<PAGE>
OCTOBER 31, 1997
ANNUAL REPORT
THE CRABBE HUSON
SPECIAL FUND, INC.
CRABBE HUSON
SMALL CAP FUND
CRABBE HUSON
REAL ESTATE
INVESTMENT FUND
CRABBE HUSON
EQUITY FUND
CRABBE HUSON
ASSET ALLOCATION FUND
CRABBE HUSON
OREGON TAX-FREE FUND
CRABBE HUSON
INCOME FUND
CRABBE HUSON
U.S. GOVERNMENT
INCOME FUND
CRABBE HUSON
U.S. GOVERNMENT
MONEY MARKET FUND
<PAGE>
OCTOBER 31, 1997
ANNUAL REPORT
MT. HOOD, OREGON
TABLE OF CONTENTS
PAGE 1 TO OUR FELLOW SHAREHOLDERS
REVIEW AND SCHEDULE OF INVESTMENTS
PAGE 14 THE CRABBE HUSON SPECIAL FUND, INC.
PAGE 20 CRABBE HUSON SMALL CAP FUND
PAGE 24 CRABBE HUSON ASSET ALLOCATION FUND
PAGE 32 CRABBE HUSON EQUITY FUND
PAGE 37 CRABBE HUSON REAL ESTATE
INVESTMENT FUND
PAGE 41 CRABBE HUSON OREGON TAX-FREE FUND
PAGE 47 CRABBE HUSON INCOME FUND
PAGE 51 CRABBE HUSON U.S. GOVERNMENT
INCOME FUND
PAGE 54 CRABBE HUSON U.S. GOVERNMENT
MONEY MARKET FUND
PAGE 58 STATEMENTS OF ASSETS & LIABILITIES
PAGE 62 STATEMENTS OF OPERATIONS
PAGE 66 STATEMENTS OF CHANGES IN NET ASSETS
PAGE 70 NOTES TO FINANCIAL STATEMENTS
PAGE 81 FINANCIAL HIGHLIGHTS
<PAGE>
[LOGO]
CRABBE HUSON
November 30, 1997
To Our Fellow Shareholders:
Jim Crabbe and I have been together professionally now for more than 17 years,
and we both started in the investment business a good many years before that.
You can imagine that in our 30-odd years each in the market, we've seen our
share of fads and heard more than a few opinions that didn't hold up.
In the last few years, though, the noise level seems to have increased, for a
number of reasons. A greater percentage of the population than ever before is
participating in financial markets. The responsibility for a financially secure
retirement has shifted dramatically from employers (E.G., traditional defined
benefit pension plans) to employees (E.G., 401(k) and other defined contribution
plans). Technology is figuratively shrinking the world, bringing markets closer
together. This stepped-up pace is fueling growth in information demand,
financial product and service development, and investor sophistication.
Those with short-term perspectives are tempted to say (and often do say) that
financial markets have changed, that their paradigms have permanently shifted.
Here's what we believe about that kind of statement:
- - On some levels, things are indeed done differently. For instance, billions of
dollars in weekly inflows to stock mutual funds will inevitably impact the
way some business is done. When you add the myriad of products, instruments,
and services that, in the context of recent history, still are fairly new, a
change in financial markets is unavoidable.
- - At its core, however, the pursuit of wealth remains unchanged. Investors
still try to build assets. Fear and greed still are the dominant emotions
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behind investment decisions. In other words, nothing about the foundation of
investment behavior is different from the form it took, say, 15 years ago. Or
50 years ago. Or even 100 years ago.
We've been lucky to have experience on our side. The most important thing
experience has given us, we believe, is a long-term viewpoint. A long-term
viewpoint, in turn, makes the lessons of history clear. The lessons of history
show that if the nucleus of investor behavior is consistent, time and resources
dedicated to ephemeral trends are wasted. We intend to devote our work instead
only to the real interests of shareholders.
The thesis of that effort is this: Crabbe Huson looks for good companies at good
prices. This primary tenet of the contrarian investment style has been proven
successful over the long term, and we have yet to find a valid reason to stray
from its course.
The good companies we bought for your portfolios have, on the whole, had a good
year. When we reported to you in April of this year, we had just seen the first
break in the large-cap dominance of the market's performance. Volatility had
shaken growth stock values, and interest began to broaden into other sectors of
the market.
Then, in early May, the broadening trend really took root and stocks that had
been virtually ignored for the previous two years rapidly drew interest. Our
funds, which owned solid positions in these companies, were positioned for the
change in the market and began to perform very well. This bias continued through
the summer and into the early fall, and our funds turned in very strong numbers
through mid-October. The last week of the fiscal year brought a halt to the run,
when the market experienced its biggest loss in value since 1987. Though the
downturn was a disappointing way to end the reporting period, we're still very
pleased with performance for the funds in fiscal year 1997.
