[Crabbe Huson graphic] October 31, 1999
ANNUAL REPORT
CRABBE HUSON FUNDS
CRABBE HUSON
CONTRARIAN FUND
CRABBE HUSON
EQUITY FUND
CRABBE HUSON
MANAGED INCOME
& EQUITY FUND
[Graphic -- vignette of photo of mountain and trees]
CRABBE HUSON
REAL ESTATE
INVESTMENT FUND
CRABBE HUSON
SMALL CAP FUND
THE CRABBE HUSON
SPECIAL FUND, INC.
CRABBE HUSON
CONTRARIAN INCOME FUND
CRABBE HUSON
OREGON TAX-FREE FUND
<PAGE>
OCTOBER 31, 1999
----------------
ANNUAL REPORT
Cover image copyright (C)1999 PhotoDisc, Inc.
<PAGE>
[Logo: Crabbe Huson graphic
CRABBE HUSON
A Subsidiary of Liberty Financial Companies, Inc.]
Dear Shareholders:
The U.S. stock market continued to show strong returns during the past 12
months, with solid gains in the first half of the period and increasing
volatility in the second half. Although the market remained concentrated in
growth stocks and select technology issues through the first quarter of 1999, it
broadened in the second quarter to include sectors that had been in the
doldrums, including economically cyclical companies, value-oriented stocks, and
many stocks in the small- and mid-cap sectors.
During the summer, however, the Federal Reserve Board (the "Fed") became
concerned about the combination of a robust economy, high stock prices and tight
labor markets -- and the effects of these factors on inflation. To slow the
economy, the Fed made three one-quarter-point (0.25%) increases in short-term
interest rates -- in June, August and finally in mid-November. Much of the
volatility the market experienced from July through October resulted from
investors either reacting to -- or trying to anticipate -- Federal Reserve
actions on interest rate movements.
In the bond market, rising interest rates hurt performance. The yield on the
30-year Treasury bond rose a full percentage point, while in the 5-year range
yields increased by 1.7%. Short-term interest rates also increased during the
summer as a result of the Fed actions. The rise in bond yields was, in large
part, the result of the strong U.S. economy and an increase in commodity prices
worldwide.
At Crabbe Huson, we continue to maintain a long-term perspective. While our
contrarian style -- which has traditionally been biased towards value stocks --
has been out of favor for the past few years, we were encouraged by the
outstanding performance of our equity funds in the second quarter of this year.
And, in a very challenging bond market, we were pleased by the results of our
fixed-income and real estate portfolios, which outperformed their benchmark
indexes during the 12-month period.(1)
In the pages that follow, our management team will provide more specific
information about Crabbe Huson Funds' performance and the strategies employed
during the fiscal year. As always, thank you for choosing Crabbe Huson and for
giving us the opportunity to serve your investment needs.
Sincerely,
/s/ Stephen E. Gibson
Stephen E. Gibson
President
December 10, 1999
(1)Please see Crabbe Huson Real Estate Fund and Crabbe Huson Contrarian Income
Fund reports for details and footnotes.
1
<PAGE>
---------------------------------------------
CRABBE HUSON'S
CONTRARIAN INVESTMENT
PHILOSOPHY
---------------------------------------------
The contrarian style of investing
Our contrarian investment philosophy follows a strict price-driven investment
discipline. We seek to uncover fundamentally strong companies that are currently
out of favor due to weak industry conditions, business setbacks or market
preferences. In addition, we focus on identifying a catalyst that has the
potential to positively change the market's perception of a company's value.
We base our investment style on a strict price-driven investment model. We avoid
"momentum" stocks that have experienced significant price gains. In many cases,
such stocks have been over-analyzed, over-bought and are over-valued, which can
limit further upside potential. Instead, we emphasize stocks of sound companies
undergoing periods of price weakness. We believe that such investments have less
market risk because their prices have already been adjusted downward, in many
cases to levels below their fundamental value. We believe these stocks are
likely to decline less in weak markets. They also offer good long-term
appreciation potential, should they recapture the market's favor.
An emphasis on teamwork
Our contrarian philosophy is supported by team-based portfolio management. While
all of our funds are managed by a group of fund managers, each manager has sole
responsibility for a designated portion of a fund's assets. However, all team
members are involved in evaluating market trends and setting a fund's strategic
direction. We believe that incorporating a variety of perspectives and drawing
upon the insight of all members of the fund management team can generate a
supportive environment for each portfolio manager's individual decisions.
2
<PAGE>
CRABBE HUSON CONTRARIAN FUND
Finding value in mid-cap stocks
The market environment in the past few years has been concentrated in larger
capitalization stocks, resulting in a tremendous performance discrepancy between
large-cap stocks and small- and mid-cap stocks, as well as between
growth-oriented and value-oriented investment styles. In addition, the
tremendous money flows into large-cap growth stocks have taken them to even
higher valuations that, in our opinion, don't make much sense. We have focused
on mid-cap companies to a greater extent than small-cap because mid-caps have
appeared to have improving prospects for future growth and benefit from greater
liquidity. However, because of the market's volatile nature and its large-cap
bias, the Fund underperformed the broader equity indexes. From its inception
date on December 1, 1998 through October 31, 1999, the Contrarian Fund's Class A
share return, without a sales charge, was 3.90%.
The Contrarian Fund -- a different investment approach
The Fund is unusual among value funds in that it blends small-, mid- and
large-cap stocks. By prospectus, the Fund must be at least 60% invested in mid-
and large-cap stocks, with the remainder in small-cap stocks and cash. The
stocks in this Fund -- as with all of our funds -- are carefully selected from
our model portfolios. We have gone to great lengths to select the best stocks
from the large-, mid- and small-cap issues that we have already culled. Each
holding has been chosen using extensive scrutiny in terms of its fundamentals,
its position in its industry and the potential catalysts that can help it
perform.
Positioning the Fund for future growth
In recent months, we have added several well-known stocks to the portfolio at
very attractive prices. These include Becton Dickinson (0.4% of net assets) and
Oracle Systems Corp. (1.4%) -- both of which are high-quality companies that
have experienced dramatic price declines. These stocks have become much more
reasonably valued, and we believe their addition to the portfolio positions it
nicely for future growth potential. Becton Dickinson manufactures a diverse
product line of medical supplies, devices and diagnostic systems. The company
has seen strong increases in earnings, yet we were able to acquire the stock at
a very reasonable price. Oracle, one of the largest database software companies
in the world, is a top-tier firm that experienced an abrupt stock price decline
after a disappointing earnings report last spring. We acquired the stock at $23
per share -- near its 52-week low. The stock price has recovered to almost $48
per share at the end of October, 1999.
We have also been focusing on companies in the non-pharmaceutical health care
industry. This industry has been ravaged by cuts in Medicare, legal problems and
competition, and the stock prices of many health providers have dropped to
extremely low levels. Our belief is that these companies will have to raise
premiums to survive, which will help return them to profitability. The prices of
these stocks have been
3
<PAGE>
CRABBE HUSON CONTRARIAN FUND
driven to levels that are incredibly low, making them good candidates for our
contrarian management style.
Outlook: anticipation of market broadening
We believe the stock market may broaden to include stocks of small- and mid-cap
companies. One indicator is the continued recovery in several important global
economies -- especially Southeast Asia and Japan. If the global economy
continues to improve, we anticipate that small- and mid-sized company earnings
should also grow because many of these firms do a great deal of business
overseas. We also believe that the Fund's large-cap holdings, which are a mix of
value stocks and growth stocks acquired at depressed prices, would have
potential if the market broadens because many of these holdings have been
overlooked. However, as no one can predict the exact course of the stock market
over any time period, we remain committed to building shareholder value in the
Fund by seeking high-quality stocks that we believe can perform over the long
term.
/s/ James E. Crabbe /s/ John W. Johnson
- ------------------ ---------------------
James E. Crabbe John W. Johnson, CFA
/s/ Robert E. Anton /s/ Marian L. Kessler
- ------------------- ---------------------
Robert E. Anton Marian L. Kessler
4
<PAGE>
CRABBE HUSON CONTRARIAN FUND
Performance Information
Crabbe Huson Contrarian Fund Investment
Performance vs. Standard & Poor's 500 Index
Change in Value of $10,000 from 12/01/1998 - 10/31/1999
Class A Shares, With and Without Sales Charge
[Plot Points For Mountain Chart]
<TABLE>
<CAPTION>
Fund Without Fund With S&P 500
Sales Charge Sales Charge Index
<S> <C> <C>
10000 9425 10000
10180 9595 10576
10440 9839 11018
9880 9312 10675
10280 9689 11102
11280 10632 11532
11611 10943 11260
12051 11358 11885
11811 11132 11514
11241 10594 11456
10701 10086 11143
10390 9793 11848
</TABLE>
For the purposes of this comparison, the S&P 500 Index is tracked from
11/30/1998, while the Fund is tracked from its inception date of 12/1/1998. The
S&P 500 Index is an unmanaged index that tracks the performance of 500 widely
held, large-capitalization U.S. stocks. Unlike mutual funds, indexes are not
investments and do not incur fees or expenses. It is not possible to invest
directly in an index.
Change in Value of a $10,000 Investment in all Share Classes
from 12/01/98 to 10/31/1999
<TABLE>
<CAPTION>
Share Class A B C
Without With Without With Without With
sales sales sales sales sales sales
charge charge charge charge charge charge
<S> <C> <C> <C> <C> <C> <C>
$10,390 $9,793 $10,330 $9,830 $10,320 $10,220
</TABLE>
Cumulative Total Returns as of 10/31/1999
<TABLE>
<CAPTION>
Inception Date 12/1/1998 12/1/1998 12/1/1998
Share Class A B C
Without With Without With Without With
sales sales sales sales sales sales
charge charge charge charge charge charge
<S> <C> <C> <C> <C> <C> <C>
Life of Fund 3.90% -2.07% 3.30% -1.70% 3.20% 2.20%
</TABLE>
Cumulative Total Returns as of 9/30/1999
<TABLE>
<CAPTION>
Share Class A B C
Without With Without With Without With
sales sales sales sales sales sales
charge charge charge charge charge charge
<S> <C> <C> <C> <C> <C> <C>
Life of Fund 7.00% 0.85% 6.30% 1.30% 6.30% 5.30%
</TABLE>
Past performance cannot predict future results. Returns and value of an
investment will vary, resulting in a gain or loss on sale. All results shown
assume reinvestment of distributions. The "with sales charge" returns include
the maximum 5.75% charge for Class A shares and the maximum contingent deferred
sales
5
<PAGE>
CRABBE HUSON CONTRARIAN FUND
charge of 5% for Life of Fund for Class B shares and 1% for Class C shares.
Performance for different share classes will vary based on differences in sales
charges and fees associated with each class.
Performance results reflect any voluntary waivers or reimbursement of Fund
expenses by the Advisor or its affiliates. Absent these waivers or reimbursement
arrangements, performance results would have been lower.
6
<PAGE>
CRABBE HUSON CONTRARIAN FUND
INVESTMENT PORTFOLIO
October 31, 1999
<TABLE>
<CAPTION>
Shares Value
- -------- ------------------------------------------------- ----------
COMMON STOCKS - 85.1%
---------------------
<S> <C> <C>
FINANCE, INSURANCE & REAL ESTATE - 8.1%
Insurance Carriers - 5.3%
2,900 Ace, Ltd. ....................................... $ 56,369
1,100 Chubb Corp. ..................................... 60,362
900 MGIC Investment Corp. ........................... 53,775
2,900 Mid Atlantic Medical Services, Inc.(a) .......... 15,769
----------
186,275
----------
Nondepository Credit Institute - 1.3%
11,400 Arcadia Financial Ltd.(a) ....................... 45,600
----------
Real Estate Investment Trust - 1.5%
2,400 Equity Office Properties Trust .................. 53,100
----------
MANUFACTURING - 37.3%
Apparel - 1.1%
1,000 Liz Claiborne, Inc. ............................. 40,000
----------
Chemicals & Allied Products - 3.4%
800 Smith International, Inc.(a) .................... 27,650
2,300 Watson Pharmaceuticals, Inc.(a) ................. 73,025
1,100 Wellman, Inc. ................................... 16,569
----------
117,244
----------
Electrical Industrial Equipment - 1.4%
2,200 American Power Conversion Corp.(a) .............. 49,362
----------
Electronic & Electrical Equipment - 1.8%
3,200 Advanced Micro Devices, Inc. .................... 63,400
----------
Electronic Components - 0.6%
900 Rayovac Corp.(a) ................................ 22,388
----------
Food & Kindred Products - 7.7%
3,400 Flowers Industries, Inc. ........................ 57,375
2,300 IBP, Inc. ....................................... 55,056
1,400 PepsiCo, Inc. ................................... 48,563
800 Philip Morris Companies, Inc. ................... 20,150
3,300 Sara Lee Corp. .................................. 89,306
----------
270,450
----------
Machinery & Computer Equipment - 8.4%
5,500 Auspex Systems, Inc.(a) ......................... 30,594
3,200 Compaq Computer Corp. ........................... 60,800
500 Hewlett-Packard Co. ............................. 37,031
2,800 McDermott International, Inc. ................... 50,750
1,200 Seagate Technology, Inc.(a) ..................... 35,325
5,300 Silicon Graphics, Inc.(a) ....................... 41,075
2,300 Tenneco Inc. .................................... 36,800
----------
292,375
----------
</TABLE>
7
<PAGE>
CRABBE HUSON CONTRARIAN FUND
INVESTMENT PORTFOLIO (Continued)
October 31, 1999
<TABLE>
<CAPTION>
Shares Value
- -------- ----------------------------------------------- ---------
COMMON STOCKS - (continued)
---------------------------
<S> <C> <C>
MANUFACTURING - (continued)
Measuring & Analyzing Instruments - 1.7%
600 Becton, Dickinson & Co. .......................... $ 15,225
8,700 Input/Output, Inc.(a) ............................ 45,675
----------
60,900
----------
Miscellaneous Manufacturing - 1.1%
2,900 Mattel, Inc. ..................................... 38,788
----------
Paper Products - 0.7%
2,100 Longview Fibre Co. ............................... 23,887
----------
Petroleum Refining - 1.9%
700 Atlantic Richfield Co. ........................... 65,231
----------
Primary Metal - 2.7%
600 Aluminum Company of America ...................... 36,450
2,800 Century Aluminum Company ......................... 25,200
3,000 Ispat International NV ........................... 31,125
----------
92,775
----------
Transportation Equipment - 4.8%
3,000 Delphi Automotive Systems Corp. .................. 49,312
600 Ford Motor Co. ................................... 32,925
1,600 Lockheed Martin Corp. ............................ 32,000
1,000 Northrop Grumman Corp. ........................... 54,875
----------
169,112
----------
MINING & ENERGY - 11.1%
Crude Petroleum & Natural Gas - 1.4%
1,400 Burlington Resources, Inc. ....................... 48,825
----------
Oil & Gas Extraction - 5.1%
5,800 Forest Oil Corp.(a) .............................. 77,575
1,500 Nabors Industries, Inc.(a) ....................... 34,031
1,300 Tom Brown, Inc.(a) ............................... 17,875
3,300 Union Pacific Resources Group, Inc. .............. 47,850
----------
177,331
----------
Oil & Gas Field Services - 4.6%
5,800 Marine Drilling Companies, Inc.(a) ............... 93,888
1,100 Schlumberger Ltd. ................................ 66,619
----------
160,507
----------
RETAIL TRADE - 2.8%
Food Stores - 1.1%
2,800 Cracker Barrel Old Country Stores, Inc. .......... 37,450
----------
</TABLE>
8
<PAGE>
CRABBE HUSON CONTRARIAN FUND
INVESTMENT PORTFOLIO (Continued)
October 31, 1999
<TABLE>
<CAPTION>
Shares Value
- --------- ----------------------------------------------- ----------
COMMON STOCKS - (continued)
---------------------------
<S> <C> <C>
RETAIL TRADE - (continued)
General Merchandise Stores - 1.7%
1,400 Federated Department Stores, Inc.(a) .......... $ 59,762
----------
SERVICES - 13.3%
Business Services - 0.6%
1,800 Safety-Kleen Corp.(a) ......................... 20,587
----------
Computer Related Services - 6.2%
900 At Home Corp. Series A(a) ..................... 33,637
2,600 Convergys Corp.(a) ............................ 50,862
1,300 Deluxe Corporation ............................ 36,725
4,200 Mentor Graphics Corporation(a) ................ 33,863
20,000 Vysis, Inc.(a) ................................ 60,000
----------
215,087
----------
Computer Software - 2.6%
1,000 Oracle Systems Corp.(a) ....................... 47,563
2,800 PeopleSoft, Inc.(a) ........................... 42,000
----------
89,563
----------
Health Services - 3.9%
3,100 Coventry Health Care Inc.(a) .................. 17,825
600 PacifiCare Health Systems, Inc.(a) ............ 23,663
4,900 Tenet Healthcare Corp.(a) ..................... 95,244
----------
136,732
----------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 9.2%
Electric Services - 1.9%
1,200 Duke Power Co. ................................ 67,800
----------
Gas Services - 3.7%
1,200 Columbia Energy Group ......................... 78,000
1,300 El Paso Energy Corp. .......................... 53,300
----------
131,300
----------
Motor Freight & Warehousing - 0.4%
1,900 Budget Group, Inc. Class A(a) ................. 13,300
----------
Telecommunication - 3.2%
5,800 PageMart Wireless, Inc. Class A(a) ............ 32,263
1,100 MediaOne Group(a) ............................. 78,169
----------
110,432
----------
WHOLESALE TRADE - 3.3%
Durable Goods - 1.0%
800 Grainger (W.W.), Inc. ......................... 33,900
----------
</TABLE>
9
<PAGE>
CRABBE HUSON CONTRARIAN FUND
INVESTMENT PORTFOLIO (Continued)
October 31, 1999
<TABLE>
<CAPTION>
Shares Value
- ---------- -------------------------------------------------------- ----------
COMMON STOCKS - (continued)
---------------------------
<S> <C> <C>
WHOLESALE TRADE - (continued)
Nondurable Goods - 2.3%
6,700 Fleming Co., Inc. ...................................... $ 79,981
----------
Total Common Stocks
(cost of $2,859,836)(b) 2,973,444
----------
Par SHORT-TERM OBLIGATIONS - 15.3%
- ---------- ------------------------------
$536,000 Repurchase agreement with Lehman Brothers, Inc., dated
10/29/99, due 11/01/99 at 5.220%, collateralized by
U.S. Treasury bonds and/or notes with various maturities
to 2009, market value $549,385 (repurchase proceeds
$536,233) .............................................. 536,000
----------
OTHER ASSETS & LIABILITIES, NET - (0.4)% (12,748)
----------
NET ASSETS - 100.0% $3,496,696
==========
</TABLE>
NOTES TO INVESTMENT PORTFOLIO:
(a) Non-income producing.
(b) Cost for federal income tax purposes is $2,864,298.
See notes to financial statements.
10
<PAGE>
CRABBE HUSON EQUITY FUND
Fund underperformed in a difficult market environment
For the 12 months ended October 31, 1999, the Crabbe Huson Equity Fund had a
total return of 5.29%, based on Class A shares without a sales charge. The
Fund's performance was held back primarily by the increasing volatility and
preference for large-cap growth stocks during much of the period, but also by
disappointing returns from holdings in the non-pharmaceutical health care
sector. This industry has been ravaged by cuts in Medicare, legal problems and
competition, and stocks of many health providers have dropped to extremely low
levels. Our belief is that these companies will have to raise premiums to
survive, which will help them return to profitability. The prices of these
stocks have been driven to levels that are incredibly low, making them good
candidates for our contrarian management style. The Fund has a mid-cap bias in
its weighting, which is a reflection of where we have found opportunities in the
past few years. The Fund is not restricted by prospectus to a certain
capitalization size.
Energy and basic materials performed well at varying times during the year
One of the Fund's largest weightings is in the energy sector, which performed
well in the latter half of the period, when energy prices rose dramatically. In
the first half of the period, we had a large weighting in basic materials
stocks, including companies in the metals, paper and chemicals industries. These
stocks did extremely well when the market broadened in the second quarter and
basic materials stocks soared. For example, we had a large holding of Alcoa
(2.0% of net assets) -- the nation's largest aluminum company -- which rose 50%
in the month of April alone. We have since tapered our basic materials holdings
but still maintain positions in solid companies like Alcoa.
In technology, a focus on companies, not industries
In the technology sector, as in our general management strategy, we look for
companies rather than industries. Our technology holdings are a diverse group.
They include Hewlett Packard (1.4% of net assets), a diversified computer
hardware firm; PeopleSoft (1.4%), which makes integrated corporate software
systems, or "enterprise" software; Seagate (1.0%), a data storage manufacturer;
3Com (1.5%), a networking systems manufacturer; and Oracle (1.6%), a leader in
large-scale database software. As contrarians, we look for catalysts that can
change investor perception. For example, PeopleSoft is coming out with a new
version of their enterprise software package that we anticipate will have strong
potential in the Year 2000. Seagate, a computer data storage company that has
very strong financials and cutting-edge technology, has been subject to intense
pricing pressure throughout the industry. We expect this competition to sort
itself out over the next year and are optimistic about Seagate's prospects once
that occurs.
11
<PAGE>
CRABBE HUSON EQUITY FUND
Outlook: anticipation of market broadening
We believe the stock market may broaden to include stocks of small- and mid-cap
companies. One indicator is the continued recovery in several important global
economies -- especially Southeast Asia and Japan. The Asian economic crisis and
corresponding global deflation have significantly impacted the profitability of
small- and mid-sized companies, and the earnings of large blue chip companies
have been much stronger on a relative basis. If the global economy continues to
improve, we anticipate that an improvement in the earnings of small- and
mid-sized companies will also occur because many of these firms do a great deal
of business overseas. In addition, the earnings growth rates of large-cap
companies have been slowing, and the earnings growth rates of smaller companies
generally have been improving. Since investors tend to recognize these factors
when valuing stocks, we believe that small- and mid-cap companies that show
strong earnings growth have excellent long-term potential.
/s/ Robert E. Anton /s/ Marian L. Kessler
- ------------------- ---------------------
Robert E. Anton Marian L. Kessler
Performance Information
Crabbe Huson Equity Fund Investment
Performance vs. Standard & Poor's 500 Index
Change in Value of $10,000 from 10/31/1989 - 10/31/1999
Class A Shares, With and Without Sales Charge
[Plot Points For Mountain Chart]
<TABLE>
<CAPTION>
Fund Without Fund With S&P 500
Sales Charge Sales Charge Index
<S> <C> <C>
10000 9425 10000
8502 8013 9252
12960 12215 12344
14578 13740 13572
19027 17933 15596
20528 19348 16198
23273 21935 20476
26480 24957 25406
34390 32412 33562
30923 29145 40949
32409 30545 51454
</TABLE>
The Standard & Poor's 500 Index is an unmanaged index that tracks the
performance of 500 widely held, large-capitalization U.S. stocks. Unlike mutual
funds, indexes are not investments and do not incur fees or expenses. It is not
possible to invest directly in an index.
12
<PAGE>
CRABBE HUSON EQUITY FUND
Change in Value of a $10,000 Investment in all Share Classes
from 10/31/1989 to 10/31/1999
<TABLE>
<CAPTION>
Share Class A B C I
Without With Without With Without With
sales sales sales sales sales sales
charge charge charge charge charge charge
<S> <C> <C> <C> <C> <C> <C> <C>
$32,409 $30,545 $32,177 $32,177 $32,197 $32,197 $32,815
</TABLE>
Average Annual Total Returns as of 10/31/1999
<TABLE>
<CAPTION>
Inception Date 1/31/1989 1/27/1999 1/27/1999 10/3/1996
Share Class A B C I
Without With Without With Without With
sales sales sales sales sales sales
charge charge charge charge charge charge
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year 5.29% (0.76)% 4.54% (0.41)% 4.60% 3.61% 5.75%
5 Years 9.67% 8.37% 9.51% 9.23% 9.52% 9.52% 9.94%
10 Years 12.48% 11.81% 12.40% 12.40% 12.40% 12.40% 12.62%
</TABLE>
Average Annual Total Returns as of 9/30/1999
<TABLE>
<CAPTION>
Share Class A B C I
Without With Without With Without With
sales sales sales sales sales sales
charge charge charge charge charge charge
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year 16.88% 10.16% 16.13% 11.13% 16.13% 15.13% 17.36%
5 Years 10.12% 8.82% 9.98% 9.70% 9.98% 9.98% 10.38%
10 Years 12.21% 11.55% 12.14% 12.14% 12.14% 12.14% 12.34%
</TABLE>
Past performance cannot predict future investment results. Returns and value of
an investment will vary, resulting in a gain or loss on sale. All results shown
assume reinvestment of distributions. The "With sales charge" returns include
the maximum 5.75% charge for Class A shares and the maximum contingent deferred
sales charge (CDSC) of 5% for one year and 2% for five years for Class B shares
and 1% for one year for Class C shares. Class I shares (institutional shares)
are offered without sales charges or contingent deferred sales charges.
Performance for different share classes will vary based on differences in sales
charges and fees associated with each class.
Performance results reflect any voluntary waivers or reimbursement of Fund
expenses by the Advisor or its affiliates. Absent these waivers or reimbursement
arrangements, performance results would have been lower.
Class B, C and I share (newer class shares) performance information includes
returns of the Fund's Class A shares (the oldest existing fund class) for
periods prior to its inception date. These Class A share returns are not
restated to reflect any expense differential (e.g., Rule 12b-1 fees) between
Class A shares and the newer class shares. Had the expense differential been
reflected, the returns for the periods prior to the inception of Class B and
Class C shares would have been lower.
