OREGON MUNICIPAL BOND FUND INC, 497, 1995-04-28

OREGON MUNICIPAL BOND FUND INC
497, 1995-04-28

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<PAGE>
__________________________________________________

THE CRABBE HUSON
FAMILY OF MUTUAL FUNDS
___________________________________________________

ADVISER
The Crabbe Huson Group, Inc.
Portland, Oregon

TRANSFER AGENT
State Street Bank and Trust Company
Boston, Massachusetts

DISTRIBUTOR
Crabbe Huson Securities, Inc.
Portland, Oregon

CUSTODIAN
First Interstate Bank of Oregon
Portland, Oregon

COUNSEL
Davis Wright Tremaine
Portland, Oregon

INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick LLP
Portland, Oregon

PROSPECTUS
April 26, 1995

CRABBE HUSON
<PAGE>
THE CRABBE HUSON FAMILY OF MUTUAL FUNDS

--------------------
PROSPECTUS
APRIL 26, 1995
--------------------

This Prospectus contains information relating to eight different mutual
funds, collectively referred to as The Crabbe Huson Family of Mutual Funds (the
"Funds"), which offer investors a range of investment opportunities with the
following objectives:

THE CRABBE HUSON SPECIAL FUND, INC. seeks to provide long-term capital
appreciation.

THE CRABBE HUSON REAL ESTATE INVESTMENT FUND, INC. seeks to provide growth
of capital and current income.

THE CRABBE HUSON EQUITY FUND, INC. seeks to provide long-term capital
appreciation.

THE CRABBE HUSON ASSET ALLOCATION FUND, INC. seeks preservation of capital,
capital appreciation and income.

THE OREGON MUNICIPAL BOND FUND, INC. seeks to provide as high a level of
income exempt from federal and Oregon income taxes as is consistent with prudent
investment management and the preservation of capital.

THE CRABBE HUSON INCOME FUND, INC. seeks to provide the highest level of
current income that is consistent with preservation of capital.

THE CRABBE HUSON U.S. GOVERNMENT INCOME FUND, INC. seeks to provide a high
level of current income and the preservation of capital.

THE CRABBE HUSON U.S. GOVERNMENT MONEY MARKET FUND, INC. seeks to provide a
high level of current income and preservation of capital while maintaining
shareholder liquidity.

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

This Prospectus concisely sets forth information about each of the Funds
that an investor ought to know, and should be retained for future reference. A
Statement of Additional Information dated February 28, 1995 has been filed with
the Securities and Exchange Commission (the "SEC"). It may be obtained free of
charge from the Funds' distributor by calling (800) 541-9732. The Statement of
Additional Information, as it may be supplemented from time to time, is
incorporated by reference in this Prospectus.

THE FUNDS CHARGE NO SALES LOAD. SHARES OF THE FUNDS ARE SOLD AND REDEEMED
AT THEIR NET ASSET VALUE.

THE SPECIAL FUND CAN LEVERAGE FOR FUND ACTIVITY. THIS ACTIVITY COULD BE
CONSIDERED SPECULATIVE AND COULD RESULT IN GREATER COST TO THE FUND. SEE PAGE
_____.

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

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

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

SHARES OF THE OREGON MUNICIPAL BOND FUND ARE ONLY AVAILABLE FOR SALE TO
RESIDENTS OF OREGON.

- -------------------------------------------------------------------------------
A COPY OF THIS PROSPECTUS MUST BE DELIVERED TO RESIDENTS OF CERTAIN STATES
PRIOR TO CONSUMMATION OF A SALE OF SHARES IN THE FUNDS.
- -------------------------------------------------------------------------------
<PAGE>
PROSPECTUS SUMMARY

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

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

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

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

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

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

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

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

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

Each of the Funds is an open-end, diversified registered investment company
(or mutual fund), with the exception of the Oregon Bond Fund, which is non-
diversified. Each Fund offers a single class of common stock pursuant to this
Prospectus, and each is managed by The Crabbe Huson Group, Inc. (the "Adviser").

The Funds are distributed by Crabbe Huson Securities, Inc. (the
"Distributor"), an affiliate of the Adviser. There is no sales load payable in
connection with the sale of shares of any of the Funds. For information about
how to purchase shares of the Funds, see "HOW TO INVEST IN THE FUNDS." For
information about redemption and repurchase of shares, see "HOW TO SELL YOUR
SHARES."

-2-
<PAGE>
RISK FACTORS

The Special, Equity and Asset Allocation Funds are subject to the risks of
investments in common stock, principally that the prices of stocks can fluctuate
dramatically in response to company, market, or economic news, and these Funds
historically have had turnover rates in their stock portfolios in excess of 75%
per year, resulting in potentially higher brokerage costs and the potential loss
of advantageous long-term capital gain treatment for tax purposes. See "Taxes."
In addition, the Special, Equity, Asset Allocation and Income Funds may each
invest up to 35% of their total assets in securities issued by foreign issuers.
The Real Estate Fund was incorporated in December 1993, and has a limited
operating history. In addition, the Real Estate Fund invests primarily in real
estate equity securities, and investments in that Fund are subject to certain
risks associated with the direct ownership of real estate. A significant risk
associated with investments in the Oregon Bond, Income and U.S. Government
Income Funds is that of increasing interest rates causing a decline in the net
asset value of the Fund. The Oregon Bond Fund is also subject to greater risks
resulting from economic difficulties in the State of Oregon, where most of its
securities are originated. The Special Fund may, from time to time, leverage
the assets it has by using borrowed money to increase its portfolio positions.
For additional information about specific risk factors associated with an
investment in each of the Funds, see "FUNDAMENTAL POLICIES," and "SPECIAL RISK
FACTORS TO BE CONSIDERED."

-3-
<PAGE>
EXPENSE DATA

The following table sets forth certain information about the expenses that
a shareholder of the Funds will incur, based upon their historical expenses for
the fiscal year ending October 31, 1994.
<TABLE>
<CAPTION>
U.S.
U.S. Government
Real Asset Oregon Government Money
Special Estate Equity Allocation Bond Income Income Market
Fund Fund Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
(as a percentage of offering price)

Maximum Sales Load Imposed on
Reinvested Dividends 0% 0% 0% 0% 0% 0% 0% 0%

Deferred Sales Load 0% 0% 0% 0% 0% 0% 0% 0%

Redemption Fees 0% 0% 0% 0% 0% 0% 0% 0%

Exchange Fees $0 $0 $0 $0 $0 $0 $0 $0

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

Management Fees (after waiver)(1) .86% .47% .89% .94% .40% 0% 0% 0%

12b(1) Fees(2) .25% .25% .25% .25% .25% .25% .25% .25%

Other Expenses (after
reimbursement) .33% .29%(3) .31% .25% .33% .55%(3) .50%(3) .45%(3)

Total Fund Operating Expenses
(after reimbursement
or waiver)(4) 1.44% 1.01% 1.45% 1.44% .98% .80% .75% .70%
</TABLE>
Example: You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of each
period:(5)
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Special Fund 15 48 84 190
Real Estate Fund(6) 11 33
Equity Fund 15 48 84 192
Asset Allocation Fund 15 48 84 190
Oregon Bond Fund 10 32 57 129
Income Fund 8 26 46 106
U.S. Government Income Fund 8 25 44 99
U.S. Government Money Market Fund 7 23 41 92

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<PAGE>
<FN>
The purpose of the above table is to assist the investor in understanding
the various costs and expenses that an investor in the Funds will bear directly
or indirectly. Such costs and expenses include investment advisory fees and
administration costs. Additionally, a long-term shareholder should consider
that the fees and costs it will incur under the 12b-1 plan may result in the
shareholder paying more than the economic equivalent of the maximum front-end
sales charge permitted by the rules and regulations of the National Association
of Securities Dealers. See "Management of the Funds" and "Purchase of Shares."

(1) Reflects a waiver of fees by the Adviser of $85,038; $50,426; $68,033;
$53,227; $31,708; $43,957; $51,245; and $107,853 for the Special Fund, the
Real Estate Fund, the Equity Fund, the Asset Allocation Fund, the Oregon
Bond Fund, the Income Fund, the U.S. Government Income Fund, and the U.S.
Government Money Market Fund, respectively. If the waiver had not been
made these percentages would have been 1.00%, 1.00%, 1.00%, 1.00%, .50%,
.75%, .50%, and .50%, respectively.

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

(3) Reflects a reimbursement of Fund expenses by the Adviser of $46,416,
$35,685, $22,837 and $18,457 for the Real Estate, Income, U.S. Government
Income and U.S. Government Money Market Funds, respectively. If the
reimbursement had not been made, these percentages would have been .57%,
1.16%, .72%, and .54%, respectively.

(4) As noted in footnotes 1 and 3, the Adviser voluntarily waived its fees
and/or reimbursed the Funds' expenses to the extent total operating
expenses exceed 1.50% for the Special, Real Estate, Equity and Asset
Allocation Funds, .98% for the Oregon Bond Fund, .80% for the Income Fund,
.75% for the U.S. Government Income Fund and .70% for the U.S. Government
Money Market Fund per annum of the Fund's net asset value. If the waivers
had not been made, total fund operating expenses would have been 1.54%,
2.03%, 1.56%, 1.52%, 1.08%, 2.16%,1.47% and 1.29% for the Special Fund, the
Real Estate Fund, the Equity Fund, the Asset Allocation Fund, the Oregon
Bond Fund, the Income Fund, the U.S. Government Income Fund and the U.S.
Government Money Market Fund, respectively. See "Services Provided by the
Adviser" in the Fund's Statement of Additional Information. The Adviser
has agreed that it will not terminate this voluntary waiver except after 30
days notice to shareholders.

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

(6) Reflects expenses for one- and three-year periods only.
</TABLE>

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<PAGE>

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CONDENSED FINANCIAL INFORMATION
-------------------------------

FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

The following information should be read in conjunction with the financial
statements and notes thereto appearing elsewhere in the Funds' Annual Report.
The calculations are based on average number of shares outstanding for each
period.

<TABLE>
<CAPTION>
NET REALIZED &
NET ASSET VALUE, UNREALIZED GAIN TOTAL FROM DIVIDENDS FROM DISTRIBU-
BEGINNING OF NET INVESTMENT (LOSS) ON INVESTMENT NET INVESTMENT TIONS FROM CAPITAL
PERIOD ENDED PERIOD INCOME SECURITIES OPERATIONS INCOME GAINS
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
THE CRABBE HUSON SPECIAL FUND, INC.
10-31-94 $11.82 $ 0.0513 $ 2.3026 $ 2.3539 $0.0000 $0.0892
10-31-93 8.36 (0.0774) 3.5374 3.4600 0.0000 0.0000
10-31-92 12.05 (0.0211) (1.6211) (1.6422) 0.0260 2.0218
10-31-91 8.78 0.0353 4.0155 4.0508 0.1453 0.6355
10-31-90 11.49 0.1546 (1.4317) (1.2771) 0.2240 1.2089
10-31-89 9.69 0.2100 1.5900 1.8000 0.0000 0.0000
10-31-88 8.13 (0.0515) 1.6115 1.5600 0.0000 0.0000
10-31-87 (d) 10.00 (0.0409) (1.8300) (1.8709) 0.0000 0.0000
THE CRABBE HUSON REAL ESTATE INVESTMENT FUND, INC.
10-31-94 (f) 10.00 0.3664 (0.6394) (0.2730) 0.2287 0.0000
THE CRABBE HUSON EQUITY FUND, INC.
10-31-94 16.08 0.1900 0.5668 0.7568 0.0344 0.3638
10-31-93 13.03 0.0981 3.4476 3.5457 0.1099 0.3858
10-31-92 12.57 0.1980 0.9186 1.1166 0.0937 0.5629
10-31-91 8.54 0.1861 4.1511 4.3372 0.3072 0.0000
10-31-90 10.50 0.2533 (1.6764) (1.4231) 0.3918 0.1451
10-31-89 (e) 10.00 0.3146 0.1854 0.5000 0.0000 0.0000
THE CRABBE HUSON ASSET ALLOCATION FUND, INC.
10-31-94 13.52 0.2990 (0.0817) 0.2173 0.2879 0.5829
10-31-93 11.68 0.2323 2.0889 2.3212 0.2373 0.2439
10-31-92 11.00 0.3468 0.8175 1.1643 0.3463 0.1380
10-31-91 9.24 0.4143 1.8208 2.2351 0.4335 0.0415
10-31-90 10.69 0.4561 (1.1200) (0.6639) 0.7159 0.0702
10-31-89 (e) 10.00 0.3990 0.2910 0.6900 0.0000 0.0000
THE OREGON MUNICIPAL BOND FUND, INC.
10-31-94 12.80 0.5418 (0.8001) (0.2583) 0.5422 0.0090
10-31-93 12.20 0.5683 0.6880 1.2563 0.5647 0.0916
10-31-92 12.14 0.6168 0.1521 0.7689 0.6168 0.0921
10-31-91 11.74 0.6385 0.4831 1.1216 0.6562 0.0654
10-31-90 11.72 0.6316 0.0522 0.6838 0.6401 0.0237
10-31-89 11.72 0.6794 0.0842 0.7636 0.6711 0.0925
10-31-88 11.08 0.6386 0.6411 1.2797 0.6386 0.0000
10-31-87 (a) 12.15 0.7311 (0.9983) (0.2672) 0.7311 0.0760
09-30-87 11.93 0.7319 (0.8051) (0.0732) 0.7319 0.0760
09-30-86 10.43 0.7720 1.5265 2.2985 0.7720 0.0255
09-30-85 (b) 10.00 0.7428 0.4284 1.1712 0.7428 0.0000
</TABLE>

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<PAGE>

-------------------------------
CONDENSED FINANCIAL INFORMATION
-------------------------------

<TABLE>
<CAPTION>
RATIO OF RATIO OF NET
TOTAL NET ASSET EXPENSES TO INVESTMENT INCOME
DISTRI- VALUE, END OF TOTAL NET ASSETS, AVERAGE NET TO AVERAGE NET PORTFOLIO
PERIOD ENDED BUTIONS PERIOD RETURN END OF PERIOD ASSETS ASSETS TURNOVER RATE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
THE CRABBE HUSON SPECIAL FUND, INC.
10-31-94 $0.0892 $14.08 22.40% $319,810,853 1.44% 0.39% 146.44%
10-31-93 0.0000 11.82 41.39% 23,816,912 1.57% -0.73% 73.29%
10-31-92 2.0478 8.36 8.11% 5,857,434 1.74% -0.25% 102.27%
10-31-91 0.7808 12.05 49.58% 3,541,797 1.92% 0.32% 256.68%
10-31-90 1.4329 8.78 -10.90% 2,926,457 2.00% 1.55% 314.73%
10-31-89 0.0000 11.49 18.68% 3,356,417 2.00% 1.96% 275.62%
10-31-88 0.0000 9.69 19.63% 4,392,920 3.94% 3.34% 155.12%
10-31-87 (d) 0.0000 8.13 -30.32%(c) 1,892,038 2.60%(c) 0.05%(c) 3.90%
THE CRABBE HUSON REAL ESTATE INVESTMENT FUND, INC.
10-31-94 (f) 0.2287 9.50 -3.25% 18,279,500 1.01%(g) 6.30%(g) 43.30%
THE CRABBE HUSON EQUITY FUND, INC.
10-31-94 0.3982 16.44 7.89% 153,105,296 1.45% 1.18% 106.49%
10-31-93 0.4957 16.08 29.90% 34,520,166 1.49% 0.67% 114.38%
10-31-92 0.6566 13.03 12.48% 13,429,315 1.55% 1.57% 180.72%
10-31-91 0.3072 12.57 52.44% 5,929,590 1.84% 1.60% 171.82%
10-31-90 0.5369 8.54 -14.97% 2,944,344 1.93% 2.56% 265.25%
10-31-89 (e) 0.0000 10.50 6.72%(c) 5,018,337 1.69%(c) 3.98%(c) 90.54%
THE CRABBE HUSON ASSET ALLOCATION FUND, INC.
10-31-94 0.8708 12.87 2.66% 110,151,785 1.44% 2.30% 149.19%
10-31-93 0.4812 13.52 20.93% 85,390,017 1.46% 1.85% 116.10%
10-31-92 0.4843 11.68 11.25% 55,098,981 1.52% 3.02% 155.26%
10-31-91 0.4750 11.00 24.55% 23,892,664 1.76% 3.97% 157.89%
10-31-90 0.7861 9.24 -6.40% 13,173,923 1.90% 4.51% 161.72%
10-31-89 (e) 0.0000 10.69 9.30%(c) 12,577,962 1.91%(c) 5.02%(c) 88.14%
THE OREGON MUNICIPAL BOND FUND, INC.
10-31-94 0.5512 11.99 -2.06% 29,045,728 0.98% 4.37% 20.58%
10-31-93 0.6563 12.80 10.71% 29,408,110 1.05% 4.51% 11.62%
10-31-92 0.7089 12.20 6.51% 20,295,896 1.11% 5.04% 25.30%
10-31-91 0.7216 12.14 9.85% 18,382,636 1.21% 5.36% 53.40%
10-31-90 0.6638 11.74 6.00% 18,766,449 1.38% 5.41% 58.52%
10-31-89 0.7636 11.72 6.67% 19,173,145 1.04% 5.82% 45.25%
10-31-88 0.6386 11.72 12.02% 20,058,295 1.21% 5.53% 31.44%
10-31-87 (a) 0.8071 11.08 -1.95% 14,276,600 1.14% 5.66% 19.18%
09-30-87 0.8079 11.05 -0.95% 14,165,161 1.31% 6.43% 18.73%
09-30-86 0.7975 11.93 22.83% 8,861,258 1.06% 6.34% 24.20%
09-30-85 (b) 0.7428 10.43 12.05%(c) 3,390,500 0.78%(c) 7.29%(c) 43.21%
</TABLE>

-7-
<PAGE>

-------------------------------
CONDENSED FINANCIAL INFORMATION
-------------------------------

FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

-8-
<PAGE>

-------------------------------
CONDENSED FINANCIAL INFORMATION
-------------------------------

-9-
<PAGE>

-------------------------------
CONDENSED FINANCIAL INFORMATION
-------------------------------

FINANCIAL HIGHLIGHTS
(CONTINUED)

(a) The Fund's Fiscal Year was changed from 9/30 to 10/31, effective
10/31/87, which represents a conformed 12-month period.
(b) Commencement of operations -- 10/3/84.
(c) Computed on an annualized basis.
(d) Commencement of operations -- 4/9/87.
(e) Commencement of operations -- 1/31/89.
(f) Commencement of operations -- 4/4/94.
(g) Computed on an annualized basis.

<TABLE>
<CAPTION>
RATIO OF RATIO OF NET
TOTAL WAIVED/ EXPENSES TO INVESTMENT INCOME
REIMBURSED NET INVESTMENT AVERAGE NET TO AVERAGE NET
PERIOD ENDED EXPENSES INCOME ASSETS ASSETS
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
THE CRABBE HUSON SPECIAL FUND, INC.
10-31-94 $100,073 $ 0.04 1.54% 0.29%
10-31-93 2,238 (0.08) 1.59% -0.75%
10-31-92 19,594 (0.06) 2.18% -0.69%
10-31-91 18,436 (0.02) 2.40% -15.00%
10-31-90 28,585 0.07 2.86% 0.70%
10-31-89 16,719 0.16 2.44%(c) 1.53%(c)
10-31-88
10-31-87 (d)
THE CRABBE HUSON REAL ESTATE INVESTMENT FUND, INC.
10-31-94 (f) 96,842 0.31 2.03%(g) 5.28%(g)
THE CRABBE HUSON EQUITY FUND, INC.
10-31-94 89,799 0.17 1.56% 1.06%
10-31-93 32,826 0.08 1.64% 0.52%
10-31-92 39,230 0.15 1.93% 1.18%
10-31-91 23,349 0.12 2.41% 1.03%
10-31-90 29,758 0.18 2.66% 1.83%
10-31-89 (e) 10,964 0.29 1.97%(c) 3.68%(c)
THE CRABBE HUSON ASSET ALLOCATION FUND, INC.
10-31-94 80,018 0.29 1.52% 2.22%
10-31-93 54,592 0.22 1.54% 1.77%
10-31-92 36,345 0.34 1.62% 2.92%
10-31-91 5,035 0.41 1.79% 3.94%
10-31-90 3,162 0.45 1.93% 4.49%
10-31-89 (e) 1,000 0.40 1.93%(c) 5.00%(c)
</TABLE>

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<PAGE>

-------------------------------
CONDENSED FINANCIAL INFORMATION
-------------------------------

FINANCIAL HIGHLIGHTS
(CONTINUED)

<TABLE>
<CAPTION>
RATIO OF RATIO OF NET
TOTAL WAIVED/ EXPENSES TO INVESTMENT INCOME
REIMBURSED NET INVESTMENT AVERAGE NET TO AVERAGE NET
PERIOD ENDED EXPENSES INCOME ASSETS ASSETS
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
THE OREGON MUNICIPAL BOND FUND, INC.
10-31-94 31,708 0.53 1.08% 4.26%
10-31-93 11,421 0.56 1.09% 4.46%
10-31-92 4,089 0.61 1.13% 5.01%
10-31-91 5,129 0.64 1.24% 5.34%
10-31-90 32,938 0.61 1.55% 5.23%
10-31-89 23,096 0.67 1.16% 5.71%
10-31-88 14,406 0.63 1.32% 5.42%
10-31-87 (a)
09-30-87
09-30-86
09-30-85 (b)
THE CRABBE HUSON INCOME FUND, INC.
10-31-94 79,642 0.36 2.16% 3.56%
10-31-93 61,698 0.34 1.96% 3.19%
10-31-92 56,221 0.55 1.94% 5.06%
10-31-91 47,163 0.56 2.42% 5.38%
10-31-90 31,474 0.53 3.07% 5.33%
10-31-89 (e) 20,273 0.29 4.56%(c) 3.81%(c)
THE CRABBE HUSON U.S. GOVERNMENT INCOME FUND, INC.
10-31-94 74,082 0.39 1.47% 3.66%
10-31-93 55,333 0.42 1.26% 3.81%
10-31-92 43,331 0.50 1.52% 4.63%
10-31-91 35,086 0.55 2.15% 5.25%
10-31-90 25,942 0.53 2.84% 5.31%
10-31-89 (e) 17,420 0.39 3.40%(c) 5.09%(c)
THE CRABBE HUSON U.S. GOVERNMENT MONEY MARKET FUND, INC.
10-31-94 126,310 0.03 1.29% 2.81%
10-31-93 67,480 0.02 1.32% 1.88%
10-31-92 50,598 0.03 1.09% 2.98%
10-31-91 68,851 0.05 1.18% 5.38%
10-31-90 83,187 0.07 1.33% 7.04%
10-31-89 (e) 34,890 0.06 1.34%(c) 7.69%(c)
</TABLE>

11
<PAGE>
PERFORMANCE INFORMATION

The annual report for the Funds contains additional information about the
performance of the Funds, and is available from the Distributor upon request and
without charge.

INVESTMENT OBJECTIVES AND POLICIES

The eight Funds described in this Prospectus have different investment
objectives that will largely determine the type of investments in each Fund's
portfolio. However, there is no assurance that the Funds will achieve their
investment objectives. Except for the Real Estate Fund, each Fund's policies,
including its investment objective, may be changed without shareholder vote to
the extent they are not described in this Prospectus under "Fundamental
Policies" or under "Investment Restrictions" in the Statement of Additional
Information. The shareholders of the Real Estate Fund must approve a change in
the Fund's investment objective.

THE CRABBE HUSON SPECIAL FUND, INC. is an open-end, diversified regulated
investment company incorporated under the laws of Oregon on January 29, 1987.
It began operations on April 9, 1987.

The Special Fund seeks long-term growth of capital through a flexible
policy of investing in a diversified portfolio of selected domestic and foreign
securities representing "special" situations, as described below (principally,
common stocks and, secondarily, preferred stocks and bonds). The production of
current income is secondary to the primary objective.

The Special Fund uses a basic value, contrarian approach in selecting its
investments. In its selection process, the Fund puts primary emphasis on
balance sheet and cash flow analysis and on the relationship between the market
price of a security and its value as a share of an ongoing business. This
approach, while not unique, contrasts with certain other methods of investment
analysis, which rely upon market timing, technical analysis, earnings forecasts,
or economic predictions.

The Special Fund seeks to invest up to 100%, and under normal conditions at
least 75%, of its assets in securities of companies that have small (under
$1,000,000,000) to medium (from $1,000,000,000 to $3,000,000,000) market
capitalization. These investments represent "special" situations or
opportunities that arise when companies, whose long-term financial structure is
intact, run into short-term difficulties that present an opportunity to buy
these companies' stocks at substantial discounts. The Special Fund's basic
value approach is based on the Adviser's belief that the securities of many
companies often sell at a discount from the securities' estimated theoretical
(intrinsic) value. The Fund attempts to identify and invest in such undervalued
securities, anticipating that capital appreciation will be realized as the
securities' prices rise to their estimated intrinsic value.

The Special Fund's investment policies are adapted to changing market
conditions. The Adviser believes that common stock will generally, over the
long-term, offer the greatest

-12-
<PAGE>
potential for capital appreciation and preservation of purchasing power, and
common stocks will usually constitute at least 75% of the Fund's investment
portfolio. However, for temporary defensive purposes, the Special Fund may
reduce its ownership of common stock if, in the opinion of the Fund, it would be
assuming undue risk in its ownership of common stock. In such a situation, the
Fund could invest up to 100% of its assets in fixed income securities, cash and
cash equivalents. The fixed income securities in which the Special Fund will
invest in such a situation shall consist of corporate debt securities (bonds,
debentures and notes), asset-backed securities, bank obligations, collateralized
bonds, loan and mortgage obligations, commercial paper, preferred stocks,
repurchase agreements, savings and loan obligations and U.S. Government and
agency obligations. At no time will the Fund have in excess of 20% of its total
assets invested in fixed income securities rated below investment grade (BBB by
Standard and Poor's ("S&P") and Baa by Moody's Investors Service ("Moody's")) or
in excess of 5% of its total assets invested in fixed income securities that are
unrated. The maturities of the fixed income securities shall be three years or
less.

The Special Fund may from time to time increase its assets for investment
through bank borrowing. Such bank borrowing may be collateralized by pledging
the Fund's portfolio securities to the lending bank. In no case will such
borrowings exceed one-third of the value of the Fund's total assets immediately
after any such borrowing. If, for any reason, the current value of the Special
Fund's total assets falls below an amount equal to three times the amount of its
indebtedness from money borrowed, the Fund will, within three days (not
including Saturdays, Sundays and holidays), reduce its indebtedness to the
extent necessary to satisfy the one-third test.

Using borrowed funds to increase the amount of securities that may be
purchased is known as leverage. Investment gains realized with borrowed funds
that exceed the interest cost for such borrowings will cause the net asset value
of Fund shares to increase more dramatically than would otherwise be the case.
On the other hand, leverage can cause the net asset value of Fund shares to
decrease more rapidly than normal if the securities purchased with borrowed
money decline in value or if the investment performance of such securities does
not cover the cost of borrowing.

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

The Special Fund also intends to sell securities "short." The technique of
selling short is subject to certain restrictions, and involves certain risks.
See "SPECIAL RISK FACTORS TO BE CONSIDERED--Short Sales."

-13-
<PAGE>
INVESTMENT RESTRICTIONS

The Special Fund's investment restrictions prohibit, among other things,
the investment of more than 5% of the Fund's total assets in the securities of
any one issuer, and prohibit the investment of more than 25% of the Fund's total
assets in any one industry (except U.S. Government securities). In addition to
common stock, the assets of the Special Fund will sometimes be invested in
convertible and nonconvertible preferred stocks and bonds, which may or may not
be rated. However, no more than 20% of the Special Fund's total assets may be
invested in fixed income or convertible securities which are rated below the
fourth highest grade by Moody's and S&P and no more than 5% of the Fund's total
assets may be invested in unrated fixed income or convertible securities. It
should be noted that obligations rated below the fourth highest grade (Baa by
Moody's or BBB by S&P) are considered to have speculative characteristics. See
"SPECIAL RISK FACTORS TO BE CONSIDERED." The Special Fund's investment
restrictions and policies are more fully described under "FUNDAMENTAL POLICIES"
and in the Statement of Additional Information.

DIVIDENDS AND DISTRIBUTIONS

The Special Fund expects to declare and distribute to shareholders once a
year, usually in December, substantially all of its net investment income and
net realized capital gains, if any. The amount distributed will vary according
to the income received from securities held by the Fund and capital gains
realized from the sale of securities.

All distributions are paid and reinvested in additional shares of the
Special Fund at net asset value at the close of business on the record date,
unless the shareholder has elected to receive payments in cash.

THE CRABBE HUSON REAL ESTATE INVESTMENT FUND, INC. is an open-end, diversified
regulated investment company incorporated under the laws of Oregon on December
29, 1993. It began operations on April 4, 1994.

INVESTMENT OBJECTIVE AND POLICIES

The Real Estate Fund's investment objective is to provide for its
shareholders capital appreciation and income. The Real Estate Fund seeks to
achieve this objective through a policy of investing in a diversified portfolio
consisting primarily of equity securities of REITs and other real estate
industry companies and, to a lesser extent, in debt securities of such companies
and in mortgage-backed securities.

The Real Estate Fund uses a basic value, contrarian approach in selecting
investments to the extent that such an approach is feasible in the real estate
market. In its selection process, the Real Estate Fund puts primary emphasis on
balance sheet and cash flow analysis and the relationship between the market
price of the security and its value as a share of an ongoing business, and/or on
securities which offer a high level of current income. This

-14-
<PAGE>
approach, while not unique, contrasts with certain other methods of investment
analysis which rely upon market timing, technical analysis, earnings forecasts,
or economic predictions. This Fund frequently focuses on companies or
industries that appear to be out of favor with the majority of the investment
community.

Under normal circumstances, at least 75% of the Real Estate Fund's total
assets will be invested in equity securities of REITs and other real estate
industry companies. For purposes of the Real Estate Fund's investments, a "real
estate industry company" is a company that derives at least 50% of its gross
revenues or net profits from either (a) the ownership, development,
construction, financing, management or sale of commercial, industrial or
residential real estate or (b) products or services related to the real estate
industry, like building supplies or mortgage servicing. The equity securities
of real estate industry companies in which the Real Estate Fund will invest
consist of common stock, shares of beneficial interests of real estate
investment trusts and securities with common stock characteristics, such as
preferred stock and debt securities convertible into common stock ("Real Estate
Equity Securities"). Real Estate Equity Securities are subject to unique risks.
See "SPECIAL RISK FACTORS TO BE CONSIDERED" for a discussion of these risks.

The Real Estate Fund may also invest up to 25% of its total assets in (a)
debt securities of real estate industry companies, (b) mortgage-backed
securities, such as mortgage pass-through certificates, real estate mortgage
investment conduit ("REMIC") certificates and collateralized mortgage
obligations ("CMOs"), and (c) short-term investments (as defined below). For
purposes of any investment in debt securities the Real Estate Fund does not
intend to invest any of its assets in debt securities that are unrated or that
are rated below Baa by Moody's or BBB by S&P. Investing in mortgage-backed
securities involves certain unique risks in addition to those associated with
investing in the real estate industry in general. These risks include the
failure of a counter-party to meet its commitments, adverse interest rate
changes and the effect of prepayments on mortgage cash flows and returns. For a
more complete discussion concerning mortgage-backed securities, see "SPECIAL
RISK FACTORS TO BE CONSIDERED."

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

The Real Estate Fund's investment policies will be adapted to changing
market conditions. When as a result of market conditions the Adviser determines
that a temporary defensive position is warranted to help preserve capital, the
Real Estate Fund may invest up to 100% of its assets in fixed income securities,
cash and cash equivalents. The fixed income

-15-
<PAGE>
securities in which the Real Estate Fund will invest in such a situation shall
consist of corporate debt securities (bonds, debentures and notes), asset-backed
securities, bank obligations, collateralized bonds, loan and mortgage
obligations, commercial paper, preferred stocks, repurchase agreements, savings
and loan obligations and U.S. Government and agency obligations. The fixed
income securities will be rated investment grade or higher (BBB by S&P and Baa
by Moody's) and will have maturities of three years or less. When the Real
Estate Fund assumes a temporary defensive position, it is not invested in
securities designed to achieve its investment objective.

A more complete discussion concerning the investment objectives and
policies of the Real Estate Fund is included under "FUNDAMENTAL POLICIES" and in
the Statement of Additional Information.

INVESTMENT RESTRICTIONS

A description of the investment restrictions and policies of the Real
Estate Fund is included under "FUNDAMENTAL POLICIES" and in the Statement of
Additional Information.

DIVIDENDS AND DISTRIBUTIONS

The Real Estate Fund expects to declare and distribute to shareholders
dividends from net investment income on the last business day of each fiscal
quarter. Net capital gains realized by the Real Estate Fund, if any, will be
declared and distributed once a year, usually in December. The amount
distributed will vary according to the income received from securities held by
the Real Estate Fund and capital gains realized from the sale of securities.

All distributions are paid and reinvested in additional shares of the Real
Estate Fund at net asset value at the close of business on the record date,
unless the shareholder has elected to receive payments in cash.

THE CRABBE HUSON EQUITY FUND, INC. is an open-end, diversified regulated
investment company incorporated under the laws of Oregon on August 10, 1988. It
began operations on January 31, 1989.

The Equity Fund seeks long-term appreciation of shareholders' capital. The
Equity Fund will seek to achieve this objective by investing in a carefully
chosen portfolio consisting primarily of common stock. The Adviser will employ
a basic value, contrarian approach in selecting securities for purchase for the
Equity Fund's portfolio. It will focus its investments in widely and actively
traded stocks with large market capitalizations (primarily in excess of
$3,000,000,000). In the selection process, the Adviser places primary emphasis
on income statement and balance sheet analysis, and on the relationship between
the market price of a security and the Adviser's opinion of its underlying
value. This approach contrasts with certain other methods of investment
analysis, which rely upon market timing, technical analysis,

-16-
<PAGE>
earnings forecasts or economic predictions. This Fund frequently focuses on
companies or industries that appear to be out of favor with the majority of the
investment community.

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

For temporary defensive purposes, the Equity Fund may reduce its ownership
of common stock substantially below the 65% level. When, as a result of market
conditions, the Adviser determines that a temporary defensive position is
warranted to help preserve capital, the Fund may, without limit, invest up to
100% of its assets in fixed income securities, cash, cash equivalents, and money
market instruments. The fixed income securities in which the Equity Fund will
invest in such a situation shall consist of corporate debt securities (bonds,
debentures and notes), asset-backed securities, bank obligations, collateralized
bonds, loan and mortgage obligations, commercial paper, preferred stocks,
repurchase agreements, savings and loan obligations and U.S. Government and
agency obligations. At no time will the Fund have in excess of 20% of its total
assets invested in fixed income securities rated below BBB by S&P and Baa by
Moody's or 5% of its total assets invested in fixed income securities that are
unrated. The maturities of the fixed income securities shall be three years or
less. In addition, for defensive purposes, the Equity Fund may purchase or
write covered put or call options on individual securities or widely traded
stock index futures. See "SPECIAL RISK FACTORS TO BE CONSIDERED."

INVESTMENT RESTRICTIONS

The Equity Fund's investment restrictions prohibit, among other things, the
investment of more than 5% of the Fund's total assets in the securities of any
one issuer, and prohibit the investment of more than 25% of the Fund's total
assets in any one industry (except U.S. Government securities). The investment
restrictions and policies of the Equity Fund are more fully described under
"FUNDAMENTAL POLICIES" and in the Statement of Additional Information.

DIVIDENDS AND DISTRIBUTIONS

The Equity Fund expects to declare and distribute to shareholders once a
year, usually in December, substantially all of its net investment income and
net realized capital gains, if any. The amount distributed will vary according
to the income received from securities held by the Fund and capital gains
realized from the sale of securities.

-17-
<PAGE>
All distributions are paid and reinvested in additional shares of the
Equity Fund at net asset value at the close of business on the record date,
unless the shareholder has elected to receive payments in cash.

THE CRABBE HUSON ASSET ALLOCATION FUND, INC. is an open-end, diversified
regulated investment company incorporated under the laws of Oregon on August 10,
1988. It began operations on January 31, 1989.

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

The Adviser will employ a basic value, contrarian approach in selecting
purchases for the Asset Allocation Fund's equity portfolio. In the selection
process, the Adviser places primary emphasis on income statement and balance
sheet analysis, and the relationship between the market price of a security and
the Adviser's opinion of its underlying value. This approach contrasts with
certain other methods of investment analysis, which rely upon market timing,
technical analysis, earnings forecasts or economic predictions. This Fund
frequently focuses on companies or industries that appear to be out of favor
with the majority of the investment community.

Many factors will be considered in determining what portion of the
portfolio will be invested in stocks, fixed income securities, or cash and cash
equivalents. The Adviser will constantly monitor and adjust its weighting of
investments in any particular area to adapt to changing market and economic
conditions. The Fund's assets will be primarily invested in fixed income
securities if it is more likely to meet its objectives through such investments
rather than through investments in common stocks. Similarly, the Adviser will
primarily invest the Asset Allocation Fund's assets in cash and cash equivalents
if in its view market conditions become uncertain, such as in periods of rapidly
rising interest rates.

-18-
<PAGE>
Since its inception, the Asset Allocation Fund has generally invested its
net assets 45% to 55% in fixed income securities, 25% to 45% in common stocks,
and 5% to 30% in cash, cash equivalents or other money market instruments.
However, for temporary defensive purposes, the Fund may invest up to 100% of its
assets in fixed income securities, cash, cash equivalents or other money market
instruments. The Asset Allocation Fund may not invest more than 75% of its
total net assets in common stocks. For a description of the risks associated
with these types of investments, please see "SPECIAL RISK FACTORS TO BE
CONSIDERED" in this Prospectus.

Although it is the general policy of the Asset Allocation Fund to invest
for long-term capital appreciation and a modest amount of income, advantage will
be taken of opportunities to earn short-term profits if the Adviser believes
that such a strategy will benefit the Asset Allocation Fund's overall objective
in light of the increased tax and brokerage expenses associated with such a
strategy.

INVESTMENT RESTRICTIONS

The Asset Allocation Fund's investment restrictions include, among others,
a prohibition on investing more than 5% of its total assets in the securities of
any one issuer (except U.S. Government securities), or 25% of its total assets
in a single industry. The investment restrictions and policies of the Asset
Allocation Fund are more fully described under "FUNDAMENTAL POLICIES" in this
Prospectus and in the Statement of Additional Information.

DIVIDENDS AND DISTRIBUTIONS

The Asset Allocation Fund expects to declare and distribute dividends from
net investment income on the last business day of each fiscal quarter. Net
capital gains realized by the Asset Allocation Fund, if any, are declared and
distributed on an annual basis, usually in December. The amount distributed
will vary according to the income received from securities held by the Asset
Allocation Fund and capital gains realized from the sale of securities.

All distributions are paid and reinvested in additional shares of the Asset
Allocation Fund at net asset value at the close of business on the record date,
unless the shareholder has elected to receive payments in cash.

THE OREGON MUNICIPAL BOND FUND, INC. is an open-end, non-diversified regulated
investment company incorporated under the laws of Oregon on October 24, 1983.
It began operations on October 3, 1984.

The Oregon Bond Fund's investment objective is to provide its shareholders
with as high a level of income exempt from federal and Oregon income taxes as is
consistent with prudent investment management and preservation of capital. The
Fund seeks to achieve this objective

-19-
<PAGE>
by investing primarily in a professionally managed portfolio of municipal
securities (including private activity bonds), the interest on which, in the
opinion of counsel for the issuer, is exempt from federal and Oregon income
taxes. It is the Fund's general policy to avoid purchasing bonds on which the
interest is subject to the federal alternative minimum tax. The Fund may,
however, purchase such bonds when their yield is sufficiently above the yield on
bonds not so taxed to compensate for the adverse tax consequences. For purposes
of its investment policy, the Fund considers a "bond" to be any municipal debt
security.

