for the Oregon Tax-
Free Fund, 10.66% and 7.02%, respectively; for the Income Fund, 11.92% and
7.88%, respectively; for the U.S. Government Income Fund, 9.12% and 6.68%,
respectively; and for the U.S. Government Money Market Fund, 5.30% and 4.03%,
respectively. The average annual total return for the Special Fund for the
seven year period ended on the same date was 17.06%. The average annual total
return for the Oregon Tax-Free Fund for the ten-year period ended on the same
date was 7.87%. The average annualized total return for the Real Estate Fund
for the one-year period ended on the same date was 8.31%.

The Small Cap Fund has been in existence less than one year. The
Institutional Class shares of each of the applicable Funds have not yet
advertised total return calculations.

OTHER QUOTATIONS, COMPARISONS AND GENERAL INFORMATION

From time to time, in advertisements, in sales literature, or in reports to
shareholders, the past performance of the Funds may be illustrated and/or
compared with that of other mutual funds with similar investment objectives, and
to stock or other relevant indices. For example, a Fund's total return may be
compared to averages or

<PAGE>

rankings prepared by LIPPER ANALYTICAL SERVICES, INC., a widely recognized
independent service which monitors mutual fund performance; the STANDARD &
POOR'S 500 STOCK INDEX, an unmanaged index of common stocks; or the DOW JONES
INDUSTRIAL AVERAGE, a recognized unmanaged index of common stock of 30
industrial companies listed on the New York Stock Exchange (the "NYSE").
Additional index which a Fund's performance may be compared include Standard
& Poors Mid-Cap 400 Index, Russell 2000 Index, Wilshire 5000 Equity Index,
Morgan Stanley REIT Index and the Lehman Brothers Government/Corporate Bond
Index and the Saloman Bond Indices.

In addition, the performance of the Funds may be compared to alternative
investment or savings vehicles and/or to indexes or indicators of economic
activity, e.g., inflation or interest rates. Performance rankings and
listings reported in newspapers or national business and financial
publications, such as BARRON'S, BUSINESS WEEK, CONSUMER'S DIGEST, CONSUMER'S
REPORT, FINANCIAL WORLD, FORBES, FORTUNE, INVESTOR'S BUSINESS DAILY,
KIPLINGER'S, PERSONAL FINANCE MAGAZINE, MONEY MAGAZINE, the NEW YORK TIMES,
SMART MONEY, USA TODAY, U.S. NEWS AND WORLD REPORT, THE WALL STREET JOURNAL
and WORTH may also be cited (if the Fund is listed in any such publication)
or used for comparison, as well as performance listings and rankings from
various other sources, including BLOOMBERG FINANCIAL SYSTEMS,
CDA/WIESENBERGER INVESTMENT COMPANIES SERVICE, DONOGHUE'S MUTUAL FUND
ALMANAC, INVESTMENT COMPANY DATA, INC., JOHNSON'S CHARTS, KANON BLOCH CARRE &
CO., MICROPAL, INC., MORNINGSTAR, INC., SCHABACKER INVESTMENT MANAGEMENT,
TOWERS DATA SYSTEMS and WEISENBERGER INVESTMENT COMPANIES SERVICE.

In addition, from time to time, quotations from articles from financial
publications, such as those listed above, may be used in advertisements, in
sales literature or in reports to shareholders of the Funds.

DIVIDENDS, DISTRIBUTIONS AND TAXES

GENERAL

Each of the Funds intends to qualify as a regulated investment company
under Part I of Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"), but there is no assurance that they will be able to do so. In
other words, each Fund is treated as a separate entity from the other Funds in
the Trust for tax purposes. In general, to qualify for this treatment, the Fund
must, among other things, derive at least 90% of its gross income from
dividends, interest, gains from the sale of securities, and certain related
income; derive less than 30% of its gross income from the sale of securities
held less than three months; invest in securities within certain statutory
limits; and distribute to its shareholders at least 90% of its

<PAGE>

taxable income and 90% of its net exempt interest income, if any, for the
taxable year. If the Fund does not so qualify, it will be treated for tax
purposes as an ordinary corporation and will receive no tax deduction for
payments made to shareholders.

As regulated investment companies, the Funds will be taxed at regular
corporate rates only on the undistributed portion of their net income and
capital gains.

If a Fund is required to pay federal income taxes on any retained Net
Capital Gain (I.E., the excess of net long-term capital gains over net short-
term capital losses and any capital loss carryover), that Fund may elect to
treat such gain as having been distributed to its shareholders. The election
will cause such amounts to be taxed to the shareholders. Each shareholder may
claim a credit against his income taxes equal to such shareholder's
proportionate share of the federal income tax liability that is paid by that
Fund, and will generally be entitled to increase the adjusted tax basis of his
shares in that Fund by the difference between his pro rata share of such gains
and his tax credit.

The Code requires a regulated investment company to pay a nondeductible 4%
excise tax if such company does not distribute at least 98% of its ordinary
income, determined on a calendar year basis, and 98% of its capital gains,
determined, in general, on an October 31 year-end. The tax is generally applied
against the excess of this required distribution over the amount actually
distributed. The Funds intend to distribute an amount of income and capital
gains that is sufficient to avoid imposition of the 4% excise tax.

The value of any shares redeemed by the Funds or repurchased or otherwise
sold may be more or less than the shareholder's tax basis in the shares at the
time the redemption, repurchase or sale is made. Any gain or loss will
generally be taxable for federal income tax purposes. Any loss realized on the
sale, redemption or repurchase of shares of the Funds that have been held by the
shareholder for six months or less will be treated for tax purposes as a long-
term capital loss to the extent of any net long-term capital gains distributions
received by the shareholder with respect to such shares. Losses on the
redemption or on the sale of shares of the Funds are not deductible if, and to
the extent that, within a period beginning 30 days before the date of the
redemption or sale and ending 30 days after such date, the taxpayer acquires
other Fund shares.

The writing of call options and other investment techniques and practices
which some Funds may utilize, as described in the Prospectus under "Fundamental
Policies," may create "straddles" for United States federal income tax purposes
and may affect the character and timing of the

<PAGE>

recognition of gains and losses by such Funds. Such transactions may increase
the amount of short-term capital gain realized by such Funds, which is taxed as
ordinary income when distributed to shareholders.

Dividends paid by the Funds will qualify for the dividends-received
deductions for corporations to the extent they are derived from dividends paid
by domestic corporations.

Distributions, if any, of net long-term capital gains from the sale of the
Funds' securities are taxable to shareholders of the Funds at capital gains
rates, regardless of the length of time the shareholder has owned shares of the
Funds and regardless of whether the distributions are reinvested in shares of
the Funds.

The Funds are required by federal law to obtain from each of their
shareholders certification of the shareholder's correct taxpayer identification
number and certain other information. If a shareholder fails to certify such
number or to provide the necessary information to the Funds, or if the Funds
receive certain notices from the Internal Revenue Service, the Funds will be
required to withhold and pay to the United States Treasury 31% of any
reportable dividends or interest paid to such shareholder.

OREGON TAX-FREE FUND

If the Oregon Tax-Free Fund does not qualify as a regulated investment
company under the Code, it will be treated for tax purposes as an ordinary
corporation and will receive no tax deduction for payments made to shareholders
and will be unable to pay "exempt interest dividends," as discussed in the
Prospectus.

From time to time, proposals have been introduced before Congress and the
Internal Revenue Service for the purpose of restricting or eliminating the
federal income tax exemption for interest on municipal securities, including
private activity bonds. It is likely that similar proposals will be introduced
in the future. If such a proposal were enacted, the availability of municipal
securities for investment by the Fund and the value of the Fund's portfolio
could be adversely affected. In such event, the Fund would re-evaluate its
investment objectives and policies and consider recommending to its
shareholders changes in the structure of the Fund.

Section 147 of the Code prohibits exemption from taxation of interest on
certain governmental obligations paid to persons who are "substantial users"
(or persons related thereto) of facilities financed by such obligations.
"Substantial user" is generally defined to include a "nonexempt person" who is
entitled to use more than 5% of a

<PAGE>

facility financed from the proceeds of industrial development bonds. No
investigation as to the substantial users of the facilities financed by bonds
in the Fund's portfolio will be made by the Fund. Potential investors who may
be, or may be related to, substantial users of such facilities should consult
their tax advisors before purchasing shares of the Fund.

Each distribution is accompanied by a brief explanation of the form and
character of the distribution. The Fund provides each shareholder with an
annual statement of the federal income tax status of all distributions,
including a statement of percentage of the prior year's distributions
designated by the Fund to be treated as tax-exempt interest or long-term
capital gain. The dollar amounts of tax-exempt and taxable dividends and
distributions paid by the Fund that are reported annually to shareholders will
vary for each shareholder, depending upon the size and duration of the
shareholder's investment in the Fund. To the extent that the Fund derives
investment income from taxable interest, it intends to designate as the actual
taxable income the same percentage of each day's dividend as the actual taxable
income bears to the total investment income earned on that day. The percentage
of the dividend designated as taxable (if any), therefore, may vary from day to
day.

Individuals, trusts, and estates who or which are residents of the state
of Oregon will not be subject to the Oregon personal income tax on
distributions from the Fund representing tax-exempt interest paid on municipal
securities issued by the State of Oregon and its political subdivisions.
Distributions to Oregon residents representing earnings of the Fund from
sources other than such tax-exempt interest will be subject to the Oregon
personal income tax. In addition, the Fund anticipates that all distributions
from the Fund, from any source, to corporations subject to the Oregon
Corporation excise tax will be subject to that tax. For purposes of the Oregon
personal income tax and the Oregon corporate excise tax, income from Fund
distributions of interest paid on municipal securities issued by a state, other
than Oregon, and its political subdivisions will be reduced by interest on
indebtedness incurred to carry such securities and expenses incurred to produce
such income.

The Oregon Corporate Excise Tax Act generally taxes corporations on income
received from municipal securities, including those issued by the state of
Oregon and its political subdivisions. Since this Fund is a trust, it would
generally be subject to such a tax. However, the Oregon Department of Revenue
has adopted an administrative rule (Oregon Administrative Rule 150.317,010(10))
which provides that a registered investment company may deduct from its income
an amount equal to the exempt interest dividends paid to its shareholders. The
Fund expects to distribute substantially all of its interest income as dividends
to its

<PAGE>

shareholders and, therefore, does not expect to be liable for Oregon Corporate
Excise tax.

Under the Code, interest on indebtedness incurred or continued to purchase
or carry shares of an investment company paying "exempt interest dividends,"
such as the Fund, is not deductible by the investor. Under rules used by the
Internal Revenue Service, the purchase of shares may be considered to have been
made with borrowed funds even though the borrowed funds are not directly
traceable to the purchase of shares. In addition, under Sections 265 and 291
of the Code, certain financial institutions acquiring shares may be subject to
a reduction in the amount of interest expense that would otherwise be allowable
as a deduction for federal income tax purposes.

FOREIGN TAXES

Certain Funds may be subject to foreign withholding taxes which would
reduce the yield on their investments. Tax treaties between certain countries
and the United States may reduce or eliminate such taxes. It is expected that
shareholders of the Funds who are subject to United States federal income tax
will not be entitled to claim a federal income tax credit or deduction for
foreign taxes paid by the Funds.

Gains and losses realized by any of the Funds on certain transactions,
including sales of foreign debt securities and certain transactions involving
foreign currency, will be treated as ordinary income or loss for federal income
tax purposes to the extent, if any, that such gains or losses are attributable
to changes in exchange rates for foreign currencies. Accordingly,
distributions taxable as ordinary income will include the net amount, if any,
of such foreign exchange gains and will be reduced by the net amount, if any,
of such foreign exchange losses.

If any of the Funds purchases shares in certain foreign investment
entities, called "passive foreign investment companies", it may be subject to
United States federal income tax on a portion of any "excess distribution" or
gain from the disposition of such share, even if such income is distributed as
a taxable dividend by such Fund to its shareholders. Additional charges in the
nature of interest may be imposed on either the Fund or its shareholders in
respect of deferred taxes arising from such distributions or gains.

If any of the Funds were to invest in a passive foreign investment company
with respect to which the Fund elected to make a "qualified electing fund"
election, in lieu of the foregoing requirement, such Fund might be required to
include in income each year a portion of the ordinary earnings and

<PAGE>

net capital gains of the qualified electing fund, even if such amount were not
distributed to such Fund.

OTHER TAX INFORMATION

The information above is only a summary of some of the tax consequences
generally affecting each Fund and its shareholders, and no attempt has been
made to discuss individual tax consequences. In addition to federal income
taxes, shareholders of a Fund may be subject to state and local personal
property taxes. Investors should consult their tax advisors to determine
whether a Fund is suitable for their particular tax situation.

_________________________
SPECIAL INVESTOR SERVICES
_________________________

SYSTEMATIC WITHDRAWAL PLAN. A shareholder owning or purchasing shares of
any Fund having a total value of $5,000 or more may participate in a systematic
withdrawal plan providing regular monthly payments in the amount of $100 or
more (the "Systematic Withdrawal Plan"). An application form containing
details of the Systematic Withdrawal Plan is available upon request from State
Street Bank and Trust Company (the "Transfer Agent"), the Funds' transfer
agent. The Plan is voluntary and may be terminated at any time by the
shareholders.

Income dividends and capital gain distributions on shares of the Funds
held in a Systematic Withdrawal Plan are automatically reinvested in additional
shares of the relevant Fund at net asset value. A Systematic Withdrawal Plan
is not an annuity and does not and cannot protect against loss in declining
markets. Amounts paid to a shareholder from the Systematic Withdrawal Plan
represent the proceeds from redemptions of Fund shares, and the value of the
shareholder's investment in a Fund will be reduced to the extent that the
payments exceed any increase in the aggregate value of the shareholder's shares
(including shares purchased through reinvestment of dividends and
distributions). If a shareholder receives payments that are greater than the
appreciation in value of his or her shares, plus the income earned on the
shares, the shareholder may eventually withdraw his or her entire account
balance. This will occur more rapidly in a declining market. For tax
purposes, depending upon the shareholder's cost basis and date of purchase,
each withdrawal will result in a capital gain or loss. See "DIVIDENDS,
DISTRIBUTIONS AND TAXES" in this Statement of Additional Information and
"TAXES" in the Funds' Prospectus.

The Funds offer certain shareholder services, which are designed to
facilitate investment in their shares. Each of the options is described in the
Funds' Prospectus. All of these special services may be terminated by either
the Funds or the shareholder without any prior written notice.

<PAGE>

SYSTEMATIC EXCHANGE PLAN. The Systematic Exchange Plan allows you to make
regular, systematic exchanges of at least $100 from one Crabbe Huson Fund
account into another Crabbe Huson Fund account. By setting up the plan, you
authorize the Fund and its agents to redeem a set dollar amount or number of
shares from the first account and purchase shares of a second Crabbe Huson
Fund. An exchange transaction is a sale and a purchase of shares for federal
income tax purposes and may result in a capital gain or loss.

To participate in the Systematic Exchange Plan, you must have an initial
account balance of $2,000 in the first account and at least $2,000 in the
second account. Exchanges may be made on any day or days of your choice. If
the amount remaining in the first account is less than the exchange amount you
requested, then the remaining amount will be exchanged. At such time as the
first account has a zero balance, your participation in the plan will be
terminated. You may also terminate the plan by calling or writing the Fund.
Once participation in the plan has been terminated for any reason, to reinstate
the plan you must do so in writing; simply investing additional funds will not
reinstate the plan.

___________________
GENERAL INFORMATION
___________________

Each of the Funds (other than the Special Fund) is a series of Crabbe
Huson Funds, an open-end management investment company organized as a Delaware
business trust by a Declaration of Trust dated October 14, 1995. On November
28, 1995, its name was changed by an amendment to the Declaration of Trust from
the Crabbe Huson Mutual Funds Group to Crabbe Huson Funds. The Small Cap Fund
commenced business as part of the trust in February, 1996. The remainder of
the Funds were Oregon corporations prior to a reorganization which was
completed ____________________. The Special Fund was incorporated under Oregon
law on January 29, 1987. Prior to February 23, 1993, the Special Fund was
called the "Crabbe Huson Growth Fund." Prior to ____________________, the
Oregon Tax-Free Fund was called the "Crabbe Huson Oregon Bond Fund."

The beneficial interests in the Trust are divided into shares, all without
par value of one class. The Trustees have the authority from time to time to
divide the shares into two or more series and further into sub-series or
classes. The Trust currently has eight series: Small Cap Fund; Real Estate
Investment Fund; Equity Fund; Asset Allocation Fund; Oregon Tax-Free Fund;
Income Fund; U.S. Government Income Fund and U.S. Government Money Market Fund.
The Small Cap Fund, Equity Fund and Asset Allocation Fund are further divided
into classes: the Primary Class, the Adviser Class and the Institutional
Class. Only the Primary Class

<PAGE>

and the Institutional Class are currently being offered for sale to the public.

The assets of the Trust received from the sale or issue of shares of each
Fund and all income, earnings, profits and proceeds thereof, subject only to
the rights of creditors, are especially allocated to such Fund, and constitute
the underlying assets of such Fund. The underlying assets of each Fund are
segregated on the books of account, and are to be charged with the liabilities
with respect to such Fund and with a share of the general expenses of the Trust.
Expenses with respect to the Trust are to be allocated in proportion to the
asset value of the respective Fund, except where allocations of direct expense
can otherwise be fairly made. The Board of Trustees has the power to determine
which expenses are allocable to all of the Funds. Expenses of the Small Cap,
Equity and Asset Allocation Funds are further allocated among the Primary Class
and the Institutional Class pursuant to a Rule 18f-3 Plan adopted by the
Trustees _______________. In the event of the dissolution or liquidation of
the Trust, shareholders of each Fund are entitled to receive as a class the
underlying assets of such Fund available for distribution.

In each matter submitted to a vote of the shareholders of the Trust, each
shareholder shall be entitled to one vote for each dollar of net asset value
held by the shareholder. Each series will vote separate from another series,
except as required by the 1940 Act, in which case the series may vote together.
As to a matter which does not affect the interests of a particular series or
class, only the holders of shares of the one or more affected series or class
shall be entitled to vote. Dividends, distributions and redemptions of shares
of the Trust are to be paid as set forth in the Prospectus. Shareholders do
not have preemptive rights or any conversion rights. Liquidation of a Fund
must be approved by two-thirds of the outstanding voting securities of that
Fund.

The Special Fund has an authorized capital of 100 million shares of common
stock. All shares of the Special Fund are of the same class. Shareholders of
the Special Fund are entitled to one vote for each full share held and
fractional votes for fractional shares held. Shareholders of the Special Fund
vote on the election of directors and any other matter submitted to a
shareholder vote. Shares issued are fully paid and nonassessable, and have no
preemptive or conversion rights. Each share is entitled to participate equally
in dividends and distributions declared, and in the net assets upon liquidation
or dissolution after satisfaction of outstanding liabilities.

<PAGE>

_______
COUNSEL
_______

The law firm of Davis Wright Tremaine, Portland, Oregon, will pass on
certain legal matters in connection with the issuance of shares of the Funds
and will also act as counsel to the Funds and as counsel to the Adviser and the
Distributor in connection with their relationship with the Funds and certain
matters.

________
AUDITORS
________

KPMG Peat Marwick LLP, Portland, Oregon, acts as the Funds' independent
auditors. In such capacity, KPMG Peat Marwick LLP performs the annual audit of
each Fund's financial statements and assists in the preparation of tax returns.

_______________________________________________________
CUSTODIAN, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
_______________________________________________________

Investors Fiduciary Trust Co. serves as the custodian (the "Custodian") of
the Funds' cash and securities. State Street Bank and Trust Company serves as
the Funds' transfer agent and dividend-disbursing agent (the "Transfer Agent").
Boston Financial Data Services serves as the Transfer Agent's Servicing Agent
in carrying out the Transfer Agent's responsibilities to the Funds. The
Transfer Agent processes requests for the purchase or redemption of a Fund's
shares, sends statements of ownership to shareholders, and performs other
administrative duties on behalf of the Funds. Neither the Custodian nor the
Transfer Agent plays any role in establishing the investment policies of the
Funds or in determining which securities are to be purchased or sold by the
Funds. All fees and expenses of the Custodian and the Transfer Agent are paid
by the Funds. For its custodial services to the Funds, the Custodian receives
monthly fees based upon the Funds' month-end, aggregate net asset value, plus
certain charges for securities transactions. For its services as transfer
agent and dividend-disbursing agent, the Transfer Agent receives fees from the
Funds based upon the number of shareholder accounts maintained and the number
of transactions effected. The Custodian and the Transfer Agent are also
reimbursed by the Funds for out-of-pocket expenses, including the expense of
clerical and administrative services provided to the Funds.

The Distributor and the Funds have also entered into various shareholder
servicing agreements in which certain broker-dealers, financial institutions,
depository institutions, and other financial intermediaries (collectively,
"Financial Intermediaries") have agreed to perform certain sub-transfer agent
and shareholder servicing functions on behalf of the Funds for clients and
customers of

<PAGE>

such Financial Intermediaries who beneficially own shares in the Funds. The
fees paid to such Financial Intermediaries will vary depending upon the
services provided.

________________________________
ADDITIONAL INFORMATION REGARDING
CERTAIN INVESTMENTS BY THE FUNDS
________________________________

GOVERNMENT SECURITIES

The taxable fixed-income obligations in which the Funds may invest on a
short-term basis may include obligations issued or guaranteed by the United
States government, its agencies, instrumentalities, or authorities. Any such
obligations in which the Funds invest will consist of bills, notes, and bonds
issued by the United States Treasury or obligations issued by other agencies of
the United States Government. Examples of other government agencies in whose
obligations the Funds may invest include Federal Home Loan Intermediate Credit
banks, Federal Land Banks, Federal Home Loan Banks, and the Federal National
Mortgage Association. Obligations issued by the United States Treasury are
guaranteed by the full faith and credit of the United States Government.
Obligations issued by other federal agencies are direct obligations of such
agencies and are not guaranteed by the United States Government.

MUNICIPAL SECURITIES (Oregon Tax-Free Fund)

The term "municipal securities," as used in this Statement of Additional
Information, means obligations issued by or on behalf of states, territories
and possessions of the United States and the District of Columbia and their
political subdivisions, agencies, or instrumentalities or multi-state agencies,
or authorities. These obligations are issued to fund various public projects
(such as construction of airports, highways, bridges, schools, and housing),
refund outstanding municipal obligations, obtain funds for general operating
expenses, and for loans to other public institutions and facilities. Municipal
securities are of varying maturities and differ in investment quality,
depending upon the credit worthiness of the obligation's issuer.

The two principal classifications of municipal securities are "general
obligation bonds" and "revenue bonds." General obligation bonds are secured by
the issuer's pledge of its full credit and taxing power for the payment of
principal and interest. Revenue bonds are payable only from the revenues
derived from a particular facility or class of facilities or project or, in a
few cases, from the proceeds of a special excise or other tax, but are not
supported by the issuer's power to levy general taxes.

<PAGE>

One type of revenue bond is the "private activity bond" (formerly referred
to as "industrial development bonds"). These obligations are issued by a
governmental or quasi-governmental issuer, but all or a major portion of the
proceeds realized upon the sale of these obligations are used, directly or
indirectly, to fund the trade or business of a private enterprise, generally by
financing the acquisition of a facility to be used by that enterprise. The
payment of principal and interest on private activity bonds is dependent on the
ability of the private enterprise to meet those obligations and is usually
secured by an interest in the financed facility or in payments, such as lease
payments, received with respect to that property. The issuer of the bonds does
not pledge its full credit and taxing power for the payment of principal and
interest. Under current federal income laws, the interest received on certain
small issues and obligations used to finance certain exempt facilities which
may be leased to or used by persons other than the issuer is exempt from
federal income tax. The Oregon Tax-Free Fund intends to purchase tax-exempt
private activity bonds if, in the opinion of the Adviser, such obligations are
appropriate for the Fund's securities portfolios. No limit has been placed
upon the amount of private activity bonds that may be purchased by the Oregon
Tax-Free Fund, and a significant percentage of the Oregon Tax-Free Fund's total
assets may be invested in such obligations. However, no more than 25% of the
Oregon Tax-Free Fund's total assets may be invested in private activity bonds
where the payment of principal and interest is the ultimate responsibility of
companies within the same industry.

________________________
SPECIAL INVESTMENT RISKS
________________________

FOREIGN SECURITIES. The Special, Small Cap, Equity, Asset Allocation and
Income Funds may invest up to 35% of their total assets in foreign securities,
which may or may not be traded on an exchange. These Funds may purchase
securities issued by issuers in any country. Securities of foreign companies
are frequently denominated in foreign currencies, and these Funds may
temporarily hold uninvested reserves in bank deposits in foreign currencies.
As a result, these Funds will be affected favorably or unfavorably by changes
in currency rates and in exchange control regulations, and they may incur
expenses in connection with conversion between various currencies. Subject to
their investment restrictions, these Funds may invest in other investment
companies that invest in foreign securities. These Funds do not expect to
invest more than 5% of their respective assets in such investment companies.

<PAGE>

portion of these taxes is recoverable, the non-recovered portion of any foreign
withholding taxes would reduce the income the affected Fund received from any
foreign investments.

Foreign investments involve certain risks, such as political or economic
instability of the issuer or of the country of the issuer, difficulty of
predicting international trade patterns, and the possibility of imposition of
exchange controls. Such securities may also be subject to greater fluctuations
in price than securities of domestic corporations or of the United States
Government. In addition, the net asset value of these Funds is determined and
shares of these Funds can be redeemed only on days during which securities are
traded on the NYSE. However, foreign securities held by these Funds may be
traded on Saturdays or other holidays when the NYSE is closed. Accordingly,
the net asset value of these Funds may be significantly affected on days when
an investor has no access to these Funds.

In addition, there may be less publicly available information about a
foreign company than about a domestic company. Foreign companies generally are
not subject to uniform accounting, auditing and financial reporting standards
comparable to those applicable to domestic companies. There is generally less
government regulation of stock exchanges, brokers and listed companies abroad
than in the United States, and the absence of negotiated brokerage commissions
in certain countries may result in higher brokerage fees. With respect to
certain foreign countries, there is a possibility of expropriation,
nationalization, or confiscatory taxation, which could affect investment in
those countries.

FUTURES CONTRACTS. When a Fund purchases a futures contract, it agrees to
purchase a specified underlying instrument at a specified future date. When a
Fund sells a futures contract, it agrees to sell the underlying instrument at a
specified future date. The price at which the purchase and sale will take
place is fixed when a Fund enters into the contract. Some currently available
futures contracts are based on specific securities, such as U.S. Treasury bonds
or notes, and some are based on indices of securities prices, such as the
Standard & Poor's Composite Index of 500 Stocks (S&P 500) or the Bond Buyer
Municipal Bond Index. Futures can be held until their delivery dates, or can
be closed out before then if a liquid secondary market is available.

The value of a futures contract tends to increase and decrease in tandem
with the value of its underlying instrument. Therefore, purchasing futures
contracts will tend to increase a Fund's exposure to positive and negative
price fluctuations in the underlying instrument, much as if it had purchased
the underlying instrument directly. When a Fund sells a futures contract, by
contrast, the value of its

<PAGE>

futures position will tend to move in a direction contrary to the market.
Selling futures contracts, therefore, will tend to offset both positive and
negative market price changes, much as if the underlying instrument had been
sold.

PURCHASE PUT AND CALL OPTIONS. By purchasing a put option, a Fund obtains
the right (but not the obligation) to sell the option's underlying instrument
at a fixed strike price. In return for this right, the Fund pays the current
market price for the option (known as the option premium). Options have
various types of underlying instruments, including specific securities, indices
of securities prices, and futures contracts. A Fund may terminate its position
in a put option it has purchased by allowing it to expire or by exercising the
option. If the option is allowed to expire, the fund will lose the entire
premium it paid. If the fund exercises the option, it completes the sale of
the underlying instrument at the strike price. A Fund may also terminate a put
option position by closing it out in the secondary market at its current price,
if a liquid secondary market exists.

The buyer of a typical put option can expect to realize a gain if the
price of the underlying security falls substantially. However, if the
underlying instrument's price does not fall enough to offset the cost of
purchasing the option, a put buyer can expect to suffer a loss (limited to the
amount of the premium paid, plus related transaction costs).

The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right to
purchase, rather than sell, the underlying instrument at the option's strike
price. A call buyer typically attempts to participate in potential price
increases of the underlying instrument with risk limited to the cost of the
option if security prices fall. At the same time, the buyer can expect to
suffer a loss if security prices do not rise sufficiently to offset the cost of
the option.