13
<PAGE>
CRABBE HUSON EQUITY FUND
INVESTMENT PORTFOLIO
October 31, 1999
<TABLE>
<CAPTION>
Shares Value
- ---------- ------------------------------------------ ------------
COMMON STOCKS - 88.6%
---------------------
<S> <C> <C>
FINANCE, INSURANCE & REAL ESTATE - 10.4%
Insurance Carriers - 8.2%
153,000 Ace, Ltd. ................................ $ 2,973,937
46,600 Aetna Life and Casualty Co. .............. 2,341,650
30,500 MGIC Investment Corp. .................... 1,822,375
3,900 Safeco Corp. ............................. 107,250
44,700 United Healthcare Corp. .................. 2,310,431
------------
9,555,643
------------
Real Estate Investment Trusts - 2.2%
120,800 Equity Office Properties Trust ........... 2,672,700
------------
MANUFACTURING - 34.8%
Apparel - 1.4%
40,300 Liz Claiborne, Inc. ...................... 1,612,000
------------
Chemicals & Allied Products - 3.5%
40,800 Smith International, Inc.(a) ............. 1,410,150
83,500 Watson Pharmaceuticals, Inc.(a) .......... 2,651,125
------------
4,061,275
------------
Electronic & Electrical Equipment - 1.8%
106,500 Advanced Micro Devices, Inc. ............. 2,110,031
------------
Food & Kindred Products - 10.9%
73,900 Dole Foods Co., Inc. ..................... 1,325,581
127,900 Flowers Industries, Inc. ................. 2,158,313
87,400 IBP, Inc. ................................ 2,092,138
52,700 PepsiCo, Inc. ............................ 1,828,031
89,600 Philip Morris Companies, Inc. ............ 2,256,800
114,500 Sara Lee Corp. ........................... 3,098,656
------------
12,759,519
------------
Machinery & Computer Equipment - 5.4%
59,700 3Com Corp.(a) ............................ 1,731,300
22,300 Hewlett-Packard Co. ...................... 1,651,594
39,500 Seagate Technology, Inc.(a) .............. 1,162,781
110,500 Tenneco Inc. ............................. 1,768,000
------------
6,313,675
------------
Measuring & Analyzing Instruments - 4.2%
90,100 Becton, Dickinson & Co. .................. 2,286,287
92,300 Xerox Corp. .............................. 2,584,400
------------
4,870,687
------------
Miscellaneous Manufacturing - 0.3%
29,600 Mattel, Inc. ............................. 395,900
------------
Petroleum Refining - 1.8%
22,700 Atlantic Richfield Co. ................... 2,115,356
------------
</TABLE>
14
<PAGE>
CRABBE HUSON EQUITY FUND
INVESTMENT PORTFOLIO (Continued)
October 31, 1999
<TABLE>
<CAPTION>
Shares Value
- --------- ------------------------------------------------- ----------
COMMON STOCKS - (continued)
---------------------------
<S> <C> <C>
MANUFACTURING - (continued)
Primary Metal - 2.0%
38,100 Aluminum Company of America ...................... $2,314,575
----------
Stone, Clay, Glass & Concrete - 1.6%
79,200 Owens-Illinois, Inc.(a) .......................... 1,895,850
----------
Transportation Equipment - 1.9%
21,100 Ford Motor Co. ................................... 1,157,863
56,400 Lockheed Martin Corp. ............................ 1,128,000
----------
2,285,863
----------
MINING & ENERGY - 7.3%
Oil & Gas Extraction - 4.3%
128,100 Nabors Industries, Inc.(a) ....................... 2,906,269
150,100 Union Pacific Resources Group, Inc. .............. 2,176,450
----------
5,082,719
----------
Oil & Gas Field Services - 3.0%
57,800 Schlumberger Ltd. ................................ 3,500,513
----------
RETAIL TRADE - 7.0%
Food Stores - 3.4%
73,900 Albertson's, Inc. ................................ 2,683,494
95,200 Cracker Barrel Old Country Stores, Inc. .......... 1,273,300
----------
3,956,794
----------
General Merchandise Stores - 2.0%
55,000 Federated Department Stores, Inc.(a) ............. 2,347,812
----------
Restaurants - 1.6%
80,000 Outback Steakhouse, Inc.(a) ...................... 1,840,000
----------
SERVICES - 11.9%
Computer Related Services - 2.6%
31,200 At Home Corp. Series A(a) ........................ 1,166,100
96,100 Convergys Corp.(a) ............................... 1,879,956
----------
3,046,056
----------
Computer Software - 2.9%
39,300 Oracle Systems Corp.(a) .......................... 1,869,206
105,500 PeopleSoft, Inc.(a) .............................. 1,582,500
----------
3,451,706
----------
Health Services - 6.4%
216,400 Healthsouth Corp.(a) ............................. 1,244,300
219,100 Health Management Associates, Inc.(a) ............ 1,944,513
25,100 PacifiCare Health Systems, Inc.(a) ............... 989,881
170,000 Tenet Healthcare Corp.(a) ........................ 3,304,375
----------
7,483,069
----------
</TABLE>
15
<PAGE>
CRABBE HUSON EQUITY FUND
INVESTMENT PORTFOLIO (Continued)
October 31, 1999
<TABLE>
<CAPTION>
Shares Value
- ---------- -------------------------------------------------------------- -----------
COMMON STOCKS - (continued)
---------------------------
<S> <C> <C>
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 16.2%
Electric Services - 7.0%
58,500 American Electric Power Co., Inc. ............................ $ 2,018,250
55,300 Duke Power Co. ............................................... 3,124,450
133,700 PG&E Corp. ................................................... 3,066,744
------------
8,209,444
------------
Gas Services - 4.0%
42,300 Columbia Energy Group ........................................ 2,749,500
46,100 El Paso Energy Corp. ......................................... 1,890,100
------------
4,639,600
------------
Telecommunication - 5.2%
51,800 AT&T Corp. ................................................... 2,421,650
52,400 MediaOne Group(a) ............................................ 3,723,675
------------
6,145,325
------------
WHOLESALE TRADE - 1.0%
Durable Goods
26,400 Grainger (W.W.), Inc. ........................................ 1,118,700
------------
Total Common Stocks
(cost of $94,336,184)(b) 103,784,812
------------
Par SHORT-TERM OBLIGATIONS - 10.7%
- ---------- ------------------------------
$6,000,000 Federal Farm Credit Bank Discount Note 5.160% 11/01/1999...... 6,000,000
6,479,000 Repurchase agreement with Lehman Brothers Inc., dated
10/29/99, due 11/01/99 at 5.220%, collateralized by U.S.
Treasury bonds and/or notes with various maturities to
2009, market value of $6,640,792 (repurchase proceeds
$6,481,818).................................................. 6,479,000
------------
Total Short-term obligations 12,479,000
------------
OTHER ASSETS & LIABILITIES, NET - 0.7% 826,524
------------
NET ASSETS - 100.0% $117,090,336
============
</TABLE>
NOTES TO INVESTMENT PORTFOLIO:
(a) Non-income producing.
(b) Cost for federal income tax purposes is $98,063,171.
See notes to financial statements.
16
<PAGE>
CRABBE HUSON MANAGED INCOME & EQUITY FUND
Challenging conditions for both stocks and bonds
For the 12 months ended October 31, 1999, Crabbe Huson Managed Income & Equity
Fund had a total return of 4.22%, based on Class A shares without a sales
charge. The Fund's performance reflects difficult conditions for anything other
than the largest capitalization segment of the stock market -- in which the
equity portion is primarily invested -- and a declining bond market during the
Fund's fiscal year. In the latter part of the summer we changed the asset
allocation in this Fund, increasing the fixed income portion from roughly 37% of
net assets to 44%, and making a corresponding reduction in the equity portion
from 58% to 51%, with the balance in cash. This was done as a conservative
reaction to the increasing volatility of the equity markets.
Equity portion underperformed in a difficult market environment
In the equity portion of the Fund, the stocks were held back by the narrow
breadth of the market and by the disappointing returns from holdings in the
non-pharmaceutical health care sector. This industry has been ravaged by cuts in
Medicare, legal problems and competition, and stocks of many health providers
have dropped to extremely low levels. Our belief is that these companies will
have to raise premiums to survive, which will help them return to profitability.
The prices of these stocks have been driven to levels that are incredibly low,
making them good candidates for our contrarian management style. The Fund has a
mid-cap bias in its weighting, which is a reflection of where we have found
opportunities in the past few years -- the Fund is not restricted by prospectus
to a certain capitalization size.
Energy and basic materials performed well at varying times during the year
One of the Fund's largest weightings is in the energy sector, which performed
well in the latter half of the period, when energy prices rose dramatically. In
the first half of the period, we had a large weighting in basic materials
stocks, including companies in the metals, paper and chemicals industries. These
stocks did extremely well when the market broadened in the second quarter and
basic materials stocks soared. For example, we had a large holding of Alcoa
(1.2% of net assets) -- the world's largest aluminum company -- which rose 50%
in the month of April alone. We have since tapered our basic materials holdings
but still maintain positions in solid companies like Alcoa.
In technology, a focus on companies, not industries
In the technology sector, as in our general management strategy, we look for
companies rather than industries. Our technology holdings are a diverse group.
They include Hewlett Packard (0.8% of net assets), a diversified computer
hardware firm; PeopleSoft (0.7%), which makes integrated corporate software
systems, or "enterprise" software; Seagate (0.6%), a data storage manufacturer;
3Com (0.7%), a networking systems manufacturer; and Oracle (0.8%), a leader in
large-scale
17
<PAGE>
CRABBE HUSON MANAGED INCOME & EQUITY FUND
database software. As contrarians, we look for catalysts that can change
investor perception. For example, PeopleSoft is coming out with a new version of
their enterprise software package that we anticipate will have strong potential
in the Year 2000. Seagate, a computer data storage company that has very strong
financials and cutting-edge technology, has been subject to intense pricing
pressure throughout the industry. We expect this competition to sort itself out
over the next year and are optimistic about Seagate's prospects once that
occurs.
Bond market hindered by rising interest rates
After a rally in bonds in the latter part of 1998, we saw interest rates
increase starting in the first quarter of 1999. Over the 12-month period, the
yield on the 30-year Treasury bond has risen a full percentage point, while in
the 5-year range yields increased by 1.7%. And, as mentioned previously, the
Federal Reserve Board raised short-term interest rates twice during the summer.
When bond yields increase, their prices decrease, hurting the performance of
fixed-income securities.
Fund's bond holdings outperformed during the period
The Fund's fixed-income portion was positioned somewhat defensively in
anticipation of a bond market decline. For example, we lowered the Fund's
duration -- a measure of sensitivity to interest rate movements -- from 5.4
years at the beginning of the period to 4.4 years at the end. In addition, we
acquired lower-grade bonds at very attractive prices when their yield spread
(the difference in yield between lower-grade bonds and higher-grade bonds)
increased in the latter part of 1998. The increase in yield spreads occurred
because uncertainty about the Asian and Russian economies caused investors to
demand higher yields from riskier lower-grade bonds. Later in the year, Asia's
economy improved and the spread narrowed, decreasing the difference between
lower- and higher-grade bond yields. This caused the value of the Fund's
lower-grade holdings to increase.
Cautious but hopeful outlook for bonds and stocks
Looking towards the next 12 months, there is increasing evidence that the U.S.
economy is beginning to slow, while the global economy continues to show
improvement. In the bond market, the slowing U.S. economy is a positive for
interest rates. We have noticed that many large institutional investors have
structured their portfolios much more defensively. As contrarians, we view this
as a signal that the worst of the bond market's decline may be over, and that it
may be time to begin making adjustments to position our portfolios for a
potential market rally. While the potential exists for interest rates to edge up
in the next few months, we plan to position the Fund for a more favorable
long-term environment -- provided that there are no major surprises in the key
inflation indicators. As always, our adjustments will be incremental, and we
will remain vigilant to determine if any further changes in course are
warranted.
18
<PAGE>
CRABBE HUSON MANAGED INCOME & EQUITY FUND
In the stock market, the continued recovery in several important global
economies -- especially Southeast Asia and Japan -- may help the market broaden
to include small- and mid-cap companies. If the global economy continues to
improve, we anticipate that an improvement in the earnings of small- and
mid-sized companies will also occur because many of these companies do a great
deal of business overseas. In addition, the earnings growth rates of large-cap
companies have been slowing, and the earnings growth rates of smaller companies
generally have been improving. Since investors tend to recognize these factors
when valuing stocks, we believe that small- and mid-cap companies that show
strong earnings growth have excellent long-term potential.
/s/ Garth Nisbet /s/ Paul Rocheleau
- ---------------- ------------------
Garth Nisbet Paul Rocheleau
/s/ Robert E. Anton /s/ Marian L. Kessler
- ------------------- ---------------------
Robert E. Anton Marian L. Kessler
Performance Information
Crabbe Huson Managed Income & Equity Fund Investment
Performance vs. Standard & Poor's 500 Index and the
Lehman Brothers Government/Corporate Bond Index
Change in Value of $10,000 from 10/31/1989 - 10/31/1999
Class A Shares, With and Without Sales Charge
[Plot Points For Mountain Chart]
<TABLE>
<CAPTION>
Fund Without Fund With S&P 500 Lehman Brothers
Sales Charge Sales Charge Index Index
<S> <C> <C> <C>
10000 9525 10000 10000
9360 8915 9252 10550
11658 11104 12344 12172
12969 12353 13572 13452
15684 14939 15596 15285
16101 15336 16198 14576
18194 17330 20476 16932
19824 18883 25406 17844
23908 22773 33562 19416
23743 22615 40949 21412
24748 23573 51454 21271
</TABLE>
The Standard & Poor's 500 Index is an unmanaged index that tracks the
performance of 500 widely held, large-capitalization U.S. stocks. The Lehman
Brothers Government/Corporate Bond Index is an unmanaged index that tracks the
performance of a selection of U.S. government and investment grade U.S.
corporate bonds. Unlike mutual funds, indexes are not investments and do not
incur fees or expenses. It is not possible to invest directly in an index.
19
<PAGE>
CRABBE HUSON MANAGED INCOME & EQUITY FUND
Change in Value of a $10,000 Investment in all Share Classes
from 10/31/1989 to 10/31/1999
<TABLE>
<CAPTION>
Share Class A B C I
Without With Without With Without With
sales sales sales sales sales sales
charge charge charge charge charge charge
<S> <C> <C> <C> <C> <C> <C> <C>
$24,748 $23,573 $24,604 $24,604 $24,604 $24,604 $25,040
</TABLE>
Average Annual Total Returns as of 10/31/1999
<TABLE>
<CAPTION>
Inception Date 1/31/1989 1/27/1999 1/27/1999 10/28/1996
Share Class A B C I
Without With Without With Without With
sales sales sales sales sales sales
charge charge charge charge charge charge
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year 4.22% (0.73)% 3.62% (1.36)% 3.62% 2.62% 4.75%
5 Years 8.98% 7.92% 8.85% 8.56% 8.85% 8.85% 9.23%
10 Years 9.48% 8.95% 9.42% 9.42% 9.42% 9.42% 9.61%
</TABLE>
Average Annual Total Returns as of 9/30/1999
<TABLE>
<CAPTION>
Inception Date 1/31/1989 1/27/1999 1/27/1999 10/28/1996
Share Class A B C I
Without With Without With Without With
sales sales sales sales sales sales
charge charge charge charge charge charge
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year 11.46% 6.17% 10.90% 5.90% 10.90% 9.90% 11.85%
5 Years 9.26% 8.20% 9.15% 8.87% 9.15% 9.15% 9.50%
10 Years 9.47% 8.94% 9.42% 9.42% 9.42% 9.42% 9.59%
</TABLE>
Past performance cannot predict future investment results. Returns and value of
an investment will vary, resulting in a gain or loss on sale. All results shown
assume reinvestment of distributions. The "With sales charge" returns include
the maximum 5.75% charge for Class A shares and the maximum contingent deferred
sales charge (CDSC) of 5% for one year and 2% for five years for Class B shares
and 1% for one year for Class C shares. Class I shares (institutional shares)
are offered without sales charges or contingent deferred sales charges.
Performance for different share classes will vary based on differences in sales
charges and fees associated with each class.
Performance results reflect any voluntary waivers or reimbursement of Fund
expenses by the Advisor or its affiliates. Absent these waivers or reimbursement
arrangements, performance results would have been lower.
Class B, C and I share (newer class shares) performance information includes
returns of the Fund's Class A shares (the oldest existing fund class) for
periods prior to its inception date. These Class A share returns are not
restated to reflect any expense differential (e.g., Rule 12b-1 fees) between
Class A shares and the newer class shares. Had the expense differential been
reflected, the returns for the periods prior to the inception of Class B and
Class C shares would have been lower.
20
<PAGE>
CRABBE HUSON MANAGED INCOME & EQUITY FUND
INVESTMENT PORTFOLIO
October 31, 1999
<TABLE>
<CAPTION>
Shares Value
- -------- ------------------------------------------ -----------
COMMON STOCKS - 50.5%
---------------------
<S> <C> <C>
FINANCE, INSURANCE & REAL ESTATE - 6.0%
Insurance Carriers - 4.7%
43,500 Ace, Ltd. ................................ $ 845,531
13,800 Aetna Life and Casualty Co. .............. 693,450
8,900 MGIC Investment Corp. .................... 531,775
1,100 Safeco Corp. ............................. 30,250
12,500 United Healthcare Corp. .................. 646,094
-----------
2,747,100
-----------
Real Estate Investment Trusts - 1.3%
34,200 Equity Office Properties Trust ........... 756,675
-----------
MANUFACTURING - 19.9%
Apparel - 0.7%
10,800 Liz Claiborne, Inc. ...................... 432,000
-----------
Chemicals & Allied Products - 2.0%
10,900 Smith International, Inc. ................ 376,731
24,600 Watson Pharmaceuticals, Inc.(a) .......... 781,050
-----------
1,157,781
-----------
Electronic & Electrical Equipment - 1.1%
31,400 Advanced Micro Devices, Inc. ............. 622,112
-----------
Food & Kindred Products - 6.2%
21,300 Dole Foods Co., Inc. ..................... 382,069
35,400 Flowers Industries, Inc. ................. 597,375
24,200 IBP, Inc. ................................ 579,287
15,100 PepsiCo, Inc. ............................ 523,781
26,500 Philip Morris Companies, Inc. ............ 667,469
33,300 Sara Lee Corp. ........................... 901,181
-----------
3,651,162
-----------
Machinery & Computer Equipment - 3.0%
15,200 3Com Corp.(a) ............................ 440,800
6,600 Hewlett-Packard Co. ...................... 488,812
11,300 Seagate Technology, Inc.(a) .............. 332,644
32,600 Tenneco, Inc. ............................ 521,600
-----------
1,783,856
-----------
Measuring & Analyzing Instruments - 2.4%
26,700 Becton, Dickinson & Co. .................. 677,513
27,300 Xerox Corp. .............................. 764,400
-----------
1,441,913
-----------
Miscellaneous Manufacturing - 0.2%
8,400 Mattel, Inc. ............................. 112,350
-----------
</TABLE>
21
<PAGE>
CRABBE HUSON MANAGED INCOME & EQUITY FUND
INVESTMENT PORTFOLIO (Continued)
October 31, 1999
<TABLE>
<CAPTION>
Shares Value
- -------- ------------------------------------------------ -----------
COMMON STOCKS - (continued)
---------------------------
<S> <C> <C>
MANUFACTURING - (continued)
Petroleum Refining - 1.1%
6,600 Atlantic Richfield Co. ........................... $ 615,037
-----------
Primary Metal - 1.2%
11,200 Aluminum Company of America ...................... 680,400
-----------
Stone, Clay, Glass & Concrete - 0.9%
22,800 Owens-Illinois, Inc.(a) .......................... 545,775
-----------
Transportation Equipment - 1.1%
6,200 Ford Motor Co. ................................... 340,225
16,600 Lockheed Martin Corp. ............................ 332,000
-----------
672,225
-----------
MINING & ENERGY - 4.0%
Oil & Gas Extraction - 2.5%
37,600 Nabors Industries, Inc.(a) ....................... 853,050
44,000 Union Pacific Resources Group, Inc. .............. 638,000
-----------
1,491,050
-----------
Oil & Gas Field Services - 1.5%
14,900 Schlumberger Ltd. ................................ 902,381
-----------
RETAIL TRADE - 4.0%
Food Stores - 2.0%
21,900 Albertson's, Inc. ................................ 795,244
28,000 Cracker Barrel Old Country Stores, Inc. .......... 374,500
-----------
1,169,744
-----------
General Merchandise Stores - 1.1%
14,700 Federated Department Stores, Inc.(a) ............. 627,506
-----------
Restaurants - 0.9%
23,700 Outback Steakhouse, Inc.(a) ...................... 545,100
-----------
SERVICES - 6.7%
Computer Related Services - 1.5%
9,100 At Home Corp. Series A(a) ........................ 340,112
26,200 Convergys Corp.(a) ............................... 512,537
-----------
852,649
-----------
Computer Software - 1.6%
10,500 Oracle Systems Corp.(a) .......................... 499,406
29,000 PeopleSoft, Inc.(a) .............................. 435,000
-----------
934,406
-----------
</TABLE>
22
<PAGE>
CRABBE HUSON MANAGED INCOME & EQUITY FUND
INVESTMENT PORTFOLIO (Continued)
October 31, 1999
<TABLE>
<CAPTION>
Shares Value
- ---------- ------------------------------------------------ -----------
COMMON STOCKS - (continued)
---------------------------
<S> <C> <C>
SERVICES - (continued)
Health Services - 3.6%
61,600 Healthsouth Corp.(a) ........................... $ 354,200
62,100 Health Management Associates, Inc.(a) .......... 551,137
6,800 PacifiCare Health Systems, Inc.(a) ............. 268,175
50,100 Tenet Healthcare Corp.(a) ...................... 973,819
-----------
2,147,331
-----------
TRANSPORTATION, COMMUNICATION,
ELECTRIC, GAS & SANITARY SERVICES - 9.4%
Electric Services - 4.1%
17,200 American Electric Power Co., Inc. .............. 593,400
16,400 Duke Power Co. ................................. 926,600
39,500 PG&E Corp. ..................................... 906,031
-----------
2,426,031
-----------
Gas Services - 2.3%
12,000 Columbia Energy Group .......................... 780,000
13,400 El Paso Energy Corp. ........................... 549,400
-----------
1,329,400
-----------
Telecommunication - 3.0%
15,300 AT&T Corp. ..................................... 715,275
15,250 MediaOne Group(a) .............................. 1,083,703
-----------
1,798,978
-----------
WHOLESALE TRADE - 0.5%
Durable Goods
7,600 Grainger (W.W.), Inc. .......................... 322,050
-----------
Total Common Stocks
(cost of $26,768,052) 29,765,012
-----------
Par CORPORATE FIXED INCOME BONDS - 22.1%
- ---------- ------------------------------------
FINANCE, INSURANCE & REAL ESTATE - 6.7%
Depository Institutions - 1.0%
$550,000 J.P. Morgan & Co., Inc.,
7.625% 09/15/04 ............................... 566,484
-----------
Insurance Carriers - 1.7%
400,000 Conseco, Inc., 7.875% 12/15/00 ................. 399,436
630,000 Lincoln National Corp.,
6.500% 03/15/08 ............................... 590,795
-----------
990,231
-----------
</TABLE>
23
<PAGE>
CRABBE HUSON MANAGED INCOME & EQUITY FUND
INVESTMENT PORTFOLIO (Continued)
October 31, 1999
<TABLE>
<CAPTION>
Par Value
- ------------- --------------------------------------- -----------
CORPORATE FIXED INCOME BONDS - (continued)
------------------------------------------
<S> <C> <C>
FINANCE, INSURANCE & REAL ESTATE - (continued)
Nondepository Credit Institutions - 2.5%
$ 250,000 American Express Credit Corp.,
6.500% 08/01/00 ...................... $ 250,480
550,000 Ford Motor Credit Co.,
6.250% 11/08/00 ....................... 549,137
655,000 General Motors Acceptance Corp.,
9.000% 10/15/02 ...................... 693,141
-----------
1,492,758
-----------
Security Brokers & Dealers - 1.5%
580,000 Bear Stearns Cos., Inc.,
6.875% 10/01/05 ...................... 564,485
350,000 Merrill Lynch & Co., Inc.,
6.020% 05/11/01 ...................... 347,092
-----------
911,577
-----------
MANUFACTURING - 7.0%
Chemical & Allied Products - 1.0%
20,000 E.I. DuPont De Nemours & Co.,
8.250% 09/15/06 ...................... 21,462
550,000 Eli Lilly & Co.,
8.375% 12/01/06 ...................... 596,585
-----------
618,047
-----------
Fabricated Metal - 0.9%
550,000 Snap-on, Inc.,
6.625% 10/01/05 ...................... 539,055
-----------
Food & Kindred Products - 1.7%
550,000 Anheuser Busch Cos., Inc.,
7.000% 09/01/05 ...................... 543,978
450,000 PepsiCo, Inc.,
5.875% 06/01/00 ...................... 450,108
-----------
994,086
-----------
Machinery & Computer Equipment - 1.9%
International Business Machines Corp.:
540,000 5.945% 05/14/01 ..................... 536,306
600,000 7.250% 11/01/02 ..................... 610,662
-----------
1,146,968
-----------
Rubber & Plastic - 0.5%
300,000 Premark International, Inc.,
6.875% 11/15/08 ..................... 294,303
-----------
</TABLE>
24
<PAGE>
CRABBE HUSON MANAGED INCOME & EQUITY FUND
INVESTMENT PORTFOLIO (Continued)
October 31, 1999
<TABLE>
<CAPTION>
Par Value
- -------------------------------------------- --------------------------- ----------
CORPORATE FIXED INCOME BONDS - (continued)
------------------------------------------
<S> <C> <C>
MANUFACTURING - (continued)
Stone, Clay, Glass & Concrete - 1.0%
$650,000 Owens - Illinois, Inc.,
7.350% 05/15/08 .......... $ 591,929
----------
RETAIL TRADE - 0.9%
Food Stores - 0.8%
550,000 Kroger Co.,
7.000% 05/01/18 .......... 497,882
----------
General Merchandise Stores - 0.1%
30,000 Wal-Mart Stores, Inc.,
8.000% 09/15/06 .......... 31,906
----------
TRANSPORTATION, COMMUNICATION,
ELECTRIC, GAS & SANITARY SERVICES - 7.4%
Cable - 0.4%
200,000 Jones Intercable, Inc.,
10.500% 03/01/08 ......... 214,500
----------
Electric Services - 1.1%
700,000 PacifiCorp,
6.375% 05/15/08 .......... 656,698
----------
Sanitary Services - 1.0%
600,000 WMX Technologies, Inc.,
6.700% 05/01/01 .......... 573,516
----------
Telecommunication - 4.9%
500,000 AT&T Corp.,
7.750% 03/01/07 .......... 517,850
650,000 CBS Corp.,
7.150% 05/20/05 .......... 641,264
590,000 GTE South, Inc.,
6.000% 02/15/08 .......... 552,128
550,000 SBC Communications, Inc.,
6.250% 03/01/05 .......... 533,159
660,000 US West Communications,
6.625% 09/15/05 .......... 640,160
----------
2,884,561
----------
WHOLESALE TRADE - 0.1%
Non-durable Goods
30,000 Sysco Corp.,
7.000% 05/01/06 ......... 29,674
----------
Total Corporate Fixed Income Bonds
(cost of $13,817,237) 13,034,175
----------
</TABLE>
25
<PAGE>
CRABBE HUSON MANAGED INCOME & EQUITY FUND
INVESTMENT PORTFOLIO (Continued)
October 31, 1999
<TABLE>
<CAPTION>
Par Value
- ---------- ----------------------------------------------------- ----------
US GOVERNMENT & AGENCIES OBLIGATIONS - 21.7%
--------------------------------------------
<S> <C> <C>
Government Agencies - 11.7%
Federal Home Loan Mortgage Corp.:
$ 349,572 9.000% 04/01/17 .................................... $ 365,648
1,952,343 7.000% 09/01/25 .................................... 1,923,664
538,443 7.500% 09/01/25 .................................... 539,450
694,731 8.000% 06/01/26 .................................... 707,972
23,128 9.250% 11/01/16 .................................... 24,356
----------
3,561,090
----------
Federal National Mortgage Association,
200,000 8.250% 12/18/00 .................................... 204,374
----------
Government National Mortgage Association:
792,022 7.000% 12/15/27 .................................... 777,417
1,787,936 7.000% 06/15/28 .................................... 1,753,840
644,141 6.500% 11/15/28 .................................... 615,554
----------
3,146,811
----------
Government Obligations - 10.0%
U.S. Treasury Bonds:
325,000 6.750% 08/15/26 .................................... 338,813
330,000 6.500% 11/15/26 .................................... 333,868
140,000 6.625% 02/15/27 .................................... 143,959
125,000 6.375% 08/15/27 .................................... 124,570
15,000 5.500% 08/15/28 .................................... 13,341
----------
954,551
----------
U.S. Treasury Notes:
2,495,000 5.500% 07/31/01 .................................... 2,481,752
2,550,000 5.250% 05/15/04 .................................... 2,477,886
----------
4,959,638
----------
Total US Government & Agencies
(cost of 12,466,743) 12,826,464
----------
ASSET BACKED SECURITIES - 0.8%
------------------------------
500,000 Green Tree Financial Corp., Series 1997-7, Class A-5,
6.540% 07/15/99 (cost of $499,874) ................. 497,425
----------
TOTAL INVESTMENTS - 95.1% (cost of $53,551,906)(b)................. 56,123,076
----------
</TABLE>
26
<PAGE>
CRABBE HUSON MANAGED INCOME & EQUITY FUND
INVESTMENT PORTFOLIO (Continued)
October 31, 1999
<TABLE>
<CAPTION>
Par Value
- -------------------------------------- -------------------------------------------------------- ----------
SHORT - TERM OBLIGATIONS - 3.7%
-------------------------------
<S> <C> <C>
$2,155,000 Repurchase Agreement with Lehman Brothers Inc., dated
10/29/99, due 11/01/99 at 5.220%, collateralized by U.S.