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

Municipal securities purchased for the Oregon Bond Fund's portfolio must,
at the time of purchase, be "investment-grade" municipal securities, rated no
lower than Baa by Moody's or BBB by S&P, or unrated municipal securities which
management believes to be comparable in quality to investment-grade municipal
securities. If any of the Oregon Bond Fund's securities fall below "investment
grade," the Fund will typically dispose of such securities, but it is not
required to do so. For a discussion concerning the rise factors associated with
municipal securities to be purchased by the Oregon Bond Fund, see "FUNDAMENTAL
POLICIES" and "SPECIAL RISK FACTORS TO BE CONSIDERED" in this Prospectus.

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

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

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

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

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

In the last fiscal year, the average percentage of the Oregon Bond Fund's
assets invested in bonds of each rating was:
<TABLE>
<S> <C> <S> <C>
AAA 54.49% Non-rated 1.32%
AA 25.02% Cash 2.20%
A 16.51%
BBB .62%
Less than BBB -0-
</TABLE>
INVESTMENT RESTRICTIONS

The Oregon Bond Fund has adopted a number of restrictions on the manner in
which its assets may be invested. The investment restrictions and policies of
the Oregon Bond Fund are more fully described under "FUNDAMENTAL POLICIES" in
this Prospectus and in the Statement of Additional Information.

The Oregon Bond Fund's investment restrictions prohibits it from investing
in securities subject to legal or contractual restrictions on resale or in
repurchase agreements with a maturity of more than seven days if, as a result of
such investment, more than 10% of the Oregon Bond Fund's assets would be
invested in illiquid securities, including such agreements. The Oregon Bond
Fund's investment restrictions also prohibit it from investing more than 10% of
total assets in securities of issuers which, with their predecessors, have a
record of less than three years of continuous operation.

DIVIDENDS AND DISTRIBUTIONS

The Oregon Bond Fund declares dividends from its net investment income each
business day. The net investment income for Saturdays, Sundays, and holidays is
declared as a dividend on the next business day. Declared income dividends are
accrued through the last business day of each month and are distributed on that
date. If an investor requests redemption of all the shares in the investor's
account at any time during the month, all income dividends declared to the date
of redemption are paid, together with the proceeds of the redemption. There is
a possibility that shareholders may lose the tax-exempt status on the accrued
income of a municipal bond if they redeem their shares before a dividend has
been declared. All income dividends will automatically be reinvested in
additional shares of the Oregon Bond Fund at the

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<PAGE>
net asset value next determined following declaration of such income dividend,
unless an investor has elected to receive dividends in cash.

Net capital gains realized by the Oregon Bond Fund, if any, will be
declared and distributed on an annual basis, usually in December. Capital gains
distributions are reinvested in additional shares of the Fund at the net asset
value next determined following declaration of such capital gains distribution,
unless an investor has notified the Oregon Bond Fund in writing of his election
to receive such distributions in cash.

THE CRABBE HUSON INCOME FUND, INC. is an open-end, diversified regulated
investment company incorporated under the laws of Oregon on August 10, 1988. It
began operations on January 31, 1989.

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

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

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

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

No more than 20% of the Income Fund's total assets may be invested in fixed
income or convertible securities which are rated lower than the fourth highest
grade by Moody's and S&P, and no more than 5% of the Income Fund's total assets
may be invested in unrated fixed income or convertible securities that may be
below investment grade. For a discussion of the fixed income securities and
convertible securities to be held by the Income Fund, see "FUNDAMENTAL POLICIES"
in this Prospectus It should be noted that obligations rated lower than the
fourth highest grade (Baa by Moody's or BBB by S&P), commonly referred to as
"junk bonds," are considered to have risks which make an investment in such
obligations predominantly speculative. See "SPECIAL RISK FACTORS TO BE
CONSIDERED" in this Prospectus.

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<PAGE>
It should also be noted that changes in interest rates have an inverse
effect on the value of interest-bearing securities such as those the Income Fund
intends to purchase. Any interest rate increase will decrease the value of the
Income Fund's securities, and therefore its total asset value. This effect
typically is more pronounced on securities having longer maturities.

INVESTMENT RESTRICTIONS

Not more than 5% of the Income Fund's total assets can be invested in the
securities of any one issuer, nor can more than 25% of the Income Fund's total
assets be invested in the securities of a single industry (excluding U.S.
Government securities).

Not more than 35% of the Income Fund's total assets may be invested in
foreign securities. See "SPECIAL RISK FACTORS TO BE CONSIDERED" in this
Prospectus. The investment restrictions and policies of the Income Fund are
more fully described under "FUNDAMENTAL POLICIES" in this Prospectus and in the
Statement of Additional Information.

DIVIDENDS AND DISTRIBUTIONS

The Income Fund declares and distributes dividends from its net investment
income on the last business day of each month. All income dividends will
automatically be reinvested in additional shares of the Income Fund at the net
asset value next determined following declaration of such income dividend,
unless an investor has elected to receive such payments in cash.

Net capital gains realized by the Income Fund, if any, will be declared and
distributed on an annual basis, usually in December. Capital gains
distributions are reinvested in additional shares of the Income Fund at the net
asset value next determined following the declaration of such a capital gains
distribution, unless an investor has notified the Income Fund in writing of his
election to receive such distributions in cash.

THE CRABBE HUSON U.S. GOVERNMENT INCOME FUND, INC. is an open-end, diversified
regulated investment company incorporated under the laws of Oregon on August 10,
1988. It began operations on January 31, 1989.

The U.S. Government Income Fund seeks to provide shareholders with a high
level of current income and safety of principal. Shares of the Fund are not
issued or guaranteed by the U.S. Government.

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

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<PAGE>
Association ("FNMA"), which are supported only by the credit of the issuing
agency or instrumentality. Under normal circumstances, at least 65% of the
value of the U.S. Government Income Fund's assets will be invested in these U.S.
Government securities. Certain agency obligations, such as those of GNMA, are
subject to prepayment by the issuer and, therefore, to the risk of loss of any
premium paid by the U.S. Government Income Fund to acquire them. The U.S.
Government Income Fund may invest up to 10% of its total assets in repurchase
agreements covering direct obligations of the U.S. Government.

The U.S. Government Income Fund will generally invest in U.S. Government
securities with maturities of less than five years. The U.S. Government Income
Fund will purchase securities based generally on the Adviser's assessment of
interest rate trends. If the Adviser expects interest rates to rise, the U.S.
Government Income Fund may purchase securities with shorter maturities.
Conversely, if interest rates are expected to decline, the U.S. Government
Income Fund may purchase securities with longer maturities.

It should be noted that changes in interest rates have an inverse effect on
the value of interest-bearing securities such as those the U.S. Government
Income Fund intends to purchase. Any interest rate increase will result in a
decrease in the value of the U.S. Government Income Fund's securities, and
therefore in the U.S. Government Income Fund's total asset value. This effect
typically is more pronounced on securities having longer maturities.

INVESTMENT RESTRICTIONS

The investment restrictions and policies of the U.S. Government Income Fund
are more fully described under "FUNDAMENTAL POLICIES" in this Prospectus and in
the Statement of Additional Information. These restrictions include, but are
not limited to, limiting the portion of the portfolio which may be invested in
government securities with maturities of more than five years to 25% of total
assets.

DIVIDENDS AND DISTRIBUTIONS

The U.S. Government Income Fund declares and distributes dividends from its
net investment income on the last business day of each month. All income
dividends will automatically be reinvested in additional shares of the U.S.
Government Income Fund at the net asset value next determined following
declaration of such income dividend, unless an investor has elected to receive
such payments in cash.

Net capital gains realized by the Fund, if any, will be declared and
distributed on an annual basis, usually in December. Capital gains
distributions are reinvested in additional shares of the U.S. Government Income
Fund at the net asset value next determined following declaration of such
capital gains distribution, unless an investor has notified the U.S. Government
Income Fund in writing of his election to receive such distributions in cash.

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<PAGE>
THE CRABBE HUSON U.S. GOVERNMENT MONEY MARKET FUND, INC. is an open-end,
diversified regulated investment company incorporated under the laws of Oregon
on August 10, 1988. It began operations on January 31, 1989.

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

The dollar weighted, average maturity of the U.S. Government Money Market
Fund's portfolio may not exceed 90 days. The U.S. Government Money Market Fund
intends to hold most of the securities in its portfolio until maturity.
However, securities may be traded if, in the opinion of the Adviser, increases
in current income can be achieved consistent with the objectives and
restrictions of the U.S. Government Money Market Fund.

To achieve its objective, the U.S. Government Money Market Fund invests in
short-term money market instruments that are direct or indirect obligations of
the U.S. Government and obligations of various agencies or instrumentalities of
the U.S. Government, such as obligations issued by GNMA or FNMA. Direct
obligations of the U.S. Government are supported by the full faith and credit of
the United States, while obligations of instrumentalities or agencies of the
U.S. Government are generally supported only by the credit of the issuing agency
or instrumentality.

The U.S. Government Money Market Fund intends to invest in treasury bills
which mature within one year of the time of issuance. Historically, these
securities have involved no risk of loss of principal if held to maturity.
Between issuance and maturity, however, the prices of these securities change in
response to changes in market interest rates. Coupon-bearing securities
generate current interest payments, and part of the U.S. Government Money Market
Fund's portfolio return may come from reinvesting interest earned on these
securities.

The U.S. Government Money Market Fund also intends to invest in zero-coupon
securities. Zero-coupon securities can either be direct or indirect obligations
of the U.S. Government. Zero-coupon U.S. Treasury securities are the unmatured
interest coupons and underlying principal portions of U.S. Treasury bonds.
Originally, these securities were created by broker-dealers who bought Treasury
bonds and deposited these securities with a custodian bank. The broker-dealers
then sold receipts representing ownership interests in the coupons or principal
portions of the bonds. Some examples of zero -coupon securities sold through
custodial receipt programs are CATS (Certificates of Accrual on Treasury
Securities), TIGRs (Treasury Investment Growth Receipts), and generic Trs
(Treasury Receipts).

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<PAGE>
The U.S. Treasury subsequently introduced its own form of zero-coupon
securities called Separate Trading of Registered Interest and Principal of
Securities (STRIPS), through which it exchanges eligible securities for their
component parts and then allows the component parts to trade in book-entry form.
(Book-entry trading eliminates the bank credit risks associated with broker-
dealer sponsored custodial receipt programs.) STRIPS are direct obligations of
the U.S. government and have the same credit risks as other U.S. Treasury
securities.

Principal and interest on bonds issued by the Resolution Funding
Corporation have also been separated and issued as zero-coupon securities. The
U.S. Government and its agencies may issue securities in zero-coupon form.
These securities are referred to as "original issue zero-coupon securities."

INVESTMENT RESTRICTIONS

The investment restrictions and policies of the U.S. Government Money
Market Fund are more fully described under "FUNDAMENTAL POLICIES" and in the
Statement of Additional Information. These restrictions include the prohibition
of purchasing any securities with a maturity greater than one year.

DIVIDENDS AND DISTRIBUTIONS

The U.S. Government Money Market Fund declares dividends from its net
investment income each business day. The net investment income for Saturdays,
Sundays and holidays is declared as a dividend on the prior business day.
Declared dividends are accrued through the last business day of each month and
are distributed on that date. All income dividends will automatically be
reinvested in additional shares of the U.S. Government Money Market Fund at the
net asset value next determined following declaration of such income dividend.

Since the U.S. Government Money Market Fund intends to maintain a constant
one dollar per share net asset value, it does not anticipate the declaration of
capital gains distributions.

FUNDAMENTAL POLICIES

The Funds have adopted a number of fundamental investment policies and
restrictions which may not be changed without a vote of the holders of "a
majority of the voting shares" of a particular Fund, as defined in the 1940 Act.
For a listing of additional policies, see "INVESTMENT RESTRICTIONS" in the
Statement of Additional Information.

ISSUER AND INDUSTRY RESTRICTIONS. The Funds' investment restrictions
(except for those of the Real Estate Fund and the Oregon Bond Fund) include a
prohibition on investing more than 5% of the total assets of any Fund (at the
time of the purchase) in the securities of any one issuer. The Real Estate
Fund's investment restrictions include a prohibition with respect to at least
75% of its total assets from investing in individual issuers in which it has
invested

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<PAGE>
5% of the value of its total assets, or investing in more than 10% of the
outstanding voting securities of a single issuer. These policies, however, do
not include investments in U.S. Government securities. Each Fund (except the
Real Estate Fund) is also prohibited from investing more than 25% of its total
assets in any one industry.

BORROWING RESTRICTIONS. Each Fund may borrow up to one-third of the value
of its total assets, although each Fund, except the Special Fund, can only
borrow in case of emergency. Further, each Fund (except the Special Fund) is
prohibited from purchasing securities when the total borrowings of the Fund
exceed 5% of the total assets.

FIXED INCOME SECURITIES. The Funds that intend to invest in fixed income
securities on a regular basis (the Asset Allocation, Income, and U.S. Government
Income Funds) will generally invest 80% or more of any assets being invested in
such securities in investment grade securities (those rated BBB or Baa or higher
by Moody's or S&P). The Real Estate Fund may invest in debt securities
(including convertible debt securities of real estate industry companies), but
it does not intend to invest any of its assets in debt securities that are
unrated or that are rated below Baa by Moody's or BBB by S&P. In the event a
debt security purchased by the Real Estate Fund is subsequently downgraded below
Baa by Moody's or BBB by S&P, the Adviser will consider whether the Real Estate
Fund should continue to hold the security. No Fund (other than the Oregon Bond
Fund) may invest more than 20% of its total assets in fixed income securities
that are either unrated or are rated less than Baa by Moody's or BBB by S&P, or
in commercial paper that is rated less than B-1 by Moody's or A- by S&P; not
more than 5% of a Fund's total assets may be invested in fixed income securities
that are unrated (including convertible stock). Securities rated Baa by Moody's
or BBB by S&P are considered medium-grade, neither highly protected nor poorly
secured, and they may contain some elements of uncertainty over any great length
of time and may have certain speculative characteristics. Securities rated
below the fourth highest grade, commonly referred to as "junk bonds," and
unrated securities (if the Adviser has deemed these securities to be of a
similar credit quality as those securities rated below the fourth highest grade)
must be considered predominantly speculative in nature and subject to a sig-
nificant risk of default as to payments of either principal or interest, or
both. Due to its unique nature of maintaining a stable net asset value, the
fixed income securities selected by the U.S. Government Money Market Fund must
have received the highest rating (Aaa by Moody's and AAA by S&P) from a least
two rating agencies (or one if only one has rated the obligation) or have
similar credit characteristics if not rated by either of these services. Most
of the instruments issued by Federal Farm Credit Agency, The Federal Home Loan
Bank and similar agencies are not rated but are believed to be of similar credit
quality. A description of the ratings assigned to securities by Moody's and S&P
is attached as Appendix A.

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

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<PAGE>
Market Fund); or (3) whose deposits are insured by the Federal Depository
Insurance Corporation. Each Fund will only invest in securities permitted by
the SEC.

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

ILLIQUID SECURITIES. No Fund may invest more than 10% of its total assets
in illiquid securities such as repurchase agreements with a maturity in excess
of seven days (other than the Real Estate Fund, which may invest up to 15% of
its total assets in such securities). All Funds are permitted to engage in
repurchase agreements. Repurchase agreements are agreements under which a
person purchases a security and simultaneously commits to resell that security
to the seller (a commercial bank or recognized securities dealer) at an agreed
upon price on an agreed upon date within a number of days (usually not more than
seven) from the date of purchase. The resale price reflects the purchase price
plus an agreed upon market rate of interest that is unrelated to the coupon rate
or maturity of the purchased security. A Fund will engage in repurchase
agreements only with banks or broker-dealers whose obligations would qualify for
direct purchase by that Fund. A repurchase agreement involves the obligation of
the seller to pay an agreed-upon price, which obligation is, in effect, secured
by the value of the underlying security. All repurchase agreements are fully
collateralized and marked to market daily, and may therefore be viewed by the
SEC or the courts as loans collateralized by the underlying security. There are
some risks associated with repurchase agreements. For instance, in the case of
default by the seller, the Fund could incur a loss or, if bankruptcy proceedings
are commenced against the seller, the Fund could incur costs and delays in
realizing upon the collateral.

PUT, CALL OPTIONS. The Special, Real Estate, Equity, Asset Allocation and
Income Funds may invest up to 10% of their total assets in put or call options.
These Funds may write call options on securities they own or have the right to
acquire, and may purchase put and call options on individual securities written
by others. No Fund may write an uncovered put or uncovered call option.
Purchasing put or call options involves greater risks than buying the underlying
security because put and call options expire in a relatively short period of
time,

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<PAGE>
which may result in the loss of the entire investment in the put or call option
upon expiration. In addition, if a Fund writes a covered call option, that Fund
may give up some or all of its opportunity to profit from an increase in the
market price of the underlying security.

INTEREST RATE, STOCK MARKET FUTURES. The Special, Real Estate, Equity,
Asset Allocation and Income Funds may invest up to 10% of their total assets in
interest rate futures, and the Special, Real Estate, Equity and Asset Allocation
Funds may invest up to 10% of their total assets in stock market index futures
(other than over the counter). These Funds may invest in futures for hedging,
rather than investment purposes and may either purchase or sell futures for
hedging purposes. Investments in futures, like purchases of put or call
options, involve a greater risk of loss of the entire investment upon expiration
than purchases of securities. Investments in futures and options are
particularly dependent on the Adviser's ability to accurately predict future
yields and prices. If the Adviser is incorrect in its predictions, if a Fund's
positions are not well correlated to the securities being hedged, or if a Fund
is unable to close out a position due to an illiquid secondary market, the Fund
will be exposed to the risk of loss of the entire investment.

When required by SEC guidelines, each Fund that invests in options, futures
or repurchase agreements, or purchases or sells securities on a when-issued or
delayed-delivery basis, will set aside liquid assets in a segregated account
with the Funds' custodian to secure its potential obligations under those
instruments or agreements.

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

FUNDAMENTAL INVESTMENT POLICY OF REAL ESTATE FUND. Under normal
circumstances, the Real Estate Fund intends to invest at least 75% of its total
assets in equity securities of REITs and other real estate industry companies;
under all circumstances, at least 25% of the Fund's total assets will be
invested in such securities. The Real Estate Fund cannot underwrite securities
issued by other persons.

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<PAGE>
SPECIAL RISK FACTORS TO BE CONSIDERED

Each of the Funds has a different investment objective. However, there can
be no guarantee or assurance that any of the Funds' investment objectives can or
will be met. Each of the Funds is responsible and may be held liable for any
material misstatement, inaccuracy or incomplete disclosure in this Prospectus,
and the registration statement of which it is part, concerning any of the Funds.
Investments of the Funds may involve additional risk, as the Funds may invest in
securities of issuers of which the officers and directors, as a group, may own
beneficially more than five percent of the securities of that issuer.

LIMITED OPERATING HISTORY OF REAL ESTATE FUND. The Real Estate Fund began
operations on April 4, 1994, and has a limited operating history.

FOREIGN SECURITIES. Four of the Funds (the Special, Equity, Asset
Allocation and Income Funds) may invest up to 35% of their total assets in
foreign securities, including securities issued by any foreign government. Such
securities may or may not be listed on a recognized domestic or foreign
exchange. Moreover, investments in foreign securities may be subject to
special, extraordinary risks including, but not limited to, foreign taxes and
restrictions, illiquidity, and fluctuations in currency values. In addition,
the financial information available regarding issuers of foreign debt securities
is frequently not as accurate or complete as would be available for a comparable
domestic issuer. See "SPECIAL INVESTMENT RISKS" in the Statement of Additional
Information.

STRIPPED SECURITIES. The U.S. Government Money Market Fund may invest in
indirect obligations of the U.S. Government, often called "stripped securities."
Such indirect obligations are derivatives of direct U.S. Government obligations.
Stripped securities are issued at a discount to their face value and generally
experience greater price volatility than ordinary debt securities because of the
manner in which the principal and interest components of the underlying U.S.
Government obligation are separated. Privately-stripped securities are not
directly issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, and are therefore not Government Securities as defined in the
1940 Act.

LEVERAGE. The Special Fund may, from time to time, use borrowed money to
increase its portfolio positions. This practice is known as leverage, and it
can cause the net asset value of Fund shares to increase or decrease in value
more dramatically than would otherwise be the case.

RESTRICTED SECURITIES. The Real Estate Fund and The Oregon Bond Fund may
invest up to 5% of its total assets in "restricted securities" (i.e., securities
that would be required to be registered prior to distribution to the public),
excluding restricted securities eligible for resale to certain institutional
investors pursuant to Rule 144A of the Securities Act of 1933. However, no more
than 15% of the Fund's total assets may be invested in restricted securities,
including securities eligible for resale under Rule 144A. In addition, the Real
Estate Fund may invest up to 15% of its net assets in illiquid investments,
which includes "restricted securities,"

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<PAGE>
securities that are not readily marketable, repurchase agreements maturing in
more than seven days and privately issued stripped mortgage-backed securities
("SMBS") (based upon a determination by the Board that the SMBS is illiquid).
The Board of Directors may adopt guidelines and delegate to the Adviser the
daily function of determining and monitoring the liquidity of restricted
securities. The Board, however, will retain sufficient oversight and be
ultimately responsible for the determinations. In determining whether a
security, including a SMBS, is liquid, the Board shall consider whether the
security can be disposed of promptly in the ordinary course of business at a
value reasonably close to that used in the calculation of the net asset value
per share.

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

PUT, CALL OPTIONS, STOCK INDEX FUTURES. The Special, Real Estate, Equity
and Asset Allocation Funds may invest up to 10% of their total assets in put or
call options and widely traded stock index futures, or write call options on
securities the Fund owns or has the right to acquire, or purchase interest rate
futures. The Income Fund may also invest up to 10% of its total assets in put
or call options, or write call options on securities the Fund owns or has the
right to acquire, or purchase interest rate futures. The purchase of any of
these instruments can result in the entire loss of the investment in that
particular instrument or, in the case of writing covered options, can limit the
opportunity to earn a profit on the underlying security. The Funds cannot write
uncovered put or call options.

FIXED INCOME SECURITIES. The Special, Equity, Asset Allocation, Income,
U.S. Government Income, and U.S. Government Money Market Funds may invest up to
20% of their total assets in fixed income securities, including convertible
securities, that are either unrated or rated below the fourth highest category
by Moody's or S&P. Not more than 5% of a Fund's total assets may be invested in
fixed income securities that are unrated. Such high-yielding, lower-rated
securities present higher risk of untimely interest and principal payments,
default, and price volatility than higher-rated securities, and may present
problems as to liquidity and valuation. The value of such securities will vary
inversely with interest rates, and their value will tend to reflect short-term
economic and corporate developments to a greater extent than higher quality
fixed income securities.

INVESTMENT IN REAL ESTATE EQUITY SECURITIES. The Real Estate Fund does not
invest directly in real estate, but does invest primarily in Real Estate Equity
Securities. Therefore, an investment in the Fund may be subject to certain
risks associated with the direct ownership of real estate. These risks include,
among others: possible declines in the value of real estate; risks related to
general and local economic conditions; possible lack of availability of mortgage
funds; overbuilding; extended vacancies of properties; increases in competition;
property taxes

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<PAGE>
and operating expenses; changes in zoning laws; costs resulting from the clean-
up of, and liability to third parties for damages resulting from, environmental
problems; casualty or condemnation losses; uninsured damages from floods,
earthquakes or other natural disasters; limitations on and variations in rents;
and changes in interest rates.

INVESTMENT IN REITS. The Real Estate, Special, Equity and Asset Allocation
Funds may invest in real estate investment trusts. For the Special, Equity and
Asset Allocation Funds, such an investment would be limited by each Funds'
restriction prohibiting it from investing more than 25% of its total assets in
any one industry. The Real Estate Fund may invest without limitation in shares
of REITs. REITs are pooled investment vehicles that invest primarily in income
producing real estate or real estate related loans or interests. REITs are
generally classified as equity REITs, mortgage REITs or a combination of equity
and mortgage REITs. Equity REITs invest the majority of their assets directly
in real property and derive income primarily from the collection of rents.
Equity REITs can also realize capital gains by selling properties that have
appreciated in value. Mortgage REITs invest the majority of their assets in
real estate mortgages and derive income from the collection of interest
payments. For federal income tax purposes, REITs attempt to qualify for
beneficial tax treatment by distributing 95% of their taxable income. If a REIT
is unable to qualify for such beneficial tax treatment, it would be taxed as a
corporation and distributions to its shareholders would therefore be reduced.

Investing in REITs involves certain unique risks in addition to those risks
associated with investing in the real estate industry in general. Equity REITs
may be affected by changes in the value of the underlying property owned by the
REITs, while mortgage REITs may be affected by the quality of any credit
extended. All REITs are dependent upon management skills, are not diversified,
and are subject to the risks of financing projects. REITs are subject to heavy
cash flow dependency, default by borrowers, self-liquidation, and the
possibilities of failing to qualify for the exemption from tax for distributed
income under the Internal Revenue Code of 1986, as amended (the "Code") and
failing to maintain their exemptions from the 1940 Act.

MORTGAGE-BACKED SECURITIES. The Real Estate Fund may invest up to 25% of
its total assets in mortgage pass-through certificates and multiple-class pass-
through securities, such as REMIC pass-through certificates, CMOs and SMBS, and
other types of mortgage-backed securities that may be available in the future
(collectively, "Mortgage-Backed Securities").

Mortgage pass-through securities represent participation interests in pools
of residential mortgage loans. They are issued by U.S. Governmental or private
lenders and guaranteed by the U.S. Government or one of its agencies or
instrumentalities, including but not limited to the GNMA, the FNMA and the
Federal Home Loan Mortgage Corporation ("Freddie Mac"). They are also issued by
private lenders. GNMA certificates are guaranteed by the full faith and credit
of the United States Government for timely payment of principal and interest on
the certificates. FNMA certificates are guaranteed by the FNMA, a federally
chartered and privately-owned corporation, for full and timely payment of
principal and interest on the

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certificates. Freddie Mac certificates are guaranteed by Freddie Mac, a
corporate instrumentality of the United States Government, for timely payment of
interest and the ultimate collection of all principal of the related mortgage
loans.

CMOs and REMIC pass-through or participation certificates may be issued by,
among others, U.S. Government agencies and instrumentalities. CMOs and REMIC
certificates are issued in multiple classes, and the principal of and interest
on the mortgage assets may be allocated among the several classes of CMOs or
REMIC certificates in various ways. Each class of CMOs or REMIC certificates,
often referred to as a "tranche," is issued at a specific adjustable or fixed
interest rate and must be fully retired no later than its final distribution
date. Generally, interest is paid or accrues on all classes of CMOs or REMIC
certificates on a monthly basis.

Typically, CMOs are collateralized by GNMA, FNMA or Freddie Mac
certificates, but they also may be collateralized by other mortgage assets such
as whole loans or private mortgage pass-through securities. Debt service on
CMOs is provided from payments of principal and interest on collateral of
mortgaged assets and any reinvestment income thereon.

REMICs are CMOs that qualify for special tax treatment under the Code, and
they invest in certain mortgages primarily secured by interests in real property
and other permitted investments. Investors may purchase "regular" and
"residual" interest shares of beneficial interest in REMIC trusts, although the
Fund does not intend to invest in residual interests.

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

Investing in Mortgage-Backed Securities involves certain unique risks in
addition to those risks associated with investing in the real estate industry in
general. These risks include the failure of a counter-party to meet its
commitments, adverse interest rate changes and the effects of prepayment on
mortgage cash flows. In addition, investing in the lowest tranche of CMOs and
REMIC certificates involves risks similar to those associated with investing in
equity securities. When interest rates decline, the value of an investment in
fixed rate obligations can be expected to rise. Conversely, when interest rates
rise, the value of an investment in fixed rate obligations can be expected to
decline. In contrast, as interest rates on adjustable rate mortgage loans are
reset periodically, yields on investments in such loans will gradually align
themselves to reflect changes in market interest rates, causing the value of
such investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.

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

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

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

When the Special Fund makes a short sale, it must leave the proceeds from
the short sale with the broker, and it must deposit with the broker a certain
amount of cash or government securities to collateralize its obligation to
replace the borrowed securities which have been sold. In addition, the Fund
must put in a segregated account (with the Fund's custodian) an amount of cash
or U.S. Government securities equal to the difference between the market value
of the securities sold short at the time they were sold short and any cash or
government securities deposited as collateral with the broker in connection with
the short sale (not including the proceeds from the short sale). Furthermore,
until the Fund replaces the borrowed security, it must daily maintain the
segregated account at a level so that (1) the amount deposited in it plus the
amount deposited with the broker (not including the proceeds from the short
sale) will equal the current market value of the securities sold short, (2) the
amount deposited in it plus the amount deposited with the broker (not including
the proceeds from the short sale) will not be less than the market value of the
securities at the time they were sold short. As a result of these requirements,
the Special Fund will not gain any leverage merely by selling short, except to
the extent that it earns interest on the immobilized cash or government
securities while also being subject to the possibility of gain or loss from the
securities sold short. The amount of the Fund's net assets that will at any
time be in the type of deposits described above (that is, collateral deposits or
segregated accounts) will not exceed

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25%. These deposits do not have the effect of limiting the amount of money that
the Fund may lose on a short sale, as the Fund's possible losses may exceed the
total amount of deposits.

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

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

MUNICIPAL SECURITIES. Because the Oregon Bond Fund intends to focus its
investments in Oregon municipal securities, the Fund and the value of its shares
will be significantly affected by any economic, political, or regulatory
developments that affect the ability of Oregon issuers to pay interest or repay
principal on their obligations. Historically, the Oregon economy has been
highly dependent on the recession-sensitive forest products industry. Recently
proposed federal administrative action that would impose restrictions on the
level of timber harvests on federal and private lands, if adopted, and the
application of the Endangered Species Act could have a general negative economic
effect, particularly in those counties that receive significant direct revenues
based on timber harvests. These proposed actions, and the application of the
Endangered Species Act, are currently the subject of litigation, and the outcome
is unknown.

Certain municipal securities purchased by the Oregon Bond Fund from Oregon
issuers may rely in whole or in part on ad valorem real property taxes as a
source of revenue for the payment of principal and interest. There are
constitutional and statutory limitations on the issuance of securities payable
from tax revenues. In 1990, a voter initiative in Oregon was passed which
restricts the ability of taxing entities to increase real property taxes by
placing a limit on the property tax rate. This initiative did, however, exempt
from the property tax rate limit assessments to pay bonded indebtedness.
However, implementation of this limit may adversely impact the property tax
revenues of certain issuers of Oregon municipal securities and might have an
adverse effect on the market value and marketability of some of the municipal
securities (other than general obligation bonds) held in the Fund's portfolio,
the Fund's net asset value per share, and the interest income realized by the
Fund.

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

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

With the exception of general obligation securities issued by the state of
Oregon, most issues of municipal securities in Oregon are relatively small in
size. Due to the small size of some issues, only a limited trading market in
the securities develops following their issuance. When there is only a limited
trading market for a particular security, a small change in the supply of or
demand for that security can result in a relatively large change in the market
price of the security. If the Oregon Bond Fund is required to sell portfolio
securities for which there is only a limited trading market, the market value of
such securities (and of securities which are part of the same issue which are
retained in the Fund's portfolio) could be adversely affected, which could
result in a decrease in the net asset value of the Fund's shares. In order to
enhance the liquidity of the Fund's portfolio, a portion of its assets will be
maintained in general obligation securities of the state of Oregon and in other
issues for which an active trading market is expected to be maintained. The
Fund expects that approximately 25% of its net assets will normally be invested
in general obligation securities of the state of Oregon. A portion of the
Oregon Bond Fund's assets may also be invested, on a temporary basis, in assets
other than municipal securities in order to increase the liquidity of the Fund's
portfolio. However, there is no assurance that these strategies will completely
eliminate the risks associated with investing in municipal securities for which
only a limited trading market exists.

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<PAGE>
MANAGEMENT OF THE FUNDS

The Funds are managed by their Boards of Directors, and all powers and
authorities are exercised by or under the direction of the Boards of Directors.

The Adviser is the investment adviser to the funds under investment
advisory agreements originally dated September 27, 1988 for the Special, Equity
and Oregon Bond Funds, August 7, 1988 for the Asset Allocation, Income, U.S.
Government Income and U.S. Government Money Market Funds and March 4, 1994 for
the Real Estate Fund. The Adviser was incorporated in 1980 and has been engaged
in the business of providing investment advice since July 1, 1980. The address
of the Adviser is 121 S.W. Morrison, Suite 1415, Portland, Oregon 97204, mailing
address: P.O. Box 6559, Portland, Oregon 97228-6559. The Distributor of the
Funds, is affiliated with the Adviser.

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

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

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

SPECIAL FUND
REAL ESTATE FUND
EQUITY FUND
ASSET ALLOCATION FUND

<TABLE>
<CAPTION>
Net Asset Value Annual Rate
--------------- -----------
<S> <C>
First $100 million 1.00%
Next $400 million 0.85%
Amounts over $500 million 0.60%

INCOME FUND

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

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<PAGE>
OREGON BOND FUND
U.S. GOVERNMENT INCOME FUND
U.S. GOVERNMENT MONEY MARKET FUND

First $500 million 0.50%
Next $500 million 0.45%
Amounts over $1 billion 0.40%
</TABLE>
Fees paid by the Special, Real Estate, Equity, Asset Allocation and Income Funds
are higher than those paid by most other mutual funds. The Adviser has
undertaken to reimburse a Fund or to waive all or a portion of its management
fee to the extent that the total operating expenses exceed a stated percentage
per annum of a Fund's net asset value in effect with respect to each Fund. This
undertaking may be canceled upon 30 days written notice. Additionally, many
states require that mutual funds meet certain expense limitations. The Funds,
their Adviser, Distributor, and Transfer Agent intend to qualify, meet, or
conform to any individual state requirements while the Funds are registered in
that state.

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

Management of the Special Fund portfolio is handled on a day-to-day basis
by a team consisting of James E. Crabbe and John P. Kinnucan. Mr. Crabbe is
coordinator of the team. Mr. Crabbe has served in various management positions
with the Adviser since 1980. Mr. Crabbe has managed the Special Fund's
portfolio since January 1, 1990. Prior to joining the Adviser, Mr. Kinnucan was
a software analyst for Texas Instruments, Inc. Mr. Kinnucan began assisting in
the management of the Special Fund portfolio in April, 1995.

Richard S. Huson is primarily responsible for the day-to-day management of
the Real Estate Fund's portfolio. Mr. Huson has served in various management
positions with the Adviser since 1980 and has managed the portfolio since the
Fund's inception.

The Oregon Bond, Income, U.S. Government Income and U.S. Government Money
Market Funds are managed on a day to day basis by a team consisting of Mr. Huson
and Garth R. Nesbit. Mr. Huson is the coordinator of the team. Mr. Nesbit
joined the Adviser April, 1995. Between February, 1993 and March, 1995 Mr.
Nesbit worked for Capital Consultants, Inc. as a portfolio manager of its fixed
income portfolio. Prior to joining Capital Consultants, Inc., Mr. Nesbit was a
Vice President and the fixed income portfolio manager at Lincoln National
Investment Management.

The Equity and Asset Allocation Fund portfolios are managed on a day-to-day
basis by a team consisting of John E. Maack, Jr. and Mr. Huson. Mr. Huson is
the coordinator of the

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<PAGE>
team. Mr. Maack has been employed as a portfolio manager and securities analyst
by the Adviser since 1988.

CONTROL PERSONS

As of November 22, 1994, Enele Co. owned 70.48% of the outstanding shares
of the Real Estate Fund and 32.43% of the outstanding shares of the U.S.
Government Money Market Fund. No person owned, directly or indirectly, 25% or
more of the voting securities of any other Fund. Enele Co. is an entity that
only holds shares as nominee for independent investors. These independent
investors, who are the beneficial owners of the shares owned by Enele Co.,
exercise complete voting control over the shares. The Funds have no record
concerning the actual share ownership of these beneficial owners.

NET ASSET VALUE

The net asset value per share of each Fund is determined as of 4 p.m.,
Eastern Time, on each day during which securities are traded on the New York
Stock Exchange (the "NYSE"). The net asset value per share is computed by
dividing the value of all assets of the Fund, less its liabilities, by the
number of shares outstanding.

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

The value of securities listed or traded on a registered securities
exchange are valued at the last sale price on the day of the computation. This
includes over-the-counter securities for which last sale information is
available. Where last sale information is not available, the best bid price
will be used. Securities and assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or under the
direction of the Board of Directors of the Fund. Such valuations and procedures
will be reviewed periodically by the Board of Directors. The Funds may retain
the services of an outside pricing service to value their portfolio securities.

WHEN TRANSACTIONS ARE RECORDED IN YOUR ACCOUNT

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

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<PAGE>
If your purchase, redemption or exchange is received in good order by the
Transfer Agent prior to 4 p.m., Eastern Time, or the close of business on the
NYSE, whichever is earlier, your trade date is the date of receipt. If your
purchase, redemption or exchange is received in good order after 4 p.m., Eastern
Time, or the close of business on the NYSE, whichever is earlier, your trade
date is the next business day.

HOW TO INVEST IN THE FUNDS

All of the Funds (with the exception of the Oregon Bond Fund) are designed
so that shareholders have the option of making fund investments within or
outside of tax-advantaged retirement accounts. The Oregon Bond Fund is only
available for investment outside of a tax-deferred retirement plan.

Crabbe Huson Securities, Inc. (the "Distributor"), Portland, Oregon, an
affiliate of the Adviser and a corporation organized under the laws of Oregon,
is the distributor of the Funds' shares.

Shares of the Funds are offered continuously with no sales load at their
next determined net asset value after receipt of an order with payment by the
Transfer Agent. The Funds' shares are offered by the Distributor directly to
the public or through broker-dealers who enter into sales agreements with the
Distributor. Each Fund reserves the right to reject any order to purchase
shares.

MINIMUM INVESTMENT: The minimum initial investment in any Fund is $2,000.
Individuals who establish an Individual Retirement Account ("IRA") using an IRA
plan available through the Transfer Agent must make a minimum initial investment
of $2,000. Additional investments in any Fund must be in amounts of at least
$500, unless the investor is enrolled in an automatic investment program such as
the "Invest-O-Matic" program described below. Additional investments should
always be identified by the shareholder's name, Fund, and account number. For
investors enrolled in "Invest-O-Matic," additional investments of as little as
$100 can be accepted by the Funds. The Adviser, in its sole discretion, may
waive any minimum purchase requirements. The Funds reserve the right to vary
the initial and subsequent investment minimums at any time. The Funds will
provide shareholders with written notice of any such change.

INVESTING DIRECTLY BY CHECK: Investors who desire to purchase shares
directly from the Funds by check should follow the instructions indicated below.

- INITIAL INVESTMENT: Complete the Account Application. Be sure to
indicate the Fund(s) in which you want to invest and the dollar amount
you want to invest by Fund. As noted on the Application, please make
a separate check

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<PAGE>
payable to each Fund. Mail your check together with your completed
account application to the following address:

The Crabbe Huson Family of Funds
P.O. Box 9135
Boston, MA 02205-8587

Should you wish to overnight mail your investment, please use the following
address:

The Crabbe Huson Family of Funds
Two Heritage Drive
Quincy, MA 02171

- SUBSEQUENT INVESTMENTS: Detach and complete the stub attached to your
statement. Make a separate check payable to each Fund, write your
shareholder account number on your check, and include your investment
stub(s) or a note designating how the amount of your check is to be
invested by Fund and indicating your account number.

In order to prevent lengthy processing delays caused by the clearing of
foreign checks, the Funds will only accept a foreign check which has been drawn
in U.S. dollars and has been issued by a foreign bank with a U.S. correspondent
bank. The name of the U.S. correspondent bank must be printed on the face of
the check. A charge may be imposed if any check used for investment does not
clear.

- INVESTING BY WIRE: The Transfer Agent will accept wire orders for
purchase of the Funds' shares prior to 4 p.m., New York time. A wire
purchase will be made at the offering price based on the next
calculation of net asset value of the shares after the purchase order
has been received by the dealer. Any dealer submitting an order is
obligated to do so promptly. The following wire instructions should
be followed and include your investment account number and your
investor shareholder registration.