WRITING PUT AND CALL OPTIONS. When a Fund writes a put option, it takes
the opposite side of the transaction from the option's purchaser. In return
for receipt of the premium, the Fund assumes the obligation to pay the strike
price for the option's underlying instrument if the other party to the option
chooses to exercise it. A Fund may seek to terminate its position in a put
option it writes before exercise by closing out the option in the secondary
market at its current price. If the secondary market is not liquid for a put
option a Fund has written, however, the Fund must continue to be prepared to
pay the strike price while the option is outstanding, regardless of price
changes, and must continue to set aside assets to cover its position.

<PAGE>

If security prices rise, a put writer would generally expect to profit,
although its gain would be limited to the amount of the premium it received.
If security prices remain the same over time, it is likely that the writer will
also profit, because it should be able to close out the option at a lower price.
If security prices fall, the put writer would expect to suffer a loss. This
loss should be less than the loss from purchasing the underlying instrument
directly, however, because the premium received for writing the option should
mitigate the effects of the decline.

Writing a call option obligates a Fund to sell or deliver the option's
underlying instrument, in return for the strike price, upon exercise of the
option. The characteristics of writing call options are similar to those of
writing put options, except that writing calls generally is a profitable
strategy, if prices remain the same or fall. Through receipt of the option
premium, a call writer mitigates the effects of a price decline. At the same
time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is
greater, a call writer gives up some ability to participate in security price
increases.

COMBINED POSITIONS. A Fund may purchase and write options in combination
with each other, or in combination with futures or forward contracts, to adjust
the risk and return characteristics of the overall position. For example, a
fund may purchase a put option and write a call option on the same underlying
instrument, in order to construct a combined position whose risk and return
characteristics are similar to selling a futures contract. Another possible
combined position would involve writing a call option at one strike price and
buying a call option at a lower price, in order to reduce the risk of the
written call option in the event of a substantial price increase. Because
combined options positions involve multiple trades, they result in higher
transaction costs and may be difficult to open and close out.

CORRELATION OF PRICE CHANGES. Because there are a limited number of types
of exchange-traded options and futures contracts, it is likely that the
standardized contracts available will not match a Fund's current or anticipated
investments exactly. A Fund may invest in options and futures contracts based
on securities with different issuers, maturities, or other characteristics from
the securities in which it typically invests, which involves a risk that the
options or futures position will not track the performance of a fund's other
investments.

Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match a Fund's
investments well. Options and futures prices are affected by such factors as

<PAGE>

current and anticipated short-term interest rates, changes in volatility of the
underlying instrument, and the time remaining until expiration of the contract,
which may not affect security prices the same way. Imperfect correlation may
also result from differing levels of demand in the options and futures markets
and the securities markets, from structural differences in how options and
futures and securities are traded, or from imposition of daily price
fluctuation limits or trading halts. A Fund may purchase or sell options and
futures contracts with a greater or lesser value than the securities it wishes
to hedge or intends to purchase in order to attempt to compensate for
differences in volatility between the contract and the securities, although
this may not be successful in all cases. If price changes in a Fund's options
or futures positions are poorly correlated with its other investments, the
positions may fail to produce anticipated gains or result in losses that are
not offset by gains in other investments.

LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a
liquid secondary market will exist for any particular options or futures
contract at any particular time. Options may have relatively low trading
volume and liquidity if their strike prices are not close to the underlying
instrument's current price. In addition, exchanges may establish daily price
fluctuation limits for options and futures contracts, and may halt trading if a
contract's price moves up or down more than the limit in a given day. On
volatile trading days when the price fluctuation limit is reached or a trading
halt is imposed, it may be impossible for a Fund to enter into new positions or
close out existing positions. If the secondary market for a contract is not
liquid because of price fluctuation limits or otherwise, it could prevent
prompt liquidation of unfavorable positions, and potentially could require a
fund to continue to hold a position until delivery or expiration regardless of
changes in its value. As a result, a fund's access to other assets held to
cover its options or futures positions could also be impaired.

OTC OPTIONS. Unlike exchange-traded options, which are standardized with
respect to the underlying instrument, expiration date, contract size, and
strike price, the terms of over-the-counter options (OTC) (options not traded
on exchanges) generally are established through negotiation with the other
party to the option contract. While this type of arrangement allows a fund
greater flexibility to tailor an option to its needs, OTC options generally
involve greater credit risk than exchange-traded options, which are guaranteed
by the clearing organization of the exchanges where they are traded.

ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. A fund will comply with
guidelines established by the SEC with respect to coverage of options and
futures strategies by

<PAGE>

mutual funds, and if the guidelines so require will set aside appropriate
liquid assets in a segregated custodial account in the amount prescribed.
Securities held in a segregated account cannot be sold while the futures or
option strategy is outstanding, unless they are replaced with other suitable
assets. As a result, there is a possibility that segregation of a large
percentage of a fund's assets could impede portfolio management or the fund's
ability to meet redemption requests or other current obligations.

____________________
FINANCIAL STATEMENTS
____________________

Following are the financial statements of the Funds as of October 31, 1995
for all the Funds other than the Small Cap Fund which are dated
_________________________.

<PAGE>
THE OREGON MUNICIPAL BOND FUND, INC.

SCHEDULE OF INVESTMENTS
October 31, 1995
<TABLE>
<CAPTION>
Face Market
Value Securities Description Value
---------- ----------------------------------------------------- -----------
<C> <S> <C>
FIXED INCOME SECURITIES - 98.3%
PRE-REFUNDED BONDS - 18.7%*
$ 40,000 Multnomah County
School District #1
9.200% 12/15/95 .................................. $ 40,255
1,000,000 Multnomah County
School District #1
9.300% 12/15/95 .................................. 1,006,490
295,000 Metropolitan Service District
5.750% 7/01/99 ................................... 314,912
270,000 Metropolitan Service District
6.600% 7/01/99 ................................... 295,987
250,000 Clackamas & Washington County
School District #003
7.200% 10/01/99 .................................. 275,937
200,000 Clackamas & Washington County
School District #003
7.250% 10/01/99 .................................. 221,000
400,000 Metropolitan Service District
7.000% 1/01/00 ................................... 446,000
353,000 Deschutes County (St.
Charles Medical Center)
6.750% 1/01/00 ................................... 390,947
100,000 Oregon State Department
General Services
7.200% 1/15/00 ................................... 112,500
150,000 Clackamas County School
District #12 6.500%
06/01/00 .......................................... 163,312
310,000 Emerald Peoples Utility
District 6.300%
11/01/00 .......................................... 339,450
125,000 Oregon Economic Development
Dept-Ser B 6.350%
1/01/01 ........................................... 137,500
250,000 Washington County School District
# 48J 6.200% 9/01/01 ........................... 272,187
250,000 Emerald Peoples Utility
District 6.500%
11/01/01 .......................................... 276,563
270,000 Port of Morrow (Pollution
Control) 6.375%
04/01/02 .......................................... 297,000
125,000 Marion & Polk County School
District #24J 5.700% 10/01/02 .................... 133,438
225,000 Marion & Polk County
School District #24-J
6.000% 10/01/02 .................................. 244,125
250,000 Oregon State Revenue
Series B 6.250%
1/01/08 ........................................... 273,750
-----------
5,241,353
-----------
INSURED BONDS - 43.8%
200,000 Jackson County School District
6.000% 6/01/01 (FSA) ............................. 215,250
250,000 Clackamas County Hospital
Facility Revenue 5.800%
3/01/02 (MBIA) .................................... 266,563

<CAPTION>
Face Market
Value Securities Description Value
------------ --------------------------------------------------------- -----------
<C> <S> <C>
$ 1,000,000 Portland Hospital Facility
Legacy Health System
6.400% 5/01/02 (AMBAC) ............................... $1,105,000
200,000 Yamhill County
School District #29J
4.800% 6/01/02 (FSA) ................................. 201,250
1,240,000 Hood River County Oregon
School District 6.000%
6/01/03 (AMBAC)........................................ 1,346,950
250,000 Emerald Peoples Utility
District 5.450%
11/01/03 (AMBAC)....................................... 263,750
500,000 Deschutes/Jefferson County
School Dist. 5.300%
6/01/04 (MBIA)......................................... 519,375
260,000 Hood River County Oregon
School Dist. 6.000%
6/01/04 (AMBAC) ...................................... 282,100
545,000 Jefferson County School District
#509J 6.500%
6/15/04 (FSA) ........................................ 609,038
400,000 University Puerto Rico Ser
5.100% 6/01/05 (MBIA)................................... 406,500
350,000 Portland Oregon Sewer System
(Revenue) 5.750%
10/01/05 (FGIC) ...................................... 377,125
500,000 Washington County Sewer System
(Revenue) 5.800%
10/01/05 (AMBAC) ..................................... 532,500
1,015,000 Crook County Oregon School
District 4.700%
2/01/06 (FSA).......................................... 984,550
400,000 Oregon State Facility
Series A 6.100%
9/01/06 (AMBAC) ...................................... 429,500
350,000 Washington County Sewer System
(Revenue) 5.900%
10/01/06 (AMBAC) ..................................... 373,625
1,065,000 McMinnville Sewer System
(Revenue) 4.700%
2/01/07 (FGIC) ....................................... 1,043,700
335,000 Jackson County School District
5.200% 6/01/07 (FSA) ................................. 340,025
1,000,000 Salem Keizer School
District #24-J 5.500%
6/01/07 (FGIC) ....................................... 1,028,750
1,100,000 Multnomah County S.D. Park Rose
5.600% 12/01/07 (FGIC)................................ 1,153,625
350,000 Portland Sewer System
6.000% 10/01/12 (FGIC)................................ 366,188
500,000 McMinnville Sewer System
(Revenue) 5.000%
2/01/14 (FGIC) ...................................... 472,500
12,317,864
CERTIFICATE OF PARTICIPATION BONDS - 1.0%
250,000 City of Portland
6.950% 04/01/99 ...................................... 272,813
</TABLE>

*Dates reflect pre-refunded dates.
See accompanying notes to financial statements.

<PAGE>

THE OREGON MUNICIPAL BOND FUND, INC.
SCHEDULE OF INVESTMENTS
October 31, 1995
<TABLE>
<CAPTION>
Face Market
Value Securities Description Value
----------- ---------------------------------------------------- -----------
<C> <S> <C>
STATE OF OREGON
GENERAL OBLIGATION - 9.4%
$ 240,000 State of Oregon G. O.
7.700% 03/01/02................................... $ 253,800
100,000 State of Oregon G. O.
9.000% 04/01/03 ................................. 126,750
205,000 State of Oregon G.O.
8.200% 07/01/04................................... 254,969
150,000 State of Oregon G.O.
7.200% 07/01/04................................... 176,250
110,000 State of Oregon G.O.
6.000% 08/01/04................................... 119,625
200,000 State of Oregon G. O.
9.000% 10/01/04 .................................. 230,500
345,000 State of Oregon G.O.
6.750% 05/01/05................................... 395,025
250,000 State of Oregon G. O.
(Veterans) 7.250% 07/01/06 ........................ 299,063
200,000 State of Oregon G. O.
(Veterans) 8.250% 01/01/07 ........................ 254,000
200,000 State of Oregon G. O.
(Veterans) 7.250% 01/01/07 ....................... 239,750
100,000 State of Oregon G.O. (Alt Energy)
6.400% 01/01/08 .................................. 106,125
130,000 State of Oregon G.O.
9.200% 04/01/08 .................................. 178,588
-----------
2,634,445
-----------
REVENUE BONDS - 2.7%
545,000 Oregon State Light Rail
7.000% 06/01/04 .................................. 627,431
125,000 Oregon State Fair & Expo
Revenue 7.375% 10/01/06 ........................... 128,154
-----------
755,585
-----------
OTHER BONDS
GENERAL OBLIGATION - 12.7%
225,000 City of Portland Water G.O.
3.700% 12/01/00 .................................. 230,062
330,000 Puerto Rico G.O.
7.125% 07/01/02 .................................. 350,625
445,000 Washington & Clackamas School
District 5.250% 6/01/03 .......................... 460,019
300,000 Deschutes G.O. School
District #1 5.800% 02/01/04 ...................... 316,875
400,000 Washington & Clackamas School
District 5.250 6/01/05 .......................... 407,000
200,000 Clackamas Community College
5.100% 12/01/05 ................................... 203,750
1,000,000 Tri-Met Light Rail
5.900% 07/01/06 .................................. 1,053,750
300,000 Salem Oregon Series A
5.875% 1/01/07 ................................... 310,875
230,000 Lane County Area Education District
4.850% 6/01/08 ................................... 224,825
-----------
3,557,781
-----------

<CAPTION>
Face Market
Value Securities Description Value
----------- --------------------------------------------------------- -----------
<C> <S> <C>
OTHER REVENUE BONDS - 10.0%
$ 200,000 City of Portland (Hydro Electric
Power) 6.500% 10/01/97 ............................ $ 201,780
335,000 Central Lincoln PUD
6.500% 01/01/02 .................................. 367,662
600,000 Clackamas County Hospital (Sisters
of Providence) 6.200% 10/01/02 .................... 646,500
350,000 City of Portland (Urban Renewal)
5.700% 06/01/04 .................................. 370,125
420,000 Multnomah County School District
5.000% 3/01/07 ................................... 417,375
765,000 Salem Educational Facility (Revenue)
6.000% 04/01/10 .................................. 797,512
-----------
2,800,954
-----------

Total Investments - 98.3% 27,580,795
(Cost $26,215,041)**
Other Assets and (Liabilities), Net - 1.7% 489,576
-----------

TOTAL NET ASSETS - 100.0% $28,070,371
-----------
-----------
</TABLE>

<TABLE>
<S> <C>
PORTFOLIO ALLOCATION TABLE:

Education................................................ 43.7%
General Obligation....................................... 10.6
General Services......................................... 8.2
Hospital................................................. 8.7
Public Utility........................................... 5.2
Transportation........................................... 6.0
Economic Development..................................... 3.8
Water & Sewer............................................ 12.1

Total Investments........................................ 98.3%
</TABLE>

**Aggregate cost for Federal income tax purposes is identical.
See accompanying notes to financial statements.

<PAGE>

THE CRABBE HUSON SPECIAL FUND, INC.

SCHEDULE OF INVESTMENTS
October 31, 1995

<TABLE>
<CAPTION>
Market
Shares Securities Description Value
- ---------------------- ----------------------------------------------- --------------
<S> <C> <C>
CONVERTIBLE PREFERRED - 0.5%
----------------------------
50,000 Olympic Financial Ltd ......................... $ 4,237,500
--------------
COMMON STOCK - 74.5%
--------------------
CONSUMER CYCLICALS
Automotive - 0.5%
91,800 Exide Corp .................................... 4,027,725
--------------
Consumer Products - 2.9%
783,100 * General Instrument Corp........................ 14,878,900
745,500 Juno Lighting, Inc ............................ 10,809,750
25,688,650
Retail - 7.6%
1,275,600 * Ann Taylor .................................... 14,031,600
1,536,900 * Bombay Co, Inc ................................ 9,029,288
1,122,100 * Burlington Coat Factory ....................... 12,483,363
753,100 Cato Corp CL A ................................ 4,612,738
1,496,000 Phillips-Van Heusen ........................... 15,147,000
631,600 Ross Stores, Inc .............................. 9,908,225
220,700 * Sports & Recreation Inc ....................... 1,627,663
--------------
66,839,877
--------------
CONSUMER STAPLES - 5.0%
771,900 * Fred Meyer Inc ................................ 14,376,638
679,200 Hudson Foods Inc CL A ......................... 9,593,700
592,400 * Paragon Trade Brands, Inc ..................... 9,404,350
1,870,400 * Payless Cashways, Inc ......................... 10,754,800
--------------
44,129,488
--------------
BASIC MATERIALS & INDUSTRIAL
Building Materials - 1.4%
164,900 Fleetwood Enterprises ......................... 3,380,450
1,393,900 Morrison Knudsen Corp ......................... 9,060,350
--------------
12,440,800
--------------
Chemicals -1.1%
781,200 Crompton & Knowles Corp ....................... 9,862,650
--------------
Equipment & Machinery - 3.4%
810,800 Giddings & Lewis, Inc ......................... 13,074,150
1,341,500 MK Rail Corp .................................. 9,558,188
213,500 Stewart & Stevenson Serv ...................... 4,857,125
89,800 Wabash National Corp .......................... 2,278,675
--------------
29,768,138
--------------
Forest Products & Packaging - 1.9%
783,900 Longview Fibre Co ............................. 11,366,550
332,800 TJ International, Inc ......................... 5,761,600
--------------
17,128,150
--------------
Metals & Mining - 5.0%
791,600 Battle Mountain Gold .......................... 6,035,950
504,600 Huntco, Inc ................................... 6,559,800
817,500 Oregon Steel Mills Inc ........................ 11,649,375
182,200 * Pegasus Gold Inc .............................. 2,004,200
1,757,500 Sante Fe Pacific Gold Co ...................... 17,355,313
--------------
43,604,638
--------------
Pollution Control - 2.0%
5,167,800 * Rollins Environmental Services ................ 17,441,325
--------------

ENERGY - 5.5%
189,600 Anadarko Petroleum Corp ....................... 8,223,900
98,400 Asarco, Inc ................................... 3,173,400
18,300 Devon Energy Corp ............................. 398,025

</TABLE>

<TABLE>
<CAPTION>
Market
Shares Securities Description Value
- ---------------------- ----------------------------------------------- --------------
<S> <C> <C>
ENERGY - (continued)
916,900 * Forcenergy Gas Exploration ..................... $ 8,939,775
589,500 Holly Corp ..................................... 12,821,625
432,500 * Oryx Energy Corp ............................... 4,973,750
983,400 Snyder Oil Corp ................................ 10,079,850
--------------
48,610,325
--------------
FINANCIAL - 8.4%
347,000 American Financial Group Inc.................... 9,716,000
544,200 * Citation Insurance Group ....................... 2,414,888
795,000 John Alden Financial Corp....................... 16,496,250
112,600 * Olympic Financial Ltd .......................... 2,054,950
620,700 * Risk Capital Holdings Inc ...................... 13,655,400
739,300 * 20th Century Industries ........................ 12,290,863
581,900 * Zurich Reinsurance Centre ...................... 16,729,625
--------------
73,357,976
--------------
HEALTHCARE - 12.7%
288,100 * Cor Therapeutices .............................. 2,989,038
1,452,800 * Coventry Corp .................................. 28,511,200
330,500 * Grancare Inc ................................... 4,833,563
291,700 Grupo Casa Autrey - ADR ........................ 3,719,175
918,100 Integrated Health Services ..................... 21,001,538
756,500 * Perrigo Co ..................................... 9,267,125
252,400 * Scherer R.P. Corp .............................. 11,231,800
720,800 * Sofamor Danek Group, Inc ....................... 17,659,600
1,073,100 * Sun Healthcare Group, Inc ...................... 12,743,063
--------------
111,956,102
--------------
REAL ESTATE INVESTMENT TRUST - 2.9%
1,626,600 * Catellus Development Corp ...................... 8,946,300
317,700 Crown American Realty .......................... 2,422,463
629,600 Prime Residential, Inc ......................... 11,018,000
217,000 Prime Retail, Inc .............................. 2,631,125
--------------
25,017,888
--------------
TECHNOLOGY - 5.1%
1,014,800 * 3D0 Co ......................................... 10,909,100
1,108,800 * Cray Research .................................. 23,007,600
1,271,700 * Zenith Electronics Corp ........................ 10,650,480
--------------
44,567,180
--------------
TRANSPORTATION - 9.1%
1,154,300 Airborne Freight Corp .......................... 30,300,375
906,600 * Alaska Air Group ............................... 13,485,675
268,600 Hunt (JB) Transportation Serv .................. 4,163,300
698,500 * Landstar System Inc ............................ 18,335,625
308,900 Teekay Shipping Corp ........................... 7,181,925
115,900 TNT Freightways Corp ........................... 2,086,200
359,900 Yellow Corp .................................... 4,723,688
--------------
80,276,788
--------------

Total Common Stocks 654,717,700
--------------
OPTIONS - 2.5%
--------------
Put Options
70,000 Cypress Semiconductor Corp
@ 45, expiring 12/15/95 ........................ 691,250
14,269,400 Morgan Stanley High Tech Index
@ 350, expiring 6/21/96 ........................ 4,913,240
15,804,800 Morgan Stanley High Tech Index
@ 316, expiring 6/21/96 ........................ 2,985,527
15,384,615 Morgan Stanley High Tech Index
@ 325, expiring 6/21/96 ........................ 3,380,000
45,839,300 Morgan Stanley High Tech Index
@ 327, expiring 6/21/96 ........................ 10,483,448
--------------
22,453,465
--------------
</TABLE>

*Non-income producing

See accompanying notes to financial statements.

58
<PAGE>
THE CRABBE HUSON SPECIAL FUND, INC.

SCHEDULE OF INVESTMENTS
October 31, 1995

<TABLE>
<CAPTION>
Shares
or face Market
Value Securities Description Value
- ---------------------- ----------------------------------------------- --------------
<S> <C> <C>
SHORT-TERM INVESTMENTS - 9.8% **
--------------------------------
Treasury Bills - 1.3%
U.S. Treasury Bill
$ 5,000,000 5.270% 11/24/95 ............................. $ 4,983,148
4,000,000 5.160% 12/21/95 ............................. 3,971,333
2,285,000 5.260% 10/17/96 ............................. 2,167,460
--------------
11,121,941
--------------
Discount Notes - 8.5%
Federal Farm Credit
3,000,000 5.480% 12/15/95 ............................. 2,979,907
3,500,000 5.500% 12/22/95 ............................. 3,472,729
865,000 5.520% 12/07/95 ............................. 860,225
500,000 5.530% 11/28/95 ............................. 497,926
1,000,000 5.550% 11/03/95 ............................. 999,692
4,010,000 5.560% 11/09/95 - 1/04/96 ................... 3,984,053
8,660,000 5.570% 11/27/95 - 1/04/96 ................... 8,615,496
1,000,000 5.590% 11/17/95 ............................. 997,516
305,000 5.610% 11/13/95 ............................. 304,430

Federal Home Loan
2,000,000 5.470% 1/22/96 .............................. 1,975,081
1,590,000 5.480% 12/28/95 ............................. 1,576,204
4,000,000 5.490% 1/30/96 .............................. 3,945,100
3,500,000 5.500% 12/29/95 ............................. 3,468,986
3,250,000 5.520% 12/08/95 - 12/13/95 .................. 3,230,028
3,155,000 5.540% 11/24/95 - 12/18/95 .................. 3,141,414
7,000,000 5.550% 1/02/96 - 1/3/96 ..................... 6,932,552
11,450,000 5.560% 11/07/95 - 1/25/96 ................... 11,347,657
6,000,000 5.570% 11/06/95 - 1/10/96 ................... 5,945,460
4,445,000 5.580% 1/05/96 - 1/08/96..................... 4,399,585
1,500,000 5.590% 11/13/95 ............................. 1,497,205
4,465,000 5.620% 11/01/95 - 11/15/95................... 4,463,984
--------------
74,635,230
--------------

Total Short-Term Investments 85,757,171
--------------

Total Investments -87.3% 767,165,836
(Cost 789,902,314)***
Cash - 0.2% 2,028,004
--------------

SECURITIES SOLD SHORT - (15.1%)
-------------------------------
COMMON STOCKS
Computers - 3.6%
180,700 Computer Associates Intl, Inc ................. (9,938,500)
107,700 Micro Warehouse Inc ........................... (4,792,650)
222,500 Sun Microsystems, Inc ......................... (17,355,000)
--------------
(32,086,150)
--------------
</TABLE>

<TABLE>
<CAPTION>
Shares
or face Market
Value Securities Description Value
- ---------------------- ----------------------------------------------- --------------
<S> <C> <C>
Semiconductors - 4.3%
408,150 Alliance Semiconductor ......................... ($12,550,611)
410,100 Cypress Semiconductor .......................... (14,456,025)
96,200 Microchip Technology Inc ....................... (3,817,938)
100,000 Micron Technology .............................. (7,062,500)
--------------
(37,887,074)
--------------
Software - 7.2%
150,000 Adobe Systems, Inc ............................. (8,550,000)
93,200 Broderbund Software ............................ (6,465,750)
431,900 Gartner Group Inc CL A ......................... (18,841,638)
854,000 Tellabs, Inc ................................... (29,036,000)
--------------
(62,893,388)
--------------

Total Securities Sold Short - (15.1%) (132,866,612)
--------------
(Proceeds $116,397,420)****
Other Assets and (Liabilities), Net - 27.6% 242,232,606
--------------
TOTAL NET ASSETS - 100.0% $878,559,834
--------------
--------------

</TABLE>

**Rates reflect purchase yield to maturity.
***Aggregate cost for Federal income tax purposes is $790,872,568.
****Aggregate proceeds for Federal income tax purposes is $119,775,124.

See accompanying notes to financial statements.

<PAGE>

THE CRABBE HUSON ASSET ALLOCATION FUND, INC.

SCHEDULE OF INVESTMENTS
October 31, 1995

Face Market
Value Securities Description Value
- ----------------------- ---------------------------------------- --------------
FIXED INCOME SECURITIES - 50.2%
------------------------------

GOVERNMENT BONDS - 33.2%
$ 10,765,000 U.S. Treasury Note
6.000% 8/31/97 ........................ $ 10,834,218
7,465,000 U.S. Treasury Note
6.250% 8/31/00 ........................ 7,615,046
3,870,000 U.S. Treasury Note
6.500% 8/15/05 ........................ 4,005,837
21,300,000 U.S. Treasury Bond
6.875% 8/15/25 ........................ 22,861,290
-------------
45,316,391
-------------

CORPORATE BONDS - 7.4%
600,000 Baxter International
7.500% 5/01/97 ........................ 612,000
500,000 GMAC
8.000% 10/01/99 ....................... 527,500
550,000 Upjohn Co
5.875% 4/15/00 ........................ 539,687
550,000 Pepsico, Inc
5.875% 6/01/00 ........................ 543,812
400,000 American Express Credit
6.500% 8/01/00 ........................ 404,500
700,000 Ford Motor Credit
6.250% 11/08/00 ....................... 696,500
725,000 GMAC
9.000% 10/15/02 ....................... 815,625
550,000 IBM Corp
7.250% 11/01/02 ....................... 576,812
550,000 Tennessee Valley Authority
6.125% 7/15/03 ........................ 540,375
550,000 JP Morgan & Company
7.625% 9/15/04 ........................ 585,062
550,000 Pacific Bell
6.250% 3/01/05 ........................ 539,687
550,000 Anheuser Busch
7.000% 9/01/05 ........................ 566,500
550,000 Bear Stearns Co.
6.875% 10/01/05 ...................... 549,312
600,000 Snap-on, Inc
6.625% 10/01/05 ....................... 609,000
600,000 Wal-Mart Stores
8.000% 9/15/06 ........................ 672,000
550,000 Eli Lilly
8.375% 12/01/06 ....................... 633,187
600,000 AT&T Corp
7.750 3/01/07 ......................... 653,250
-------------
10,064,809
-------------

AGENCIES - 5.6%
420,000 International Bank Recon.
& Dev. Floater 5.890%**
8/07/97 ............................... 378,415
1,400,000 Federal Home Loan Bank
8.220% 12/22/97 ...................... 1,403,430
1,500,000 SLMA Treasury Ind. Floater
(10-Year Treasury - 180 BP)
4.680% 2/11/98 ....................... 1,470,000

Shares
or Face Market
Value Securities Description Value
- ----------------------- ---------------------------------------- --------------
<S> <C> <C>
$ 900,000 Federal National Mortgage Association
6.080% 9/25/00................................. $ 902,205
1,200,000 Federal National Mortgage Association
8.25% 12/18/00................................. 1,314,960
1,000,000 Federal Home Loan Bank
7.590% 3/10/05 ................................ 1,088,060
1,000,000 Federal National Mortgage Association
7.375% 3/28/05 ................................ 1,071,160
-------------
7,628,230
-------------
FHLMC - 2.9%
109,807 FHLMC Pool #281037
9.250% 11/01/16 ............................... 114,007
1,067,640 FHLMC Pool #303033
9.000% 4/01/17 ................................ 1,103,480
1,400,000 FHLMC Pool #TBA
7.000% 10/01/25 ............................... 1,388,406
1,400,000 FHLMC Pool #TBA
7.500% 10/01/25 ............................... 1,415,093
-------------
4,020,986
-------------
CMO - 1.1%
1,645,000 GCA GNMA 1993 - PO 1 - B 1,515,970
-------------
Total Fixed Income Securities 68,546,386
-------------

CONVERTIBLE PREFERRED - 0.8%
----------------------------
20,000 Delta Air Lines ................................. 1,107,500
------------

COMMON STOCK - 45.3%
---------------------
CONSUMER CYCLICALS
Automotive - 1.5%
47,300 General Motors Corp ............................. 2,069,375
------------

Consumer Products - 2.2%
23,200 Bausch & Lomb, Inc .............................. 803,300
29,300 Brunswick Corp .................................. 571,350
5,500 Quaker Oats ..................................... 187,687
15,000 Rubbermaid, Inc ................................. 391,875
72,800 Sunbeam Corporation ............................. 1,092,000
-------------
3,046,212
-------------
Retail - 3.4%
8,500 Dayton-Hudson ................................... 584,375
27,600 Limited, Inc .................................... 507,150
41,400 Liz Claiborne, Inc .............................. 1,174,725
68,300 * Price/Costco, Inc ............................... 1,161,100
34,500 Wal-Mart Stores, Inc ............................ 746,062
34,100 Woolworth Corp .................................. 498,712
-------------
4,672,124
-------------
BASIC MATERIALS AND INDUSTRIAL
Building Materials - 2.1%
100,000 * USG Corp ........................................ 2,912,500
-------------

Chemicals -0.2%
34,600 * Uniroyal Chemical Corp .......................... 263,825
-------------

Equipment & Machinery - 0.4%
27,100 * Detroit Diesel Corp ............................. 481,025
-------------

</TABLE>

*Non-income producing
**Zero-coupon bonds- rates reflect purchase yield to maturity.
See accompanying notes to financial statements.