Treasury bonds and/or notes with various maturities to
2009, market value $2,208,814 (repurchase proceeds
$2,155,937) ........................................... $ 2,155,000
-----------
OTHER ASSETS & LIABILITIES, NET - 1.2% 732,845
-----------
NET ASSETS - 100.0% $59,010,921
===========
</TABLE>
NOTES TO INVESTMENT PORTFOLIO:
(a) Non-income producing.
(b) Cost for federal income tax purposes is $54,435,770.
See notes to financial statements.
27
<PAGE>
CRABBE HUSON REAL ESTATE INVESTMENT FUND
A difficult year for real estate investments
The past 12 months have been difficult for investors in real estate investment
trusts (REITs) and other real estate-related securities. The National
Association of Real Estate Investment Trusts[RegTM] (NAREIT) Equity Index had a
return of negative 6.02% for the year ended October 31, 1999. Several factors
have contributed to the lackluster performance of real estate securities. First,
during the summer, stock market investors became jittery about rising interest
rates and moved from the small- and mid-cap issues (including REITs) that had
been favored in the spring back into large-capitalization stocks. Real estate
holdings then performed poorly from August through October. Second,
institutional real estate investors have experienced a steady outflow of funds
for the past few years, as investors have favored other sectors of the stock
market. Paradoxically, the fundamentals of property holdings have been strong,
reflecting the continued strength of the U.S. economy.
Fund has outperformed
In the challenging conditions of the past year, the Fund has outperformed both
its benchmark index (the NAREIT Equity Index) and its Lipper peer group average.
For the 12-month period, the Fund's Class A shares had a total return of
negative 3.73%, without a sales charge, compared to negative 4.11% for the
Lipper Real Estate Funds category average.(1) The Fund's good relative
performance can be attributed to careful selection of securities and our
conservative, contrarian approach of buying high-quality real estate securities
near the bottom of their 52-week trading range.
Holdings illustrate management style
Crabbe Huson's approach to real estate investing follows our overall management
style. We use diligent, bottom-up research on a company-by-company basis to
uncover overlooked, attractive companies at below-average valuations. Whereas
many of our competitors look for growth at any price, we focus on the value of
the assets and pay careful attention to catalysts that can cause price
appreciation.
After a dismal year in 1998, the prices for REITs reached very low levels. We
took the opportunity to acquire a select group of high-quality REIT holdings for
the Fund at the end of 1998 and in the early part of 1999. In the first half of
1999, these securities performed well, especially in the second quarter when the
stock market broadened to include a much wider range of sectors.
- ----------------------
(1) Lipper, Inc., a widely respected data provider for the industry, calculates
an average total return for mutual funds with similar investment objectives as
the Fund. The average total return calculated for funds in the Lipper Real
Estate Funds category was negative 4.11% for the 12 months ended October 31,
1999. The Fund's Class A shares ranked in the second quartile for one year
(ranked 50 out of 129 funds), in the second quartile for three years (ranked 24
out of 57 funds), and in the third quartile for five years (ranked 14 out of
20). Rankings do not include any sales charges. Performance for different share
classes will vary with fees associated with each class. Past performance cannot
guarantee future results.
28
<PAGE>
CRABBE HUSON REAL ESTATE INVESTMENT FUND
We recently acquired Spieker Properties (3.1% of net assets), a real estate
holding which has many of the characteristics that we are looking for. The
company owns office and industrial properties all along the West Coast of the
U.S., from Seattle to San Diego. The economy in this region has recovered from
the Asian economic crisis in 1997 and 1998, boosting the values of Spieker's
property holdings. The company has excellent management, and their lease
agreements are being renewed at 20 - 30% increases. We acquired Spieker near its
52-week low at roughly $34 per share.
An advantage of the Crabbe Huson Real Estate Investment Fund is that we are not
required to own only REITs, but may by prospectus own other types of real estate
holdings. Another holding that we acquired in the second half of the year is
Sunrise Assisted Living (4.4% of net assets), an assisted living facility owner
and manager. It is not a REIT, and therefore does not have to pay out 95% of its
taxable income in distributions. As a result, its total return potential can be
higher than that of REIT securities, which are primarily income investments. The
price of Sunrise's stock declined dramatically due to an earnings shortfall, and
we acquired the stock at a deep discount to its estimated net asset value. Our
acquisition of Sunrise illustrates our strategy of increasing the Fund's
non-REIT holdings to better position it in an environment where REITs are
underperforming.
Outlook
After several years of underperforming, in comparison to their historical
average of 10 - 12% annually, real estate investments are currently trading at
very attractive prices. It is very difficult to predict what will happen over
the next several months, especially in a market that has become so focused on
short-term performance and ever-changing economic events of dubious long-term
relevance. However, we believe that real estate currently offers very good
long-term potential in comparison to its relatively low level of risk.
/s/ Michael B. Stokes
- ----------------------
Michael B. Stokes, CFA
29
<PAGE>
CRABBE HUSON REAL ESTATE INVESTMENT FUND
Performance Information
Crabbe Huson Real Estate Investment Fund
Investment Performance vs. NAREIT Equity Index
Change in Value of $10,000 from 4/01/1994 - 10/31/1999
Class A Shares, With and Without Sales Charge
[Plot Points For Mountain Chart]
<TABLE>
<CAPTION>
Fund Without NAREIT Equity Fund With
Sales Charge Index Sales Charge
<S> <C> <C>
10000 10000 9525
10212 10170 9727
10392 10396 9898
10301 10184 9812
10112 10134 9631
10274 10165 9786
10062 9976 9584
9700 9630 9239
9434 9299 8986
10058 9978 9581
9859 9760 9391
10038 10001 9561
9891 9961 9421
9823 9958 9356
10236 10381 9750
10533 10547 10033
10785 10728 10273
10624 10857 10120
10807 11043 10294
10506 10807 10007
10430 10905 9935
11011 11501 10488
11339 11690 10800
11416 11827 10874
11660 11762 11107
11655 11822 11101
11878 12128 11314
11979 12286 11410
12042 12378 11470
12551 12866 11955
12879 13090 12267
13174 13478 12548
13571 14092 12927
14979 15557 14267
15064 15731 14349
14849 15699 14143
14861 15665 14155
14419 15234 13734
14948 15682 14238
15597 16444 14856
16288 16952 15514
16422 16912 15642
17717 18387 16876
17198 17890 16381
17296 18277 16475
17789 18784 16944
17569 18614 16734
17512 18280 16681
18057 18682 17199
17721 18033 16879
17537 17880 16704
17283 17854 16462
16253 16695 15481
14483 15119 13795
15268 15975 14542
14897 15679 14189
15053 15910 14338
15435 15509 14702
15259 15185 14535
14672 14828 13975
14688 14762 13990
16191 16162 15422
16442 16518 15661
16029 15250 15268
15731 15734 14984
15092 15534 14375
14582 14944 13889
14343 14576 13662
</TABLE>
For the purposes of this comparison, the National Association of Real Estate
Investment Trust[RegTM] (NAREIT) Equity Index is tracked from 3/31/1994, while
the Fund is tracked from its inception date of 4/1/1994. The NAREIT Equity Index
is an unmanaged index that tracks the performance of all equity real estate
investment trusts (REITs) that trade on the New York Stock Exchange, the
American Stock Exchange and the NASDAQ. Unlike mutual funds, indexes are not
investments and do not incur fees or expenses. It is not possible to invest
directly in an index.
Change in Value of a $10,000 Investment in all Share Classes
from 4/01/1994 to 10/31/1999
<TABLE>
<CAPTION>
Share Class A B C Z
Without With Without With Without With
sales sales sales sales sales sales
charge charge charge charge charge charge
<S> <C> <C> <C> <C> <C> <C> <C>
$14,343 $13,662 $14,280 $14,180 $14,265 $14,265 $14,378
</TABLE>
Average Annual Total Returns as of 10/31/1999
<TABLE>
<CAPTION>
Inception Date 4/1/1994 1/27/1999 1/27/1999 1/29/1999
Share Class A B C Z
Without With Without With Without With
sales sales sales sales sales sales
charge charge charge charge charge charge
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year (3.73)% (8.31)% (4.16)% (9.16)% (4.26)% (5.26)% (3.50)%
5 Years 8.14% 7.09% 8.04% 7.75% 8.02% 8.02% 8.19%
Life of Fund 6.67% 5.74% 6.58% 6.45% 6.56% 6.56% 6.71%
</TABLE>
Average Annual Total Returns as of 9/30/1999
<TABLE>
<CAPTION>
Share Class A B C Z
Without With Without With Without With
sales sales sales sales sales sales
charge charge charge charge charge charge
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year (4.50)% (9.04)% (4.92)% (9.86)% (5.02)% (6.01)% (4.36)%
5 Years 7.70 6.66% 7.61% 7.31% 7.59% 7.59% 7.73%
Life of Fund 7.10% 6.15% 7.01% 6.87% 6.99% 6.99% 7.12%
</TABLE>
30
<PAGE>
CRABBE HUSON REAL ESTATE INVESTMENT FUND
Past performance cannot predict future investment results. Returns and value of
an investment will vary, resulting in a gain or loss on sale. All results shown
assume reinvestment of distributions. The "With sales charge" returns include
the maximum 5.75% charge for Class A shares and the maximum contingent deferred
sales charge (CDSC) of 5% for one year and 2% for five years for Class B shares
and 1% for life of Fund for Class B Shares and 1% for one year for Class C
shares. Performance for different share classes will vary based on differences
in sales charges and fees associated with each class.
Performance results reflect any voluntary waivers or reimbursement of Fund
expenses by the Advisor or its affiliates. Absent these waivers or reimbursement
arrangements, performance results would have been lower.
Class B, C and Z share (newer class shares) performance information includes
returns of the Fund's Class A shares (the oldest existing fund class) for
periods prior to its inception date. These Class A share returns are not
restated to reflect any expense differential (e.g., Rule 12b-1 fees) between
Class A shares and the newer class shares. Had the expense differential been
reflected, the returns for the periods prior to the inception of Class B and
Class C shares would have been lower.
31
<PAGE>
CRABBE HUSON REAL ESTATE INVESTMENT FUND
INVESTMENT PORTFOLIO
October 31, 1999
<TABLE>
<CAPTION>
Shares Value
- --------- ------------------------------------------------ ---------
COMMON STOCKS - 96.1%
---------------------
<S> <C> <C>
FINANCE, INSURANCE & REAL ESTATE - 96.1%
Apartments - 5.3%
12,900 Archstone Communities Trust .................... $ 258,000
9,117 Camden Property Trust .......................... 246,729
----------
504,729
----------
Diversified - 16.9%
14,500 Castle & Cooke, Inc.(a) ........................ 201,188
20,000 Catellus Development Corp.(a) .................. 235,000
15,000 Glenborough Realty Trust, Inc. ................. 195,938
35,000 Kennedy-Wilson, Inc.(a) ........................ 339,062
31,000 Meditrust Co. .................................. 249,937
26,400 Trammell Crow Co.(a) ........................... 382,800
----------
1,603,925
----------
Factory Outlets - 5.4%
15,000 Pan Pacific Retail Properties, Inc. ............ 273,750
30,000 Prime Retail, Inc. ............................. 238,125
----------
511,875
----------
Healthcare - 9.6%
13,700 Brookdale Living Communities, Inc.(a) .......... 169,537
16,725 Healthcare Realty Trust, Inc. .................. 321,956
38,000 Sunrise Assisted Living, Inc.(a) ............... 418,000
----------
909,493
----------
Industrial - 6.4%
19,000 AMB Property Corp. ............................. 377,625
12,000 Prologis Trust ................................. 231,750
----------
609,375
----------
Lodging - 5.6%
36,800 Silverleaf Resorts, Inc.(a) .................... 230,000
32,000 Sunstone Hotel Investors, Inc. ................. 306,000
----------
536,000
----------
Manufactured Homes - 6.8%
28,400 Asset Investors Corp. .......................... 360,325
58,100 Commercial Assets, Inc. ........................ 290,500
----------
650,825
----------
Office - 16.4%
12,000 Brandywine Realty Trust ........................ 201,750
10,500 Crescent Real Estate Equities Co. .............. 175,219
29,800 Equity Office Properties Trust ................. 659,325
8,500 Spieker Properties, Inc. ....................... 296,969
12,200 TrizecHahn Corp. ............................... 225,700
----------
1,558,963
----------
</TABLE>
32
<PAGE>
CRABBE HUSON REAL ESTATE INVESTMENT FUND
INVESTMENT PORTFOLIO (Continued)
October 31, 1999
<TABLE>
<CAPTION>
Shares Value
- ---------------------- -------------------------------------------------------- ----------
<S> <C> <C>
COMMON STOCKS - (continued)
---------------------------
FINANCE, INSURANCE & REAL ESTATE - (continued)
Regional Malls - 6.2%
18,650 Gilmcher Realty Trust .................................. $ 276,253
13,640 Simon Property Group, Inc. ............................. 314,572
----------
590,825
----------
Storage - 6.4%
25,000 Public Storage, Inc. ................................... 603,125
----------
Triple Net Lease - 11.1%
16,000 Capital Automotive REIT ................................ 204,000
28,500 Correctional Properties Trust .......................... 375,844
11,000 Franchise Finance Corp. of America ..................... 239,250
22,937 Prison Realty Corp. .................................... 233,671
----------
1,052,765
----------
Total Common Stocks
(cost of $10,241,611) (b) 9,131,900
----------
Par SHORT-TERM OBLIGATIONS - 3.6%
- ------------------------- -----------------------------
$344,000 Repurchase Agreement with Lehman Brothers Inc., dated
10/29/99, due 11/01/99 at 5.220%, collateralized by U.S.
Treasury bonds and/or notes with various maturities to
2009, market value $352,590 (repurchase proceeds
$344,150) .............................................. 344,000
----------
OTHER ASSETS & LIABILITIES, NET - 0.3% 30,459
----------
NET ASSETS - 100.0% $9,506,359
==========
</TABLE>
NOTES TO INVESTMENT PORTFOLIO:
(a) Non-income producing.
(b) Cost for federal income tax purposes is $10,279,506.
See notes to financial statements.
33
<PAGE>
CRABBE HUSON SMALL CAP FUND
Fund performance affected by market bias toward large-cap growth and impact of
health care stocks
During the fiscal year, the Fund had a total return of negative 5.48%, based on
Class A shares without a sales charge. The Fund has not performed well in the
past few years, in large part because the stock market has been dominated by
large-cap growth stocks, and because investors have favored growth stocks
generally over value stocks. While we do seek -- and have found -- growth stocks
that are reasonably priced, the Fund has had a value bias for the past several
years.
The Fund was also impacted by events in the health care industry. Non-
pharmaceutical health care companies, including HMOs and sub-acute care
companies, have been very harshly treated by the Hospital Financial Control
Authority (HFCA) -- the financial arm of Medicare. Most of the much-publicized
$200 billion in Medicare savings has come from the enormous reductions in
Medicare reimbursements to health care providers. As many people are aware, this
has severely impacted profitability in the health care sector.
An outstanding second quarter
When the market broadened in the second quarter of this year, the Fund performed
very well, posting a return of 21.94% for the quarter ended June 30, 1999. By
comparison, the Russell 2000 Index, a broad-based measure of small-cap stock
performance, had a total return of 15.52% during the same period. However, when
the market again narrowed in August to favor large caps and became more volatile
across the board, small-cap stocks declined substantially. The Fund fared poorly
during this time primarily because it had a significant weighting in
value-oriented stocks. These companies were shunned by investors who -- in a
volatile and uncertain market -- fled to the more familiar large-cap growth
issues. Also, the Fund had exposure to certain sectors that did not perform as
well, including health care, and, to a lesser extent, basic materials.
Technology and energy holdings hold promise
The Fund's technology weighting at roughly 20% of net assets is the largest
percentage focus of the portfolio. Most of these companies are component or
circuit manufacturers that are creating entirely new designs for a variety of
electronic and high-tech applications. The second largest sector is energy, at
roughly 15% of net assets. In this sector, we are invested primarily in natural
gas companies involved in exploration, production and service. In the past year,
there has been a severe depletion of natural gas reserves and a drop in Canadian
natural gas production, resulting in a significant decline in supply that
created many attractive investment opportunities. We also have stocks in the
basic materials sector, including the aluminum and chemicals industries. We
believe that if global economies continue improving and commodity prices remain
firm, basic materials companies should be profitable.
34
<PAGE>
CRABBE HUSON SMALL CAP FUND
New additions to the Fund illustrate contrarian style
The concentration of the stock market's preference toward large-cap, blue chip
growth companies has created many opportunities in the small- and mid-cap areas
of the market. One example is Mail-Well (2.5% of net assets), a fast-growing
company in the printing industry. Mail-Well is the leading conglomerate in this
fragmented business, having consolidated companies in four areas: commercial
printing, envelopes, labels, and printing for distributors. The firm has had
strong sales and earnings growth, and we were able to acquire it after its stock
dropped sharply from its mid-summer high. As a growing company, Mail-Well nicely
fits our criteria of acquiring growth companies on share price weakness.
Outlook: anticipation of market broadening
We believe the stock market may broaden to include stocks of small- and mid-cap
companies. One indicator is the continued recovery in several important global
economies -- especially Southeast Asia and Japan. The Asian economic crisis and
corresponding global deflation have significantly impacted the profitability of
small- and mid-sized companies, and the earnings of large blue chip companies
have been much stronger on a relative basis. If the global economy continues to
improve, we anticipate that an improvement in the earnings of small- and
mid-sized companies will also occur because many of these firms do a great deal
of business overseas. In addition, the earnings growth rates of large-cap
companies have been slowing, and the earnings growth rates of smaller companies
generally have been improving. Since investors tend to recognize these factors
when valuing stocks, we believe that small-cap companies that show strong
earnings growth have excellent long-term potential.
/s/ James E. Crabbe /s/ John W. Johnson
- ------------------- -------------------
James E. Crabbe John W. Johnson, CFA
35
<PAGE>
CRABBE HUSON SMALL CAP FUND
Performance Information
Crabbe Huson Small Cap Fund Investment
Performance vs. the Russell 2000 Index
Change in Value of $10,000 from 2/29/1996 - 10/31/1999
Class A Shares, With and Without Sales Charge
[Plot Points For Mountain Chart]
<TABLE>
<CAPTION>
Fund Without Russell 2000 Fund With
Sales Charge Index Sales Charge
<S> <C> <C>
10000 10000 9425
10538 10204 9932
11026 10750 10392
11216 11173 10571
11106 10714 10467
10757 9779 10138
11066 10347 10429
11016 10752 10382
10966 10586 10336
11345 11022 10692
11872 11311 11189
12215 11537 11513
12296 11258 11589
12205 10727 11503
12255 10757 11550
13386 11953 12616
13991 12466 13187
14628 13045 13787
15394 13344 14509
16484 14321 15536
15625 13692 14727
14747 13603 13899
14974 13841 14113
14232 13622 13413
15273 14629 14395
15307 15232 14427
15662 15316 14761
14443 14490 13613
13801 14520 13007
11717 13344 11043
8458 10753 7972
9379 11595 8839
9590 12068 9038
9889 12700 9320
10168 13486 9583
10157 13666 9573
9175 12559 8648
8741 12755 8238
9733 13898 9173
10356 14100 9761
10658 14738 10045
10780 14334 10160
10401 13804 9803
10290 13806 9698
9063 13862 8542
</TABLE>
The Russell 2000 index is an unmanaged index that tracks the performance of
small-capitalization stocks traded on the New York Stock Exchange, the American
Stock Exchange, and the NASDAQ. Unlike mutual funds, indexes are not investments
and do not incur fees or expenses. It is not possible to invest directly in an
index.
Change in Value of a $10,000 Investment in all Share Classes
from 2/29/1996 to 10/31/1999
<TABLE>
<CAPTION>
Share Class A I
Without With
sales sales
charge charge
<S> <C> <C> <C>
$9,063 $8,542 $9,185
</TABLE>
Average Annual Total Returns as of 10/31/1999
<TABLE>
<CAPTION>
Inception Date 2/16/1996 10/10/1996
Share Class A I
Without With
sales sales
charge charge
<S> <C> <C> <C>
1 year (5.48)% (10.91)% (5.00)%
Life of Fund (2.51)% (4.06)% (2.16)%
</TABLE>
Average Annual Total Returns as of 9/30/1999
<TABLE>
<CAPTION>
Share Class A I
Without With
sales sales
charge charge
<S> <C> <C> <C>
1 Year 9.72% 3.41% 10.16%
Life of Fund 0.90% (0.73)% 1.25%
</TABLE>
36
<PAGE>
CRABBE HUSON SMALL CAP FUND
Past performance cannot predict future investment results. Returns and value of
an investment will vary, resulting in a gain or loss on sale. All results shown
assume reinvestment of distributions. The "With sales charge" returns include
the maximum 5.75% charge for Class A shares. Class I shares (institutional
shares) are offered without sales charges or contingent deferred sales charges.
Performance for different share classes will vary based on differences in sales
charges and fees associated with each class.
Performance results reflect any voluntary waivers or reimbursement of Fund
expenses by the Advisor or its affiliates. Absent these waivers or reimbursement
arrangements, performance results would have been lower.
Class I share performance information includes returns of the Fund's Class A
shares for periods prior to its inception date. These Class A share returns are
not restated to reflect any expense differential (e.g., Rule 12b-1 fees) between
Class A shares and Class I shares.
37
<PAGE>
CRABBE HUSON SMALL CAP FUND
INVESTMENT PORTFOLIO
October 31, 1999
<TABLE>
<CAPTION>
Shares Value
- ---------------------------------------- ----------------------------------------------- ----------
COMMON STOCKS - 98.2%
---------------------
<S> <C> <C>
FINANCE, INSURANCE & REAL ESTATE - 9.5%
Insurance Carriers - 6.8%
180,000 Mid Atlantic Medical Services, Inc.(a) .......... $ 978,750
54,600 Risk Capital Holdings, Inc.(a) .................. 713,213
18,000 StanCorp Financial Group, Inc. .................. 456,750
---------
2,148,713
---------
Nondepository Credit Institute - 2.7%
211,500 Arcadia Financial Ltd.(a) ....................... 846,000
---------
MANUFACTURING - 37.8%
Apparel - 4.1%
131,000 Phillips-Van Heusen ............................. 1,048,000
15,700 The Warnaco Group, Inc., Class A ................ 223,725
---------
1,271,725
---------
Electrical Industrial Equipment - 6.0%
100,400 Actel Corp.(a) .................................. 1,895,050
---------
Electronic & Electrical Equipment - 1.8%
76,200 Checkpoint Systems, Inc. ........................ 571,500
---------
Electronic Components - 2.3%
228,600 HMT Technology Corp.(a) ......................... 714,375
---------
Machinery & Computer Equipment - 3.9%
222,300 Auspex Systems, Inc.(a) ......................... 1,236,544
---------
Measuring & Analyzing Instruments - 5.5%
76,600 Flanders Corp.(a) ............................... 193,894
125,400 Input/Output, Inc.(a) ........................... 658,350
132,900 Oakley, Inc.(a) ................................. 863,850
---------
1,716,094
---------
Paper Products - 1.3%
37,100 Longview Fibre Co. .............................. 422,012
---------
Primary Metal - 7.7%
112,900 Century Aluminum Co. ............................ 1,016,100
85,800 Ispat International NV .......................... 890,175
60,400 Oregon Steel Mills, Inc. ........................ 509,625
---------
2,415,900
---------
Printing & Publishing - 2.5%
59,000 Mail-Well, Inc.(a) .............................. 789,125
---------
</TABLE>
38
<PAGE>
CRABBE HUSON SMALL CAP FUND
INVESTMENT PORTFOLIO (Continued)
October 31, 1999
<TABLE>
<CAPTION>
Shares Value
- ------------------------------------------- -------------------------------------------------- ---------
COMMON STOCKS - (continued)
---------------------------
<S> <C> <C>
MANUFACTURING - (continued)
Transportation Equipment - 2.7%
53,800 Wabash National Corp. ........................... $ 854,075
---------
MINING & ENERGY - 14.9%
Oil & Gas Extraction - 9.2%
63,200 Forest Oil Corp.(a) ............................. 845,300
610,600 Grey Wolf, Inc.(a) .............................. 1,602,825
31,900 Tom Brown, Inc.(a) .............................. 438,625
---------
2,886,750
---------
Oil & Gas Field Services - 5.7%
55,000 Marine Drilling Cos., Inc.(a) ................... 890,312
64,100 Nuevo Energy Co.(a) ............................. 909,419
---------
1,799,731
---------
RETAIL TRADE - 3.1%
Apparel & Accessory Stores - 2.3%
61,900 The Cato Corp. .................................. 711,850
---------
Home Furnishings & Equipment - 0.8%
58,300 The Bombay Company, Inc.(a) ..................... 240,488
---------
SERVICES - 15.2%
Business Services - 1.7%
45,834 Safety-Kleen Corp.(a) ........................... 524,226
---------
Computer Related Services - 8.6%
149,200 Mentor Graphics Corp.(a) ........................ 1,202,925
57,300 Sensormatic Electronics Corp. ................... 866,663
207,000 Vysis, Inc.(a) .................................. 621,000
---------
2,690,588
---------
Computer Software - 1.5%
43,500 CCC Information Services Group Inc.(a) .......... 478,500
---------
Health Services - 3.4%
96,200 Coventry Health Care Inc.(a) .................... 553,150
27,000 IDEXX Labs, Inc.(a) ............................. 408,375
154,300 Innovative Clinical Solutions, Ltd.(a) .......... 48,219
174,700 Integrated Health Services, Inc. ................ 49,134
---------
1,058,878
---------
TRANSPORTATION, COMMUNICATION,
ELECTRIC, GAS & SANITATION SERVICES - 16.1%
Communications - 2.8%
70,300 Precision Response Corp.(a) ..................... 874,356
---------
</TABLE>
39
<PAGE>
CRABBE HUSON SMALL CAP FUND
INVESTMENT PORTFOLIO (Continued)
October 31, 1999
<TABLE>
<CAPTION>
Shares Value
- -------------------- ------------------------------------------------------------ ------------
COMMON STOCKS - (continued)
---------------------------
<S> <C> <C>
TRANSPORTATION, COMMUNICATION,
ELECTRIC, GAS & SANITATION SERVICES - (continued)
Gas Services - 2.8%
53,088 Western Gas Resources, Inc. ............................... $ 872,634
------------
Motor Freight & Warehousing - 8.7%
53,900 Budget Group, Inc. Class A(a) ............................. 377,300
56,100 J.B. Hunt Transport Services, Inc. ........................ 722,287
96,900 Yellow Corp. .............................................. 1,647,300
------------
2,746,887
------------
Telecommunication - 1.8%
66,200 PageMart Wireless, Inc. Class A(a) ........................ 368,237
57,400 PictureTel Corp.(a) ....................................... 200,900
------------
569,137
------------
WHOLESALE TRADE - 1.6%
Nondurable Goods
41,300 Fleming Co., Inc. ......................................... 493,019
------------
Total Common Stocks (cost of $50,798,042)(b) 30,828,157
------------
Par
- -----------------
SHORT-TERM OBLIGATIONS - 11.5%
------------------------------
$3,605,000 Repurchase agreement with Lehman Brothers Inc., dated
10/29/99, due at 11/01/99 at 5.220%, collateralized by
U.S. Treasury bonds and/or notes with various maturities to
2009, market value $3,695,023 (repurchase proceeds
$3,606,568) ............................................... 3,605,000
------------
OTHER ASSETS & LIABILITIES, NET - (9.7)% (3,057,630)
------------
NET ASSETS - 100.0% $ 31,375,527
============
</TABLE>
NOTES TO INVESTMENT PORTFOLIO:
(a) Non-income producing security.