State Street Bank & Trust Co.
225 Franklin Street
Boston, MA 02110
ABA No. 011 0000 28
FOR CREDIT: Crabbe Huson
DDA No. 99051039

Since the U.S. Government Money Market Fund and the U.S. Government Income
Fund invest in obligations normally requiring payment in Federal Funds, purchase
orders will not be processed unless received in Federal Funds or until converted
by or paid to the Fund in Federal Funds. Shares in these two funds are
purchased on the day Federal Funds are received by the

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<PAGE>
Funds at the next determined net asset value. Checks or negotiable U.S. drafts
may require up to three business days to convert to Federal Funds. Checks drawn
on banks that are not members of the Federal Reserve system may take up to four
business days to convert into Federal Funds. Prior to conversion into Federal
Funds, funds will not be invested. Information about Federal Funds is available
from any bank that is a member of the Federal Reserve System.

INVESTING THROUGH AN AUTHORIZED BROKER-DEALER: Fund shares are offered
without a front end sales load through selected broker-dealers who have entered
into sales agreements with the Distributor. Investors should contact an
authorized broker-dealer directly for appropriate purchase instructions, as well
as information pertaining to accounts and any service or transaction fees that
may be charged by them. It is the responsibility of dealers to transmit such
orders promptly.

CERTIFICATES: The issuance of shares is recorded on the books of the Funds
in full and fractional shares carried to the third decimal place. To avoid
additional operating costs, and for investor convenience, share certificates are
not issued.

SALES LOAD AND 12B-1 FEES There is no front end sales load charged with
respect to any of the Funds. However, although there are no sales charges
levied directly by the Funds, approved broker-dealers or other intermediaries,
including financial institutions, may charge the investor a transaction-based
fee or other fees at either the time of purchase or the time of redemption.
Such charges may vary among broker-dealers but in all cases will be retained by
the broker-dealer and not remitted to the Funds, the Distributor, or the
Adviser.

Each Fund has adopted a distribution plan pursuant to rule 12b-1 under the
1940 Act (the "Plans"). Under the Plans, the Distributor is entitled to
reimbursement for its actual expenses incurred in the distribution and promotion
of the Funds' shares. These expenses include, but are not limited to, expenses
incurred in the printing of prospectuses and statements of additional
information for persons other than then-current shareholders, expenses related
to preparation and printing of sales literature, and other distribution-related
expenses. Total reimbursement to the Distributor pursuant to the Plans is
computed separately for each Fund, and may not exceed .25% per annum of the
average daily net assets of each respective Fund. Distribution expenses that
are not allocable to a specific Fund are allocated to a Fund based on the
percentage of new accounts established to purchase shares in that Fund during
the fiscal year.

A portion of the expenses reimbursed and paid to the Distributor will be
paid by the Distributor on a quarterly basis to broker-dealers that have entered
into sales agreements with the Distributor, and may be paid to investment
executives of the Distributor.

In the event expenses for a Fund in any one year exceed the maximum
reimbursable under the Plan, such expenses may not be carried forward to the
following year. The Funds

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<PAGE>
cannot be charged for any financing charges on any unreimbursed expenses payable
pursuant to the Plans.

RETIREMENT AND QUALIFIED PLANS Investors may invest in any of the Funds
(except the Oregon Bond Fund) through the Crabbe Huson IRA Pension. Investments
in the Funds may also be made in connection with established retirement plans.
For further information on these plans, call the Transfer Agent at (800) 541-
9732.

In addition, an authorized broker-dealer may offer various tax deferred
retirement plans, including 401(k) plans or "tax sheltered accounts" under
section 403(b)(7) of the Internal Revenue Code. Investments in the Funds may
also be made in connection with established retirement plans. For further
information regarding these plans, contact your broker-dealer. If you are
considering adopting such a plan, you should consult with your own legal or tax
adviser, with respect to the establishment and maintenance of such a plan.

HOW TO SELL YOUR SHARES

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

Payment for redemptions of shares of the U.S. Government Money Market Fund
will be made on the day after your trade date. See "WHEN TRANSACTIONS ARE
RECORDED IN YOUR ACCOUNT." Shares of the U.S. Government Money Market Fund may
be redeemed in response to a redemption request, as set forth above, or by using
share drafts. Share drafts will be provided through the U.S. Government Money
Market Fund's bank, will be subject to the bank's rules and regulations, and may
be negotiated by shareholders of the U.S. Government Money Market Fund much like
a check is negotiated. However, share drafts are not "checks," and the bank's
intermediary status does not create an "account" between the shareholder and the
bank. Share drafts will be honored only if made payable for amounts of $500.00
or more.

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

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<PAGE>
The market value of the securities in the Funds' portfolios is subject to
daily fluctuations, and the net asset value of the Funds' shares change
accordingly. The U.S. Government Money Market Fund will attempt to maintain its
net asset value at a constant one dollar per share. However, there is no
assurance that it will be able to do so.

REDEMPTION BY MAIL: To be in proper form, written requests for redemption
must 1) state the total dollar value of shares or the total number of shares to
be redeemed, 2) provide the investor's account number, and 3) be signed by each
registered owner exactly as the shares are registered. If the proceeds of the
redemption (a) exceed $5,000, (b) result from a 100% redemption of the account,
(c) are to be paid to a person other than the record owner, (d) are to be sent
to an address other than the address on the Transfer Agent's records, or (e) are
to be paid to a corporation, partnership, trust or fiduciary, the signature(s)
on the redemption request and on the certificates, if any, or stock power must
be guaranteed by an "eligible guarantor institution." An "eligible guarantor
institution" includes any bank, broker, dealer or credit union that is a
participant in the STAMP and Medallion signature program. The Transfer Agent
reserves the right to request additional information from, and make reasonable
inquiries of, any eligible guarantor institution. The Transfer Agent may
require additional supporting documents for redemptions made by corporations,
executors, administrators, trustees, or guardians. A redemption request will
not be deemed to have been submitted until the Transfer Agent receives all
required documents in proper form. All documents and correspondence concerning
redemptions should be sent to the Funds' Transfer Agent at the following
address:

The Crabbe Huson Family of Funds
P.O. Box 8413
Boston, MA 02266-8413

Redemptions may also be requested by telephone. See "Redemption or Exchange by
Telephone." Depending on the purchase price or other tax basis of the shares
redeemed, the investor may realize a capital gain or loss on each redemption.

Should you wish to receive instructions on how to obtain your funds by
wire, please call the Transfer Agent at (800) 541-9732.

INVOLUNTARY REDEMPTION: In order to reduce expenses of the Funds, a Fund
may redeem all of the shares of any shareholder, other than a shareholder which
is an IRA or other tax-deferred retirement plan, in any Fund account which has a
net asset value of less than $2,000 due to a redemption. The relevant Fund will
give such shareholders 60 days' prior written notice in which to purchase
sufficient additional shares to avoid such redemption.

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

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REDEMPTIONS (BY SECURITIES DEALERS): The Funds accept redemption orders by
telephone from securities dealers who have entered into sales agreements with
the Distributor. Such redemption orders should be placed by the dealer with the
Transfer Agent. Shares will be redeemed at the net asset value determined on a
shareholder's trade date. Except with respect to shares of the U.S. Government
Money Market Fund, the seven-day period within which the proceeds of the
redemption will be sent to the shareholder or shareholder's dealer will begin on
the day of the net asset value calculation, unless the Transfer Agent has not
received a written request in proper form from the dealer by the seventh day.
In that event, the proceeds of the redemption will be sent to the shareholder or
the shareholder's dealer immediately upon the Transfer Agent's receipt of the
written request in proper form. Payment for redemptions of shares of the U.S.
Government Money Market Fund will be made on the day following the trade date.
Dealers are responsible for the prompt transmittal of redemption orders to the
Transfer Agent. Dealers not affiliated with the Funds may charge a fee for
handling redemptions.

HOW TO EXCHANGE YOUR SHARES

The proceeds from the redemption of shares of any of the Funds may be used
to purchase shares of any of the other Funds on the shareholder's trade date.
See "WHEN TRANSACTIONS ARE RECORDED IN YOUR ACCOUNT."

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

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

In order to protect shareholders from investors that may abuse the exchange
privilege to the detriment of the Funds and their shareholders, each Fund
reserves the right to terminate or modify the exchange privilege applicable to
all shareholders at any time upon 60 days' notice. This exchange privilege may
be temporarily or permanently suspended with respect to any shareholder that
engages in more than ten exchanges in any 12-month period.

Any written exchange request, in proper form, may be mailed to the Transfer
Agent at the following address:

The Crabbe Huson Family of Funds
P.O. Box 8413
Boston, MA 02266-8413

Should you wish to overnight mail your redemption request, please use the
following address:

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<PAGE>
The Crabbe Huson Family of Funds
Two Heritage Drive
Quincy, MA 02171

REDEMPTION OR EXCHANGE BY TELEPHONE

All or part of an investor's account may be redeemed or exchanged for
shares in another Fund by telephone if the investor has completed and placed on
file with the Transfer Agent the appropriate authorization.

Proceeds from such redemptions may be sent directly to the designated bank
or brokerage account specified on the application. Exchanges from one Fund to
another Fund can be made only if the shareholder registrations are identical.

The Funds and the Transfer Agent will employ reasonable procedures to
confirm that instructions communicated by telephone are properly authorized.
The failure of any of the Funds to do so may result in the Fund being liable for
losses due to unauthorized or fraudulent telephone transactions. However, the
Funds and the Transfer Agent will not be liable for executing telephonic
instructions that are deemed to be authorized after following reasonable
procedures. These procedures include recording telephonic instructions, mailing
to the shareholder a written confirmation of the transaction, performing a
personal identity test and restricting the mailing of redemptions to the
shareholder's address of record or the wiring of redemptions to financial
institutions previously authorized in writing by the shareholder.

Telephone redemptions or exchanges may be made by calling the Transfer
Agent at (800) 541-9732.

Exchanges or redemptions by telephone may become difficult or impossible to
effect during periods of severe economic or market changes. If a shareholder is
unable to reach the Funds by telephone, redemptions or exchanges may be effected
either through the broker-dealer from which the shares were purchased, or by
sending a written redemption or exchange request in proper form by mail directly
to the Funds' Transfer Agent at the following address:

The Crabbe Huson Family of Mutual Funds
P.O. Box 8413
Boston, MA 02266-8413

Should you wish to overnight mail your redemption request, please use the
following address:

The Crabbe Huson Family of Mutual Funds
Two Heritage Drive
Quincy, MA 02171

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<PAGE>
ALLOCATION OF BROKERAGE

The Adviser is responsible for the overall management of the portfolio of
each Fund and determines which brokers will execute the purchases and sales of
the portfolio securities. The Adviser's foremost responsibility is to place
orders so as to achieve prompt execution at the most favorable price. However,
the Adviser may place orders with brokers that provide special brokerage and
research services or with brokers that promote the sale of the Funds' shares.
The Adviser is authorized, in recognition of the value of brokerage and research
services provided, to pay commissions to a broker in excess of the amounts which
another broker might have charged for effecting the same transaction.

A broker affiliated with the Adviser may be employed to execute brokerage
transactions on behalf of the Funds, as long as commissions paid are reasonable
and fair compared to the commissions received by other brokers in connection
with comparable transactions involving similar securities being purchased or
sold on a securities exchange during a comparable period of time. Additional
information about portfolio brokerage is included in the Statement of Additional
Information.

SPECIAL INVESTOR SERVICES

SHAREHOLDER INQUIRIES: Inquiries regarding specific information that
cannot be handled directly through an authorized broker-dealer of the Fund can
be directed to the Transfer Agent at The Crabbe Huson Family of Funds, P.O. Box
8413, Boston, MA 02266-8413. The Transfer Agent's toll-free telephone number is
(800) 541-9732.

APPLICATIONS: Applications for all of the Funds and the special programs
listed below are available through authorized broker-dealers or through the
Funds' Transfer Agent at the address and phone number listed above.

THE CRABBE HUSON IRA (INDIVIDUAL RETIREMENT ACCOUNT): Certain individuals
who earn income may establish an Individual Retirement Account using an IRA plan
adopted by the Fund. These individuals may invest up to the lesser of $2,000 or
100% of the individual's annual earnings in shares of the Funds. The plan is
also available for a Spousal IRA, transfer of an existing IRA, and for certain
rollover contributions from other qualified plans.

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

GROUP INVESTMENT PLAN: Group Investment Plans are available for the
purchase of Fund shares by employee or other groups, using systematic payroll
deductions or other

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<PAGE>
systematic payment arrangements. The Funds may, depending upon the size of the
plan, waive their minimum, initial and additional purchase requirements.

SYSTEMATIC WITHDRAWAL PLAN

A shareholder owning shares of any Fund with a total value of not less than
$5,000 may participate in a systematic withdrawal plan providing for fixed
payments to such shareholder of $100 or more at regular monthly intervals (the
"Systematic Withdrawal Plan"). The shareholder may realize a capital gain or
loss on each fixed-amount payment. Additional information concerning the
Systematic Withdrawal Plan is set forth in the Statement of Additional
Information. Shareholders desiring to participate in the Systematic Withdrawal
Plan may do so by completing and submitting the appropriate application to the
Transfer Agent. The Systematic Withdrawal Plan is voluntary and may be
terminated at any time by the shareholder.

CUSTODIAN, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT

First Interstate Bank of Oregon, 1300 S.W. Fifth Avenue, Portland, Oregon
97201, acts as Custodian of the cash and securities of each of the Funds.

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

LENDING OF PORTFOLIO SECURITIES

Although the Funds have no present intention of doing so, they may loan
portfolio securities to broker-dealers or other institutional investors if at
least 100% cash (or cash equivalent) collateral is pledged and maintained by the
borrower. The Funds believe that the cash collateral would minimize the risk of
lending their portfolio securities. Such loans of portfolio securities may not
be made if the aggregate of such loans would exceed 10% of the value of a Fund's
total assets. If the borrower defaults, there may be delays in recovery of
loaned securities or even a loss of the securities loaned, in which case the
Funds would pursue the cash (or cash equivalent) collateral. While there is
some risk in loaning portfolio securities, loans will be made only to firms or
broker-dealers deemed by the Adviser, in consultation with the Adviser, to be of
good standing and will not be made unless, in the judgment of the Adviser the
consideration to be earned from such loans would justify the risk. For
additional disclosure, see "INVESTMENT RESTRICTIONS - LOANS OF PORTFOLIO
SECURITIES" in the Statement of Additional Information.

-48-
<PAGE>
PORTFOLIO TURNOVER

The Funds generally do not trade in securities with the goal of obtaining
short-term profits, but when circumstances warrant, securities will be sold
without regard to the length of time the security has been held.

The Funds anticipate that, except in periods of unusual market conditions,
their annual portfolio turnover (the lesser of purchase or sales of portfolio
securities for the year divided by the monthly average of the value of the
portfolio securities owned by the Funds during the year) will generally range
between 20 and 150%, although Funds with smaller portfolios may have portfolio
turnover in excess of this range. A higher portfolio turnover rate may involve
correspondingly greater transaction costs, which would be borne directly by the
Funds, as well as additional realized gains and/or losses to shareholders.

YIELD

The SEC has imposed a number of rules and policies regarding the
calculation of yield. The Funds intend to continually comply with these rules
and policies in their quotation of yield. For an explanation of the method of
yield calculation, see "Yield and Performance" in the Statement of Additional
Information.

TAXES

The Funds individually intend to qualify each year as "regulated
investment companies" under the Internal Revenue Code so they will not pay
federal taxes on either income or capital gains distributed to shareholders,
although there can be no assurance that they will so qualify.

The Funds would be subject to a 4% excise tax on a portion of their
undistributed income if they fail to meet certain annual distribution
requirements. The Funds intend to make distributions in a timely manner and,
accordingly, do not expect to be subject to the excise tax.

For federal income tax purposes, all Fund distributions (except
distributions from the Oregon Bond Fund) are reportable as adjusted gross income
whether a shareholder elects to take them in cash or reinvest them in additional
shares of the Funds.

Distributions representing net investment income (including short-term
capital gains) are taxable as ordinary income. Distributions derived from net
long-term capital gains that are properly designated by the Funds as such will
be taxable to shareholders as long-term capital gains, whether received in cash
or reinvested in additional shares, regardless of how long the shareholder has
held the shares.

Under the Revenue Reconciliation Act of 1993 (the "Act"), potentially
favorable income tax treatment on distributions representing long-term capital
gains has been restored, effective

-49-
<PAGE>
for tax years beginning after 1992. Under the Act, ordinary income may be taxed
at marginal rates significantly (up to 11.6%) higher than the marginal rate at
which long-term capital gains are taxed. Accordingly, distributions
representing net long-term capital gains may be subject to a reduced rate of tax
to shareholders.

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

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

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

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

-50-
<PAGE>
THE OREGON MUNICIPAL BOND FUND, INC.

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

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

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

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

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

PERFORMANCE COMPARISONS

The Funds may compare their performance to other mutual funds with similar
investment objectives and to the mutual fund industry as a whole, as quoted by
ranking services and publications of general interest. For example, these
services or publications may include Lipper Analytical Services, Inc.,
Schabacker's Total Investment Service, CDA Technologies, SEI, Frank Russell
Trust, BARRON'S BUSINESS WEEK, CHANGING TIMES, THE FINANCIAL TIMES, FINANCIAL
WORLD, FORBES, INVESTOR'S DAILY, MONEY, MORNINGSTAR MUTUAL FUNDS, PERSONAL
INVESTOR, THE ECONOMIST, THE WALL STREET JOURNAL, INDIVIDUAL INVESTOR, LOUIS
RUKEYSER'S WALL STREET, FINANCIAL WORLD, and USA TODAY. These ranking services
and publications rank the performance of the Funds against all other funds over
specified periods and against funds in specified categories.

-51-
<PAGE>
The Funds may also either include presentations of, or may compare their
performance or the performance of the Funds' Adviser to, a recognized stock or
bond index, including the Standard & Poor's 500, Standard & Poor's Mid-Cap,
Value Line, Dow Jones, and NASDAQ stock indices and the Shearson Lehman and
Salomon bond indices. The comparative material found in advertisements, sales
literature, or in reports to shareholders may contain past or present
performance ratings. This is not to be considered representative or indicative
of future results or future performance.

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

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

The yields of each of the Funds are not fixed and will fluctuate. The
principal value of an investment in each Fund (except, under normal
circumstances, the U.S. Government Money Market Fund) at redemption may be more
or less than its original cost. In addition, investments in the Funds are not
insured and an investor's yield is not guaranteed. Although the yields of bank
money market deposit accounts and NOW accounts will fluctuate, principal will
not fluctuate and is insured by the Federal Deposit Insurance Corporation up to
$100,000. Bank passbook savings accounts normally offer a fixed rate of
interest, and their principal and interest are also guaranteed and insured.
Bank certificates of deposit offer fixed or variable rates for a set term.
Principal and fixed rates are guaranteed and insured. There is no fluctuation
in principal value. Withdrawal of these deposits prior to maturity will
normally be subject to a penalty.

The Fund's investment results will vary from time to time depending on
market conditions, the composition of the Fund's portfolio, and operating
expenses of the Fund. These factors and possible differences in the methods
used in calculating investment results should

-52-
<PAGE>
be considered when comparing performance information regarding the Fund to
information published for other investment companies and other investment
vehicles. You should also consider return quotations relative to changes in the
value of the Fund's shares and the risks associated with the Fund's investment
objectives and policies. At any time in the future, return quotations may be
higher or lower than past return quotations, and there may be no assurance that
any historical return-quotation will continue in the future.

For more information about the calculation methods used to compute the
Fund's investment results, see "YIELD AND PERFORMANCE" in the Statement of
Additional Information.

CAPITAL STOCK

Each Fund has authorized and issued a single class of $.001 per share par
value voting common stock. Shareholders of each Fund are entitled to one vote
for each full share held and fractional votes for fractional shares held for
that particular Fund. Shareholders of each Fund vote on the election of
directors and any other matter submitted to a shareholder vote. Shares issued
are fully paid and nonassessable and have no preemptive or conversion rights.
Each share is entitled to participate equally in dividends and distributions
declared by that Fund and in the net assets of that Fund upon liquidation or
dissolution after satisfaction of outstanding liabilities. Certain rights of
shareholders may be modified, pursuant to the 1940 Act, by a vote of the
shareholders, including a vote of the lesser of (i) two-thirds of any quorum at
a shareholders' meeting of more than 50% of the shares issued and outstanding or
(ii) a majority of the shares issued and outstanding (including any change in a
Fund's fundamental policies and investment restrictions). In general, Oregon
law permits modifications to the rights of shareholders by amendment to the
Articles of Incorporation of the Fund, which requires a vote of the majority of
the shares present at any meeting at which a quorum (50% plus 1 of the
outstanding shares) is present.

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

TABLE OF CONTENTS
Page
----
PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
EXPENSE DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
CONDENSED FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . 6
PERFORMANCE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . . . . . . . . . 12
FUNDAMENTAL POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SPECIAL RISK FACTORS TO BE CONSIDERED. . . . . . . . . . . . . . . . . . . . 30
MANAGEMENT OF THE FUNDS. . . . . . . . . . . . . . . . . . . . . . . . . . . 37
CONTROL PERSONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
NET ASSET VALUE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
WHEN TRANSACTIONS ARE RECORDED
IN YOUR ACCOUNT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
HOW TO INVEST IN THE FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . 40
HOW TO SELL YOUR SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . 43
HOW TO EXCHANGE YOUR SHARES. . . . . . . . . . . . . . . . . . . . . . . . . 45
REDEMPTION OR EXCHANGE BY TELEPHONE. . . . . . . . . . . . . . . . . . . . . 46
ALLOCATION OF BROKERAGE. . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SPECIAL INVESTOR SERVICES. . . . . . . . . . . . . . . . . . . . . . . . . . 47
SYSTEMATIC WITHDRAWAL PLAN . . . . . . . . . . . . . . . . . . . . . . . . . 48
CUSTODIAN, TRANSFER AGENT AND
DIVIDEND-DISBURSING AGENT. . . . . . . . . . . . . . . . . . . . . . . . . 48
LENDING OF PORTFOLIO SECURITIES. . . . . . . . . . . . . . . . . . . . . . . 48
PORTFOLIO TURNOVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
YIELD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
PERFORMANCE COMPARISONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 51
CAPITAL STOCK. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

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

THE CRABBE HUSON
FAMILY OF
MUTUAL FUNDS

THE CRABBE HUSON SPECIAL FUND, INC.

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

THE CRABBE HUSON REAL ESTATE INVESTMENT FUND, INC.

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

THE CRABBE HUSON EQUITY FUND, INC.

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

THE CRABBE HUSON ASSET ALLOCATION FUND, INC.

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

THE OREGON MUNICIPAL BOND FUND, INC.

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

THE CRABBE HUSON INCOME FUND, INC.

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

THE CRABBE HUSON U.S. GOVERNMENT INCOME FUND, INC.

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

THE CRABBE HUSON U.S. GOVERNMENT MONEY MARKET FUND, INC.

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

PROSPECTUS
APRIL 26, 1995

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
APPENDIX A

BOND RATING AGENCIES
- --------------------

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

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

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

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

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

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

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

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

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

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

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

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

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

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

A: Bonds rated A have a strong capacity to pay interest and repay
principal, although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
<PAGE>
BBB: Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in higher rated categories.

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

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

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

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

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

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

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

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

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

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

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

<PAGE>
---------------------------------------
THE CRABBE HUSON FAMILY OF MUTUAL FUNDS
---------------------------------------

The Crabbe Huson Special Fund, Inc.
The Crabbe Huson Real Estate Investment Fund, Inc.
The Crabbe Huson Equity Fund, Inc.
The Crabbe Huson Asset Allocation Fund, Inc.
The Oregon Municipal Bond Fund, Inc.
The Crabbe Huson Income Fund, Inc.
The Crabbe Huson U.S. Government Income Fund, Inc.
The Crabbe Huson U.S. Government Money Market Fund, Inc.

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

April 26, 1995

This Statement of Additional Information of The Crabbe Huson Family of
Mutual Funds (the "Funds") is not a prospectus but should be read in
conjunction with the Prospectus of the Funds, dated the same date as
this Statement of Additional Information, which has been filed with
the Securities and Exchange Commission (the "SEC") and which is
available without charge upon request by calling (800) 541-9732 or
writing the Funds at The Crabbe Huson Family of Mutual Funds, P.O. Box
8413, Boston, MA 02266-8413. This Statement of Additional Information
has been incorporated by reference into the Prospectus.
<PAGE>
-----------------
TABLE OF CONTENTS
-----------------

Page
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

-- Directors and Officers of the Funds. . . . . . . . . . . . . . . . . . 4

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

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

SYSTEMATIC WITHDRAWAL PLAN . . . . . . . . . . . . . . . . . . . . . . . . . 13

-- Distribution Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . 13

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

-- General Considerations . . . . . . . . . . . . . . . . . . . . . . . . 15

-- Portfolio Turnover . . . . . . . . . . . . . . . . . . . . . . . . . . 17

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

-- Securities of Other Investment Companies . . . . . . . . . . . . . . . 31

LOANS OF PORTFOLIO SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . 31

PURCHASE AND REDEMPTION OF FUND SHARES . . . . . . . . . . . . . . . . . . . 32

U.S. GOVERNMENT MONEY MARKET FUND. . . . . . . . . . . . . . . . . . . . . . 34

PRICING OF SECURITIES BEING OFFERED. . . . . . . . . . . . . . . . . . . . . 34

YIELD AND PERFORMANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

-- The U.S. Government Money Market Fund. . . . . . . . . . . . . . . . . 35

-- Yield. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

-- Total Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

-- Other Quotations, Comparisons and General
Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

DIVIDENDS, DISTRIBUTIONS AND TAXES . . . . . . . . . . . . . . . . . . . . . 41

-- General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

-- The Oregon Municipal Bond Fund, Inc. . . . . . . . . . . . . . . . . . 43

-- Foreign Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

2
<PAGE>
SPECIAL INVESTOR SERVICES. . . . . . . . . . . . . . . . . . . . . . . . . . 46

GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

COUNSEL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

CUSTODIAN, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT. . . . . . . . . . . 48

ADDITIONAL INFORMATION REGARDING CERTAIN INVESTMENTS
BY THE FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

-- Government Securities. . . . . . . . . . . . . . . . . . . . . . . . . 48

-- Municipal Securities . . . . . . . . . . . . . . . . . . . . . . . . . 49

SPECIAL INVESTMENT RISKS . . . . . . . . . . . . . . . . . . . . . . . . . . 50

-- Foreign Securities . . . . . . . . . . . . . . . . . . . . . . . . . . 50

-- Futures Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . 51

FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

3
<PAGE>
----------
MANAGEMENT
----------

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

DIRECTORS AND OFFICERS OF THE FUNDS

RICHARD S. HUSON,* 54, is a Director and President of each of the Funds.
Mr. Huson is a chartered financial analyst. Mr. Huson is a director and
Secretary of The Crabbe Huson Group, Inc., the Funds' Adviser. Mr. Huson has,
since 1980, served in various management positions with the Adviser. His
business address is 16 NW Oregon Avenue, Bend, Oregon 97709.

JAMES E. CRABBE,* 49, is a Director and Vice President of each of the
Funds. He is a director and President of The Crabbe Huson Group, Inc., the
Funds' Adviser. Mr. Crabbe has, since 1980, served in various management
positions with the Adviser. His business address is 121 SW Morrison, Suite
1400, Portland, Oregon 97204.

GARY L. CAPPS, 58, is a Director of each of the Funds. Mr. Capps has been
the Executive Director of the Bend Chamber of Commerce since July 1992. Mr.
Capps was the owner and Chief Executive Officer of ten radio stations in Oregon,
Idaho and Washington from 1964 until 1986. He has been a director of Bank of
the Cascades in Bend, Oregon since 1980, and has served as Chairman since 1983.
His business address is 63085 N. Hwy 97, Bend, Oregon 97701.

DAVID R. LEES,* 29, is Treasurer of the Funds. Mr. Lees has been employed
by the Crabbe Huson Group for the past five years, principally working in the
area of fund accounting. Mr. Lees' business address is 121 SW Morrison, Suite
1400, Portland, Oregon 97204.

LOUIS SCHERZER, 73, is a Director of each of the Funds. Mr. Scherzer is an
officer of Scherzer Partners, Inc., a real estate development and management
firm located at 5440 SW Westgate Drive, Suite 222, Portland, Oregon 97221. Mr.
Scherzer was employed by the Benjamin Franklin Federal Savings and Loan
Association from 1946 to 1980, where he served as Senior Executive Vice
President and Director from 1980 to 1985.

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

4
<PAGE>
ROBERT L. SMITH, 56, is a Director of each of the Funds. Mr. Smith has
been President of VIP's Industries since 1968, and has been a Director of
Western Security Bank since 1980, a Director of KeyCorp since 1988 and a
Director of Blue Cross/Blue Shield of Oregon since 1984. His business address
is 280 Liberty Street S.E., Salem, Oregon 97301.

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

RICHARD P. WOLLENBERG, 78, is a Director of each of the Funds. Mr.
Wollenberg has been Chairman and Chief Executive Officer of Longview Fibre
Company since 1978, and a Trustee of Reed College since 1962. His business
address is Longview Fibre Company, P.O. Box 606, Longview, Washington 98632.

WILLIAM WENDELL WYATT, Jr., 43, is a Director of each of the Funds. He has
been President of the Oregon Business Council, 522 S.W. Fifth Ave., Suite 810,
Portland, Oregon 97204, since 1987. From 1981 to September 1987, Mr. Wyatt was
the Executive Director of the Association for Portland Progress. From 1978 to
1981 he was the Director of State and Federal Affairs for the City of Portland.

The members of the Funds' Boards of Directors are elected annually by the
Funds' shareholders. The Boards of Directors are responsible for the overall
management of the Funds, including general supervision and review of their
investment policies and activities. The Boards of Directors elect the officers
of the Funds who are responsible for supervising and administering the Funds'
day-to-day operations. In November of 1994, each Board of Directors created an
audit committee that reviews the report and management letters of the auditors,
reviews the terms of the auditor's engagement and makes recommendations to the
Boards concerning the terms of the auditor's engagements. The audit committees
currently consist of Messrs. Scherzer, Smith and Wyatt. The Funds currently pay
each of the directors who are not "interested persons" on a per meeting basis as
described below:

5
<PAGE>
<TABLE>
<CAPTION>
Per Meeting
-----------
<S> <C>
The Crabbe Huson Special Fund, Inc. $400.00
The Crabbe Huson Real Estate Investment
Fund, Inc. 150.00
The Crabbe Huson Equity Fund, Inc. 400.00
The Crabbe Huson Asset Allocation
Fund, Inc. 400.00
The Oregon Municipal Bond Fund, Inc. 150.00
The Crabbe Huson Income Fund, Inc. 50.00
The Crabbe Huson U.S. Government Income
Fund, Inc. 50.00
The Crabbe Huson U.S. Government Money
Market Fund, Inc. 150.00
</TABLE>

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

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

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

The Adviser is the investment advisor to the Funds under investment
advisory agreements originally dated September 27, 1988, for the Special, Equity
and Oregon Municipal Bond Funds, August 7, 1988 for the Asset Allocation,
Income, U.S. Government Income and U.S. Government Money Market Funds, and March
4, 1994 for the Real Estate Investment Fund. The Adviser was incorporated in
1980 and has been engaged in the business of providing investment advice since
July 1, 1980. The address of the Adviser is 121 SW Morrison, Suite 1425,
Portland, Oregon 97204, mailing address: P.O. Box 6559, Portland, Oregon 97228-
6559. Crabbe Huson Securities, Inc., the Distributor of the Funds, is
affiliated with the Adviser.

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

The Adviser has agreed to waive its fee and/or reimburse each Fund for the
amount, if any, by which the total operating expenses of such Fund (including
the Adviser's

6
<PAGE>
compensation and any amounts paid pursuant to the Rule 12b-1 plan) for any
fiscal year exceed certain annual rates applied to the average daily net assets
of the Funds. The annual rates in effect are as follows: 1.50% of the average
daily net assets of The Crabbe Huson Special Fund, Inc. (the "Special Fund"),
The Crabbe Huson Real Estate Investment Fund, Inc. (the "Real Estate Fund"), The
Crabbe Huson Equity Fund, Inc. (the "Equity Fund") and The Crabbe Huson Asset
Allocation Fund, Inc. (the "Asset Allocation Fund"); .98% of the average daily
net assets of The Oregon Municipal Bond Fund, Inc. (the "Oregon Bond Fund");
.80% of the average daily net assets of The Crabbe Huson Income Fund, Inc. (the
"Income Fund"); .75% of the average daily net assets of The Crabbe Huson U.S.
Government Income Fund, Inc. (the "U.S. Government Income Fund"); and .70% of
the average daily net assets of The Crabbe Huson U.S. Government Money Market
Fund, Inc. (the "U.S. Government Money Market Fund"). This waiver may be
withdrawn at any time upon 30 days' written notice to the shareholders of the
affected Fund. Even in the event of discontinuance of this agreement, the Funds
may still be subject to the laws of certain states, which require that if a
mutual fund's expenses (including advisory fees but excluding interest, taxes,
brokerage commissions and extraordinary expenses) exceed certain percentages of
average net assets, the Fund must be reimbursed for such excess expenses.

Under the Advisory Agreements, the Adviser determines the structure of the
Funds' portfolios, the nature and timing of the changes in it, and the manner of
implementing such changes (subject to any directions it may receive from the
Funds' Board of Directors); provides the Funds with investment advisory research
and related services for the investment of assets; furnishes (without expense to
the Funds) the services of such members of its organization as may be duly
elected officers or directors of the Funds; and pays all executive officers'
salaries and expenses. Additional information about the services provided by
the Adviser is described under "MANAGEMENT OF THE FUNDS" in the Prospectus.

As compensation for its services under the Advisory Agreements, the Adviser
receives a semi-monthly fee based on the annual schedule of fees outlined in the
Prospectus. For the year ended October 31, 1992, the Funds paid the following
investment advisory fees to the Adviser:

7
<PAGE>
<TABLE>
<CAPTION>
Amount
Fee Waived Total
--- ------ -----
<S> <C> <C> <C>
Special Fund $ 44,630 $ 19,594 $ 25,036
Equity Fund 102,079 39,230 62,849
Asset Allocation Fund 359,301 36,345 322,956
Oregon Bond Fund 96,637 4,089 92,548
Income Fund 40,805 40,805 -0-
U.S. Government
Income Fund 29,959 29,959 -0-
U.S. Government
Money Market Fund 74,163 50,598 23,565
</TABLE>

For the year ended October 31, 1993, the Funds paid the following
investment advisory fees to the Adviser:

<TABLE>
<CAPTION>
Amount
Fee Waived Total
--- ---------- -----
<S> <C> <C> <C>
Special Fund $ 129,227 $ 2,238 $ 126,989
Equity Fund 217,212 32,826 184,386
Asset Allocation Fund 683,280 54,592 628,688
Oregon Bond Fund 120,660 11,421 109,239
Income Fund 40,195 40,195 -0-
U.S. Government
Income Fund 54,023 54,023 -0-
U.S. Government
Money Market Fund 53,882 53,882 -0-
</TABLE>

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

<TABLE>
<CAPTION>
Amount
Fee Waived Total
--- ------ -----
<S> <C> <C> <C>
Special Fund $ 963,723 $ 85,038 $878,685
Real Estate Fund 94,916 50,426 44,490
Equity Fund 782,419 68,033 714,386
Asset Allocation Fund 1,034,183 53,227 980,956
Oregon Bond Fund 152,868 31,708 121,160
Income Fund 43,957 43,957 -0-
U.S. Government
Income Fund 51,245 51,245 -0-
U.S. Government
Money Market Fund 107,853 107,853 -0-
</TABLE>
8
<PAGE>
---------------------------------------------------
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
---------------------------------------------------

The following table shows the persons known by the Funds to beneficially
own 5% or more of any class of any of the Funds' voting securities, and the
ownership of the officers and directors of each Fund, as a group, as of November
22, 1994. Those shareholders marked with an asterisk are nominees holding
shares for beneficial owners and the Funds have no records concerning the actual
beneficial owners.

THE CRABBE HUSON SPECIAL FUND, INC.

Approximate Approximate
Number of Shares Percent of
Beneficial Owners Beneficially Owned Shares
- ----------------- ------------------ ----------

Charles Schwab & Co. Inc.* 5,569,484 22.22
Special Custody A/C
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104-4122

Gary L. Capps, Director 11,125 .04

Robert L. Smith, Director 778 .003

Richard P. Wollenberg, Director 11,398 .04

William Wendell Wyatt, Jr., Director 376 .0015

Officers and Directors 23,677 .0845
as a group

THE CRABBE HUSON REAL ESTATE INVESTMENT FUND, INC.

Approximate Approximate
Number of Shares Percent of
Beneficial Owners Beneficially Owned Shares
- ----------------- ------------------ -----------

Enele Co. C/F* 1,290,530 70.48
Pacific Northwest Trust Company
121 S.W. Morrison, Suite 1450
Portland, OR 97204-3144

Richard P. Wollenberg, Director 1,933 .14

Officers and Directors
as a group 3,550 .22

9
<PAGE>
THE CRABBE HUSON EQUITY FUND, INC.

Approximate Approximate
Number of Shares Percent of
Beneficial Owners Beneficially Owned Shares
- ----------------- ------------------ -----------

Enele Co. C/F* 526,231 5.44
Pacific Northwest Trust Company
121 S.W. Morrison, Suite 1450
Portland, Oregon 97204-3144

Charles Schwab & Co., Inc.* 1,237,830 12.80
Special Custody A/C
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104-4122

Robert L. Smith, Director 998 .01

Richard P. Wollenberg, Director 5,209 .05

Officers and Directors
as a group 6,207 .06

THE CRABBE HUSON ASSET ALLOCATION FUND, INC.

Approximate Approximate
Number of Shares Percent of
Beneficial Owners Beneficially Owned Shares
- ----------------- ------------------ -----------

Enele Co. C/F* 983,205 11.51
Pacific Northwest Trust Company
121 SW Morrison, Suite 1450
Portland, Oregon 97204-3144

Gary L. Capps, Director 4,868 .05

William Wendell Wyatt, Jr., Director 256 .003

Officers and Directors 6,545 .063
as a group

10
<PAGE>
THE OREGON MUNICIPAL BOND FUND, INC.

Approximate Approximate
Number of Shares Percent of
Beneficial Owners Beneficially Owned Shares
- ----------------- ------------------ -----------

Gary L. Capps, Director 7,406 .32

Officers and Directors 7,406 .32
as a group

THE CRABBE HUSON INCOME FUND, INC.

Approximate Approximate
Number of Shares Percent of
Beneficial Owners Beneficially Owned Shares
- ----------------- ------------------ -----------

Klamath Medical Service Bureau 34,725 6.44
2500 Daggett Street
Klamath Falls, Oregon 97601

Lowa Columbia Pathologists 32,013 5.93
Project Sharing
William Elton
2656 Jerry Avenue
Longview, WA 98632-4436

Enele Co. C/F* 78,715 14.70
Pacific Northwest Trust Company
121 S.W. Morrison, Suite 1450
Portland, Oregon 97204-3144

Enele Co. FBO 56,434 10.46
Blackwell NA Ret A/C 5326
121 S.W. Morrison, Suite 1450
Portland, OR 97204-3144

Officers and Directors, None
as a group

11
<PAGE>
THE CRABBE HUSON U.S. GOVERNMENT INCOME FUND, INC.

Approximate Approximate
Number of Shares Percent of
Beneficial Owners Beneficially Owned Shares
- ----------------- ------------------ -----------

Klamath Medical Service
Bureau 49,040 5.54
2500 Daggett Street
Klamath Falls, Oregon 97601

Pacific Northwest Trust
Company C/F 104,191 11.76
Robert B. Hodge, IRA
369 Kubli Road
Grants Pass, Oregon 97527

Enele Co. C/F* 82,959 9.37
Pacific Northwest Trust Company
121 S.W. Morrison, Suite 1450
Portland, Oregon 97204

Pacific Northwest Trust
Company C/F 48,513 5.48
Beverly M. Hodge
369 Kubli Road
Grants Pass, OR 97527

Officers and Directors None
as a group

THE CRABBE HUSON U.S. GOVERNMENT MONEY MARKET FUND, INC.