<PAGE>

THE CRABBE HUSON ASSET ALLOCATION FUND, INC.

SCHEDULE OF INVESTMENTS
October 31, 1995

Market
Shares Securities Description Value
- ----------------------- ---------------------------------------- --------------
<S> <C> <C>

COMMON STOCK - (continued)
--------------------------
BASIC MATERIALS AND INDUSTRIAL - (continued)

Forest Products & Packaging - 2.3%
56,100 * Domtar, Inc ............................. $ 511,912
111,400 Louisiana Pacific Corp .................. 2,659,675
-------------
3,171,587
-------------
Metals & Mining - 4.1%
107,200 * Bethlehem Steel Corp .................... 1,407,000
79,000 J & L Specialty Steel ................... 1,293,625
135,600 * National Steel Corp - Class B ........... 1,796,700
22,800 Nucor Corp .............................. 1,097,250
-------------
5,594,575
-------------
ENERGY - 7.1%
35,000 Apache Corp ............................. 892,500
55,900 Burlington Resources, Inc ............... 2,012,400
62,600 Dresser Industries ...................... 1,298,950
52,100 Enserch Corp ............................ 755,450
84,400 * Enserch Exploration ..................... 833,450
63,300 Occidental Petroleum Corp ............... 1,360,950
25,300 Tenneco, Inc ............................ 1,110,037
24,300 Union Texas Petro Hldgs ................. 437,400
35,300 Unocal Corp ............................. 926,625
-------------
9,627,762
-------------
FINANCIAL - 6.4%
56,700 Ahmanson (H.F.) & Co .................... 1,417,500
48,220 Bear Stearns Cos, Inc ................... 958,372
119,500 Equitable Companies ..................... 2,539,375
4,300 * Prudential Reinsurance Hlds ............. 87,612
34,600 Salomon, Inc ............................ 1,249,925
68 * Transport Holdings ...................... 2,669
13,700 Travelers, Inc .......................... 691,850
58,900 U.S. Bancorp ............................ 1,744,929
-------------
8,692,232
-------------
HEALTHCARE - 2.7%
30,500 Allergan, Inc ........................... 895,937
14,700 * Apria Healthcare Group .................. 317,887
66,700 * Humana, Inc ............................. 1,409,037
27,600 U S Healthcare .......................... 1,062,600
-------------
3,685,461
-------------
REAL ESTATE INVESTMENT TRUST - 2.0%
52,100 Debartolo Realty Corp ................... 677,300
38,200 First Industrial Realty Trust ........... 778,325
53,400 Spieker Properties ...................... 1,294,950
-------------
2,750,575
-------------
TECHNOLOGY - 1.1%
36,400 * Tandem Computers, Inc ................... 409,500
43,100 * Unisys Corp ............................. 242,437
89,900 * Zenith Electronics ...................... 752,912
-------------
1,404,849
-------------
TELECOMMUNICATIONS - 4.0%
21,800 AT&T Corp ............................... 1,395,200
65,500 Comcast Corp Special Class A ............ 1,170,812
51,703 * Cox Communications, Inc Class A ......... 969,431
22,500 Time Warner, Inc ........................ 821,250
80,700 Westinghouse Electric ................... 1,139,887
-------------
5,496,580
-------------
Shares
or Face Market
Value Securities Description Value
- ----------------------- ---------------------------------------- --------------
<S> <C> <C>

TRANSPORTATION - 5.8%
23,800 * AMR Corp ........................................ $ 1,570,800
13,800 Burlington Northern Santa Fe .................... 1,157,475
79,800 Consolidated Freightways ........................ 1,855,350
23,000 Delta Air Lines, Inc ............................ 1,509,375
38,900 Ryder System .................................... 938,462
40,707 * Southern Pacific Rail Corp ...................... 905,730
-------------
7,937,192
-------------

Total Common Stocks 61,805,874
-------------

SHORT-TERM INVESTMENTS - 0.7%
-----------------------------

TREASURY BILLS - 0.7%
1,000,000 U.S. Treasury Bill
5.070% 10/17/96 ............................... 948,560
-------------

Total Investments - 97.0% 132,408,320
(Cost $127,582,027)***
Cash - 4.6% 6,303,890
Other Assets and (Liabilities), Net - (1.6%) (2,182,153)
-------------

TOTAL NET ASSETS - 100.0% $136,530,057
-------------
-------------

</TABLE>

*Non-income producing
***Aggregate cost for Federal income tax purposes is $127,567,346.
See accompanying notes to financial statements.

61
<PAGE>

THE CRABBE HUSON EQUITY FUND, INC.
SCHEDULE OF INVESTMENTS
October 31, 1995

Market
Shares Securities Description Value
- ------------------------ -------------------------------------- --------------
<S> <C> <C>

COMMON STOCK - 84.0%
CONSUMER CYCLICALS

AUTOMOTIVE - 2.7%
240,800 General Motors Corp ................... $ 10,535,000
--------------

CONSUMER PRODUCTS - 4.2%
138,900 Bausch & Lomb, Inc .................... 4,809,413
135,300 Brunswick Corp ........................ 2,638,350
33,700 Quaker Oats ........................... 1,150,012
81,900 Rubbermaid, Inc ....................... 2,139,637
375,500 Sunbeam Corp .......................... 5,632,500
--------------
16,369,912
--------------
RETAIL - 6.5%
42,700 Dayton-Hudson Corp .................... 2,935,625
141,500 Limited, Inc .......................... 2,600,063
239,000 Liz Claiborne, Inc .................... 6,781,625
334,400 * Price/Costco, Inc ..................... 5,684,800
205,200 Wal-Mart Stores, Inc .................. 4,437,450
190,100 Woolworth Corp ........................ 2,780,212
--------------
25,219,775
--------------

BASIC MATERIALS AND INDUSTRIAL
BUILDING MATERIALS - 3.9%
523,200 * USG Corp .............................. 15,238,200
--------------

CHEMICALS - 0.3%
170,000 * Uniroyal Chemical Corp ................ 1,296,250
--------------

EQUIPMENT & MACHINERY - 0.7%
142,600 * Detroit Diesel Corp ................... 2,531,150
--------------

FOREST PRODUCTS & PACKAGING - 4.2%
288,900 * Domtar, Inc ........................... 2,636,212
562,200 Louisiana Pacific Corp ................ 13,422,525
--------------
16,058,737
--------------
METALS & MINING - 7.5%
570,500 * Bethlehem Steel Corp .................. 7,487,812
403,700 J & L Specialty Steel ................. 6,610,587
660,400 * National Steel Corp - Class B ......... 8,750,300
128,400 Nucor Corp ............................ 6,179,250
--------------
29,027,949
--------------
ENERGY - 13.8%
207,200 Apache Corp ........................... 5,283,600
282,600 Burlington Resources, Inc ............. 10,173,600
344,500 Dresser Industries, Inc ............... 7,148,375
282,100 Enserch Corp .......................... 4,090,450
472,400 * Enserch Exploration ................... 4,664,950
354,900 Occidental Petroleum Corp ............. 7,630,350
147,700 Tenneco Inc ........................... 6,480,339
151,000 Union Texas Petro Hldgs Inc ........... 2,718,000
198,200 Unocal Corp ........................... 5,202,750
--------------
53,392,414
--------------
FINANCIAL - 12.2%
337,200 Ahmanson (H.F.) & Co .................. 8,430,000
294,275 Bear Stearns Cos, Inc ................. 5,848,715
605,900 Equitable Companies ................... 12,875,375
24,500 * Prudential Reinsurance Hlds ........... 499,187
195,100 Salomon, Inc .......................... 7,047,987
327 * Transport Holdings .................... 12,834

Shares
Or Face Market
Value Securities Description Value
- ------------------------ -------------------------------------- --------------
<S> <C> <C>
FINANCIAL - (continued)
65,500 Travelers, Inc ........................ $ 3,307,750
311,400 U.S. Bancorp .......................... 9,225,225
--------------
47,247,073
--------------
HEALTHCARE - 4.8%
151,100 Allergan, Inc ......................... 4,438,563
77,000 * Apria Healthcare Group ................ 1,665,125
330,900 * Humana, Inc ........................... 6,990,263
142,500 U S Healthcare ........................ 5,486,250
--------------
18,580,201
--------------
REAL ESTATE INVESTMENT TRUST - 3.5%
255,900 DeBartolo Realty Corp ................. 3,326,700
149,300 First Industrial Realty Trust ......... 3,041,989
294,300 Spieker Properties .................... 7,136,775
--------------
13,505,464
--------------
TECHNOLOGY- 1.7%
209,600 * Tandem Computers, Inc ................. 2,358,000
216,500 * Unisys Corp ........................... 1,217,812
369,100 * Zenith Electronics Corp ............... 3,091,212
--------------
6,667,024
--------------
TELECOMMUNICATIONS - 7.6%
123,000 AT&T Corp ............................. 7,872,000
363,600 Comcast Corp Special Class A .......... 6,499,350
264,219 * Cox Communications, Inc Class A ....... 4,954,110
117,100 Time Warner, Inc ...................... 4,274,150
406,800 Westinghouse Electric Corp ............ 5,746,050
--------------
29,345,660
--------------
TRANSPORTATION - 9.6%
122,500 * AMR Corp .............................. 8,085,000
69,500 Burlington Northern RR, Inc ........... 5,829,312
413,100 Consolidated Freightways .............. 9,604,575
59,000 Delta Air Lines, Inc .................. 3,871,875
193,000 Ryder System .......................... 4,656,125
223,610 * Southern Pacific Rail Corp ............ 4,975,322
--------------
37,022,209
--------------
UTILITIES - 0.8%
94,700 BCE Inc ............................... 3,184,289
--------------

Total Common Stocks 325,221,307
--------------

CONVERTIBLE PREFERRED - 1.3%
----------------------------

92,100 Delta Air Lines ....................... 5,100,037
--------------

SHORT TERM INVESTMENTS** - 14.4%
--------------------------------

TREASURY BILLS & NOTES - 2.3%
U. S. TREASURY NOTE
$ 2,500,000 5.125% 11/15/95 ..................... $ 2,499,550
5,915,000 5.260% 10/17/96 ..................... 5,610,732
1,000,000 5.330% 12/07/95 ..................... 994,665
--------------
9,104,947
--------------

DISCOUNT NOTES - 12.1%
FEDERAL FARM CREDIT
600,000 5.510% 12/04/95 ..................... 596,970
900,000 5.520% 11/28/95 ..................... 896,274
415,000 5.530% 11/28/95 ..................... 413,279
490,000 5.540% 12/20/95 ..................... 486,305
500,000 5.500% 12/22/95 ..................... 496,104
100,000 5.560% 11/03/95 ..................... 99,969
7,945,000 5.570% 11/01/95 - 12/07/95........... 7,912,672

</TABLE>

*Non-income producing
**Rates reflect purchase yield to maturity.
See accompanying notes to financial statements.

<PAGE>

THE CRABBE HUSON EQUITY FUND, INC.
SCHEDULE OF INVESTMENTS
October 31, 1995

<TABLE>
<CAPTION>
Face Market
Value Securities Description Value
- ------------------------ -------------------------------------- --------------
<S> <C> <C>

DISCOUNT NOTES - (CONTINUED)
FEDERAL HOME LOAN
$ 1,250,000 5.420% 2/16/96 ...................... $ 1,229,865
250,000 5.430% 2/20/96 ...................... 245,814
700,000 5.450% 1/22/96 ...................... 691,310
250,000 5.470% 1/22/96 ...................... 246,885
1,950,000 5.480% 12/28/95 - 1/17/96 ........... 1,928,361
1,000,000 5.490% 1/16/96 ...................... 988,410
985,000 5.500% 12/29/95 - 1/10/96 ........... 975,016
675,000 5.520% 12/13/95 ..................... 670,653
480,000 5.530% 12/05/95 ..................... 477,493
3,645,000 5.540% 11/24/95 - 12/19/95 .......... 3,624,808
7,075,000 5.550% 11/02/95 - 1/29/96 ........... 7,514,523
5,695,000 5.560% 11/02/95 - 1/29/96 ........... 5,668,512
5,470,000 5.570% 11/06/95 - 1/30/96 ........... 6,419,637
500,000 5.580% 1/08/96 ...................... 494,730
2,035,000 5.590% 11/13/95 - 1/09/96 ........... 2,018,367
1,000,000 5.620% 11/15/95 ..................... 997,814
1,600,000 5.630% 11/21/95 ..................... 1,594,996
--------------
46,688,767
--------------

Total Short Term Investments 55,793,714
--------------

Total Investments - 99.7% 386,115,058
(Cost $371,004,735)***
Cash - 1.1% 4,226,599
Other Assets and (Liabilities), Net - 0.8% (3,157,577)
--------------

TOTAL NET ASSETS - 100.0% $ 387,184,080
--------------
--------------
</TABLE>

***Aggregate cost for Federal income tax purposes is $371,627,627.
See accompanying notes to financial statements.

63
<PAGE>
THE CRABBE HUSON INCOME FUND, INC.

SCHEDULE OF INVESTMENTS
October, 31 1995
<TABLE>
<CAPTION>
Face Market
Value Securities Description Value
- ------------------------- ----------------------------------------------- -------------
<S> <C> <C>
FIXED INCOME SECURITIES - 97.1%
GOVERNMENT BONDS - 52.6%

$ 1,000,000 U.S. Treasury Note 6.000%
8/31/97 ................................... $ 1,006,430
1,000,000 U.S. Treasury Bond 7.625%
2/15/25 ................................... 1,160,390
1,500,000 U.S. Treasury Bond 6.875%
8/15/25 ................................... 1,609,950
-------------
3,776,770
-------------
CORPORATE BONDS - 20.2%
100,000 Baxter International
7.500% 5/01/97 ............................ 102,000
100,000 GMAC
8.000% 10/01/99 .......................... 105,500
100,000 Upjohn Company
5.875% 4/15/00 ............................ 98,125
100,000 Pepsico, Inc
5.875% 6/01/00 ............................ 98,875
100,000 American Express Credit
6.500% 8/01/00 ............................ 101,125
100,000 IBM Corp
7.250% 11/01/02 ........................... 104,875
100,000 JP Morgan & Company
7.625% 9/15/04 ............................ 106,375
100,000 Pacific Bell
6.250% 3/01/05 ............................ 98,125
100,000 Anheuser Busch
7.000% 9/01/05 ............................ 103,000
100,000 Bear Stearns Co
6.875% 10/01/05 .......................... 99,875
100,000 Snap-on, Inc
6.625% 10/01/05 ........................... 101,500
100,000 Wal-Mart Stores
8.000% 9/15/06 ............................ 112,000
100,000 Eli Lilly
8.375% 12/01/06 ........................... 115,125
100,000 AT&T Corp
7.750% 3/01/07 ........................... 108,875
-------------
1,455,375
-------------
INSURED BONDS - 2.2%
160,000 City of Lincoln Oregon
5.800% 6/01/97
(AMBAC) .................................... 160,000
-------------

Face Market
Value Securities Description Value
- ------------------------- ----------------------------------------------- -------------
<S> <C> <C>
AGENCIES - 22.1%
$ 320,000 International Bank Recon &
Dev Floater 6.170%*
8/07/97 .................................... $ 288,317
300,000 FHLMC Strips
11/15/99 .................................. 235,905
100,000 Tennessee Valley Authority
6.125% 7/15/03 ............................ 98,250
81,539 FNMA Pool #30333
9.250% 9/01/16 ........................... 85,264
123,549 FHLMC Pool #302029
9.500% 10/01/16 .......................... 128,952
183,090 FHLMC Pool #303033
9.000% 4/01/17 ........................... 189,236
241,386 FHLMC Pool #301538
10.000% 7/01/17 .......................... 259,625
150,000 FHLMC Pool TBA
7.000% 10/01/25 .......................... 148,758
150,000 FHLMC Pool TBA
7.500% 10/01/25 .......................... 151,617
-------------
1,585,924

Total Investments - 97.1% 6,978,069
(Cost $6,754,759)**
Cash - 5.8% 417,578
Other Assets and (Liabilities), Net - (2.9)% (205,522)
-------------

TOTAL NET ASSETS - 100.0% $ 7,190,125
-------------
-------------
</TABLE>

*Zero-coupon bonds-rates reflect purchase yield to maturity.
**Aggregate cost for Federal income tax purposes is $6,774,069.
See accompanying notes to financial statements.

<PAGE>
THE CRABBE HUSON U.S. GOVERNMENT INCOME FUND, INC.
SCHEDULE OF INVESTMENTS
October 31, 1995
<TABLE>
<CAPTION>
Face Market
Value Securities Description Value
------------- --------------------------------------------------------- -------------
<C> <S> <C>
FIXED INCOME SECURITIES - 98.4%
U.S. GOVERNMENT AND AGENCY
$ 255,000 International Bank Recon & Dev
Floater 5.390%* 08/07/97 ............................. $ 229,752
4,655,000 U. S. Treasury Note
6.000% 8/31/97 ....................................... 4,684,932
150,000 Federal National Mortgage
Assoc. 4.950% 9/30/98 ................................ 146,148
1,045,000 U. S. Treasury Note
6.250% 8/31/00 ....................................... 1,066,005
120,000 Federal National Mortgage
Assoc. Medium Term Note
6.080% 9/25/00 ........................................ 120,294
100,000 Federal National Mortgage
Assoc. 8.250% 12/18/00 ............................... 109,580
50,000 Federal Home Loan Bank
7.590% 3/10/05 ........................................ 54,403
50,000 Federal National Mortgage
Assoc. 7.375% 3/28/05 ................................ 53,558
1,700,000 U. S. Treasury Bond
6.875% 8/15/25 ....................................... 1,824,610
-------------
8,289,282
-------------
Total Investments - 98.4% 8,289,282

(Cost $8,185,803)**
Cash - 0.4% 32,860
Other Assets and (Liabilities), Net - 1.2% 104,057
-------------
TOTAL NET ASSETS - 100.0% $ 8,426,199
-------------
-------------
</TABLE>

*Zero-coupon bond-rate reflects purchase yield to maturity.
**Aggregate cost for Federal income tax purposes is $8,186,756.
See accompanying notes to financial statements.

65
<PAGE>
THE CRABBE HUSON U.S. GOVERNMENT MONEY MARKET FUND, INC.
SCHEDULE OF INVESTMENTS
October 31, 1995

<TABLE>
<CAPTION>
Face Market
Value Securities Description Value
--------------- ------------------------------------------------ -------------
<C> <S> <C>
FIXED INCOME SECURITIES* - 99.6%
U.S. GOVERNMENT & AGENCY
Treasury Bills - 10.2%
$ 1,000,000 U. S. Treasury Bill
5.540% 7/25/96 ................................ $ 958,912
4,850,000 U. S. Treasury Bill
5.260% 10/17/96 ............................... 4,601,268
-------------
5,560,180
-------------
Discount Notes - 89.4%
Federal Farm Credit
400,000 5.510% 12/04/95 ............................... 397,980
235,000 5.520% 11/28/95 - 12/07/95 .................... 233,841
585,000 5.530% 11/28/95 ............................... 582,574
510,000 5.540% 12/20/95 ............................... 506,154
1,890,000 5.560% 11/03/95 - 1/04/96 ..................... 1,888,023
7,395,000 5.570% 11/01/95 - 1/04/96 ..................... 7,363,603
695,000 5.610% 11/13/95 ............................... 693,700
Federal Home Loan
750,000 5.420% 2/16/96 ................................ 737,918
3,250,000 5.430% 1/17/96 - 2/20/96 ...................... 3,203,279
800,000 5.450% 1/22/96 ................................ 790,069
750,000 5.470% 1/22/96 ................................ 740,655
1,460,000 5.480% 12/28/95 - 1/17/96 ..................... 1,445,962
795,000 5.490% 1/16/96 ................................ 785,786
2,515,000 5.500% 12/29/95 - 1/10/96 ..................... 2,488,470
1,075,000 5.520% 12/08/95 - 12/13/95 .................... 1,068,652
2,270,000 5.530% 12/05/95 - 1/18/96 ..................... 2,249,696
3,200,000 5.540% 11/24/95 - 12/19/95 .................... 3,179,455
7,145,000 5.550% 11/02/95 - 2/01/96 ..................... 7,077,470
5,225,000 5.560% 11/08/95 - 1/26/96 ..................... 5,183,831
3,740,000 5.570% 11/16/95 - 1/30/96 ..................... 3,707,315
2,055,000 5.580% 1/05/96 - 1/08/96 ...................... 2,033,765
650,000 5.590% 11/22/95 ............................... 647,880
535,000 5.620% 11/15/95 ............................... 533,831
1,400,000 5.630% 11/21/95 ............................... 1,395,621
-------------
48,935,530
-------------

Total Investments - 99.6% 54,495,710
(Cost $54,495,710)**
Cash - 0.4% 233,521
Other Assets and (Liabilities), Net 0.0% (15,012)
-------------
TOTAL NET ASSETS - 100.0% $ 54,714,219
-------------
-------------
</TABLE>

*Rates reflect purchase yield to maturity.
**Aggregate cost for Federal income tax purposes is identical.
See accompanying notes to financial statements.

66
<PAGE>
THE CRABBE HUSON REAL ESTATE INVESTMENT FUND, INC.

SCHEDULE OF INVESTMENTS
October 31, 1995

<TABLE>
<CAPTION>
Market
Shares Securities Description Value
---------- ------------------------------------------------- -------------
<C> <S> <C>
COMMON STOCK - 98.1%
REAL ESTATE INVESTMENT TRUST
APARTMENT - 23.5%
20,000 Camden Property Trust ........................... $ 415,000
25,000 Pacific Gulf Properties, Inc .................... 378,125
20,000 Paragon Group, Inc .............................. 345,000
15,000 Post Properties ................................. 450,000
60,000 Prime Residential, Inc .......................... 1,050,000
20,000 SouthWest Property Trust ........................ 242,500
35,000 Summit Properties, Inc .......................... 647,500
73,500 Town & Country Trust ............................ 937,125
-------------
4,465,250
-------------
INDUSTRIAL - 16.1%
10,000 Cali Realty Corp ................................ 195,000
25,900 Carr Realty Corp ................................ 492,100
33,500 First Industrial Realty Trust ................... 682,562
19,000 Liberty Property Trust .......................... 384,750
17,000 Reckson Associates Realty Corp .................. 456,875
24,000 Spieker Properties, Inc ......................... 582,000
10,000 Trinet Corp. Realty Trust ...................... 267,500
-------------
3,060,787
-------------
LODGING - 4.3%
30,000 Starwood Lodging Trust .......................... 817,500
-------------
MALLS - 12.2%
62,100 Crown American Realty ........................... 473,512
71,400 DeBartolo Realty Corp ........................... 928,200
5,000 Macerich Company ................................ 100,625
35,000 Simon Property Group Inc ........................ 813,750
-------------
2,316,087
-------------
MANUFACTURED HOUSING - 0.9%
10,000 Manufactured Home Communities.................... 165,000
-------------
OUTLET CENTERS - 10.2%
35,200 Factory Stores of America ....................... 677,600
15,000 Mills Corp ...................................... 256,875
63,000 Prime Retail, Inc ............................... 763,875
10,000 Tanger Factory Outlet Center .................... 235,000
-------------
1,933,350
-------------
SHOPPING CENTER - 30.9%
11,200 Burnham Pacific Property, Inc ................... 126,000
28,700 Commercial Net Lease Realty ..................... 365,925
12,700 Developers Diversified Realty ................... 361,950
5,000 Excel Realty Trust, Inc ......................... 94,375
36,100 Federal Realty Investment Trust ................. 731,025
44,250 Glimcher Realty Trust ........................... 796,500
43,700 JDN Realty Corp ................................. 890,387
60,000 Kranzco Realty Trust ............................ 915,000
55,000 Malan Realty Investors, Inc ..................... 770,000
28,750 Mark Centers Trust .............................. 309,064
30,000 Regency Realty Corp ............................. 510,000
-------------
5,870,226
-------------

Total Investments - 98.1% 18,628,200
(Cost $19,605,304)*
Cash - 0.5% 99,391
Other Assets and (Liabilities), Net - 1.4% 257,923
-------------
TOTAL NET ASSETS - 100.0% $ 18,985,514
-------------
-------------
</TABLE>
*Aggregate cost for Federal income tax purposes is $19,610,488.
See accompanying notes to financial statements.

67
<PAGE>
CRABBE HUSON FUNDS

STATEMENTS OF ASSETS AND LIABILITIES
October 31, 1995

<TABLE>
<CAPTION>
THE OREGON THE THE
MUNICIPAL CRABBE HUSON CRABBE HUSON
BOND SPECIAL ASSET ALLOCATION
FUND, INC. FUND, INC. FUND, INC.
--------------- ---------------- ----------------
<S> <C> <C> <C>
ASSETS:
Investment securities,
at market (cost $26,215,041; $789,902,314;
$127,582,027; $371,004,735; $6,754,759;
$8,185,803; $54,495,710 and $19,605,304
respectively) $ 27,580,795 $ 767,165,836 $ 132,408,320
Cash ---- 2,028,004 6,303,890
Deposits with brokers for securities sold short ---- 184,796,646 ----
Receivables:
Dividends and Interest 509,615 849,007 857,351
Fund shares sold 25,000 4,090,362 405,209
Investment securities sold ---- 4,355,170 920,708
Due from distributor (Note 2) ---- ---- ----
Due from investment advisor (Note 2) ---- ---- ----
Proceeds from securities sold short ---- 116,397,420 ----
Organization expenses ---- ---- ----
Prepaid Expenses 1,362 44,011 6,508
--------------- ---------------- ----------------
$ 28,116,772 $ 1,079,726,456 $ 140,901,986
--------------- ---------------- ----------------
LIABILITIES:
Securities sold short,
at market (proceeds $116,397,420) ---- 132,866,612 ----
Payables:
Investment securities payable ---- 40,952,158 4,284,356
Fund shares redeemed ---- 9,144,015 42,751
Short sales closed ---- 17,711,422 ----
Payable to affiliates and directors (Note 2) 778 1,027 2,027
Accrued liabilities 45,623 491,388 42,795
--------------- ---------------- ----------------
46,401 201,166,622 4,371,929
--------------- ---------------- ----------------
NET ASSETS: $ 28,070,371 $ 878,559,834 $ 136,530,057
--------------- ---------------- ----------------
--------------- ---------------- ----------------
NET ASSETS CONSIST OF:
Capital shares 2,225 63,670 10,010
Capital paid in 26,699,373 874,136,535 120,240,658
Undistributed accumulated net
investment income ---- 11,747,830 ----
Undistributed accumulated net
realized gain (loss) on investments 3,019 31,817,469 11,453,096
Net unrealized appreciation
(depreciation) on investments and short sales(Note 5) 1,365,754 (39,205,670) 4,826,293
--------------- ---------------- ----------------
$ 28,070,371 $ 878,559,834 $ 136,530,057
--------------- ---------------- ----------------
--------------- ---------------- ----------------
CAPITAL SHARES, PAR VALUE $.001
Authorized 10,000,000 100,000,000 100,000,000
Outstanding (Note 4) 2,225,010 63,670,184 10,010,125
--------------- ---------------- ----------------
NET ASSET VALUE PER SHARE $ 12.62 $ 13.80 $ 13.64
--------------- ---------------- ----------------
--------------- ---------------- ----------------
</TABLE>

See accompanying notes to financial statements.