(b) Cost for federal income tax purposes is $51,028,887.
See notes to financial statements.
40
<PAGE>
CRABBE HUSON SPECIAL FUND
Fund performance affected by market bias toward large-cap growth and impact of
health care stocks
During the fiscal year, the Fund had a total return of negative 13.95%, based on
Class A shares without a sales charge. The Fund has not performed well in the
past few years, in large part because the stock market has been dominated by
large-cap growth stocks, and because investors have favored growth stocks
generally over value stocks. While we do seek -- and have found -- growth stocks
that are reasonably priced, the Fund has had a value bias for the past several
years.
The Fund was also impacted by events in the health care industry. Non-
pharmaceutical health care companies, including HMOs and sub-acute care
companies, have been very harshly treated by the Hospital Financial Control
Authority (HFCA) -- the financial arm of Medicare. Most of the much-publicized
$200 billion in Medicare savings has come from the enormous reductions in
Medicare reimbursements to health care providers. As many people are aware, this
has severely impacted profitability in the health care sector.
"Short selling" techniques not used in 1999
The Fund experienced an especially difficult year in 1998 because of "short
selling" strategies that did not achieve their goals. Short selling is a common
market strategy that allows investors to sell an unowned stock in anticipation
of a price decline with the intent to buy it back at a lower price. It is
typically used to hedge downside risk. We have not employed this strategy in the
Special Fund in 1999.
An outstanding second quarter
When the market broadened in the second quarter of this year, the Fund performed
very well, posting a return of 29.61% for the quarter ended June 30, 1999. By
comparison, the Russell 2000 Index, a broad-based measure of small-cap stock
performance, had a total return of 15.52% during the same period. However, when
the market again narrowed in August to favor large caps and became more volatile
across the board, small-cap stocks declined substantially. The Fund fared poorly
during this time primarily because it had a significant weighting in
value-oriented stocks. These companies were shunned by investors who -- in a
volatile and uncertain market -- fled to the more familiar large-cap growth
issues. Also, the Fund had exposure to certain sectors that did not perform as
well, including health care, and, to a lesser extent, basic materials.
Technology and energy holdings hold promise
The Fund's technology holdings, at roughly 20% of net assets, are an important
part of the portfolio. Most of these companies are component or circuit
manufacturers that are creating entirely new designs for a variety of electronic
and high-tech applications. Another large sector is mining and energy, at
roughly 24% of net assets. In this sector, we are invested primarily in natural
gas companies involved in
41
<PAGE>
CRABBE HUSON SPECIAL FUND
exploration, production and service. In the past year, there has been a severe
depletion of natural gas reserves and a drop in Canadian natural gas production,
resulting in a significant decline in supply that created many attractive
investment opportunities. We also have stocks in the basic materials sector,
including the aluminum and chemicals industries. We believe that if global
economies continue improving and commodity prices remain firm, basic materials
companies should be profitable.
New additions to the Fund illustrate contrarian style
The concentration of the stock market's preference toward large-cap, blue chip
growth companies has created many opportunities in the small- and mid-cap areas
of the market. One example is Mail-Well (1.2% of net assets), a fast-growing
company in the printing industry. Mail-Well is the leading conglomerate in this
fragmented business, having consolidated companies in four areas: commercial
printing, envelopes, labels, and printing for distributors. The firm has had
strong sales and earnings growth, and we were able to acquire it after its stock
dropped sharply from its mid-summer high. As a growing company, Mail-Well nicely
fits our criteria of growth at a reasonable price.
Outlook: anticipation of market broadening
We believe the stock market may broaden to include stocks of small- and mid-cap
companies. One indicator is the continued recovery in several important global
economies -- especially Southeast Asia and Japan. The Asian economic crisis and
corresponding global deflation have significantly impacted the profitability of
small- and mid-sized companies, and the earnings of large blue chip companies
have been much stronger on a relative basis. If the global economy continues to
improve, we anticipate that an improvement in the earnings of small- and
mid-sized companies should also occur. In addition, the earnings growth rates of
large-cap companies have been slowing, and the earnings growth rates of smaller
companies generally have been improving. Since investors tend to recognize these
factors when valuing stocks, we believe that small-cap companies that show
strong earnings growth have excellent long-term potential.
/s/ James E. Crabbe /s/ John W. Johnson
- ------------------- -------------------
James E. Crabbe John W. Johnson, CFA
42
<PAGE>
CRABBE HUSON SPECIAL FUND
Performance Information
Crabbe Huson Special Fund Investment
Performance vs. the Russell 2000 Index
Change in Value of $10,000 from 10/31/1989 - 10/31/1999
Class A Shares, With and Without Sales Charge
[Plot Points For Mountain Chart]
<TABLE>
<CAPTION>
Fund Without Fund With Russell 2000
Sales Charge Sales Charge Index
<S> <C> <C>
9425 10000 10000
8398 8910 7272
12561 13328 11536
13580 14408 12631
19201 20372 16725
23502 24935 16666
23920 25379 19725
25123 26656 23001
31811 33752 29747
17496 18563 26225
15053 15971 30123
</TABLE>
The Russell 2000 index is an unmanaged index that tracks the performance of
small-capitalization stocks traded on the New York Stock Exchange, the American
Stock Exchange, and the NASDAQ. Unlike mutual funds, indexes are not investments
and do not incur fees or expenses. It is not possible to invest directly in an
index.
Average Annual Total Returns as of 10/31/1999
<TABLE>
<CAPTION>
Inception Date 4/9/1987
Share Class A
Without With
sales sales
charge charge
<S> <C> <C>
1 Year (13.95)% (18.90)%
5 Years (8.52)% (9.60)%
10 Years 4.79% 4.17%
</TABLE>
Average Annual Total Returns as of 9/30/1999
<TABLE>
<CAPTION>
Share Class A
Without With
sales sales
charge charge
<S> <C> <C>
1 Year 3.13% (2.80)%
5 Years (5.00)% (6.12)%
10 Years 6.18% 5.55%
</TABLE>
Past performance cannot predict future investment results. Returns and value of
an investment will vary, resulting in a gain or loss on sale. All results shown
assume reinvestment of distributions. The "With sales charge" returns include
the maximum 5.75% charge for Class A shares.
Performance results reflect any voluntary waivers or reimbursement of Fund
expenses by the Advisor or its affiliates. Absent these waivers or reimbursement
arrangements, performance results would have been lower.
43
<PAGE>
CRABBE HUSON SPECIAL FUND
INVESTMENT PORTFOLIO
October 31, 1999
<TABLE>
<CAPTION>
Shares Value
- ---------------------------------------- ------------------------------------------------- ----------
<S> <C> <C>
COMMON STOCKS - 118.7%
----------------------
FINANCE, INSURANCE & REAL ESTATE - 15.6%
Insurance Carriers - 9.2%
346,800 Mid Atlantic Medical Services, Inc.(a) .......... $1,885,725
189,700 Risk Capital Holdings, Inc.(a) .................. 2,477,956
----------
4,363,681
----------
Nondepository Credit Institute - 6.4%
754,900 Arcadia Financial Ltd.(a) ....................... 3,019,600
----------
MANUFACTURING - 44.8%
Apparel - 4.0%
236,700 Phillips-Van Heusen ............................. 1,893,600
----------
Chemicals & Allied Products - 1.1%
34,600 Wellman, Inc. ................................... 521,163
----------
Electrical Industrial Equipment - 4.8%
120,200 Actel Corp.(a) .................................. 2,268,775
----------
Electronic & Electrical Equipment - 1.9%
119,900 Checkpoint Systems, Inc. ........................ 899,250
----------
Electronic Components - 2.2%
331,400 HMT Technology Corp.(a) ......................... 1,035,625
----------
Machinery & Computer Equipment - 3.5%
300,000 Auspex Systems, Inc.(a) ......................... 1,668,750
----------
Measuring & Analyzing Instruments - 2.7%
194,300 Oakley, Inc.(a) ................................. 1,262,950
----------
Paper Products - 6.9%
287,300 Longview Fibre Co.(a) ........................... 3,268,038
----------
Primary Metal - 12.6%
206,900 Century Aluminum Co. ............................ 1,862,100
229,900 Ispat International NV .......................... 2,385,212
207,300 Oregon Steel Mills, Inc. ........................ 1,749,094
----------
5,996,406
----------
Printing & Publishing - 1.2%
43,300 Mail-Well, Inc.(a) .............................. 579,138
----------
Transportation Equipment - 3.9%
118,000 Wabash National Corp. ........................... 1,873,250
----------
</TABLE>
44
<PAGE>
CRABBE HUSON SPECIAL FUND
INVESTMENT PORTFOLIO (Continued)
October 31, 1999
<TABLE>
<CAPTION>
Shares Value
- -------------------------------------------- ------------------------------------------------- -----------
<S> <C> <C>
COMMON STOCKS - (continued)
---------------------------
MINING & ENERGY - 23.7%
Oil & Gas Extraction - 16.2%
222,500 Forest Oil Corp.(a) ............................. $2,975,938
924,900 Grey Wolf, Inc.(a) .............................. 2,427,863
263,165 Santa Fe Corp.(a) ............................... 2,269,798
----------
7,673,599
----------
Oil & Gas Field Services - 7.5%
124,900 Marine Drilling Co., Inc.(a) .................... 2,021,819
109,500 Nuevo Energy Co.(a) ............................. 1,553,531
----------
3,575,350
----------
RETAIL TRADE - 1.0%
Home Furnishings & Equipment
120,900 The Bombay Company, Inc.(a) ..................... 498,712
----------
SERVICES - 18.4%
Business Services - 1.6%
67,400 Safety-Kleen Corp.(a) ........................... 770,887
----------
Computer Related Services - 8.7%
178,900 Mentor Graphics Corp.(a) ........................ 1,442,381
167,000 Sensormatic Electronics Corp. ................... 2,525,875
61,500 Vysis, Inc.(a) .................................. 184,500
----------
4,152,756
----------
Health Services - 8.1%
538,000 Coventry Health Care Inc.(a) .................... 3,093,500
43,400 IDEXX Labs, Inc.(a) ............................. 656,425
62,800 Innovative Clinical Solutions, Ltd.(a) .......... 19,625
199,500 Integrated Health Services, Inc. ................ 56,109
----------
3,825,659
----------
TRANSPORTATION, COMMUNICATION,
ELECTRICITY, GAS & SANITARY SERVICES - 10.5%
Motor Freight & Warehousing - 8.2%
60,400 J.B. Hunt Transport Services, Inc. .............. 777,650
182,600 Yellow Corp. .................................... 3,104,200
----------
3,881,850
----------
Telecommunication - 2.3%
99,600 PageMart Wireless, Inc.(a) ...................... 554,025
160,900 PictureTel Corp.(a) ............................. 563,150
----------
1,117,175
----------
</TABLE>
45
<PAGE>
CRABBE HUSON SPECIAL FUND
INVESTMENT PORTFOLIO (Continued)
October 31, 1999
<TABLE>
<CAPTION>
Shares Value
- ----------------------- ------------------------------------------------------- -----------
COMMON STOCKS - (continued)
---------------------------
<S> <C> <C>
WHOLESALE TRADE - 4.7%
Nondurable Goods
185,700 Fleming Co., Inc. ..................................... $ 2,216,794
-----------
Total Common Stocks
(cost of $85,710,753)(b) 56,363,008
-----------
<CAPTION>
Par
- ----------------------
<S> <C> <C>
SHORT-TERM OBLIGATIONS - 0.4%
-----------------------------
$ 171,000 Repurchase agreement with Lehman Brothers Inc. dated
10/29/99, due 11/01/99 at 5.220% collateralized by U.S.
Treasury bonds and/or notes with various maturities to
2009, market value $175,270 (repurchase proceeds
$171,074) ............................................ 171,000
------------
OTHER ASSETS & LIABILITIES, NET - (19.1)% (9,062,152)
------------
NET ASSETS - 100.0% $ 47,471,856
============
</TABLE>
NOTES TO INVESTMENT PORTFOLIO:
(a) Non-income producing security.
(b) Cost for federal income tax purposes is $86,161,545.
See notes to financial statements.
46
<PAGE>
CRABBE HUSON CONTRARIAN INCOME FUND
Fund outperformed, reflecting conservative contrarian approach
During the period, Crabbe Huson Contrarian Income Fund had a total return of
0.42%, based on Class A shares without a sales charge. By comparison, the Fund's
benchmark, the Lehman Brothers Government Corporate Index, had a total return of
negative 0.66% for the same period. The average return for funds in the Lipper
Corporate Debt Funds A-Rated category was negative 0.93%. The Fund ranked in the
top 17% of its Lipper peer group for the year and was the top-ranked fund for
the three-year period.(1)
We believe the Fund outperformed the Index and its Lipper average in part
because it was positioned somewhat defensively in anticipation of a bond market
decline. For example, we lowered the Fund's duration, a measure of sensitivity
to interest rate movements, from 5.4 years at the beginning of the period to 4.4
years at the end. In addition, we increased our holdings of lower-grade bonds
when their yield spread, the difference in yield between lower-grade bonds and
higher-grade bonds, increased in the latter part of 1998. The increase in yield
spreads occurred because uncertainty about the Asian and Russian economies
caused investors to demand higher yields from riskier lower-grade bonds. As a
result, we acquired these holdings at relatively good prices. Later in the year,
Asia's economy improved and the spread narrowed, decreasing the difference
between lower- and higher-grade bond yields. This caused the value of the Fund's
lower-grade holdings to increase. Despite the changes we have made, the Fund
remains a well-diversified, high-quality portfolio, with ratings of A+ by
Standard & Poor's and A1 by Moody's.
Bond sector, in general, hurt by rising interest rates
After a rally in bonds in the latter part of 1998, we saw interest rates
increase beginning in the first quarter of 1999. Over the 12-month period, the
yield on the 30-year Treasury bond rose a full percentage point, while in the
5-year range yields increased by 1.7%. Short-term interest rates also increased
when the Federal Reserve Board (the "Fed") implemented two quarter-point rate
increases during the summer. When bond yields increase, their prices decrease,
hurting the performance of fixed-income securities.
The rise in bond yields over the past year has come primarily in response to
events in the U.S. and global economies. Commodity prices worldwide have
increased, including the prices of steel, oil, and chemicals, and the economies
of Southeast Asia
- ----------------------
(1) Lipper, Inc., a widely respected data provider for the industry, calculates
an average total return for mutual funds with similar investment objectives as
the Fund. The average total return calculated for funds in the Lipper Corporate
Debt Funds A-Rated category was negative 0.93% for the 12 months ended October
31, 1999. The Fund's Class A shares ranked in the first quartile for one year
(ranked 27 out of 160 funds), in the first quartile for three years (ranked 1
out of 132 funds), in the first quartile for five years (ranked 19 out of 97),
and in the third quartile for 10 years (ranked 32 out of 42). Rankings do not
include any sales charges. Performance for different share classes will vary
with fees associated with each class. Past performance cannot guarantee future
results.
47
<PAGE>
CRABBE HUSON CONTRARIAN INCOME FUND
and Japan have staged a dramatic recovery. In the U.S., we have seen continued
positive economic growth, low unemployment, and low inflation. These factors
have caused concern among bond investors that inflation could potentially begin
to increase as the economy becomes "overheated." An increase in inflation would
be detrimental for bond performance because rising prices can erode the buying
power for fixed-income investors, making bonds less attractive. However, despite
the continued expansion of the U.S. economy -- the duration of which is nearing
an all-time record -- and the tight labor market that has existed for the past
few years, inflation has been kept at bay because of significant increases in
productivity driven by technological advances. We believe that this productivity
rise, along with the Fed's rate increases (which have a slowing effect on
economic growth), can have a positive impact for bonds over the long term by
keeping inflation under control.
Cautious but hopeful outlook
Looking towards the next 12 months, there is evidence building that the U.S.
economy is beginning to slow. Several interest-rate-sensitive sectors in the
economy, including housing, autos and manufacturing, have slowed in response to
Fed interest rate hikes, and employment growth is slowing.
Regarding the bond market, we have noticed that many large institutional
investors have structured their portfolios much more defensively. As
contrarians, we view this as a signal that the worst may be over, and that it
may be time to begin making adjustments to position our portfolios for a
potential market rally. While the potential exists for interest rates to edge up
in the next few months, we plan to position the Fund for a more favorable
long-term environment -- provided that there are no major surprises in the key
inflation indicators. As always, our adjustments will be incremental, and we
will remain vigilant to determine if any further changes in course are
warranted.
/s/ Garth R. Nisbet /s/ Paul C. Rocheleau
- -------------------- ---------------------
Garth R. Nisbet, CFA Paul C. Rocheleau
48
<PAGE>
CRABBE HUSON CONTRARIAN INCOME FUND
Performance Information
Change in Value of $10,000 from 10/31/1989 - 10/31/1999
Class A Shares, With and Without Sales Charge
[Plot Points For Mountain Chart]
<TABLE>
<CAPTION>
Fund Without Fund With Lehman Brothers
Sales Charge Sales Charge Index
<S> <C> <C>
10000 9525 10000
10443 9947 10550
11854 11291 12172
13008 12391 13452
14014 13348 15285
13634 12987 14576
15259 14535 16932
16013 15253 17844
17655 16816 19416
19634 18701 21412
19714 18778 21271
</TABLE>
The Lehman Brothers Government/Corporate Bond Index is an unmanaged index that
tracks the performance of a selection of U.S. government and investment grade
U.S. corporate bonds. Unlike mutual funds, indexes are not investments and do
not incur fees or expenses. It is not possible to invest directly in an index.
Change in Value of a $10,000 Investment in all Share Classes
from 10/31/1989 to 10/31/1999
<TABLE>
<CAPTION>
Share Class A B C Z I
Without With Without With Without With
sales sales sales sales sales sales
charge charge charge charge charge charge
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$19,714 $18,778 $19,640 $19,640 $19,694 $19,694 $19,662 $19,847
</TABLE>
Average Annual Total Returns as of 10/31/1999
<TABLE>
<CAPTION>
Inception Date 1/31/1989 9/15/1999 9/15/1999 9/15/1999 10/1/1998
Share Class A B C Z I
Without With Without With Without With
sales sales sales sales sales sales
charge charge charge charge charge charge
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year 0.42% (4.35)% 0.04% (4.63)% 0.31% (0.62)% 0.15% 0.90%
5 Years 7.65% 6.61% 7.57% 7.27% 7.63% 7.63% 7.60% 7.80%
10 Years 7.02% 6.50% 6.98% 6.98% 7.01% 7.01% 6.99% 7.10%
</TABLE>
Average Annual Total Returns as of 9/30/1999
<TABLE>
<CAPTION>
Share Class A B C Z I
Without With Without With Without With
sales sales sales sales sales sales
charge charge charge charge charge charge
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year (0.39)% (5.12)% (0.68)% (5.28)% (0.64)% (1.56)% (0.72)% 0.08%
5 Years 7.70% 6.66% 7.64% 7.34% 7.65% 7.65% 7.63% 7.80%
10 Years 7.18% 6.66% 7.15% 7.15% 7.15% 7.15% 7.15% 7.23%
</TABLE>
49
<PAGE>
CRABBE HUSON CONTRARIAN INCOME FUND
Past performance cannot predict future investment results. Returns and value of
an investment will vary, resulting in a gain or loss on sale. All results shown
assume reinvestment of distributions. The "With sales charge" returns include
the maximum 4.75% charge for Class A shares and the maximum contingent deferred
sales charge (CDSC) of 5% for one year and 2% for five years for Class B shares
and 1% for one year for Class C shares. Class I shares (institutional shares)
are offered without sales charges or contingent deferred sales charges.
Performance for different share classes will vary based on differences in sales
charges and fees associated with each class.
Performance results reflect any voluntary waivers or reimbursement of Fund
expenses by the Advisor or its affiliates. Absent these waivers or reimbursement
arrangements, performance results would have been lower.
Class B, C, I and Z share (newer class shares) performance information includes
returns of the Fund's Class A shares (the oldest existing fund class) for
periods prior to its inception date. These Class A share returns are not
restated to reflect any expense differential (e.g., Rule 12b-1 fees) between
Class A shares and the newer class shares. Had the expense differential been
reflected, the returns for the periods prior to the inception of Class B and
Class C shares would have been lower.
50
<PAGE>
CRABBE HUSON CONTRARIAN INCOME FUND
INVESTMENT PORTFOLIO
October 31, 1999
<TABLE>
<CAPTION>
Par Value
- ----------- ----------------------------------------------------------------- -------
CORPORATE FIXED INCOME BONDS - 51.9%
------------------------------------
<S> <C> <C>
FINANCE, INSURANCE & REAL ESTATE - 12.0%
Depository Institutions - 2.4%
$100,000 Citicorp, 6.375% 11/15/08 ....................................... $ 94,311
100,000 J.P. Morgan & Co., Inc., 7.625% 09/15/04 ........................ 102,997
--------
197,308
--------
Financial Services - 0.6%
50,000 Sears, Roebuck & Co. Acceptance Corp., 6.930% 11/15/02 .......... 49,680
--------
Insurance Carriers - 2.3%
50,000 American General Finance Corp., 6.200% 03/15/03 ................. 48,895
50,000 Conseco, Inc., 7.875% 12/15/00 .................................. 49,929
100,000 Lincoln National Corp., 6.500% 03/15/08 ......................... 93,777
--------
192,601
--------
Nondepository Credit Institute - 4.9%
100,000 American Express Credit Corp., 6.500% 08/01/00 .................. 100,192
100,000 Ford Motor Credit Co., 6.250% 11/08/00 .......................... 99,843
100,000 General Motors Acceptance Corp., 9.000% 10/15/02 ................ 105,823
100,000 Household Finance Corp., 6.000% 05/08/00 ........................ 99,888
--------
405,746
--------
Security Brokers & Dealers - 1.8%
100,000 Bear Stearns Cos., Inc., 6.875% 10/01/05 ........................ 97,325
50,000 Merrill Lynch & Co., Inc., 6.020% 05/11/01 ...................... 49,584
--------
146,909
--------
MANUFACTURING - 16.0%
Chemicals & Allied Products - 5.1%
100,000 E.I. DuPont De Nemours & Co., 8.250% 09/15/06 ................... 107,309
100,000 Eli Lilly & Co., 8.375% 12/01/06 ................................ 108,470
100,000 IMC Global, Inc., 7.400% 11/01/02 ............................... 99,244
100,000 Upjohn Co., 5.875% 04/15/00 ..................................... 99,994
--------
415,017
--------
Fabricated Metal - 1.1%
90,000 Snap-on, Inc., 6.625% 10/01/05 .................................. 88,209
--------
Food & Kindred Products - 3.6%
100,000 Anheuser Busch Cos., Inc., 7.000% 09/01/05 ...................... 98,905
100,000 Diageo Capital Place, 7.250% 11/01/09 ........................... 100,175
100,000 PepsiCo, Inc., 5.875% 06/01/00 .................................. 100,024
--------
299,104
--------
</TABLE>
51
<PAGE>
CRABBE HUSON CONTRARIAN INCOME FUND
INVESTMENT PORTFOLIO (Continued)
October 31, 1999
<TABLE>
<CAPTION>
Par Value
- --------- ----------------------------------------------------------- --------
CORPORATE FIXED INCOME BONDS (continued)
----------------------------------------
<S> <C> <C>
MANUFACTURING - (continued)
Machinery & Computer Equipment - 3.6%
International Business Machines Corp.:
$100,000 5.945% 05/14/01 .......................................... $ 99,316
100,000 7.250% 11/01/02 .......................................... 101,777
100,000 Raytheon Co., 6.150% 11/01/08 ............................. 90,291
--------
291,384
--------
Miscellaneous Manufacturing - 0.6%
50,000 Cooper Industries, Inc., 6.375% 05/08/08 .................. 46,613
--------
Rubber & Plastic - 1.2%
100,000 Premark International, Inc., 6.875% 11/15/08 .............. 98,101
--------
Stone, Clay, Glass & Concrete - 0.8%
75,000 Owens-Illinois, Inc., 7.350% 05/15/08 ..................... 68,299
--------
MINING & ENERGY - 2.3%
Oil & Gas Extraction - 1.2%
100,000 Occidental Petroleum Corp., 6.750% 11/15/02 ............... 98,876
--------
Oil & Gas Field Services - 1.1%
100,000 Enron Corp., 6.725% 11/17/08 .............................. 92,144
--------
RETAIL TRADE - 4.7%
Food Stores - 2.2%
100,000 Kroger Co., 7.000% 05/01/18 ............................... 90,524
100,000 Safeway, Inc., 6.500% 11/15/08 ............................ 93,622
--------
184,146
--------
General Merchandise Stores - 2.5%
50,000 Kmart Corp., 7.700% 07/02/02 .............................. 48,739
50,000 Saks, Inc., 8.250% 11/15/08 ............................... 47,355
100,000 Wal-Mart Stores, Inc., 8.000% 09/15/06 .................... 106,352
--------
202,446
--------
SERVICES - 2.4%
Amusement & Recreation - 0.6%
50,000 Circus Circus Enterprises, Inc., 9.250% 12/01/05 .......... 50,000
--------
Auto Repair Services & Parking - 0.6%
50,000 Hertz Corp. 6.625% 05/15/08 ............................... 47,387
--------
Business Services - 1.2%
100,000 Comdisco, Inc., 6.650% 11/13/01 ........................... 98,694
--------
TRANSPORTATION, COMMUNICATION, ELECTRIC
GAS & SANITARY SERVICES - 13.3%
Broadcasting - 0.6%
50,000 USA Networks, Inc., 6.750% 11/15/05 ....................... 47,761
--------
</TABLE>
52
<PAGE>
CRABBE HUSON CONTRARIAN INCOME FUND
INVESTMENT PORTFOLIO (Continued)
October 31, 1999
<TABLE>
<CAPTION>
Par Value
- --------- ------------------------------------------------------------- ---------
CORPORATE FIXED INCOME BONDS (continued)
----------------------------------------
<S> <C> <C>
TRANSPORTATION, COMMUNICATION, ELECTRIC
GAS & SANITARY SERVICES - (continued)
Cable - 0.6%
$ 50,000 Jones Intercable, Inc., 10.500% 03/01/08 ..................... $ 53,625
---------
Communications - 0.6%
50,000 Sprint Corp., 6.125% 11/15/05 ................................ 46,337
---------
Electric Services - 2.4%
50,000 Indiana Michigan Power Co., 6.450% 11/10/08 .................. 46,712
100,000 Kentucky Power Co., 6.450% 11/10/08 .......................... 94,052
55,000 NorAm Energy Corp., 6.375% 11/01/03 .......................... 53,146
---------
193,910
---------
Motor Freight & Warehousing - 1.3%
115,000 Ryder System Inc., 6.500% 05/15/05 ........................... 108,140
---------
Railroad - 0.6%
50,000 Union Pacific Corp., 6.790% 11/09/07 ......................... 47,851
---------
Sanitary Services - 1.2%
100,000 WMX Technologies, Inc., 6.700% 05/01/01 ...................... 95,586
---------
Telecommunication - 6.0%
80,000 AT&T Corp., 7.750% 03/01/07 .................................. 82,856
75,000 CBS Corp., 7.150% 05/20/05 ................................... 73,992
50,000 Comcast Cable Communications, Inc., 6.200% 11/15/08 .......... 46,178
100,000 GTE South, Inc., 6.000% 02/15/08 ............................. 93,581
100,000 SBC Communications, Inc., 6.250% 03/01/05 .................... 96,938
100,000 US West Communications, 6.625% 09/15/05 ...................... 96,994
---------
490,539
---------
WHOLESALE TRADE - 1.2%
Nondurable Goods
100,000 Sysco Corp., 7.000% 05/01/06 ................................. 98,914
---------
Total Corporate Fixed Income Bonds
(cost of $4,317,086) 4,255,327
---------
U.S.GOVERNMENT & AGENCIES OBLIGATIONS - 45.7%
---------------------------------------------
Government Agencies - 21.0%
Federal Home Loan Mortgage Corp.:
42,488 9.500% 10/01/16 ............................................. 44,694
59,948 9.000% 04/01/17 ............................................. 62,705
57,452 7.500% 09/01/25 ............................................. 57,559
90,080 7.000% 11/01/25 ............................................. 88,757
74,435 8.000% 06/01/26 ............................................. 75,854
126,257 7.000% 03/01/27 ............................................. 124,402
---------
453,971
---------
</TABLE>
53
<PAGE>
CRABBE HUSON CONTRARIAN INCOME FUND
INVESTMENT PORTFOLIO (Continued)
October 31, 1999
<TABLE>
<CAPTION>
Par Value
- -------- --------------------------------------------------------- ----------
U.S. GOVERNMENT & AGENCIES OBLIGATIONS (continued)
--------------------------------------------------
<S> <C> <C>
Government Agencies - (continued)
Federal National Mortgage Association,
$ 64,146 9.250% 9/1/16 ......................................... $ 67,233
----------
Government National Mortgage Association:
859,426 7.000% 6/15/28 ........................................ 843,037
381,713 6.500% 11/15/28 ....................................... 364,773
----------
1,207,810
----------
Government Obligations - 24.7%
U S Treasury Bond,
75,000 5.250% 2/15/29 ........................................ 64,828
U S Treasury Notes:
300,000 5.500% 7/31/01 ........................................ 298,407
1,275,000 5.500% 8/31/01 ........................................ 1,268,026
400,000 6.125% 8/15/29 ........................................ 398,248
----------
2,029,509
----------
Total U.S. Government & Agency Obligations
(cost of $3,811,228) 3,758,523
----------
ASSET BACKED SECURITIES - 1.6%
------------------------------
130,000 Green Tree Financial Corp., Series 1997-7, Class A-5,
6.540% 7/15/19 (cost of $128,055) ..................... 129,331
----------
Total Investments
(cost of $8,256,369)(a) 8,143,181
----------
SHORT-TERM OBLIGATIONS - 1.1%
-----------------------------
91,000 Repurchase agreement with Lehman Brothers Inc., dated
10/29/99, due 11/01/99 at 5.220%, collateralized by U.S.