Approximate Approximate
Number of Shares Percent of
Beneficial Owners Beneficially Owned Shares
- ----------------- ------------------ -----------

Enele Co. 12,355,189 32.43
Pacific Northwest Trust Company
121 S.W. Morrison, Suite 1450
Portland, Oregon 97204-3144

James E. Crabbe, Vice President 18,353 .04

Richard S. Huson, President 40,520 .10

Officers and Directors, 58,573 .14
as a group

12
<PAGE>
--------------------------
SYSTEMATIC WITHDRAWAL PLAN
--------------------------

A shareholder owning or purchasing shares of any Fund having a net asset
value of $5,000 or more may participate in a systematic withdrawal plan
providing regular monthly payments in the amount of $100 or more from the shares
held in any Fund (the "Systematic Withdrawal Plan"). An application form
containing details of the Systematic Withdrawal Plan is available upon request
from State Street Bank & Trust Co. (the "Transfer Agent"), the Funds' transfer
agent. The Plan is voluntary and may be terminated at any time by the
shareholders.

Income dividends and capital gain distributions on shares of the Funds held
in a Systematic Withdrawal Plan are automatically reinvested in additional
shares of the relevant Fund at net asset value. A Systematic Withdrawal Plan is
not an annuity and does not and cannot protect against loss in declining
markets. Amounts paid to a shareholder from the Systematic Withdrawal Plan
represent the proceeds from redemptions of Fund shares, and the value of the
shareholder's investment in a Fund will be reduced to the extent that the
payments exceed any increase in the aggregate value of the shareholder's shares
(including shares purchased through reinvestment of dividends and
distributions). If a shareholder receives payments that are greater than the
appreciation in value of his or her shares, plus the income earned on the
shares, the shareholder may eventually withdraw his or her entire account
balance. This will occur more rapidly in a declining market. For tax purposes,
depending upon the shareholder's cost basis and date of purchase, each
withdrawal will result in a capital gain or loss. See "DIVIDENDS, DISTRIBUTIONS
AND TAXES" in this Statement of Additional Information and "TAXES" in the Funds'
Prospectus.

DISTRIBUTION PLAN

Rule 12b-1 under the Investment Company Act of 1940 (the "1940 Act")
requires that any payments made by the Funds in connection with financing the
distribution of their shares may only be made pursuant to a written plan
describing all aspects of the proposed financing of distribution, and also
requires that all agreements with any person relating to the implementation of
the plan must be in writing. Because some of the payments described below to be
made by the Funds are distribution expenses within the meaning of Rule 12b-1,
the Funds have entered into distribution agreements with Crabbe Huson
Securities, Inc. (the "Distributor") pursuant to a distribution plan (the
"Plan") adopted in accordance with such Rule.

Rule 12b-1 requires that the Plan be approved by a majority of a Fund's
outstanding shares, and requires that the Plan, together with any related
agreements, be approved
13
<PAGE>
by a vote of the directors of the Funds who are not interested persons of the
Funds and who have no direct or indirect financial interest in the operation of
the Plan or in the agreements related to the Plan, cast in person at a meeting
called for the purpose of voting on such plan or agreement. The Plan and any
agreement related to it must provide, in substance:

(a) that it shall continue in effect for a period of more than one
year from the date of its execution or adoption only so long as such
continuance is specifically approved at least annually in the manner
described in the Rule;

(b) that any person authorized to direct the disposition of moneys
paid or payable by the Funds pursuant to the Plan or any related agreement
shall provide to the Funds' Board of Directors, and the Directors shall
review, at least quarterly, a written report of the amounts so expended and
the purposes for which such expenditures were made; and

(c) in the case of the Plan, that it may be terminated at any time by
a vote of a majority of the members of the Board of Directors of the Fund
who are not interested persons of the Fund and who have no Direct or
indirect financial interest in the operation of the Plan or in any
agreements related to the Plan, or by a vote of a majority of the
outstanding voting securities of a Fund.

The Plan may not be amended to increase materially the amount to be spent
for distribution without shareholder approval, and all material amendments to
the Plan must be approved in the manner described in the Rule.

The Funds may rely upon Rule 12b-1 only if the selection and nomination of
the Funds' disinterested directors is committed to the discretion of the
disinterested Directors. The Funds may implement or continue a plan pursuant to
Rule 12b-1 only if the directors who vote to approve such implementation or
continuation conclude, in the exercise of reasonable business judgment and in
light of their fiduciary duties under state law, and under Sections 36(a) and
(b) of the 1940 Act, that there is a reasonable likelihood that the plan will
benefit the Funds and their shareholders. The Boards of Directors have
concluded that there is a reasonable likelihood that a distribution plan will
benefit each Fund.

Pursuant to the provisions of the Plan, each participating Fund may pay up
to .25% of its average daily net assets to the Distributor to reimburse the
Distributor for actual expenses incurred in the distribution and promotion of
such Fund's shares.

14
<PAGE>
Expenses for which the Distributor will be reimbursed under the Plan
include, but are not limited to, expenses incurred in the printing of
prospectuses and statements of additional information for persons other than
then-current shareholders, expenses related to preparation and printing of sales
literature, and other distribution-related expenses. Compensation will be paid
out on a quarterly basis to the Distributor and to broker-dealers which have
entered into sales agreements with the Distributor, and may be paid to
investment executives of the Distributor.

----------------------
PORTFOLIO TRANSACTIONS
----------------------

GENERAL CONSIDERATIONS

The Adviser is responsible for decisions to buy and sell securities for the
Funds, the selection of brokers and dealers to effect the transactions and the
negotiation of brokerage commissions, if any. Purchases and sales of securities
on a securities exchange are effected through brokers who charge a negotiated
commission for their services. Orders may be directed to any broker.

In the over-the-counter market, debt and equity securities are generally
traded on a "net" basis with dealers acting as principal for their own accounts
without a stated commission, although the price of a security usually includes a
profit to the dealer. A Fund may also pay a mark-up (sometimes referred to as a
dealer's "turn") in principal transactions and in transactions in the over-the-
counter market. In underwritten offerings, securities are purchased at a fixed
price which includes an amount of compensation to the underwriter, generally
referred to as the underwriter's concession or discount. On occasion, certain
money market instruments may be purchased directly from an issuer, in which case
no commissions or discounts are paid.

The primary considerations in the selection of a broker or dealer for
portfolio transactions are the availability of the desired security and the
prompt execution of orders in an effective manner at the most favorable prices.
Subject to those considerations, dealers that provide supplemental investment
research and statistical or other services to the Adviser may receive orders for
portfolio transactions by the Funds. Such services may include advice
concerning the value of securities; the advisability of investing in,
purchasing, or selling securities; the availability of securities; purchasers or
sellers of securities; and the furnishing of analysis and reports concerning
industries, economic facts and trends, and portfolio strategies. There is no
formula for such allocation. The research information received from brokers or
dealers may or may not be useful to the Funds and the Adviser in a number of
ways. The information may be in written form or may be obtained through direct
contact with

15
<PAGE>
individuals, and may include information on particular issuers as well as market
and general economic information. The Adviser will not be deemed to have
breached its obligations to the Funds solely by reason of having caused the
Funds to pay a broker or dealer an amount of commission for effecting a
securities transaction in excess of the amount of commission another broker or
dealer could have charged for effecting that transaction, if the Adviser has
determined in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services provided to the
Funds and to other accounts of the Adviser.

In addition to placing the Funds' brokerage business with firms that
provide the above research, market and statistical services to the Adviser, the
Funds' brokerage business may also be placed with firms that promote the sale of
the Funds' shares, consistent with achieving the best price and execution.

In the fiscal year ended October 31, 1992, the Special Fund paid $36,590,
the Equity Fund paid $81,700, the Asset Allocation Fund paid $163,732, the
Income Fund paid $1,760, and the U.S. Government Income Fund paid $539 in
aggregate brokerage commissions. None of these commissions were paid to the
Funds' Distributor. The Oregon Bond Fund and the U.S. Government Money Market
Fund did not pay any brokerage commissions during the year ended October 31,
1992, as these Funds executed all portfolio transactions on a principal basis.
The Real Estate Fund began operations in 1994.

In the fiscal year ended October 31, 1993, the Special Fund paid $113,857,
the Equity Fund paid $115,701, the Asset Allocation Fund paid $225,228, the
Income Fund paid $603, and the U.S. Government Income Fund paid $384 in
brokerage commissions. None of these commissions were paid to the Funds'
Distributor. The Oregon Bond Fund and the U.S. Government Money Market Fund did
not pay any brokerage commissions during the year ended October 31, 1993, as
these Funds executed all portfolio transactions on a principal basis. The Real
Estate Fund began operations in 1994.

In the fiscal year ended October 31, 1994, the Special Fund paid $766,879,
the Equity Fund paid $44,904, the Asset Allocation Fund paid $309,181, the
Income Fund paid $3,407, the U.S. Government Income Fund paid $318, and the Real
Estate Fund paid $71,851 in brokerage commissions. None of these commissions
were paid to the Funds' Distributor. The Oregon Bond Fund and the U.S.
Government Money Market Fund did not pay any brokerage commissions in the year
ended October 31, 1994, as these Funds executed all portfolio transactions on a
principal basis. Of the commissions paid in the fiscal year ending October 31,
1994 the Special Fund paid $550,799, the Equity Fund paid $253,908, the Asset
Allocation Fund paid $183,915, and the Real Estate Fund paid

16
<PAGE>
$60,795 in commissions as a result of research provided by the brokers. None of
the other Funds directed brokerage on the basis of research provided by a
broker.

Under the 1940 Act, persons affiliated with the Funds are prohibited from
dealing with the Funds as principals in the purchase or sale of securities. The
Funds or broker-dealers affiliated with the Adviser will not deal with
affiliated parties, including the Distributor, in connection with principal
transactions.

The SEC has the authority to issue and amend regulations involving
transactions with affiliates of the Funds. While there is no indication that it
will do so, the SEC may issue regulations at any time that would prohibit the
Funds from executing portfolio transactions through an affiliate. The Funds'
Boards of Directors will review all transactions with affiliates at least
quarterly and determine the overall reasonableness of any brokerage commissions
paid.

Even though investment decisions for the Funds are made independently from
those of the other accounts managed by the Adviser or its affiliates, securities
of the same issuer may be purchased, held, or sold by the Funds and the other
accounts, because the same security may be suitable for all of them. When the
Funds and such other accounts are simultaneously engaged in purchase or sale of
the same security, efforts will be made to allocate price and amounts in an
equitable manner. In some cases, this procedure may adversely affect the price
paid or received by the Funds or the size of the position purchased or sold by
the Funds.

PORTFOLIO TURNOVER

The Funds anticipate that, except in periods of unusual market conditions,
their annual portfolio turnover rate (the lesser of purchase or sales of
portfolio securities for the year divided by the monthly average of the value of
the portfolio securities owned by the Funds during the year) will generally
range between 20% and 150%, although Funds with smaller portfolios may have
portfolio turnover in excess of this range. However, the rate of turnover will
not be a limiting factor when the Funds deem it desirable to purchase or sell
securities. A higher portfolio turnover rate may involve correspondingly
greater transaction costs, which would be borne directly by the Funds, as well
as additional realized gains and/or losses to shareholders.

17
<PAGE>
-----------------------
INVESTMENT RESTRICTIONS
-----------------------

The investment restrictions described below have been adopted by the Funds
as fundamental investment policies. These fundamental investment policies may
not be changed without the approval of the holders of the lesser of a majority
of a Fund's outstanding shares or 67% of the shares represented at a meeting of
shareholders at which the holders of more than 50% of the shares are
represented.

If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage beyond the specified limit resulting
from a change in values of assets will not be considered a violation of the
investment restrictions relating to purchases of portfolio securities.

Each Fund, except the Special Fund, is prohibited from purchasing
securities when the total borrowings of that Fund exceed 5% of its total assets.

Each Fund (except the Oregon Bond Fund and the Real Estate Fund) is
prohibited from investing more than 20% of its total assets in fixed income
securities, including convertible stock, that are rated less than Moody's Baa or
S&P BBB, or in commercial paper that is rated less than B-1 by Moody's or A- by
S&P; not more than 5% of a Fund's total assets may be invested in fixed income
securities that are unrated. Securities rated below the fourth highest grade
and unrated fixed income securities have speculative characteristics and
additional risks. These are described in "SPECIAL RISK FACTORS TO BE
CONSIDERED" in the Prospectus. The Oregon Bond and Real Estate Funds are
subject to more restrictive quality limitations as set forth below.

THE CRABBE HUSON SPECIAL FUND, INC.
THE CRABBE HUSON EQUITY FUND, INC.
THE CRABBE HUSON ASSET ALLOCATION FUND, INC.

These Funds may not:

1. Invest an amount that exceeds 5% of the value of a Fund's total
assets in the securities of any one issuer. This restriction
does not apply to holdings of U.S. Government securities.

2. Invest more than 25% of their total assets in any one industry.
This restriction does not apply to holdings of U.S. Government
securities.

3. Issue any senior securities, as defined in the 1940 Act.

18
<PAGE>
4. Purchase the securities of any issuer for the purpose of
exercising control of management, and a Fund may not acquire or
own more than 10% of any class of the securities of any issuer.

5. Sell securities short, except in the case of the Special Fund, as
permitted in the Prospectus.

6. Invest in any security that would subject a Fund to unlimited
liability, although the Special Fund may sell securities short
and the Special, Equity and Asset Allocation may invest in
interest rate and stock market futures.

7. Underwrite the securities of other issuers or invest more than
10% of net assets in illiquid securities, such as repurchase
agreements with a maturity in excess of seven days.
Notwithstanding the above, these Funds may not invest in
restricted securities (including, but not limited to, nonpublicly
traded debt securities).

8. Invest in securities of other investment companies, except as set
forth in the Statement of Additional Information under
"SECURITIES OF OTHER INVESTMENT COMPANIES."

9. Purchase securities on margin.

10. Write uncovered put or uncovered call options.

11. Purchase portfolio securities from or sell securities directly to
any of a Fund's, or the Adviser's, officers, directors, or
employees as a principal for their own account.

12. Purchase or sell commodities or commodity contracts (stock index
and interest rate futures will not be considered commodity
contracts).

13. Purchase or sell real estate or real estate mortgages, provided
that the Fund may invest in marketable securities, such as
obligations of the Government National Mortgage Association, that
are secured by real estate or interests therein or are issued by
companies which invest in real estate or interests therein, such
as publicly traded real estate investment trusts.

19
<PAGE>
14. Purchase or sell interests in oil, gas, or other mineral
exploration or development programs.

15. Lend portfolio securities, except as described in the Statement
of Additional Information under "LOANS OF PORTFOLIO SECURITIES."

16. Make loans to other persons, provided that, for purposes of this
restriction, the acquisition of bonds, debentures, or other
corporate debt securities and investment in government
obligations, short-term commercial paper, certificates of
deposit, bankers' acceptances, and repurchase agreements will not
be deemed to be the making of a loan.

17. Borrow money, except in an emergency or as set forth in the
Funds' Prospectus. In no case will borrowing exceed one-third of
the value of a Fund's total assets immediately after any such
borrowing. If, for any reason, the current value of a Fund's
total assets falls below an amount equal to three times the
amount of its indebtedness for money borrowed, a Fund will,
within three days (not including Saturdays, Sundays and
holidays), reduce its indebtedness to the extent necessary to
satisfy the one-third test.

18. Invest more than 10% of a Fund's total assets in put or call
options.

19. Invest more than 35% of a Fund's total assets in foreign
securities.

20. Invest more than 10% of a Fund's total assets in stock index
futures.

21. Invest more than 10% of its total assets in interest rate futures
contracts.

THE CRABBE HUSON REAL ESTATE INVESTMENT FUND, INC.

This Fund may not:

1. With respect to at least 75% of the Fund's total assets, invest
an amount that exceeds 5% of the value of the Fund's total assets
in the securities of any one issuer or invest in more than 10% of
the outstanding voting securities of any one issuer. This
restriction does not apply to holdings of government securities.

20
<PAGE>
2. Issue any senior securities, except as permitted by paragraph 13
below. For purposes of this restriction, the issuance of shares
of stock in multiple classes or series, the purchase or sale of
options, future contracts and options on future contracts,
forward commitments and repurchase agreements entered into in
accordance with the Fund's investment policy and the rules and
regulations of the SEC, and the pledge, mortgage or hypothecation
of the Fund's assets within the meaning of paragraph 18 below,
are not deemed to be senior securities.

3. Purchase the securities of any issuer for the purpose of
exercising control of management, and the Fund may not acquire
or own more than 10% of any class of the securities of any
company.

4. Sell securities short.

5. Invest in any security that would subject the Fund to unlimited
liability, although the Fund may invest in interest rate and
stock market futures.

6. Purchase securities on margin.

7. Write uncovered put or uncovered call options.

8. Purchase portfolio securities from or sell securities directly to
any of the Adviser, officers, directors, or employees as a
principal for their own account.

9. Purchase or sell commodities or commodity contracts (stock index
and interest rate futures will not be considered commodity
contracts).

10. Purchase or sell real estate, real estate limited partnership
interests, or real estate mortgages, provided that the Fund may
invest in securities that are secured by real estate or interests
therein and may purchase and sell mortgage-related securities and
may hold and sell real estate acquired by the Fund as a result of
the ownership of securities.

11. Purchase or sell interests in oil, gas, or other mineral
exploration or development programs.

21
<PAGE>
12. Make loans to other persons, other than loans resulting from the
acquisition of bonds, debentures, or other corporate debt
securities and investment in government obligations, short-term
commercial paper, certificates of deposit, bankers' acceptances,
repurchase agreements (in conformance with the Fund's investment
policy and the rules and regulations of the SEC) and the lending
of portfolio securities, as described under "Loans of Portfolio
Securities" in the Statement of Additional Information as set
forth on the effective date of the Registration Statement.

13. Borrow money, except as set forth below. The Fund may borrow
money from a bank as a temporary measure for extraordinary
defensive purposes in amounts not to exceed 33-1/3% of the Fund's
total assets (including the amount borrowed) taken at market
value. The Fund shall not use leverage to increase income and
will not purchase securities while outstanding borrowings exceed
5% of the Fund's total assets. If, for any reason, the current
value of the Fund's total assets falls below an amount equal to
three times the amount of its indebtedness for money borrowed,
the Fund will, within three days (not including Saturdays,
Sundays and holidays), reduce its indebtedness to the extent
necessary to satisfy the one-third test.

14. Invest more than 10% of its total assets in put or call options.

15. Invest more than 10% of its total assets in stock index or
interest rate futures.

16. Pledge, mortgage or hypothecate its assets, except to secure
indebtedness permitted by paragraph 13, and then only if such
pledging, mortgaging or hypothecating does not exceed 33-1/3% of
the Fund's total assets taken at market value.

17. Invest more than 5% of its total assets in "restricted
securities" (I.E., securities that would be required to be
registered prior to distribution to the public), excluding
restricted securities eligible for resale to certain
institutional investors pursuant to Rule 144A of the Securities
Act of 1933; provided, however, that no more than 15% of the
Fund's total assets may be invested in

22
<PAGE>
restricted securities, including securities eligible for resale
under Rule 144A. In addition, the Fund may invest up to 15% of
its net assets in illiquid investments, which includes securities
that are not readily marketable, repurchase agreements maturing
in more than seven days and privately issued SMBS, based upon a
determination by the Board that the SMBS is illiquid. The Board
of Directors shall adopt guidelines and delegate to the Adviser
the daily function of determining and monitoring the liquidity of
its investments. The Board, however, will retain sufficient
oversight and will be ultimately responsible for the
determinations.

18. Invest more than 25% of its total asset value in the purchase of
when-issued and delayed-delivery securities.

THE OREGON MUNICIPAL BOND FUND, INC.

This Fund may not:

1. Purchase common stocks, preferred stocks, warrants, or other
equity securities.

2. Purchase securities of any issuer (other than obligations of, or
guaranteed by, the United States Government, its agencies, or
instrumentalities) if, as a result, more than 25% of the value of
the Fund's total assets would be invested in securities of that
issuer. For purposes of this limitation, each governmental
subdivision (I.E., state, territory, possession of the United
States, or any political subdivision of any of the foregoing,
including agencies, authorities, instrumentalities, or similar
entities) will be considered a separate issuer if its assets and
revenues are separate from those of the government body creating
it and the securities are backed only by its own assets and
revenues. In the case of an industrial development bond, if the
security is backed only by the assets and revenues of a
nongovernmental user, then such nongovernmental user will be
deemed to be the sole issuer. However, if an industrial
development bond or governmental issue is guaranteed by a
governmental or some other entity, such guaranty shall be
considered a separate security issued by the guarantor as well as
the nongovernmental user, subject to limited exclusions allowed
by the 1940 Act.

23
<PAGE>
3. With respect to at least 50% of the Fund's total assets, purchase
securities of any issuer (except securities issued or guaranteed
by the United States government or its agencies or instrumen-
talities) if, as a result, more than 5% of the value of the
Fund's total assets would be invested in securities of that
issuer.

4. Invest more than 10% of the Fund's total assets in securities of
issuers that, with their predecessors, have a record of less than
3 years of continuous operation.

5. Lend its funds or other assets to others (except through the
purchase of debt obligations or repurchase agreements in
accordance with its investment objectives and policies).
Although such loans are not presently intended, this prohibition
will not preclude the Fund from loaning securities to broker-
dealers or other institutional investors if at least 100% cash
collateral is pledged and maintained by the borrower, provided
such security loans may not be made if, as a result, the
aggregate of such loans exceeds 10% of the value of the Fund's
total assets.

6. Borrow money, except from banks as a temporary measure for
extraordinary or emergency purposes, and then only in an amount
up to one-third of the value of its total assets, in order to
meet redemption requests without immediately selling any
portfolio securities. If, for any reason, the current value of
the Fund's total assets falls below an amount equal to three
times the amount of its indebtedness from money borrowed, the
Fund will, within three days (not including Saturdays, Sundays,
and holidays), reduce its indebtedness to the extent necessary to
satisfy the one-third test. The Fund will not borrow for
leverage purposes and will not make any additional investments
while borrowings exceed 5% of the value of its total assets.

7. Pledge, mortgage, or hypothecate its assets, except that, to
secure borrowing permitted by paragraph six above, the Fund may
pledge up to 10% of the value of its total assets.

8. Make short sales of securities, or purchase any securities on
margin except to obtain such

24
<PAGE>
short-term credits as may be necessary for the clearance of
transactions.

9. Write, purchase, or sell puts, calls, or combinations thereof,
except rights to resell municipal securities to the persons from
whom they are purchased.

10. Concentrate more than 25% of the value of its total assets in any
one industry; PROVIDED HOWEVER, that, for purposes of this
limitation, tax-exempt municipal securities and United States
Government obligations are not considered to be part of any
industry. For purposes of this restriction, industrial
development bonds, where the payment of principal and interest is
the ultimate responsibility of companies within the same
industry, are grouped together as one "industry."

11. Purchase or retain the securities of any issuer if those
individual officers or directors of the Fund, the Adviser, each
owning beneficially more than 1/2 of 1% of the securities of such
issuer, together own more than 5% of the securities of such
issuer.

12. Invest in securities subject to legal or contractual restrictions
on resale or in repurchase agreements maturing in more than seven
days if, as a result of such investment, more than 10% of the net
assets of the Fund would be invested in such securities.

13. Invest in companies for the purpose of exercising control or
management.

14. Invest in commodities or commodity futures contracts or oil, gas,
or other mineral exploration or development programs or in real
estate or interests therein.

15. Invest in securities of other investment companies, except as set
forth in the Statement of Additional Information under
"Securities of Other Investment Companies."

16. Underwrite securities issued by others, except to the extent the
Fund may be deemed to be an underwriter under the federal
securities laws, in connection with the disposition of portfolio
securities.

25
<PAGE>
17. Issue senior securities, as defined in the 1940 Act.

THE CRABBE HUSON INCOME FUND, INC.

This Fund may not:

1. Buy or sell common stock.

2. Issue any senior securities, as defined in the 1940 Act.

3. Sell securities short.

4. Purchase securities on margin.

5. Purchase or sell commodities or commodity contracts (except
interest rate futures contracts as defined in the Statement of
Additional Information).

6. Invest an amount that exceeds 5% of the value of the Fund's total
assets in the securities of any one issuer. This restriction
does not apply to holdings of U.S. Government securities.

7. Invest more than 25% of its total assets in any one industry
(except U.S. Government securities).

8. Purchase the securities of any issuer for the purpose of
exercising control of management, and the Fund may not acquire or
own more than 10% of any class of the securities of any issuer.

9. Invest in any security that would subject the Fund to unlimited
liability.

10. Underwrite the securities of other issuers or invest more than
10% of its net assets in illiquid securities, such as repurchase
agreements with a maturity in excess of seven days.
Notwithstanding the above, the Fund may not invest in restricted
securities (including, but not limited to, nonpublicly traded
debt securities).

11. Invest in securities of other investment companies, except as set
forth in the Statement of Additional Information under the
heading "SECURITIES OF OTHER INVESTMENT COMPANIES."

26
<PAGE>
12. Write uncovered put or uncovered call options.

13. Purchase portfolio securities from or sell securities directly to
any of the Funds', or the Adviser's, officers, directors, or
employees as principal for their own account.

14. Purchase or sell real estate or real estate mortgages, provided
that the Fund may invest in marketable fixed income securities
that are secured by real estate or interests therein.

15. Purchase or sell interests in oil, gas, or other mineral
exploration or development programs.

16. Lend portfolio securities, except as described in the Statement
of Additional Information under "LOANS OF PORTFOLIO SECURITIES."

17. Make loans to other persons, provided that, for purposes of this
restriction, the acquisition of bonds, debentures, or other
corporate debt securities and investment in government
obligations, short-term commercial paper, certificates of
deposit, bankers' acceptances, and repurchase agreements will not
be deemed to be the making of a loan.

18. Invest more than 10% of the Fund's total assets in interest rate
futures.

19. Borrow money, except in an emergency. In no case will borrowing
exceed one-third of the value of the Fund's total assets
immediately after any such borrowing. If, for any reason, the
current value of a Fund's total assets falls below an amount
equal to 3 times the amount of its indebtedness for money
borrowed, a Fund will, within 3 days (not including Saturdays,
Sundays and holidays), reduce its indebtedness to the extent
necessary to satisfy the one-third test.

20. Invest more than 35% of the Fund's total assets in foreign
securities.

THE CRABBE HUSON U.S. GOVERNMENT INCOME FUND, INC.

This Fund may not:

1. Buy or sell common stock.

2. Issue any senior securities, as defined in the 1940 Act.

27
<PAGE>
3. Sell securities short.

4. Purchase securities on margin.

5. Invest in any security that would subject the Fund to unlimited
liability.

6. Underwrite the securities of other issuers or invest more than
10% of its net assets in illiquid securities, such as repurchase
agreements with a maturity in excess of seven days.
Notwithstanding the above, the Fund may not invest in restricted
securities (including, but not limited to, nonpublicly traded
debt securities).

7. Invest in securities of other investment companies.

8. Write uncovered put or uncovered call options.

9. Purchase securities that are other than direct or indirect
obligations of the United States Government or its agencies or
instrumentalities and repurchase agreements with respect to those
obligations.

10. Borrow money, except in an emergency. In no case will borrowing
exceed one-third of the value of a Fund's total assets
immediately after any such borrowing. If, for any reason, the
current value of a Fund's total assets falls below an amount
equal to three times the amount of its indebtedness of money
borrowed, a Fund will, within three days (not including
Saturdays, Sundays and holidays), reduce its indebtedness to the
extent necessary to satisfy the one-third test.

11. Purchase portfolio securities from or sell securities directly to
any of the Funds', or the Adviser's, officers, directors, or
employees as principal for their own account.

12. Purchase or sell commodities or commodity contracts.

13. Lend portfolio securities, except as described in the Statement
of Additional Information under "Loans of Portfolio Securities."

14. Invest more than 10% of the Fund's total assets in repurchase
agreements.

28
<PAGE>
15. Invest more than 25% of the Fund's total assets in government
securities maturing in more than five years.

16. Purchase or sell real estate or real estate mortgages, provided
that the Fund may invest in marketable fixed income securities
that are secured by real estate or interests therein.

THE CRABBE HUSON U.S. GOVERNMENT MONEY MARKET FUND, INC.

This Fund may not:

1. Buy or sell common stock.

2. Issue any senior securities, as defined in the 1940 Act.

3. Sell securities short.

4. Purchase securities on margin.

5. Purchase or sell commodities or commodity contracts.

6. Invest an amount that exceeds 5% of the value of the Fund's total
assets in the securities of any one issuer (excluding U.S.
Government securities).

7. Invest more than 25% of its total assets in any one industry
(excluding U.S. Government securities).

8. Purchase securities that are other than direct or indirect
obligations of the United States Government or its agencies or
instrumentalities and repurchase agreements with respect to those
obligations.

9. Purchase the securities of any issuer for the purpose of
exercising control of management, and the Fund may not acquire or
own more than 10% of any class of the securities of any issuer.

10. Invest in any security that would subject the Fund to unlimited
liability.

11. Underwrite the securities of other issuers or invest more than
10% of its net assets in illiquid securities, such as repurchase
agreements with a maturity in excess of seven days.
Notwithstanding the above, the Fund may not invest in restricted
securities

29
<PAGE>
(including, but not limited to, nonpublicly traded debt
securities).

12. Invest in securities of other investment companies.

13. Write uncovered put or uncovered call options.

14. Purchase portfolio securities from or sell securities directly to
any of the Funds', or the Adviser's, officers, directors, or
employees as principal for their own account.

15. Purchase or sell real estate or real estate mortgages, provided
that the Fund may invest in marketable securities that are
secured by real estate or interests therein or are issued by
companies which invest in real estate or interests therein, such
as publicly traded real estate investment trusts.

16. Purchase or sell interests in oil, gas, or other mineral
exploration or development programs.

17. Lend portfolio securities, except as described in the Statement
of Additional Information under "LOANS OF PORTFOLIO SECURITIES."

18. Make loans to other persons, provided that, for purposes of this
restriction, the acquisition of bonds, debentures, or other
corporate debt securities and investment in government
obligations, short-term commercial paper, certificates of
deposit, bankers' acceptances, and repurchase agreements will not
be deemed to be the making of a loan.

19. Borrow money, except as set forth in the Funds' Prospectus. In
no case will borrowing exceed one third of the value of a Fund's
total assets immediately after any such borrowing. If, for any
reason, the current value of a Fund's total assets falls below an
amount equal to three times the amount of its indebtedness of
money borrowed, a Fund will, within three days (not including
Saturdays, Sundays and holidays), reduce its indebtedness to the
extent necessary to satisfy the one-third test.

20. Purchase any corporate debt security rated less than AA by S&P or
Aa by Moody's.

30
<PAGE>
21. Purchase any debt security with a maturity in excess of one year
from the date of purchase.

22. Purchase any short-term, unsecured promissory notes of
corporations, including variable amount master demand notes,
which at the date of investment are rated less than A-1 by S&P or
B-1 by Moody's or, if not so rated, which the Board has
determined are of comparable quality to such rated securities.

SECURITIES OF OTHER INVESTMENT COMPANIES

The Funds will not invest in securities of other investment companies
(I.E., mutual funds), except in connection with a merger, consolidation,
reorganization, or acquisition of assets, and except to the extent permitted by
Section 12 of the 1940 Act (which currently provides that no more than 10% of
the total assets of a Fund may be invested in securities of other investment
companies, no more than 5% of the total assets of a Fund may be invested in
securities of any other single investment company, and no more than 3% of total
outstanding voting stock of any one investment company may be purchased). All
such securities must be acquired by a Fund in the open market in transactions
involving no commissions or discounts to a sponsor or dealer (other than
customary brokerage commissions). The issuers of investment company securities
acquired by a Fund are not required to redeem such securities in an amount
exceeding 1% of such issuers' total outstanding securities during any period of
less than 30 days, and a Fund will vote all proxies with respect to such
securities in the same proportion as the vote of all other holders of such
securities. The U.S. Government Income Fund and the U.S. Government Money
Market Fund may not purchase the securities of other investment companies.

-----------------------------
LOANS OF PORTFOLIO SECURITIES
-----------------------------

Loan transactions involve the lending of securities to a broker-dealer or
institutional investor for its use in connection with short sales, arbitrage or
other securities transactions. Loans of portfolio securities of the Funds will
be made, if at all, in strict conformity with applicable federal and state rules
and regulations. The term of any such loans will generally not exceed nine
months.

The Funds will engage in loan transactions only if the following conditions
are met: (1) a Fund must receive at least 100% collateral in the form of cash
or cash equivalents (e.g., U.S. Treasury bills or notes) from the borrower; (2)
the borrower must increase the collateral whenever the market value of the
securities loaned (determined on a daily basis) rises above the level of the
collateral; (3) a Fund must be

31
<PAGE>
able to terminate the loan after notice at any time; (4) a Fund must receive
reasonable interest on the loan or a flat fee from the borrower, as well as
amounts equivalent to any dividends, interest or other distributions on the
securities loaned and any increase in the market value of the securities; (5) a
Fund may pay only reasonable custodian fees in connection with the loan; and (6)
voting rights on the securities loaned may pass to the borrower. If a material
event affecting the investment occurs, the directors of a Fund must be able to
terminate the loan and vote proxies or enter into an alternative arrangement
with the borrower to enable the directors to vote proxies. Excluding items (1)
and (2), these practices may be amended from time to time as regulatory
provisions dictate.

While there may be delays in recovery of loaned securities or even a loss
of the securities loaned should the borrower default, loans will be made only to
firms or broker-dealers deemed by the Adviser to be of good standing and will
not be made unless, in the judgment of the Adviser, the consideration to be
earned from such loans would justify the risk. Such loan transactions are
referred to in this section as "qualified loan transactions."

The purpose of a qualified loan transaction is to afford a Fund the
opportunity to continue to earn income on the securities loaned and, at the same
time, to earn income on the collateral held by it. In furtherance of this
purpose, the cash collateral acquired through qualified loan transactions may be
invested in any obligation in which a Fund is authorized to invest in accordance
with its investment objectives. The investment of the cash collateral in other
obligations subjects that investment, as well as the security loaned, to market
forces, I.E., capital appreciation or depreciation, just like any other
portfolio security.

--------------------------------------
PURCHASE AND REDEMPTION OF FUND SHARES
--------------------------------------

Information concerning the purchase and redemption of each Fund's shares is
set forth under "HOW TO INVEST IN THE FUNDS" and "HOW TO SELL YOUR SHARES" in
the Funds' Prospectus.

Each Fund has entered into a distribution agreement with the Distributor.
These agreements obligate the Distributor to pay certain expenses in connection
with the offering of shares of the Funds, including expenses related to the
printing of prospectuses and statements of additional information, the
preparation and printing of sales literature, and other distribution-related
expenses. Shares of the Funds are offered continuously to the public by the
Distributor and broker-dealers who enter into sales agreements with the
Distributor. Additional information

32
<PAGE>
about the distribution plans is provided under "HOW TO INVEST IN THE FUNDS" in
the Prospectus.

During the fiscal year ended October 31, 1992, the Funds paid the following
aggregate sales commissions and distribution fees to the Distributor and the
Dealers:

<TABLE>
<CAPTION>
Distributor Dealers
----------- -------

Total Distribution Distribution
Paid Fees Commissions Fees Commissions
---- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Special Fund $ 2,723 $ 1,751 $ 0 $ 972 $ 0
Equity Fund 8,310 5,691 0 2,619 0
Asset Allocation
Fund 62,477 19,005 0 43,472 0
Oregon Bond Fund 26,236 863 0 25,373 0
Income Fund 6,075 813 0 5,262 0
U.S. Government
Income Fund 8,515 1,288 0 7,227 0
U.S. Government
Money Market Fund 4,976 1,503 0 3,473 0
</TABLE>

During the fiscal year ended October 31, 1993, the Funds paid the following
aggregate sales commissions and distribution fees to the Distributor and the
Dealers:

<TABLE>
<CAPTION>
Distributor Dealers
----------- -------

Total Distribution Distribution
Paid Fees Commissions Fees Commissions
----- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Special Fund $ 15,061 $12,359 $ 0 $ 2,702 $ 0
Equity Fund 39,034 29,495 0 9,539 0
Asset Allocation
Fund 166,158 86,657 0 79,501 0
Oregon Bond Fund 50,411 16,652 0 33,759 0
Income Fund 9,669 5,185 0 4,484 0
U.S. Government
Income Fund 17,014 11,416 0 5,598 0
U.S. Government
Money Market Fund 12,200 7,947 0 4,259 0
</TABLE>

During the fiscal year ended October 31, 1994, the Funds paid the following
aggregate sales commissions and distribution fees to the Distributor and the
Dealers:

33
<PAGE>

<TABLE>
<CAPTION>
Distributor Dealers
----------- -------

Total Distribution Distribution
Paid Fees Commissions Fees Commissions
---- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Special Fund $100,461 $92,906 -0- $7,555 -0-
Real Estate Fund 11,265 11,253 -0- 12 -0-
Equity Fund 102,058 73,886 -0- 28,172 -0-
Asset Allocation
Fund 187,265 85,787 -0- 101,478 -0-
Oregon Bond Fund 56,262 23,574 -0- 32,688 -0-
Income Fund 10,978 5,812 -0- 5,166 -0-
U.S. Government
Income Fund 19,149 15,271 -0- 3,878 -0-
U.S. Government
Money Market Fund 35,927 33,321 -0- 2,606 -0-
</TABLE>
---------------------------------
U.S. GOVERNMENT MONEY MARKET FUND
---------------------------------

The U.S. Government Money Market Fund uses the amortized cost method of
valuing its investments, which facilitates the maintenance of the Fund's per
share net asset value at $1.00. The U.S. Government Money Market Fund intends
to maintain its net asset value at a constant one dollar per share, although
there is no assurance that it will be able to do so.

The extent of deviation between the U.S. Government Money Market Fund's net
asset value based upon available market quotations or market equivalents and
$1.00 per share based on amortized cost will be periodically examined by the
Directors. If such deviation exceeds 1/2 of 1%, the Directors will promptly
consider what action, if any, will be initiated. In the event the Directors
determine that a deviation exists which may result in material dilution or other
unfair results to investors or existing shareholders, they will cause the U.S.
Government Money Market Fund to take such corrective action as they regard to be
necessary and appropriate to eliminate or reduce to the extent reasonably
practicable such dilution or unfair results. Such action may include the sale
of U.S. Government Money Market Fund instruments prior to maturity to realize
capital gains or losses or to shorten average portfolio maturity; withholding
part or all of dividends or payment of distributions from capital or capital
gains; redemptions of shares in kind; or establishing a net asset value per
share by using available market quotations or equivalents. In addition, in
order to stabilize the net asset value per share at $1.00, the Directors have
the authority (i) to reduce or increase the number of shares outstanding on a
pro rata basis, and (ii) to offset each shareholder's pro rata portion of the
deviation between the net asset value per share and $1.00 from the shareholder's
accrued dividend account or from future dividends.

-----------------------------------
PRICING OF SECURITIES BEING OFFERED
-----------------------------------

The price for shares of a Fund is the next determined net asset value of
the Fund per share.

34
<PAGE>
Each Fund's net asset value per share is computed by dividing the value of
the securities held by the Fund plus any cash or other assets (including
interest and dividends accrued but not yet received) minus all liabilities
(including accrued expenses) by the total number of shares outstanding at such
time. Expenses, including the fees payable to the Adviser, are accrued daily to
the extent practicable.

Dividends receivable are treated as assets from the date on which
securities go ex-dividend and interest on bonds is accrued daily.