<PAGE>

CRABBE HUSON FUNDS

STATEMENTS OF ASSETS AND LIABILITIES
October 31, 1995

<TABLE>
<CAPTION>
THE THE THE CRABBE HUSON
CRABBE HUSON CRABBE HUSON U.S. GOVERNMENT
EQUITY FUND, INC. INCOME FUND, INC. INCOME FUND, INC.
----------------- ----------------- -----------------
<S> <C> <C> <C>
ASSETS:
Investment securities,
at market (cost $26,215,041; $789,902,314;
$127,582,027; $371,004,735; $6,754,759;
$8,185,803; $54,495,710 and $19,605,304
respectively) $ 386,115,058 $ 6,978,069 $ 8,289,282
Cash 4,226,599 417,578 32,860
Deposits with brokers for securities sold short ---- ---- ----
Receivables:
Dividends and Interest 154,250 89,712 88,913
Fund shares sold 1,109,039 3,376 6,658
Investment securities sold 919,085 ---- ----
Due from distributor (Note 2) 60,875 ---- ----
Due from investment advisor (Note 2) ---- 7,411 8,384
Proceeds from securities sold short ---- ---- ----
Organization expenses ---- ---- ----
Prepaid Expenses 17,515 359 434
---------------- ----------------- -----------------
$ 392,602,421 $ 7,496,505 $ 8,426,531
---------------- ----------------- -----------------

LIABILITIES:
Securities sold short,
at market (proceeds $116,397,420) ---- ---- ----
Payables:
Investment securities payable 4,885,161 301,803 ----
Fund shares redeemed 393,222 4,253 ----
Short sales closed ---- ---- ----
Payable to affiliates and directors (Note 2) 2,027 277 277
Accrued liabilities 137,931 47 55
---------------- ----------------- -----------------
5,418,341 306,380 332
---------------- ----------------- -----------------
NET ASSETS: $ 387,184,080 $ 7,190,125 $ 8,426,199
---------------- ----------------- -----------------
---------------- ----------------- -----------------
NET ASSETS CONSIST OF:
Capital shares 21,309 702 790
Capital paid in 349,459,104 7,146,824 8,468,549
Undistributed accumulated net
investment income 2,666,550 ---- 690
Undistributed accumulated net
realized gain (loss) on investments 19,926,794 (180,711) (147,309)
Net unrealized appreciation
(depreciation) on investments and short sales(Note 5) 15,110,323 223,310 103,479
---------------- ----------------- -----------------
$ 387,184,080 $ 7,190,125 $ 8,426,199
---------------- ----------------- -----------------
---------------- ----------------- -----------------
CAPITAL SHARES, PAR VALUE $.001
Authorized 100,000,000 100,000,000 100,000,000
Outstanding (Note 4) 21,309,191 700,892 790,370
---------------- ----------------- -----------------
---------------- ----------------- -----------------
NET ASSET VALUE PER SHARE $ 18.17 $ 10.26 $ 10.66
---------------- ----------------- -----------------
---------------- ----------------- -----------------

<CAPTION>
THE CRABBE HUSON THE CRABBE HUSON
U.S. GOVERNMENT REAL ESTATE
MONEY MARKET INVESTMENT
FUND, INC. FUND, INC.
---------------- ----------------
<S> <C> <C>
ASSETS:
Investment securities,
at market (cost $26,215,041; $789,902,314;
$127,582,027; $371,004,735; $6,754,759;
$8,185,803; $54,495,710 and $19,605,304
respectively) $ 54,495,710 $ 18,628,200
Cash 233,521 99,391
Deposits with brokers for securities sold short ---- ----
Receivables:
Dividends and Interest 646 110,797
Fund shares sold ---- 7,204
Investment securities sold ---- 133,980
Due from distributor (Note 2) ---- ----
Due from investment advisor (Note 2) ---- ----
Proceeds from securities sold short ---- ----
Organization expenses ---- 89,606
Prepaid Expenses 2,612 219
---------------- ----------------
$ 54,732,489 $ 19,069,397
---------------- ----------------

LIABILITIES:
Securities sold short,
at market (proceeds $116,397,420) ---- ----
Payables:
Investment securities payable ---- 74,647
Fund shares redeemed ---- ----
Short sales closed ---- ----
Payable to affiliates and directors (Note 2) 778 778
Accrued liabilities 17,492 8,458
---------------- ----------------
18,270 83,883
---------------- ----------------
NET ASSETS: $ 54,714,219 $ 18,985,514
---------------- ----------------
---------------- ----------------
NET ASSETS CONSIST OF:
Capital shares 54,714 1,960
Capital paid in 54,659,505 19,720,169
Undistributed accumulated net
investment income ---- 7,309
Undistributed accumulated net
realized gain (loss) on investments ---- 233,180
Net unrealized appreciation
(depreciation) on investments and short sales(Note 5) ---- (977,104)
---------------- ----------------
$ 54,714,219 $ 18,985,514
---------------- ----------------
---------------- ----------------
CAPITAL SHARES, PAR VALUE $.001
Authorized 2,000,000,000 1,000,000,000
Outstanding (Note 4) 54,714,219 1,959,931
---------------- ----------------
---------------- ----------------
NET ASSET VALUE PER SHARE $ 1.00 $ 9.69
---------------- ----------------
---------------- ----------------
</TABLE>

See accompanying notes to financial statements.

<PAGE>

STATEMENTS OF OPERATIONS
For the year ended October 31, 1995

<TABLE>
<CAPTION>
THE OREGON THE THE
MUNICIPAL CRABBE HUSON CRABBE HUSON
BOND SPECIAL ASSET ALLOCATION
FUND, INC. FUND, INC. FUND, INC.
----------------- ----------------- -----------------
<S> <C> <C> <C>
INVESTMENT INCOME
Interest $ 1,455,231 $ 18,261,908 $ 3,701,179
Dividends (net of foreign taxes withheld of
$0; $3,347; $18,635; $55,166; $0; $0; $0; and
$0 respectively) -- 4,558,333 1,226,139
----------------- ----------------- -----------------
1,455,231 22,820,241 4,927,318
----------------- ----------------- -----------------
EXPENSES
Investment advisory fees (Note 2) 134,042 5,398,048 1,183,215
Transfer agent 32,241 953,607 115,803
Printing 10,074 269,190 35,347
Postage 7,606 200,609 25,533
Custody 2,860 54,216 18,637
Legal 3,836 140,115 26,247
Auditing 5,081 43,092 11,792
Insurance 1,254 27,016 5,467
Directors' fees 3,118 8,118 8,113
Registration fees 1,067 203,324 28,117
Amortization of organization expenses -- -- --
Miscellaneous 3,992 194,903 19,119
Distribution fees (Note 2) 61,567 1,701,991 303,887
Administration 16,852 57,617 33,456
Short sales dividends -- 286,184 --
----------------- ----------------- -----------------
283,590 9,538,030 1,814,733
Fees waived by investment advisor (Note 2) (20,866) (697) (14,567)
Expenses reimbursed by investment advisor (Note 2) -- -- --
----------------- ----------------- -----------------
NET EXPENSES 262,724 9,537,333 1,800,166
----------------- ----------------- -----------------
NET INVESTMENT INCOME 1,192,507 13,282,908 3,127,152
----------------- ----------------- -----------------
REALIZED AND UNREALIZED GAIN:
Net realized gain (loss) on investments 3,019 31,170,355 11,435,123
Net change in unrealized appreciation
or depreciation of investments and short sales 1,454,370 (51,415,104) 20,021
----------------- ----------------- -----------------
NET GAIN (LOSS) ON INVESTMENTS 1,457,389 (20,244,749) 11,455,144
----------------- ----------------- -----------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 2,649,896 ($ 6,961,841) $ 14,582,296
----------------- ----------------- -----------------
----------------- ----------------- -----------------
See accompanying notes to financial statements.
</TABLE>
70
<PAGE>

<TABLE>
<CAPTION>
THE CRABBE HUSON THE CRABBE HUSON
THE THE THE CRABBE HUSON U.S. GOVERNMENT REAL ESTATE
CRABBE HUSON CRABBE HUSON U.S. GOVERNMENT MONEY MARKET INVESTMENT
EQUITY FUND, INC. INCOME FUND, INC. INCOME FUND, INC. FUND, INC. FUND, INC.
---------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Interest $ 3,253,320 $ 398,333 $ 487,929 $ 2,990,307 $ 20,613
Dividends (net of foreign taxes
withheld of $0; $3,347; $18,635;
$55,166; $0; $0; $0; and $0
respectively) 4,154,003 11,688 -- -- 1,139,451
---------------- ---------------- ---------------- ---------------- ----------------
7,407,323 410,021 487,929 2,990,307 1,160,064
---------------- ---------------- ---------------- ---------------- ----------------
EXPENSES
Investment advisory fees (Note 2) 2,471,465 49,011 43,576 253,198 190,619
Transfer agent 299,262 28,160 27,224 67,713 53,365
Printing 79,105 6,057 5,146 25,002 6,313
Postage 53,732 3,328 3,200 20,094 4,249
Custody 30,335 2,294 1,817 8,789 2,960
Legal 57,142 1,938 2,392 10,985 9,089
Auditing 19,826 3,479 3,688 6,134 4,741
Insurance 11,152 294 414 2,157 869
Directors' fees 8,118 1,118 1,118 3,118 3,118
Registration fees 84,568 19,398 20,464 37,880 20,584
Amortization of organization expenses -- -- -- -- 10,868
Miscellaneous 80,371 2,827 3,944 19,022 5,085
Distribution fees (Note 2) 621,908 16,337 21,788 126,599 47,655
Administration 23,057 551 726 4,090 1,603
Short sales dividends -- -- -- -- --
---------------- ---------------- ---------------- ---------------- ----------------
3,840,041 134,792 135,497 584,781 361,118
Fees waived by investment advisor (Note 2) -- (49,011) (43,576) (230,305) (75,190)
Expenses reimbursed by investment
advisor (Note 2) -- (33,287) (26,493) -- --
---------------- ---------------- ---------------- ---------------- ----------------
NET EXPENSES 3,840,041 52,494 65,428 354,476 285,928
---------------- ---------------- ---------------- ---------------- ----------------
NET INVESTMENT INCOME 3,567,282 357,527 422,501 2,635,831 874,136
---------------- ---------------- ---------------- ---------------- ----------------
REALIZED AND UNREALIZED GAIN:
Net realized gain (loss) on investments 19,596,449 108,710 7,624 -- 51,165
Net change in unrealized appreciation
or depreciation of investments and
short sales 9,278,013 304,184 324,469 -- 565,011
---------------- ---------------- ---------------- ---------------- ----------------
NET GAIN (LOSS) ON INVESTMENTS 28,874,462 412,894 332,093 -- 616,176
---------------- ---------------- ---------------- ---------------- ----------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 32,441,744 $ 770,421 $ 754,594 $ 2,635,831 $ 1,490,312
---------------- ---------------- ---------------- ---------------- ----------------
---------------- ---------------- ---------------- ---------------- ----------------
See accompanying notes to financial statements.
</TABLE>
71
<PAGE>

CRABBE HUSON FUNDS

STATEMENTS OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
THE OREGON THE CRABBE HUSON
MUNICIPAL BOND FUND, INC. SPECIAL FUND, INC.
------------------------------------ ------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 1995 OCTOBER 31, 1994 OCTOBER 31, 1995 OCTOBER 31, 1994
------------------------------------ ------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS:
Net investment income $ 1,192,507 $ 1,335,320 $ 13,282,908 $ 396,099
Net realized gain (loss) on investments 3,019 151,835 31,170,355 11,534,530
Net change in unrealized appreciation
or depreciation of investments and short sales 1,454,370 (2,209,050) (51,415,104) 8,747,502
----------------------------------- -----------------------------------
Increase (decrease) in net assets
resulting from operations 2,649,896 (721,895) (6,961,841) 20,678,131
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (1,192,507) (1,335,320) (1,107,597) --
In excess of net investment income -- (770) -- --
From net realized gain on investments (151,835) (22,243) (11,710,943) (687,990)
In excess of net realized gain on investments -- -- -- --
CAPITAL SHARE TRANSACTIONS, NET (Note 4) (2,280,911) 1,717,846 578,529,362 276,003,800
----------------------------------- -----------------------------------
Total increase (decrease) in net assets (975,357) (362,382) 558,748,981 295,993,941
FUND NET ASSETS, BEGINNING OF PERIOD 29,045,728 29,408,110 319,810,853 23,816,912
----------------------------------- -----------------------------------
FUND NET ASSETS, END OF PERIOD $ 28,070,371 $ 29,045,728 $ 878,559,834 $ 319,810,853
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------

<CAPTION>
THE CRABBE HUSON
THE CRABBE HUSON U.S. GOVERNMENT
INCOME FUND, INC. INCOME FUND, INC.
------------------------------------ ------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 1995 OCTOBER 31, 1994 OCTOBER 31, 1995 OCTOBER 31, 1994
------------------------------------ ------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS:
Net investment income $ 357,527 $ 288,002 $ 422,501 $ 449,352
Net realized gain on investments 108,710 (283,625) 7,624 (148,628)
Net change in unnrealized appreciation
or depreciation of investments and short sales 304,184 (169,542) 324,469 (480,026)
----------------------------------- -----------------------------------
Increase (decrease) in net assets
resulting from operations 770,421 (165,165) 754,594 (179,302)
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (357,527) (288,002) (422,501) (449,352)
In excess of net investment income (17,066) (4,622) (9,331) (3,373)
From net realized gain on investments -- (156,271) -- (108,276)
In excess of net realized gain on investments -- -- -- --
CAPITAL SHARE TRANSACTIONS, NET (Note 4) 1,520,890 190,912 (1,145,775) (1,228,397)
----------------------------------- -----------------------------------
Total increase (decrease) in net assets 1,916,718 (423,148) (823,013) (1,968,700)
FUND NET ASSETS, BEGINNING OF PERIOD 5,273,407 5,696,555 9,249,212 11,217,912
----------------------------------- -----------------------------------
FUND NET ASSETS, END OF PERIOD $ 7,190,125 $ 5,273,407 $ 8,426,199 $ 9,249,212
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
</TABLE>

See accompanying notes to financial statements.

72
<PAGE>

STATEMENTS OF CHANGES IN NET ASSETS

THE CRABBE HUSON THE CRABBE HUSON
ASSET ALLOCATION FUND, INC. EQUITY FUND, INC.
------------------------------------ ------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 1995 OCTOBER 31, 1994 OCTOBER 31, 1995 OCTOBER 31, 1994
------------------------------------ ------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS:
Net investment income $ 3,127,152 $ 2,402,334 $ 3,567,282 $ 940,474
Net realized gain (loss) on investments 11,435,123 4,008,708 19,596,449 2,406,325
Net change in unrealized appreciation
or depreciation of investments and short sales 20,021 (3,975,212) 9,278,013 1,406,726
----------------------------------- -----------------------------------
Increase (decrease) in net assets
resulting from operations 14,582,296 2,435,830 32,441,744 4,753,525
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (3,090,031) (2,313,253) (1,413,080) (170,079)
In excess of net investment income -- -- -- --
From net realized gain on investments (4,120,955) (4,683,410) (2,376,723) (1,800,301)
In excess of net realized gain on investments -- -- -- --
CAPITAL SHARE TRANSACTIONS, NET (Note 4) 19,006,962 29,322,601 205,426,843 115,801,985
----------------------------------- -----------------------------------
Total increase (decrease) in net assets 26,378,272 24,761,768 234,078,784 118,585,130
FUND NET ASSETS, BEGINNING OF PERIOD 110,151,785 85,390,017 153,105,296 34,520,166
----------------------------------- -----------------------------------
FUND NET ASSETS, END OF PERIOD $ 136,530,057 $ 110,151,785 $ 387,184,080 $ 153,105,296
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------

THE CRABBE HUSON THE CRABBE HUSON
U.S. GOVERNMENT REAL ESTATE
MONEY MARKET FUND, INC. INVESTMENT FUND, INC.
------------------------------------ ------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
OCTOBER 31, 1995 OCTOBER 31, 1994 OCTOBER 31, 1995 OCTOBER 31, 1994*
------------------------------------ ------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS:
Net investment income $ 2,635,831 $ 731,382 $ 874,136 $ 598,957
Net realized gain on investments -- -- 51,165 206,890
Net change in unnrealized appreciation
or depreciation of investments and short sales -- -- 565,011 (1,550,914)
----------------------------------- -----------------------------------
Increase (decrease) in net assets
resulting from operations 2,635,831 731,382 1,490,312 (745,067)
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (2,635,831) (731,382) (862,995) (373,869)
In excess of net investment income -- -- -- --
From net realized gain on investments -- -- (240,802) --
In excess of net realized gain on investments -- -- -- --
CAPITAL SHARE TRANSACTIONS, NET (Note 4) 22,331,667 17,598,059 319,499 19,298,436
----------------------------------- -----------------------------------
Total increase (decrease) in net assets 22,331,667 17,598,059 706,014 18,179,500
FUND NET ASSETS, BEGINNING OF PERIOD 32,382,552 14,784,493 18,279,500 100,000
----------------------------------- -----------------------------------
FUND NET ASSETS, END OF PERIOD $ 54,714,219 $ 32,382,552 $ 18,985,514 $ 18,279,500
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
</TABLE>

*For the period from April 4, 1994 (commencement of operations) to October 31,
1994.

<PAGE>

CRABBE HUSON FUNDS

NOTES TO FINANCIAL STATEMENTS
October 31, 1995

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION: The Oregon Municipal Bond Fund, Inc. is registered under the
Investment Company Act of 1940, as amended, as an open-end non-diversified
investment company. The Crabbe Huson Special Fund, Inc., The Crabbe Huson Asset
Allocation Fund, Inc., The Crabbe Huson Equity Fund, Inc., The Crabbe Huson
Income Fund, Inc., The Crabbe Huson U.S. Government Income Fund, Inc., The
Crabbe Huson U.S. Government Money Market Fund, Inc. and The Crabbe Huson Real
Estate Investment Fund, Inc. are registered under the Investment Company Act of
1940, as amended, as open-end diversified investment companies.

The following is a summary of significant accounting policies consistently
followed by the Funds in preparation of financial statements.

SECURITY VALUATION--THE CRABBE HUSON U.S. GOVERNMENT MONEY MARKET FUND, INC.:
The Fund seeks to maintain a constant net asset value of $1.00 and values its
assets using the amortized cost method by adjusting the cost of each security
for accretion of discount or amortization of premium.

SECURITY VALUATION--OTHER FUNDS: Securities listed or traded on a registered
securities exchange are valued at the last price on the date of the
computation. This includes over-the-counter securities for which last sale
information is available. Where last sale information is not available, the
best bid price is used. Securities and assets for which market quotations are
not readily available are valued at fair market value as determined in good
faith by or under the direction of the Board of Directors of the Funds. Cash
equivalents relating to Firm Commitment Purchase Agreements are segregated by
the custodian and may not be sold while the current commitment is outstanding.

SECURITY TRANSACTIONS AND INVESTMENT INCOME: Security transactions are
accounted for on the trade date, the date the order to buy or sell is executed.
Interest income is recorded daily on the accrual basis. Interest income
consists of interest accrued plus the accretion of original issue discount and
minus the amortization of investment premium, both calculated on an effective
interest basis. Dividend income and distributions to shareholders are recorded
on the ex-dividend date. Net realized gains and losses on investments are
computed on the first-in, first-out, method.

DIVIDENDS AND DISTRIBUTIONS: The Oregon Municipal Bond Fund, Inc. declares
dividends from its net investment income each business day. The net investment
income for Saturdays, Sundays and holidays is declared as a dividend on the next
business day. Declared dividends are accrued through the last business day of
each month and are distributed on that date. Net capital gains realized by the
Fund, if any, are declared and distributed on an annual basis, usually in
December.

The Crabbe Huson Special Fund, Inc. and The Crabbe Huson Equity Fund, Inc.
expect to declare and distribute to shareholders, once a year in December,
substantially all of the net investment income and net realized capital gains,
if any.

The Crabbe Huson Asset Allocation Fund, Inc. and The Crabbe Huson Real Estate
Investment Fund, Inc. expect to declare and distribute dividends from net
investment income on the last business day of each fiscal quarter. Net capital
gains realized by the Funds, if any, are declared and distributed on an annual
basis, usually in December.

The Crabbe Huson Income Fund, Inc. and The Crabbe Huson U.S. Government Income
Fund, Inc. declare and distribute dividends from net investment income on the
last business day of each month. Net capital gains realized by the Funds, if
any, are declared and distributed on an annual basis, usually in December.

The Crabbe Huson U.S. Government Money Market Fund, Inc. declares dividends from
its net investment income each business day. The net investment income for
Saturdays, Sundays and holidays is declared as a dividend on the prior business
day. Declared dividends are accrued through the last business day of each month
and are distributed on that date. Net capital gains realized by the Fund, if
any, are declared and distributed on an annual basis, usually in December.

SHORT SALES: Crabbe Huson Special Fund during the year sold securities short.
A short sale is effected when it is believed that the price of a particular
security will decline, and involves the sale of a security which the Fund does
not own in the hope of purchasing the same security at a later date at a lower
price. To make delivery to the buyer, the Fund must borrow the security. The
Fund is then obligated to return the security to the lender, and therefore it
must subsequently purchase the same security.

<PAGE>
CRABBE HUSON FUNDS

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1995

SHORT SALES - (CONTINUED): In addition, the Fund must put in a segregated
account (with the Fund's custodian) an amount of cash or U.S. Government
securities equal to the difference between the market value of the securities
sold short at the time they were sold short and any cash or government
securities deposited as collateral with the broker in connection with the short
sale (not including the proceeds from the short sale). Furthermore, until the
Fund replaces the borrowed security, it must daily maintain the segregated
account at a level so that (1) the amount deposited in it plus the amount
deposited with the broker (not including the proceeds from the short sale) will
equal the current market value of the securities sold short, (2) the amount
deposited in it plus the amount deposited with the broker (not including the
proceeds from the short sale) will not be less than the market value of the
securities at the time they were sold short. As a result of these requirements,
the Special Fund will not gain any leverage merely by selling short, except to
the extent that it earns interest on the immobilized cash or government
securities while also being subject to the possibility of gain or loss from the
securities sold short. The amount of the Special Fund's net assets that will at
any time be in the type of deposits described above (that is, collateral
deposits or segregated accounts) will not exceed 25%.

OPTIONS: The Special, Real Estate, Equity, Asset Allocation and Income Funds
may write call options on securities they own or have the right to acquire, and
may purchase put and call options on individual securities and indexes written
by others. The purchase of any of these instruments can result in the entire
loss on the investment in that particular instrument or, in the case of writing
covered options, can limit the opportunity to earn a profit on the underlying
security.

When an option is written (sold), an amount equal to the premium received is
recorded as a liability. The amount of liability is adjusted daily to reflect
the current market value of the option written. When an option written by the
Fund, expires on its stipulated expiration date, the Fund realizes a gain equal
to the net premium received for the option. When the Fund enters into a closing
purchase transaction, the Fund realizes a gain or loss equal to the difference
between the cost of a closing purchase transaction and the premium received when
the call option was written. In the case of either expiration of a written
option or a closing purchase transaction, the liability related to such option
is extinguished.

Call or put options purchased are accounted for in the same manner as marketable
portfolio securities. When a call or put option is exercised, the proceeds from
the underlying securities bought or sold are decreased by the premium paid in
determining the gain or loss.

Options on stock indexes differ from options on securities in that the exercise
of an option on a stock index does not involve delivery of the actual underlying
security and are settled in cash only.

During the year the Crabbe Huson Special Fund, Inc. purchased put options.
Outstanding put options at October 31, 1995 are disclosed in the schedule of
investments.

ORGANIZATION COSTS: Expenses incurred in connection with the organization of
the Funds are amortized over a sixty-month period. The amortization is
calculated based upon the projected growth in net assets of the Funds. As of
October 31, 1995 organization costs for all Funds except for The Crabbe Huson
Real Estate Investment Fund, Inc. have been fully amortized. The Crabbe Huson
Real Estate Investment Fund, Inc. has amortized $10,868 through October 31,
1995. The Crabbe Huson Group, Inc., the Fund's investment advisor, has agreed
that, in the event any of the initial shares are redeemed during the 60-month
period for amortizing the Fund's organization costs, the Fund will be reimbursed
by the investment advisor for the unamortized balances of such costs in the same
proportion as the number of shares reduced bears to the number of initial shares
outstanding at the time of redemption.

REORGANIZATION COSTS: On July 7, 1995 the Board of Directors approved the
reorganization of the Oregon Municipal Bond Fund, Inc., The Crabbe Huson Special
Fund, Inc., The Crabbe Huson Asset Allocation Fund, Inc. The Crabbe Huson Equity
Fund, Inc., The Crabbe Huson Income Fund, Inc., The Crabbe Huson U.S. Government
Income Fund, Inc., The Crabbe Huson U.S. Government Money Market Fund, Inc. and
The Crabbe Huson Real Estate Investment Fund, Inc., ("the Fund") into a single
Delaware business trust which will operate as a series company. The record date
of this reorganization is December 20, 1995 and the costs related to the
reorganization will be incurred by the Funds.

FEDERAL INCOME TAXES: It is each Fund's policy to distribute substantially all
of its taxable income to shareholders and otherwise comply with the provisions
of the Internal Revenue Code applicable to regulated investment companies.
Therefore, no provision has been made for Federal income tax or excise taxes.

<PAGE>

CRABBE HUSON FUNDS

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1995

FEDERAL INCOME TAXES - (CONTINUED): Due to the timing of dividend distributions
and the differences in accounting for income and realized gains (losses) for
financial statement and federal income tax purposes, the fiscal year in which
amounts are distributed may differ from the year in which the income and
realized gains (losses) were recorded by the funds. The differences between the
income or gains distributed on a book versus tax basis are shown as excess
distributions of net investment income and net realized gain on sales of
investments in the Statement of Changes in Net Assets.

On the Statement of Assets and Liabilities, as a result of permanent book-to-tax
differences, reclassification adjustments have been made as shown in Table A.

NOTE 2. INVESTMENT ADVISOR AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISOR: The Funds have entered into an investment advisory
agreement with The Crabbe Huson Group, Inc. (the "Advisor"), an affiliated
company. The investment advisory fee of each Fund is accrued daily and paid
semi-monthly. The annual investment advisory fee for each Fund is described
below:

THE CRABBE HUSON ASSET ALLOCATION FUND, INC.
THE CRABBE HUSON SPECIAL FUND, INC.
THE CRABBE HUSON EQUITY FUND, INC.
THE CRABBE HUSON REAL ESTATE INVESTMENT FUND, INC.

1.00% of daily net assets up to $100,000,000
.85 of 1% of daily net assets between $100,000,000 and $500,000,000
.60 of 1% of daily net assets over $500,000,000

THE CRABBE HUSON INCOME FUND, INC.

.75 of 1% of daily net assets up to $100,000,000
.60 of 1% of daily net assets up to $500,000,000
.50 of 1% of daily nets assets over $500,000,000

THE CRABBE HUSON U.S. GOVERNMENT INCOME FUND, INC.
THE CRABBE HUSON U.S. GOVERNMENT MONEY MARKET FUND, INC.
THE OREGON MUNICIPAL BOND FUND, INC.

.50 of 1% of daily net assets up to $500,000,000
.45 of 1% of daily net assets between $500,000,000 and $1,000,000,000
.40 of 1% of daily net assets over $1,000,000,000

The Advisor has voluntarily agreed to waive its management fee and/or reimburse
each Fund for the amount, if any, by which the total operating and management
expenses of such Fund (including the Advisor's compensation and any amounts paid
pursuant to the participating Funds' Rule 12b-1 plan but excluding interest,
taxes, brokerage fees and commissions, and extraordinary expenses) exceed
certain annual rates applied to the average daily net assets of the Funds.

The annual expense limit for each Fund is listed below:

The Oregon Municipal Bond Fund, Inc. 0.98%
The Crabbe Huson Special Fund, Inc. 1.50%
The Crabbe Huson Asset Allocation Fund, Inc. 1.50%
The Crabbe Huson Equity Fund, Inc. 1.50%
The Crabbe Huson Income Fund, Inc. 0.80%
The Crabbe Huson U.S. Government Income Fund, Inc. 0.75%
The Crabbe Huson U.S. Government Money
Market Fund, Inc. 0.70%
The Crabbe Huson Real Estate Investment Fund, Inc. 1.50%

DISTRIBUTOR: The Funds have entered into a distribution agreement with Crabbe
Huson Securities, Inc. (the "Distributor"), an affiliated company. Under the
Distribution Plan, each of the participating Funds may pay up to 1/4 of 1% of
such Fund's average daily net assets to the Distributor as reimbursement for its
actual expenses incurred in the distribution and promotion of such Fund's
shares.