We believe late October was a demonstration of the kind of activity we can (and
should) expect from the market going forward. Volatility is an unavoidable part
of long-term equity investing. Dedicating a portion of your portfolio to
contrarian management, however, represents your desire to maintain an equity
position while potentially mitigating downside risk and taking advantage of
opportunities uncovered by market swings. This is precisely what Crabbe Huson is
working toward for you.
A brief word about the format of this report: our semi-annual report document
was received well, according to the comments you shared with us. Thanks to those
who took the time to share opinions and suggestions. Acting on your feedback,
we've included these features in this document:
- - A restatement of Crabbe Huson's investment philosophy, which represents the
foundation of our work on your behalf
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- - Easy-to-read type and clearly designed graphics, meant to give you
information in a direct, efficient manner
- - A modestly sized document, with minimal use of color processing to maintain
lower printing and mailing costs
Again, thank you for the opportunity to contribute to your long-term investment
goals. Please stay in touch.
Sincerely,
[SIGNATURE]
Richard S. Huson
President
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------------------------------------------
CRABBE HUSON'S INVESTMENT PHILOSOPHY
----------------------------------
THE ART OF CONTRARIAN INVESTING
In the investment world, the term "contrarian" is often misused and
misunderstood. In our view, contrarian investing represents a mindset that
requires a unique perspective and disciplined thinking.
The nucleus of Crabbe Huson's investment style is buying good companies at good
prices. Rather than looking only to rapidly advancing stocks, Crabbe Huson's
team looks instead at companies
- - with attractive stock prices;
- - that are temporarily out of favor with the broader investment community;
- - that have solid underlying business structures and intelligent, forward-
thinking management; and
- - that, if recovering from previous difficulties, have implemented the
catalysts necessary to return the company to market favor.
Investors typically look favorably upon stocks rising in price and reject those
falling in price. Accordingly, they often invest in companies or industries
widely followed by portfolio managers and the financial media. These fast-rising
"opportunities" are easily recognizable because they already have begun to pay
off. The danger, however, is that the success of these stocks may mean that a
significant portion of their upside potential has passed.
Further, investing in rapidly appreciating stocks may appear to be safe and
prudent because their upward movement is under way and is widely recognized and
endorsed. In fact, however, IT IS AT THIS POINT THAT A STOCK'S DOWNSIDE RISK MAY
BE AT ITS GREATEST: when it becomes over-analyzed, over-owned, and overvalued.
Crabbe Huson believes that solid, reasonably priced companies with strong
potential for appreciation are smarter, more risk-averse investments. While
there's a measure of science inherent in the process, the contrarian's best
asset is an artist's eye -- one that can size up the market, recognize quality,
and act with discipline and decisiveness.
To be sure, there are many good companies in which one may invest. However, GOOD
COMPANIES ARE NOT ALWAYS GOOD INVESTMENTS. Crabbe Huson believes money is not
wisely invested unless a company is purchased at a good price.
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THE IMPORTANCE OF TEAMWORK
The bedrock of Crabbe Huson's effort is the team-based approach to portfolio
management. We strongly believe in the importance of more than one perspective
and in the value of collective ability.
While our managers are responsible for discrete sections of each portfolio, the
investment team works closely to back individual efforts with insight and
support. This structure allows latitude for the research, analysis, and
discussion necessary for making effective portfolio decisions. Our team process
and strict management disciplines help ensure consistency in our method and, in
the end, value for our shareholders.
WHAT IT MEANS FOR INVESTORS
Because the nature of our approach prompts us to see opportunities outside Wall
Street's mainstream of thought, investors will at times notice strategies or
holdings that seem incongruent with current investment trends. However, in the
final analysis, long-term investors who select Crabbe Huson benefit from a
common sense, risk-averse investment style that identifies good companies that
we believe are well priced and poised for appreciation.
Shareholders who invest with Crabbe Huson
- - have enjoyed a history of long-term, competitive performance with less
relative market risk;
- - maintain portfolios that are diversified by investment STYLE, as well as by
asset class; and
- - are supported by a team of experienced professionals, dedicated to
effectively managing your assets and meeting your highest standards of
service.
With experience, teamwork, and dedication to service, we have committed to our
style of contrarian investing with all the skill, care, and diligence we can
bring to bear. We believe it's an approach that is worthy of your trust.
5
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------------------------------------------------------
INVESTMENT REVIEW AND DISCUSSION
----------------------------------
As though it shared a timetable with Crabbe Huson's scheduled reports, the
market's prevailing trend changed markedly from the first half of fiscal year
1997 to the second. The first half was a continuation of the long-running trend
that was established in early 1995: market activity was dominated by the large-
cap stocks that comprise the Dow Jones Industrial Average and S&P 500 Index, and
there was little activity, or even interest, in other sectors of the market.