---------------------
YIELD AND PERFORMANCE
---------------------

The Funds will from time to time advertise or quote their respective yields
and total return performance. These figures are calculated according to SEC
rules standardizing such computations and represent historical data. The
investment return and principal value (except for the U.S. Government Money
Market Fund) will fluctuate so that shares when redeemed may be worth more or
less than their original cost.

The Funds may, from time to time, include in such advertisements or quotes
comparisons of a Fund's yield or total return performance against one or more
indices of stock or bond performance. Such indices include, for example, the
Standard & Poor's 500 Stock Index, Dow Jones Industrial, Value Line Rates, and
the Shearson Lehman Government/Corporate Bond Index.

THE U.S. GOVERNMENT MONEY MARKET FUND

Current yield is calculated by dividing the net change in the value of an
account of one share during an identified seven-calendar-day period by the value
of the one share account at the beginning of the same period ($1.00) and
multiplying that base period return by 365/7, I.E.:

net change in value of account with one share x 365 = Current
- --------------------------------------------- ---
value of account at beginning of period 7 Yield

Compounded effective yield is calculated by daily compounding of the base
period return referred to above. This calculation is made by adding 1 to the
base period return, raising the sum to a number equal to 365 divided by 7, and
subtracting 1 from the result, I.E.:

[(base period return + 1) 365/7] -1 = Compounded Effective Yield

The determination of net change in the value of an account for purposes of
the U.S. Government Money Market Fund yield calculations reflects the value of
additional shares purchased with income dividends from the original share, and
income dividends declared on both the original share and such additional shares.
The determination of net change does not

35
<PAGE>
reflect realized gains or losses from the sale of securities or realized
appreciation or depreciation. The U.S. Government Money Market Fund includes
unrealized appreciation or depreciation, as well as unrealized gains or losses,
in the determination of actual daily dividends. Therefore, the quoted yields as
calculated above may differ from the actual dividends paid.

The U.S. Government Money Market Fund's seven-day yield and effective yield
as of the date of the most recent statement of assets and liabilities included
in this registration statement is 4.35% and 4.45%, respectively.

YIELD

Current yield of the Oregon Bond Fund, the Income Fund and the U.S.
Government Income Fund is calculated by dividing the net investment income per
share earned during an identified 30-day period by the maximum offering price
per share on the last day of the same period, according to the following
formula:

YIELD = 2 [( a-b + 1)(6) -1]
---
cd

Where: a = dividends and interest earned during the period.

b = expenses accrued for the period (net of reim-
bursements).

c = the average daily number of shares outstanding during
the period that were entitled to receive dividends.

d = the maximum offering price per share on the last day of
the period.

The Funds use generally accepted accounting principles in determining
actual income paid, which differ in some instances from SEC rules for computing
income for the above yield calculations. Therefore, the quoted yields as
calculated above may differ from the actual dividends paid.

The Oregon Bond, Income and U.S. Government Income Funds' yields for the
30-day period ended the date of the most recent statement of assets and
liabilities included in this registration statement were 4.45%, 5.92%, and
5.86%, respectively.

The Real Estate Fund's yield is computed by dividing the Fund's net
investment income per share during a base period of 30 days, or one month, by
the maximum offering price per

36
<PAGE>
share of the Fund on the last day of such base period in accordance with the
following formula:

YIELD = 2 [( a-b + 1)(6) -1]
---
cd

Where: a = interest earned during the period

b = net expenses accrued for the period
c = the average daily number of shares outstanding during
the period that were entitled to receive dividends

d = the maximum offering price per share on the last day of
the period

For purposes of calculating interest earned on debt obligations as provided
in item "a" above:

(i) The yield to maturity of each obligation held by the Fund is computed
based on the market value of the obligation (including actual accrued interest,
if any) at the close of business each day during the 30-day base period, or,
with respect to obligations purchased during the month, the purchase price (plus
actual accrued interest, if any) on settlement date, and with respect to
obligations sold during the month the sale price (plus actual accrued interest,
if any) between the trade and settlement dates.

(ii) The yield to maturity of each obligation is then divided by 360 and
the resulting quotient is multiplied by the market value of the obligation
(including actual accrued interest, if any) to determine the interest income on
the obligation for each day. The yield to maturity calculation has been made on
each obligation during the 30-day base period.

(iii) Interest earned on all debt obligations during the 30-day or one
month period is then totaled.

(iv) The maturity of an obligation with a call provision(s) is the next
call date on which the obligation reasonably may be expected to be called or, if
none, the maturity date.

With respect to the treatment of discount and premium on mortgage or other
receivables-backed obligations which are expected to be subject to monthly
payments of principal and interest ("pay downs"), the Fund accounts for gain or
loss attributable to actual monthly pay downs as an increase or decrease to
interest income during the period. In addition, the Fund may elect (i) to
amortize the discount or premium remaining on a security, based on the cost of
the security, to the weighted average maturity date, if such information is

37
<PAGE>
available, or to the remaining term of the security, if the weighted average
maturity date is not available, or (ii) not to amortize the remaining discount
or premium on a security.

The Fund's yield for the 30-day period ended the date of the most recent
statement of assets and liabilities included in this registration statement was
4.93%.

The Oregon Bond Fund may publish a tax equivalent yield for Oregon
shareholders that represents the yield that an investor would have to receive on
a fully taxable investment to achieve the same after-tax results at the highest
then-existing marginal combined Oregon and Federal income tax rates, calculated
according to the following formula:

Tax Equivalent Yield = a + c + e + g
--- --- ---
1-b 1-d 1-f

Where: a = that portion of the current yield of the Fund that is exempt
from Federal and Oregon income tax.

b = highest then-existing marginal combined Federal and Oregon
income tax rate.

c = that portion of the current yield of the Fund that is only
exempt from Federal gross income tax.

d = highest then-existing Federal income tax rate.

e = that portion of the current yield of the Fund that is only
exempt from Oregon gross income tax.

f = highest then-existing Oregon income tax rate.

g = that portion of the current yield of the Fund that is not
tax exempt.

The tax equivalent yield for the 30-day period ended the date of the most
recent statement of assets and liabilities included in this registration
statement was 7.40%.

The Oregon Bond Fund may also publish a tax equivalent yield for residents
of Oregon that represents the yield that an investor would have to receive on a
fully taxable investment to achieve the same after-tax results of the highest
then-existing marginal Federal income tax rate, calculated according to the
following formula:

38
<PAGE>
Tax Equivalent Yield = a + c
---
1-b

Where: a = that portion of the current yield of the Fund that is
exempt from Federal income tax.

b = highest then-existing marginal Federal income tax rate

c = that portion of the current yield of the Fund that is
not tax exempt.

The tax equivalent yield for the Oregon Bond Fund, calculated according to
the above formula, for the 30-day period ended the date of the most recent
statement of assets and liabilities included in this registration statement was
6.42%.

The U.S. Government Income Fund may publish a tax equivalent yield for
residents of Oregon that represents the yield that an investor would have to
receive on a fully taxable investment to achieve the same after-tax results of
the highest then-existing marginal Oregon income tax rate, calculated according
to the following formula:

Tax Equivalent Yield = a + c
---
1-b

Where: a = that portion of the current yield of the Fund that is exempt
from Federal income tax.

b = highest then-existing marginal Oregon income tax rate

c = that portion of the current yield of the Fund that is not
tax exempt.

The tax equivalent yield for the U.S. Government Income Fund, calculated
according to the above formula, for the 30-day period ended October 31, 1994 was
6.42%.

TOTAL RETURN

The Funds may also publish average annual total return quotations for
recent one, five and ten year periods computed by finding the average annual
compounded rates of return over the one, five and ten year periods that would
equate the initial amount invested to the ending redeemable value, according to
the following formula:

39
<PAGE>
P(1+T)(n) = ERV

Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1, 5 or 10 year
periods (or fractional portion thereof)

Total return figures may also be published for recent one, five and ten
year periods where the total return figures represent the percentage return for
the one, five and ten year periods that would equate the initial amount invested
to the ending redeemable value. Total return percentages for periods of less
than one year are usually annualized.

If a Fund's registration statement under the 1940 Act has been in effect
less than one, five or ten years, the time period during which the registration
statement has been in effect will be substituted for the period stated.

The average annual total return for the one- and five-year periods ended
the date of the most recent statement of assets and liabilities included in this
statement was, for the Special Fund, 22.40%, and 20.05%, respectively; for the
Equity Fund, 7.89%, and 15.36%, respectively; for the Asset Allocation Fund,
2.66% and 10.00%, respectively; for the Oregon Bond Fund, -2.06% and 6.10%,
respectively; for the Income Fund, -2.71% and 6.40%, respectively; for the U.S.
Government Income Fund, -1.78% and 6.15%, respectively; and for the U.S.
Government Money Market Fund, 3.28% and 4.48%, respectively. The average annual
total return for the Special Fund for the seven year period ended on the same
date was 19.79% The average annual total return for the Oregon Bond Fund for
the ten-year period ended on the same date was 8.08%. The average annualized
total return for the Real Estate Fund for the one-year period ended on the same
date was -5.50%.

OTHER QUOTATIONS, COMPARISONS AND GENERAL INFORMATION

From time to time, in advertisements, in sales literature, or in reports to
shareholders, the past performance of the Funds may be illustrated and/or
compared with that of other mutual funds with similar investment objectives, and
to stock or other relevant indices. For example, a Fund's total return may be
compared to averages or rankings prepared by LIPPER ANALYTICAL SERVICES, INC., a
widely recognized independent service which monitors mutual fund performance;
the STANDARD & POOR'S 500 STOCK INDEX, an unmanaged index of common stocks; or
the DOW JONES INDUSTRIAL AVERAGE, a recognized unmanaged index of common stock
of 30

40
<PAGE>
industrial companies listed on the New York Stock Exchange (the "NYSE").

In addition, the performance of the Funds may be compared to alternative
investment or savings vehicles and/or to indexes or indicators of economic
activity, e.g., inflation or interest rates. Performance rankings and listings
reported in newspapers or national business and financial publications, such as
BARRON'S, BUSINESS WEEK, CONSUMER'S DIGEST, CONSUMER'S REPORT, FINANCIAL WORLD,
FORBES, FORTUNE, INVESTOR'S BUSINESS DAILY, KIPLINGER'S, PERSONAL FINANCE
MAGAZINE, MONEY MAGAZINE, the NEW YORK TIMES, SMART MONEY, USA TODAY, U.S. NEWS
AND WORLD REPORT, THE WALL STREET JOURNAL and WORTH may also be cited (if the
Fund is listed in any such publication) or used for comparison, as well as
performance listings and rankings from various other sources, including
BLOOMBERG FINANCIAL SYSTEMS, CDA/WIESENBERGER INVESTMENT COMPANIES SERVICE,
DONOGHUE'S MUTUAL FUND ALMANAC, INVESTMENT COMPANY DATA, INC., JOHNSON'S CHARTS,
KANON BLOCH CARRE & CO., MICROPAL, INC., MORNINGSTAR, INC., SCHABACKER
INVESTMENT MANAGEMENT, TOWERS DATA SYSTEMS and WEISENBERGER INVESTMENT COMPANIES
SERVICE.

In addition, from time to time, quotations from articles from financial
publications, such as those listed above, may be used in advertisements, in
sales literature or in reports to shareholders of the Funds.

----------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
----------------------------------

GENERAL

Each of the Funds intends to qualify as a regulated investment company
under Part I of Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"), but there is no assurance that they will be able to do so. In
general, to qualify for this treatment, the Fund must, among other things,
derive at least 90% of its gross income from dividends, interest, gains from the
sale of securities, and certain related income; derive less than 30% of its
gross income from the sale of securities held less than three months; invest in
securities within certain statutory limits; and distribute to its shareholders
at least 90% of its taxable income and 90% of its net exempt interest income, if
any, for the taxable year. If the Fund does not so qualify, it will be treated
for tax purposes as an ordinary corporation and will receive no tax deduction
for payments made to shareholders.

As regulated investment companies, the Funds will be taxed at regular
corporate rates only on the undistributed portion of their net income and
capital gains.

41
<PAGE>
If a Fund is required to pay federal income taxes on any retained Net
Capital Gain (I.E., the excess of net long-term capital gains over net short-
term capital losses and any capital loss carryover), that Fund may elect to
treat such gain as having been distributed to its shareholders. The election
will cause such amounts to be taxed to the shareholders. Each shareholder may
claim a credit against his income taxes equal to such shareholder's
proportionate share of the federal income tax liability that is paid by that
Fund, and will generally be entitled to increase the adjusted tax basis of his
shares in that Fund by the difference between his pro rata share of such gains
and his tax credit.

The Code requires a regulated investment company to pay a nondeductible 4%
excise tax if such company does not distribute at least 98% of its ordinary
income, determined on a calendar year basis, and 98% of its capital gains,
determined, in general, on an October 31 year-end. The tax is generally applied
against the excess of this required distribution over the amount actually
distributed. The Funds intend to distribute an amount of income and capital
gains that is sufficient to avoid imposition of the 4% excise tax.

The value of any shares redeemed by the Funds or repurchased or otherwise
sold may be more or less than the shareholder's tax basis in the shares at the
time the redemption, repurchase or sale is made. Any gain or loss will
generally be taxable for federal income tax purposes. Any loss realized on the
sale, redemption or repurchase of shares of the Funds that have been held by the
shareholder for six months or less will be treated for tax purposes as a long-
term capital loss to the extent of any net long-term capital gains distributions
received by the shareholder with respect to such shares. Losses on the
redemption or on the sale of shares of the Funds are not deductible if, and to
the extent that, within a period beginning 30 days before the date of the
redemption or sale and ending 30 days after such date, the taxpayer acquires
other Fund shares.

The writing of call options and other investment techniques and practices
which some Funds may utilize, as described in the Prospectus under "Fundamental
Policies," may create "straddles" for United States federal income tax purposes
and may affect the character and timing of the recognition of gains and losses
by such Funds. Such transactions may increase the amount of short-term capital
gain realized by such Funds, which is taxed as ordinary income when distributed
to shareholders.

Dividends paid by the Funds will qualify for the dividends-received
deductions for corporations to the extent they are derived from dividends paid
by domestic corporations.

42
<PAGE>
Distributions, if any, of net long-term capital gains from the sale of the
Funds' securities are taxable to shareholders of the Funds at capital gains
rates, regardless of the length of time the shareholder has owned shares of the
Funds and regardless of whether the distributions are reinvested in shares of
the Funds.

The Funds are required by federal law to obtain from each of their
shareholders certification of the shareholder's correct taxpayer identification
number and certain other information. If a shareholder fails to certify such
number or to provide the necessary information to the Funds, or if the Funds
receive certain notices from the Internal Revenue Service, the Funds will be
required to withhold and pay to the United States Treasury 20% of any reportable
dividends or interest paid to such shareholder.

THE OREGON MUNICIPAL BOND FUND, INC.

As stated in the Prospectus, the Oregon Bond Fund expects to qualify in the
current and future fiscal years as a regulated investment company under the
Code. If it does not so qualify, it will be treated for tax purposes as an
ordinary corporation and will receive no tax deduction for payments made to
shareholders and will be unable to pay "exempt interest dividends," as discussed
in the Prospectus.

From time to time, proposals have been introduced before Congress and the
Internal Revenue Service for the purpose of restricting or eliminating the
federal income tax exemption for interest on municipal securities, including
private activity bonds. It is likely that similar proposals will be introduced
in the future. If such a proposal were enacted, the availability of municipal
securities for investment by the Fund and the value of the Fund's portfolio
could be adversely affected. In such event, the Fund would re-evaluate its
investment objectives and policies and consider recommending to its shareholders
changes in the structure of the Fund.

Section 147 of the Code prohibits exemption from taxation of interest on
certain governmental obligations paid to persons who are "substantial users" (or
persons related thereto) of facilities financed by such obligations.
"Substantial user" is generally defined to include a "nonexempt person" who is
entitled to use more than 5% of a facility financed from the proceeds of
industrial development bonds. No investigation as to the substantial users of
the facilities financed by bonds in the Fund's portfolio will be made by the
Fund. Potential investors who may be, or may be related to, substantial users
of such facilities should consult their tax advisors before purchasing shares of
the Fund.

43
<PAGE>
Each distribution is accompanied by a brief explanation of the form and
character of the distribution. The Fund provides each shareholder with an
annual statement of the federal income tax status of all distributions,
including a statement of percentage of the prior year's distributions designated
by the Fund to be treated as tax-exempt interest or long-term capital gain. The
dollar amounts of tax-exempt and taxable dividends and distributions paid by the
Fund that are reported annually to shareholders will vary for each shareholder,
depending upon the size and duration of the shareholder's investment in the
Fund. To the extent that the Fund derives investment income from taxable
interest, it intends to designate as the actual taxable income the same
percentage of each day's dividend as the actual taxable income bears to the
total investment income earned on that day. The percentage of the dividend
designated as taxable (if any), therefore, may vary from day to day.

Individuals, trusts, and estates who or which are residents of the state of
Oregon will not be subject to the Oregon personal income tax on distributions
from the Fund representing tax-exempt interest paid on municipal securities
issued by the State of Oregon and its political subdivisions. Distributions to
Oregon residents representing earnings of the Fund from sources other than such
tax-exempt interest will be subject to the Oregon personal income tax. In
addition, the Fund anticipates that all distributions from the Fund, from any
source, to corporations subject to the Oregon Corporation excise tax will be
subject to that tax. For purposes of the Oregon personal income tax and the
Oregon corporate excise tax, income from Fund distributions of interest paid on
municipal securities issued by a state, other than Oregon, and its political
subdivisions will be reduced by interest on indebtedness incurred to carry such
securities and expenses incurred to produce such income.

The Oregon Corporate Excise Tax Act generally taxes corporations on income
received from municipal securities, including those issued by the state of
Oregon and its political subdivisions. Since the Fund is a corporation, it
would generally be subject to such a tax. However, the Oregon Department of
Revenue has adopted an administrative rule (Oregon Administrative Rule
150.317,010(10)) which provides that a registered investment company may deduct
from its income an amount equal to the exempt interest dividends paid to its
shareholders. The Fund expects to distribute substantially all of its interest
income as dividends to its shareholders and, therefore, does not expect to be
liable for Oregon Corporate Excise tax.

Under the Code, interest on indebtedness incurred or continued to purchase
or carry shares of an investment company paying "exempt interest dividends,"
such as the Fund, is not deductible by the investor. Under rules used by the
Internal Revenue Service, the purchase of shares may be

44
<PAGE>
considered to have been made with borrowed funds even though the borrowed funds
are not directly traceable to the purchase of shares. In addition, under
Sections 265 and 291 of the Code, certain financial institutions acquiring
shares may be subject to a reduction in the amount of interest expense that
would otherwise be allowable as a deduction for federal income tax purposes.

FOREIGN TAXES

As described below in "Special Investment Risks -- Foreign Securities,"
certain Funds may be subject to foreign withholding taxes which would reduce the
yield on their investments. Tax treaties between certain countries and the
United States may reduce or eliminate such taxes. It is expected that
shareholders of the Funds who are subject to United States federal income tax
will not be entitled to claim a federal income tax credit or deduction for
foreign taxes paid by the Funds.

Gains and losses realized by any of the Funds on certain transactions,
including sales of foreign debt securities and certain transactions involving
foreign currency, will be treated as ordinary income or loss for federal income
tax purposes to the extent, if any, that such gains or losses are attributable
to changes in exchange rates for foreign currencies. Accordingly, distributions
taxable as ordinary income will include the net amount, if any, of such foreign
exchange gains and will be reduced by the net amount, if any, of such foreign
exchange losses.

If any of the Funds purchases shares in certain foreign investment
entities, called "passive foreign investment companies", it may be subject to
United States federal income tax on a portion of any "excess distribution" or
gain from the disposition of such share, even if such income is distributed as a
taxable dividend by such Fund to its shareholders. Additional charges in the
nature of interest may be imposed on either the Fund or its shareholders in
respect of deferred taxes arising from such distributions or gains.

If any of the Funds were to invest in a passive foreign investment company
with respect to which the Fund elected to make a "qualified electing fund"
election, in lieu of the foregoing requirement, such Fund might be required to
include in income each year a portion of the ordinary earnings and net capital
gains of the qualified electing fund, even if such amount were not distributed
to such Fund.

45
<PAGE>
-------------------------
SPECIAL INVESTOR SERVICES
-------------------------

The Funds offer certain shareholder services, which are designed to
facilitate investment in their shares. Each of the options is described in the
Funds' Prospectus. All of these special services may be terminated by either
the Funds or the shareholder without any prior written notice.

-------------------
GENERAL INFORMATION
-------------------
The Funds were incorporated under Oregon law on the dates listed below.

Date
Incorporated
------------

The Crabbe Huson Special Fund, Inc. 1/29/87
The Crabbe Huson Real Estate Investment Fund, Inc. 12/29/93
The Crabbe Huson Equity Fund, Inc. 8/10/88
The Crabbe Huson Asset Allocation Fund, Inc. 8/10/88
The Oregon Municipal Bond Fund, Inc. 10/24/83
The Crabbe Huson Income Fund, Inc. 8/10/88
The Crabbe Huson U.S. Government Income Fund, Inc. 8/10/88
The Crabbe Huson U.S. Government Money Market
Fund, Inc. 8/10/88

During the last five years, the following Funds have changed their names on
the approximate dates indicated:

The Crabbe Huson Special Fund, Inc.
Formerly The Crabbe Huson Growth Fund, Inc. until 2/23/93
Formerly The PNCG Growth Fund, Inc. until 6/14/90

The Crabbe Huson Equity Fund, Inc.
Formerly The PNCG Equity Fund, Inc. until 6/14/90

The Crabbe Huson Asset Allocation Fund, Inc.
Formerly The PNCG Asset Allocation Fund, Inc. until 6/14/90

The Crabbe Huson Income Fund, Inc.
Formerly The PNCG Income Fund, Inc. until 6/14/90

The Crabbe Huson U.S. Government Income Fund, Inc.
Formerly The Crabbe Huson U.S. Government Income Fund, Inc.
until 6/14/90

The Crabbe Huson U.S. Government Money Market Fund, Inc.
Formerly The Crabbe Huson Money Market Fund, Inc.
until 2/23/93
Formerly The PNCG Money Market Fund, Inc. until 6/14/90

Each Fund has an authorized capital of 100 million shares of common stock
(except the Real Estate Fund, which

46
<PAGE>
has an authorized capital of 1 billion shares; the Oregon Bond Fund, which has
an authorized capital of 10 million shares with a par value of $.001 per share;
and the U.S. Government Money Market Fund, which has an authorized capital of 2
billion shares). All shares of each fund are of the same class, although the
Real Estate Fund may establish other classes in the future. Shareholders of
each Fund are entitled to one vote for each full share held and fractional votes
for fractional shares held for that particular Fund. Shareholders of each Fund
vote on the election of directors and any other matter submitted to a
shareholder vote. Shares issued are fully paid and nonassessable, and have no
preemptive or conversion rights. Each share is entitled to participate equally
in dividends and distributions declared by that Fund, and in the net assets of
that Fund upon liquidation or dissolution after satisfaction of outstanding
liabilities.

The authorized shares of the Real Estate Fund may be divided into such
separate series as the Fund's Board of Directors may establish. The Board of
Directors may establish additional classes or series of shares, and may divide
or combine the shares into a greater or lesser number of shares without changing
the proportionate interest of a shareholder. The holders of any additional
shares would participate equally in the earnings, dividends and assets of the
particular series, and would be entitled to vote separately to approve
investment advisory agreements or changes in investment restrictions, but
shareholders of all series would vote together in the election of directors and
accountants.

-------
COUNSEL
-------

The law firm of Davis Wright Tremaine, Portland, Oregon, will pass on
certain legal matters in connection with the issuance of shares of the Funds and
will also act as counsel to the Funds and as counsel to the Adviser and the
Distributor in connection with their relationship with the Funds and certain
matters.

--------
AUDITORS
--------

KPMG Peat Marwick LLP, Portland, Oregon, acts as the Funds' independent
auditors. In such capacity, KPMG Peat Marwick LLP performs the annual audit of
each Fund's financial statements and assists in the preparation of tax returns.

47
<PAGE>
-------------------------------------------------------
CUSTODIAN, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
-------------------------------------------------------

First Interstate Bank of Oregon serves as the custodian (the "Custodian")
of the Funds' cash and securities. State Street Bank & Trust Company serves as
the Funds' transfer agent and dividend-disbursing agent (the "Transfer Agent").
Boston Financial Data Services services as the Transfer Agent's Servicing Agent
in carrying out the Transfer Agent's responsibilities to the Funds. The
Transfer Agent processes requests for the purchase or redemption of a Fund's
shares, sends statements of ownership to shareholders, and performs other
administrative duties on behalf of the Funds. Neither the Custodian nor the
Transfer Agent plays any role in establishing the investment policies of the
Funds or in determining which securities are to be purchased or sold by the
Funds. All fees and expenses of the Custodian and the Transfer Agent are paid
by the Funds. For its custodial services to the Funds, the Custodian receives
monthly fees based upon the Funds' month-end, aggregate net asset value, plus
certain charges for securities transactions. For its services as transfer agent
and dividend-disbursing agent, the Transfer Agent receives fees from the Funds
based upon the number of shareholder accounts maintained and the number of
transactions effected. The Custodian and the Transfer Agent are also reimbursed
by the Funds for out-of-pocket expenses, including the expense of clerical and
administrative services provided to the Funds.

--------------------------------
ADDITIONAL INFORMATION REGARDING
CERTAIN INVESTMENTS BY THE FUNDS
--------------------------------

GOVERNMENT SECURITIES

The taxable fixed-income obligations in which the Funds may invest on a
short-term basis may include obligations issued or guaranteed by the United
States government, its agencies, instrumentalities, or authorities. Any such
obligations in which the Funds invest will consist of bills, notes, and bonds
issued by the United States Treasury or obligations issued by other agencies of
the United States Government. Examples of other government agencies in whose
obligations the Funds may invest include Federal Home Loan Intermediate Credit
banks, Federal Land Banks, Federal Home Loan Banks, and the Federal National
Mortgage Association. Obligations issued by the United States Treasury are
guaranteed by the full faith and credit of the United States Government.
Obligations issued by other federal agencies are direct obligations of such
agencies and are not guaranteed by the United States Government.

48
<PAGE>
MUNICIPAL SECURITIES (The Oregon Municipal Bond Fund, Inc.)

The term "municipal securities," as used in this Statement of Additional
Information, means obligations issued by or on behalf of states, territories and
possessions of the United States and the District of Columbia and their
political subdivisions, agencies, or instrumentalities or multi-state agencies,
or authorities. These obligations are issued to fund various public projects
(such as construction of airports, highways, bridges, schools, and housing),
refund outstanding municipal obligations, obtain funds for general operating
expenses, and for loans to other public institutions and facilities. Municipal
securities are of varying maturities and differ in investment quality, depending
upon the credit worthiness of the obligation's issuer.

The two principal classifications of municipal securities are "general
obligation bonds" and "revenue bonds." General obligation bonds are secured by
the issuer's pledge of its full credit and taxing power for the payment of
principal and interest. Revenue bonds are payable only from the revenues
derived from a particular facility or class of facilities or project or, in a
few cases, from the proceeds of a special excise or other tax, but are not
supported by the issuer's power to levy general taxes.

One type of revenue bond is the "private activity bond" (formerly referred
to as "industrial development bonds"). These obligations are issued by a
governmental or quasi-governmental issuer, but all or a major portion of the
proceeds realized upon the sale of these obligations are used, directly or
indirectly, to fund the trade or business of a private enterprise, generally by
financing the acquisition of a facility to be used by that enterprise. The
payment of principal and interest on private activity bonds is dependent on the
ability of the private enterprise to meet those obligations and is usually
secured by an interest in the financed facility or in payments, such as lease
payments, received with respect to that property. The issuer of the bonds does
not pledge its full credit and taxing power for the payment of principal and
interest. Under current federal income laws, the interest received on certain
small issues and obligations used to finance certain exempt facilities which may
be leased to or used by persons other than the issuer is exempt from federal
income tax. The Oregon Bond Fund intends to purchase tax-exempt private
activity bonds if, in the opinion of the Adviser, such obligations are
appropriate for the Fund's securities portfolios. No limit has been placed upon
the amount of private activity bonds that may be purchased by the Oregon Bond
Fund, and a significant percentage of the Oregon Bond Fund's total assets may be
invested in such obligations. However, no more than 25% of the Oregon Bond
Fund's total assets may be invested in private activity bonds where the payment
of principal and

49
<PAGE>
interest is the ultimate responsibility of companies within the same industry.

------------------------
SPECIAL INVESTMENT RISKS
------------------------

FOREIGN SECURITIES

The Special, Equity, Asset Allocation and Income Funds may invest up to 35%
of their total assets in foreign securities, which may or may not be traded on
an exchange. These Funds may purchase securities issued by issuers in any
country. Securities of foreign companies are frequently denominated in foreign
currencies, and these Funds may temporarily hold uninvested reserves in bank
deposits in foreign currencies. As a result, these Funds will be affected
favorably or unfavorably by changes in currency rates and in exchange control
regulations, and they may incur expenses in connection with conversion between
various currencies. Subject to their investment restrictions, these Funds may
invest in other investment companies that invest in foreign securities. These
Funds do not expect to invest more than 5% of their respective assets in such
investment companies.

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

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

In addition, there may be less publicly available information about a
foreign company than about a domestic company. Foreign companies generally are
not subject to uniform accounting, auditing and financial reporting standards
comparable to those applicable to domestic companies. There is generally less
government regulation of

50
<PAGE>
stock exchanges, brokers and listed companies abroad than in the United States,
and the absence of negotiated brokerage commissions in certain countries may
result in higher brokerage fees. With respect to certain foreign countries,
there is a possibility of expropriation, nationalization, or confiscatory
taxation, which could affect investment in those countries.

FUTURES CONTRACTS

STOCK INDEX FUTURES

The Special, Real Estate, Equity and Asset Allocation Funds may invest up
to 10% of their total assets in futures contracts of broad based stock market
indices. Purchasing such contracts involves greater risks than buying the
underlying securities because futures contracts expire in a relatively short
period of time and may result in the loss of the entire investment in such
contracts. These Funds intend to use such contracts primarily for hedging and
defensive purposes.

INTEREST RATE FUTURES

The Special, Real Estate, Equity, Asset Allocation and Income Funds may
invest up to 10% of their total assets in futures contracts on fixed income
securities such as U.S. Government Bonds, bills or notes. These Funds intend to
use such contracts for hedging or defensive purposes.

Interest rate futures contracts carry the risk of loss of the entire amount
of investment since they have a limited expiration date.

--------------------
FINANCIAL STATEMENTS
--------------------

Following are the financial statements of The Crabbe Huson Family of Mutual
Funds as of October 31, 1994.

51
<PAGE>
THE CRABBE HUSON SPECIAL FUND, INC.
SCHEDULE OF INVESTMENTS
October 31, 1994
<TABLE>
<CAPTION>
MARKET
SHARES SECURITIES DESCRIPTION VALUE
- ----------- ---------------------------------- ------------
<S> <C> <C>
COMMON STOCK - 65.7%
--------------------
COMPUTERS & PRODUCTS - 6.5%
201,400 Apple Computers Inc ................ $8,697,963
154,300 * Artisoft Inc ....................... 1,504,425
566,100 * Cray Research ...................... 10,826,663
----------
21,029,051
----------

CONSUMER PRODUCTS - 5.6%
686,900 * Snapple Beverage Corp .............. 9,616,600
582,200 * Zenith Electronics Corp ............ 8,150,800
----------
17,767,400
----------
ELECTRONICS AND TECHNOLOGY - 6.4%
237,200 * Brooktree, Corp .................... 1,675,225
125,600 * Kulicke & Soffa Industries ......... 2,323,600
224,500 * Lattice Semiconductor, Corp ........ 3,788,438
19,100 * Triquint Semiconductor Inc ......... 112,213
108,500 * Vitesse Semiconductor Corp ......... 488,250
944,600 * VLSI Technology, Inc ............... 12,279,800
----------
20,667,526
----------

ENERGY AND ENERGY SERVICES - 2.2%
135,000 * Kenetech Corp ...................... 1,721,250
200,000 * Landmark Graphics Corp ............. 4,100,000
191,180 Noram Energy Corp .................. 1,147,080
----------
6,968,330
----------

FINANCIAL SERVICES - 6.2%
163,800 American Premier Underwriter ....... 4,095,000
343,500 * Citation Insurance Group ........... 1,631,625
677,000 * Olympic Financial Ltd .............. 3,385,000
297,300 * 20th Century Industries ............ 3,604,763
199,800 U.S. Bancorp ....................... 4,945,050
83,400 * Zurich Reinsurance Centre .......... 2,168,400
----------
19,829,838
----------

HEALTHCARE - 3.1%
308,400 * Amsco International, Inc ........... 2,968,350
406,800 * Sofamor Danek Group, Inc ........... 6,813,900
----------
9,782,250
----------
<CAPTION>
MARKET
SHARES SECURITIES DESCRIPTION VALUE
- ----------- ---------------------------------- ------------
<S> <C> <C>
MACHINERY & EQUIPMENT - 5.1%
573,200 Giddings & Lewis Inc ............... $8,884,600
777,000 MK Rail Corp ....................... 7,575,750
----------
16,460,350
----------

METALS & MINING - 1.5%
275,900 Oregon Steel Mills Inc ............. 4,724,788
----------

MISCELLANEOUS - 4.2%
26,000 Bowne & Co Inc ..................... 416,000
35,280 * Onsite Energy, Corp ................ 30,870
2,187,800 * Rollins Environmental Services ..... 12,853,325
----------
13,300,195
----------

PAPER & FOREST PRODUCTS - 1.0%
5,000 Longview Fibre Co .................. 83,750
169,000 TJ International Inc ............... 3,042,000
----------
3,125,750
----------

REIT - 4.5%
822,500 * Catellus Development Corp .......... 5,449,063
212,600 Crown American Realty .............. 2,923,250
370,000 Prime Residential Inc .............. 5,873,750
----------
14,246,063
----------

RETAIL - 6.3%

352,100 * Burlington Coat Factory ............ 4,577,300
753,100 Cato Corp CL A ..................... 7,060,313
45,000 Oshkosh B Gosh, Inc Class A ........ 675,000
839,700 * Payless Cashways Inc ............... 7,872,188
----------
20,184,801
----------
SOFTWARE - 7.8%
144,500 * BMC Software Inc ................... 6,538,625
25,000 * Corel Corp ......................... 387,500
199,800 * Intergraph Corp .................... 1,723,275
716,300 * Mentor Graphics Corp ............... 9,580,513
158,400 * Parametric Technology Corp ......... 5,702,400
96,300 System Software Assoc., Inc ........ 1,197,731
----------
25,130,044
----------
</TABLE>

52
<PAGE>
THE CRABBE HUSON SPECIAL FUND, INC.
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1994
<TABLE>
<CAPTION>
SHARES
OR FACE MARKET
VALUE SECURITIES DESCRIPTION VALUE
- ----------- --------------------------------- -------------
COMMON STOCK - 65.7% (CONTINUED)
---------------------------------
<S> <C> <C>
TELECOMMUNICATIONS - .7%
200,000 * Crosscomm Corp ................. $2,100,000
-------------

TELEPHONE & UTILITIES - .7%
373,200 * Porta Systems Corp ............. 2,379,150
-------------

TRANSPORTATION - 3.9%
532,900 Airborne Freight Corp .......... 10,191,713
125,400 * Alaska Air Group Inc ........... 2,194,500
-------------
12,386,213
-------------

TOTAL COMMON STOCK 210,081,749
-------------

FIXED INCOME SECURITIES - .6%
-----------------------------
CORPORATE BONDS - .6%
2,550,000 Eagle Hardware (Convertible)
6.250% 03/15/01 ............... 1,880,625
-------------

TOTAL FIXED INCOME SECURITIES 1,880,625
-------------
SHORT-TERM INVESTMENTS-20.4 % ****
----------------------------------
5,000,000 Federal Home Loan (Disc Note)
4.800% 11/01/94 .............. 5,000,000
5,000,000 Federal Home Loan (Disc Note)
4.810% 11/02/94 .............. 4,999,332
5,000,000 Federal Home Loan (Disc Note)
4.820% 11/04/94 .............. 4,997,992
5,000,000 Federal Farm Credit (Disc Note)
4.810% 11/08/94 .............. 4,995,324
7,000,000 Federal Home Loan (Disc Note)
4.860% 11/10/94 .............. 6,991,491
1,635,000 Federal Farm Credit (Disc Note)
4.780% 11/15/94 .............. 1,631,961
5,000,000 Federal Farm Credit (Disc Note)
4.830% 11/16/94 .............. 4,989,917

<CAPTION>
FACE MARKET
VALUE SECURITIES DESCRIPTION VALUE
- ----------- --------------------------------- ------------
<S> <C> <C>
$4,145,000 Federal Farm Credit (Disc Note)
4.830% 11/22/94 .............. $4,133,331

5,000,000 Federal Farm Credit (Disc Note)
4.830% 11/23/94 .............. 4,985,211

5,000,000 Federal Home Loan (Disc Note)
4.800% 11/28/94 .............. 4,982,000

5,000,000 Federal Home Loan (Disc Note)
4.860% 11/29/94 .............. 4,981,100

5,000,000 Federal Home Loan (Disc Note)
4.990% 12/05/94 .............. 4,976,436

1,565,000 Federal Home Loan (Disc Note)
4.950% 12/14/94 .............. 1,555,747

6,000,000 U.S. Treasury Bill
4.750% 12/22/94 .............. 5,959,575
-------------

TOTAL SHORT-TERM INVESTMENTS 65,179,417
-------------

Total Investments - 86.7%
(Cost $262,789,296)** 277,141,791
Cash - 22.1% 70,702,953

SECURITIES SOLD SHORT (13.1%)
COMMON STOCKS
-------------
(158,800) Autodesk Inc ................... (5,478,600)
(30,000) Best Buy Inc ................... (1,132,500)
(90,000) Broderbund Software ............ (5,760,000)
(57,500) Champion Enterprises Inc ....... (2,041,250)
(210,000) Compaq Computers Corp .......... (8,426,250)
(100,000) Microsoft Corp ................. (6,300,000)
(126,000) Oracle Systems Corp ............ (5,796,000)
(120,000) Xilinx Inc ..................... (6,975,000)
-------------

Total Securities Sold Short - (13.1%) (41,909,600)
-------------
(Proceeds $39,766,539)***
Other Assets and (Liabilities), Net - 4.3% 13,875,709
-------------

TOTAL NET ASSETS 100.0% $319,810,853
------------
------------
<FN>
*Non-Income Producing.
**Aggregate cost for Federal income tax purposes is $262,772,363.
***Aggregate proceeds for Federal income tax purposes is $39,666,875.
****Rates reflect purchase yield to maturity.
See accompanying notes to financial statements.
</TABLE>

53
<PAGE>
THE CRABBE HUSON REAL ESTATE INVESTMENT FUND, INC.
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1994

<TABLE>
<CAPTION>
MARKET
SHARES SECURITIES DESCRIPTION VALUE
- ---------- ------------------------------ -------------

COMMON STOCK - 96.8%
--------------------
REIT - 96.8%
<S> <C> <C>
56,000 Cali Realty Corp ............. $889,000
1,000 Camden Property Trust ........ 21,250
34,900 Carr Realty Corp ............. 680,550
19,650 Chateau Properties, Inc ...... 393,000
60,800 Commercial Net Lease Realty .. 752,400
62,100 Crown American Realty ........ 853,875
54,900 Debartolo Realty Corp ........ 734,288
10,000 Duke Realty Investments ...... 246,250
28,350 Excel Realty Trust, Inc ...... 485,494
40,200 Factory Stores of America .... 834,150
30,000 First Industrial Realty ...... 585,000
29,250 Glimcher Reatly Trust ........ 566,719
108,100 IRT Property Co .............. 1,040,463
40,650 Kranzco Realty Trust ......... 701,213
55,000 Malan Realty Investors, Inc .. 825,000
48,750 Mark Centers Trust ........... 633,750
37,300 The Mills Corp ............... 722,685
22,000 Pacific Gulf Properties Inc ... 346,500
60,000 Prime Residential Inc ......... 952,500
1,300 Regency Realty Corp ........... 20,638
41,900 ROC Communities Inc ........... 838,000
1,300 Sizeler Property Investors .... 14,300
29,900 Southwestern Properties Trust .. 366,275
38,600 Spieker Properties Inc ........ 772,000
50,000 Summit Properties Inc ......... 868,750
58,500 Town & Country Trust .......... 862,875
33,800 Trinet Corporate Realty
Trust Inc ..................... 912,600
29,700 Walden Residential
Properties, Inc ............... 571,725
10,000 Weeks Corp .................... 208,750
-------------
17,700,000
-------------