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
TABLE A UNDISTRIBUTED UNDISTRIBUTED
ACCUMULATED ACCUMULATED NET
CAPITAL NET INVESTMENT REALIZED GAIN ON
PAID IN INCOME INVESTMENTS
------------- -------------- ---------------------

<S> <C> <C> <C>
The Oregon Municipal Bond Fund, Inc. -- -- --
The Crabbe Huson Special Fund, Inc. $ 79,005 $ (726,118) $ 647,113
The Crabbe Huson Asset Allocation Fund, Inc. (108,605) (37,121) 145,726
The Oregon Equity Fund, Inc. 29,829 (360,174) 330,345
The Crabbe Huson Income Fund, Inc. 38,846 17,066 (55,912)
The Crabbe Huson U.S. Government Income Fund, Inc. (3,715) 10,021 (6,306)
The Crabbe Huson U.S. Government Money Market Fund, Inc. -- -- --
The Crabbe Huson Real Estate Investment Fund, Inc. (182,383) (3,832) 177,416
</TABLE>

<PAGE>

CRABBE HUSON FUNDS

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1995

ADMINISTRATOR: State Street Bank and Trust Company (the "Administrator") serves
as administrator of the Funds. The Administrator performs certain
administrative services for the Funds. The Funds pays the Administrator a fee
at the rate of 0.06% of the Fund's average net assets up to $500 million, 0.03%
of the next $500 million, and 0.01% of those assets in excess of $1 billion,
plus certain out of pocket costs.

DIRECTORS FEES: As of October 31, 1995, fees payable to the disinterested
directors were $778, $1,027, $2,027, $2,027, $277, $277, $778 and $778 for The
Oregon Municipal Bond Fund, Inc., The Crabbe Huson Special Fund, Inc., The
Crabbe Huson Asset Allocation Fund, Inc., The Crabbe Huson Equity Fund, Inc.,
The Crabbe Huson Income Fund, Inc., The Crabbe Huson U.S. Government Income
Fund, Inc., The Crabbe Huson U.S. Government Money Market Fund, Inc. and The
Crabbe Huson Real Estate Investment Fund, Inc., respectively.

NOTE 3. DISTRIBUTIONS TO SHAREHOLDERS (Unaudited)

THE OREGON MUNICIPAL BOND FUND, INC. Of the Fund's distributions paid to
shareholders from net investment income during the fiscal year ended October 31,
1995, 99.3% was attributable to investments in municipal bonds issued by the
state of Oregon and its political subdivisions, agencies authorities and
instrumentalities and other municipal securities.

THE CRABBE HUSON SPECIAL FUND, INC. Of the Fund's net investment income earned
during the fiscal year ended October 31, 1995, 22.6% was attributable to
investments in direct or indirect debt obligations of the United States
Government, or its agencies or instrumentalities.

THE CRABBE HUSON ASSET ALLOCATION FUND, INC. Of the Fund's net investment
income earned during the fiscal year ended October 31, 1995, 60.1% was
attributable to investments in direct or indirect debt obligations of the United
States Government, or its agencies or instrumentalities.

THE CRABBE HUSON EQUITY FUND, INC. Of the Fund's net investment income earned
during the fiscal year ended October 31, 1995, 40.9% was attributable to
investments in direct or indirect debt obligations of the United States
Government, or its agencies or instrumentalities.

THE CRABBE HUSON INCOME FUND, INC. Of the Fund's net investment income earned
during the fiscal year ended October 31, 1995, 50.4% was attributable to
investments in direct or indirect debt obligations of the United States
Government, or its agencies or instrumentalities.

THE CRABBE HUSON U.S. GOVERNMENT INCOME FUND, INC. Of the Fund's net investment
income earned during the fiscal year ended October 31, 1995, 95.8% was
attributable to investments in direct or indirect debt obligations of the United
States Government, or its agencies or instrumentalities.

THE CRABBE HUSON U.S. GOVERNMENT MONEY MARKET FUND, INC. Of the Fund's net
investment income earned during the fiscal year ended October 31, 1995, 98.2%
was attributable to investments in direct or indirect debt obligations of the
United States Government, or its agencies or instrumentalities.

THE CRABBE HUSON REAL ESTATE INVESTMENT FUND, INC. Of the Fund's net investment
income earned during the fiscal year ended October 31, 1995, none was
attributable to investments in direct or indirect debt obligations of the United
States Government, or its agencies or instrumentalities.

On December 6, 1995 the following distributions were declared from net realized
capital gains from investment transactions. The dividend was paid on December
6, 1995, to shareholders of record on December 5, 1995, as shown in Table B.

- ------------------------------------------------------------------------------------------------------------------------------------
TABLE B PER SHARE DOLLARS
-----------------------------------------------------------------------------
SHORT-TERM LONG-TERM SHORT-TERM LONG-TERM
CAPITAL GAIN CAPITAL GAIN CAPITAL GAIN CAPITAL GAIN
DISTRIBUTION (1) DISTRIBUTION DISTRIBUTION (1) DISTRIBUTION
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
The Oregon Municipal Bond Fund, Inc. -- -- -- --
The Crabbe Huson Special Fund, Inc. 0.3764 0.1983 $23,686,427 $12,479,000
The Crabbe Huson Asset Allocation Fund, Inc. 0.5232 0.6046 5,306,597 6,131,818
The Crabbe Huson Equity Fund, Inc. 0.6038 0.3385 13,191,040 7,394,039
The Crabbe Huson Income Fund, Inc. -- -- -- --
The Crabbe Huson U.S. Government Income Fund, Inc. -- -- -- --
The Crabbe Huson Real Estate Investment Fund, Inc. 0.1225 -- 238,364 --
</TABLE>

(1)Short-term capital gains are taxable to shareholders as ordinary income
dividends.

<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 1995

NOTE 4. CAPITAL SHARE TRANSACTIONS
Transactions in capital shares of the Funds were as follows:
<TABLE>
<CAPTION>
THE OREGON
MUNICIPAL BOND FUND, INC.
------------------------------------------------------------------------
SHARES AMOUNT
------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1995 1994 1995 1994
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 552,364 858,058 $ 6,744,052 $10,795,284
Shares issued in
reinvestment of dividends 73,838 85,380 906,976 1,057,544
------------------------------------------------------------------------
626,202 943,438 7,651,028 11,852,828
Shares redeemed (822,850) (818,671) (9,931,939) (10,134,982)
------------------------------------------------------------------------
Net increase (decrease) (196,648) 124,767 ($ 2,280,911) $ 1,717,846
------------------------------------------------------------------------
------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
THE CRABBE HUSON
INCOME
FUND, INC.
------------------------------------------------------------------------
SHARES AMOUNT
------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1995 1994 1995 1994
------------------------------------------------------------------------
<S> <C> <C> <C> <C>

Shares sold 398,837 323,868 $3,890,790 $3,312,857
Shares issued in
reinvestment of dividends 33,473 28,426 329,268 289,053
------------------------------------------------------------------------
432,310 352,294 4,220,058 3,601,910
Shares redeemed (274,572) (338,813) (2,699,168) (3,410,998)
------------------------------------------------------------------------
Net increase (decrease) 157,738 13,481 $1,520,890 $ 190,912
------------------------------------------------------------------------
------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
THE CRABBE HUSON
SPECIAL FUND, INC.
------------------------------------------------------------------------
SHARES AMOUNT
------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1995 1994 1995 1994
------------------------------------------------------------------------
<S> <C> <C> <C> <C>

Shares sold 65,374,197 23,946,462 $928,135,711 $318,927,086
Shares issued in
reinvestment of dividends 78,213 51,007 1,030,774 610,047
------------------------------------------------------------------------
65,452,410 23,997,469 929,166,485 319,537,133
Shares redeemed (24,491,886) (3,303,144) (350,637,123) (43,533,333)
------------------------------------------------------------------------
Net increase (decrease) 40,960,524 20,694,325 $578,529,362 $276,003,800
------------------------------------------------------------------------
------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
THE CRABBE HUSON
U.S. GOVERNMENT
INCOME FUND, INC.
------------------------------------------------------------------------
SHARES AMOUNT
------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1995 1994 1995 1994
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 320,552 318,425 $3,315,281 $3,370,107
Shares issued in
reinvestment of dividends 33,757 46,002 351,187 488,454
------------------------------------------------------------------------
354,309 364,427 3,666,468 3,858,561
Shares redeemed (464,645) (480,229) (4,812,243) (5,086,958)
------------------------------------------------------------------------
Net increase (decrease) (110,336) (115,802) ($1,145,775) ($1,228,397)
------------------------------------------------------------------------
------------------------------------------------------------------------
</TABLE>

<PAGE>

THE CRABBE HUSON ASSET
ALLOCATION FUND, INC.
------------------------------------------------------------------------
SHARES AMOUNT
------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1995 1994 1995 1994
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 3,651,020 4,625,388 $47,567,984 $60,156,367
Shares issued in
reinvestment of dividends 213,856 460,871 2,807,183 5,964,138
------------------------------------------------------------------------
3,864,876 5,086,259 50,375,167 66,120,505
Shares redeemed (2,415,859) (2,842,271) (31,368,205) (36,797,904)
------------------------------------------------------------------------
Net increase (decrease) 1,449,017 2,243,988 $19,006,962 $29,322,601
------------------------------------------------------------------------
------------------------------------------------------------------------
</TABLE>

THE CRABBE HUSON
U.S. GOVERNMENT
MONEY MARKET FUND, INC.
------------------------------------------------------------------------
SHARES AMOUNT
------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1995 1994 1995 1994
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 166,147,604 99,391,599 $166,147,604 $99,391,599
Shares issued in
reinvestment of dividends 1,738,682 391,037 1,738,682 391,037
------------------------------------------------------------------------
167,886,286 99,782,636 167,886,286 99,782,636
Shares redeemed (145,554,619) (82,184,578) (145,554,619) (82,184,578)
------------------------------------------------------------------------
Net increase (decrease) 22,331,667 17,598,058 $ 22,331,667 $17,598,058
------------------------------------------------------------------------
------------------------------------------------------------------------

</TABLE>

<TABLE>
<CAPTION>
THE CRABBE HUSON
EQUITY FUND, INC.
------------------------------------------------------------------------
SHARES AMOUNT
------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1995 1994 1995 1994
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 16,135,368 8,303,990 $277,119,565 $134,306,739
Shares issued in
reinvestment of dividends 79,947 105,277 1,237,639 1,635,783
------------------------------------------------------------------------
16,215,315 8,409,267 278,357,204 135,942,522
Shares redeemed (4,218,957) (1,243,034) (72,930,361) (20,140,537)
------------------------------------------------------------------------
Net increase (decrease) 11,996,358 7,166,233 $205,426,843 $115,801,985
------------------------------------------------------------------------
------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
THE CRABBE HUSON
REAL ESTATE
INVESTMENT FUND, INC.
------------------------------------------------------------------------
SHARES AMOUNT
------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1995 1994 1995 1994
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 821,200 2,006,502 $7,937,889 $20,250,921
Shares issued in
reinvestment of dividends 36,962 33,284 357,391 323,473
------------------------------------------------------------------------
858,162 2,039,786 8,295,280 20,574,394
Shares redeemed (822,760) (125,257) (7,975,781) (1,275,958)
------------------------------------------------------------------------
Net increase (decrease) 35,402 1,914,529 $ 319,499 $19,298,436
------------------------------------------------------------------------
------------------------------------------------------------------------
</TABLE>
*For the period from April 4, 1994 (commencement of operations) to October 31,
1994.

79
<PAGE>

80
<PAGE>

CRABBE HUSON FUNDS
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 1995

NOTE 5. INVESTMENT TRANSACTIONS

For the year ended October 31, 1995, The Crabbe Huson U.S. Government Money
Market Fund, Inc. had aggregate security purchases and sales (including
maturities) of $443,976,883 and $424,658,448, respectively. Aggregate
purchases, sales and maturities for the year ended October 31, 1995
(excluding short-term securities) for the remaining funds, are as follows:

THE OREGON THE CRABBE THE CRABBE THE CRABBE
MUNICIPAL HUSON HUSON ASSET HUSON
BOND SPECIAL ALLOCATION EQUITY
FUND, INC. FUND, INC. FUND, INC. FUND, INC.
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Purchases: $5,984,368 $959,620,834 $274,278,333 $397,589,397
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------

Sales and Maturities: 8,735,890 572,783,341 248,155,111 200,246,630
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------

Gross unrealized appreciation and depreciation on securites held by the Funds at October 31, 1995 are as follows:

Unrealized Appreciation (Depreciation):
For book purposes
Appreciation 1,399,431 65,671,560 6,773,143 27,705,429
Depreciation (33,677) (104,877,230) (1,946,850) (12,595,106)
--------------- --------------- --------------- ---------------
Net unrealized appreciation (depreciation) $1,365,754 ($ 39,205,670) $ 4,826,293 $ 15,110,323
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------

Unrealized Appreciation (Depreciation):
For Federal income tax purposes
Appreciation 1,399,431 64,232,281 6,797,897 27,259,001
Depreciation (33,677) (107,785,909) (1,956,923) (12,771,570)
--------------- --------------- --------------- ---------------
Net unrealized appreciation (depreciation) $1,365,754 ($ 43,553,628) $ 4,840,974 $ 14,487,431
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------

<CAPTION>
THE CRABBE THE
THE CRABBE HUSON U.S. CRABBE HUSON
HUSON GOVERNMENT REAL ESTATE
INCOME INCOME INVESTMENT
FUND, INC. FUND, INC. FUND, INC.
--------------- --------------- ---------------
<S> <C> <C> <C>
Purchases: $34,477,754 $19,009,336 $11,936,969
--------------- --------------- ---------------
--------------- --------------- ---------------

Sales and Maturities: 32,908,584 20,219,537 10,862,375
--------------- --------------- ---------------
--------------- --------------- ---------------

Gross unrealized appreciation and depreciation on securites held by the Funds at October 31, 1995 are as follows:

Unrealized Appreciation (Depreciation):
For book purposes
Appreciation 223,991 107,717 636,791
Depreciation (681) (4,238) (1,613,895)
--------------- --------------- ---------------
Net unrealized appreciation (depreciation) $ 223,310 $ 103,479 ($977,104)
--------------- --------------- ---------------
--------------- --------------- ---------------

Unrealized Appreciation (Depreciation):
For Federal income tax purposes
Appreciation 204,681 106,764 634,056
Depreciation (681) (4,238) (1,616,344)
--------------- --------------- ---------------
Net unrealized appreciation (depreciation) $ 204,000 $ 102,526 ($982,288)
--------------- --------------- ---------------
--------------- --------------- ---------------
</TABLE>

<PAGE>

CRABBE HUSON FUNDS

FINANCIAL HIGHLIGHTS

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
The following information has been derived from the Fund's financial statements
and notes included in the 1995 Annual Report. These financial statements and
the notes for the periods beginning after October 31, 1988 have been audited by
KPMG Peat Marwick, LLP, whose report thereon is included with the financial
statements in the Statement of Additional Information.

(a) The Fund's Fiscal Year was changed from 9/30 to 10/31, effective 10/31/87,
which represents a conformed 12-month period.
(b) Computed on an annualized basis.
(c) Commencement of operations - 4/9/87.
(d) Commencement of operations - 1/31/89.
(e) Commencement of operations - 4/4/94.

THE OREGON MUNICIPAL BOND FUND, INC.

<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
10/31/89 10/31/88 10/31/87(a) 9/30/87 9/30/86 10/31/90
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.99 $12.80 $12.20 $12.14 $11.74 $11.72

INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
NET INVESTMENT INCOME 0.5480 0.5418 0.5683 0.6168 0.6385 0.6316
NET REALIZED & UNREALIZED
GAIN (LOSS) ON SECURITIES 0.6998 (0.8001) 0.6880 0.1521 0.4831 0.0522
----------- ----------- ----------- ----------- ----------- -----------
TOTAL FROM INVESTMENT OPERATIONS 1.2478 (0.2583) 1.2563 0.7689 1.1216 0.6838

LESS DISTRIBUTIONS
- ------------------
DISTRIBUTIONS FROM NET INVESTMENT INCOME 0.5480 0.5419 0.5647 0.6168 0.6562 0.6401
DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME 0.0000 0.0003 0.0000 0.0000 0.0000 0.0000
DISTRIBUTIONS FROM CAPITAL GAINS 0.0698 0.0090 0.0916 0.0921 0.0654 0.0237
----------- ----------- ----------- ----------- ----------- -----------
TOTAL DISTRIBUTIONS 0.6178 0.5512 0.6563 0.7089 0.7216 0.6638

----------- ----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $12.62 $11.99 $12.80 $12.20 $12.14 $11.74
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
TOTAL RETURN 10.66% -2.06% 10.71% 6.51% 9.85% 6.00%

RATIOS/SUPPLEMENTAL DATA
- ------------------------
NET ASSETS, END OF PERIOD $28,070,371 $29,045,728 $29,408,110 $20,295,896 $18,382,636 $18,766,449
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.98% 0.98% 1.05% 1.11% 1.21% 1.38%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 4.45% 4.37% 4.51% 5.04% 5.36% 5.41%
PORTFOLIO TURNOVER RATE 22.91% 20.58% 11.62% 25.30% 53.40% 58.52%

RATIOS IF FEES HAD NOT BEEN WAIVED AND/OR REIMBURSED
- ----------------------------------------------------
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.08% 1.08% 1.09% 1.13% 1.24% 1.55%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 4.35% 4.26% 4.46% 5.01% 5.34% 5.23%

<PAGE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
10/31/89 10/31/88 10/31/87(a) 09/30/87 09/30/86
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.72 $11.08 $12.15 $11.93 $10.43

INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
NET INVESTMENT INCOME 0.6794 0.6386 0.7311 0.7319 0.7720
NET REALIZED & UNREALIZED ENDED
GAIN (LOSS) ON SECURITIES 0.0842 0.6411 (0.9983) (0.8051) 1.5265
----------- ----------- ----------- ----------- -----------
TOTAL FROM INVESTMENT OPERATIONS 0.7636 1.2797 (0.2672) (0.0732) 2.2985

LESS DISTRIBUTIONS
- ------------------
DISTRIBUTIONS FROM NET INVESTMENT INCOME 0.6711 0.6386 0.7311 0.7319 0.7720
DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME 0.0000 0.0000 0.0000 0.0000 0.0000
DISTRIBUTIONS FROM CAPITAL GAINS 0.0925 0.0000 0.0760 0.0760 0.0255
----------- ----------- ----------- ----------- -----------
TOTAL DISTRIBUTIONS 0.7636 0.6386 0.8071 0.8079 0.7975

----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $11.72 $11.72 $11.08 $11.05 $11.93
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
TOTAL RETURN 6.67% 12.02% -1.95% -0.95% 22.83%

RATIOS/SUPPLEMENTAL DATA
- ------------------------
NET ASSETS, END OF PERIOD $19,173,145 $20,058,295 $14,276,600 $14,165,161 $8,861,258
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.04% 1.21% 1.14% 1.31% 1.06%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 5.82% 5.53% 5.66% 6.43% 6.34%
PORTFOLIO TURNOVER RATE 45.25% 31.44% 19.18% 18.73% 24.20%

RATIOS IF FEES HAD NOT BEEN WAIVED AND/OR REIMBURSED
- ----------------------------------------------------
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.16% 1.32% ---- ---- ----
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 5.71% 5.42% ---- ---- ----
</TABLE>

<PAGE>

CRABBE HUSON FUNDS

FINANCIAL HIGHLIGHTS
(Continued)

THE CRABBE HUSON SPECIAL FUND, INC.

<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
10/31/95 10/31/94 10/31/93 10/31/92
------------ ------------ ----------- ----------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $14.08 $11.82 $8.36 $12.05

INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (LOSS) 0.2704 0.0513 (0.0774) (0.0211)
NET REALIZED & UNREALIZED
GAIN (LOSS) ON SECURITIES (0.2894) 2.3026 3.5374 (1.6211)
------------ ------------ ----------- ----------
TOTAL FROM INVESTMENT OPERATIONS (0.0190) 2.3539 3.4600 (1.6422)

LESS DISTRIBUTIONS
DISTRIBUTIONS FROM NET INVESTMENT INCOME 0.0226 0.0000 0.0000 0.0260
DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME 0.0000 0.0892 0.0000 2.0218
DISTRIBUTIONS FROM CAPITAL GAINS 0.2384 0.0000 0.0000 0.0000
------------ ------------ ----------- ----------
TOTAL DISTRIBUTIONS 0.2610 0.0892 0.0000 2.0478

------------ ------------ ----------- ----------
NET ASSET VALUE, END OF PERIOD $13.80 $14.08 $11.82 $8.36
------------ ------------ ----------- ----------
------------ ------------ ----------- ----------
TOTAL RETURN 1.78% 22.40% 41.39% 8.11%

RATIOS/SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $878,559,834 $319,810,853 $23,816,912 $5,857,434
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.40% 1.44% 1.57% 1.74%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 1.95% 0.39% -0.73% -0.25%
PORTFOLIO TURNOVER RATE 122.97% 146.44% 73.29% 102.27%

RATIOS IF FEES HAD NOT BEEN WAIVED AND/OR REIMBURSED
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.40% 1.54% 1.59% 2.18%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 1.95% 0.29% -0.75% -0.69%

<PAGE>

<CAPTION>
YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED
10/31/91 10/31/90 10/31/89 10/31/88 10/31/87(c)
------------ ------------ ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $8.78 $11.49 $9.69 $8.13 $10.00

INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (LOSS) 0.0353 0.1546 0.2100 (0.0515) (0.0409)
NET REALIZED & UNREALIZED
GAIN (LOSS) ON SECURITIES 4.0155 (1.4317) 1.5900 1.6115 (1.8300)
------------ ------------ ----------- ---------- -----------
TOTAL FROM INVESTMENT OPERATIONS 4.0508 (1.2771) 1.8000 1.5600 (1.8709)

LESS DISTRIBUTIONS
DISTRIBUTIONS FROM NET INVESTMENT INCOME 0.1453 0.2240 0.0000 0.0000 0.0000
DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME 0.6355 1.2089 0.0000 0.0000 0.0000
DISTRIBUTIONS FROM CAPITAL GAINS 0.0000 0.0000 0.0000 0.0000 0.0000
------------ ------------ ----------- ---------- ----------
TOTAL DISTRIBUTIONS 0.7808 1.4329 0.0000 0.0000 0.0000

------------ ------------ ----------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $12.05 $8.78 $11.49 $9.69 $8.13
------------ ------------ ----------- ---------- ----------
------------ ------------ ----------- ---------- ----------
TOTAL RETURN 49.58% -10.90% 18.68% 19.63% -30.32%(b)

RATIOS/SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $3,541,797 $2,926,457 $3,356,417 $4,392,920 $1,892,038
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.92% 2.00% 2.00% 3.94% 2.60%(b)
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 0.32% 1.55% 1.96% 3.34% 0.05%(b)
PORTFOLIO TURNOVER RATE 256.68% 314.73% 275.62% 155.12% 3.90%

RATIOS IF FEES HAD NOT BEEN WAIVED AND/OR REIMBURSED
RATIO OF EXPENSES TO AVERAGE NET ASSETS 2.40% 2.86% 2.44%(b) ---- ----
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS -0.15% 0.70% 1.53%(b) ---- ----
</TABLE>

<PAGE>

CRABBE HUSON FUNDS

FINANCIAL HIGHLIGHTS
(Continued)

THE CRABBE HUSON ASSET ALLOCATION FUND, INC.

<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
10/31/95 10/31/94 10/31/93 10/31/92
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.87 $13.52 $11.68 $11.00

INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
NET INVESTMENT INCOME 0.3361 0.2990 0.2323 0.3468
NET REALIZED & UNREALIZED
GAIN (LOSS) ON SECURITIES 1.2090 (0.0817) 2.0889 0.8175
----------- ----------- ----------- -----------
TOTAL FROM INVESTMENT OPERATIONS 1.5451 0.2173 2.3212 1.1643

LESS DISTRIBUTIONS
- ------------------
DISTRIBUTIONS FROM NET INVESTMENT INCOME 0.3321 0.2879 0.2373 0.3463
DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME 0.0000 0.0000 0.0000 0.0000
DISTRIBUTIONS FROM CAPITAL GAINS 0.4430 0.5829 0.2439 0.1380
----------- ----------- ----------- -----------
TOTAL DISTRIBUTIONS 0.7751 0.8708 0.4812 0.4843

----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $13.64 $12.87 $13.52 $11.68
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
TOTAL RETURN 13.00% 2.66% 20.93% 11.25%

RATIOS/SUPPLEMENTAL DATA
- ------------------------
NET ASSETS, END OF PERIOD $136,530,057 $110,151,785 $85,390,017 $55,098,981
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.48% 1.44% 1.46% 1.52%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 2.57% 2.30% 1.85% 3.02%
PORTFOLIO TURNOVER RATE 225.70% 149.19% 116.10% 155.26%

RATIOS IF FEES HAD NOT BEEN WAIVED AND/OR REIMBURSED
- ----------------------------------------------------
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.49% 1.52% 1.54% 1.62%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 2.56% 2.22% 1.77% 2.92%

<PAGE>

<CAPTION>
YEAR YEAR PERIOD
ENDED ENDED ENDED
10/31/91 10/31/90 10/31/89 (d)
----------- ----------- -----------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $9.24 $10.69 $10.00

INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
NET INVESTMENT INCOME 0.4143 0.4561 0.3990
NET REALIZED & UNREALIZED
GAIN (LOSS) ON SECURITIES 1.8208 (1.1200) 0.2910
----------- ----------- -----------
TOTAL FROM INVESTMENT OPERATIONS 2.2351 (0.6639) 0.6900

LESS DISTRIBUTIONS
- ------------------
DISTRIBUTIONS FROM NET INVESTMENT INCOME 0.4335 0.7159 0.0000
DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME 0.0000 0.0000 0.0000
DISTRIBUTIONS FROM CAPITAL GAINS 0.0415 0.0702 0.0000
----------- ----------- -----------
TOTAL DISTRIBUTIONS 0.4750 0.7861 0.0000

----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $11.00 $9.24 $10.69
----------- ----------- -----------
----------- ----------- -----------
TOTAL RETURN 24.55% -6.40% 9.30%(b)

RATIOS/SUPPLEMENTAL DATA
- ------------------------
NET ASSETS, END OF PERIOD $23,892,664 $13,173,923 $12,577,962
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.76% 1.90% 1.91%(b)
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 3.97% 4.51% 5.02%(b)
PORTFOLIO TURNOVER RATE 157.89% 161.72% 88.14%

RATIOS IF FEES HAD NOT BEEN WAIVED AND/OR REIMBURSED
- ----------------------------------------------------
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.79% 1.93% 1.93%(b)
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 3.94% 4.49% 5.00%(b)
</TABLE>

<PAGE>

CRABBE HUSON FUNDS

FINANCIAL HIGHLIGHTS
(Continued)

THE CRABBE HUSON EQUITY FUND, INC.