Treasury bonds and/or notes with various maturities to
2009, market value of $93,272 (repurchase proceeds
$91,039) .............................................. 91,000
----------
OTHER ASSETS & LIABILITIES, NET - (0.3)% (26,980)
----------
NET ASSETS - 100.0% $8,207,201
----------
</TABLE>
NOTES TO INVESTMENT PORTFOLIO:
(a) Cost for federal income tax purposes is $8,256,749.
See notes to financial statements.
54
<PAGE>
CRABBE HUSON OREGON TAX-FREE FUND
Municipal bond market subject to general fixed-income environment
The past year has been a difficult one for the bond market in general, but it
has been especially hard for municipal bond investors. The rise in bond yields
over the past year has come primarily in response to events in the U.S. and
global economies. Commodity prices worldwide have increased -- including the
prices of steel, oil, and chemicals -- and the economies of Southeast Asia and
Japan have staged a dramatic recovery. In the U.S., we have seen continued
positive economic growth, low unemployment, and low inflation. These factors
have caused concern among bond investors that inflation could potentially begin
to increase as the economy becomes "overheated." An increase in inflation would
be detrimental for bond performance because rising prices can erode the buying
power for fixed-income investors, making bonds less attractive.
In the municipal market, the negative impact of rising interest rates has been
compounded by a lack of demand for municipals from both institutional and
individual investors. Moreover, we have seen a significant increase in supply,
caused by the booming Oregon and national economies. As a result, municipal
bonds generally have underperformed their Treasury counterparts over the
12-month period.
Performance reflects general market conditions
For the 12 months ended October 31, 1999, the Fund had a total return of
negative 4.70%, based on Class A shares without a sales charge. By comparison,
the average return for the Lehman Brothers Municipal Bond Index was negative
1.77% for the same period. The Fund underperformed the Lehman Index primarily
because the average maturity of our holdings was slightly longer than the
average maturity of bonds in the Index. The longer the average maturity is for a
given municipal bond, the more sensitive it typically will be to interest rate
changes.
Strong Oregon economy
The Oregon economy has benefited from the national economic expansion, now in
its ninth consecutive year. Having diversified out of a heavy dependence on
forestry, fishing and agriculture, Oregon now has strength in high technology,
financial services, health care and business services. Although wood products
and agriculture are still important, Oregon's diversity has helped its economy
grow at a faster rate than the national average throughout the 1990s. In the
year ended May 1999, state employment grew by 2%, ranking Oregon 16th in the
nation for job growth in that period. For municipal bond holders, Oregon's
strong economy bodes well over the long term, as a thriving, well-diversified
state economy can only help the credit ratings of Oregon's municipal issuers.
55
<PAGE>
CRABBE HUSON OREGON TAX-FREE FUND
Outlook: cautiously optimistic
The outlook for Oregon municipal bonds depends in large part on the municipal
market and the bond market in general. Despite the continued expansion of the
U.S. economy -- the duration of which is nearing an all-time record -- and the
tight labor market that has existed for the past few years, inflation has been
kept at bay because of significant increases in productivity driven by
technological advances. We believe that this productivity rise -- along with
this year's interest rate increases by the Federal Reserve Board -- can have a
positive impact for bonds over the long term. High productivity keeps inflation
in check, while higher short-term interest rates tend to have a slowing effect
on the economy. As far as municipals are concerned, we believe that they are
currently excellent values compared to taxable bonds. In our opinion, this makes
their long-term potential very attractive. Given the forecast for continued
strength in Oregon's economy and the state's well-managed finances, we believe
Oregon's municipal bonds remain attractive long-term investments.
/s/ Garth R. Nisbet /s/ Paul C. Rocheleau
- -------------------- ---------------------
Garth R. Nisbet, CFA Paul C. Rocheleau
56
<PAGE>
CRABBE HUSON OREGON TAX-FREE FUND
Performance Information
Crabbe Huson Oregon Tax-Free Fund Investment
Performance vs. Lehman Brothers Municipal Bond Index
Change in Value of $10,000 from 10/31/1989 - 10/31/1999
Class A Shares, With and Without Sales Charge
[Plot Points For Mountain Chart]
<TABLE>
<CAPTION>
Fund Without Fund With Lehman Brothers Municipal
Sales Charge Sales Charge Bond Index
<S> <C> <C>
10000 9525 10000
10600 10097 10742
11644 11091 12049
12402 11813 13060
13722 13070 14899
13438 12799 14250
14870 14164 16364
15380 14650 17297
16406 15627 18765
17477 16647 20270
16663 15872 19912
</TABLE>
The Lehman Brothers Municipal Bond Index is a broad-based, unmanaged index that
tracks the performance of the municipal bond market. Unlike mutual funds,
indexes are not investments and do not incur fees or expenses. It is not
possible to invest directly in an index.
Change in Value of a $10,000 Investment in all Share Classes
from 10/31/1989 to 10/31/1999
<TABLE>
<CAPTION>
Share Class A B
Without With Without With
sales sales sales sales
charge charge charge charge
<S> <C> <C> <C> <C>
$16,663 $15,872 $16,567 $16,567
</TABLE>
57
<PAGE>
CRABBE HUSON OREGON TAX-FREE FUND
Average Annual Total Returns as of 10/31/1999
<TABLE>
<CAPTION>
Inception Date 10/4/1984 1/27/1999
Share Class A B
Without With Without With
sales sales sales sales
charge charge charge charge
<S> <C> <C> <C> <C>
1 Year (4.70)% (9.23)% (5.26)% (10.15)%
5 Years 4.38% 3.37% 4.26% 3.92%
10 Years 5.24% 4.73% 5.18% 5.18%
</TABLE>
Average Annual Total Returns as of 9/30/1999
<TABLE>
<CAPTION>
Share Class A B
Without With Without With
sales sales sales sales
charge charge charge charge
<S> <C> <C> <C> <C>
1 Year (3.08)% (7.69)% (3.59)% (8.47)%
5 Years 4.57% 3.56% 4.46% 4.12%
10 Years 5.51% 5.00% 5.46% 5.46%
</TABLE>
Past performance cannot predict future investment results. Returns and value of
an investment will vary, resulting in a gain or loss on sale. All results shown
assume reinvestment of distributions. The "With sales charge" returns include
the maximum 4.75% charge for Class A shares and the maximum contingent deferred
sales charge (CDSC) of 5% for one year and 2% for five years for Class B shares.
Performance for different share classes will vary based on differences in sales
charges and fees associated with each class.
Performance results reflect any voluntary waivers or reimbursement of Fund
expenses by the Advisor or its affiliates. Absent these waivers or reimbursement
arrangements, performance results would have been lower.
Class B share (newer class shares) performance information includes returns of
the Fund's Class A shares (the oldest existing fund class) for periods prior to
its inception date. These Class A share returns are not restated to reflect any
expense differential (e.g., Rule 12b-1 fees) between Class A shares and Class B
shares. Had the expense differential been reflected, the returns for the periods
prior to the inception of Class B shares would have been lower.
58
<PAGE>
CRABBE HUSON OREGON TAX-FREE OREGON FUND
INVESTMENT PORTFOLIO
October 31, 1999
<TABLE>
<CAPTION>
Par Value
- ----------- ------------------------------------------------------------ ---------
MUNICIPAL BONDS - 98.8%
-----------------------
<S> <C> <C>
EDUCATION - 10.8%
Education
$ 500,000 Clackamas Community College District, Series 1997,
5.400% 06/01/15 ........................................... $ 487,840
1,000,000 Multomah County, University of Portland, Series 1997,
5.150% 04/01/14 ........................................... 946,270
765,000 Salem, Educational Facility Revenue, Williamette University,
6.000% 04/01/10 ........................................... 795,577
---------
2,229,687
---------
HEALTHCARE - 7.4%
Health Services - 2.0%
500,000 Benton County Hospital Facilities Authority, Samaritan
Health Services, Series 1998, 5.125% 10/01/28 ............. 415,335
---------
Hospital - 5.4%
1,000,000 Medford Hospital Facilities Authority, Asante Health
Systems, Series 1998 B, 5.125% 08/15/28 ................... 865,020
228,000 Saint Charles Memorial Hospital, Inc., Series 1973 A,
6.750% 01/01/06 ........................................... 240,804
---------
1,105,824
---------
HOUSING - 6.2%
Multi-Family - 4.3%
1,000,000 Portland Housing Authority, Series 1998 A, 5.000% 01/01/19 886,910
---------
Single-Family - 1.9%
State Department of Housing & Community Services:
300,000 Series 1997 E, 5.150% 07/01/13 ............................ 282,576
110,000 Series 1998 A, 5.150% 07/01/15 ............................ 101,059
---------
383,635
---------
OTHER - 8.3%
Refunded/Escrowed
265,000 Canby, Series 1997, 5.150% 12/01/14 ........................ 253,334
500,000 Clackamas & Washington Counties School District No. 3,
Series 1997, 5.150% 06/01/14 .............................. 476,405
485,000 Oregon City, Series 1997, 5.200% 10/01/15 .................. 462,549
400,000 State Department of General Services, Real Property
Financing Program, Series 1992 A, 6.100% 09/01/06 ......... 418,936
95,000 Washington County United Sewer Agency, Series 1992 A,
5.900% 10/01/06 ........................................... 98,534
---------
1,709,758
---------
TAX-BACKED - 49.1%
Local General Obligations - 31.0%
300,000 Yamhill County School District No. 40, Series 1997,
6.000% 06/01/08 ........................................... 320,508
</TABLE>
59
<PAGE>
CRABBE HUSON OREGON TAX-FREE OREGON FUND
INVESTMENT PORTFOLIO (Continued)
October 31, 1999
<TABLE>
<CAPTION>
Par Value
- --------- --------------------------------------------------------- ----------
MUNICIPAL BONDS - (continued)
-----------------------------
<S> <C> <C>
TAX-BACKED (continued)
Local General Obligations (continued)
$ 160,000 Portland, Series 1993 A, 4.750% 04/01/08 ................. $ 157,163
135,000 Bend County Service District, Series 1996, 5.375% 06/01/11 135,774
250,000 Deschutes County, Series 1998, 4.750% 12/01/12 ........... 232,655
450,000 Josephine County School District No. 7, Series 1995,
5.750% 06/01/07 ......................................... 473,684
240,000 Lane County Area Educational District, Lane Community
College, Series 1995, 4.850% 06/01/08 .................... 235,042
Marion County School District No. 103:
1,000,000 Series 1998, 5.000% 11/01/15 ............................ 919,260
160,000 Series 1995 A, 6.000% 11/01/05 .......................... 170,688
435,000 Multomah County School District No. 1J, Series 1993 A,
5.000% 03/01/07 ......................................... 435,631
100,000 Salem, Series 1992 A, 5.875% 01/01/07 .................... 102,877
750,000 Salem-Keizer School District No. 24J, Series 1998, 4.875%
06/01/14 ................................................ 691,320
1,000,000 Tualatin Hills Parks & Recreation District, Series 1998,
5.750% 03/01/15 .......................................... 1,006,000
295,000 Umatilla County School District No. 6-R, Series 1998,
4.750% 06/15/10 ......................................... 285,182
15,000 Washington & Clackmas Counties School District No. 23,
Series 1993, 5.000% 01/01/05 ............................. 15,169
400,000 Washington County School District No. 48J: Series 1998,
5.000% 08/01/17 ......................................... 359,456
20,000 No.88J, Series 1994, 6.100% 06/01/12 .................... 20,560
900,000 Washington, Multnomah & Yamhill Counties School District,
Series 1998, 5.000% 11/01/14 ............................ 838,746
---------
6,399,715
---------
Special Non-Property Tax - 3.7%
Commonwealth of Puerto Rico Infrastructure Financing
Authority:
500,000 Series 1997 A, 5.000% 07/01/13 ......................... 477,080
300,000 Series B, 5.000% 07/01/13 .............................. 286,248
---------
763,328
---------
Special Property Tax - 0.7%
150,000 Metro, Regional Center Project, Series 1993 A, 5.000%
08/01/10 ................................................ 146,094
---------
State Appropriated - 2.9%
665,000 State Department of Administrative Services, State Parks
Project, Series 1998 A, 4.750% 04/01/13 ................. 602,776
---------
</TABLE>
60
<PAGE>
CRABBE HUSON OREGON TAX-FREE OREGON FUND
INVESTMENT PORTFOLIO (Continued)
October 31, 1999
<TABLE>
<CAPTION>
Par Value
- ----------- ----------------------------------------------------------- ---------
MUNICIPAL BONDS - (continued)
-----------------------------
<S> <C> <C>
TAX-BACKED (continued)
State General Obligations - 10.8%
Northern Oregon Corrections Authority, Gilliam Hood River:
$500,000 Series 1997, 5.400% 09/15/16 .............................. $ 481,640
175,000 Series 1979 LXI, 7.200% 07/01/04 .......................... 193,639
250,000 Series 1979 LXI, 7.250% 07/01/06 .......................... 283,983
200,000 Series 1979 LXI, 7.250% 01/01/07 .......................... 227,598
100,000 Series 1980 LXII, 9.000% 04/01/03 ......................... 113,882
180,000 Series 1980 LXII, 9.200% 04/01/08 ......................... 230,036
205,000 Series 1980 LXIII, 8.200% 07/01/04 ........................ 235,078
200,000 Series 1980 LXIII, 8.250% 01/01/07 ........................ 239,084
110,000 Series 1992 B, 6.000% 08/01/04 ............................ 115,904
95,000 Series 1997 76A, 5.550% 04/01/09 .......................... 98,019
----------
2,218,863
----------
TRANSPORTATION - 4.5%
Airports - 1.5%
355,000 Portland, Portland International Airport, Series 1998 12-A,
5.000% 07/01/18 .......................................... 313,966
----------
Transportation - 3.0%
Commonwealth of Puerto Rico Highway & Transportation
Authority:
300,000 Series 1998 A, 5.500% 07/01/12 ............................ 303,528
310,000 Series 1998 A, 5.500% 07/01/14 ............................ 307,818
----------
611,346
----------
UTILITY - 9.9%
Municipal Electric - 4.4%
Puerto Rico Electric Power Authority:
500,000 Series 1998 EE, 5.250% 07/01/14 ........................... 485,035
500,000 Series 1998 GG, 4.750% 07/01/21 ........................... 425,800
----------
910,835
----------
Water & Sewer - 5.5%
500,000 McMinnville, Series 1994 A, 5.000% 02/01/14 ............... 465,185
500,000 Molalla, Series 1997, 5.200% 08/01/17 ..................... 469,925
Portland:
100,000 Series 1993 A, 5.150% 03/01/08 ............................ 100,175
100,000 Series 1995, 5.100% 08/01/08 .............................. 100,411
----------
1,135,696
----------
</TABLE>
61
<PAGE>
CRABBE HUSON OREGON TAX-FREE OREGON FUND
INVESTMENT PORTFOLIO (Continued)
October 31, 1999
<TABLE>
<CAPTION>
Par Value
- ------------- -------------------------------------------------- -----------
MUNICIPAL BONDS - (continued)
-----------------------------
<S> <C> <C>
OTHER - 2.6%
Deschutes County:
$420,000 Series 1998 A, 5.050% 06/01/17 .................... $ 362,229
100,000 Series 1998 A, 5.100% 06/01/18 .................... 86,370
100,000 Portland, Series 1999 A, 5.125% 06/01/14 .......... 95,034
-----------
543,633
-----------
Total Municipal Bonds
(cost $21,221,010)(a) 20,377,401
-----------
OTHER ASSETS & LIABILITIES - 1.2% 243,128
-----------
NET ASSETS - 100.0% $20,620,529
-----------
</TABLE>
(a) Cost of for federal income tax purposes is the same.
62
<PAGE>
CRABBE HUSON FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
October 31, 1999
<TABLE>
<CAPTION>
THE CRABBE CRABBE CRABBE HUSON
HUSON HUSON MANAGED
CONTRARIAN EQUITY INCOME & EQUITY
FUND FUND FUND
---------- ------------ ------------
<S> <C> <C> <C>
ASSETS:
Investments at cost $2,859,836 $ 94,336,184 $53,551,906
Appreciation (depreciation) 113,608 9,448,628 2,571,170
---------- ------------ ------------
Investments at market 2,973,444 103,784,812 56,123,076
Repurchase agreements 536,000 6,479,000 2,155,000
Short-term obligations -- 6,000,000 --
Cash 35,155 2,314,247 547
Receivables:
Investments sold 5,408 1,141,035 354,029
Fund shares sold 2,995 16,469 699
Dividends and interest 583 33,238 453,635
Expense reimbursement due from Advisor 22,467 32,493 80,434
Organization expenses -- -- --
Other -- 24,575 3,621
---------- ------------ ------------
3,576,052 119,825,869 59,171,041
---------- ------------ ------------
LIABILITIES:
Payable due to custodian bank -- -- --
Payables:
Loan Payable -- -- --
Investments purchased 49,605 2,326,660 5,037
Fund shares redeemed -- 209,880 45,404
Distributions -- -- --
Payable to Advisor -- -- --
Accrued:
Management fee 2,372 98,240 50,379
Administration fee 148 5,029 2,519
Service fee -- -- --
Bookkeeping fee 2,134 4,327 2,570
Transfer Agent fee 700 21,115 7,727
Interest expense -- -- --
Deferred Trustees fees 14 132 85
Other 24,383 70,150 46,399
---------- ------------ ------------
79,356 2,735,533 160,120
---------- ------------ ------------
NET ASSETS: $3,496,696 $117,090,336 $59,010,921
========== ============ ============
NET ASSETS CONSIST OF:
Capital paid in $3,390,630 $107,959,918 $53,350,409
Undistributed (overdistributed) net
investment income (1,040) (2,679) 329,416
Accumulated net realized gain (loss) (6,502) (315,531) 2,759,926
Net unrealized appreciation (depreciation) 113,608 9,448,628 2,571,170
---------- ------------ ------------
$3,496,696 $117,090,336 $59,010,921
========== ============ ============
CLASS A
Net Assets $3,278,535 $102,427,575 $37,790,589
Shares outstanding 315,575 6,103,663 2,955,175
========== ============ ============
NET ASSET VALUE AND
REDEMPTION PRICE PER SHARE $ 10.39(a) $ 16.78(a) $ 12.79(a)
========== ============ ============
MAXIMUM OFFERING PRICE PER
SHARE (NAV/(1-SALES LOAD)) $ 11.02(b) $ 17.80(b) $ 13.42(b)
========== ============ ============
CLASS B
Net Assets $ 208,702 $ 466,543 $ 29,352
Shares outstanding 20,211 27,996 2,299
========== ============ ============
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE 10.33(a) 16.66(a) $ 12.77(a)
========== ============ ============
CLASS C
Net Assets $ 9,459 $ 6,376 $ 2,818
Shares outstanding 917 383 221
========== ============ ============
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE $ 10.32(a) $ 16.67(a) $ 12.77(a)
========== ============ ============
CLASS I
Net Assets -- $ 14,189,842 $21,188,162
Shares outstanding -- 843,429 1,659,291
========== ============ ============
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE -- $ 16.82 $ 12.77
========== ============ ============
CLASS Z
Net Assets -- -- --
Shares outstanding -- -- --
========== ============ ============
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE -- -- --
========== ============ ============
</TABLE>
(a) Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
(b) On sales of $50,000 or more the offering price is reduced.
See notes to financial statements.
63
<PAGE>
CRABBE HUSON FUNDS
STATEMENTS OF ASSETS AND LIABILITIES (continued)
<TABLE>
<CAPTION>
CRABBE HUSON CRABBE THE CRABBE CRABBE HUSON CRABBE HUSON
REAL ESTATE HUSON HUSON CONTRARIAN OREGON
INVESTMENT SMALL CAP SPECIAL INCOME TAX-FREE
FUND FUND FUND, INC. FUND FUND
------------ ------------ ------------ ---------- -----------
<S> <C> <C> <C> <C>
$10,241,611 $ 50,798,042 $ 85,710,753 $8,256,369 $21,221,010
(1,109,711) (19,969,885) (29,347,745) (113,188) (843,609)
----------- ------------ ------------ ---------- -----------
9,131,900 30,828,157 56,363,008 8,143,181 20,377,401
344,000 3,605,000 171,000 91,000 --
-- -- -- -- --
871 426,651 866 292 --
314,111 51,248 1,743 14,881 --
-- 442,266 1,032 58 1
27,738 8,182 3,094 127,494 335,652
17,632 44,555 70,421 37,238 --
-- 61,333 -- -- --
170 134 61,315 -- --
----------- ------------ ------------ ---------- -----------
9,836,422 35,467,526 56,672,479 8,414,144 20,713,054
----------- ------------ ------------ ---------- -----------
-- -- -- -- 27,149
-- 4,000,000 9,000,000 -- --
235,019 -- -- 99,825 --
58,244 27,373 64,906 69,435 934
-- -- 8,071 8,167 25,121
-- -- -- -- 11,463
8,290 30,929 43,486 5,261 8,877
415 1,546 2,174 351 888
1,615 -- 11,122 -- --
2,250 2,250 2,329 2,250 2,250
1,957 1,495 10,263 1,908 2,308
126 -- -- -- --
58 76 85 14 --
22,089 28,330 58,187 19,732 13,535
----------- ------------ ------------ ---------- -----------
330,063 4,091,999 9,200,623 206,943 92,525
----------- ------------ ------------ ---------- -----------
$ 9,506,359 $ 31,375,527 $ 47,471,856 $8,207,201 $20,620,529
=========== ============ ============ ========== ===========
$10,491,465 $ 74,386,720 $125,676,214 $8,287,118 $21,134,883
364,598 (1,702) (1,888) (9,431) 182,022
(239,993) (23,039,606) (48,854,725) 42,702 147,233
(1,109,711) (19,969,885) (29,347,745) (113,188) (843,609)
----------- ------------ ------------ ---------- -----------
$ 9,506,359 $ 31,375,527 $ 47,471,856 $8,207,201 $20,620,529
=========== ============ ============ ========== ===========
$ 8,185,442 $ 6,895,056 $ 47,471,856 $3,843,080 $20,568,276
857,034 848,070 6,812,058 380,165 1,769,524
=========== ============ ============ ========== ===========
$ 9.55(a) $ 8.13(a) $ 6.97(a) $ 10.11(a) $ 11.62(a)
=========== ============ ============ ========== ===========
$ 10.03(b) $ 8.63(a) $ 7.40(a) $ 10.61(b) $ 12.20(b)
=========== ============ ============ ========== ===========
$ 763,916 -- -- $ 16,207 $ 52,253
80,024 -- -- 1,600 4,498
=========== ============ ============ ========== ===========
$ 9.55(a) -- -- $ 10.13(a) $ 11.62(a)
=========== ============ ============ ========== ===========
$ 63,842 -- -- $ 1,006 --
6,693 -- -- 99 --
=========== ============ ============ ========== ==========
$ 9.54(a) -- -- $ 10.15(a) --
=========== ============ ============ ========== ==========
-- $ 24,480,471 -- $ 100,505 --
-- 2,986,983 -- 9,946 --
=========== ============ ============ ========== ==========
-- $ 8.20 -- $ 10.10 --
=========== ============ ============ ========== ==========
$ 493,159 -- -- $4,246,403 --
51,607 -- -- 419,911 --
=========== ============ ============ ========== ==========
$ 9.56 -- -- $ 10.11 --
=========== ============ ============ ========== ==========
</TABLE>
64
<PAGE>
CRABBE HUSON FUNDS
STATEMENTS OF OPERATIONS
For the year ended October 31, 1999
<TABLE>
<CAPTION>
CRABBE CRABBE CRABBE HUSON
HUSON HUSON MANAGED
CONTRARIAN EQUITY INCOME & EQUITY
FUND FUND FUND
---------- ------------ ------------
<S> <C> <C> <C>
INVESTMENT INCOME
Interest $ 20,496 $ 467,604 $ 2,062,247
Securities Lending -- 65,535 29,565
Dividends 25,908 2,237,418 630,321
---------- ------------ ------------
46,404 2,770,557 2,722,133
---------- ------------ ------------
EXPENSES
Management fee 25,678 1,620,607 775,433
Administration fee 1,593 87,292 38,433
Service fee--Class A 7,927 377,989 126,621
Service fee--Class B -- 288 17
Service fee--Class C -- 5 3
Distribution fee--Class B 467 863 53
Distribution fee--Class C 10 16 10
Transfer agent--Class A, B, C 7,712 462,229 134,707
Transfer agent--Class I -- 494 667
Bookkeeping fee 24,750 69,761 36,552
Trustees fee 4,714 12,267 8,369
Custodian fee 4,863 18,849 10,740
Interest -- 27,243 4,576
Audit fee 15,059 29,305 17,813
Legal fee 3,294 5,053 4,489
Registration fee 67,275 43,573 39,433
Reports to shareholders 1,379 17,824 11,477
Amortization of deferred organization
expenses -- -- 3,020
Other 430 62,083 28,187
---------- ------------ ------------
165,151 2,835,741 1,240,600
Fees and expenses waived or borne
by the Advisor (113,486) (478,449) (258,141)
---------- ------------ ------------
NET EXPENSES 51,665 2,357,292 982,459
---------- ------------ ------------
NET INVESTMENT INCOME (LOSS) (5,261) 413,265 1,739,674
---------- ------------ ------------
REALIZED AND UNREALIZED
GAIN (LOSS):
Net realized gain (loss) on investments (6,502) 16,616,334 5,979,039
Net change in unrealized appreciation/
depreciation of investments 113,608 (3,203,399) (3,117,510)
---------- ------------ ------------
NET GAIN (LOSS) ON INVESTMENTS 107,106 13,412,935 2,861,529
---------- ------------ ------------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING FROM
OPERATIONS $ 101,845 $ 13,826,200 $ 4,601,203
========== ============ ============
</TABLE>
(a) Rounds to less than one.