Total Investments - 96.8% $17,700,000
(Cost $19,250,914)**
Cash - 1.5% 276,002
Other Assets and (Liabilities), Net - 1.7% 303,498
-------------

TOTAL NET ASSETS 100.0% $18,279,500
-------------
-------------
<FN>
See accompanying notes to financial statements.
**Aggregate cost for Federal income tax purposes is $19,025,825.
</TABLE>

54
<PAGE>
THE CRABBE HUSON EQUITY FUND, INC.
SCHEDULE OF INVESTMENTS
October 31, 1994

<TABLE>
<CAPTION>
MARKET
SHARES SECURITIES DESCRIPTION VALUE
- ----------- ----------------------------------- ------------
COMMON STOCK - 69.5%
-----------------------
<S> <C> <C>
AUTOS & PRODUCTS - 1.2%
60,400 Echlin Inc ................ $1,857,300
------------

CHEMICAL - 1.8%
71,100 Grace W.R. ................ 2,817,338
------------

COMMUNICATIONS - 1.8%
85,100 Times Mirror Co Class A .... 2,776,388
------------

COMPUTERS & PRODUCTS - 4.8%
62,400 Apple Computers, Inc ...... 2,694,900
36,500 International Business Machine.... 2,719,250
77,500 * Seagate Technology, Inc.... 1,966,563
------------
7,380,713
------------

CONSUMER PRODUCTS - 10.8%
81,400 American Greetings Corp Class A 2,228,325
65,700 Bausch & Lamb Inc ......... 2,135,250
167,000 Chiquita Brands Int'l, Inc ... 2,066,625
57,800 CPC International, Inc .... 3,092,300
46,900 IBP Inc .................... 1,600,463
122,500 McCormick & Co ............. 2,419,375
215,000 * Zenith Electronics Corp .... 3,010,000
------------
16,552,338
------------

ELECTRONICS & TECHNOLOGY - 1.1%
128,100 * VLSI Technology Inc ........ 1,665,300
------------

ENERGY & ENERGY SERVICES - 8.8%
34,600 Dresser Industries Inc ..... 730,925
222,800 Enserch Corp ............... 3,174,900
43,100 Exxon Corp ................. 2,709,913
137,600 Occidental Petroleum Corp .. 3,010,000
53,700 * Triton Energy Corp ......... 1,906,350
68,900 * Vastar Resources Inc ....... 1,989,488
------------
13,521,576
------------
<CAPTION>
MARKET
SHARES SECURITIES DESCRIPTION VALUE
- ----------- ----------------------------------- ------------
<S> <C> <C>
FINANCIAL SERVICES - 8.3%
165,800 Ahmanson (H.F.) & Co ....... $3,170,925
55,900 Dun & Bradstreet ........... 3,277,138
98,650 Edwards (AG), Inc .......... 1,825,025
224,100 Equitable Companies ........ 4,369,950
------------
12,643,038
------------

FOREIGN HOLDINGS - 2.5%
300,800 * Domtar, Inc ................ 1,729,600
38,300 Telefonos De Mexico - ADR .... 2,111,288
------------
3,840,888
------------

HEALTHCARE - 1.8%
55,500 Allergan Inc ............... 1,463,813
24,800 Johnson & Johnson .......... 1,354,700
------------
2,818,513
------------

MACHINERY & EQUIPMENT - 3.1%
48,000 * Detroit Diesel Corp ........ 1,188,000
58,900 Ingersoll Rand Inc ......... 2,098,313
114,400 * Navistar International Corp .... 1,501,500
------------
4,787,813
------------

METALS & MINING - .9%
77,700 J & L Specialty Steel ...... 1,369,463
------------

MISCELLANEOUS - 2.8%
99,200 * Rollins Environmental Services .... 582,800
191,000 * USG Corp ................... 3,748,375
------------
4,331,175
------------

REIT - 4.5%
106,000 Crown American Realty ...... 1,457,500
83,100 First Industrial Realty Trust .... 1,620,450
51,900 Simon Property Group Inc ... 1,239,113
127,700 Spieker Properties, Inc .... 2,554,000
------------
6,871,063
------------

</TABLE>

55
<PAGE>
THE CRABBE HUSON EQUITY FUND, INC.
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1994
<TABLE>
<CAPTION>
SHARES
OR FACE MARKET
VALUE SECURITIES DESCRIPTION VALUE
- ------------ ----------------------------- ------------
COMMON STOCK - 69.5% (Continued)
--------------------------------
RETAIL - 2.6%
<S> <C> <C>
46,400 Dillard Dept Stores Class A .... $1,229,600
151,200 Limited Inc .................... 2,778,300
------------
4,007,900
------------

SOFTWARE - 1.8%
202,200 * Mentor Graphics Corp ........... 2,704,425
------------

TELEPHONE & UTILITIES - 1.9%
166,400 Portland General Corp .......... 2,891,200
------------

TRANSPORTATION - 9.0%
189,500 * Consolidated Freightways, Inc .. 4,240,063
59,000 Delta Air Lines Inc ............ 3,068,000
115,000 Ryder System, Inc .............. 2,702,500
212,200 * Southern Pacific Rail Corp ..... 3,686,975
------------
13,697,538
------------

Total Common Stocks 106,533,969
------------
<CAPTION>
SHORT-TERM INVESTMENTS - 21.8% ****
-----------------------------------
<S> <C> <C>
U.S. GOVERNMENT AND AGENCY - 21.8%
295,000 Federal Farm Credit
(Disc Note) 4.730%
11/01/94 ................ 295,000
480,000 Federal Farm Credit
(Disc Note) 4.700%
11/02/94 ................ 479,937
350,000 Federal Farm Credit
(Disc Note) 4.890%
11/04/94 ................ 349,857
285,000 Federal Home Loan
(Disc Note) 4.690%
11/08/94 ................ 284,740
2,690,000 Federal Farm Credit
(Disc Note) 4.770%
11/08/94 ................ 2,687,500
4,000,000 Federal Farm Credit
(Disc Note) 4.690%
11/09/94 ................ 3,995,831

<CAPTION>
FACE MARKET
VALUE SECURITIES DESCRIPTION VALUE
- ------------ -------------------------------- -------------
<S> <C> <C>
$3,075,000 Federal Home Loan
(Disc Note) 4.950%
11/10/94 ................ 3,071,195
1,000,000 Federal Home Loan
(Disc Note) 4.700%
11/14/94 ................ 998,303
140,000 Federal Home Loan
(Disc Note) 4.720%
11/16/94 ................ 139,725
1,000,000 Federal Home Loan
(Disc Note) 4.720%
11/17/94 ................ 997,902
625,000 Federal Farm Credit
(Disc Note) 4.700%
11/21/94 ................ 623,368
950,000 Federal Home Loan
(Disc Note) 4.850%
11/22/94 ................ 947,312
335,000 Federal Home Loan
(Disc Note) 4.730%
11/28/94 ................ 333,812
2,480,000 Federal Home Loan
(Disc Note) 4.800%
11/29/94 ................ 2,470,741
205,000 Federal Home Loan
(Disc Note) 4.850%
12/01/94 ................ 204,171
415,000 Tennessee Valley Authority
(Disc Note) 5.030%
12/02/94 ................ 413,202
2,050,000 Federal Home Loan
(Disc Note) 4.990%
12/05/94 ................ 2,040,339
270,000 Federal Home Loan
(Disc Note) 4.850%
12/06/94 ................ 268,727
1,500,000 Federal Home Loan
(Disc Note) 4.990%
12/07/94 ................ 1,492,515

</TABLE>

56
<PAGE>
THE CRABBE HUSON EQUITY FUND, INC.
SCHEDULE OF INVESTMENTS
October 31, 1994

<TABLE>
<CAPTION>
FACE MARKET
VALUE SECURITIES DESCRIPTION VALUE
- ------------ ---------------------------------- ------------
SHORT-TERM INVESTMENTS - 21.8% (Continued)
------------------------------------------
U.S. GOVERNMENT AND AGENCY - 21.8% (Continued)
<S> <C> <C>
$935,000 Federal Home Loan
(Disc Note) 4.930%
12/15/94 ................ $929,366
6,000,000 U.S. Treasury Bill
4.750% 12/22/94 ........ 5,959,583
3,000,000 Federal Home Loan
(Disc Note) 5.030%
12/27/94 ................ 2,976,527
935,000 Federal Home Loan
(Disc Note) 5.300%
01/20/95 ................ 923,982
440,000 Federal Home Loan
(Disc Note) 5.350%
01/23/95 ................ 434,573
------------

Total Short Term Investments 33,318,208
-------------

Total Investments - 91.3%
(Cost $134,019,867)** 139,852,177
Cash - 6.8% 10,327,688
Other Assets and (Liabilities), Net - 1.9% 2,925,431
-------------

TOTAL NET ASSETS - 100.0% $153,105,296
-------------
-------------

<FN>
*Non-Income Producing
**Aggregate cost for Federal income tax purposes is $133,960,475.
****Rates reflect purchase yield to maturity.
See accompanying notes to financial statements.
</TABLE>

<PAGE>

THE CRABBE HUSON ASSET ALLOCATION FUND, INC.
SCHEDULE OF INVESTMENTS
October 31, 1994
<TABLE>

FACE MARKET
VALUE SECURITIES DESCRIPTION VALUE
- ------------- ---------------------------------------- --------------
<S> <C> <C>

FIXED INCOME SECURITIES - 36.2%
-------------------------------

CORPORATE BONDS - 2.5%
$1,600,000 GCA 1993 GNMA PO
0.000% 03/28/98. . . . . . . . . . . . $1,334,000
250,000 Bear Stearns Co.
7.625% 09/15/99. . . . . . . . . . . . 244,063
500,000 GMAC
4.625% 10/01/99. . . . . . . . . . . . 495,000
725,000 GMAC
5.500% 10/15/02. . . . . . . . . . . . 708,688
------------
2,781,751
------------

OTHER REVENUE BONDS - 2.0%
2,085,000 Intermountain Power Agency UT
9.000% 07/01/19. . . . . . . . . . . . 2,168,400
------------

U.S. GOVERNMENT AND AGENCY - 31.7%
4,970,000 U.S. Treasury Note
7.875% 07/31/96. . . . . . . . . . . . 5,064,132
5,500,000 U.S. Treasury Note
8.000% 01/15/97. . . . . . . . . . . . 5,619,790
390,000 International Bank Recon.
& Dev. Floater 0.000%
08/07/97. . . . . . . . . . . . . . . . 319,398
1,100,000 U.S. Treasury Note
8.750% 10/15/97. . . . . . . . . . . . 1,146,068
1,500,000 SLMA Treasury Ind. Floater
4.000% 02/11/98. . . . . . . . . . . . 1,490,145
3,830,000 U.S. Treasury Note
5.125% 03/31/98. . . . . . . . . . . . 3,585,033
2,000,000 U.S. Treasury Note
8.000% 08/15/99. . . . . . . . . . . . 2,045,200
1,700,000 Federal National Mortgage Assoc.
8.650% 12/10/99. . . . . . . . . . . . 1,703,910
2,000,000 Federal Home Loan Mortgage Corp.
8.020% 10/02/01. . . . . . . . . . . . 2,000,040
1,150,000 Federal National Mortgage Assoc.
8.050% 11/01/01. . . . . . . . . . . . 1,150,000
1,000,000 U.S. Treasury Note
7.500% 11/15/01. . . . . . . . . . . . 991,810

SHARES
OR FACE MARKET
VALUE SECURITIES DESCRIPTION VALUE
- ------------- ---------------------------------------- --------------
<S> <C> <C>

$2,000,000 U.S. Treasury Strip
0.000% 02/15/03. . . . . . . . . . . . $1,054,740
112,584 FHLMC Pool #281037
9.250% 11/01/16. . . . . . . . . . . . 115,027
1,336,953 FHLMC Pool #303033
9.000% 04/01/17. . . . . . . . . . . . 1,352,529
3,900,000 U.S. Treasury Bond
8.125% 08/15/21. . . . . . . . . . . . 3,911,583
3,500,000 U.S. Treasury Bond
7.625% 11/15/22. . . . . . . . . . . . 3,329,270
------------
34,878,675
------------

Total Fixed Income Securites 39,828,826
------------

COMMON STOCK - 47.8%
--------------------

AUTOMOBILES - .8%
29,000 Echlin Inc . . . . . . . . . . . . . . . 891,750
------------

CHEMICAL - 1.6%
44,100 Grace W.R. . . . . . . . . . . . . . . . 1,747,463
------------

COMMUNICATIONS - 1.1%
38,200 Times Mirror Co Class A. . . . . . . . . 1,246,275
------------

COMPUTERS & PRODUCTS - 4.0%
36,800 Apple Computers. . . . . . . . . . . . . 1,589,300
25,700 International Business Machine . . . . . 1,914,650
37,900 * Seagate Technology, Inc. . . . . . . . . 961,713
------------
4,465,663
------------

CONSUMER PRODUCTS - 6.5%
36,200 American Greetings Corp Class. . . . . . 990,975
26,100 Bausch & Lomb Inc. . . . . . . . . . . . 848,250
98,100 Chiquita Brands Intl . . . . . . . . . . 1,213,988
23,600 CPC International Inc. . . . . . . . . . 1,262,600
25,800 IBP Inc. . . . . . . . . . . . . . . . . 880,425
44,700 McCormick & Co . . . . . . . . . . . . . 882,825
84,900 * Zenith Electronics Corp. . . . . . . . . 1,188,600
------------
7,267,663
------------

</TABLE>

<PAGE>

THE CRABBE HUSON ASSET ALLOCATION FUND, INC.
SCHEDULE OF INVESTMENTS
October 31, 1994

MARKET
SHARES SECURITIES DESCRIPTION VALUE
- ------------- ---------------------------------------- --------------
<S> <C> <C>

COMMON STOCK - 47.8% (Continued)
--------------------------------
ELECTRONICS & TECHNOLOGY - .7%
55,000 * VLSI Technology Inc. . . . . . . . . . . $715,000
------------

ENERGY & ENERGY SERVICES - 6.1%
13,600 Dresser Industries Inc . . . . . . . . . 287,300
106,000 Enserch Corp . . . . . . . . . . . . . . 1,510,500
19,600 Exxon Corp . . . . . . . . . . . . . . . 1,232,350
71,000 Occidental Petroleum Corp. . . . . . . . 1,553,125
32,000 * Triton Energy Corp . . . . . . . . . . . 1,136,000
36,400 * Vastar Resources Inc . . . . . . . . . . 1,051,050
------------
6,770,325
------------

FINANCIAL SERVICES - 5.3%
107,000 Ahmanson (H.F.) & Co . . . . . . . . . . 2,046,375
21,900 Dun & Bradstreet Corp. . . . . . . . . . 1,283,888
45,050 Edwards (AG) Inc . . . . . . . . . . . . 833,425
90,400 Equitable Companies. . . . . . . . . . . 1,762,800
------------
5,926,488
------------

FOREIGN HOLDINGS - 1.7%
164,400 * Domtar Inc . . . . . . . . . . . . . . . 945,300
17,200 Telefonos De Mexico - ADR. . . . . . . . 948,150
------------
1,893,450
------------

HEALTHCARE - 2.5%
46,100 Allergan Inc . . . . . . . . . . . . . . 1,215,888
27,200 Johnson & Johnson. . . . . . . . . . . . 1,485,800
------------
2,701,688
------------

MACHINERY - 2.0%
19,500 * Detroit Diesol Corp. . . . . . . . . . . 482,625
31,500 Ingersoll Rand Inc . . . . . . . . . . . 1,122,188
44,800 * Navistar International, Corp . . . . . . 588,000
------------
2,192,813
------------

MARKET
SHARES SECURITIES DESCRIPTION VALUE
- ------------- ---------------------------------------- --------------
<S> <C> <C>

METALS AND MINING - .9%
55,000 J & L Specialty Steel. . . . . . . . . . $969,375
------------

MISCELLANEOUS - 1.6%
38,900 * Rollins Environmental Services . . . . . 228,538
77,100 * USG Corp . . . . . . . . . . . . . . . . 1,513,088
------------
1,741,626
------------

REIT - 2.9%
62,100 Crown American Realty. . . . . . . . . . 853,875
32,600 First Industrial Reaty Trust . . . . . . 635,700
27,300 Simon Property Group, Inc. . . . . . . . 651,788
51,000 Spieker Properties . . . . . . . . . . . 1,020,000
------------
3,161,363
------------

RETAIL - 1.8%
21,500 Dillard Dept. Stoares - Class A. . . . . 569,750
73,700 Limited, Inc . . . . . . . . . . . . . . 1,354,238
------------
1,923,988
------------

SOFTWARE - 1.6%

129,600 * Mentor Graphics Corp . . . . . . . . . . 1,733,400
------------

TELEPHONE & UTILITIES - 1.2%
74,000 Portland General Corp. . . . . . . . . . 1,285,750
------------

TRANSPORTATION - 5.5%
89,000 * Consolidated Freightways . . . . . . . . 1,991,375
23,500 Delta Air Lines Inc. . . . . . . . . . . 1,196,000
47,600 Ryder System . . . . . . . . . . . . . . 1,118,600
101,200 * Southern Pacific Rail Corp . . . . . . . 1,758,350
------------
6,064,325
------------

Total Common Stocks 52,698,405
------------

</TABLE>

<PAGE>

THE CRABBE HUSON ASSET ALLOCATION FUND, INC.
SCHEDULE OF INVESTMENTS
October 31, 1994

<TABLE>

FACE MARKET
VALUE SECURITIES DESCRIPTION VALUE
- ------------- ---------------------------------------- -------------
<S> <C> <C>

SHORT-TERM INVESTMENTS - 13.0% ****
-----------------------------------

$1,000,000 Federal Farm Credit
(Disc Note) 4.930%
11/10/94. . . . . . . . . . . . . . . . $998,768
2,000,000 Federal Home Loan
(Disc Note) 4.800%
11/21/94. . . . . . . . . . . . . . . . 1,994,667
2,000,000 Federal Home Loan
(Disc Note) 4.850%
11/30/94. . . . . . . . . . . . . . . . 1,992,186
840,000 Federal Home Loan
(Disc Note) 4.910%
12/02/94. . . . . . . . . . . . . . . . 836,448
1,600,000 Federal Home Loan
(Disc Note) 4.960%
12/19/94. . . . . . . . . . . . . . . . 1,589,419
3,000,000 U.S. Treasury Bill
4.750% 12/22/94 . . . . . . . . . . . . 2,979,791
1,530,000 Federal Home Loan
(Disc Note) 5.040%
12/27/94. . . . . . . . . . . . . . . . 1,518,005
2,400,000 Federal Home Loan
(Disc Note) 5.050%
12/30/94. . . . . . . . . . . . . . . . 2,380,130
------------

Total Short-Term Investments 14,289,414
------------

Total Investments - 97.0%
(Cost $102,010,373)** 106,816,645
Cash - .3% 395,421
Other Assets and (Liabilities), Net - 2.7% 2,939,719
------------

TOTAL NET ASSETS - 100.0% $110,151,785
------------
------------

<FN>
*Non-income producing
**Aggregate cost for Federal income tax purposes is $101,935,031.
****Rates reflect purchase yield to maturity.
See accompanying notes to financial statements.

</TABLE>

60
<PAGE>
THE OREGON MUNICIPAL BOND FUND, INC.
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1994
<TABLE>
<CAPTION>
FACE MARKET
VALUE SECURITIES DESCRIPTION VALUE
- ------------- ------------------------ --------------
FIXED INCOME SECURITIES - 94.4%
-------------------------------
<S> <C> <C>

STATE OF OREGON GENERAL
OBLIGATION BONDS - 12.8%
$105,000 State of Oregon G. O.
8.500% 04/01/96 ........ $110,381
205,000 State of Oregon G. O.
Environmental 8.000%
08/01/96 ............... 216,019
555,000 State of Oregon G. O.
7.300% 03/01/98 ........ 586,913
240,000 State of Oregon G. O.
7.700% 03/01/02........ 255,300
100,000 State of Oregon G. O.
9.000% 04/01/03 ....... 120,500
205,000 State of Oregon G.O.
8.200% 07/01/04......... 239,081
150,000 State of Oregon G.O.
7.200% 07/01/04......... 164,625
110,000 State of Oregon G.O.
6.000% 08/01/04......... 110,963
200,000 State of Oregon G. O.
9.000% 10/01/04 ........... 228,500
345,000 State of Oregon G.O.
6.750% 05/01/05......... 367,425
250,000 State of Oregon G. O.
(Veterans) 7.250%
07/01/06 ................... 274,688
200,000 State of Oregon G. O.
(Veterans) 8.250%
01/01/07 .................... 234,500
200,000 State of Oregon G. O.
(Veterans) 7.250%
01/01/07 .................. 218,500
100,000 State of Oregon G.O.
(Alt Energy)
6.400% 01/01/08......... 100,375
130,000 State of Oregon G.O.
9.200% 04/01/08......... 164,450
305,000 State of Oregon G. O.
9.400% 10/01/15 .......... 322,156
--------------
3,714,376
--------------
<CAPTION>
FACE MARKET
VALUE SECURITIES DESCRIPTION VALUE
- -------------- --------------------------------- ---------------
<S> <C> <C>

STATE OF OREGON REVENUE BONDS - 2.5%
$545,000 Oregon State Light Rail
7.000% 06/01/04 ............. $592,006
125,000 Oregon State Fair & Expo
Revenue 7.375%
10/01/06.................... 128,594
---------------
720,600
---------------

OTHER GENERAL OBLIGATION
BONDS - 11.0%
1,000,000 City of Portland Water G.O.
3.700% 12/01/00 .......... 987,500
330,000 Puerto Rico G.O.
7.125% 07/01/02 .......... 346,500
300,000 Deschutes G.O. School
District #1
5.800% 02/01/04 .......... 295,125
250,000 Washington County School
District # 48J
6.200% 09/01/04 .......... 259,063
125,000 Marion & Polk County
School District #24J
5.700% 10/01/05 .......... 125,781
200,000 Clackamas Community College
5.100% 12/01/05 .......... 187,250
1,000,000 Tri-Met Light Rail
5.900% 07/01/06 .......... 988,750
---------------
3,189,969
---------------

OTHER REVENUE BONDS - 8.4%
200,000 City of Portland (Hydro
Electric Power) 6.500%
10/01/97 ................ 200,750
295,000 Metropolitan Service District
5.750% 07/01/00 ......... 304,956
600,000 Clackamas County Hospital
(Sisters of Providence)
6.200% 10/01/01 ............ 599,250
335,000 Central Lincoln PUD
6.500% 01/01/02 ................ 349,656

</TABLE>

61
<PAGE>

THE OREGON MUNICIPAL BOND FUND, INC.
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1994

FACE MARKET
VALUE SECURITIES DESCRIPTION VALUE
- ------------- ---------------------------------------- --------------
<S> <C> <C>

OTHER REVENUE BONDS - 8.4% (CONTINUED)
$500,000 City of Portland
(Urban Renewal)
6.100% 06/01/03. . . . . . . . . . . . $504,375
150,000 Owyhee Malheur County
(Irrigation District)
9.600% 12/01/03. . . . . . . . . . . . 157,688
350,000 City of Portland
(Urban Renewal)
5.700% 06/01/04. . . . . . . . . . . . 336,000
------------
2,452,675
------------

PRE-REFUNDED BONDS - 22.4% ****
100,000 City of Lebanon G.O.
8.600% 11/01/95. . . . . . . . . . . . 104,125
125,000 City of Portland
Urban Renewal
9.000% 12/01/95. . . . . . . . . . . . 133,438
365,000 Multnomah County
School District #1
8.850% 12/15/95. . . . . . . . . . . . 382,794
1,000,000 Multnomah County
School District #1
9.300% 12/15/95. . . . . . . . . . . . 1,053,750
100,000 Gresham Sewer Revenue
7.900% 06/01/96. . . . . . . . . . . . 106,750
170,000 City of Springfield G.O.
8.100% 06/01/96 . . . . . . . . . . . . 178,713
100,000 City of Oregon City
(Water) 7.100%
10/15/96. . . . . . . . . . . . . . . . 105,250
550,000 City of Portland (Sewer)
7.000% 03/01/98. . . . . . . . . . . . 582,313
270,000 Metropolitan Service District
6.600% 07/01/99. . . . . . . . . . . . 288,563
250,000 Clackamas & Washington County
School District #003
7.200% 10/01/99. . . . . . . . . . . . 269,688
200,000 Clackamas & Washington County
School District #003
7.250% 10/01/99. . . . . . . . . . . . 216,250
400,000 Oregon State Department
General Services
7.500% 09/01/00. . . . . . . . . . . . 447,500
310,000 Emerald Peoples Utility
District 6.300%
11/01/00. . . . . . . . . . . . . . . . $326,275
373,000 Deschutes County (St.
Charles Medical Center)
6.750% 01/01/00. . . . . . . . . . . . 394,448
320,000 Metropolitan Service District
7.300% 01/01/00. . . . . . . . . . . . 351,200
400,000 Metropolitan Service District
7.000% 01/01/00. . . . . . . . . . . . 433,500
100,000 Oregon State Department
General Services
7.200% 1/15/00 . . . . . . . . . . . . 109,500
250,000 Oregon State Revenue
Series B 6.250%
01/01/01. . . . . . . . . . . . . . . . 262,500
250,000 Emerald Peoples Utility
District 6.500%
11/01/01. . . . . . . . . . . . . . . . 264,375
270,000 Port of Morrow (Pollution
Control) 6.375%
04/01/02 . . . . . . . . . . . . . . . . 282,488
225,000 Marion & Polk County
School District #24-J
6.000% 10/01/02. . . . . . . . . . . . 230,625
------------
6,524,045
------------

INSURED BONDS - 36.4%
100,000 Hood River County
Oregon School District
12.500% 06/01/96
(AMBAC) . . . . . . . . . . . . . . . . 111,250
140,000 Marion County Solid Waste
8.700% 10/01/96
(AMBAC) . . . . . . . . . . . . . . . . 148,400
400,000 Clackamas Hospital
(Adventist) 5.350%
03/01/98 (MBIA) . . . . . . . . . . . . 404,000
500,000 Oregon State Department
of Administrative Services
4.000% 11/01/99
(MBIA). . . . . . . . . . . . . . . . . 468,750
250,000 Clackamas County Hospital
Facility Revenue 5.800%
03/01/02 (MBIA) . . . . . . . . . . . . 253,438
</TABLE>

62
<PAGE>
THE OREGON MUNICIPAL BOND FUND, INC.
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1994
<TABLE>
<CAPTION>

FACE MARKET
VALUE SECURITIES DESCRIPTION VALUE
- ------------- ---------------------------------------- --------------
<S> <C> <C>

INSURED BONDS - 36.4% (Continued)

$1,100,000 Portland Legacy Health
System 6.400%
05/01/02 (AMBAC). . . . . . . . . . . . $1,155,000
200,000 Yamhill Clackamas Washington
School District #29J
4.800% 06/01/02 (FSA). . . . . . . . . 186,500
675,000 Port of Portland (Revenue)
6.250% 07/01/02
(MBIA). . . . . . . . . . . . . . . . . 702,844
1,240,000 Hood River County
Oregon School District
6.000% 06/01/03
(AMBAC) . . . . . . . . . . . . . . . . 1,246,200
250,000 Emerald Peoples Utility
District 5.450%
11/01/03 (AMBAC) . . . . . . . . . . . 246,250
500,000 Deschutes/Jefferson County
School Dist. 5.300%
06/01/04 (MBIA). . . . . . . . . . . . 474,375
260,000 Hood River County Oregon
School Dist. 6.000%
06/01/04 (AMBAC) . . . . . . . . . . . 58,700
545,000 Jefferson County School Dist.
509J 6.500%
06/15/04 (FSA) . . . . . . . . . . . . 568,163
350,000 Portland Oregon Sewer System
(Revenue) 5.750%
10/01/05 (FGIC). . . . . . . . . . . . 343,875
500,000 Washington County Sewer System
(Revenue) 5.800%
10/01/05 (AMBAC) . . . . . . . . . . . 501,250
1,015,000 Crook County School District
4.700% 02/01/06
(FSA) . . . . . . . . . . . . . . . . . 899,544
400,000 Oregon State Facility
Series A 6.100%
09/01/06 (AMBAC) . . . . . . . . . . . 403,000
350,000 Washington County Sewer
(Revenue) 5.900%
10/01/06
(AMBAC) . . . . . . . . . . . . . . . . $350,875
1,065,000 McMinnville Sewer System
Revenue 4.700%
02/01/07 (FGIC). . . . . . . . . . . . 927,881
1,000,000 Salem Keizer School
District #24-J 5.500%
06/01/07 (FGIC) . . . . . . . . . . . 946,250
------------
10,596,545
------------

CERTIFICATE OF PARTICIPATION BONDS - .9%
250,000 City of Portland (COP)
6.950% 04/01/99. . . . . . . . . . . . 265,313
------------

Total Fixed Income Securities 27,463,523
------------

SHORT-TERM INVESTMENTS - 4.7%
-----------------------------

235,000 City of Springfield G.O.
7.600% 06/01/95. . . . . . . . . . . . 239,756
185,000 Clackamas County Tax Revenue
5.700% 09/01/95. . . . . . . . . . . . 185,463
750,000 Clackamas County Hospital
(Sisters of Providence)
9.625% 10/01/95. . . . . . . . . . . . 799,680
150,000 Clackamas County Hospital
Facility (Sisters of
Providence)
9.200% 10/01/95. . . . . . . . . . . . 159,375
------------
Total Short-Term Investments 1,384,274
------------

Total Investments - 99.1%
(Cost 28,936,413)** $28,847,797
Cash - 0.2% 51,223
Other Assets and (Liabilities), Net - .7% 146,708
------------
TOTAL NET ASSETS - 100.0% $29,045,728
------------
------------

<FN>
**Aggregate cost for Federal income tax purposes is identical.
****Dates reflect pre-refunded dates.
See accompanying notes to financial statements.

</TABLE>

<PAGE>

THE CRABBE HUSON INCOME FUND, INC.
SCHEDULE OF INVESTMENTS
October 31, 1994

FACE MARKET
VALUE SECURITIES DESCRIPTION VALUE
- ------------- ---------------------------------------- --------------
<S> <C> <C>

FIXED INCOME SECURITIES - 80.3%
-------------------------------

CORPORATE BONDS - 14.4%
$250,000 Bear Stearns Co
7.625% 09/15/99. . . . . . . . . . . . $244,063
100,000 GMAC
4.625% 10/01/99. . . . . . . . . . . . 99,000
250,000 Costco Wholesale (Convertible)
5.750% 05/15/02. . . . . . . . . . . . 210,000
500,000 Alaska Air Group
0.000% 04/18/06. . . . . . . . . . . . 206,250
------------
759,313
------------

INSURED BONDS - 4.1%
225,000 City of Lincoln City
5.800% 06/01/97
(AMBAC) . . . . . . . . . . . . . . . . 217,406
------------

OTHER REVENUE BONDS - 4.6%
235,000 Intermountain Power Agency UT
9.000% 07/01/19. . . . . . . . . . . . 244,400
------------

U.S. GOVERNMENT AND AGENCY - 57.2%
235,000 U.S. Treasury Note 7.875%
07/31/96. . . . . . . . . . . . . . . . 239,451
320,000 International Bank Recon
Dev Floater 0.000%
08/07/97. . . . . . . . . . . . . . . . 262,070
350,000 U.S. Treasury Note 5.125%
03/31/98. . . . . . . . . . . . . . . . 327,614
130,000 U.S. Treasury Strip 0.000%
05/15/99 . . . . . . . . . . . . . . . . 93,353
250,000 U.S. Treasury Note 8.000%
08/15/99. . . . . . . . . . . . . . . . 255,650
300,000 Federal Home Loan
Mortgage Corp. Strip
0.000 11/15/99 . . . . . . . . . . . . 205,209
300,000 Federal National Mortgage
Assoc. 8.650%
12/10/99. . . . . . . . . . . . . . . . 300,690
200,000 Federal Home Loan
Mortgage Corp.
8.000% 10/02/01. . . . . . . . . . . . 200,004
84,546 FNMA Pool #30333 9.250%
09/01/16. . . . . . . . . . . . . . . . 87,066
141,717 FHLMC Pool #302029 9.500%
10/01/16. . . . . . . . . . . . . . . . 146,264
229,275 FHLMC Pool #303033 9.000%
04/01/17. . . . . . . . . . . . . . . . 231,946
244,252 FHLMC Pool #301538 10.000%
07/01/17. . . . . . . . . . . . . . . . 256,442
300,000 U.S. Treasury Bond 6.250%
08/15/23. . . . . . . . . . . . . . . . 240,162
175,000 U.S. Treasury Bond 7.500%
11/15/24 . . . . . . . . . . . . . . . . 165,736
------------
3,011,657
------------

Total Fixed Income Securities 4,232,776
------------

PREFERRED STOCK - 5.1%
----------------------

11,500 Prime Retail Inc . . . . . . . . . . . . 270,250
------------

SHORT TERM INVESTMENTS - 1.9%
-----------------------------

CORPORATE BONDS - 1.9%
100,000 Salomon, Inc.
9.000% 07/01/95. . . . . . . . . . . . 101,375
------------

Total Investments - 87.3%
(Cost $4,685,275)** 4,604,401
Cash - 16.4% 866,086
Other Assets and (Liabilities), Net - (3.7%) (197,080)
------------

TOTAL NET ASSETS - 100.0% $5,273,407
------------
------------

<FN>
**Aggregate cost for Federal income tax purposes is $4,735,391.
See accompanying notes to financial statements.

</TABLE>

<PAGE>

THE CRABBE HUSON U.S. GOVERNMENT INCOME FUND, INC.
SCHEDULE OF INVESTMENTS
October 31, 1994
<TABLE>
<CAPTION>

FACE MARKET
VALUE SECURITIES DESCRIPTION VALUE
- ------------- ---------------------------------------- --------------
<S> <C> <C>

U.S. GOVERNMENT AND AGENCY - 86.4%
----------------------------------

$900,000 U.S. Treasury Note 7.625%
04/30/96. . . . . . . . . . . . . . . . $913,185
600,000 U.S. Treasury Note 5.500%
04/30/96. . . . . . . . . . . . . . . . 590,724
1,200,000 U.S. Treasury Note 7.375%
05/15/96. . . . . . . . . . . . . . . . 1,212,804
300,000 U.S. Treasury Note 6.000%
06/30/96. . . . . . . . . . . . . . . . 296,847
520,000 U.S. Treasury Note 7.875%
07/15/96. . . . . . . . . . . . . . . . 529,604
480,000 U.S. Treasury Note 8.000%
01/15/97. . . . . . . . . . . . . . . . 490,454
650,000 U.S. Treasury Note 6.375%
06/30/97. . . . . . . . . . . . . . . . 640,036
255,000 International Bank Recon
& Dev Floater
0.000% 08/07/97. . . . . . . . . . . . 208,837
800,000 U.S. Treasury Note 5.500%
09/30/97. . . . . . . . . . . . . . . . 766,576
800,000 U.S. Treasury Note 8.750%
10/15/97. . . . . . . . . . . . . . . . 833,504
750,000 U.S. Treasury Note 5.625%
01/31/98. . . . . . . . . . . . . . . . 715,373
165,000 U.S. Treasury Note 5.125%
03/31/98. . . . . . . . . . . . . . . . 154,447
500,000 U.S. Treasury Note 4.750%
09/30/98. . . . . . . . . . . . . . . . 456,435
150,000 Federal National Mortgage
Assoc. 4.950%
09/30/98. . . . . . . . . . . . . . . . 136,746
65,000 U.S. Treasury Strip 0.000%
05/15/99. . . . . . . . . . . . . . . . 46,677
------------

Total Fixed Income Securities 7,992,249
------------

SHORT-TERM INCOME SECURITIES - 10.2%
-------------------------------------

U.S. GOVERNMENT AND AGENCY - 10.2%
250,000 U.S. Treasury Note 8.625%
01/15/95. . . . . . . . . . . . . . . . 251,688
690,000 U.S. Treasury Note 5.500%
02/15/95. . . . . . . . . . . . . . . . 690,123
------------
941,811
------------

Total Short Term Investments 941,811
------------

Total Investments - 96.6%
(Cost $9,155,050)** 8,934,060
Cash - 2.1% 198,158
Other Assets and (Liabilities), Net - 1.3% 116,994
------------

TOTAL NET ASSETS - 100.0% $9,249,212
------------
------------

<FN>
**Aggregate cost for Federal income tax purposes is identical.
See accompanying notes to financial statements.

</TABLE>

<PAGE>

THE CRABBE HUSON U.S. GOVERNMENT MONEY MARKET FUND, INC.
SCHEDULE OF INVESTMENTS
October 31, 1994

Face Market
Value Securities Description Value
- ------------- ---------------------------------------- --------------
<S> <C> <C>
U.S. GOVERNMENT AND AGENCY - 99.6% ****
$605,000 Federal Farm Credit
(Disc Note) 4.730%
11/01/94. . . . . . . . . . . . . . . . $605,000
520,000 Federal Farm Credit
(Disc Note) 4.700%
11/02/94. . . . . . . . . . . . . . . . 519,932
1,250,000 Federal Farm Credit
(Disc Note) 4.850%
11/03/94. . . . . . . . . . . . . . . . 1,249,664
890,000 Federal Home Loan Bank
(Disc Note) 4.820%
11/04/94. . . . . . . . . . . . . . . . 889,643
1,135,000 Federal Home Loan Bank
(Disc Note) 4.640%
11/07/94. . . . . . . . . . . . . . . . 1,134,123
715,000 Federal Home Loan Bank
(Disc Note) 4.690%
11/08/94. . . . . . . . . . . . . . . . 714,348
1,310,000 Federal Farm Credit
(Disc Note) 4.690%
11/08/94. . . . . . . . . . . . . . . . 1,308,805
580,000 Federal Farm Credit
(Disc Note) 4.900%
11/09/94. . . . . . . . . . . . . . . . 579,368
930,000 Federal Home Loan Bank
(Disc Note) 4.950%
11/10/94. . . . . . . . . . . . . . . . 928,849
700,000 Federal Farm Credit
(Disc Note) 4.740%
11/14/94. . . . . . . . . . . . . . . . 698,802
365,000 Federal Farm Credit
(Disc Note) 4.780%
11/15/94. . . . . . . . . . . . . . . . 364,322
860,000 Federal Farm Credit
(Disc Note) 3.530%
11/16/94. . . . . . . . . . . . . . . . 858,309
800,000 Federal Home Loan Bank
(Disc Note) 4.720%
11/17/94. . . . . . . . . . . . . . . . 798,367
1,000,000 Federal Farm Credit
(Disc Note) 4.590%
11/18/94. . . . . . . . . . . . . . . . 997,762
270,000 Federal Farm Credit
(Disc Note) 4.700%
11/21/94. . . . . . . . . . . . . . . . 269,295
500,000 Federal Farm Credit
(Disc Note) 4.960%
11/22/94. . . . . . . . . . . . . . . . 498,553
1,020,000 Federal Farm Credit
(Disc Note) 4.920%
11/23/94. . . . . . . . . . . . . . . . 1,016,935
1,665,000 Federal Home Loan Bank
(Disc Note) 4.770%
11/28/94. . . . . . . . . . . . . . . . 1,659,048
520,000 Federal Home Loan Bank
(Disc Note) 4.800%
11/29/94. . . . . . . . . . . . . . . . 518,059
1,035,000 Federal Farm Credit
(Disc Note) 4.820%
11/30/94. . . . . . . . . . . . . . . . 1,030,979
200,000 Federal Home Loan Bank
(Disc Note) 4.850%
12/01/94. . . . . . . . . . . . . . . . 199,192
1,585,000 Tennessee Valley Authority
(Disc Note) 5.030%
12/02/94. . . . . . . . . . . . . . . . 1,578,135
1,660,000 Federal Home Loan Bank
(Disc Note) 4.910%
12/02/94. . . . . . . . . . . . . . . . 1,652,981
950,000 Federal Home Loan Bank
(Disc Note) 4.990%
12/05/94. . . . . . . . . . . . . . . . 945,523
230,000 Federal Home Loan Bank
(Disc Note) 4.850%
12/06/94. . . . . . . . . . . . . . . . 228,915
1,500,000 Federal Home Loan Bank
(Disc Note) 4.990%
12/07/94. . . . . . . . . . . . . . . . 1,492,515
1,435,000 Federal Home Loan Bank
(Disc Note) 4.950%
12/14/94. . . . . . . . . . . . . . . . 1,426,516
1,065,000 Federal Home Loan Bank
(Disc Note) 4.930%
12/15/94. . . . . . . . . . . . . . . . 1,058,583

</TABLE>

<PAGE>

THE CRABBE HUSON U.S. GOVERNMENT MONEY MARKET FUND, INC.
SCHEDULE OF INVESTMENTS
October 31, 1994

Face Market
Value Securities Description Value
- ------------- ---------------------------------------- --------------
<S> <C> <C>
U.S. GOVERNMENT AND AGENCY - 99.6% (continued)
$1,000,000 Federal Home Loan Bank
(Disc Note) 5.000%
12/20/94. . . . . . . . . . . . . . . . $993,194
1,470,000 Federal Home Loan Bank
(Disc Note) 5.040%
12/27/94. . . . . . . . . . . . . . . . 1,458,475
1,000,000 Federal Home Loan Bank
(Disc Note) 4.920%
01/17/95. . . . . . . . . . . . . . . . 989,477
1,065,000 Federal Home Loan Bank
(Disc Note) 5.300%
01/20/95. . . . . . . . . . . . . . . . 1,052,457
560,000 Federal Home Loan Bank
(Disc Note) 5.350%
01/23/95. . . . . . . . . . . . . . . . 553,093
1,000,000 Federal Home Loan Bank
(Disc Note) 5.020%
02/13/95. . . . . . . . . . . . . . . . 985,498
1,000,000 Federal Home Loan Bank
(Disc Note) 4.980%
02/14/95. . . . . . . . . . . . . . . . 985,472
------------
32,240,189
------------

Total Investments - 99.6%
(Cost $32,240,189)** 32,240,189
Cash - 0.3% 116,761
Other Assets and (Liabilities), Net - 0.1% 25,602
------------

TOTAL NET ASSETS - 100.0% $32,382,552
------------
------------

<FN>
**Aggregate cost for Federal income tax purposes is identical.
****Rates reflect purchase yield to maturity.
See accompanying notes to financial statements.