<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
10/31/95 10/31/94 10/31/93 10/31/92
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $16.44 $16.08 $13.03 $12.57

INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
NET INVESTMENT INCOME 0.2223 0.1900 0.0981 0.1980
NET REALIZED & UNREALIZED
GAIN (LOSS) ON SECURITIES 1.7438 0.5668 3.4476 0.9186
------------ ------------ ----------- -----------
TOTAL FROM INVESTMENT OPERATIONS 1.9661 0.7568 3.5457 1.1166

LESS DISTRIBUTIONS
- ------------------
DISTRIBUTIONS FROM NET INVESTMENT INCOME 0.0880 0.0344 0.1099 0.0937
DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME 0.0000 0.0000 0.0000 0.0000
DISTRIBUTIONS FROM CAPITAL GAINS 0.1481 0.3638 0.3858 0.5629
------------ ------------ ----------- ----------
TOTAL DISTRIBUTIONS 0.2361 0.3982 0.4957 0.6566

------------ ------------ ----------- -----------
NET ASSET VALUE, END OF PERIOD $18.17 $16.44 $16.08 $13.03
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
TOTAL RETURN 13.37% 7.89% 29.90% 12.48%

RATIOS/SUPPLEMENTAL DATA
- ------------------------
NET ASSETS, END OF PERIOD $387,184,080 $153,105,296 $34,520,166 $13,429,315
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.40% 1.45% 1.49% 1.55%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 1.30% 1.18% 0.67% 1.57%
PORTFOLIO TURNOVER RATE 92.43% 106.49% 114.38% 180.72%

RATIOS IF FEES HAD NOT BEEN WAIVED AND/OR REIMBURSED
- ----------------------------------------------------
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.40% 1.56% 1.64% 1.93%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 1.28% 1.06% 0.52% 1.18%

<PAGE>

<CAPTION>
YEAR YEAR PERIOD
ENDED ENDED ENDED
10/31/91 10/31/90 10/31/89 (d)
------------ ------------ -----------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $8.54 $10.50 $10.00

INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
NET INVESTMENT INCOME 0.1861 0.2533 0.3146
NET REALIZED & UNREALIZED
GAIN (LOSS) ON SECURITIES 4.1511 (1.6764) 0.1854
------------ ------------ -----------
TOTAL FROM INVESTMENT OPERATIONS 4.3372 (1.4231) 0.5000

LESS DISTRIBUTIONS
- ------------------
DISTRIBUTIONS FROM NET INVESTMENT INCOME 0.3072 0.3918 0.0000
DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME 0.0000 0.0000 0.0000
DISTRIBUTIONS FROM CAPITAL GAINS 0.0000 0.1451 0.0000
------------ ------------ -----------
TOTAL DISTRIBUTIONS 0.3072 0.5369 0.0000
------------ ------------ -----------
NET ASSET VALUE, END OF PERIOD $12.57 $8.54 $10.50
------------ ------------ -----------
------------ ------------ -----------
TOTAL RETURN 52.44% -14.97% 6.72%(b)

RATIOS/SUPPLEMENTAL DATA
- ------------------------
NET ASSETS, END OF PERIOD $5,929,590 $2,944,344 $5,018,337
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.84% 1.93% 1.69%(b)
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 1.60% 2.56% 3.98%(b)
PORTFOLIO TURNOVER RATE 171.82% 265.25% 90.54%

RATIOS IF FEES HAD NOT BEEN WAIVED AND/OR REIMBURSED
- ----------------------------------------------------
RATIO OF EXPENSES TO AVERAGE NET ASSETS 2.41% 2.66% 1.97%(b)
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 1.03% 1.83% 3.68%(b)
</TABLE>

<PAGE>

CRABBE HUSON FUNDS

FINANCIAL HIGHLIGHTS
(Continued)

THE CRABBE HUSON INCOME FUND, INC.

<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
10/31/95 10/31/94 10/31/93 10/31/92
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $9.71 $10.75 $10.90 $10.63

INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
NET INVESTMENT INCOME 0.5329 0.4995 0.4637 0.6583
NET REALIZED & UNREALIZED
GAIN (LOSS) ON SECURITIES 0.5754 (0.7669) 0.3265 0.3569
------------ ------------ ------------ ------------
TOTAL FROM INVESTMENT OPERATIONS 1.1083 (0.2674) 0.7902 1.0152

LESS DISTRIBUTIONS
- ------------------
DISTRIBUTIONS FROM NET INVESTMENT INCOME 0.5329 0.4995 0.4879 0.6588
DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME 0.0254 0.0080 0.0000 0.0000
DISTRIBUTIONS FROM CAPITAL GAINS 0.0000 0.2710 0.4523 0.0864
------------ ------------ ------------ ------------
TOTAL DISTRIBUTIONS 0.5583 0.7785 0.9402 0.7452

------------ ------------ ------------ ------------
NET ASSET VALUE, END OF PERIOD $10.26 $9.71 $10.75 $10.90
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
TOTAL RETURN 11.92% -2.71% 7.73% 9.74%

RATIOS/SUPPLEMENTAL DATA
- ------------------------
NET ASSETS, END OF PERIOD $7,190,125 $5,273,407 $5,696,555 $5,634,372
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.80% 0.80% 0.81% 0.90%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 5.47% 4.92% 4.34% 6.09%
PORTFOLIO TURNOVER RATE 543.15% 306.79% 260.22% 227.45%

RATIOS IF FEES HAD NOT BEEN WAIVED AND/OR REIMBURSED
- ----------------------------------------------------
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.95% 2.16% 1.96% 1.94%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 4.32% 3.56% 3.19% 5.06%

<PAGE>

<CAPTION>
YEAR YEAR PERIOD
ENDED ENDED ENDED
10/31/91 10/31/90 10/31/89 (d)
------------ ----------- -----------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.01 $10.27 $10.00

INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
NET INVESTMENT INCOME 0.7038 0.6869 0.5545
NET REALIZED & UNREALIZED
GAIN (LOSS) ON SECURITIES 0.6218 (0.2407) 0.2761
------------ ----------- -----------
TOTAL FROM INVESTMENT OPERATIONS 1.3256 0.4462 0.8306

LESS DISTRIBUTIONS
- ------------------
DISTRIBUTIONS FROM NET INVESTMENT INCOME 0.7056 0.6840 0.5606
DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME 0.0000 0.0000 0.0000
DISTRIBUTIONS FROM CAPITAL GAINS 0.0000 0.0222 0.0000
------------ ----------- -----------
TOTAL DISTRIBUTIONS 0.7056 0.7062 0.5606

------------ ----------- -----------
NET ASSET VALUE, END OF PERIOD $10.63 $10.01 $10.27
------------ ----------- -----------
------------ ----------- -----------
TOTAL RETURN 13.51% 4.43% 10.43%(b)

RATIOS/SUPPLEMENTAL DATA
- ------------------------
NET ASSETS, END OF PERIOD $5,485,830 $2,123,203 $1,356,008
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.98% 1.51% 1.15%(b)
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 6.82% 6.89% 7.23%(b)
PORTFOLIO TURNOVER RATE 115.76% 73.76% 86.60%

RATIOS IF FEES HAD NOT BEEN WAIVED AND/OR REIMBURSED
- ----------------------------------------------------
RATIO OF EXPENSES TO AVERAGE NET ASSETS 2.42% 3.07% 4.56%(b)
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 5.38% 5.33% 3.81%(b)
</TABLE>

<PAGE>

CRABBE HUSON FUNDS

FINANCIAL HIGHLIGHTS
(Continued)

THE CRABBE HUSON U.S. GOVERNMENT INCOME FUND, INC.

<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
10/31/95 10/31/94 10/31/93 10/31/92
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.27 $11.04 $10.91 $10.69

INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
NET INVESTMENT INCOME 0.5097 0.4648 0.4755 0.5801
NET REALIZED & UNREALIZED
GAIN (LOSS) ON SECURITIES 0.4013 (0.6515) 0.2159 0.2921
------------- ------------- ------------- -------------
TOTAL FROM INVESTMENT OPERATIONS 0.9110 (0.1867) 0.6914 0.8722

LESS DISTRIBUTIONS
- ------------------
DISTRIBUTIONS FROM NET INVESTMENT INCOME 0.5097 0.4647 0.4848 0.5839
DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME 0.0113 0.0035 0.0000 0.0000
DISTRIBUTIONS FROM CAPITAL GAINS 0.0000 0.1120 0.0766 0.0683
------------- ------------- ------------- -------------
TOTAL DISTRIBUTIONS 0.5210 0.5802 0.5614 0.6522

------------- ------------- ------------- -------------
NET ASSET VALUE, END OF PERIOD $10.66 $10.27 $11.04 $10.91
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
TOTAL RETURN 9.12% -1.78% 6.71% 8.70%

RATIOS/SUPPLEMENTAL DATA
- ------------------------
NET ASSETS, END OF PERIOD $8,426,199 $9,249,212 $11,217,912 $8,958,757
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.75% 0.75% 0.75% 0.80%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 4.85% 4.39% 4.33% 5.35%
PORTFOLIO TURNOVER RATE 230.43% 76.09% 81.74% 105.52%

RATIOS IF FEES HAD NOT BEEN WAIVED AND/OR REIMBURSED
- ----------------------------------------------------
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.46% 1.47% 1.26% 1.52%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 4.14% 3.66% 3.81% 4.63%

<PAGE>

<CAPTION>
YEAR YEAR PERIOD
ENDED ENDED ENDED
10/31/91 10/31/90 10/31/89 (d)
------------- ------------- -------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.24 $10.28 $10.00

INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
NET INVESTMENT INCOME 0.6722 0.6768 0.5637
NET REALIZED & UNREALIZED
GAIN (LOSS) ON SECURITIES 0.4542 (0.0326) 0.2852

------------- ------------- -------------
TOTAL FROM INVESTMENT OPERATIONS 1.1264 0.6442 0.8489

LESS DISTRIBUTIONS
- ------------------
DISTRIBUTIONS FROM NET INVESTMENT INCOME 0.6746 0.6735 0.5689
DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME 0.0000 0.0000 0.0000
DISTRIBUTIONS FROM CAPITAL GAINS 0.0018 0.0106 0.0000
------------- ------------- -------------
TOTAL DISTRIBUTIONS 0.6764 0.6842 0.5689

------------- ------------- -------------
NET ASSET VALUE, END OF PERIOD 10.69 10.24 10.28
------------- ------------- -------------
------------- ------------- -------------
TOTAL RETURN 11.17% 6.40% 11.15%(b)

RATIOS/SUPPLEMENTAL DATA
- ------------------------
NET ASSETS, END OF PERIOD $3,748,244 $2,069,435 $1,717,128
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.96% 1.42% 1.14%(b)
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 6.44% 6.72% 7.35%(b)
PORTFOLIO TURNOVER RATE 114.81% 87.71% 40.42%

RATIOS IF FEES HAD NOT BEEN WAIVED AND/OR REIMBURSED
- ----------------------------------------------------
RATIO OF EXPENSES TO AVERAGE NET ASSETS 2.15% 2.84% 3.40%(b)
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 5.25% 5.31% 5.09%(b)
</TABLE>

<PAGE>

CRABBE HUSON FUNDS

FINANCIAL HIGHLIGHTS
(Continued)

THE CRABBE HUSON U.S. GOVERNMENT MONEY MARKET FUND, INC.

YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
10/31/95 10/31/94 10/31/93 10/31/92
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00

INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
NET INVESTMENT INCOME 0.0512 0.0339 0.0250 0.0332
NET REALIZED & UNREALIZED
GAIN (LOSS) ON SECURITIES 0.0000 0.0000 0.0000 0.0000
----------- ----------- ----------- -----------
TOTAL FROM INVESTMENT OPERATIONS 0.0512 0.0339 0.0250 0.0332

LESS DISTRIBUTIONS
- ------------------
DISTRIBUTIONS FROM NET INVESTMENT INCOME 0.0512 0.0339 0.0250 0.0332
DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME 0.0000 0.0000 0.0000 0.0000
----------- ----------- ----------- -----------
TOTAL DISTRIBUTIONS 0.0512 0.0339 0.0250 0.0332

----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
TOTAL RETURN 5.30% 3.28% 2.53% 3.36%

RATIOS/SUPPLEMENTAL DATA
- ------------------------
NET ASSETS, END OF PERIOD $54,714,219 $32,382,552 $14,784,493 $12,395,326
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.70% 0.70% 0.70% 0.75%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 5.21% 3.39% 2.51% 3.32%

RATIOS IF FEES HAD NOT BEEN WAIVED AND/OR REIMBURSED
- ----------------------------------------------------
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.16% 1.29% 1.32% 1.09%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 4.75% 2.81% 1.88% 2.98%

<PAGE>

<CAPTION>
YEAR YEAR PERIOD
ENDED ENDED ENDED
10/31/91 10/31/90 10/31/89 (d)
----------- ----------- -----------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00

INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
NET INVESTMENT INCOME 0.0576 0.0737 0.0633
NET REALIZED & UNREALIZED
GAIN (LOSS) ON SECURITIES 0.0000 0.0000 0.0000
----------- ----------- -----------
TOTAL FROM INVESTMENT OPERATIONS 0.0576 0.0737 0.0633

LESS DISTRIBUTIONS
- ------------------
DISTRIBUTIONS FROM NET INVESTMENT INCOME 0.0576 0.0737 0.0633
DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME 0.0000 0.0000 0.0000
----------- ----------- -----------
TOTAL DISTRIBUTIONS 0.0576 0.0737 0.0633

----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00
----------- ----------- -----------
----------- ----------- -----------
TOTAL RETURN 13.76% 7.62% 10.05%(b)

RATIOS/SUPPLEMENTAL DATA
- ------------------------
NET ASSETS, END OF PERIOD $14,906,733 $21,405,713 $10,735,032
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.81% 0.80% 0.60%(b)
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 5.76% 7.57% 8.43%(b)

RATIOS IF FEES HAD NOT BEEN WAIVED AND/OR REIMBURSED
- ----------------------------------------------------
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.18% 1.33% 1.34%(b)
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 5.38% 7.04% 7.69%(b)
</TABLE>

<PAGE>

CRABBE HUSON FUNDS

FINANCIAL HIGHLIGHTS
(Continued)

THE CRABBE HUSON REAL ESTATE INVESTMENT FUND, INC.

<TABLE>
<CAPTION>
YEAR PERIOD
ENDED ENDED
10/31/95 10/31/94 (e)
----------- -----------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $9.50 $10.00

INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
NET INVESTMENT INCOME 0.4436 0.3664
NET REALIZED & UNREALIZED
GAIN (LOSS) ON SECURITIES 0.3065 (0.6394)
----------- -----------
TOTAL FROM INVESTMENT OPERATIONS 0.7501 (0.2730)

LESS DISTRIBUTIONS
- ------------------
DISTRIBUTIONS FROM NET INVESTMENT INCOME 0.4379 0.2287
DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME 0.0000 0.0000
DISTRIBUTIONS FROM CAPITAL GAINS 0.1222 0.0000
----------- -----------
TOTAL DISTRIBUTIONS 0.5601 0.2287

----------- -----------
NET ASSET VALUE, END OF PERIOD $9.69 $9.50
----------- -----------
----------- -----------
TOTAL RETURN 8.31% -3.25%

RATIOS/SUPPLEMENTAL DATA
- ------------------------
NET ASSETS, END OF PERIOD $18,985,514 $18,279,500
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.50% 1.01%(b)
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 4.59% 6.30%(b)
PORTFOLIO TURNOVER RATE 59.53% 43.30%

RATIOS IF FEES HAD NOT BEEN WAIVED AND/OR REIMBURSED
- ----------------------------------------------------
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.89% 2.03%(b)
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 4.20% 5.28%(b)
</TABLE>

<PAGE>

INDEPENDENT AUDITORS' REPORT

The Shareholders and Boards of Directors
Crabbe Huson Funds -
The Oregon Municipal Bond Fund, Inc.
The Crabbe Huson Special Fund, Inc.
The Crabbe Huson Asset Allocation Fund, Inc.
The Crabbe Huson Equity Fund, Inc.
The Crabbe Huson Income Fund, Inc.
The Crabbe Huson U.S. Government Income Fund, Inc.
The Crabbe Huson U.S. Government Money Market Fund, Inc.
The Crabbe Huson Real Estate Investment Fund, Inc.:

We have audited the accompanying statements of assets and liabilities, including
the schedules of investments of each of the Crabbe Huson Funds, as of October
31, 1995, and the related statements of operations for the year then ended, the
statements of changes in net assets for The Oregon Municipal Bond Fund, Inc.,
The Crabbe Huson Special Fund, Inc., The Asset Allocation Fund, Inc., The Crabbe
Huson Equity Fund, Inc., The Crabbe Huson Income Fund, Inc., The Crabbe Huson
U.S. Government Fund, Inc. and The Crabbe Huson U.S. Government Money Market
Fund, Inc. for each of the two years then ended, and for The Real Estate
Investment Fund, Inc. for the year ended October 31, 1995 and for the period
from April 4, 1994 (commencement of operations) to October 31, 1994, and the
financial highlights for The Oregon Municipal Bond Fund, Inc. and The Crabbe
Huson Special Fund, Inc. for each of the seven years ended October 31, 1995, The
Crabbe Huson Asset Allocation Fund, Inc., The Crabbe Huson Equity Fund, Inc.,
The Crabbe Huson Income Fund, Inc., The Crabbe Huson U.S. Government Income
Fund, Inc. and The Crabbe Huson U.S. Government Money Market Fund, Inc. for each
of the six years ended October 31, 1995 and for the period from January 31, 1989
(commencement of operations) to October 31, 1989 and for the Crabbe Huson Real
Estate Investment Fund, Inc. for the year ended October 31, 1995 and for the
period from April 4, 1994 (commencement of operations) to October 31, 1994.
These financial statements and financial highlights are the responsibility of
the management of the Crabbe Huson Funds. Our responsibility is to express an
opinion on these financial statements and financial highlights based upon our
audits. The financial highlights for The Oregon Municipal Bond Fund, Inc. and
The Crabbe Huson Special Fund, Inc. for the periods ended October 31, 1988 and
prior were audited by other auditors whose reports expressed unqualified
opinions on the financial highlights.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included verification of
securities owned as of October 31, 1995, by examination and other appropriate
audit procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the Crabbe Huson Funds as of October 31, 1995, the results of their
operations, the changes in their net assets and their financial highlights for
the periods indicated above, in conformity with generally accepted accounting
principles.

KPMG PEAT MARWICK LLP

Portland, Oregon
December 8, 1995

<PAGE>

-----------------

PART C

OTHER INFORMATION
-----------------

Item 24. FINANCIAL STATEMENTS AND EXHIBITS

(a) Index to Financial Statement.

The following financial information of the Registrant is included in Part A
of the Registration Statement (the Prospectus)

Condensed Financial Information as of thru 10/31/95
(for all Funds other than Small Cap Fund):

The following Financial Statements of the Registrant are included in Part B
of the Registration Statement (the Statement of Additional Information):

Small Cap Fund

To be included by amendment

Real Estate Investment Fund
Equity Fund
Asset Allocation Fund
Income Fund
Oregon Bond Fund
U.S. Government Income Fund
U.S. Government Money Market Fund

Statement of Assets and Liabilities at 10/31/95
Statement of Operations for period ended 10/31/95
Statement of Changes in Net Assets for periods ended 10/31/94 and
10/31/95
Schedule of Selected Per Share Data and Ratios at 10/31/95
Investments in Securities at 10/31/95
Notes to Financial Statements for period ended 10/31/95
Independent Auditors' Report

(b) Exhibits:

1 Amended Declaration of Trust (1)

2 Amended Bylaws (1)

3 None

- --------------------------

(1) Incorporated by reference from Pre-Effective Amendment No. 1 to the
Registration Statement filed with the Securities and Exchange Commission on
February 9, 1996 (File No. 33-64363).

-1-

<PAGE>

4 Copies of all instruments defining the rights of holders of the securities
being registered including, where applicable, the relevant portion of the
Declaration of Trust or bylaws of the registrant.

The Amended Declaration of Trust and Amended Bylaws of the registrant are
hereby incorporated by reference from the Pre-Effective Amendment No. 1
filed with the Securities and Exchange Commission on February 9, 1996. In
addition, attached as Exhibit is the written instrument establishing and
designating separate classes of shares adopted by the Board of Trustees of
the Crabbe Huson Funds on May , 1996.

5 Form of Master Investment Advisory Contract (1)

6(a) Form of Distribution Agreement

6(b) Form of Selected Dealer Agreement

7 None

8 Custody and Investment Accounting (1)

9(a) Administration Agreement (1)
9(b) Transfer Agency and Service Agreement

10 Opinion and Consent of Davis Wright Tremaine, Counsel to Registrant (1)

11 Consent of Accountants

12 See paragraph (a) of this Item 24

13 None

14 Retirement Plans (2)

15 Distribution Plan

16 Computation Schedule (3)

17 Form of Rule 483 Financial Data Schedule

18 Rule 18f-3 Plan

Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

Registrant does not have any subsidiaries and does not control any other company
or person.

- --------------------------------
(2) Incorporated by reference from the Post-Effective Amendment No. 5 filed by
the Crabbe Huson Equity Fund, Inc., File Nos. 33-25044 and 811-5837.

(3) To be supplied by amendment.

-2-

<PAGE>

Item 26. NUMBER OF HOLDERS OF SECURITIES

As of June 30, 1996, 1996 Funds' outstanding shares were held as follows(1):

<S> <C>
Small Cap Fund
Primary Class
Institutional Class 0

Real Estate Investment Fund
Primary Class 1

Equity Fund
Primary Class 1
Institutional Class 0

Asset Allocation Fund
Primary Class 1
Institutional Class 0

Oregon Bond Fund
Primary Class 1

Income Fund
Primary Class 1

U.S. Government Income Fund
Primary Class 1

U.S. Government Money Market Fund
Primary Class 1

</TABLE>

(1) This date precedes the date of the reorganization. At the completion of
the reorganization, the Primary Class of each series will have the same
number of shareholders as its respective corporate form immediately prior
to the reorganization.

Item 27. INDEMNIFICATION

The Declaration of Trust of the Registrant contains the following provisions:

"LIMITATION OF LIABILITY. No personal liability for any debt or obligation
of the Trust shall attach to any Trustee of the Trust. Without limiting the
foregoing, a Trustee shall not be responsible for or liable in any event for
any neglect or wrongdoing of any officer, agent, employee, investment
adviser, subadviser, principal underwriter or custodian of the Trust, nor
shall any Trustee be responsible or liable for the act or omission of any
other Trustee. Nothing contained herein shall protect any Trustee against any
liability to which such Trustee would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office.

"Every note, bond, contract, instrument, certificate, Share or undertaking
and every other act or thing whatsoever executed or done by or on behalf of
the Trust or the Trustees or any of them in connection with the Trust shall
be conclusively deemed to have been executed or done only in or with respect
to their or his capacity as Trustees or Trustee and neither such Trustees or
Trustee nor the Shareholders shall be personally liable thereon.

"Every note, bond, contract, instrument, certificate or undertaking made or
issued by the Trustees or by any officers or officer shall recite that the same
was executed or made by or on behalf of

-3-

<PAGE>

the Trust by them as Trustees or Trustee or as officers or officer and not
individually and that the obligations of such instrument are not binding upon
any of them or the Shareholders individually but are binding only upon the
assets and property of the Trust, and may contain such further recitals as
they or he may deem appropriate, but the omission thereof shall not operate
to bind any Trustees or Trustee or officers or officer or Shareholders or
Shareholder individually.

"All persons extending credit to, contracting with or having any claim
against the Trust shall look only to the assets of the Trust for payment
under such credit, contract or claim; and neither the Shareholders nor the
Trustees nor any of the Trust's officers, employees or agents, whether past,
present or future, shall be personally liable therefor.

. . . . .

"INDEMNIFICATION. Subject to the exceptions and limitations contained in this
Section 4, every person who is, or has been, a Trustee,
officer, employee or agent of the Trust, including persons who serve at the
request of the Trust as directors, trustees, officers, employees or agents of
another organization in which the Trust has an interest as a shareholder,
creditor or otherwise (hereinafter referred to as a "Covered Person"), shall
be indemnified by the Trust to the fullest extent permitted by law against
liability and against all expenses reasonably incurred or paid by him in
connection with any claim, action, suit or proceeding in which he becomes
involved as a party or otherwise by virtue of his being or having been such a
Trustee, director, officer, employee or agent and against amounts paid or
incurred by him in settlement thereof.

"No indemnification shall be provided hereunder to a Covered Person:

"(1) against any liability to the Trust or its Shareholders by reason of a
final adjudication by the court or other body before which the proceeding was
brought that he engaged in willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of his office;

"(2) with respect to any matter as to which he shall have been finally
adjudicated not to have acted in good faith in the reasonable belief that his
action was in the best interests of the Trust; or

"(3) in the event of a settlement or other disposition not involving a final
adjudication (as provided in paragraph (a) or (b)) and resulting in a payment
by a Covered Person, unless there has been either a determination that such
Covered Person did not engage in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office by the court or other body approving the settlement or other
disposition, or a reasonable determination, based on a review of readily
available facts (as opposed to a full trial-type inquiry), that he did not
engage in such conduct, such determination being made by:

"(a) a vote of a majority of the Disinterested Trustees acting on the matter
(provided that a majority of the Disinterested Trustees then in office act on
the matter); or

"(b) written opinion of independent legal counsel.

"The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not affect any other
rights to which any Covered Person may now or hereafter be entitled, shall
continue as to a person who has ceased to be such a Covered Person and shall
inure to the benefit of the heirs, executors and administrators of such a
person.

-4-

<PAGE>

Nothing contained herein shall affect any rights to indemnification to which
Trust personnel other than Covered Persons may be entitled by contract or
otherwise under law.

"Expenses of preparation and presentation of a defense to any claim, action,
suit or proceeding subject to a claim for indemnification under this Section
4 shall be advanced by the Trust prior to final disposition thereof upon
receipt of an undertaking by or on behalf of the recipient to repay such
amount if it is ultimately determined that he is not entitled to
indemnification under this Section 4, provided that either:

"(a) such undertaking is secured by a surety bond or some other appropriate
security or the Trust shall be insured against losses arising out of any such
advances; or

"(b) a majority of the Disinterested Trustees acting on the matter (provided
that a majority of the Disinterested Trustees then in office act on the
matter) or independent legal counsel in a written opinion shall determine,
based upon a review of the readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the recipient
ultimately will be found entitled to indemnification.

"As used in this Section 4, a "Disinterested Trustee" is one (x) who is not
an Interested Person of the Trust (including anyone, as such Disinterested
Trustee, who has been exempted from being an Interested Person by any rule,
regulation or order of the Commission), and (y) against whom none of such
actions, suits or other proceedings or another action, suit or other
proceeding on the same or similar grounds is then or has been pending.

"As used in this Section 4, the words "claim," "action," "suit" or
"proceeding" shall apply to all claims, actions, suits, proceedings (civil,
criminal, administrative or other, including appeals), actual or threatened;
and the words "liability" and "expenses" shall include without limitation,
attorneys' fees, costs, judgments, amounts paid in settlement, fines,
penalties and other liabilities."

Insurance of Officers, Directors, Employers and Agents

"(k) INSURANCE. To purchase and pay for entirely out of Trust property such
insurance as they may deem necessary or appropriate for the conduct of the
business, including, without limitation, insurance policies insuring the
assets of the Trust and payment of distributions and principal on its
portfolio investments, and insurance policies insuring the Shareholders,
Trustees, officers, employees, agents, consultants, investment advisers,
managers, administrators, distributors, principal underwriters, or
independent contractors, or any thereof (or any person connected therewith),
of the Trust individually against all claims and liabilities of every nature
arising by reason of holding, being or having held any such office or
position, or by reason of any action alleged to have been taken or omitted by
any such person in any such capacity, including any action taken or omitted
that may be determined to constitute negligence, whether or not the Trust
would have the power to indemnify such person against such liability . . ."

Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provision or otherwise, the Registrant has
been advised that in the opinion of the Securities & Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liability (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the

-5-

<PAGE>

Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

The Registrant has made application for insurance to indemnify the directors
and officers of the registrant against liabilities incurred as a result of
serving in such capacity.

Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

The business and other connections of the officers, directors of the
Registrant's investment advisor, The Crabbe Huson Group, Inc., are listed on
the Form ADV of The Crabbe Huson Group, Inc. as currently on file with the
Commission (File No. 801-15154), the text of which is incorporated herein by
reference. The following sections of such Form ADV are incorporated herein
by reference: (a) Items 1 and 2 of Part 2, and (b) Section 6, Business
Background of each Schedule D.

Item 29. PRINCIPAL UNDERWRITER

(a) Registrant's Distributor, Crabbe Huson Securities, Inc., also acts as
exclusive distributor of The Crabbe Huson Special Fund, Inc., an
Oregon corporation registered under the Securities Act of 1933 and the
Investment Company Act of 1940.

b) The directors and officers of Crabbe Huson Securities, Inc., as of the
date of this Registration Statement, are as follows:

(1) (2) (3)
Name and Principal Position and Office with Position and Office
Business Address Crabbe Huson Securities, Inc. with Registrant
- ---------------- ----------------------------- ---------------
<S> <C> <C>

Thomas F. Biesiadecki Secretary and Chief
121 SW Morrison Compliance Officer
Suite 1410
Portland, OR 97204

Craig L. Kolzow Vice President Assistant
121 SW Morrison Treasurer
Suite 1410
Portland, OR 97204

Cheryl A. Burgermeister Vice President, Treasurer
121 SW Morrison Treasurer and Director
Suite 1410
Portland, OR 97204

Craig P. Stuvland President and Director Secretary and
121 SW Morrison Director
Suite 1410
Portland, OR 97204

</TABLE>

-6-

<PAGE>

Item 30. LOCATION OF ACCOUNTS AND RECORDS

The accounts, books and other documents required to be maintained by the Fund
pursuant to Section 31(a) of the Investment Company Act of 1940 and the rules
thereunder will be maintained at the offices of the Fund at 121 SW Morrison,
Suite 1415, Portland, Oregon 97204, at the offices of the Custodian,
Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City,
Missouri 64105, at the offices of Davis Wright Tremaine, the Fund's legal
counsel, 1300 S.W. 5th Avenue, Suite 2300, Portland, Oregon, 97201 and at the
offices of State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts, the Fund's transfer agent and dividend disbursing agent.