See notes to financial statements.
65
<PAGE>
CRABBE HUSON FUNDS
STATEMENTS OF OPERATIONS (continued)
For the year ended October 31, 1999
<TABLE>
<CAPTION>
CRABBE HUSON CRABBE CRABBE HUSON CRABBE HUSON
REAL ESTATE HUSON THE CRABBE CONTRARIAN OREGON
INVESTMENT SMALL CAP HUSON SPECIAL INCOME TAX-FREE
FUND FUND FUND, INC. FUND FUND
---------- ------------- ----------- --------- ------------
<S> <C> <C> <C> <C>
$ 20,296 $ 47,108 $ 21,235 $ 373,545 $ 1,207,532
2,928 61,658 23,314 -- --
947,594 238,324 454,582 -- --
---------- ------------- ----------- --------- ------------
970,818 347,090 499,131 373,545 1,207,532
---------- ------------- ----------- --------- ------------
136,995 570,333 766,465 43,955 117,591
6,879 28,575 38,323 2,991 11,844
32,165 24,760 191,616 13,013 58,785
909 -- -- 3 --
45 -- -- (a) --
2,720 -- -- 10 161
136 -- -- 1 --
43,803 43,893 278,365 14,632 43,781
-- 1,184 -- 3 --
26,893 29,999 36,266 27,000 27,000
6,583 7,611 2,076 5,664 6,800
5,003 7,106 -- 4,457 3,648
458 31,049 367,729 321 --
6,562 13,872 2,970 5,245 7,971
3,765 4,508 2,810 5,823 2,019
24,152 38,585 30,982 64,254 1,032
2,306 9,251 -- 1,237 2,503
14,643 28,916 3,990 -- --
4,431 24,415 3,669 6,305 23,697
---------- ------------- ----------- --------- ------------
318,448 864,057 1,725,261 194,914 306,832
(111,228) (241,817) (575,563) (149,825) (75,106)
---------- ------------- ----------- --------- ------------
207,220 622,240 1,149,698 45,089 231,726
---------- ------------- ----------- --------- ------------
763,598 (275,150) (650,567) 328,456 975,806
---------- ------------- ----------- --------- ------------
(233,887) (22,918,425) (27,640,698) 92,322 176,439
(741,407) 23,557,586 21,898,716 (362,140) (2,201,977)
---------- ------------- ----------- --------- ------------
(975,294) 639,161 (5,741,982) (269,818) (2,025,538)
---------- ------------- ----------- --------- ------------
$ (211,696) $ 364,011 $(6,392,549) $ 58,638 $ (1,049,732)
========== ============= =========== ========= ============
</TABLE>
66
<PAGE>
CRABBE HUSON FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
CRABBE HUSON
CONTRARIAN FUND
-------------------
PERIOD ENDED
OCTOBER 31, 1999(b)
-------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income (loss) $ (5,261)
Net realized gain (6,502)
Net unrealized appreciation
(depreciation) of investments 113,608
----------
Net Increase (Decrease) from Operations 101,845
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income-Class A --
From net investment income-Class B --
From net investment income-Class C --
From net investment income-Class Z --
From net investment income-Class I --
From net realized gains on investments-Class A --
From net realized gain on investments-Class I --
----------
101,845
----------
CAPITAL SHARE TRANSACTIONS:
Receipts for shares sold-Class A 3,235,295
Value of distributions reinvested-Class A --
Cost of shares repurchased-Class A (82,256)
----------
3,153,039
----------
Receipts for shares sold-Class B 232,547
Value of distributions reinvested-Class B --
Cost of shares repurchased-Class B (264)
----------
232,283
----------
Receipts for shares sold-Class C 9,529
Value of distributions reinvested-Class C --
Cost of shares repurchased-Class C --
----------
9,529
----------
Receipts for shares sold-Class I --
Value of distributions reinvested-Class I --
Cost of shares repurchased-Class I --
----------
--
----------
Receipts for shares sold-Class Z --
Value of distributions reinvested-Class Z --
Cost of shares repurchased-Class Z --
----------
--
----------
Net Increase (Decrease) from Fund
Share Transactions 3,394,851
----------
Total Increase (Decrease) in Net Assets 3,496,696
----------
FUND NET ASSETS, BEGINNING OF PERIOD --
----------
FUND NET ASSETS, END OF PERIOD* $3,496,696
==========
*Net of undistributed (overdistributed)
net investment income: $ (1,040)
==========
</TABLE>
(a) Class B, Class C and Class Z were inially offered on September 15, 1999.
(b) The Fund commenced investment operations on December 1, 1998.
See notes to financial statements.
67
<PAGE>
CRABBE HUSON FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (continued)
<TABLE>
<CAPTION>
CRABBE HUSON
EQUITY FUND
--------------------------------------
YEAR ENDED YEAR ENDED
OCTOBER 31, 1999(a) OCTOBER 31, 1998
------------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income $ 413,265 $ 1,631,851
Net realized gain 16,616,334 8,001,428
Net unrealized appreciation
(depreciation) of investments (3,203,399) (44,543,545)
-------------- --------------
Net Increase (Decrease) from Operations 13,826,200 (34,910,266)
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income-Class A (1,254,599) (804,289)
From net investment income-Class B -- --
From net investment income-Class C -- --
From net investment income-Class Z -- --
From net investment income-Class I (288,497) (150,978)
From net realized gain on investments-Class A (7,391,449) (77,290,555)
From net realized gain on investments-Class I (919,801) (4,893,327)
-------------- --------------
3,971,854 (118,049,415)
-------------- --------------
CAPITAL SHARE TRANSACTIONS:
Receipts for shares sold-Class A 75,426,893 97,527,486
Value of distributions reinvested-Class A 8,116,009 74,537,053
Cost of shares repurchased-Class A (211,486,686) (216,438,529)
-------------- --------------
(127,943,784) (44,373,990)
-------------- --------------
Receipts for shares sold-Class B 520,696 --
Value of distributions reinvested-Class B -- --
Cost of shares repurchased-Class B (71) --
-------------- --------------
520,625 --
-------------- --------------
Receipts for shares sold-Class C 6,940 --
Value of distributions reinvested-Class C -- --
Cost of shares repurchased-Class C -- --
-------------- --------------
6,940 --
-------------- --------------
Receipts for shares sold-Class I 2,581,967 17,904,274
Value of distributions reinvested-Class I 1,074,278 5,044,293
Cost of shares repurchased-Class I (17,421,639) (10,356,193)
-------------- --------------
(13,765,394) 12,592,374
-------------- --------------
Receipts for shares sold-Class Z -- --
Value of distributions reinvested-Class Z -- --
Cost of shares repurchased-Class Z -- --
-------------- --------------
-- --
-------------- --------------
Net Increase (Decrease) from Fund
Share Transactions (141,181,613) (31,781,616)
-------------- --------------
Total Increase (Decrease) in Net Assets (137,209,759) (149,831,031)
FUND NET ASSETS, BEGINNING OF PERIOD 254,300,095 404,131,126
-------------- --------------
FUND NET ASSETS, END OF PERIOD* $ 117,090,336 $ 254,300,095
============== ==============
*Net of undistributed (overdistributed) net
investment income: $ (2,679) $ 1,172,132
============== ==============
</TABLE>
(a) Class B and/or Class C shares were initially offered on January 27, 1999.
(b) Class Z shares were initially offered on January 29, 1999.
See notes to financial statements.
68
<PAGE>
CRABBE HUSON FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (continued)
<TABLE>
<CAPTION>
CRABBE HUSON
MANAGED INCOME & EQUITY FUND
--------------------------------------
YEAR ENDED YEAR ENDED
OCTOBER 31, 1999(a) OCTOBER 31, 1998
------------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income (loss) $ 1,739,694 $ 2,880,765
Net realized gain (loss) on investments 5,979,039 1,965,514
Net realized loss on closed short sales -- --
Net change in unrealized appreciation/
depreciation of investments (3,117,510) (5,596,448)
------------- ------------
Increase (Decrease) in net assets resulting
from operations (4,601,203) (750,169)
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income-Class A (1,024,235) (1,566,627)
From net investment income-Class I (731,632) (677,141)
From net investment income-Class B (186) --
From net investment income-Class C (24) --
Return of capital-Class A -- --
From net realized gain on investments-Class A (1,378,198) (11,232,637)
In excess of net realized gains on investments-Class A -- --
From net realized gain on investments-Class I (723,750) (3,834,627)
In excess of net realized gains on investments-Class I -- --
------------- ------------
743,178 (18,061,201)
------------- ------------
CAPITAL SHARE TRANSACTIONS:
Receipts for shares sold-Class A 2,052,293 13,003,112
Value of distributions reinvested-Class A 2,231,687 11,922,009
Cost of shares repurchased-Class A (34,679,599) (39,765,833)
------------- ------------
(30,395,619) (14,840,712)
------------- ------------
Receipts for shares sold-Class B 31,130 --
Value of distributions reinvested-Class B 187 --
Cost of shares repurchased-Class B (395) --
------------- ------------
30,922 --
------------- ------------
Receipts for shares sold-Class C 2,995 --
Value of distributions reinvested-Class C 24 --
Cost of shares repurchased-Class C -- --
------------- ------------
3,019 --
------------- ------------
Receipts for shares sold-Class I 1,839,007 26,660,076
Value of distributions reinvested-Class I 1,456,135 4,511,764
Cost of shares repurchased-Class I (16,069,684) (21,423,740)
------------- ------------
(12,774,542) 9,748,100
------------- ------------
Net Increase (Decrease) from Fund
Share Transactions (43,136,220) (5,092,612)
------------- ------------
Total Increase (Decrease) in Net Assets (42,393,042) (23,153,813)
------------- ------------
FUND NET ASSETS, BEGINNING OF PERIOD 101,403,963 124,557,776
------------- ------------
FUND NET ASSETS, END OF PERIOD* $ 59,010,921 $101,403,963
============= ============
*Net of undistributed (overdistributed) net
investment income: $ 329,416 $ 316,366
============= ============
</TABLE>
(a) Class B and Class C shares were initially offered on January 27, 1999.
See notes to financial statements.
69
<PAGE>
CRABBE HUSON FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (continued)
<TABLE>
<CAPTION>
CRABBE HUSON
ESTATE INVESTMENT FUND
-----------------------------------------
YEAR ENDED YEAR ENDED
OCTOBER 31, 1999(a)(b) OCTOBER 31, 1998
---------------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income $ 763,598 $ 990,794
Net realized gain (233,887) 297,927
Net unrealized appreciation
(depreciation) of investments (741,407) (4,584,901)
------------- -----------
Net Increase (Decrease) from Operations (211,696) (3,297,180)
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income-Class A (451,269) (766,460)
From net investment income-Class B (10,018) --
From net investment income-Class C (482) --
From net investment income-Class Z (9,270) --
From net investment income-Class I -- --
From net realized gain on investments-Class A (282,505) (3,695,066)
From net realized gain on investments-Class I -- --
------------- -----------
(965,240) (7,768,706)
------------- -----------
CAPITAL SHARE TRANSACTIONS:
Receipts for shares sold-Class A 2,445,427 10,975,706
Value of distributions reinvested-Class A 706,348 4,237,480
Cost of shares repurchased-Class A (11,534,879) (24,279,539)
------------- -----------
(8,383,094) (9,066,353)
------------- -----------
Receipts for shares sold-Class B 1,024,618 --
Value of distributions reinvested-Class B 7,814 --
Cost of shares repurchased-Class B (212,999) --
------------- -----------
819,433 --
------------- -----------
Receipts for shares sold-Class C 73,494 --
Value of distributions reinvested-Class C 339 --
Cost of shares repurchased-Class C (4,314) --
------------- -----------
69,519 --
------------- -----------
Receipts for shares sold-Class I -- --
Value of distributions reinvested-Class I -- --
Cost of shares repurchased-Class I -- --
------------- -----------
-- --
------------- -----------
Receipts for shares sold-Class Z 534,812 --
Value of distributions reinvested-Class Z 9,270 --
Cost of shares repurchased-Class Z (1,834) --
------------- -----------
542,248 --
------------- -----------
Net Increase (Decrease) from Fund
Share Transactions (6,951,894) (9,066,353)
------------- -----------
Total Increase (Decrease) in Net Assets (7,917,134) (16,835,059)
FUND NET ASSETS, BEGINNING OF PERIOD 17,423,493 34,258,552
------------- -----------
FUND NET ASSETS, END OF PERIOD* $ 9,506,359 $17,423,493
============= ===========
*Net of undistributed (overdistributed) net
investment income: $ 364,598 $ 98,585
============= ===========
</TABLE>
(a) Class B and/or Class C shares were initially offered on January 27, 1999.
(b) Class Z shares were initially offered on January 29, 1999.
See notes to financial statements.
70
<PAGE>
CRABBE HUSON FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (continued)
<TABLE>
<CAPTION>
CRABBE HUSON
SMALL CAP FUND
----------------------------------
YEAR ENDED YEAR ENDED
INCREASE (DECREASE) IN NET ASSETS OCTOBER 31, 1999 OCTOBER 31, 1998
FROM OPERATIONS: ---------------- ----------------
<S> <C> <C>
Net investment income (loss) $ (275,150) $ (454,875)
Net realized gain (loss) on investments (22,918,425) 311,050
Net realized loss on closed short sales -- --
Net change in unrealized appreciation/
depreciation of investments 23,557,586 (53,349,009)
------------- ------------
Increase (Decrease) in net assets resulting
from operations 364,011 (53,492,834)
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income-Class A -- --
From net investment income-Class I -- (355,900)
From net investment income-Class B -- --
From net investment income-Class C -- --
Return of capital-Class A -- --
From net realized gain on investments-Class A (59,988) (3,251,640)
In excess of net realized gains on investments-Class A (18,856) --
From net realized gain on investments-Class I (254,415) (7,631,388)
In excess of net realized gains on investments-Class I (79,968) --
------------- ------------
(49,216) (64,731,762)
------------- ------------
CAPITAL SHARE TRANSACTIONS:
Receipts for shares sold-Class A 4,729,406 21,327,758
Value of distributions reinvested-Class A 72,137 3,079,615
Cost of shares repurchased-Class A (12,006,322) (35,197,213)
------------- ------------
(7,204,779) (10,789,840)
------------- ------------
Receipts for shares sold-Class B -- --
Value of distributions reinvested-Class B -- --
Cost of shares repurchased-Class B -- --
------------- ------------
-- --
------------- ------------
Receipts for shares sold-Class C -- --
Value of distributions reinvested-Class C -- --
Cost of shares repurchased-Class C -- --
------------- ------------
-- --
------------- ------------
Receipts for shares sold-Class I 14,429,080 76,871,733
Value of distributions reinvested-Class I 309,467 7,987,258
Cost of shares repurchased-Class I (53,110,089) (46,554,601)
------------- ------------
(38,371,542) 38,304,390
------------- ------------
Net Increase (Decrease) from Fund
Share Transactions (45,576,321) 27,514,550
------------- ------------
Total Increase (Decrease) in Net Assets (45,625,537) (37,217,212)
------------- ------------
FUND NET ASSETS, BEGINNING OF PERIOD 77,001,064 114,218,296
------------- ------------
FUND NET ASSETS, END OF PERIOD* $ 31,375,527 $ 77,001,064
============= ============
*Net of undistributed (overdistributed) net
investment income: $ (1,702) $ --
============= ============
</TABLE>
71
<PAGE>
CRABBE HUSON FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (continued)
<TABLE>
<CAPTION>
THE CRABBE HUSON
SPECIAL FUND, INC.
-------------------------------------
YEAR ENDED YEAR ENDED
INCREASE (DECREASE) IN NET ASSETS OCTOBER 31, 1999(a) OCTOBER 31, 1998
FROM OPERATIONS: ------------------- ----------------
<S> <C> <C>
Net investment income (loss) $ (650,567) $ 809,357
Net realized gain (loss) on investments (27,640,698) 41,061,041
Net realized loss on closed short sales -- (59,279,457)
Net change in unrealized appreciation/
depreciation of investments 21,898,716 (102,586,857)
------------- -------------
Increase (Decrease) in net assets resulting
from operations (6,392,549) (119,995,916)
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income-Class A -- (3,172,152)
From net investment income-Class I -- --
From net investment income-Class B -- --
From net investment income-Class C -- --
Return of capital-Class A -- (396,855)
From net realized gain on investments-Class A -- (38,363,921)
In excess of net realized gains on investments-Class A -- --
From net realized gain on investments-Class I -- --
In excess of net realized gains on investments-Class I -- --
------------- -------------
(6,392,549) (161,928,844)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Receipts for shares sold-Class A 28,680,609 70,050,093
Value of distributions reinvested-Class A -- 40,752,447
Cost of shares repurchased-Class A (79,319,894) (240,705,256)
------------- -------------
(50,639,285) (129,902,716)
------------- -------------
Receipts for shares sold-Class B -- --
Value of distributions reinvested-Class B -- --
Cost of shares repurchased-Class B -- --
------------- -------------
-- --
------------- -------------
Receipts for shares sold-Class C -- --
Value of distributions reinvested-Class C -- --
Cost of shares repurchased-Class C -- --
------------- -------------
-- --
------------- -------------
Receipts for shares sold-Class I -- --
Value of distributions reinvested-Class I -- --
Cost of shares repurchased-Class I -- --
------------- -------------
-- --
------------- -------------
Net Increase (Decrease) from Fund
Share Transactions (50,639,285) (129,902,716)
------------- -------------
Total Increase (Decrease) in Net Assets (57,031,834) (291,831,560)
------------- -------------
FUND NET ASSETS, BEGINNING OF PERIOD 104,503,690 396,335,250
------------- -------------
FUND NET ASSETS, END OF PERIOD* $ 47,471,856 $ 104,503,690
============= =============
*Net of undistributed (overdistributed) net
investment income: $ (1,888) $ (8,072)
============= =============
</TABLE>
(a) Class B and Class C shares were initially offered on January 27, 1999.
See notes to financial statements.
72
<PAGE>
CRABBE HUSON FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (continued)
<TABLE>
<CAPTION>
CRABBE HUSON
CONTRARIAN INCOME FUND
---------------------------------------
YEAR ENDED YEAR ENDED
OCTOBER 31, 1999(a) OCTOBER 31, 1998
--------------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income $ 328,456 $ 293,333
Net realized gain 92,322 221,484
Net unrealized appreciation
(depreciation) of investments (362,140) 115,513
----------- ------------
Net Increase (Decrease) from Operations 58,638 630,330
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income-Class A (280,146) (381,093)
From net investment income-Class B (50) --
From net investment income-Class C (7) --
From net investment income-Class Z (43,797) --
From net investment income-Class I (6,305) (381)
From net realized gain on investments-Class A (160,374) --
From net realized gain on investments-Class I (2,044) --
----------- ------------
(434,085) 248,856
----------- ------------
CAPITAL SHARE TRANSACTIONS:
Receipts for shares sold-Class A 977,689 9,017,282
Value of distributions reinvested-Class A 324,283 344,452
Cost of shares repurchased-Class A (5,862,851) (4,060,463)
----------- ------------
(4,560,879) 5,301,271
----------- ------------
Receipts for shares sold-Class B 16,204 --
Value of distributions reinvested-Class B 38 --
Cost of shares repurchased-Class B -- --
----------- ------------
16,242 --
----------- ------------
Receipts for shares sold-Class C 1,000 --
Value of distributions reinvested-Class C 7 --
Cost of shares repurchased-Class C -- --
----------- ------------
1,007 --
----------- ------------
Receipts for shares sold-Class I -- 100,000
Value of distributions reinvested-Class I 8,481 382
Cost of shares repurchased-Class I -- --
----------- ------------
8,481 100,382
----------- ------------
Receipts for shares sold-Class Z 4,231,282 --
Value of distributions reinvested-Class Z 46,492 --
Cost of shares repurchased-Class Z -- --
----------- ------------
4,277,774 --
----------- ------------
Net Increase (Decrease) from Fund
Share Transactions (257,375) 5,401,653
----------- ------------
Total Increase (Decrease) in Net Assets (691,460) 5,650,509
FUND NET ASSETS, BEGINNING OF PERIOD 8,898,661 3,248,152
----------- ------------
FUND NET ASSETS, END OF PERIOD* $ 8,207,201 $ 8,898,661
=========== ============
*Including undistributed (distributions in excess of)
net investment income of: $ (9,431) $ 2,770
=========== ============
</TABLE>
(a) Class B, Class C and Class Z were initially offered on September 15, 1999.
(b) The Fund commenced investment operations on December 1, 1998.
See notes to financial statements.
73
<PAGE>
CRABBE HUSON FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (continued)
<TABLE>
<CAPTION>
CRABBE HUSON
OREGON TAX-FREE FUND
--------------------------------------
YEAR ENDED YEAR ENDED
OCTOBER 31, 1999(a) OCTOBER 31, 1998
------------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income $ 975,806 $ 1,087,256
Net realized gain 176,439 675,948
Net unrealized appreciation
(depreciation) of investments (2,201,977) (80,976)
------------ ------------
Net Increase (Decrease) from Operations (1,049,732) 1,682,228
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income-Class A (977,765) (1,086,789)
From net investment income-Class B (764) --
From net investment income-Class C -- --
From net investment income-Class Z -- --
From net investment income-Class I -- --
From net realized gain on investments-Class A (620,463) (71,383)
From net realized gain on investments-Class I -- --
------------ ------------
(2,648,724) 524,056
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Receipts for shares sold-Class A 565,418 2,685,236
Value of distributions reinvested-Class A 1,239,295 853,092
Cost of shares repurchased-Class A (4,182,093) (4,958,242)
------------ ------------
(2,377,380) (1,419,914)
------------ ------------
Receipts for shares sold-Class B 54,532 --
Value of distributions reinvested-Class B 712 --
Cost of shares repurchased-Class B -- --
------------ ------------
55,244 --
------------ ------------
Receipts for shares sold-Class C -- --
Value of distributions reinvested-Class C -- --
Cost of shares repurchased-Class C -- --
------------ ------------
-- --
------------ ------------
Receipts for shares sold-Class I -- --
Value of distributions reinvested-Class I -- --
Cost of shares repurchased-Class I -- --
------------ ------------
-- --
------------ ------------
Receipts for shares sold-Class Z -- --
Value of distributions reinvested-Class Z -- --
Cost of shares repurchased-Class Z -- --
------------ ------------
-- --
------------ ------------
Net Increase (Decrease) from Fund
Share Transactions (2,322,136) (1,419,914)
------------ ------------
Total Increase (Decrease) in Net Assets (4,970,860) (895,858)
FUND NET ASSETS, BEGINNING OF PERIOD 25,591,389 26,487,247
------------ ------------
FUND NET ASSETS, END OF PERIOD* $ 20,620,529 $ 25,591,389
============ ============
*Net of undistributed (overdistributed) net
investment income: $ 182,022 $ 183,251
============ ============
</TABLE>
(a) Class B and/or Class C shares were initially offered on January 27, 1999.
(b) Class Z shares were initially offered on January 29, 1999.
See notes to financial statements.
74
<PAGE>
CRABBE HUSON FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (continued)
<TABLE>
<CAPTION>
CRABBE HUSON
CONTRARIAN FUND
-------------------
PERIOD ENDED
OCTOBER 31, 1999(c)
-------------------
<S> <C>
NUMBER OF FUND SHARES:
Sold-Class A 322,801
Issued for distributions reinvested-Class A --
Repurchased-Class A (7,226)
-------
315,575
-------
Sold-Class B 20,234
Issued for distributions reinvested-Class B --
Repurchased-Class B (23)
-------
20,211
-------
Sold-Class C 917
Issued for distributions reinvested-Class C --
Repurchased-Class C --
-------
917
-------
Sold-Class I --
Issued for distributions reinvested-Class I --
Repurchased-Class I --
-------
--
-------
Sold-Class Z --
Issued for distributions reinvested-Class Z --
Repurchased-Class Z --
-------
--
-------
</TABLE>
<TABLE>
<CAPTION>
CRABBE HUSON
EQUITY FUND
--------------------------------------
YEAR ENDED YEAR ENDED
OCTOBER 31, 1999(a) OCTOBER 31, 1998
------------------- ----------------
<S> <C> <C>
NUMBER OF FUND SHARES:
Sold-Class A 4,419,062 5,210,556
Issued for distributions reinvested-Class A 496,999 4,095,442
Repurchased-Class A (12,462,492) (11,954,302)
----------- -----------
(7,546,431) (2,648,304)
----------- -----------
Sold-Class B 28,000 --
Issued for distributions reinvested-Class B -- --
Repurchased-Class B (4) --
------------ -----------
27,996 --
----------- -----------
Sold-Class C 383 --
Issued for distributions reinvested-Class C -- --
Repurchased-Class C -- --
----------- -----------
383 --
----------- -----------
Sold-Class I 152,513 996,398
Issued for distributions reinvested-Class I 65,866 277,311
Repurchased-Class I (1,036,701) (641,322)
----------- -----------
(818,322) 632,387
----------- -----------
Sold-Class Z -- --
Issued for distributions reinvested-Class Z -- --
Repurchased-Class Z -- --
----------- -----------
-- --
----------- -----------
</TABLE>
(a) Class B and Class C shares were initially offered on January 27, 1999.
(b) Class Z shares were initially offered on January 29, 1999.
(c) The Fund commenced investment operations on December 1, 1998.
See notes to financial statements.