</TABLE>

<PAGE>
THE CRABBE HUSON FAMILY OF MUTUAL FUNDS

STATEMENTS OF ASSETS AND LIABILITIES
October 31, 1994

THE
THE CRABBE HUSON THE THE
CRABBE HUSON REAL ESTATE CRABBE HUSON CRABBE HUSON
SPECIAL INVESTMENT EQUITY ASSET ALLOCATION
FUND, INC. FUND, INC. FUND, INC. FUND, INC.
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investment securities, at market (cost $262,789,296,
$19,250,914, $134,019,867, $102,010,373, $28,936,413,
$4,685,275, $9,155,050 and $32,240,189, respectively)...... $277,141,791 $17,700,000 $139,852,177 $ 106,816,645
Cash........................................................ 70,702,953 276,002 10,327,688 395,421
Deposits with brokers for securities sold short............. 39,766,539 -- -- --
Receivables:
Dividends and interest.................................... 154,712 62,141 118,082 804,629
Fund shares sold.......................................... 1,016,491 -- 269,174 --
Investment securities sold................................ 5,285,675 1,206,070 5,620,180 2,887,330
Short sales closed........................................ 421,472 -- -- --
Due from investment advisor (note 2)...................... -- 30,481 -- --
Due from affiliates (note 2).............................. -- 3,471 -- --
Organization costs, (less accumulated amortization of
$3,977).................................................. -- 99,703 -- --
Prepaid expenses.......................................... 19,903 1,550 17,557 15,846
------------ ------------ ------------ ------------------
$394,509,536 $19,379,418 $156,204,858 $ 110,919,871
------------ ------------ ------------ ------------------
LIABILITIES
Securities sold short, at market (proceeds $39,766,539)..... 41,909,600 -- -- --
Payables:
Investment securities purchased........................... 32,661,600 -- 3,039,419 714,385
Fund shares redeemed...................................... -- 1,041,550 -- --
Distributions to shareholders............................. -- 46,416 -- --
Payable to affiliates and directors (Note 2).............. 67,718 780 29,500 28,725
Accrued liabilities....................................... 59,765 11,172 30,643 24,976
------------ ------------ ------------ ------------------
74,698,683 1,099,918 3,099,562 768,086
------------ ------------ ------------ ------------------
NET ASSETS.................................................. $319,810,853 $18,279,500 $153,105,296 $ 110,151,785
------------ ------------ ------------ ------------------
------------ ------------ ------------ ------------------
NET ASSETS CONSIST OF:
Capital shares............................................ 22,709 1,925 9,313 8,561
Capital paid in........................................... 295,569,131 19,583,087 144,014,430 101,343,751
Undistributed accumulated net investment income........... 298,637 -- 872,521 --
Undistributed accumulated net realized gain (loss) on
investments.............................................. 11,710,942 245,402 2,376,722 3,993,201
Net unrealized appreciation (depreciation) on investments
(Note 6)................................................. 12,209,434 (1,550,914) 5,832,310 4,806,272
------------ ------------ ------------ ------------------
$319,810,853 $ 18,279,500 $153,105,296 $110,151,785
------------ ------------ ------------ ------------------

CAPITAL SHARES, PAR VALUE $.001
Authorized................................................ 100,000,000 1,000,000,000 100,000,000 100,000,000
Outstanding............................................... 22,709,660 1,924,529 9,312,833 8,561,108
------------ ------------ ------------ ------------------
------------ ------------ ------------ ------------------
NET ASSET VALUE PER SHARE................................. $ 14.08 $ 9.50 $ 16.44 $ 12.87
------------ ------------ ------------ ------------------
------------ ------------ ------------ ------------------
</TABLE>

See accompanying notes to financial statements.

THE THE
THE THE CRABBE HUSON CRABBE HUSON
OREGON CRABBE HUSON U.S. GOVERNMENT U.S. GOVERNMENT
MUNICIPAL BOND INCOME INCOME MONEY MARKET
FUND, INC. FUND, INC. FUND, INC. FUND, INC.
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investment securities, at market (cost $262,789,296,
$19,250,914, $134,019,867, $102,010,373, $28,936,413,
$4,685,275, $9,155,050 and $32,240,189, respectively)...... $ 28,847,797 $ 4,604,401 $ 8,934,060 $ 32,240,189
Cash........................................................ 51,223 866,086 198,158 116,761
Deposits with brokers for securities sold short............. -- -- -- --
Receivables:
Dividends and interest.................................... 547,162 73,545 121,099 2,628
Fund shares sold.......................................... -- -- -- 38,600
Investment securities sold................................ -- 1,565 131 --
Short sales closed........................................ -- -- -- --
Due from investment advisor (note 2)...................... -- -- -- --
Due from affiliates (note 2).............................. -- -- -- --
Organization costs, (less accumulated amortization of
$3,977).................................................. -- -- -- --
Prepaid expenses.......................................... 870 7,981 8,101 12,296
--------------- ------------ ---------------- ----------------
$ 29,447,052 $ 5,553,578 $ 9,261,549 $ 32,410,474
--------------- ------------ ---------------- ----------------

LIABILITIES
Securities sold short, at market (proceeds $39,766,539)..... -- -- -- --
Payables:
Investment securities purchased........................... -- 271,688 -- --
Fund shares redeemed...................................... 369,802 -- -- --
Distributions to shareholders............................. -- -- -- --
Payable to affiliates and directors (Note 2).............. 21,103 3,479 6,899 17,604
Accrued liabilities....................................... 10,419 5,004 5,438 10,318
--------------- ------------ ---------------- ----------------
401,324 280,171 12,337 27,922
--------------- ------------ ---------------- ----------------
NET ASSETS.................................................. $ 29,045,728 $ 5,273,407 $ 9,249,212 $ 32,382,552
--------------- ------------ ---------------- ----------------
--------------- ------------ ---------------- ----------------
NET ASSETS CONSIST OF:
Capital shares............................................ 2,422 544 901 32,382
Capital paid in........................................... 28,980,087 5,587,246 9,617,929 32,350,170
Undistributed accumulated net investment income........... -- -- -- --
Undistributed accumulated net realized gain (loss) on
investments.............................................. 151,835 (233,509) (148,628) --
Net unrealized appreciation (depreciation) on investments
(Note 6)................................................. (88,616) (80,874) (220,990) --
--------------- ------------ ---------------- ----------------
$29,045,728 $ 5,273,407 $ 9,249,212 $ 32,382,552
--------------- ------------ ---------------- ----------------

CAPITAL SHARES, PAR VALUE $.001
Authorized................................................ 10,000,000 100,000,000 100,000,000 2,000,000,000
Outstanding............................................... 2,421,658 543,154 900,706 32,382,552
--------------- ------------ ---------------- ----------------
--------------- ------------ ---------------- ----------------
NET ASSET VALUE PER SHARE................................. $ 11.99 $ 9.71 $ 10.27 $ 1.00
--------------- ------------ ---------------- ----------------
--------------- ------------ ---------------- ----------------
</TABLE>

<PAGE>
THE CRABBE HUSON FAMILY OF MUTUAL FUNDS

STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1994, EXCEPT FOR THE
REAL ESTATE INVESTMENT FUND, INC., WHICH IS FOR THE PERIOD
APRIL 4, 1994 (COMMENCEMENT OF OPERATIONS) TO
OCTOBER 31, 1994
<TABLE>
<CAPTION>
THE
THE CRABBE HUSON THE THE
CRABBE HUSON REAL ESTATE CRABBE HUSON CRABBE HUSON
SPECIAL INVESTMENT EQUITY ASSET ALLOCATION
FUND, INC. FUND, INC. FUND, INC. FUND, INC.
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest....................................................... $ 1,351,013 $ 23,285 $ 843,945 $ 2,699,652
Dividends (net of foreign taxes withheld of $0, $0, $28,740,
$20,877, $0, $0, $0, and $0, respectively).................... 525,884 671,629 1,254,455 1,211,466
------------ ------------ ------------ ------------
1,876,897 694,914 2,098,400 3,911,118
------------ ------------ ------------ ------------
EXPENSES
Investment advisor fees (Note 2)............................... 963,723 94,916 782,419 1,034,183
Transfer agent (Note 2)........................................ 92,985 45,223 66,034 60,798
Printing....................................................... 61,325 2,373 36,386 29,054
Custody (Note 3)............................................... 15,035 2,953 21,766 26,791
Legal.......................................................... 30,029 5,273 23,167 30,095
Auditing....................................................... 21,302 5,785 16,507 22,621
Insurance...................................................... 11,034 1,005 9,069 13,630
Directors' fees................................................ 3,019 2,198 3,019 7,769
Registration fees.............................................. 60,109 1,260 44,904 38,376
Amortization of organization expenses.......................... -- 3,977 2,978 2,978
Miscellaneous.................................................. 62,674 4,106 42,665 55,342
Distribution fees (Note 2)..................................... 252,436 23,730 198,811 267,165
Short sales dividends.......................................... 7,200 -- -- --
------------ ------------ ------------ ------------
1,580,871 192,799 1,247,725 1,588,802
Fees waived by investment advisor (Note 2)..................... (85,038) (50,426) (68,033) (53,227)
Expenses reimbursed by investment advisor (Note 2)............. -- (46,416) -- --
Expenses paid by third party (Note 3).......................... (15,035) -- (21,766) (26,791)
------------ ------------ ------------ ------------
NET EXPENSES..................................................... 1,480,798 95,957 1,157,926 1,508,784
------------ ------------ ------------ ------------
NET INVESTMENT INCOME............................................ 396,099 598,957 940,474 2,402,334
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN:
Net realized gain (loss) on investments........................ 11,534,530 206,890 2,406,325 4,008,708
Net change in unrealized appreciation or depreciation of
investments................................................... 8,747,502 (1,550,914) 1,406,726 (3,975,212)
------------ ------------ ------------ ------------
NET GAIN (LOSS) ON INVESTMENTS................................... 20,282,032 (1,344,024) 3,813,051 33,496
------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS..................................................... $20,678,131 ($ 745,067) $ 4,753,525 $ 2,435,830
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>

See accompanying notes to financial statements.

<PAGE>
<TABLE>
<CAPTION>
THE THE
THE THE CRABBE HUSON CRABBE HUSON
OREGON CRABBE HUSON U.S. GOVERNMENT U.S. GOVERNMENT
MUNICIPAL BOND INCOME INCOME MONEY MARKET
FUND, INC. FUND, INC. FUND, INC. FUND, INC.
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest....................................................... $ 1,634,942 $ 324,621 $ 526,202 $ 882,376
Dividends (net of foreign taxes withheld of $0, $0, $28,740,
$20,877, $0, $0, $0, and $0, respectively).................... -- 10,268 -- --
------------ ------------ ------------ ------------
1,634,942 334,889 526,202 882,376
------------ ------------ ------------ ------------
EXPENSES
Investment advisor fees (Note 2)............................... 152,868 43,957 51,245 107,853
Transfer agent (Note 2)........................................ 29,381 22,603 23,807 26,911
Printing....................................................... 10,150 4,137 4,377 10,274
Custody (Note 3)............................................... 6,184 2,887 3,945 7,198
Legal.......................................................... 7,535 2,831 2,771 8,464
Auditing....................................................... 8,186 4,143 4,737 6,650
Insurance...................................................... 4,210 876 1,497 2,790
Directors' fees................................................ 3,019 1,119 1,119 3,019
Registration fees.............................................. 3,193 19,331 19,922 32,088
Amortization of organization expenses.......................... -- 2,978 2,978 2,930
Miscellaneous.................................................. 30,018 7,490 8,766 15,877
Distribution fees (Note 2)..................................... 76,586 14,177 25,768 53,250
Short sales dividends.......................................... -- -- -- --
------------ ------------ ------------ ------------
331,330 126,529 150,932 277,304
Fees waived by investment advisor (Note 2)..................... (31,708) (43,957) (51,245) (107,853)
Expenses reimbursed by investment advisor (Note 2)............. -- (35,685) (22,837) (18,457)
Expenses paid by third party (Note 3).......................... -- -- -- --
------------ ------------ ------------ ------------
NET EXPENSES..................................................... 299,622 46,887 76,850 150,994
------------ ------------ ------------ ------------
NET INVESTMENT INCOME............................................ 1,335,320 288,002 449,352 731,382
------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN:
Net realized gain (loss) on investments........................ 151,835 (283,625) (148,628) --
Net change in unrealized appreciation or depreciation of
investments................................................... (2,209,050) (169,542) (480,026) --
------------ ------------ ------------ ------------
NET GAIN (LOSS) ON INVESTMENTS................................... (2,057,215) (453,167) (628,654) --
------------ ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS..................................................... ($ 721,895) ($ 165,165) ($ 179,302) $ 731,382
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------

</TABLE>

<PAGE>
THE CRABBE HUSON FAMILY OF MUTUAL FUNDS

STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
THE
THE THE CRABBE HUSON
CRABBE HUSON CRABBE HUSON REAL ESTATE
SPECIAL SPECIAL INVESTMENT
FUND, INC. FUND, INC. FUND, INC.
- -------------------------------------------------------------------------------------
PERIOD FROM
YEAR ENDED YEAR ENDED APRIL 4, 1994
OCTOBER 31, OCTOBER 31, TO OCTOBER
1994 1993 31, 1994
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income (loss).......... $ 396,099 ($ 95,041) $ 598,957
Net realized gain on investments...... 11,534,530 817,789 206,890
Net change in unrealized appreciation
or depreciation of investments....... 8,747,502 3,393,061 (1,550,914)
-------------- ------------- -------------
Increase (decrease) in net assets
resulting from operations............ 20,678,131 4,115,809 (745,067)

DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income............ -- -- (373,869)
In excess of net investment income.... -- -- --
From net realized gain on investment
transactions......................... (687,990) -- --
CAPITAL SHARE TRANSACTIONS, NET
(Note 5)............................. 276,003,800 13,843,669 19,298,436
-------------- ------------- -------------
Total increase (decrease) in net
assets............................... 295,993,941 17,959,478 18,179,500
FUND NET ASSETS, BEGINNING OF PERIOD.... 23,816,912 5,857,434 100,000
-------------- ------------- -------------
FUND NET ASSETS, END OF PERIOD.......... $ 319,810,853 $ 23,816,912 $ 18,279,500
-------------- ------------- -------------
-------------- ------------- -------------
Undistributed (distributed in excess of)
net investment income, end of
period............................... $ 298,637 ($ 124,823) --
-------------- ------------- -------------
-------------- ------------- -------------

</TABLE>

See accompanying notes to financial statements.

72
<PAGE>
<TABLE>
<CAPTION>

THE THE THE THE THE THE
CRABBE HUSON CRABBE HUSON CRABBE HUSON CRABBE HUSON OREGON OREGON
EQUITY EQUITY ASSET ALLOCATION ASSET ALLOCATION MUNICIPAL BOND MUNICIPAL BOND
FUND, INC. FUND, INC. FUND, INC. FUND, INC. FUND, INC. FUND, INC.
- ----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1994 1993 1994 1993 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income (loss)..........$ 940,474 $ 147,072 $ 2,402,334 $ 1,262,683 $ 1,335,320 $ 1,090,421
Net realized gain on investments...... 2,406,325 1,802,860 4,008,708 4,695,884 151,835 26,159
Net change in unrealized appreciation
or depreciation of investments....... 1,406,726 3,656,219 (3,975,212) 6,814,377 (2,209,050) 1,256,165
-------------- ------------- -------------- ------------- ------------- -------------
Increase (decrease) in net assets
resulting from operations............ 4,753,525 5,606,151 2,435,830 12,772,944 (721,895) 2,372,745

DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income............ (170,079) (164,714) (2,313,253) (1,289,619) (1,335,320) (1,083,539)
In excess of net investment income.... -- -- -- -- (770) --
From net realized gain on investment
transactions......................... (1,800,301) (578,181) (4,683,410) (1,325,447) (22,243) (175,703)
CAPITAL SHARE TRANSACTIONS, NET
(Note 5).............................. 115,801,985 16,227,595 29,322,601 20,133,158 1,717,846 7,998,711
-------------- ------------- -------------- ------------- ------------- -------------
Total increase (decrease) in net
assets............................... 118,585,130 21,090,851 24,761,768 30,291,036 (362,382) 9,112,214
FUND NET ASSETS, BEGINNING OF PERIOD.... 34,520,166 13,429,315 85,390,017 55,098,981 29,408,110 20,295,896
-------------- ------------- -------------- ------------- ------------- -------------
FUND NET ASSETS, END OF PERIOD..........$ 153,105,296 $ 34,520,166 $ 110,151,785 $ 85,390,017 $ 29,045,728 $ 29,408,110
-------------- ------------- -------------- ------------- ------------- -------------
-------------- ------------- -------------- ------------- ------------- -------------
Undistributed (distributed in excess of)
net investment income, end of
period...............................$ 872,521 $ 120,476 -- ($ 58,322) -- ($ 20,305)
-------------- ------------- -------------- ------------- ------------- -------------
-------------- ------------- -------------- ------------- ------------- -------------

</TABLE>

73
<PAGE>
THE CRABBE HUSON FAMILY OF MUTUAL FUNDS

STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
THE THE
CRABBE HUSON CRABBE HUSON
INCOME INCOME
FUND, INC. FUND, INC.
- ---------------------------------------------------------------------
YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1994 1993
- ---------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income................. $ 288,002 $ 232,413
Net realized gain (loss) on
investments.......................... (283,625) 160,888
Net change in unrealized appreciation
or depreciation of investments....... (169,542) 1,101
------------ ------------
Increase (decrease) in net assets
resulting from operations............ (165,165) 394,402

DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income............ (288,002) (244,552)
In excess of net investment income.... (4,622) --
From net realized gain on investment
transactions......................... (156,271) (226,735)
CAPITAL SHARE TRANSACTIONS, NET
(Note 5)............................. 190,912 139,068
------------ ------------
Total increase (decrease) in net
assets............................... (423,148) 62,183
FUND NET ASSETS, BEGINNING OF PERIOD.... 5,696,555 5,634,372
------------ ------------
FUND NET ASSETS, END OF PERIOD.......... $ 5,273,407 $ 5,696,555
------------ ------------
------------ ------------
Undistributed (distributed in excess of)
net investment income, end of
period................................ -- ($ 12,823)
------------ ------------
------------ ------------

</TABLE>

74
<PAGE>
<TABLE>
<CAPTION>
THE THE THE THE
CRABBE HUSON CRABBE HUSON CRABBE HUSON CRABBE HUSON
U.S. GOVERNMENT U.S. GOVERNMENT U.S. GOVERNMENT U.S. GOVERNMENT
INCOME INCOME MONEY MARKET MONEY MARKET
FUND, INC. FUND, INC. FUND, INC. FUND, INC.
- -------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1994 1993 1994 1993
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income................. $ 449,352 $ 467,922 $ 731,382 $ 270,217
Net realized gain (loss) on
investments.......................... (148,628) 113,322 -- --
Net change in unrealized appreciation
or depreciation of investments....... (480,026) 81,912 -- --
------------- ------------- ------------- -------------
Increase (decrease) in net assets
resulting from operations............ (179,302) 663,156 731,382 270,217
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income............ (449,352) (477,050) (731,382) (270,244)
In excess of net investment income.... (3,373) -- -- --
From net realized gain on investment
transactions......................... (108,276) (75,395) -- --
CAPITAL SHARE TRANSACTIONS, NET
(Note 5)............................. (1,228,397) 2,148,444 17,598,059 2,389,193
------------- ------------- ------------- -------------
Total increase (decrease) in net
assets............................... (1,968,700) 2,259,155 17,598,059 2,389,166
FUND NET ASSETS, BEGINNING OF PERIOD.... 11,217,912 8,958,757 14,784,493 12,395,327
------------- ------------- ------------- -------------
FUND NET ASSETS, END OF PERIOD.......... $ 9,249,212 $ 11,217,912 $ 32,382,552 $ 14,784,493
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Undistributed (distributed in excess of)
net investment income, end of
period................................ -- ($ 11,677) -- --
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>

75
<PAGE>
NOTES TO FINANCIAL STATEMENTS
October 31, 1994

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION: The Crabbe Huson Special Fund, Inc., The Crabbe Huson Real
Estate Investment Fund, Inc., The Crabbe Huson Equity Fund, Inc., The Crabbe
Huson Asset Allocation Fund, Inc., The Crabbe Huson Income Fund, Inc., The
Crabbe Huson U.S. Government Income Fund, Inc. and The Crabbe Huson U.S.
Government Money Market Fund, Inc. are registered under the Investment Company
Act of 1940, as amended, as open-end diversified investment companies. The
Crabbe Huson Real Estate Investment Fund, Inc. was incorporated in Oregon on
December 29, 1993 and investment operations of the Fund commenced on April 4,
1994. The Oregon Municipal Bond Fund, Inc. is registered under the Investment
Company Act of 1940, as amended, as an open-end non-diversified investment
company.

The following is a summary of significant accounting policies consistently
followed by the Funds in preparation of financial statements.

SECURITY VALUATION--THE CRABBE HUSON U.S. GOVERNMENT MONEY MARKET FUND, INC.:
In order to maintain a constant net asset value of $1.00, the Fund values its
assets using the amortized cost method by adjusting the cost of each security
for accretion of discount or amortization of premium.

SECURITY VALUATION--OTHER FUNDS: Securities listed or traded on a registered
securities exchange are valued at the last price on the date of the computation.
This includes over-the-counter securities for which last sale information is
available. Where last sale information is not available, the last bid price is
used. Securities and assets for which market quotations are not readily
available are valued at fair market value as determined in good faith by or
under the direction of the Board of Directors of the Funds. Short-term
investments are valued using the amortized cost method by adjusting the cost of
each security for accretion of discount or amortization of premium.

SECURITY TRANSACTIONS AND INVESTMENT INCOME: Security transactions are
accounted for on the trade date, the date the order to buy or sell is executed.
Interest income is recorded daily on the accrual basis. Interest income
consists of interest accrued plus the accretion of original issue discount and
minus the amortization of investment premium, both calculated on an effective
interest basis. Dividend income and distributions to shareholders are recorded
on the ex-dividend date. Net realized gains and losses are computed on the
first-in, first-out, method.

The majority of the dividend income recorded by the Crabbe Huson Real Estate
Investment Fund, Inc. is from Real Estate Investment Trusts (REITs). For tax
purposes, a portion of

76
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 1994

these dividends consists of capital gains and return of capital. For financial
reporting purposes, these dividends are recorded as dividend income.

DIVIDENDS AND DISTRIBUTIONS: The Oregon Municipal Bond Fund, Inc. declares
dividends from its net investment income each business day. The net investment
income for Saturdays, Sundays and holidays is declared as a dividend on the next
business day. Declared dividends are accrued through the last business day of
each month and are distributed on that date. Net capital gains realized by the
Fund, if any, are declared and distributed on an annual basis, usually in
December.

The Crabbe Huson Special Fund, Inc. and The Crabbe Huson Equity Fund, Inc.
expect to declare and distribute to shareholders, once a year in December,
substantially all of the net investment income and net realized capital gains
(if any).

The Crabbe Huson Real Estate Investment Fund, Inc., and The Crabbe Huson Asset
Allocation Fund, Inc. expect to declare and distribute dividends from net
investment income on the last business day of each fiscal quarter. Net capital
gains realized by the Fund, if any, are declared and distributed on an annual
basis, usually in December.

The Crabbe Huson Income Fund, Inc. and The Crabbe Huson U.S. Government Income
Fund, Inc. declare and distribute dividends from net investment income on the
last business day of each month. Net capital gains realized by the Funds, if
any, are declared and distributed on an annual basis, usually in December.

The Crabbe Huson U.S. Government Money Market Fund, Inc. declares dividends from
its net investment income each business day. The net investment income for
Saturdays, Sundays and holidays is declared as a dividend on the prior business
day. Declared dividends are accrued through the last business day of each month
and are distributed on that date. Since the Fund intends to maintain a constant
one dollar per share net asset value, it does not anticipate the declaration of
capital gain distributions.

ORGANIZATION COSTS: Expenses incurred in connection with the organization of
the Funds, are amortized over a sixty-month period. The amortization is
calculated based upon the projected growth in net assets of the Funds. As of
October 31, 1994 amortization costs for all Funds have been fully amortized,
except for The Crabbe Huson Real Estate Investment Fund, Inc. which commenced
operation on April 4, 1994. The Crabbe Huson Group, Inc., the Crabbe Huson Real
Estate Investment 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.

77
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 1994

FEDERAL INCOME TAXES: It is each Fund's policy to distribute all of its taxable
income to shareholders and otherwise comply with the provisions of the Internal
Revenue Code applicable to regulated investment companies. Therefore, no
provision has been made for Federal income tax on net investment income and
realized capital gains.

During the current year, the funds adopted Statement of Position 93-2
"Determination, Disclosure, and Financial Presentation of Income, Capital Gain,
and Return of Capital Distributions by Investment Companies". Due to the timing
of dividend distributions and the differences in accounting for income and
realized gains (losses) for financial statement and federal income tax purposes,
the fiscal year in which amounts are distributed may differ from the year in
which the income and realized gains (losses) were recorded by the funds. The
differences between the income or gains distributed on a book versus tax basis
are shown as excess distributions of net investment income and net realized gain
on sales of investments in the Statement of Changes in Net Assets.

On the Statement of Assets and Liabilities, as a result of permanent book-to-tax
differences, reclassification adjustments have been made as follows:
<TABLE>
<CAPTION>
Undistributed Undistributed
Accumulated Accumulated
Net Net Realized
Capital Investment Gain On
Paid In Income Investments
---------- -------------- ------------
<S> <C> <C> <C>
The Crabbe Huson Special
Fund, Inc. $ (109,017) $ 27,358 $ 81,659
The Crabbe Huson Real Estate
Investment Fund, Inc. 186,577 (225,089) 38,512
The Crabbe Huson Equity
Fund, Inc. (552) (18,350) 18,902
The Crabbe Huson Asset
Allocation Fund, Inc. 59,202 (30,760) (28,442)
The Oregon Municipal Bond
Fund, Inc. 15,531 21,078 (36,609)
The Crabbe Huson Income
Fund, Inc. (51,824) 17,450 34,374
The Crabbe Huson U.S.
Government Income Fund, Inc. (1,320) 15,054 (13,734)
The Crabbe Huson U.S. Government
Money Market Fund, Inc. ---- ---- ----
</TABLE>

78
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 1994

2. INVESTMENT ADVISOR AND OTHER TRANSACTIONS WITH
AFFILIATES

INVESTMENT ADVISOR: The Funds have entered into an investment advisory
agreement with Crabbe Huson Group, Inc., an affiliated company. The investment
advisory fee of each Fund is accrued daily and paid semi-monthly. The annual
investment advisory fee for each Fund is described below:

THE CRABBE HUSON SPECIAL FUND, INC.
THE CRABBE HUSON REAL ESTATE INVESTMENT FUND, INC.
THE CRABBE HUSON EQUITY FUND, INC.
THE CRABBE HUSON ASSET ALLOCATION FUND, INC.

1.00% of daily net assets up to $100,000,000
.85 of 1% of daily net assets between $100,000,000 and $500,000,000
.60 of 1% of daily net assets over $500,000,000

THE CRABBE HUSON INCOME FUND, INC.

.75 of 1% of daily net assets up to $100,000,000
.60 of 1% of daily net assets up to $500,000,000
.50 of 1% of daily nets assets over $500,000,000

THE OREGON MUNICIPAL BOND FUND, INC.
THE CRABBE HUSON U.S. GOVERNMENT INCOME FUND, INC.
THE CRABBE HUSON U.S. GOVERNMENT MONEY MARKET FUND, INC.

.50 of 1% of daily net assets up to $500,000,000
.45 of 1% of daily net assets between
$500,000,000 and $1,000,000,000
.40 of 1% of daily net assets over $1,000,000,000

The Advisor has voluntarily agreed to waive its management fee and/or
distribution fee and/or reimburse each Fund for the amount, if any, by which the
total operating and management expenses of such Fund (including the Advisor's
compensation and any amounts paid pursuant to the participating Funds' Rule 12b-
1 plan but excluding interest, taxes, brokerage fees and commissions and
extraordinary expenses) exceed certain annual rates applied to the average daily
net assets of the Funds.

79
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 1994

The annual expense limit for each Fund is listed below:

The Crabbe Huson Special Fund, Inc. 1.50%
The Crabbe Huson Real Estate Investment Fund, Inc. 1.50%
The Crabbe Huson Equity Fund, Inc. 1.50%
The Crabbe Huson Asset Allocation Fund, Inc. 1.50%
The Oregon Municipal Bond Fund, Inc. .98%
The Crabbe Huson Income Fund, Inc. .80%
The Crabbe Huson U.S. Government Income Fund, Inc. .75%
The Crabbe Huson U.S. Government Money Market Fund, Inc. .70%

This informal agreement may be modified or discontinued at any time, at the
Advisor's discretion.

DISTRIBUTOR: The Funds have entered into a distribution agreement with Crabbe
Huson Securities, Inc., an affiliated company. Under the Distribution Plan,
each of the participating Funds may pay up to 1/4 of 1% of such Fund's average
daily net assets to the Distributor as reimbursement for its actual expenses
incurred in the distribution and promotion of such Fund's shares. For the
reported period ended October 31, 1994, the following are the amounts received
by and payable to Crabbe Huson Securities, Inc. for each Fund's distribution
fees:
<TABLE>
<CAPTION>
Distribution
Fees
Received by Distribution
Crabbe Huson Fees
Securities, Inc. Payable
---------------- ------------
<S> <C> <C>
The Crabbe Huson Special Fund, Inc. $ 100,461 $ 66,938
The Crabbe Huson Real Estate Investment
Fund, Inc. 11,265 3,471
The Crabbe Huson Equity Fund, Inc. 102,058 28,720
The Crabbe Huson Asset Allocation Fund, Inc. 187,265 26,690
The Oregon Municipal Bond Fund, Inc. 56,262 20,323
The Crabbe Huson Income Fund, Inc. 10,978 3,199
The Crabbe Huson U.S. Government Income
Fund, Inc. 19,149 6,619
The Crabbe Huson U.S. Government Money
Market Fund, Inc. 35,927 16,824
</TABLE>
TRANSFER AGENT: The Funds have entered into agreements with Pacific Northwest
Trust Company, an affiliated company, to provide transfer agent and accounting
services.

80
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 1994

DIRECTORS FEES: As of October 31, 1994, fees payable to the disinterested
directors were $780, $780, $780, $2,035, $780, $280, $280 and $780 for The
Crabbe Huson Special Fund, Inc., The Crabbe Huson Real Estate Investment Fund,
Inc., The Crabbe Huson Equity Fund, Inc., The Crabbe Huson Asset Allocation
Fund, Inc., The Oregon Municipal Bond Fund, Inc., The Crabbe Huson Income Fund,
Inc., The Crabbe Huson U.S. Government Income Fund, Inc. and The Crabbe Huson
U.S. Government Money Market Fund, Inc., respectively.

3. AGREEMENTS WITH THIRD PARTIES

The Crabbe Huson Special Fund, Inc., The Crabbe Huson Asset Allocation Fund,
Inc. and The Crabbe Huson Equity Fund, Inc. have entered into an agreement with
Execution Services, Inc., ("ESI") an unaffiliated brokerage firm, whereby these
funds execute portfolio transaction business through ESI in consideration of
which ESI pays for custodial services utilized by these funds. For the period
ended October 31, 1994 ESI paid all custody fees incurred by these funds. On
the Statement of Operations, gross custody fees are reflected and the amounts
paid by ESI are shown separately as "Expenses paid by third party."

4. DISTRIBUTIONS TO SHAREHOLDERS (Unaudited)

THE CRABBE HUSON SPECIAL FUND, INC. Of the Fund's net investment income earned
during the fiscal year ending October 31, 1994, 15.0% was attributable to
investments in direct or indirect debt obligations of the United States
Government, or its agencies or instrumentalities.

3.6% of the net investment income earned during the fiscal year ending October
31, 1994 qualifies for the dividend received deduction available to corporate
shareholders.

THE CRABBE HUSON REAL ESTATE INVESTMENT FUND, INC.

Short-term capital gains totaling $240,803 will be distributed to shareholders
in December 1994. Short-term capital gains are taxable to shareholders as
ordinary income dividends.

THE CRABBE HUSON EQUITY FUND, INC. Of the Fund's net investment income earned
during the fiscal year ended October 31, 1994, 34.1% was attributable to
investments in direct or indirect debt obligations of the United States
Government, or its agencies or instrumentalities.

74.1% of the net investment income earned during the fiscal year ending October
31, 1994 qualifies for the dividend received deduction available to corporate
shareholders.

81
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 1994

THE CRABBE HUSON ASSET ALLOCATION FUND, INC. Of the Fund's net investment
income earned during the fiscal year ended October 31, 1994, 49.6% was
attributable to investments in direct or indirect debt obligations of the United
States Government, or its agencies or instrumentalities.

36.4% of the net investment income earned during the fiscal year ending October
31, 1994 qualifies for the dividend received deduction available to corporate
shareholders.

THE OREGON MUNICIPAL BOND FUND, INC. Of the Fund's distributions paid to
shareholders from net investment income during the fiscal year ended October 31,
1994, 99.3% was attributable to investments in municipal bonds issued by the
state of Oregon and its political subdivisions, agencies, authorities and
instrumentalities and other municipal securities.

THE CRABBE HUSON INCOME FUND, INC. Of the Fund's net investment income earned
during the fiscal year ended October 31, 1994, 39.8% was attributable to
investments in direct or indirect debt obligations of the United States
Government, or its agencies or instrumentalities.

THE CRABBE HUSON U.S. GOVERNMENT INCOME FUND, INC. Of the Fund's net investment
income earned during the fiscal year ended October 31, 1994, 94.3% was
attributable to investments in direct or indirect debt obligations of the United
States Government, or its agencies or instrumentalities.

THE CRABBE HUSON U.S. GOVERNMENT MONEY MARKET FUND, INC. Of the Fund's net
investment income earned during the fiscal year ended October 31, 1994, 99.7%
was attributable to investments in direct or indirect debt obligations of the
United States Government, or its agencies or instrumentalities.