Item 31. MANAGEMENT SERVICES

Not applicable.

Item 32. UNDERTAKINGS

(a) Not applicable.

(b) Not applicable.

(c) The Registrant undertakes to furnish to each person to whom a
Prospectus is delivered a copy of the Registrant's latest annual
report to shareholders, upon request and without charge.

(d) Registrant undertakes to call a shareholders meeting for the purpose
of voting upon a proposal to remove a trustee if requested to do so by
at least 10% of registrant's outstanding shares. Registrant also
undertakes to assist in communications among shareholders in
connection with such a meeting.

-7-

<PAGE>

SIGNATURES AND CERTIFICATION

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Portland, Oregon on June _____, 1996.

CRABBE HUSON FUNDS

By:/s/Richard S. Huson
-------------------
Richard S. Huson, President

We, the undersigned Trustees and Officers of CRABBE HUSON FUNDS, do
hereby constitute and appoint Richard S. Huson our true and lawful attorney and
agent, to do any and all acts and things in our name and behalf in our
capacities as Trustees and Officers, and to execute any and all instruments for
us and in our name in the capacities indicated below, which said attorney and
agent may deem necessary or advisable to enable said Fund to comply with the
Securities Act of 1933, as amended, the Investment Company Act of 1940 and any
rules, regulations and requirements of the Securities and Exchange Commission,
in connection with this Registration Statement, including specifically, but not
without limitation, the power and authority to sign for us or any of us in our
names in the capacities indicated below, any and all amendments (including
post-effective amendments) hereto; and we do hereby ratify and confirm that
said attorney and agent shall do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on June _____, 1996, by the
following persons in the capacities indicated:

(1) Principal Executive Officers:

/s/Richard S. Huson President
----------------------------------
Richard S. Huson

(2) Principal Accounting and
Financial Officer

/s/Cheryl A. Burgermeister Treasurer
----------------------------------
Cheryl A. Burgermeister

Page 1 - SIGNATURES AND CERTIFICATION

<PAGE>

(3) Trustees:

/s/Gary L. Capps Trustee
----------------------------------
Gary L. Capps

/s/James E. Crabbe Trustee
----------------------------------
James E. Crabbe

/s/Richard S. Huson Trustee
----------------------------------
Richard S. Huson

/s/William Wendell Wyatt Trustee
----------------------------------
William Wendell Wyatt

/s/Craig P. Stuvland Trustee
----------------------------------
Craig P. Stuvland

/s/Louis Scherzer Trustee
----------------------------------
Louis Scherzer

/s/Bob L. Smith Trustee
----------------------------------
Bob L. Smith

/s/Richard P. Wollenberg Trustee
----------------------------------
Richard P. Wollenberg

Page 2 - SIGNATURES AND CERTIFICATION

<PAGE>
<ARTICLE> 6
<RESTATED>
<SERIES>
<NUMBER> 011
<NAME> CRABBE HUSON ASSET ALLOCATION FUND

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 127582027
<INVESTMENTS-AT-VALUE> 132408320
<RECEIVABLES> 2183268
<ASSETS-OTHER> 6310398
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 140901986
<PAYABLE-FOR-SECURITIES> 42844356
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 87573
<TOTAL-LIABILITIES> 4371929
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 120250668
<SHARES-COMMON-STOCK> 10010125
<SHARES-COMMON-PRIOR> 8561108
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 11453096
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4826293
<NET-ASSETS> 136530057
<DIVIDEND-INCOME> 1226139
<INTEREST-INCOME> 3701179
<OTHER-INCOME> 0
<EXPENSES-NET> 1800166
<NET-INVESTMENT-INCOME> 3127152
<REALIZED-GAINS-CURRENT> 11435123
<APPREC-INCREASE-CURRENT> 20021
<NET-CHANGE-FROM-OPS> 14582296
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3090031)
<DISTRIBUTIONS-OF-GAINS> (4120955)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3651020
<NUMBER-OF-SHARES-REDEEMED> (24155859)
<SHARES-REINVESTED> 213856
<NET-CHANGE-IN-ASSETS> 26378272
<ACCUMULATED-NII-PRIOR> 0
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<GROSS-EXPENSE> 1814733
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<PER-SHARE-NAV-BEGIN> 12.87
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</TABLE>

<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 02
<NAME> CRABBE HUSON TAX-FREE FUND

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1994
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<SHARES-REINVESTED> 73838
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</TABLE>

<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 031
<NAME> CRABBE HUSON EQUITY FUND

<S> <C>
<PERIOD-TYPE> 12-MOS
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<OVERDISTRIBUTION-NII> 0
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<DIVIDEND-INCOME> 4154003
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<EXPENSES-NET> 3840041
<NET-INVESTMENT-INCOME> 3567282
<REALIZED-GAINS-CURRENT> 19596449
<APPREC-INCREASE-CURRENT> 9278013
<NET-CHANGE-FROM-OPS> 32441744
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1413080)
<DISTRIBUTIONS-OF-GAINS> (2376723)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 16135368
<NUMBER-OF-SHARES-REDEEMED> (4218957)
<SHARES-REINVESTED> 79947
<NET-CHANGE-IN-ASSETS> 234078784
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</TABLE>

<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 041
<NAME> CRABBE HUSON INCOME FUND

<S> <C>
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</TABLE>

<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 051
<NAME> CRABBE HUSON U.S. GOVERNMENT INCOME FUND

<S> <C>
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<PER-SHARE-NAV-BEGIN> 10.27
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</TABLE>

<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 061
<NAME> CRABBE HUSON U.S. GOVERNMENT MONEY MARKET FUND

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1994
<PERIOD-END> OCT-31-1995
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</TABLE>

<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 071
<NAME> CRABBE HUSON REAL ESTATE INVESTMENT FUND

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1994
<PERIOD-END> OCT-31-1995
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<INVESTMENTS-AT-VALUE> 18628200
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<OTHER-ITEMS-ASSETS> 0
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<PAYABLE-FOR-SECURITIES> 74647
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<TOTAL-LIABILITIES> 83883
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 19722129
<SHARES-COMMON-STOCK> 1959931
<SHARES-COMMON-PRIOR> 1924529
<ACCUMULATED-NII-CURRENT> 7309
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 233180
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (977104)
<NET-ASSETS> 18985514
<DIVIDEND-INCOME> 1139451
<INTEREST-INCOME> 20613
<OTHER-INCOME> 0
<EXPENSES-NET> 285928
<NET-INVESTMENT-INCOME> 874136
<REALIZED-GAINS-CURRENT> 51165
<APPREC-INCREASE-CURRENT> 565011
<NET-CHANGE-FROM-OPS> 1490312
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<DISTRIBUTIONS-OF-INCOME> (862995)
<DISTRIBUTIONS-OF-GAINS> (240802)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 821200
<NUMBER-OF-SHARES-REDEEMED> (822760)
<SHARES-REINVESTED> 36962
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</TABLE>

<PAGE>
EXHIBIT 99.4

WRITTEN INSTRUMENT ESTABLISHING AND DESIGNATING
SEPARATE CLASSES OF SHARES

I. RECITALS

1. The undersigned constitute all the trustees of Crabbe Huson
Funds (the "Fund"), a Delaware business trust governed by a Declaration of
Trust dated October 14, 1995 (the "Declaration of Trust"). This instrument
is executed pursuant to Section _____ of Article _____ of the Declaration of
Trust in order to establish and designate separate classes of shares of
certain series of the Fund, and is based in part upon resolutions of the
Board of Trustees of the Fund adopted at a meeting on May _____, 1996.

2. Pursuant to the Declaration of Trust, the Trustees currently
have designated nine Series and have the authority to establish and designate
additional Series (the "Series"). Under the Declaration of Trust, the Board
of Trustees has the authority, in its discretion and without shareholder
approval, to divide the shares of any Series of the Fund into separate
classes of shares.

3. The Board of Trustees deems it desirable and in the best
interest of the Fund to divide the shares of the Series listed in Exhibit A,
which may be amended from time to time (the "Multi-Class Series"), into three
separate classes of shares to be named as follows: "Primary Class"; "Advisor
Class"; and "Institutional Class" (individually a "Class").

4. The Board of Trustees believes that the creation of three
separate classes of shares as provided herein will be in the best interest of
and will have no negative effects upon the current shareholders of the Fund.

5. It is the intent of the Board of Trustees that shares of the
Primary Class be treated in the same manner as the original shares of the
Multi-Class Series prior to creation of the multi-class distribution system.

NOW, THEREFORE, the establishment and designation of separate
classes of the Series is approved in accordance with the following provisions:

II. DESIGNATION OF CLASSES

1. ESTABLISHMENT OF CLASSES. Subject to the conditions hereinafter
set forth, the shares of the Multi-Class Series shall be divided into three
classes to be known respectively as the "Primary Class," "Advisor Class," and
the "Institutional Class," which classes shall have such preferences and special
or relative rights and privileges as set forth hereunder and as may be
determined from time to time by the Board of Trustees, subject always to the
Declaration of Trust and the Investment Company Act of 1940 and the rules and
regulations thereunder (the "1940 Act").

Page 1 - DESIGNATION OF SHARES

<PAGE>

2. DISTRIBUTION OF MULTI-CLASS SHARES. Subject to the terms of the
Declaration of Trust, shares of the Primary Class, Advisor Class and
Institutional Class will have the following arrangement for shareholder services
and their distribution.

A. PRIMARY CLASS. The Primary Class shall bear a distribution
fee of .25% per annum of the average daily net assets value of the Primary Class
shares pursuant to Rule 12b-1 of the 1940 Act.

B. ADVISOR CLASS. The Advisor Class shall bear a distribution
fee of .75% per annum of the average daily net asset value of the Advisor Class
pursuant to Rule 12b-1 of the 1940 Act.

C. INSTITUTIONAL CLASS. The Institutional Class will be sold
without any initial sales charge, deferred sales charge or any asset-based sales
charge.

3. CLASSIFICATION OF ORIGINAL SHARES. Any shares of the Multi-Class
Series that are issued and outstanding at the time when their shares are
effectively divided into separate classes of shares as set forth above shall be
classified as Primary Class shares.

4. VOTING RIGHTS. Each Class shall have exclusive voting rights on
any matter submitted to its shareholders that relates solely to its shareholder
servicing or distribution arrangement. Furthermore, each Class shall have
separate voting rights on any matter submitted to shareholders in which the
interests of one Class differ from the interests of any other Class. In all
other respects voting shall be as set forth in the Declaration of Trust.

5. EXPENSES. Expenses of each Class shall be administered as set
forth in the Rule 18f-3 Plan adopted by the Board of Trustees, as amended from
time to time.

6. DIVIDENDS AND DISTRIBUTIONS. Dividends and distributions on
shares of a particular Class of any Multi-Class Series may be paid with such
frequency as the Board of Trustees may determine, which may be daily or
otherwise, pursuant to a standing resolution or resolutions adopted only once or
with such frequency as the Board of Trustees may determine, to the holders of
shares of that Class, from such of the income and capital gains, accrued or
realized, from the assets belonging to that Class, as the Board of Trustees may
determine, after providing for actual and accrued liabilities belonging and
attributable to that Class. All dividends and distributions on shares of a
particular Class shall be distributed pro rata to the holders of shares of that
Class in proportion to the number of shares of that Class held by such holders
at the date and time of record established for the payment of such dividends or
distributions, except that in connection with any dividend or distribution
program or procedure the Board of Trustees may determine that dividend or
distribution shall be payable on shares as to which the shareholder's purchase
order

Page 2 - DESIGNATION OF SHARES

<PAGE>

and/or payment have not been received by the time or times established by
the Board of Trustees under such program or procedure. Such dividends and
distributions may be made in cash or shares of that Class or a combination
thereof as determined by the Board of Trustees or pursuant to any program the
Board of Trustees may have in effect at the time for the election by each
shareholder of the mode of the making of such dividend or distribution to that
shareholder. Any such dividend or distribution paid in shares will be paid at
the net asset value thereof as determined in accordance with Paragraph 10 of
this Written Designation.

7. LIQUIDATION. In the event of the liquidation or dissolution of
the Fund, any Series, or any Class, the shareholders of each Class that has been
established and designated and that has voted to be liquidated or dissolved,
shall be entitled to receive, when and as declared by the Board of Trustees, the
excess of the assets attributable to that Class over the liabilities
attributable to that Class. The assets so distributable to the shareholders of
any particular Class shall be distributed among such shareholders in proportion
to the number of shares of that Class held by them and recorded on the books of
the Class. The liquidation of any particular Class may be authorized by a vote
of a majority of the Trustees then in office, subject to the approval of two-
thirds of the outstanding voting securities of that Class.

8. REDEMPTION. Each holder of record of shares of a particular
Class shall have the right at such times as may be permitted by the Fund and as
otherwise required by the 1940 Act to require the Fund to redeem all or any part
of his shares of that Class at a redemption price equal to the net asset value
per share of that Class next determined in accordance with Paragraph 10 of this
Written Designation after the shares are properly tendered for redemption, less
any charge which may be imposed by the Fund in connection with such redemption
and described in the Fund's then current prospectus. Payment of the redemption
price shall be in cash; provided, however, that if the Board of Trustees
determines, which determination shall be conclusive, that conditions exist which
may make payment wholly in cash unwise or undesirable, the Fund may, subject to
the requirements of the 1940 Act, make payment wholly or partly in securities or
other assets belonging to the Class of which the shares being redeemed are a
part at the value of such securities or assets used in such determination of net
asset value. Notwithstanding the foregoing, the Fund may postpone payment of
the redemption price and may suspend the right of the holders of shares of any
Class to require the Fund to redeem shares of that Class during any period or at
any time when and to the extent permissible under the 1940 Act.

9. INVOLUNTARY REDEMPTION. The Trustees may cause the Fund to
redeem at net asset value the shares of a Class if the net asset value of the
shares is less than $2,000 for the Primary Class, ________ for the Advisor Class
and $750,000 for the Institutional Class as a result of shareholder redemptions.
No such redemption shall be effective unless the Fund has given the holder at
least sixty (60) days' notice of its intention to redeem

Page 3 - DESIGNATION OF SHARES

<PAGE>

such shares and an opportunity to purchase a sufficient number of additional
shares to bring the aggregate current net asset value of the holder's shares
in the particular Class above the number specified above. Upon redemption of
Shares pursuant to this Paragraph, the Fund shall promptly cause payment of
the full redemption price to be made to the holder of the shares so redeemed.
The Fund may reject any purchase order, refuse to transfer such shares and
compel redemption of shares if, in its opinion, any such rejected action
would prevent the Fund from becoming a personal holding company as defined by
the Internal Revenue Code of 1986, as amended.

10. CALCULATION OF NET ASSET VALUE. The net asset value of each
Class shall be determined by adding that Class's pro rata share of the
applicable Series' investments, cash and other assets, subtracting that Class's
pro rata share of the value of the applicable Series' liabilities, subtracting
the liabilities allocated to that Class, and dividing the result by the number
of shares of Class that are outstanding.

11. CONVERSION. The shares of each Class will not be subject to any
automatic conversion feature, other than the shares of the Institutional Class
which will convert into shares of the Primary Class, at the discretion of the
applicable Fund, any time that the value of the shares in an Institutional Class
Account falls below $750,000.

12. EXCHANGES. Shares of each Class shall be exhangeable into shares
of any other mutual fund managed by The Crabbe Huson Group, Inc., or any
business successor, provided any investment minimums are satisfied on such
exchange.

<TABLE>
<CAPTION>
"Trustees"

<S> <C>

- ------------------------------ ---------------------------------
Richard S. Huson James E. Crabbe

- ------------------------------ ---------------------------------
Craig P. Stuvland Gary L. Capps

- ------------------------------ ---------------------------------
Louis Scherzer Robert L. Smith

- ------------------------------ ---------------------------------
Richard P. Wollenberg William Wendall Wyatt, Jr.

</TABLE>

Page 4 - DESIGNATION OF SHARES

<PAGE>
EXHIBIT NO. 99.6(a)

CRABBE HUSON FUNDS

AMENDED
DISTRIBUTION AGREEMENT

Agreement made as of _______________, 1996, between Crabbe Huson
Funds, a Delaware business trust (the "Trust"), and Crabbe Huson Securities,
Inc. (the "Distributor").

RECITALS

1. The Trust is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment
company. It is in the interest of the Trust to offer its shares of
beneficial interest in the Trust for sale to the public on a continuous basis.

2. The Trust operates as a "series company" within the meaning of
Rule 18f-2 of the 1940 Act. The Trust's Declaration of Trust establishes
nine separate series and permits the Board of Trustees to establish
additional series (the "Series"). The Declaration of Trust further
authorizes the establishment of sub-series or classes. Pursuant to Rule
18f-3 of the 1940 Act, the Board of Trustees has adopted a Rule 18f-3 Plan
approving the creation of multiple classes of certain series of the Trust.
Only the Initial Class of shares of each Series (the "Shares") shall be
subject to the terms and conditions set forth herein.

3. The Distributor is a broker-dealer registered under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and is
engaged in the business of distributing Shares of registered investment
companies either directly or through other broker-dealers.

4. The Trust and the Distributor wish to enter into an agreement
with each other, with respect to the continuous offering of the Trust's
Shares from and after the date hereof in order to promote the growth of the
Trust and facilitate the distribution of its Shares.

5. The Trust has adopted a plan of distribution pursuant to Rule
12b-1 under the 1940 Act (the "Plan") that provides that each Series shall
become subject to the Plan authorizing payments by the Trust to the
Distributor with respect to the distribution of Shares of that Series and the
maintenance of shareholder accounts. Upon approval of the shareholders of
each Series that Series shall become subject to the Plan.

AMENDED DISTRIBUTION AGREEMENT - 1

<PAGE>

AGREEMENT

NOW, THEREFORE, the parties agree as follows:

Section 1. APPOINTMENT OF THE DISTRIBUTOR.

The Trust hereby appoints the Distributor to act as the distributor of
Shares of each Series of the Trust on the terms and for the period set forth in
this Agreement. The Distributor hereby accepts such appointment and agrees to
render the services and duties set forth in Section 4 hereof.

Section 2. DELIVERY OF DOCUMENTS.

The Trust has furnished the Distributor with copies, properly
certified or otherwise authenticated, of each of the following documents and
will deliver to the Distribution all future amendments and supplements, if any:

(i) The Trust's Declaration of Trust;

(ii) The Trust's By-Laws:

(iii) Resolutions of the Trust's Board of Trustees authorizing the
execution and delivery of this Agreement;

(iv) The Trust's most recent amendment to its Registration Statement
under the Securities Act of 1933, as amended (the "Securities Act"), and the
1940 Act on Form N-1A as filed with the Securities and Exchange Commission (the
"Commission") relating to the Trust (the Registration Statement, as presently in
effect and as amended or supplemented from time to time, is herein called the
"Registration Statement");

(v) The Trust's most recent Prospectus and Statement of Additional
Information and all amendments and supplements thereto (such Prospectus and
Statement of Additional Information and supplements thereto, as presently in
effect and as from time to time amended and supplemented, are herein called the
"Prospectus");

(vi) The Trust's audited financial statements; and

(vii) Any other information that the Distributor may reasonably
request.

Section 3. REGISTRATION AND SALE OF ADDITIONAL SHARES.

The Trust will from time to time use its best efforts to register
under the Securities Act such Shares not already so registered as the
Distributor may reasonably be expected to sell as agent on behalf of the
Trust. This Agreement relates to the

AMENDED DISTRIBUTION AGREEMENT - 2

<PAGE>

issue and sale of Shares that are duly authorized and registered and
available for sale by the Trust if, but only if, the Trust sees fit to sell
them. The Trust will take such action as may be necessary from time to time
to qualify Shares for sale in such states as are mutually agreeable to the
Distributor and the Trust, and to maintain such qualification if and so long
as such Shares are duly registered under the Securities Act.

Section 4. SERVICES AND DUTIES.

The Distributor enters into the following covenants with respect to
its services and duties:

4.1 The Distributor agrees to sell, as agent on behalf of the
Trust, from time to time during the term of this Agreement, authorized and
issued Shares of each Series upon the terms and at the public offering price,
which will be the net asset value per share of the Series as determined in
the Prospectus. The Distributor is hereby authorized and will use its best
efforts (but only in states in which it may lawfully do so) to enter into
agreements with broker-dealers that are lawfully registered under federal and
applicable state law ("Selling Agents") providing for such Selling Agents to
obtain from investors unconditional orders for Shares, provided that the
Distributor may in its discretion refuse to accept orders for such Shares
from any particular applicant. The Distributor will act only in its own
behalf as principal in making agreements with Selling Agents. No
broker-dealer or other person which enters into a selling or servicing
agreement with the Distributor shall be authorized to act as agent for the
Trust in connection with the offering or sale of Shares to the public or
otherwise. The Distributor shall use its reasonable efforts to sell Shares
of the Trust but shall not be obligated to sell any certain number of Shares.

4.2 The Distributor shall prepare and, after review by the Trust,
file with the National Association of Securities Dealers, Inc. or other
organization as required by federal or other applicable laws and regulations,
all sales literature (advertisements, brochures and shareholder
communications) for each Series. The Trust will not permit the use of any
sales literature unless it has been so reviewed and filed.

4.3 In performing all of its services and duties as the
Distributor, the Distributor will act in conformity with the Declaration of
Trust, By-Laws, Prospectus and resolutions and other instructions of the
Trust's Board of Trustees (as provided by the Trust) and will comply with the
requirements of the Securities Act, the Exchange Act, the 1940 Act and all
other applicable federal or state laws.

AMENDED DISTRIBUTION AGREEMENT - 3

<PAGE>

4.4 The Trust shall have the right to suspend the sale of Shares
at any time in response to conditions in the securities markets or otherwise,
and to suspend the redemption of Shares of any Series at any time permitted
by the 1940 Act or the rules and regulations ("Rules") promulgated
thereunder. If and whenever a suspension of the right of redemption or
postponement of the date of payment or redemption has been declared and has
become effective, then, until such suspension or postponement is terminated,
no further orders for the Series shall be accepted by the Distributor except
such unconditional orders placed with the Distributor before the Distributor
has knowledge of the suspension.

4.5 The Trust reserves the right to reject any order for Shares
but will not do so arbitrarily or without reasonable cause.

Section 5. COMPENSATION.

5.1 The Trust shall pay up to one-twelfth (1/12) of .25% of each
Series' average daily net assets to the Distributor to reimburse the
Distributor for actual expenses incurred in the distribution and promotion of
the Trust's Shares, to the extent permitted by Rule 12b-1, and as determined
in accordance with the Prospectus and the Plan. Amounts payable under the
Plan shall be accrued daily and paid monthly or at such other intervals as
the Trustees may determine. Amounts payable under the Plan shall be subject
to the limitations of Article III, Section 26 of the NASD Rules of Fair
Practice. Distribution expenses that are not allocable to a specific Series
are allocated to a Series based on the respective net asset value of each
Series.

5.2 So long as the Plan or any amendment thereto is in effect, the
Distributor, on a quarterly basis, shall inform the Board of Trustees of the
trailer commissions to be paid by the Distributor to Selling Agents who have
entered into selling agent agreements with the Distributor, or any other
amounts expended by the Distributor under this Agreement, and of the purposes
of such expenditures. So long as the Plan (or any amendment thereto) is in
effect, at the request of the Board of Trustees or any agent or
representative of the Trust, the Distributor shall provide such additional
information as may reasonably be requested concerning the activities of the
Distributor hereunder and the costs incurred in performing such activities.

5.3 Expenses of distribution with respect to the Shares of the
Trust include, among others:

(a) commissions, including trailer commissions paid to, or on
account of, broker-dealers that have entered into selling
agent

AMENDED DISTRIBUTION AGREEMENT - 4

<PAGE>

agreements with the Distributor with respect to Shares
of the Fund;

(b) advertising for the Fund in various forms through any
available medium, including the cost of printing and mailing
Fund Prospectuses, and periodic financial reports and sales
literature to persons other than current shareholders of the
Fund; and

Section 6. ALLOCATION OF EXPENSES.

6.1 The Trust shall bear all costs and expenses of the continuous
offering of its Shares, including fees and disbursements of its counsel and
auditors, in connection with the preparation and filing of any required
Registration Statements and/or Prospectuses under the 1940 Act or the
Securities Act, and preparing and mailing annual and periodic reports and
proxy materials to shareholders (including but not limited to the expense of
setting in type any such Registration Statements, Prospectuses, annual or
periodic reports or proxy materials). The Trust shall also bear the cost and
expenses of qualification of the Shares for sale, and, if necessary or
advisable in connection therewith, of qualifying the Trust as a broker or
dealer, in such states of the United States or other jurisdictions as shall
be selected by the Trust, and the cost and expense payable to each such state
for continuing qualification therein until the Trust decides to discontinue
such qualification. As set forth in Section 4.1 above, the Trust shall also
bear the expenses it assumes pursuant to the Plan with respect to
distribution of the Shares, so long as the Plan is in effect. The
Distributor shall pay all fees and expenses in connection with its
qualification as a broker-dealer in the various states and other expenses
which have been mutually agreed upon in connection with the offer and sale of
Shares which have not been specifically allocated to the Trust.

Section 7. INDEMNIFICATION.

7.1 The Trust agrees to indemnify, defend and hold the
Distributor, its officers and directors and any person who controls the
Distributor within the meaning of Section 15 of the Securities Act, free and
harmless from and against any and all claims, demands, liabilities and
expenses (including the cost of investigating or defending such claims,
demands or liabilities and any counsel fees incurred in connection therewith)
which the Distributor, its officers, directors or any such controlling person
may incur under the Securities Act, or under common law or

AMENDED DISTRIBUTION AGREEMENT - 5

<PAGE>

otherwise, arising out of or based upon any untrue statement of a material
fact contained in the Registration Statement or Prospectus or arising out of
or based upon any alleged omission to state a material fact required to be
stated in either thereof or necessary to make the statements in either
thereof not misleading, except insofar as such claims, demands, liabilities
or expenses arise out of or are based upon any such untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with information furnished in writing by the Distributor to the
Trust for use in the Registration Statement or Prospectus; provided, however,
that this indemnity agreement shall not inure to the benefit of any such
officer, director, or controlling person unless a court of competent
jurisdiction shall determine in a final decision on the merits, that the
person to be indemnified was not liable by reason of willful misfeasance, bad
faith or gross negligence in the performance of its duties, or by reason of
its reckless disregard of its obligations under this Agreement ("disabling
conduct"), or, in the absence of such a decision, a reasonable determination,
based upon a review of the facts, that the indemnified person was not liable
by reason of disabling conduct, by (a) a vote of a majority of a quorum of
Trustees who are neither "interested persons" of the Trust as defined in
Section 2(a)(19) of the 1940 Act nor parties to the proceeding, or (b) an
independent legal counsel in a written opinion. The Trust's agreement to
indemnify the Distributor, its officers and directors and any such
controlling person as aforesaid is expressly conditioned upon the Trust's
being promptly notified of any action brought against the Distributor, its
officers or directors, or any such controlling person, such notification to
be given by letter or telegram addressed to the Trust at its principal
business office. The Trust agrees promptly to notify the Distributor of the
commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issue and sale of any Shares.

7.2 The Distributor agrees to indemnify, defend and hold the Trust,
its officers and Trustees and any person who controls the Trust, if any, within
the meaning of Section 15 of the Securities Act, free and harmless from and
against any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending against such claims, demands or liabilities
and any counsel fees incurred in connection therewith) with the Trust, its
officers and Trustees or any such controlling person may incur under the
Securities Act or under common law or otherwise, but only to the extent that
such liability or expense incurred by the Trust, its Trustees or officers or
such controlling person resulting from such claims or demands shall arise out of
or be based upon any alleged untrue statement of a material fact contained in
information furnished in writing by the Distributor to the Trust for use in the
Registration Statement or Prospectus or shall arise out of or be

AMENDED DISTRIBUTION AGREEMENT - 6

<PAGE>

based upon any alleged omission to state a material fact in connection with
such information required to be stated in the Registration Statement or
Prospectus or necessary to make such information not misleading. The
Distributor's agreement to indemnify the Trust, its officers and Trustees and
any such controlling person as aforesaid, is expressly conditioned upon the
Distributor being promptly notified of any action brought against the Trust,
its officers and Trustees or any such controlling person, such notification
being given to the Distributor at its principal business office.