75
<PAGE>
CRABBE HUSON FUNDS
<TABLE>
<CAPTION>
CRABBE HUSON CRABBE HUSON REAL
MANAGED INCOME & EQUITY FUND ESTATE INVESTMENT FUND
-------------------------------------- -----------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 1999(a) OCTOBER 31, 1998 OCTOBER 31, 1999(a)(b) OCTOBER 31, 1998
------------------- ---------------- ---------------------- ----------------
<S> <C> <C> <C>
155,941 956,085 236,140 881,894
175,603 941,150 68,570 359,412
(2,660,810) (3,036,182) (1,117,360) (2,002,564)
---------- ---------- ---------- ----------
(2,329,266) (1,138,947) (812,650) (761,258)
---------- ---------- ---------- ----------
2,313 -- 100,362 --
14 -- 757 --
(28) -- (21,095) --
---------- ---------- ---------- ----------
2,299 -- 80,024 --
---------- ---------- ---------- ----------
219 -- 7,119 --
2 -- 33 --
-- -- (459) --
---------- ---------- ---------- ----------
221 -- 6,693 --
---------- ---------- ---------- ----------
142,253 2,089,941 -- --
114,631 356,384 -- --
(1,229,687) (1,728,685) -- --
---------- ---------- ---------- ----------
(972,803) 717,640 -- --
---------- ---------- ---------- ----------
-- -- 50,892 --
-- -- 898 --
-- -- (183) --
---------- ---------- ---------- ----------
-- -- 51,607 --
---------- ---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
CRABBE HUSON THE CRABBE HUSON
SMALL CAP FUND SPECIAL FUND, INC.
------------------------------------- -------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 1999 OCTOBER 31, 1998 OCTOBER 31, 1999 OCTOBER 31, 1998
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C>
518,133 1,710,595 3,351,118 6,060,598
8,006 243,064 -- 3,099,046
(1,350,075) (3,031,548) (9,447,772) (19,847,978)
---------- ---------- ---------- -----------
(823,936) (1,077,889) (6,096,654) (10,688,334)
---------- ---------- ---------- -----------
-- -- -- --
-- -- -- --
-- -- -- --
---------- ---------- ---------- -----------
-- -- -- --
---------- ---------- ---------- -----------
-- -- -- --
-- -- -- --
-- -- -- --
---------- ---------- ---------- -----------
-- -- -- --
---------- ---------- ---------- -----------
1,631,965 5,973,355 -- --
34,233 630,407 -- --
(5,886,724) (4,008,863) -- --
---------- ---------- ---------- -----------
(4,220,526) 2,594,899 -- --
---------- ---------- ---------- -----------
-- -- -- --
-- -- -- --
-- -- -- --
---------- ---------- ---------- -----------
-- -- -- --
---------- ---------- ---------- -----------
</TABLE>
76
<PAGE>
CRABBE HUSON FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (continued)
<TABLE>
<CAPTION>
CRABBE HUSON
CONTRARIAN INCOME FUND
--------------------------------------
YEAR ENDED YEAR ENDED
OCTOBER 31, 1999(b) OCTOBER 31, 1998
------------------- ----------------
<S> <C> <C>
NUMBER OF FUND SHARES:
Sold-Class A 93,007 853,853
Issued for distributions reinvested-Class A 30,812 34,069
Repurchased-Class A (552,474) (386,073)
-------- --------
(428,655) 501,849
-------- --------
Sold-Class B 1,596 --
Issued for distributions reinvested-Class B 4 --
Repurchased-Class B -- --
-------- --------
1,600 --
-------- --------
Sold-Class C 99 --
Issued for distributions reinvested-Class C 1 --
Repurchased-Class C -- --
-------- --------
100 --
-------- --------
Sold-Class I -- 9,099
Issued for distributions reinvested-Class I 812 35
Repurchased-Class I -- --
-------- --------
812 9,134
-------- --------
Sold-Class Z 415,297 --
Issued for distributions reinvested-Class Z 4,615 --
Repurchased-Class Z -- --
-------- --------
419,912 --
-------- --------
</TABLE>
<TABLE>
<CAPTION>
THE CRABBE HUSON
OREGON TAX-FREE FUND
--------------------------------------
YEAR ENDED YEAR ENDED
OCTOBER 31, 1999(a) OCTOBER 31, 1998
------------------- ----------------
<S> <C> <C>
NUMBER OF FUND SHARES:
Sold-Class A 45,385 209,498
Issued for distributions reinvested-Class A 99,282 72,091
Repurchased-Class A (339,345) (390,338)
-------- --------
(194,678) (108,749)
-------- --------
Sold-Class B 4,438 --
Issued for distributions reinvested-Class B 60 --
Repurchased-Class B -- --
-------- --------
4,498 --
-------- --------
Sold-Class C -- --
Issued for distributions reinvested-Class C -- --
Repurchased-Class C -- --
-------- --------
-- --
-------- --------
Sold-Class I -- --
Issued for distributions reinvested-Class I -- --
Repurchased-Class I -- --
-------- --------
-- --
-------- --------
Sold-Class Z -- --
Issued for distributions reinvested-Class Z -- --
Repurchased-Class Z -- --
-------- --------
-- --
-------- --------
</TABLE>
(a) Class B shares were initially offered on January 27, 1999.
(b) Class B, C, Z shares were initially offered on September 15, 1999.
(c) The Fund commenced investment operations on December 1, 1998.
See notes to financial statements.
77
<PAGE>
CRABBE HUSON FUNDS
NOTES TO FINANCIAL STATEMENTS
October 31, 1999
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization: All of the Funds, a series of Liberty Funds Trust III, are
registered under the Investment Company Act of 1940. All of the Funds (other
than the Oregon Tax-Free Fund) are open-end diversified portfolio investment
companies. The Oregon Tax-Free Fund is an open-end non-diversified investment
company. Each Fund may issue an unlimited number of shares. All of the Funds
offer Class A shares. Class A shares are sold with a front-end sales charge.
Redemptions from Class A share accounts with shares valued between $1 million to
$5 million may be subject to a contingent deferred sales charge. Effective
January 27, 1999, Equity, Managed, Real Estate and Oregon Tax-Free Funds began
offering Class B shares. Effective September 15, 1999, The Contrarian Income
began offering Class B shares. The Contrarian Fund has continued to offer Class
B shares since inception on December 1, 1998. Class B shares are subject to an
annual distribution fee and a contingent deferred sales charge. Class B shares
will convert to Class A shares when they have been outstanding approximately
eight years. Effective January 27, 1999, Equity, Managed and Real Estate Funds
began offering Class C shares. Effective September 15, 1999, The Contrarian
Income Fund began offering Class C shares. The Contrarian Fund has continued to
offer Class C shares since inception on December 1, 1998. Class C shares are
subject to a contingent deferred sales charge on redemptions made within one
year after purchase and an annual distribution fee. The Equity, Managed, Small
Cap and Income Funds offer Class I shares. Effective January 29, 1999, Real
Estate Fund began offering Class Z shares. Effective September 15, 1999, The
Contrarian Income Fund began offering Class Z shares. Class Z shares are offered
continuously at net asset value. In addition, there are certain restrictions on
the purchase of Class I and Class Z shares, as described in the Funds'
prospectus. The Class A and Class I shares differ principally in the service
fees and shareholder servicing fees.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the period. Actual results
could differ from those estimates. The following is a summary of significant
accounting policies that are consistently followed by the Funds in the
preparation of their financial statements.
Security valuation and transactions: Equity securities generally are valued at
the last sale price or, in the case of unlisted or listed securities for which
there were no sales during the day, at current quoted bid prices.
Debt securities generally are valued by a pricing service based upon market
transactions for normal, institutional-size trading units of similar securities.
When management deems it appropriate, an over-the-counter or exchange bid
quotation is used.
Options are valued at the last reported sale price, or in the absence of a sale,
the mean between the last quoted bid and asking price.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
78
<PAGE>
CRABBE HUSON FUNDS
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 1999
Portfolio positions for which market quotations are not readily available are
valued at fair value under procedures approved by the Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains and losses are based upon specific identification
method for both financial statement and federal income tax purposes.
The Funds may trade securities on other than normal settlement terms. This may
increase the risk if the other party to the transaction fails to deliver and
causes the Funds to subsequently invest at less advantageous prices.
The Special Fund may engage in short sales. 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.
Proceeds from the sale of a borrowed security remain on deposit with the broker
loaning that security. Additional deposits may be required in the event that the
value of the securities sold short exceeds a percentage of the amount on deposit
with the broker. In addition, the borrowing fund is required to segregate cash,
U.S. Government securities or other liquid securities in an amount equal to the
market value of all borrowed securities less any amounts on deposit with
brokers. As a result of these activities, the borrowing fund will not be deemed
to create leverage merely by entering into a short selling transaction, except
to the extent that income is earned on amounts on deposit with the broker. The
amount on deposit with the broker plus the value of the segregated securities
may not exceed 25% of Net Assets.
Loans of Portfolio Securities: Each of the Funds may lend portfolio securities,
up to 20% (10% for Oregon Tax-Free Fund) of the value of a Fund's total assets.
The Funds receive total collateral in an amount at least equal to 100% of the
market value of the securities loaned at the inception of the loan. The value of
the portfolio securities loaned is marked to market on a daily basis and
additional collateral is received from the borrower, as necessary, to ensure
that its value is at least equal to 100% of the securities loaned at all times.
Interest income earned on the investment of the collateral plus reimbursement
for management fees associated with such investment, in excess of rebates to the
borrower, is recorded on an accrual basis. Income earned on non-cash collateral
is based on a percentage of the market value of the securities loaned and is
recorded on an accrual basis. If the borrower defaults and the value of the
portfolio securities increases in excess of the collateral received or if
bankruptcy proceedings commence with respect to the borrower of the security,
realization of the value of the securities loaned may be delayed or limited.
Determination of class net asset values and financial highlights: All income,
expenses (other than the Class A, Class B and Class C service fees, Class B and
Class C distribution fees and Class I transfer agent fee) and realized and
unrealized gains (losses) are allocated to each class proportionately on a daily
basis for purposes of determining the net asset value of each class.
79
<PAGE>
CRABBE HUSON FUNDS
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 1999
The per share data (other than the Oregon Tax-Free Fund) was calculated using
average shares outstanding during the period. In addition, Class A, Class B and
Class C net investment income per share data reflect the service fee per share
applicable to Class A, Class B and Class C shares and the distribution fee
applicable to Class B and Class C shares only. Class I net investment income per
share data reflect the transfer agent fee per share applicable to Class I shares
only.
Class A, Class B and Class C ratios are calculated by adjusting the expense and
net investment income ratios for the Fund for the entire period by the service
fee applicable to Class A, Class B and Class C shares and the distribution fee
applicable to Class B and Class C shares only. Class I ratios are calculated by
adjusting the expense and net investment income ratios for the Fund for the
entire period by the transfer agent fee applicable to Class I shares only.
Federal income taxes: Consistent with the Funds' policy to qualify as a
regulated investment company and to distribute all of its taxable income, no
federal income tax has been accrued.
Interest income, debt discount and premium: Interest income is recorded on an
accrual basis. Original issue discount is accreted to interest income over the
life of a security with a corresponding increase in the cost basis; market
discount is not accreted. Premium is amortized against interest income with a
corresponding decrease in the cost basis.
Distributions to shareholders: Distributions to shareholders (other than the
Oregon Tax-Free) are recorded on the ex-date. The Oregon Tax-Free Fund declares
and records distributions daily and pays monthly.
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. Reclassifications are made to the Funds' capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforwards) under income tax regulations.
Other: Corporate actions are recorded on the ex-date.
The Funds' custodian takes possession through the federal book-entry system of
securities collateralizing repurchase agreements. Collateral is marked-to-market
daily to ensure that the market value of the underlying assets remains
sufficient to protect the Funds. The Funds may experience costs and delays in
liquidating the collateral if the issuer defaults or enters bankruptcy.
Organization Costs: Expenses incurred in connection with the original
organization of the Funds are amortized using the sum of the years digits
method. As of October 31, 1999 the initial organization costs for all Funds
except for Small Cap Fund have been fully amortized. 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.
80
<PAGE>
CRABBE HUSON FUNDS
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 1999
NOTE 2. FEES AND COMPENSATION PAID TO AFFILIATES
Management fee: Crabbe Huson Group, Inc. (the "Advisor"), is the investment
Advisor of each Fund and receives a monthly fee based on each Fund's average
net assets as follows:
Equity Fund
Managed Fund
Real Estate Fund
Small Cap Fund
Special Fund
1.05% of average daily net assets up to $100,000,000
.90 of 1% of average daily net assets between $100,000,000 and $500,000,000
.65 of 1% of average daily net assets over $500,000,000
Income Fund
.80 of 1% of average daily net assets up to $100,000,000
.65 of 1% of average daily net assets between $100,000,000 and $500,000,000
.55 of 1% of average daily nets assets over $500,000,000
Oregon Tax-Free Fund
.55 of 1% of average daily net assets up to $100,000,000
.50 of 1% of average daily net assets between $100,000,000 and $500,000,000
.45 of 1% of average daily net assets over $500,000,000
Contrarian Fund
.85 of 1% of average daily net assets
Administration fee: Colonial Management Associates, Inc. (the Administrator),
an affiliate of the Advisor, provides accounting and other services for a
monthly fee equal to 0.05% annually of the Funds' average net assets. The
Funds' Advisor delegates certain of its administrative duties to the
Administrator.
Bookkeeping fee: The Administrator provides bookkeeping and pricing services for
$27,000 per year plus 0.035% of the Funds' average net assets over $50 million.
Transfer agent: Liberty Funds Services, Inc. (the Transfer Agent), an affiliate
of the Administrator, provides shareholder services for a monthly fee at the
annual rate of 0.236% for the Class A, Class B and Class C shares (as applicable
to each Fund) for Small Cap, the Special Fund, the Equity Fund, the Managed Fund
and the Real Estate Fund, 0.17% for the Income Fund and 0.13% for the Oregon
Tax-Free Fund, plus certain out-of-pocket expenses. The Transfer Agent also
provides shareholder services for a monthly fee at the annual rate of 0.0025%
for the Class I shares of Small Cap Fund, the Equity Fund, the Managed Fund and
the Income Fund, plus certain out-of-pocket expenses.
Underwriting discounts, service and distribution fees: Liberty Funds
Distributor, Inc. (the Distributor), a subsidiary of the Administrator is the
Funds' principal underwriter. For the
81
<PAGE>
CRABBE HUSON FUNDS
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 1999
Special, Small Cap, Managed, Equity, Real Estate, Oregon Tax-Free, Income and
Contrarian Funds, the Distributor retained $10,581, $4,315, $619, $3,588,
$50,536, $320, $130 and $28 on sales of the Funds' Class A shares, respectively.
There were no contingent deferred sales charges received on the Special, Small
Cap, Managed, Equity, Oregon Tax-Free, Income and Contrarian Funds. For the Real
Estate Fund, the Distributor received contingent deferred sales charges (CDSC)
of none, $2,151 and none on Class A, Class B and Class C share redemptions,
respectively.
Each Fund has adopted a 12b-1 plan (Plan) which requires it to pay the
Distributor a service fee equal to 0.25% annually on Class A, Class B and Class
C net assets as of the 20th of each month. The Plan also require the payment of
a distribution fee to the Distributor equal to 0.75% annually of the average net
assets attributable to Class B and Class C shares only.
The CDSC and the fees received from the Plan are used principally as repayment
to the Distributor for amounts paid by the Distributor to dealers who sold such
shares.
Expense limits: The Advisor/Administrator have agreed, until further notice, to
waive fees and bear certain Fund expenses to the extent that total Class A,
Class B and Class C expenses (exclusive of service fees, distribution fees,
brokerage commissions, taxes and extraordinary expenses, if any) exceed 1.25%
for the Special Fund, the Small Cap Fund, the Real Estate Fund, 1.17% for the
Equity Fund and the Managed Fund, 0.73% for the Oregon Tax-Free Fund, 0.55% for
the Income Fund and 1.35% for the Contrarian Fund. The Advisor/Administrator
have also agreed, until further notice, to waive fees and bear certain expenses
to the extent that total Class I expenses (exclusive of service fees,
distribution fees, brokerage commissions, taxes and extraordinary expenses, if
any) exceed 1.00% for the Small Cap Fund, the Equity Fund and the Managed Fund
and 0.38% for the Income Fund.
Other: The Funds pay no compensation to their officers, all of whom are
employees of the Advisor or Administrator.
The Funds' Trustees may participate in a deferred compensation plan which may be
terminated at any time. Obligations of the plan will be paid solely out of the
Fund's assets.
The Funds' have an agreement with their custodian bank under which custodian
fees have been reduced by balance credits applied during the year ended October
31, 1999. For the Small Cap, Managed, Equity, Real Estate, Income and Contrarian
the credits were $276, $440, $755, $63, $96 and $38, respectively. The Funds'
could have invested a portion of the assets utilized in connection with the
expense offset arrangements in an income producing asset if it had not entered
into such agreements.
82
<PAGE>
CRABBE HUSON FUNDS
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 1999
- --------------------------------------------------------------------------------
NOTE 3. PORTFOLIO INFORMATION
Investment activity: For the year ended October 31, 1999, purchases and sales of
investments, other than short-term obligations, were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
--------- -----------
<S> <C> <C>
Contrarian Fund $ 5,847,082 $ 2,980,745
Equity Fund 221,118,649 359,754,328
Managed Fund 74,128,858 117,455,689
Real Estate Fund 10,763,148 16,709,009
Small Cap Fund 6,932,256 54,069,592
Special Fund 8,954,158 56,536,094
Income Fund 11,911,075 12,184,094
Oregon Tax-Free Fund 968,337 3,692,534
</TABLE>
Unrealized appreciation (depreciation) at October 31, 1999, based on cost of
investments for federal income tax purposes was:
<TABLE>
<CAPTION>
CONTRARIAN EQUITY MANAGED REAL ESTATE
---------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Gross unrealized appreciation $ 387,479 $ 9,947,128 $ 3,266,989 $ 155,988
Gross unrealized depreciation (278,333) (4,225,486) (1,579,683) (1,303,594)
--------- ----------- ------------ -----------
Net unrealized appreciation
(depreciation) $ 109,146 $ 5,721,641 $ 1,687,306 $(1,147,606)
--------- ----------- ------------ -----------
<CAPTION>
OREGON
SMALL CAP SPECIAL INCOME TAX-FREE
------------ ------------ --------- -----------
<S> <C> <C> <C> <C>
Gross unrealized appreciation $ 1,650,618 $ 2,655,000 $ 7,096 $ 260,628
Gross unrealized depreciation (21,851,348) (32,453,537) (120,664) (1,104,237)
------------ ------------ --------- -----------
Net unrealized appreciation
(depreciation) $(20,200,730) $(29,798,537) $(113,568) $ (843,609)
------------ ------------ --------- -----------
</TABLE>
83
<PAGE>
CRABBE HUSON FUNDS
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 1999
Capital Loss Carryforwards: At October 31, 1999, capital loss carryforwards
available (to the extent provided in regulations) to offset future realized
gains were as follows:
<TABLE>
<CAPTION>
YEAR OF CAPITAL LOSS
EXPIRATION CARRY FORWARD
------------ --------------
<S> <C> <C>
Crabbe Huson
Small Cap Fund 2007 $22,808,761
Crabbe Huson
Real Estate Fund 2007 193,496
Crabbe Huson 2006 20,747,182
Special Fund 2007 27,656,752
-----------
48,403,934
Crabbe Huson
Contrarian Fund 2007 2,021
</TABLE>
Other: There are certain risks arising from geographic concentration in any
state. Certain revenue or tax related events in a state may impair the ability
of certain issuers of municipal securities to pay principal and interest on
their obligations.
The Funds may focus their investments in certain industries, subjecting them to
a greater risk than a fund that is more diversified.
NOTE 4. LINE OF CREDIT
The Funds (other than the Special Fund) may borrow up to 331/3% of its net
assets under a line of credit for temporary or emergency purposes. Any
borrowings bear interest at one of the following options determined at the
inception of the loan: (1) federal funds rate plus 1/2 of 1%, (2) the lending
bank's base rate or (3) IBOR offshore loan rate plus 1/2 of 1%. For the year
ended October 31, 1999, the Small Cap Fund had $4,000,000 of borrowings
outstanding.
During the year ended October 31, 1999, the Equity Fund utilized this facility
on two different occasions. The maximum loan outstanding during the period was
$3,000,000 at a rate of 6.07%. The Small Cap Fund utilized this facility on
three different occasions. The maximum loan outstanding during the period was
$4,000,000 at a rate of 5.79%. For Managed, Real Estate, Contrarian Income,
Contrarian, and Oregon Tax-Free, there were no borrowings under the line of
credit during the year ended October 31, 1999.
The Special Fund may borrow the lesser of $25 million or 331/3% of its total
assets on a secured basis. When the Special Fund borrows it must put in a
segregated account debt securities, domestic or foreign equities, or commercial
paper in an amount equal to at least 200% of the amount borrowed. The Fund must
maintain the segregated account daily to ensure that its value is at least equal
to 200% of the funds borrowed at all times. No single issuer, other than U.S.
Government and U.S. Government agencies, can comprise in excess of 10% of the
segregated account. For the year ended October 31, 1999, the Special Fund had
$9,000,000 of borrowings outstanding.
84
<PAGE>
CRABBE HUSON FUNDS
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 1999
CHANGE IN INDEPENDENT AUDITIOR (UNAUDITED)
Based on the recommendation of the Audit Committee of the Fund on June 18, 1999,
the Board of Trustees determined not to retain KPMG Peat Marwick LLP (KPMG) as
the Fund's independent auditor and voted to appoint Ernst & Young LLP for the
fiscal year ended October 31, 1999. During the two most recent fiscal years,
KPMG's audit reports contained no adverse opinion or disclaimer of opinion; nor
were its reports qualified or modified as to uncertainty, audit scope, or
accounting principle. Further, in connection with its audits for the two most
recent fiscal years and through December 4, 1998, there were no disagreements
between the Fund and KPMG on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure, which if not
resolved to the satisfaction of KPMG would have caused it to make reference to
the disagreements in its report in the financial statements for such years.
85
<PAGE>
CRABBE HUSON CONTRARIAN FUND
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF EACH CLASS OUTSTANDING THROUGHOUT EACH PERIOD ARE AS FOLLOWS:
YEAR ENDED 10/31/1999(b)
----------------------------------------------
Class A Class B Class C
----------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period ............................ $10.000 $10.000 $10.000
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
Net Investment Income (a) ....................................... (0.015) (0.091) (0.089)
Net Realized & Unrealized Gain (Loss) on Investments ............ 0.405 0.421 0.409
----------------------------------------------
Total from Investment Operations .............................. 0.390 0.330 0.320
----------------------------------------------
Net Asset Value, End of Period .................................. $10.390 $10.330 $10.320
=============================================
Total Return (c)(d) ............................................. 3.90%(e) 3.30%(e) 3.20%(e)
RATIOS TO AVERAGE NET ASSETS
- ----------------------------
Expenses (f)(g) ................................................. 1.60% 2.35% 2.35%
Net Investment Income (f)(g) .................................... (0.15)% (0.90)% (0.90)%
Fees and expenses waived or borne by the Advisor (f)(g) ......... 3.56% 3.56% 3.56%
Portfolio Turnover Rate (e) ..................................... 105% 105% 105%
Net Assets, End of Period (000's) ............................... $3,279 $209 $9
</TABLE>
- --------------
(a) Per share data was calculated using average shares outstanding during the
period.
(b) The Fund commenced investment operations on December 1, 1998.
(c) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(d) Had the Advisor not waived or reimbursed a portion of expenses, total return
would have been reduced.
(e) Not annualized.
(f) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(g) Annualized.
86
<PAGE>
CRABBE HUSON EQUITY FUND
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
YEAR ENDED 10/31/99 YEAR ENDED 10/31/98
--------------------------------------------------------------------------
Class A Class B(b) Class C(b) Class I Class A(c) Class I(c)
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ................. $16.600 $16.440 $16.440 $16.650 $23.320 $23.400
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
Net Investment Income (a) ............................ 0.031 (0.076) (0.076) 0.115 0.070 0.170
Net Realized & Unrealized Gain (Loss) on Investments.. 0.550 0.296 0.306 0.818 (2.000) (2.030)
--------------------------------------------------------------------------
Total from Investment Operations ................... 0.860 0.220 0.230 0.933 (1.930) (1.860)
LESS DISTRIBUTIONS
- ------------------
Distributions from Net Investment Income ............. (0.099) -- -- (0.182) (0.050) (0.150)
Distributions from Capital Gains ..................... (0.581) -- -- (0.581) (4.740) (4.740)
--------------------------------------------------------------------------
Total Distributions ................................ (0.680) -- -- (0.763) (4.790) (4.890)
--------------------------------------------------------------------------
Net Asset Value, End of Period ....................... $16.780 $16.660 $16.670 $16.820 $16.600 $16.650
=========================================================================
Total Return (d)(e) .................................. 5.29% 1.34%(f) 1.40%(f) 5.75% (10.08)% (9.72)%
RATIOS TO AVERAGE NET ASSETS
- ----------------------------
Expenses ............................................. 1.42%(g) 2.17%(g) 2.17%(g) 0.93%(g) 1.39%(h) 1.01%(h)
Net Investment Income ................................ 0.18%(g) (0.56)%(g) (0.56)%(g) 0.67%(g) 0.38%(h) 0.76%(h)
Fees and expenses waived or borne by the Advisor ..... 0.28%(g) 0.28%(g) 0.28%(g) 0.28%(g) 0.03% 0.12%
Portfolio Turnover Rate .............................. 134% 134% 134% 134% 1% 1%
Net Assets, End of Period (000's) .................... $102,428 $466 $6 $14,190 $226,628 $27,672
</TABLE>
- --------------
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Class B and Class C shares were initially offered on January 27, 1999. Per
share amounts reflect activity from that date.
(c) Effective October 19, 1998, the Primary and Institutional shares were
redesignated Class A and Class I shares, respectively.
(d) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(e) Had the Advisor not waived or reimbursed a portion of expenses, total return
would have been reduced.
(f) Not annualized.
(g) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(h) Includes expenses paid indirectly through directed brokerage and certain
expense offset arrangements.
- --------------------------------------------------------------------------------
Federal Income Tax Information (unaudited)
100% of the ordinary income distribution by the Fund in the year ended October
31, 1999 qualifies for the corporate dividends received deduction.
For the fiscal year ended October 31, 1999 the Fund earned $4,546,997 of long
term capital gains.
- --------------------------------------------------------------------------------
87
<PAGE>
CRABBE HUSON EQUITY FUND
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
YEAR
ENDED
YEAR ENDED 10/31/1997 YEAR ENDED 10/31/1996 10/31/1995
--------------------------------------------------------------------
Class A Class I Class A Class I(b)
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $19.500 $19.510 $18.170 $19.820 $16.440
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
Net Investment Income (a) ............................. 0.070 0.210 0.110 0.000 0.220
Net Realized & Unrealized Gain (Loss) on Investments .. 5.360 5.310 2.330 (0.310) 1.750
--------------------------------------------------------------------
Total from Investment Operations .................... 5.430 5.520 2.440 (0.310) 1.970
LESS DISTRIBUTIONS
- ------------------
Distributions from Net Investment Income .............. (0.070) (0.090) (0.170) 0.000 (0.090)
Distributions from Capital Gains ...................... (1.540) (1.540) (0.940) 0.000 (0.150)
--------------------------------------------------------------------
Total Distributions ................................. (1.610) (1.630) (1.110) 0.000 (0.240)
--------------------------------------------------------------------
Net Asset Value, End of Period ........................ $23.320 $23.400 $19.500 $19.510 $18.170
====================================================================
Total Return (c)(d) ................................... 29.87% 30.35% 13.78% (1.56)%(e) 13.37%
RATIOS TO AVERAGE NET ASSETS
- ----------------------------
Expenses .............................................. 1.42%(f) 1.00%(f) 1.38%(f) 1.00%(f)(g) 1.40%
Net Investment Income ................................. 0.29%(f) 0.71%(f) 0.56%(f) 0.15%(f)(g) 1.30%
Fees and expenses waived or borne by the Advisor ...... 0.02% 0.23% -- 0.58%(g) 0.02%
Portfolio Turnover Rate ............................... 129% 129% 117% 117% 92%
Net Assets, End of Period (000's) ..................... $380,047 $24,084 $436,578 $4,415 $387,184
</TABLE>
- --------------
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Class I shares were initially offered on October 3, 1996. Per share amounts
reflect activity from that date.