82
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 1994

On December 13, 1994 the following distributions were declared from net realized
capital gains from investment transactions during the 1994 fiscal year. The
dividend was paid on December 13, 1994, to shareholders of record on December
12, 1994:
<TABLE>
<CAPTION>
------------------------------ ------------------------------
PER SHARE DOLLARS
------------------------------ ------------------------------

Short-Term Long-Term Short-Term Long-Term
Capital Gain Capital Gain Capital Gain Capital Gain
Distribution(1) Distribution Distribution(1) Distribution
------------------------------ ------------------------------

<S> <C> <C> <C> <C>
The Crabbe Huson Special Fund, Inc. 0.2898 0.1610 $ 7,529,612 $ 4,181,331
The Crabbe Huson Real Estate Investment
Fund, Inc. 0.1251 ---- 240,813 ----
The Crabbe Huson Equity Fund, Inc. 0.0672 0.1808 640,775 1,724,054
The Crabbe Huson Asset Allocation Fund, Inc. 0.0503 0.4148 430,561 3,553,916
The Oregon Municipal Bond Fund, Inc. ---- 0.0675 ---- 151,835
The Crabbe Huson Income Fund, Inc. ---- ---- ---- ----
The Crabbe Huson U.S. Government Income
Fund, Inc. ---- ---- ---- ----

(1) Short-term capital gains are taxable to shareholders as ordinary income
dividends.
</TABLE>

83
<PAGE>
THE CRABBE HUSON FAMILY OF MUTUAL FUNDS

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

OCTOBER 31, 1994

5. CAPITAL SHARE TRANSACTIONS
Transactions in capital shares of the Funds were as follows:

<TABLE>
<CAPTION>
THE CRABBE HUSON
SPECIAL FUND, INC.
--------------------------------------------------------
SHARES AMOUNT
--------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
October 31, October 31, October 31, October 31,
1994 1993 1994 1993
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold........................ 23,946,462 1,683,309 $ 318,927,086 $ 17,744,485
Shares issued in reinvestment of
dividends........................ 51,007 -- 610,047 --
------------ ----------- -------------- -------------
23,997,469 1,683,309 319,537,133 17,744,485

Shares redeemed.................... (3,303,144) (368,618) (43,533,333) (3,900,816)
------------ ----------- -------------- -------------
Net increase....................... 20,694,325 1,314,691 $ 276,003,800 $ 13,843,669
------------ ----------- -------------- -------------
------------ ----------- -------------- -------------

<CAPTION>
THE CRABBE HUSON REAL
ESTATE INVESTMENT FUND, INC.
----------------------------
SHARES AMOUNT
----------------------------
Period Ended Period Ended
October 31, October 31,
1994 1994
- ----------------------------------------------------------------
<S> <C> <C>
Shares sold........................ 2,006,502 20,250,921
Shares issued in reinvestment of
dividends........................ 33,284 323,473
------------ --------------
2,039,786 20,574,394
Shares redeemed.................... (125,257) (1,275,985)
------------ --------------
Net increase....................... 1,914,529 $ 19,298,436
------------ --------------
------------ --------------
</TABLE>

<TABLE>
<CAPTION>
THE CRABBE HUSON
EQUITY FUND, INC.
--------------------------------------------------------
SHARES AMOUNT
--------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
October 31, October 31, October 31, October 31,
1994 1993 1994 1993
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold........................ 8,303,990 1,311,503 $ 134,306,739 $ 19,042,640
Shares issued in reinvestment of
dividends........................ 105,277 49,317 1,635,783 656,353
------------ ----------- -------------- -------------
8,409,267 1,360,820 135,942,522 19,698,993

Shares redeemed.................... (1,243,034) (244,793) (20,140,537) (3,471,398)
------------ ----------- -------------- -------------
Net increase (decrease)............ 7,166,233 1,116,027 $ 115,801,985 $ 16,227,595
------------ ----------- -------------- -------------
------------ ----------- -------------- -------------

<CAPTION>
THE CRABBE HUSON ASSET
ALLOCATION FUND, INC.
---------------------------------------------------------
SHARES AMOUNT
---------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
October 31, October 31, October 31, October 31,
1994 1993 1994 1993
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold........................ 4,625,388 2,765,392 $ 60,156,367 $34,454,774
Shares issued in reinvestment of
dividends........................ 460,871 188,098 5,964,138 2,303,080
------------ ------------ -------------- -----------
5,086,259 2,953,490 66,120,505 36,757,854
Shares redeemed.................... (2,842,271) (1,353,469) (36,797,904) (16,624,696)
------------ ------------ -------------- -----------
Net increase (decrease)............ 2,243,988 1,600,021 $ 29,322,601 $20,133,158
------------ ------------ -------------- -----------
------------ ------------ -------------- -----------
</TABLE>

<PAGE>

THE CRABBE HUSON FAMILY OF MUTUAL FUNDS

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

OCTOBER 31, 1994

<TABLE>
<CAPTION>
THE OREGON
MUNICIPAL BOND FUND, INC.
------------------------------------------------------
SHARES AMOUNT
------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
October 31, October 31, October 31, October 31,
1994 1993 1994 1993
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold........................ 858,058 726,438 $ 10,795,284 $ 9,144,407
Shares issued in reinvestment of
dividends........................ 85,380 79,380 1,057,544 996,199
---------- ---------- -------------- -------------
943,438 805,818 11,852,828 10,140,606

Shares redeemed.................... (818,671) (172,159) (10,134,982) (2,141,895)
---------- ---------- -------------- -------------
Net increase....................... 124,767 633,659 $ 1,717,846 $ 7,998,711
---------- ---------- -------------- -------------
---------- ---------- -------------- -------------

<CAPTION>
THE CRABBE HUSON
INCOME FUND, INC.
------------------------------------------------------------
SHARES AMOUNT
------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
October 31, October 31, October 31, October 31,
1994 1993 1994 1993
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold........................ 323,868 146,381 $ 3,312,857 $ 1,563,663
Shares issued in reinvestment of
dividends........................ 28,426 32,343 289,053 341,349
------------- ------------- -------------- --------------
352,294 178,724 3,601,910 1,905,012
Shares redeemed.................... (338,813) (166,182) (3,410,998) (1,765,944)
------------- ------------- -------------- --------------
Net increase....................... 13,481 12,542 190,912 139,068
------------- ------------- -------------- --------------
------------- ------------- -------------- --------------
</TABLE>

<TABLE>
<CAPTION>
THE CRABBE HUSON
U.S. GOVERNMENT
INCOME FUND, INC.
------------------------------------------------------
SHARES AMOUNT
------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
October 31, October 31, October 31, October 31,
1994 1993 1994 1993
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold........................ 318,425 734,366 $ 3,370,107 $ 8,069,618
Shares issued in reinvestment of
dividends........................ 46,002 47,494 488,454 519,650
---------- ---------- -------------- -------------
364,427 781,860 3,858,561 8,589,268

Shares redeemed.................... (480,229) (586,207) (5,086,958) (6,440,824)
---------- ---------- -------------- -------------
Net increase (decrease)............ (115,802) 195,653 ($ 1,228,397) $ 2,148,444
---------- ---------- -------------- -------------
---------- ---------- -------------- -------------

<CAPTION>
THE CRABBE HUSON
U.S. GOVERNMENT
MONEY MARKET FUND, INC.
------------------------------------------------------------
SHARES AMOUNT
------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
October 31, October 31, October 31, October 31,
1994 1993 1994 1993
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold........................ 99,391,599 40,465,465 $ 99,391,599 $ 40,465,465
Shares issued in reinvestment of
dividends........................ 391,037 119,425 391,037 119,425
------------- ------------- -------------- --------------
99,782,636 40,584,890 99,782,636 40,584,890
Shares redeemed.................... (82,184,577) (38,195,697) (82,184,577) (38,195,697)
------------- ------------- -------------- --------------
Net increase (decrease)............ 17,598,059 2,389,193 $ 17,598,059 $ 2,389,193
------------- ------------- -------------- --------------
------------- ------------- -------------- --------------
</TABLE>

85
<PAGE>
THE CRABBE HUSON FAMILY OF FUNDS

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

OCTOBER 31, 1994

6. INVESTMENT TRANSACTIONS
For the year ended October 31, 1994, The Crabbe Huson U.S. Government Money
Market Fund, Inc. had aggregate security purchases and sales (including
maturities) of $167,509,546 and $150,889,797, respectively. Aggregate purchases,
sales and maturities and unrealized appreciation (depreciation) of securities
for the period ended October 31, 1994 (excluding short-term securities) for the
remaining Funds are as follows:

<TABLE>
<CAPTION>
THE
THE CRABBE HUSON THE
CRABBE HUSON REAL ESTATE CRABBE HUSON
SPECIAL INVESTMENT EQUITY
FUND, INC. FUND, INC. FUND, INC.
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchases:................................... $ 222,714,452 $ 26,117,732 $ 137,016,705

Sales and Maturities:........................ 95,304,816 7,073,708 62,307,338

Unrealized Appreciation (Depreciation):
Appreciation............................... 19,365,234 59,512 7,487,480
Depreciation............................... (7,155,800) (1,610,426) (1,655,170)
-------------- ------------- --------------
Net unrealized appreciation
(depreciation)............................ $ 12,209,434 ($ 1,550,914) $ 5,832,310
-------------- ------------- --------------
-------------- ------------- --------------
Unrealized Appreciation (Depreciation):
For Federal Income Tax Purposes
Appreciation............................... 19,365,234 59,512 7,487,480
Depreciation............................... (7,238,531) (1,385,337) (1,595,778)
-------------- ------------- --------------
Net unrealized appreciation
(depreciation)............................ $ 12,126,703 ($ 1,325,825) $ 5,891,702
-------------- ------------- --------------
-------------- ------------- --------------
</TABLE>

86
<PAGE>
THE CRABBE HUSON FAMILY OF FUNDS

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

OCTOBER 31, 1994

THE THE THE
CRABBE HUSON THE OREGON CRABBE HUSON CRABBE HUSON
ASSET ALLOCATION MUNICIPAL BOND INCOME U.S. GOVERNMENT
FUND, INC. FUND, INC. FUND, INC. INCOME FUND, INC.
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Purchases:................................. $ 152,470,071 $ 8,435,079 $ 16,612,160 $ 7,403,621
Sales and Maturities:...................... 138,710,736 6,119,933 16,922,578 8,417,015
Unrealized Appreciation (Depreciation):.... 5,898,002 568,514 22,628 7,769
Appreciation............................. (1,091,730) (657,130) (103,502) (228,759)
-------------- ------------ ------------- ------------
Depreciation............................. $ 4,806,272 ($ 88,616) ($ 80,874) ($ 220,990)
-------------- ------------ ------------- ------------
-------------- ------------ ------------- ------------
Unrealized Appreciation (Depreciation):
For Federal Income Tax Purposes
Appreciation............................. 5,898,002 568,514 22,628 7,769
Depreciation............................. (1,016,388) (657,130) (153,618) (228,759)
-------------- ------------ ------------- ------------
Net unrealized appreciation
(depreciation).......................... $ 4,881,614 ($ 88,616) ($ 130,990) ($ 220,990)
-------------- ------------ ------------- ------------
-------------- ------------ ------------- ------------
</TABLE>

87
<PAGE>

FINANCIAL HIGHLIGHTS

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
The following information should be read in conjunction with the financial
statements and notes thereto appearing elsewhere in this Annual Report.
The calculations are based on average number of shares outstanding for each
period.

(a) The Fund's Fiscal Year was changed from 9/30 to 10/31, effective 10/31/87,
which represents a conformed 12-month period.
(b) Commencement of operations - 10/3/84.
(c) Computed on an annualized basis.
(d) Commencement of operations - 4/9/87.
(e) Commencement of operations - 1/31/89.

THE CRABBE HUSON SPECIAL FUND, INC.

<TABLE>
<CAPTION>
PERIOD PERIOD PERIOD PERIOD
ENDED ENDED ENDED ENDED
10/31/94 10/31/93 10/31/92 10/31/91
----------- ---------- --------- ----------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.82 $8.36 $12.05 $8.78

INCOME FROM INVESTMENT OPERATIONS
---------------------------------
NET INVESTMENT INCOME 0.0513 (0.0774) (0.0211) 0.0353
NET REALIZED & UNREALIZED
GAIN (LOSS) ON SECURITIES 2.3026 3.5374 (1.6211) 4.0155
----------- ---------- --------- ----------
TOTAL FROM INVESTMENT OPERATIONS 2.3539 3.4600 (1.6422) 4.0508

LESS DISTRIBUTIONS
------------------
DIVIDENDS FROM NET INVESTMENT INCOME 0.0000 0.0000 0.0260 0.1453
DISTRIBUTIONS FROM CAPITAL GAINS 0.0892 0.0000 2.0218 0.6355
----------- ---------- --------- ----------
TOTAL DISTRIBUTIONS 0.0892 0.0000 2.0478 0.7808
----------- ---------- --------- ----------
NET ASSET VALUE, END OF PERIOD $14.08 $11.82 $8.36 $12.05
----------- ---------- --------- ----------
----------- ---------- --------- ----------
TOTAL RETURN 22.40% 41.39% 8.11% 49.58%

RATIOS/SUPPLEMENTAL DATA
- ------------------------
NET ASSETS, END OF PERIOD 319,810,853 23,816,912 5,857,434 3,541,797
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.44% 1.57% 1.74% 1.92%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 0.39% -0.73% -0.25% 0.32%
PORTFOLIO TURNOVER RATE 146.44% 73.29% 102.27% 256.68%

RATIOS IF FEES HAD NOT BEEN WAIVED
- ----------------------------------
TOTAL WAIVED/REIMBURSED EXPENSES $100,073 $2,238 $19,594 $18,436
NET INVESTMENT INCOME 0.04 (0.08) (0.06) (0.02)
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.54% 1.59% 2.18% 2.40%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 0.29% -0.75% -0.69% -15.00%

</TABLE>

<PAGE>

<TABLE>
<CAPTION>
PERIOD PERIOD PERIOD PERIOD
ENDED ENDED ENDED ENDED
10/31/90 10/31/89 10/31/88 10/31/87 (d)
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.49 $9.69 $8.13 $10.00

INCOME FROM INVESTMENT OPERATIONS
---------------------------------
NET INVESTMENT INCOME 0.1546 0.2100 (0.0515) (0.0409)
NET REALIZED & UNREALIZED
GAIN (LOSS) ON SECURITIES (1.4317) 1.5900 1.6115 (1.8300)
--------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS (1.2771) 1.8000 1.5600 (1.8709)

LESS DISTRIBUTIONS
------------------
DIVIDENDS FROM NET INVESTMENT INCOME 0.2240 0.0000 0.0000 0.0000
DISTRIBUTIONS FROM CAPITAL GAINS 1.2089 0.0000 0.0000 0.0000
--------- --------- --------- ---------
TOTAL DISTRIBUTIONS 1.4329 0.0000 0.0000 0.0000
--------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $8.78 $11.49 $9.69 $8.13
--------- --------- --------- ---------
--------- --------- --------- ---------
TOTAL RETURN -10.90% 18.68% 19.63% -30.32%(c)

RATIOS/SUPPLEMENTAL DATA
- ------------------------
NET ASSETS, END OF PERIOD 2,926,457 3,356,417 4,392,920 1,892,038
RATIO OF EXPENSES TO AVERAGE NET ASSETS 2.00% 2.00% 3.94% 2.60%(c)
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 1.55% 1.96% 3.34% 0.05%(c)
PORTFOLIO TURNOVER RATE 314.73% 275.62% 155.12% 3.90%

RATIOS IF FEES HAD NOT BEEN WAIVED
- ----------------------------------
TOTAL WAIVED/REIMBURSED EXPENSES $28,585 $16,719
NET INVESTMENT INCOME 0.07 0.16
RATIO OF EXPENSES TO AVERAGE NET ASSETS 2.86% 2.44%(c)
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 0.70% 1.53%(c)

</TABLE>

89
<PAGE>

FINANCIAL HIGHLIGHTS
(Continued)

THE CRABBE HUSON REAL ESTATE INVESTMENT FUND, INC.

(For a Share Outstanding Throughout the Period)
The following information should be read in conjunction with the financial
statements and notes thereto appearing elsewhere in this Annual Report.
The calculations are based on average number of shares outstanding for the
period.

(a) Commencement of operations - 4/4/94. PERIOD
(b) Computed on an annualized basis. ENDED
10/31/94 (a)
-------------
<S> <C>

NET ASSET VALUE, BEGINNING OF PERIOD $10.00

INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME 0.3664
NET REALIZED & UNREALIZED
LOSS ON SECURITIES (0.6394)
-------------
TOTAL FROM INVESTMENT OPERATIONS (0.2730)

LESS DISTRIBUTIONS
DIVIDENDS FROM NET INVESTMENT INCOME 0.2287
DISTRIBUTIONS FROM CAPITAL GAINS 0.0000
-------------
TOTAL DISTRIBUTIONS 0.2287

-------------
NET ASSET VALUE, END OF PERIOD $9.50
-------------
-------------

TOTAL RETURN -3.25%

RATIOS/SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $18,279,500
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.01%(b)
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 6.30%(b)
PORTFOLIO TURNOVER RATE 43.30%

RATIOS IF FEES HAD NOT BEEN WAIVED
TOTAL WAIVED/REIMBURSED EXPENSES $96,842
NET INVESTMENT INCOME 0.31
RATIO OF EXPENSES TO AVERAGE NET ASSETS 2.03%(b)
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 5.28%(b)

</TABLE>

<PAGE>

(This page has been left blank intentionally)

<PAGE>

FINANCIAL HIGHLIGHTS
(Continued)

THE CRABBE HUSON EQUITY FUND, INC.

<TABLE>
<CAPTION>
PERIOD PERIOD PERIOD PERIOD
ENDED ENDED ENDED ENDED
10/31/94 10/31/93 10/31/92 10/31/91
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $16.08 $13.03 $12.57 $8.54

INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME 0.1900 0.0981 0.1980 0.1861
NET REALIZED & UNREALIZED
GAIN (LOSS) ON SECURITIES 0.5668 3.4476 0.9186 4.1511
------------ ----------- ------------ ------------
TOTAL FROM INVESTMENT OPERATIONS 0.7568 3.5457 1.1166 4.3372

LESS DISTRIBUTIONS
DIVIDENDS FROM NET INVESTMENT INCOME 0.0344 0.1099 0.0937 0.3072
DISTRIBUTIONS FROM CAPITAL GAINS 0.3638 0.3858 0.5629 0.0000
------------ ----------- ------------ ------------
TOTAL DISTRIBUTIONS 0.3982 0.4957 0.6566 0.3072

------------ ----------- ------------ ------------
NET ASSET VALUE, END OF PERIOD $16.44 $16.08 $13.03 $12.57
------------ ----------- ------------ ------------
------------ ----------- ------------ ------------

TOTAL RETURN 7.89% 29.90% 12.48% 52.44%

RATIOS/SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD 153,105,296 34,520,166 13,429,315 5,929,590
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.45% 1.49% 1.55% 1.84%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 1.18% 0.67% 1.57% 1.60%
PORTFOLIO TURNOVER RATE 106.49% 114.38% 180.72% 171.82%

RATIOS IF FEES HAD NOT BEEN WAIVED
TOTAL WAIVED/REIMBURSED EXPENSES $89,799 $32,826 $39,230 $23,349
NET INVESTMENT INCOME 0.17 0.08 0.15 0.12
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.56% 1.64% 1.93% 2.41%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 1.06% 0.52% 1.18% 1.03%

PERIOD PERIOD
ENDED ENDED
10/31/90 10/31/89 (e)
------------ ------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.50 $10.00

INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME 0.2533 0.3146
NET REALIZED & UNREALIZED
GAIN (LOSS) ON SECURITIES (1.6764) 0.1854
------------ ------------
TOTAL FROM INVESTMENT OPERATIONS (1.4231) 0.5000

LESS DISTRIBUTIONS
DIVIDENDS FROM NET INVESTMENT INCOME 0.3918 0.0000
DISTRIBUTIONS FROM CAPITAL GAINS 0.1451 0.0000
------------ ------------
TOTAL DISTRIBUTIONS 0.5369 0.0000

------------ ------------
NET ASSET VALUE, END OF PERIOD $8.54 $10.50
------------ ------------
------------ ------------

TOTAL RETURN -14.97% 6.72% (c)

RATIOS/SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD 2,944,344 5,018,337
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.93% 1.69% (c)
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 2.56% 3.98% (c)
PORTFOLIO TURNOVER RATE 265.25% 90.54%

RATIOS IF FEES HAD NOT BEEN WAIVED
TOTAL WAIVED/REIMBURSED EXPENSES $29,758 $10,964
NET INVESTMENT INCOME 0.18 0.29
RATIO OF EXPENSES TO AVERAGE NET ASSETS 2.66% 1.97% (c)
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 1.83% 3.68% (c)
</TABLE>

<PAGE>

FINANCIAL HIGHLIGHTS
(Continued)

THE CRABBE HUSON ASSET ALLOCATION FUND, INC.

PERIOD PERIOD PERIOD PERIOD
ENDED ENDED ENDED ENDED
10/31/94 10/31/93 10/31/92 10/31/91
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $13.52 $11.68 $11.00 $9.24

INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME 0.2990 0.2323 0.3468 0.4143
NET REALIZED & UNREALIZED
GAIN (LOSS) ON SECURITIES (0.0817) 2.0889 0.8175 1.8208
----------- ----------- ----------- -----------
TOTAL FROM INVESTMENT OPERATIONS 0.2173 2.3212 1.1643 2.2351

LESS DISTRIBUTIONS
DIVIDENDS FROM NET INVESTMENT INCOME 0.2879 0.2373 0.3463 0.4335
DISTRIBUTIONS FROM CAPITAL GAINS 0.5829 0.2439 0.1380 0.0415
----------- ----------- ----------- -----------
TOTAL DISTRIBUTIONS 0.8708 0.4812 0.4843 0.4750

----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $12.87 $13.52 $11.68 $11.00
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

TOTAL RETURN 2.66% 20.93% 11.25% 24.55%

RATIOS/SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD 110,151,785 85,390,017 55,098,981 23,892,664
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.44% 1.46% 1.52% 1.76%
RATIO OF NET INVESTMENT INCOME TO AVERAGE
NET ASSETS 2.30% 1.85% 3.02% 3.97%
PORTFOLIO TURNOVER RATE 149.19% 116.10% 155.26% 157.89%

RATIOS IF FEES HAD NOT BEEN WAIVED
TOTAL WAIVED/REIMBURSED EXPENSES $80,018 $54,592 $36,345 $5,035
NET INVESTMENT INCOME 0.29 0.22 0.34 0.41
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.52% 1.54% 1.62% 1.79%
RATIO OF NET INVESTMENT INCOME TO AVERAGE
NET ASSETS 2.22% 1.77% 2.92% 3.94%

PERIOD PERIOD
ENDED ENDED
10/31/90 10/31/89 (e)
----------- -----------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.69 $10.00
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME 0.4561 0.3990
NET REALIZED & UNREALIZED
GAIN (LOSS) ON SECURITIES (1.1200) 0.2910
----------- -----------
TOTAL FROM INVESTMENT OPERATIONS (0.6639) 0.6900

LESS DISTRIBUTIONS
DIVIDENDS FROM NET INVESTMENT INCOME 0.7159 0.0000
DISTRIBUTIONS FROM CAPITAL GAINS 0.0702 0.0000
----------- -----------
TOTAL DISTRIBUTIONS 0.7861 0.0000

----------- -----------
NET ASSET VALUE, END OF PERIOD $9.24 $10.69
----------- -----------
----------- -----------

TOTAL RETURN -6.40% 9.30% (c)

RATIOS/SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD 13,173,923 12,577,962
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.90% 1.91% (c)
RATIO OF NET INVESTMENT INCOME TO AVERAGE
NET ASSETS 4.51% 5.02% (c)
PORTFOLIO TURNOVER RATE 161.72% 88.14%

RATIOS IF FEES HAD NOT BEEN WAIVED
TOTAL WAIVED/REIMBURSED EXPENSES $3,162 $1,000
NET INVESTMENT INCOME 0.45 0.40
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.93% 1.93% (c)
RATIO OF NET INVESTMENT INCOME TO AVERAGE
NET ASSETS 4.49% 5.00% (c)
</TABLE>

95
<PAGE>

FINANCIAL HIGHLIGHTS
(Continued)

THE OREGON MUNICIPAL BOND FUND, INC.

PERIOD PERIOD PERIOD PERIOD PERIOD PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
10/31/94 10/31/93 10/31/92 10/31/91 10/31/90 10/31/89
------------ ------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.80 $12.20 $12.14 $11.74 $11.72 $11.72

INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------
NET INVESTMENT INCOME 0.5418 0.5683 0.6168 0.6385 0.6316 0.6794
NET REALIZED & UNREALIZED
GAIN (LOSS) ON SECURITIES (0.8001) 0.6880 0.1521 0.4831 0.0522 0.0842
------------ ------------ ------------ ------------ ------------ -----------
TOTAL FROM INVESTMENT OPERATIONS (0.2583) 1.2563 0.7689 1.1216 0.6838 0.7636

LESS DISTRIBUTIONS
- --------------------
DIVIDENDS FROM NET INVESTMENT INCOME 0.5422 0.5647 0.6168 0.6562 0.6401 0.6711
DISTRIBUTIONS FROM CAPITAL GAINS 0.0090 0.0916 0.0921 0.0654 0.0237 0.0925
------------ ------------ ------------ ------------ ------------ -----------
TOTAL DISTRIBUTIONS 0.5512 0.6563 0.7089 0.7216 0.6638 0.7636

------------ ------------ ------------ ------------ ------------ -----------
NET ASSET VALUE, END OF PERIOD $11.99 $12.80 $12.20 $12.14 $11.74 $11.72
------------ ------------ ------------ ------------ ------------ -----------
------------ ------------ ------------ ------------ ------------ -----------

TOTAL RETURN -2.06% 10.71% 6.51% 9.85% 6.00% 6.67%

RATIOS/SUPPLEMENTAL DATA
- ------------------------
NET ASSETS, END OF PERIOD 29,045,728 29,408,110 20,295,896 18,382,636 18,766,449 19,173,145
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.98% 1.05% 1.11% 1.21% 1.38% 1.04%
RATIO OF NET INVESTMENT INCOME TO AVERAGE
NET ASSETS 4.37% 4.51% 5.04% 5.36% 5.41% 5.82%
PORTFOLIO TURNOVER RATE 20.58% 11.62% 25.30% 53.40% 58.52% 45.25%

RATIOS IF FEES HAD NOT BEEN WAIVED
- ----------------------------------
TOTAL WAIVED/REIMBURSED EXPENSES $31,708 $11,421 $4,089 $5,129 $32,938 $23,096
NET INVESTMENT INCOME 0.53 0.56 0.61 0.64 0.61 0.67
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.08% 1.09% 1.13% 1.24% 1.55% 1.16%
RATIO OF NET INVESTMENT INCOME TO AVERAGE
NET ASSETS 4.26% 4.46% 5.01% 5.34% 5.23% 5.71%

<PAGE>

PERIOD PERIOD PERIOD PERIOD PERIOD
ENDED ENDED ENDED ENDED ENDED
10/31/88 10/31/87 (a) 10/31/87 10/31/86 9/30/85 (b)
------------ ------------ ------------ ------------ ------------
NET ASSET VALUE, BEGINNING OF PERIOD $11.08 $12.15 $11.93 $10.43 $10.00

INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------
NET INVESTMENT INCOME 0.6386 0.7311 0.7319 0.7720 0.7428
NET REALIZED & UNREALIZED
GAIN (LOSS) ON SECURITIES 0.6411 (0.9983) (0.8051) 1.5265 0.4284
------------ ------------ ------------ ------------ ------------
TOTAL FROM INVESTMENT OPERATIONS 1.2797 (0.2672) (0.0732) 2.2985 1.1712

LESS DISTRIBUTIONS
- --------------------
DIVIDENDS FROM NET INVESTMENT INCOME 0.6386 0.7311 0.7319 0.7720 0.7428
DISTRIBUTIONS FROM CAPITAL GAINS 0.0000 0.0760 0.0760 0.0255 0.0000
------------ ------------ ------------ ------------ ------------
TOTAL DISTRIBUTIONS 0.6386 0.8071 0.8079 0.7975 0.7428

------------ ------------ ------------ ------------ ------------
NET ASSET VALUE, END OF PERIOD $11.72 $11.08 $11.05 $11.93 $10.43
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------

TOTAL RETURN 12.02% -1.95% -0.95% 22.83% 12.05% (c)

RATIOS/SUPPLEMENTAL DATA
- ------------------------
NET ASSETS, END OF PERIOD 20,058,295 14,276,600 14,165,161 8,861,258 3,390,500
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.21% 1.14% 1.31% 1.06% 0.78% (c)
RATIO OF NET INVESTMENT INCOME TO AVERAGE
NET ASSETS 5.53% 5.66% 6.43% 6.34% 7.29% (c)
PORTFOLIO TURNOVER RATE 31.44% 19.18% 18.73% 24.20% 43.21%

RATIOS IF FEES HAD NOT BEEN WAIVED
- ----------------------------------
TOTAL WAIVED/REIMBURSED EXPENSES $14,406
NET INVESTMENT INCOME 0.63
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.32%
RATIO OF NET INVESTMENT INCOME TO AVERAGE
NET ASSETS 5.42%

</TABLE>

<PAGE>

FINANCIAL HIGHLIGHTS
(Continued)

THE CRABBE HUSON INCOME FUND, INC.

PERIOD PERIOD PERIOD PERIOD
ENDED ENDED ENDED ENDED
10/31/94 10/31/93 10/31/92 10/31/91
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.75 $10.90 $10.63 $10.01

INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME 0.4995 0.4637 0.6583 0.7038
NET REALIZED & UNREALIZED
GAIN (LOSS) ON SECURITIES (0.7669) 0.3265 0.3569 0.6218
---------- ---------- ---------- ----------
TOTAL FROM INVESTMENT OPERATIONS (0.2674) 0.7902 1.0152 1.3256

LESS DISTRIBUTIONS
DIVIDENDS FROM NET INVESTMENT INCOME 0.5075 0.4879 0.6588 0.7056
DISTRIBUTIONS FROM CAPITAL GAINS 0.2710 0.4523 0.0864 0.0000
---------- ---------- ---------- ----------
TOTAL DISTRIBUTIONS 0.7785 0.9402 0.7452 0.7056

---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $9.71 $10.75 $10.90 $10.63
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------

TOTAL RETURN -2.71% 7.73% 9.74% 13.51%

RATIOS/SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD 5,273,407 5,696,555 5,634,372 5,485,830
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.80% 0.81% 0.90% 0.98%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 4.92% 4.34% 6.09% 6.82%
PORTFOLIO TURNOVER RATE 306.79% 260.22% 227.45% 115.76%

RATIOS IF FEES HAD NOT BEEN WAIVED
TOTAL WAIVED/REIMBURSED EXPENSES $79,642 $61,698 $56,221 $47,163
NET INVESTMENT INCOME 0.36 0.34 0.55 0.56
RATIO OF EXPENSES TO AVERAGE NET ASSETS 2.16% 1.96% 1.94% 2.42%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 3.56% 3.19% 5.06% 5.38%

<PAGE>
<CAPTION>
PERIOD PERIOD
ENDED ENDED
10/31/90 10/31/89 (e)
---------- -----------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.27 $10.00

INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME 0.6869 0.5545
NET REALIZED & UNREALIZED
GAIN (LOSS) ON SECURITIES (0.2407) 0.2761
---------- -----------
TOTAL FROM INVESTMENT OPERATIONS 0.4462 0.8306

LESS DISTRIBUTIONS
DIVIDENDS FROM NET INVESTMENT INCOME 0.6840 0.5606
DISTRIBUTIONS FROM CAPITAL GAINS 0.0222 0.0000
---------- -----------
TOTAL DISTRIBUTIONS 0.7062 0.5606

---------- -----------
NET ASSET VALUE, END OF PERIOD $10.01 $10.27
---------- -----------
---------- -----------

TOTAL RETURN 4.43% 10.43% (c)

RATIOS/SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD 2,123,203 1,356,008
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.51% 1.15% (c)
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 6.89% 7.23% (c)
PORTFOLIO TURNOVER RATE 73.76% 86.60%

RATIOS IF FEES HAD NOT BEEN WAIVED
TOTAL WAIVED/REIMBURSED EXPENSES $31,474 $20,273
NET INVESTMENT INCOME 0.53 0.29
RATIO OF EXPENSES TO AVERAGE NET ASSETS 3.07% 4.56% (c)
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 5.33% 3.81% (c)
</TABLE>

99
<PAGE>

FINANCIAL HIGHLIGHTS
(Continued)

THE CRABBE HUSON U.S. GOVERNMENT INCOME FUND, INC.

<TABLE>
<CAPTION>
PERIOD PERIOD PERIOD PERIOD
ENDED ENDED ENDED ENDED
10/31/94 10/31/93 10/31/92 10/31/91
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.04 $10.91 $10.69 $10.24

INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------
NET INVESTMENT INCOME 0.4648 0.4755 0.5801 0.6722
NET REALIZED & UNREALIZED
GAIN (LOSS) ON SECURITIES (0.6515) 0.2159 0.2921 0.4542
------------ ------------ ----------- ------------
TOTAL FROM INVESTMENT OPERATIONS (0.1867) 0.6914 0.8722 1.1264

LESS DISTRIBUTIONS
- --------------------
DIVIDENDS FROM NET INVESTMENT INCOME 0.4682 0.4848 0.5839 0.6746
DISTRIBUTIONS FROM CAPITAL GAINS 0.1120 0.0766 0.0683 0.0018
------------ ------------ ----------- ------------
TOTAL DISTRIBUTIONS 0.5802 0.5614 0.6522 0.6764

------------ ------------ ----------- ------------
NET ASSET VALUE, END OF PERIOD $10.27 $11.04 $10.91 $10.69
------------ ------------ ----------- ------------
------------ ------------ ----------- ------------

TOTAL RETURN -1.78% 6.71% 8.70% 11.17%

RATIOS/SUPPLEMENTAL DATA
- ------------------------
NET ASSETS, END OF PERIOD 9,249,212 11,217,912 8,958,757 3,748,244
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.75% 0.75% 0.80% 0.96%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 4.39% 4.33% 5.35% 6.44%
PORTFOLIO TURNOVER RATE 76.09% 81.74% 105.52% 114.81%

RATIOS IF FEES HAD NOT BEEN WAIVED
- ----------------------------------
TOTAL WAIVED/REIMBURSED EXPENSES $74,082 $55,333 $43,331 $35,086
NET INVESTMENT INCOME 0.39 0.42 0.50 0.55
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.47% 1.26% 1.52% 2.15%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 3.66% 3.81% 4.63% 5.25%

100

PERIOD PERIOD
ENDED ENDED
10/31/90 10/31/89 (e)
------------ ------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.28 $10.00

INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------
NET INVESTMENT INCOME 0.6768 0.5637
NET REALIZED & UNREALIZED
GAIN (LOSS) ON SECURITIES (0.0326) 0.2852
------------ ------------
TOTAL FROM INVESTMENT OPERATIONS 0.6442 0.8489

LESS DISTRIBUTIONS
- --------------------
DIVIDENDS FROM NET INVESTMENT INCOME 0.6736 0.5689
DISTRIBUTIONS FROM CAPITAL GAINS 0.0106 0.0000
------------ ------------
TOTAL DISTRIBUTIONS 0.6842 0.5689

------------ ------------
NET ASSET VALUE, END OF PERIOD $10.24 $10.28
------------ ------------
------------ ------------

TOTAL RETURN 6.40% 11.15% (c)

RATIOS/SUPPLEMENTAL DATA
- ------------------------
NET ASSETS, END OF PERIOD 2,069,435 1,717,128
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.42% 1.14% (c)
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 6.72% 7.35% (c)
PORTFOLIO TURNOVER RATE 87.71% 40.42%

RATIOS IF FEES HAD NOT BEEN WAIVED
- ----------------------------------
TOTAL WAIVED/REIMBURSED EXPENSES $25,942 $17,420
NET INVESTMENT INCOME 0.53 0.39
RATIO OF EXPENSES TO AVERAGE NET ASSETS 2.84% 3.40% (c)
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 5.31% 5.09% (c)

</TABLE>

101

<PAGE>

FINANCIAL HIGHLIGHTS
(Continued)

THE CRABBE HUSON U.S. GOVERNMENT MONEY MARKET FUND, INC.

<TABLE>
<CAPTION>
PERIOD PERIOD PERIOD PERIOD
ENDED ENDED ENDED ENDED
10/31/94 10/31/93 10/31/92 10/31/91
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00

INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------
NET INVESTMENT INCOME 0.0339 0.0250 0.0332 0.0576
NET REALIZED & UNREALIZED
GAIN (LOSS) ON SECURITIES 0.0000 0.0000 0.0000 0.0000
------------ ------------ ------------ ------------
TOTAL FROM INVESTMENT OPERATIONS 0.0339 0.0250 0.0332 0.0576

LESS DISTRIBUTIONS
- --------------------
DIVIDENDS FROM NET INVESTMENT INCOME 0.0339 0.0250 0.0332 0.0576
DISTRIBUTIONS FROM CAPITAL GAINS 0.0000 0.0000 0.0000 0.0000
------------ ------------ ------------ ------------
TOTAL DISTRIBUTIONS 0.0339 0.0250 0.0332 0.0576

------------ ------------ ------------ ------------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------

TOTAL RETURN 3.28% 2.53% 3.36% 13.76%

RATIOS/SUPPLEMENTAL DATA
- ------------------------
NET ASSETS, END OF PERIOD 32,382,552 14,784,493 12,395,326 14,906,733
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.70% 0.70% 0.75% 0.81%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 3.39% 2.51% 3.32% 5.76%

RATIOS IF FEES HAD NOT BEEN WAIVED
- ----------------------------------
TOTAL WAIVED/REIMBURSED EXPENSES $126,310 $67,480 $50,598 $68,851
NET INVESTMENT INCOME 0.03 0.02 0.03 0.05
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.29% 1.32% 1.09% 1.18%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 2.81% 1.88% 2.98% 5.38%

102

PERIOD PERIOD
ENDED ENDED
10/31/90 10/31/89 (e)
------------ ------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00

INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------
NET INVESTMENT INCOME 0.0737 0.0633
NET REALIZED & UNREALIZED
GAIN (LOSS) ON SECURITIES 0.0000 0.0000
------------ ------------
TOTAL FROM INVESTMENT OPERATIONS 0.0737 0.0633

LESS DISTRIBUTIONS
- --------------------
DIVIDENDS FROM NET INVESTMENT INCOME 0.0737 0.0633
DISTRIBUTIONS FROM CAPITAL GAINS 0.0000 0.0000
------------ ------------
TOTAL DISTRIBUTIONS 0.0737 0.0633

------------ ------------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00
------------ ------------
------------ ------------

TOTAL RETURN 7.62% 10.05% (c)

RATIOS/SUPPLEMENTAL DATA
- ------------------------
NET ASSETS, END OF PERIOD 21,405,713 10,735,032
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.80% 0.60% (c)
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 7.57% 8.43% (c)

RATIOS IF FEES HAD NOT BEEN WAIVED
- ----------------------------------
TOTAL WAIVED/REIMBURSED EXPENSES $83,187 $34,890
NET INVESTMENT INCOME 0.07 0.06
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.33% 1.34% (c)
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 7.04% 7.69% (c)

</TABLE>

103

<PAGE>
INDEPENDENT AUDITORS' REPORT

The Shareholders and Boards of Directors
The Crabbe Huson Family of Mutual Funds -
The Crabbe Huson Special Fund, Inc.
The Crabbe Huson Real Estate Investment Fund, Inc.
The Crabbe Huson Equity Fund, Inc.
The Crabbe Huson Asset Allocation Fund, Inc.
The Oregon Municipal Bond Fund, Inc.
The Crabbe Huson Income Fund, Inc.
The Crabbe Huson U.S. Government Income Fund, Inc.
The Crabbe Huson U.S. Government Money Market Fund, Inc.:

We have audited the accompanying statements of assets and liabilities of
each of The Crabbe Huson Family of Mutual Funds, including the schedules of
investments, as of October 31, 1994, and the related statements of operations
for the year then ended, except for The Crabbe Huson Real Estate Investment
Fund, Inc. which is for the period from April 4, 1994 (commencement of
operations) to October 31, 1994, and the statements of changes in net assets
for each of the two years then ended, except for The Crabbe Huson Real Estate
Investment Fund, Inc. which is for the period from April 4, 1994 (commencement
of operations) to October 31, 1994, and The Crabbe Huson Real Estate Investment
Fund, Inc. which is for the period from April 4, 1994 (commencement of
operations) to October 31, 1994, and the financial highlights for The Crabbe
Huson Special Fund, Inc. and The Oregon Municipal Bond Fund, Inc. for each of
the six years ended October 31, 1994 and for The Crabbe Huson Equity Fund,
Inc., The Crabbe Huson Asset Allocation Fund, Inc., The Crabbe Huson Income
Fund, Inc., The Crabbe Huson U.S. Government Income Fund, Inc. and The Crabbe
Huson U.S. Government Money Market Fund, Inc. for each of the five years ended
October 31, 1994 and for the period from January 31, 1989 (commencement of
operations) to October 31, 1989. These financial statements and financial
highlights are the responsibility of the management of The Crabbe Huson Family
of Mutual Funds. Our responsibility is to express an opinion on these financial
statements based upon our audits. The financial highlights for The Crabbe
Huson Special Fund, Inc. and The Oregon Municipal Bond Fund, Inc. for the
periods ended October 31, 1988 and prior were audited by other auditors whose
reports expressed unqualified opinions on the financial highlights.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of October 31, 1994, by correspondence with the custodian
and brokers. An audit also includes assessing the

104
<PAGE>
INDEPENDENT AUDITORS' REPORT (CONTINUED)

accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of The Crabbe Huson Family of Mutual Funds as of October 31, 1994, the
results of its operations for the year then ended, except for The Crabbe Huson
Real Estate Investment Fund, Inc. which is for the period from April 4, 1994
(commencement of operations) to October 31, 1994, and the changes in net
assets for each of the two years then ended and the financial highlights for
The Crabbe Huson Special Fund, Inc. and The Oregon Municipal Bond Fund, Inc.
for each of the six years ended October 31, 1994 and The Crabbe Huson Equity
Fund, Inc., The Crabbe Huson Real Estate Investment Fund, Inc. which is for the
period from April 4, 1994 (commencement of operations) to October 31, 1994, and
for The Crabbe Huson Equity Fund, Inc., The Crabbe Huson Asset Allocation Fund,
Inc., The Crabbe Huson Income Fund, Inc., The Crabbe Huson U.S. Government
Income Fund, Inc. and The Crabbe Huson U.S. Government Money Market Fund, Inc.
for each of the five years ended October 31, 1994 and for the period from
January 31, 1989 (commencement of operations) to October 31, 1989, in
conformity with generally accepted accounting principles.

KPMG PEAT MARWICK LLP

Portland, Oregon
December 9, 1994

105