Section 8. DURATION AND TERMINATION OF THIS AGREEMENT.

8.1 This Agreement shall become effective as of the date first
above written and shall remain in force for two years from the date hereof
and thereafter as to each Series of the Trust which has approved the Plan,
but only so long as such continuance is specifically approved at least
annually by (a) the Board of Trustees of the Trust, or by the vote of a
majority of the outstanding voting securities of the Shares of each Series,
and (b) by the vote of a majority of those Trustees who are not parties to
this Agreement or interested persons of any such parties and who have no
direct or indirect financial interest in this Agreement or in the operation
of the Trust's Plan or in any agreement related thereto ("Independent
Trustees"), cast in person at a meeting called for the purpose of voting upon
such approval.

8.2 This Agreement may be terminated at any time as to any Series,
without the payment of any penalty, by a majority of the Independent Trustees
or by vote of a majority of the outstanding voting securities of the Shares
of the Series, or by the Distributor, on sixty (60) days' written notice to
the other party. This Agreement shall automatically terminate in the event
of its assignment.

8.3 The terms "affiliated person," "assignment," "interested
person" and "vote of a majority of the outstanding voting securities," when
used in this Agreement, shall have the respective meanings specified in the
1940 Act.

Section 9. AMENDMENTS TO THIS AGREEMENT.

This Agreement may be amended by the parties only if such amendment
is specifically approved by (a) the Board of Trustees of the Trust, or by the
vote of a majority of the outstanding voting securities of the Shares of any
Series affected by the Amendment, and (b) by the vote of a majority of the
Independent Trustees cast in person at a meeting called for the purpose of
voting on such amendment.

AMENDED DISTRIBUTION AGREEMENT - 7

<PAGE>

Section 10. GOVERNING LAW.

The provisions of this Agreement shall be construed and interpreted
in accordance with the laws of the State of Oregon as at the time in effect
and the applicable provisions of the 1940 Act. To the extent that the
applicable law of the State of Oregon, or any of the provisions herein,
conflict with the applicable provisions of the 1940 Act, the latter shall
control.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year above written.

CRABBE HUSON SECURITIES, INC.

By:
-----------------------------------------

CRABBE HUSON FUNDS

By:
-----------------------------------------

AMENDED DISTRIBUTION AGREEMENT - 8

<PAGE>

Exhibit No. 99.6(b)

SELECTED DEALER AGREEMENT

FOR

CRABBE HUSON FUNDS

_______________________________________________________________________________
Date Name of Firm

_______________________________________________________________________________
Address of Principal Office City State Zip Code

_______________________________________________________________________________
Name of Contact Telephone Number

We have entered into a distribution agreement with the mutual funds listed on
Exhibit A (the "Funds") under which we are acting as the exclusive distributor
to the Funds for the purpose of distributing their shares (the "Shares") to
investors, either directly or indirectly through other broker-dealers, banks
and other qualified institutions. We invite you to become a member of the
Selling Group and to participate in the distribution of the Shares of the Funds
on the following terms and conditions:

1. Orders for Shares received from you will be accepted by us on behalf of
the Funds only at the public offering price applicable to each other, as
established by the then effective Prospectus of the Funds. The procedure
relating to the handling of orders shall be subject to instructions which we
shall forward, from time to time, to all members of the Selling Group. Initial
purchase orders shall not be accepted from any investor by you in amounts of
less than $2,000, and subsequent purchase orders shall not be accepted in
amounts of less than $500. These minimums may be increased with respect to
sales of other classes of shares. We will notify you by letter of the
availability, and terms of sale and your compensation, for sale of any other
classes of Shares. All orders are subject to acceptance by us, and we reserve
the right, in our sole discretion, to reject any order.

2. Payments due to members of the Selling Group will be accrued quarterly and
paid out the next succeeding month, or when such payments aggregate at least
$25, whichever is later.

3. As a member of the Selling Group, you agree to purchase Shares only from
the Funds or from your customers. You agree that all purchases of Shares from
the Funds shall be made only to cover

1 - SELECTED DEALER AGREEMENT

<PAGE>

orders received by you from your customers or for your own bona fide
investment. If you purchase Shares from your customers, you agree to pay such
customers not less than the redemption price in effect on the date of such
purchase, as defined in the then current Prospectus of the Funds.

4. You represent and warrant to us: (a) that you are a member of the
National Association of Securities Dealers, Inc. ("NASD"), that such membership
has not been suspended, and that you agree to maintain membership in the NASD,
or (b) that you are a foreign dealer not eligible for membership in the NASD,
and are fully licensed and legally empowered to act as a securities
broker/dealer under the laws of each jurisdiction in which you conduct such
business, or (c) that you are a bank licensed and regulated under the laws of
the United States or of the state in which you do business, and are legally
authorized to sell the Shares, or (d) that you are a Securities and Exchange
Commission registered Investment Advisor pursuant to the Investment Advisors
Act of 1940. You agree to abide by the provisions of the Investment Company
Act of 1940, as amended (the "1940 Act"), the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended, and all the rules
and regulations of the Securities and Exchange Commission and the NASD which
are binding upon underwriters and dealers in the distribution of the securities
of open-end investment companies, including without limitation, the NASD Rules
of Fair Practice. You further agree to comply with all other state and Federal
laws and the rules and regulations of authorized regulatory agencies applicable
to the sale of Shares. You agree that you will not sell or offer for sale
Shares in any state or other jurisdiction where they have not been qualified
for sale or if we have not advised you in advance that such sale is exempt from
such qualification requirements. You are responsible under this Agreement for
inquiring of us as to the jurisdictions in which Shares are not qualified for
sale.

5. You agree that you will not withhold placing customers' orders so as to
profit yourself as a result of such withholding.

6. Only unconditional orders for Shares will be accepted.

7. Payments for purchase of Shares made by you by telephone or wire order
(including purchase orders received through our manual or automated phone
system, or via the Fund/SERV program of National Securities Clearing
Corporation), and all necessary account information required by us to establish
an account or to settle a resale order, including, without limitation, the tax
identification number of the purchaser, certified either by the purchaser or by
you, shall be provided to us and received by us within three business days
after our acceptance of your order or such shorter time as may be required by
law. If such payment or other settlement information are not timely received
by us, you

2 - SELECTED DEALER AGREEMENT

<PAGE>

understand that we reserve the right, without notice, to cancel the purchase or
resale order, or, at our option in the case of a purchase order, to sell the
Shares ordered by you back to the Fund, and in either case you shall promptly
reimburse us for any loss to us or the Fund, including without limitation loss
of our profit, suffered by us resulting from your failure to make the aforesaid
timely payment or settlement. If sales of any Fund's Shares are contingent
upon the Fund's receipt of Federal Funds in payment therefor, you will forward
promptly to us any purchase orders and/or payments received by you for such
Shares from our customers. With respect to purchase orders of uncertificated
book Shares placed via Fund/SERV, you shall retain in your files all
applications and other documents required by us to establish an account or to
settle a resale order. You will provide us with the original of such documents
at our request.

8. You will offer and sell Shares of any Fund only in accordance with the
terms and conditions of its then-current Prospectus and Statement of Additional
Information (collectively referred to as the "Prospectus") and you will make no
representations about such Shares not included in said Prospectus or in any
authorized supplemental material supplied or authorized by us. You will not
use any other offering materials for the Funds with out our written consent.
You will use your best efforts in the development and promotion of sales of
Shares and agree to be responsible for the proper instruction and training of
all sales personnel employed by you, in order that the Shares will be offered
and sold in accordance with the terms and conditions of this Agreement and all
applicable laws, rules and regulations. You agree to hold harmless and
indemnify us, the Funds, and our respective officers, directors, trustees and
employees in the event that you, or any of your current or former employees,
should violate any law, rule or regulation, or any provisions of this
Agreement, which violation may result in any loss or liability to us, our
affiliates or any Fund. If we determine to refund any amounts paid by an
investor by reason of any such violation on our part, you shall promptly return
to us on demand any commissions previously paid or discounts allowed by you to
us with respect to the transaction for which the refund is made. Furthermore,
you agree to indemnify us, our affiliates and the Funds against any and all
claims, demands, controversies, actions, losses, damages, liabilities,
expenses, arbitrations, complaints or investigations, including without
limitation, reasonable attorneys' fees and court costs that are the result of
or arise directly or indirectly, in whole or in part, from us, our affiliates
or the Funds acting upon instructions for the purchase, exchange or resale of
uncertificated book Shares received through your manual or automated phone
system or the Fund/SERV program of National Securities Clearing Corporation;
provided such loss, liability or damages are not the result of the gross
negligence, recklessness or intentional misconduct of us, our affiliates or the
Funds. All expenses which you incur in

3 - SELECTED DEALER AGREEMENT

<PAGE>

connection with your activities under this Agreement shall be borne by you.
Termination or cancellation of this Agreement shall not relieve us from the
requirements of this paragraph as to transactions or occurrences arising prior
to such termination.

9. We reserve the right, at our discretion, without notice to you, to suspend
sales or withdraw the offering of Shares of the Funds entirely, to change the
offering price as provided in the Prospectus, or to cancel this Agreement.
Except as specified in the previous sentence, any amendment to this Agreement
will be effective only if in writing and signed by both parties hereto.

10. Additional copies of any Prospectus and any printed information issued as
supplemental to any Prospectus will be supplied by us to members of the Selling
Group in reasonable quantities upon request.

11. In no transaction shall you have any authority whatever to act as agent of
the Funds or of us or of any member of the Selling Group.

12. This Agreement may be terminated upon written notice by either party at
any time, and shall automatically terminate upon (a) its attempted assignment
by you, by operation of law or otherwise, or (b) by us otherwise than by
operation of law, or (c) your expulsion from the NASD, or (d) your loss of
qualification to sell Shares of the Fund.

13. This Agreement shall become effective upon receipt by us of a signed copy.
All amendments to this Agreement shall take effect on the date set forth in the
Notice of Amendment sent to you by us. All communications to us should be sent
to the aforementioned address. Any notice to you shall be duly given if mailed
or telegraphed to you at your address specified above. This Agreement shall be
construed in accordance with the laws of Oregon.

14. We agree to pay to you, in compensation for your efforts in marketing and
distributing Shares of the Funds, distribution expenses in accordance with the
Distribution Plan that has been adopted by the Funds, a copy of which is
attached hereto as Exhibit 1. You agree that Crabbe Huson Securities, Inc.
will not be liable for payment of distribution expenses, until Crabbe Huson
Securities, Inc. is in receipt of such payments from the Funds. As long as
this Distribution Plan is in effect and distribution expenses are being paid to
us by the Funds, we will pay to you quarterly distribution expenses up to the
following amounts, based on the following rates applied to the quarterly
weighted average of the total amount invested in Shares of the participating
Funds as to which you are, at the end of the quarter, a broker of record of an
aggregate of $1,000,000 or more of Shares in the Funds:

4 - SELECTED DEALER AGREEMENT

<PAGE>

1/4 of .25% of the asset value of the Asset Allocation,
Equity, Special, Small Cap and Real Estate Investment Funds;

1/4 of .15% of the asset value of the Income, U.S.
Government Income, and Oregon Municipal Bond Funds; and

1/4 of .10% of the asset value of the Money Market Fund.

All such distribution expense payments are subject to termination or alteration
in accordance with the terms of the Distribution Plan, the terms of its
approval by the Funds, and any requirement now existing or hereafter adopted by
the United States Securities Exchange Commission. If we offer for sale other
classes of Shares, we will notify you by letter of the compensation, if any,
that will be payable to you with respect to sales of such Shares.

By: ______________________________ Date:________________________

Title: ___________________________

The undersigned accepts your invitation to become a member of the Selling Group
and agrees to abide by the terms and conditions of the foregoing Agreement.
The undersigned acknowledges receipt of the Prospectus of the Funds for use in
connection with this offering.

_______________________________________________________________________________
Firm Name (Please print or type)

By:____________________________________________________________________________
Authorized Signature Print or Typed Name

Title:________________________

Date:_________________________

The above Agreement should be executed in triplicate and signed copies should
be returned to Crabbe Huson Securities, Inc.

Please direct all orders for the Purchase, Redemption, all other transactions
and Funds' correspondence to:

5 - SELECTED DEALER AGREEMENT

<PAGE>

Transfer Agent:

The Crabbe Huson Family of Mutual Funds
P.O. Box 8413
Boston, Massachusetts 02110-8413

The Crabbe Huson Family of Mutual Funds
Two Heritage Drive
Quincy, Massachusetts 02171

(800) 541-9732

The Crabbe Huson Family of Mutual Funds
Administrative Office
121 SW Morrison, Suite 1400
Portland, Oregon 97204

(503) 295-0111

6 - SELECTED DEALER AGREEMENT

<PAGE>

EXHIBIT 99.10

INDEPENDENT AUDITORS' CONSENT

The Board of Directors
Crabbe Huson Funds:

We consent to the inclusion in Crabbe Huson Funds' Post-Effective Amendment
No. 1 to the Registration Statement No. 33-64363 filed on Form N-1A under the
Securities Act of 1933 and Amendment No. 1 to the Registration Statement No.
811-7427 filed on Form N-1A under the Investment Company Act of 1940 of our
report dated December 8, 1995, on the financial statements and financial
highlights of the Crabbe Huson Funds (constituting the Oregon Tax-Free Fund
(formerly the Oregon Municipal Bond Fund, Inc.), the Crabbe Huson Asset
Allocation Fund, Inc., the Crabbe Huson Equity Fund, Inc., the Crabbe Huson
Income Fund, Inc., the Crabbe Huson U.S. Government Income Fund, Inc., the
Crabbe Huson U.S. Government Money Market Fund, Inc., and the Crabbe Huson
Real Estate Investment Fund, Inc.) for the periods indicated therein, which
report has been included in the Statement of Additional Information of the
Crabbe Huson Funds.

We also consent to the reference to our firm under the heading "Financial
Highlights" in the Prospectuses and under the heading "Auditors" in the
Statement of Additional Information.

KPMG PEAT MARWICK LLP

Portland, Oregon
July 10, 1996

<PAGE>
Exhibit No. 99.15

CRABBE HUSON FUNDS

AMENDED
DISTRIBUTION PLAN

DISTRIBUTION PLAN, as of _______________, 1996, of Crabbe Huson
Funds, a Delaware business trust (the "Trust").

RECITALS

1. The Trust has been organized to operate as an open-end
management investment company and is registered under the Investment Company
Act of 1940 (collectively with the rules and regulations promulgated
thereunder, the "1940 Act").

2. The Trustees of the Trust under the Trust's Declaration of
Trust are authorized to issue an unlimited number of shares of beneficial
interest of the Trust, without par value, and to create an unlimited number
of series of shares of the Trust with each series having its own investment
objectives, assets and liabilities. The Trustees are further authorized to
divide the shares into sub-series. Pursuant to Rule 18f-3 of the 1940 Act,
the Trustees have approved the creation of multiple classes of shares. Only
the Initial Class of shares (the "Shares") shall be subject to the terms and
conditions set forth herein.

3. The Trust intends to distribute the Shares in accordance with
Rule 12b-1 ("Rule 12b-1") under the 1940 Act and desires to adopt this
Distribution Plan (the "Plan") as a plan of distribution pursuant to Rule
12b-1.

4. The Trust operates as a "series company" within the meaning of
Rule 18f-2 of the Act. Pursuant to its Declaration of Trust the Trust has
authorized nine series of its shares of beneficial interest.

5. The Trust desires to engage Crabbe Huson Securities, Inc. (the
"Distributor") to provide certain distribution services for the Trust.

6. The Distributor is a broker/dealer properly licensed to act as
a distributor of securities and is willing to act as such in the sale and
distribution of shares of each of the series as are designated by the Trust.

7. The Trust desires to enter into a distribution agreement in
such form as may from time to time be approved by the Trustees of the Trust
in the manner specified in Rule 12b-1 (the "Distribution Agreement") with the
Distributor, whereby the

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Distributor will provide facilities and personnel and render services to the
Trust in connection with the offering and distribution of the Shares.

8. The Trust desires to reimburse the Distributor, within
specified limits, for the Distributor's actual expenses incurred in the
distribution and promotion of the Shares.

9. The Trustees, in considering whether the Trust should adopt
and implement this Plan, have evaluated such information as they deemed
necessary to an informed determination as to whether this Plan should be
adopted and implemented and have considered such pertinent factors as they
deemed necessary to form the basis for a decision to use assets of the Trust
for such purposes, and have determined that there is a reasonable likelihood
that the adoption and implementation of this Plan will benefit the Trust and
its shareholders.

PLAN

NOW, THEREFORE, the Trustees hereby adopt this Plan for the Trust
as a plan of distribution in accordance with Rule 12b-1, on the following
terms and conditions:

1. The Distributor shall perform such services and bear such
costs as shall be specified in a Distribution Agreement approved by a
majority of all the Trustees and of the Trustees who are not "interested
persons" of the Trust and who have no direct or indirect financial interest
in the operation of the Plan or in any agreements related to the Plan (the
"Qualified Trustees").

2. The proper officers of the Trust may authorize the direct or
indirect use of the Trust assets to finance the sale of Shares ("Additional
Sales Activity"). Expenses attributable to such Additional Sales Activity
may include, without limitation, the cost of printing sales literature,
prospectuses, statements of additional information and reports used for sale
purposes for persons other than then-current shareholders, the cost of
mailing such materials in circumstances in which the Distributor will not
incur such mail costs, compensation paid to registered representatives of the
Distributor and to broker/dealers which have entered into sales agreements
with the Distributor, compensation to investment advisors and other persons
or entities that promote the sale of any Series' Shares, advertisement,
promotion, marketing and sales expenses and compensation to investment
advisers or other persons or entities that promote the sale of any Series'
Shares.

3. The Trust may pay up to one-twelfth (1/12) of .25% of each
series' average daily net assets on a monthly basis to the Distributor to
reimburse the Distributor for actual expenses

AMENDED DISTRIBUTION PLAN - 2

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incurred in the distribution and promotion of that series' Shares, to the
extent permitted by Rule 12b-1, and as determined in accordance with the
Trust's prospectus and the Rules of Fair Practice of the National Association
of Securities Dealers, Inc. All or any part of the reimbursements may be
waived by the Distributor in the Distribution Agreement. Distribution
expenses that are not allocable to a specific series shall be allocated based
on the number of net assets of the respective Funds which are participants in
this Plan.

4. Nothing herein contained shall be deemed to require the Trust
to take any action contrary to the Declaration of Trust of the Trust or
By-Laws of the Trust or any applicable statutory or regulatory requirement to
which the Trust is subject or by which it is bound, or to relieve or deprive
the Trustees of the responsibility for and control of the conduct of the
affairs of the Trust.

5. This Plan shall become effective as to each series upon (1)
approval by a vote of at least a "majority of the outstanding voting
securities" of that series, and (b) approval by a vote of the Trustees and of
the Qualified Trustees, such votes to be cast in person at a meeting called
for the purpose of voting on this Plan.

6. This Plan shall continue in effect indefinitely for each
series; PROVIDED, HOWEVER, that such continuance is subject to annual
approval by a vote of the Trustees and of the Qualified Trustees, such votes
to be cast in person at a meeting called for the purpose of voting on
continuance of this Plan. If such annual approval is not obtained, this Plan
shall expire as to any series on the date which is 15 months after the date
of last approval.

7. This Plan may be amended at any time by the Trustees, provided
that (a) any amendment to increase materially the amount to be expended from
the assets of any single Fund for the services described herein shall be
effective only upon the approval by a vote of a "majority of the outstanding
voting securities" of any series affected by the amendment, and (b) any
material amendment of this Plan shall be effective only upon approval by a
vote of the Trustees and of the Qualified Trustees, such votes to be cast in
person at a meeting called for the purpose of voting on such amendment. This
Plan may be terminated as to any series at any time by a vote of a majority
of the Qualified Trustees or by a vote of a "majority of the outstanding
voting securities" of that particular series.

8. The officers of the Trust shall provide the Trustees, and the
Trustees shall review, at least quarterly, a written report of the amounts
expended under this Plan and the purposes for which such expenditures were
made.

AMENDED DISTRIBUTION PLAN - 3

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9. While this Plan is in effect, the selection and nomination of
those Trustees who are not "interested persons" of the Trust shall be
committed to the discretion of such disinterested Trustees.

10. For the purpose of this Plan, the terms "interested persons" and
"majority of the outstanding voting securities" are used as defined in the 1940
Act.

11. The Trust shall preserve copies of this Plan, and each agreement
related hereto and each report referred to in paragraph 8 hereof (collectively,
the "Records") for a period of six years from the end of the fiscal year in
which such Record was made, and each such Record shall be kept in an easily
accessible place for the first two years of said record-keeping.

12. This Plan shall be construed in accordance with the laws of the
State of Oregon and the applicable provisions of the 1940 Act.

13. If any provision of this Plan shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Plan shall not
be affected thereby.

AMENDED DISTRIBUTION PLAN - 4

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EXHIBIT 99.18

CRABBE HUSON FUNDS
RULE 18F-3 PLAN

RECITALS

A. Rule 18f-3 (the "Rule") under the Investment Company Act of 1940, as
amended (the "1940 Act"), requires that the board of directors or trustees of
an investment company wishing to offer multiple classes pursuant to the Rule
adopt a plan setting forth the separate arrangement and expense allocation of
each class, and any related conversion features or exchange privileges.

B. Crabbe Huson Funds (the "Trust"), a Delaware business trust, is an
open-end, management investment company of the series type and is so registered
under the 1940 Act. The Trust currently offers shares in eight separate
series. The series identified on Exhibit A attached hereto (individually a
"Fund" and, collectively, the "Funds") have determined to establish three
classes of shares, to be known as the Primary Class, the Adviser Class and the
Institutional Class.

C. The principal differences in distribution arrangements, other services,
and expenses between the Primary Class, the Adviser Class, and the
Institutional Class, and the exchange features of each class are set forth
below in this Plan, which is subject to change, to the extent permitted by law
and by the governing documents of the Trust and each Fund, by action of the
Trustees of the Trust (the "Trustees"), acting as a body (the "Board").

D. The Trustees, including a majority of the Trustees who are not "interested
persons" of the Trust (as defined in the 1940 Act), have determined as to each
Fund that the Plan is in the best interests of each class of shares of such
Fund individually and such Fund as a whole.

PLAN

1. DIFFERENCES IN DISTRIBUTION ARRANGEMENTS.

a. Shares of the Primary Class will be sold primarily through
broker-dealers and financial institutions who hold Primary Class shares for the
benefit of their customers, to participant-directed employee benefit plans and
directly to individual investors by the Distributor. To compensate the
Distributor for distributing the Primary Class to such investors, including
making payments to broker-dealers, retirement plan administrators, and financial
services companies, and for incurring other expenses in connection with such
distribution and providing shareholder and administrative services described

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below, each Fund will pay a distribution fee of 0.25% per annum of the average
daily net asset value of the Primary Class to the Distributor in accordance
with a distribution plan adopted pursuant to Rule 12b-1 under the 1940 Act. It
is the intent of the Board that the Primary Class shall be administered in the
same manner as the Funds were managed prior to creation of this multi-class
distribution arrangement.

b. The Adviser Class may be offered through broker-dealers
retirement plan administrators, and other financial intermediaries. To
compensate the Funds' Distributor for distributing shares of the Adviser Class
to such investors, including making payments to broker-dealers, retirement plan
administrators, and financial services companies, and for incurring other
expenses in connection with such distribution and providing shareholder and
administrative services described below, the Funds will pay a distribution fee
of 0.75% per annum of the average daily net asset value of the Adviser Class to
the Funds' Distributor in accordance with a Distribution Plan adopted pursuant
to Rule 12b-1 under the 1940 Act. The minimum initial purchase amount shall
initially be set at _______, but may be adjusted from time to time as
determined by the Board.

c. The Institutional Class will be sold directly by the Funds'
Distributor to institutional investors such as pension and profit sharing
plans, other employee benefit trusts, endowments, foundations, corporations,
and high net worth individuals. Sales will generally be subject to specified
minimum initial purchase amounts at a significantly higher level than are the
other classes. The minimum initial purchase amount shall initially be set at
$1,000,000, but may be adjusted from time to time as determined by the Board.

2. DIFFERENCES IN SERVICES. Beneficial owners of the Advisor Class and
the Primary Class will have smaller accounts than holders of the Institutional
Class, will engage in more shareholder transactions in relation to the size of
their holdings, and will require more information-, communication-, and
transaction-related services, including automatic investment programs, in
relation to such holdings. These services will be provided by broker-dealers,
financial institutions and/or retirement plan administrators who hold shares of
the Adviser Class or the Primary Class for the benefit of their customers, as
well as by the Transfer Agent and the Distributor.

3. ALLOCATIONS.

a. The following expenses shall be allocated, to the extent
practicable, on a class-by-class basis: (i) Rule 12b-1 fees payable by a Fund
to the distributor or principal underwriter of the Fund's shares (the
"Distributor"), and (ii) transfer agency costs attributable to each class.
Subject to the approval of the Board, including a majority of the

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independent Trustees, the following "Class Expenses" may be allocated on a
class-by-class basis: (a) printing and postage expenses related to preparing
and distributing materials such as shareholder reports, prospectuses and proxy
statements to current shareholders of a specific class, (b) SEC registration
fees incurred with respect to a specific class, (c) blue sky and foreign
registration fees and expenses incurred with respect to a specific class, (d)
the expenses of administrative personnel and services required to support
shareholders of a specific class (including, but not limited to, maintaining
telephone lines and personnel to answer shareholder inquiries about their
accounts or about the Fund), (e) litigation and other legal expenses relating
to a specific class of shares, (f) Trustees' fees or expenses incurred as a
result of issues relating to a specific class of shares, (g) accounting and
consulting expenses relating to a specific class of shares, (h) any fees
imposed pursuant to a non-Rule 12b-1 shareholder services plan that relate to a
specific class of shares, and (i) any additional expenses, not including
advisory or custodial fees or other expenses related to the management of the
Fund's assets, if these expenses are actually incurred in a different amount
with respect to a class, or if services are provided with respect to a class
that are of a different kind or to a different degree than with respect to one
or more other classes.

All expenses not now or hereafter designated as Class Expenses ("Fund
Expenses") will be allocated to each class on the basis of the net asset value
of that class in relation to the net asset value of the Fund.

b. WAIVERS AND REIMBURSEMENTS. The Adviser or Distributor may
choose to waive or reimburse expenses of a class on a voluntary, temporary
basis. Such waiver or reimbursement may be applicable to some or all of the
classes and may be in different amounts for one or more classes.

c. INCOME, GAINS AND LOSSES. Income, and realized and unrealized
capital gains and losses shall be allocated to each class on the basis of the
net asset value of that class in relation to the net asset value of the Fund.

4. CONVERSION FEATURES. No class of shares shall be subject to
automatic conversion into another class of shares, other than the shares of the
Institutional Class may be converted, at the discretion of the applicable Fund,
into shares of the Primary Class any time that the value of the shares in an
Institutional Class account falls below $750,000.

5. EXCHANGE PRIVILEGES. Shares of a class shall be exchangeable for
shares of any investment company advised by The Crabbe Huson Group, Inc., or
any successor to its business, provided any minimum investment requirements
are satisfied on the exchange.

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6. ADDITIONAL INFORMATION. This Plan is qualified by and subject to the
terms of the current prospectus for each of the respective classes; provided,
however that none of the terms set forth in any such prospectus shall be
inconsistent with the terms of the classes contained in this Plan. The
prospectus for each class contains additional information about that class and
the applicable Fund's multiple class structure.

7. APPROVAL BY BOARD OF TRUSTEES. This Plan shall not take effect until
it has been approved as to each Fund by the vote of a majority (or whatever
greater percentage may, from time to time, be required under Rule 18f-3 under
the 1940 Act) of (a) all the Trustees of the Trust and (b) the Trustees who are
not "interested persons" of the Trust.

8. AMENDMENTS. No material amendment to this Plan shall be effective
unless it is approved by the Board of Trustees in the same manner provided in
Paragraph 7. The Board may determine in the future that other distribution
arrangements, allocations of sales charges (if any), expenses whether ordinary
or extraordinary), or services to be provided to a class of shares are
appropriate and amend this Plan accordingly without the approval of
shareholders of any class.

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