(c) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(d) Had the Advisor not waived or reimbursed a portion of expenses, total return
would have been reduced.
(e) Not annualized.
(f) Includes expenses paid indirectly through directed brokerage and certain
expense offset arrangements.
(g) Annualized.
88
<PAGE>
CRABBE HUSON MANAGED INCOME & EQUITY FUND
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
10/31/1999 10/31/1998
-------------------------------------------------------------------------
Class A Class B (b) Class C (b) Class I Class A (c) Class I (c)
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ................... $12.810 $12.760 $12.760 $12.810 $14.940 $14.940
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
Net Investment Income (a) .............................. 0.275 0.143 0.143 0.334 0.290 0.320
Net Realized & Unrealized Gain (Loss) on Investments ... 0.262 0.016 0.016 0.269 (0.370) (0.370)
-------------------------------------------------------------------------
Total from Investment Operations ..................... 0.537 0.159 0.159 0.603 (0.080) (0.050)
LESS DISTRIBUTIONS
- ------------------
Distributions from Net Investment Income ............... (0.281) (0.149) (0.149) (0.367) (0.240) (0.270)
Distributions from Capital Gains ....................... (0.276) -- -- (0.276) (1.810) (1.810)
-------------------------------------------------------------------------
Total Distributions .................................. (0.557) -- -- (0.643) (2.050) (2.080)
-------------------------------------------------------------------------
Net Asset Value, End of Period ......................... $12.790 $12.770 $12.770 $12.770 $12.810 $12.810
=========================================================================
Total Return (d)(e) .................................... 4.22% 1.18%(f) 1.18%(f) 4.75% (0.69)% (0.44)%
RATIOS TO AVERAGE NET ASSETS
- ----------------------------
Expenses ............................................... 1.42%(g) 2.17%(g) 2.17%(g) 0.96%(g) 1.32%(h) 1.01%(h)
Net Investment Income .................................. 2.08%(g) 1.40%(g) 1.40%(g) 2.54%(g) 2.27%(h) 2.58%(h)
Fees and expenses waived or borne by the Advisor ....... 0.33%(g) 0.40%(g) 0.40%(g) 0.33%(g) 0.16% 0.24%
Portfolio Turnover Rate ................................ 99% 99% 99% 99% 115% 115%
Net Assets, End of Period (000's) ...................... $37,791 $29 $3 $21,188 $67,681 $33,723
</TABLE>
- --------------
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Class B and Class C shares were initially offered on January 27, 1999. Per
share amounts reflect activity from that date.
(c) Effective October 19, 1998, the Primary and Institutional shares were
redesignated Class A and Class I shares, respectively.
(d) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(e) Had the Advisor or its affiliates not waived or reimbursed a portion of
expenses, total return would have been reduced.
(f) Not annualized.
(g) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(h) Includes expenses paid indirectly through directed brokerage and certain
expense offset arrangements.
- --------------------------------------------------------------------------------
Federal Income Tax Information (unaudited)
43% of the ordinary income distribution by the Fund in the year ended October
31, 1999 qualifies for the corporate dividends received deduction.
For the fiscal year ended October 31, 1999 the Fund earned $2,396,409 of long
term capital gains.
- --------------------------------------------------------------------------------
89
<PAGE>
CRABBE HUSON MANAGED INCOME & EQUITY FUND
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
YEAR
ENDED
YEAR ENDED 10/31/1997 YEAR ENDED 10/31/1996 10/31/1995
----------------------------------------------------------------------
Class A Class I Class A Class I (d)
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .................. $13.390 $13.390 $13.640 $13.380 $12.870
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
Net Investment Income (a) ............................. 0.320 0.420 0.300 0.010 0.340
Net Realized & Unrealized Gain (Loss) on Investments .. 2.290 2.240 0.880 0.080 1.210
----------------------------------------------------------------------
Total from Investment Operations .................... 2.610 2.660 1.180 0.090 1.550
LESS DISTRIBUTIONS
- ------------------
Distributions from Net Investment Income .............. (0.320) (0.370) 0.300 (0.080) (0.330)
Distributions from Capital Gains ...................... (0.740) (0.740) 1.130 -- (0.450)
----------------------------------------------------------------------
Total Distributions ................................. (1.060) (1.110) 1.430 (0.080) (0.780)
Net Asset Value, End of Period ........................ $14.940 $14.940 $13.390 $13.390 $13.640
======================================================================
Total Return (e)(f) ................................... 20.60% 21.18% 8.96% 0.59%(g) 13.00%
RATIOS TO AVERAGE NET ASSETS
- ----------------------------
Expenses .............................................. 1.42%(j) 1.00%(j) 1.47%(j) 1.00%(i)(j) 1.48%
Net Investment Income ................................. 2.25%(j) 2.70%(j) 2.22%(j) 2.87%(i)(j) 2.57%
Fees and expenses waived or borne by the Advisor ...... 0.13% 0.42% -- 1.00%(i) 0.01%
Portfolio Turnover Rate ............................... 119% 119% 252% 252% 226%
Net Assets, End of Period (000's) ..................... $95,960 $28,598 $125,018 $2,526 $136,530
</TABLE>
- --------------
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Class B and Class C shares were initially offered on January 27, 1999. Per
share amounts reflect activity from that date.
(c) Effective October 19, 1998, the Primary and Institutional shares were
redesignated Class A and Class I shares, respectively.
(d) Class I shares were initially offered on October 28, 1996. Per share amounts
reflect activity from that date.
(e) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(f) Had the Advisor or its affiliates not waived or reimbursed a portion of
expenses, total return would have been reduced.
(g) Not annualized.
(h) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(i) Annualized.
(j) Includes expenses paid indirectly through directed brokerage and certain
expense offset arrangements.
90
<PAGE>
CRABBE HUSON REAL ESTATE INVESTMENT FUND
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
YEAR ENDED 10/31/1999
------------------------------------------------------------
Class A Class B(b) Class C(b) Class Z(b)
------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ......................... $10.440 $10.580 $10.580 $10.440
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
Net Investment Income (a) .................................... 0.581 0.424 0.425 0.495
Net Realized & Unrealized Loss on Investments ................ (0.939) (1.269) (1.280) (1.129)
------------------------------------------------------------
Total from Investment Operations ........................... (0.358) (0.845) (0.855) (0.634)
LESS DISTRIBUTIONS
- ------------------
Distributions from Net Investment Income ..................... (0.357) (0.185) (0.185) (0.246)
Distributions from Capital Gains ............................. (0.175) -- -- --
------------------------------------------------------------
Total Distributions ........................................ (0.532) (0.185) (0.185) (0.246)
------------------------------------------------------------
Net Asset Value, End of Period ............................... $9.550 $9.550 $9.540 $9.560
=============================================================
Total Return (c)(d) .......................................... (3.73)% (8.12)%(e) (8.21)%(e) (6.24)%(e)
RATIOS TO AVERAGE NET ASSETS
- ----------------------------
Expenses (f) ................................................. 1.50% 2.25%(g) 2.25%(g) 1.25%
Net Investment Income (f) .................................... 5.59% 5.01%(g) 5.01%(g) 6.04%
Fees and expenses waived or borne by the Advisor (f) ......... 0.81% 0.98%(g) 0.98%(g) 0.98%
Portfolio Turnover Rate ...................................... 82% 82% 82% 82%
Net Assets, End of Period (000's) ............................ $8,185 $764 $64 $493
</TABLE>
- --------------
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Class B, Class C shares were initially offered on January 27, 1999. Class Z
shares were initially offered on January 29, 1999. Per share amounts reflect
activity from that date.
(c) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(d) Had the Advisor or its affiliates not waived or reimbursed a portion of
expenses, total return would have been reduced.
(e) Not annualized.
(f) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(g) Annualized.
- --------------------------------------------------------------------------------
Federal Income Tax Information (unaudited)
100% of the ordinary income distribution by the Fund in the year ended October
31, 1999 qualifies for the corporate dividends received deduction.
- --------------------------------------------------------------------------------
91
<PAGE>
CRABBE HUSON REAL ESTATE INVESTMENT FUND
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
10/31/98 10/31/97 10/31/96 10/31/95
------------------------------------------------------
Class A(c)
-------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ..................... $14.090 $11.580 $9.690 $9.500
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
Net Investment Income (a) ................................ 0.400 0.380 0.380 0.440
Net Realized & Unrealized Gain (Loss) on Investments ..... (2.000) 3.020 2.010 0.310
------------------------------------------------------
Total from Investment Operations ....................... (1.600) 3.400 2.390 0.750
LESS DISTRIBUTIONS
- ------------------
Distributions from Net Investment Income ................. (0.360) (0.380) (0.380) (0.440)
Distributions from Capital Gains ......................... (1.690) (0.510) (0.120) (0.120)
------------------------------------------------------
Total Distributions .................................... (2.050) (0.890) (0.500) (0.560)
------------------------------------------------------
Net Asset Value, End of Period ........................... $10.440 $14.090 $11.580 $9.690
======================================================
Total Return (e)(f) ...................................... (13.39)% 30.56% 25.39% 8.31%
RATIOS TO AVERAGE NET ASSETS
- ----------------------------
Expenses ................................................. 1.50% 1.50% 1.50% 1.50%
Net Investment Income .................................... 3.71% 2.93% 3.59% 4.59%
Fees and expenses waived or borne by the Advisor ......... 0.42% 0.26% 0.38% 0.39%
Portfolio Turnover Rate .................................. 97% 80% 120% 60%
Net Assets, End of Period (000's) ........................ $17,423 $34,259 $20,649 $18,986
</TABLE>
- --------------
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Class B, Class C shares were initially offered on January 27, 1999. Class Z
shares were initially offered on January 29, 1999. Per share amounts reflect
activity from that date.
(c) Effective October 19, 1998, the Primary shares were redesignated Class A
shares.
(d) The Fund commenced investment operations on April 4, 1994.
(e) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(f) Had the Advisor or its affiliates not waived or reimbursed a portion of
expenses, total return would have been reduced.
(g) Not annualized.
(h) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(i) Annualized.
(j) Includes expenses paid indirectly through directed brokerage and certain
expense offset arrangements.
92
<PAGE>
CRABBE HUSON SMALL CAP FUND
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
10/31/1999 10/31/1998
----------------------------------------------------------
Class A Class I Class A (b) Class I (b)
----------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ......................... $8.650 $8.680 $15.480 $15.530
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
Net Investment Income (Loss) (a) ............................. (0.078) (0.035) (0.030) 0.030
Net Realized & Unrealized Gain (Loss) on Investments ......... (0.391) (0.394) (5.560) (5.580)
----------------------------------------------------------
Total from Investment Operations ........................... (0.469) (0.429) (5.590) (5.550)
LESS DISTRIBUTIONS
- ------------------
Distributions from Net Investment Income ..................... -- -- -- (0.010)
Distributions in excess of Net Investment Income ............. -- -- -- (0.050)
Distributions from Net Realized Gains ........................ (0.039) (0.039) (1.240) (1.240)
Distributions in excess of Net Realized Gains ................ (0.012) (0.012) -- --
----------------------------------------------------------
Total Distributions ........................................ (0.051) (0.051) (1.240) (1.300)
----------------------------------------------------------
Net Asset Value, End of Period ............................... $8.130 $8.200 $8.650 $8.680
==========================================================
Total Return (c)(d) .......................................... (5.48)% (5.00)% (38.64)% (38.37)%
RATIOS TO AVERAGE NET ASSETS
- ----------------------------
Expenses (e) ................................................. 1.50% 1.00% 1.37% 1.00%
Net Investment Income (e) .................................... (0.89)% (0.39)% (0.65)% (0.28)%
Fees and expenses waived or borne by the Advisor (e) ......... 0.41% 0.42% 0.25% 0.21%
Portfolio Turnover Rate ...................................... 12% 12% 30% 30%
Net Assets, End of Period (000's) ............................ $6,895 $24,481 $14,462 $62,539
</TABLE>
- --------------
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Effective October 19, 1998, the Primary and Institutional shares were
redesignated Class A and Class I shares, respectively.
(c) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(d) Had the Advisor not waived or reimbursed a portion of expenses, total return
would have been reduced.
(e) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
93
<PAGE>
CRABBE HUSON SMALL CAP FUND
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
10/31/1997 10/31/96 (b)
------------------------------------------------
Class A Class I Class A Class I
------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ......................... $11.020 $11.010 $10.000 $11.050
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
Net Investment Income (Loss) (a) ............................. -- 0.070 0.030 --
Net Realized & Unrealized Gain (Loss) on Investments ......... 4.620 4.620 0.990 (0.040)
------------------------------------------------
Total from Investment Operations ........................... 4.620 4.690 1.020 (0.040)
LESS DISTRIBUTIONS
- ------------------
Distributions from Net Investment Income ..................... (0.020) (0.030) -- --
Distributions in excess of Net Investment Income ............. -- -- -- --
Distributions from Capital Gains ............................. (0.140) (0.140) -- --
------------------------------------------------
Total Distributions ........................................ (0.160) (0.170) -- --
------------------------------------------------
Net Asset Value, End of Period ............................... $15.480 $15.530 $11.020 $11.010
================================================
Total Return (c)(d) .......................................... 42.38% 43.11% 10.20% (0.36)%(e)
RATIOS TO AVERAGE NET ASSETS
- ----------------------------
Expenses (f) ................................................. 1.50% 1.00% 1.51%(g) 1.00%(g)
Net Investment Income (f) .................................... 0.03% 0.60% 0.70%(g) (0.43)%(g)
Fees and expenses waived or borne by the Advisor (f) ......... 0.23% 0.28% 0.81% 2.55%
Portfolio Turnover Rate ...................................... 65% 65% 39% 39%
Net Assets, End of Period (000's) ............................ $42,563 $71,655 $19,156 $1,514
</TABLE>
- --------------
(a) Per share data was calculated using average shares outstanding during the
period.
(b) The Fund commenced investment operations on October 10, 1996.
(c) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(d) Had the Advisor not waived or reimbursed a portion of expenses, total return
would have been reduced.
(e) Not annualized.
(f) Includes expenses paid indirectly through directed brokerage and certain
expense offset arrangements.
(g) Annualized.
94
<PAGE>
THE CRABBE HUSON SPECIAL FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF EACH CLASS OUTSTANDING THROUGHOUT EACH PERIOD ARE
AS FOLLOWS:
For the year or period ending on or after 10/31/96, calculations are based on a
share outstanding during the period.
For years or periods ending prior to 11/1/95, calculations are based on the
weighted average number of shares outstanding for each period.
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
10/31/99 10/31/98 10/31/97 10/31/96 10/31/95
-----------------------------------------------------------------------
Class A Class A (b)
-----------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .................. $8.100 $16.800 $13.710 $13.800 $14.080
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
Net Investment Income (a) ............................. (0.069) 0.070 0.150 0.140 0.270
Net Realized & Unrealized Gain (Loss) on Investments .. (1.061) (6.920) 3.410 0.550 (0.290)
-----------------------------------------------------------------------
Total from Investment Operations .................... (1.130) (6.850) 3.560 0.690 (0.020)
LESS DISTRIBUTIONS
- ------------------
Distributions from Net Investment Income .............. -- (0.140) (0.140) (0.210) (0.020)
Return of Capital ..................................... -- (0.020) -- -- --
Distributions in excess of Net Investment Income ...... -- -- -- -- --
Distributions from Capital Gains ...................... -- (1.690) (0.330) (0.570) (0.240)
-----------------------------------------------------------------------
Total Distributions ................................. -- (1.850) (0.470) (0.780) (0.260)
-----------------------------------------------------------------------
Net Asset Value, End of Period ........................ $6.970 $8.100 $16.800 $13.710 $13.800
======================================================================
Total Return (c)(d) ................................... (13.95)% (44.94)% 26.62% 5.03% 1.78%
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Expenses .............................................. 1.50%(e) 1.50%(e) 1.50% 1.37%(f) 1.40%
Net Investment Income ................................. (0.85)%(e) 0.40%(e) 0.86% 0.72%(f) 1.95%
Fees and expenses waived or borne by the Advisor ...... 0.75%(e) 0.34%(e) 0.08% -- --
Portfolio Turnover Rate ............................... 11% 22% 33% 33% 123%
Net Assets, End of Period (000's) ..................... $47,472 $104,504 $396,335 $481,039 $878,560
</TABLE>
- ------------------------------
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Effective October 19, 1998, the Primary shares were redesignated Class A
shares.
(c) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(d) Had the Advisor not waived or reimbursed a portion of expenses, total return
would have been reduced.
(e) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(f) Includes expenses paid indirectly through directed brokerage and certain
expense offset arrangements.
95
<PAGE>
CRABBE HUSON CONTRARIAN INCOME FUND
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
YEAR ENDED 10/31/1999
-------------------------------------------------------------------
Class A Class B(b) Class C(b) Class Z(b) Class I
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .................. $10.880 $10.170 $10.170 $10.170 $10.900
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
Net Investment Income (a) ............................. 0.583 0.020 0.013 0.007 0.607
Net Realized & Unrealized Loss on Investments ......... (0.538) 0.002 0.037 0.046 (0.512)
-------------------------------------------------------------------
Total from Investment Operations .................... 0.045 0.022 0.050 0.053 0.095
LESS DISTRIBUTIONS
- ------------------
Distributions from Net Investment Income .............. (0.620) (0.062) (0.070) (0.113) (0.700)
Distributions in excess of Net Investment Income ...... -- -- -- -- --
Distributions from Capital Gains ...................... (0.195) -- -- -- (0.195)
-------------------------------------------------------------------
Total Distributions ................................. (0.815) (0.062) (0.070) (0.113) (0.895)
-------------------------------------------------------------------
Net Asset Value, End of Period ........................ $10.110 $10.130 $10.150 $10.110 $10.100
===================================================================
Total Return (c)(d) ................................... 0.42% 0.22%(e) 0.49%(e) 0.53%(e) 0.90%
RATIOS TO AVERAGE NET ASSETS
- ----------------------------
Expenses (f) .......................................... 0.80% 1.55%(g) 1.55%(g) 0.55%(g) 0.38%
Net Investment Income (f) ............................. 5.57% 4.46%(g) 4.46%(g) 5.46%(g) 5.99%
Fees and expenses waived or borne by the Advisor (f) .. 2.24% 5.84%(g) 5.84%(g) 5.84%(g) 2.36%
Portfolio Turnover Rate ............................... 196% 196% 196% 196% 196%
Net Assets, End of Period (000's) ..................... $3,843 $16 $1 $4,246 $101
</TABLE>
- --------------
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Class B, Class C and Class Z shares were initially offered on September 15,
1999.
(c) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(d) Had the Advisor not waived or reimbursed a portion of expenses, total return
would have been reduced.
(e) Not annualized.
(f) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(g) Annualized.
- --------------------------------------------------------------------------------
Federal Income Tax Information (unaudited)
For the fiscal year ended October 31, 1999 the Fund earned $79,458 of long term
capital gains.
- --------------------------------------------------------------------------------
96
<PAGE>
CRABBE HUSON CONTRARIAN INCOME FUND
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
10/31/98 10/31/97 10/31/96 10/31/95
----------------------------------------------------------------------
Class A (b) Class I (c)
---------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .................. $10.580 $10.990 $10.200 $10.260 $9.710
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
Net Investment Income (a) ............................. 0.500 0.020 0.620 0.540 0.530
Net Realized & Unrealized Gain (Loss) on Investments .. 0.590 (0.070) 0.380 (0.050) 0.580
----------------------------------------------------------------------
Total from Investment Operations .................... 1.090 (0.050) 1.000 0.490 1.110
LESS DISTRIBUTIONS
- ------------------
Distributions from Net Investment Income .............. (0.790) (0.040) (0.620) (0.550) (0.530)
Distributions in excess of Net Investment Income ...... -- -- -- -- (0.030)
----------------------------------------------------------------------
Total Distributions ................................. (0.790) (0.040) (0.620) (0.550) (0.560)
----------------------------------------------------------------------
Net Asset Value, End of Period ........................ $10.880 $10.900 $10.580 $10.200 $10.260
======================================================================
Total Return (d)(e) ................................... 11.21% (0.45)%(f) 10.25% 4.94% 11.92%
RATIOS TO AVERAGE NET ASSETS
- ----------------------------
Expenses .............................................. 0.80%(g) 0.38%(g)(h) 0.80% 0.80% 0.80%
Net Investment Income ................................. 5.36%(g) 5.88%(g)(h) 5.96% 5.31% 5.47%
Fees and expenses waived or borne by the Advisor ...... 1.56%(g) 4.62%(g)(h) 1.98% 1.49% 1.15%
Portfolio Turnover Rate ............................... 158% 158% 56% 469% 543%
Net Assets, End of Period (000's) ..................... $8,799 $100 $3,248 $4,694 $7,190
</TABLE>
- --------------
(a) Per share data was calculated using average shares outstanding during the
period.
(b) Effective October 19, 1998, the Primary shares were redesignated Class A
shares.
(c) Class I shares were initially offered on October 19, 1998. Per share amounts
reflect activity from that date.
(d) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(e) Had the Advisor not waived or reimbursed a portion of expenses, total return
would have been reduced.
(f) Not annualized.
(g) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(h) Annualized.
97
<PAGE>
CRABBE HUSON OREGON TAX-FREE FUND
FINANCIAL HIGHLIGHTS (Continued)
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
10/31/99 10/31/98 10/31/97 10/31/96 10/31/95
---------------------------------------------------------------------
Class A Class B(a) Class A(b)
------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .................. $13.030 $12.750 $12.780 $12.500 $12.620 $11.990
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
Net Investment Income ................................. 0.524 0.326 0.280 0.540 0.540 0.550
Net Realized & Unrealized Gain (Loss) on Investments .. (1.103) (1.147) 0.270 0.280 (0.120) 0.700
---------------------------------------------------------------------
Total from Investment Operations .................... (0.579) (0.821) 0.550 0.820 0.420 1.250
LESS DISTRIBUTIONS
- ------------------
Distributions from Net Investment Income .............. (0.514) (0.309) (0.270) (0.470) (0.540) (0.550)
Distributions from Capital Gains ...................... (0.317) -- (0.030) (0.070) -- (0.070)
---------------------------------------------------------------------
Total Distributions ................................. (0.831) (0.309) (0.300) (0.540) (0.540) (0.620)
---------------------------------------------------------------------
Net Asset Value, End of Period ........................ $11.620 $11.620 $13.030 $12.780 $12.500 $12.620
---------------------------------------------------------------------
Total Return (c)(d) ................................... (4.70)% (6.43)%(e) 6.39% 6.67% 3.43% 10.66%
RATIOS TO AVERAGE NET ASSETS
- ----------------------------
Expenses .............................................. 0.98%(f) 1.73%(f)(g) 0.98%(f) 0.98% 0.98% 0.98%
Net Investment Income ................................. 4.12%(f) 3.39%(f)(g) 4.12%(f) 4.25% 4.33% 4.45%
Fees and expenses waived or borne by the Advisor ...... 0.32%(f) 0.31%(f)(g) --(f) 0.12% 0.06% 0.10%
Portfolio Turnover Rate ............................... 4% 4% 44% 17% 16% 23%
Net Assets, End of Period (000's) ..................... $20,568 $52 $25,591 $26,487 $26,135 $28,070
</TABLE>
- --------------
(a) Class B shares were initially offered on January 27, 1999. Per share amounts
reflect activity from that date.
(b) Effective October 19, 1998, the Primary shares were redesignated Class A
shares.
(c) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(d) Had the Advisor not waived or reimbursed a portion of expenses, total return
would have been reduced.
(e) Not annualized.
(f) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(g) Annualized.
- --------------------------------------------------------------------------------
Federal Income Tax Information (unaudited)
100% of the income distribution by the Fund in the year ended October 31, 1999
qualifies as exempt income.
For the fiscal year ended October 31, 1999 the Fund earned $176,439 of long term
capital gains.
- --------------------------------------------------------------------------------
98
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Trustees of Liberty Funds Trust III and Shareholders of:
Crabbe Huson Contrarian Fund
Crabbe Huson Equity Fund
Crabbe Huson Managed Income & Equity Fund
Crabbe Huson Real Estate Investment Fund
Crabbe Huson Small Cap Fund
The Crabbe Huson Special Fund, Inc.
Crabbe Huson Contrarian Income Fund
Crabbe Huson Oregon Tax-Free Fund
We have audited the accompanying statements of assets and liabilities of the
Crabbe Huson Contrarian Fund, Crabbe Huson Equity Fund, Crabbe Huson Managed
Income & Equity Fund, Crabbe Huson Real Estate Investment Fund, Crabbe Huson
Small Cap Fund, The Crabbe Huson Special Fund, Inc., Crabbe Huson Contrarian
Income Fund, and Crabbe Huson Oregon Tax-Free Fund, eight of the series of
Liberty Funds Trust III (the "Trust"), including the investment portfolios, as
of October 31, 1999, and the related statements of operations, the statements of
changes in net assets, and the financial highlights for each of the periods
ended October 31, 1999. These financial statements and financial highlights are
the responsibility of the Trust's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audit. The statements of changes in net assets for the period ended October 31,
1998, and the financial highlights for each of the four years in the period then
ended were audited by other auditors whose report dated December 4, 1998
expressed an unqualified opinion on those financial statements and financial
highlights.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the 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 confirmation of securities owned
as of October 31, 1999 by correspondence with the custodian and brokers or by
other appropriate auditing procedures where replies from brokers were not
received. 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 audit provides 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 aforementioned series of Liberty Funds Trust III at October 31, 1999, the
results of their operations, the changes in their net assets, and the financial
highlights for each of the periods ended October 31, 1999 in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
December 10, 1999
<PAGE>
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<PAGE>
IMPORTANT INFORMATION ABOUT THIS REPORT
THE TRANSFER AGENT FOR
THE CRABBE HUSON FUNDS IS:
Liberty Funds Services, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Crabbe Huson Funds mails one
shareholder report to each shareholder
address. If you would like more than one
report, please call 1-800-426-3750 and
additional reports will be sent to you.
This report has been prepared for share-
holders of the Crabbe Huson Funds. This
report may also be used as sales literature
when preceded or accompanied by the
current prospectus which provides details
about sales charges, investment objectives
and operating policies of the Funds.
<PAGE>
[Logo: Graphic of face of Statue of Liberty
LIBERTY FUNDS
ALL-STAR o COLONIAL o CRABBE HUSON o NEWPORT o STEIN ROE ADVISOR]
Liberty Funds Distributor, Inc.(C)1999
One Financial Center, Boston, MA 02111-2621, 1-800-426-3750
www.libertyfunds.com
TRUSTEES
Robert J. Birnbaum
Tom Bleasdale
John V. Carberry
Lora S. Collins
James E. Grinnell
Richard W. Lowry
Salvatore Macera
William E. Mayer
James L. Moody, Jr.
John J. Neuhauser
Thomas E. Stitzel
Robert L. Sullivan
Anne-Lee Verville
CH-02/130I-1099 (12/99) 99/1535