The second half, however, brought changes. The equity market's roar had quieted
to a whimper by April. Then, in early May, timed almost to a day, a broadening
trend emerged. Wall Street broke its long fixation on the big names in the
market and began looking for value in other areas. Though some valuations
remained, in our opinion, dangerously high, concentration in the market's top
names lessened a bit. This was a healthy change and a welcome one for us. The
new environment was one in which contrarian portfolios often do well.
Indeed, your funds performed very well, beginning a performance run that
continued almost unabated until the infamous last week of October. Even during
the initial phases of that downturn, the portfolios performed well on a relative
basis, precisely as they should have in turbulent waters. Despite a rough final
week, fiscal year 1997 was very good for your equity funds.
Though bond markets have played second fiddle (and a very quiet second fiddle at
that) to stocks in the last several years, we haven't lost sight of their
potential both for performance and for portfolio insurance going forward. Bond
markets have been quieter in the latter half of the year -- yields have fallen
thanks to softer economic growth, and the Federal Reserve has been quiet on
interest rate changes. We've kept average maturities comparatively long to the
market and we are maintaining a constructive, interest rate-sensitive stance.
Here's our review of the markets:
EQUITY MARKET
Crabbe Huson's equity fund lineup posted solid returns for the fiscal year.
Broader participation by small-cap stocks in the latter half of the year helped
the Small Cap Fund significantly outperform its index, while the Special Fund
also had a strong year. The Equity Fund, recovering nicely from earlier
difficulty, surged in the latter half of the year to turn in an impressive gain.
The Asset Allocation Fund, hedging a bit against possible market volatility by
upping its bond position slightly, benefited from the broadening trend and
finished the year with good numbers.
6
<PAGE>
In our April report, we noted the danger in assuming that the index performance
you saw on the nightly news was indicative of market performance across the
board. For the last couple of years, the indices have been rose-colored glasses
through which investors viewed the market: While the Dow Jones Industrial
Average and the S&P 500 Index posted gains for the fiscal year through April 30,
the much broader Russell 2000 Index was up less than 2% for the same period. At
the same time, our conclusion was that most stocks already had "corrected" and
the bull market was fueled by a dangerously narrow section of big-name
companies.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
INDEX PERFORMANCE 10/31/96 THROUGH
4/30/97
<S> <C>
Dow Jones 17.40%
Russell 2000 1.61%
S&P 500 14.68%
</TABLE>
SOURCE: INTERACTIVE DATA CORP. AND FRANK RUSSELL COMPANY
Index performance results include reinvestment of dividends and
capital gains.
But who are we to spoil the party? The rate of inflow of dollars into the
market -- literally billions every week -- was spectacular. Investors seemed
unafraid of the risk presented by overvaluation. The indices continued to climb.
During a healthy market and a strong economy, money poured into equities.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
INDEX PERFORMANCE 4/30/97 THROUGH
10/31/97
<S> <C>
Dow Jones 7.12%
Russell 2000 27.29%
S&P 500 15.17%
</TABLE>
SOURCE: INTERACTIVE DATA CORP. AND FRANK RUSSELL COMPANY
Index performance results include reinvestment of dividends and
capital gains.
7
<PAGE>
Jump ahead six months to the end of the fiscal year, and we see what a
difference a little time can make. By the close of the fiscal year, the Russell
2000 had almost completely closed the gap between itself and the other indices.
This tells us that while large-cap issues still did well overall, small- to
mid-cap companies were moving at full speed. And inflows into stock funds hadn't
slowed.
What accounted for the change in the market's interest? We believe that a number
of factors were at work. In the mid-cap area of the market, value stocks were
relatively underpriced. (Some remain so today.) In addition, these mid-cap
companies are more sensitive to the domestic economy than are their large-cap
counterparts, and the sound economy (low inflation, low interest rates, good
economic growth) was a strong platform on which to build.
Another (more controversial) factor had to do with the cut in the capital gains
tax rate from 28% to 20%. The reduction's effective date was May 7, 1997; it may
be no coincidence that the market's broadening trend began in early May.
In an environment of high capital gains tax rates, investors are inclined to buy
stocks they believe they may never have to sell, thus avoiding the loss of a
significant portion of their gains to taxes. This mindset favors growth stocks.
In a less severe tax environment, investors may purchase stocks they'd be more
willing to sell at some point, since the lower tax rate would take a smaller
bite out of profits. This may be an incentive for investors to buy stocks with
fortunes that are less certain. The rate cut likely wasn't the whole reason for
the new trend, but it certainly helped trigger new interest elsewhere in the
market.
Finally, periods of volatility in the spring and a lull in large-cap activity in
the late summer were noticeable interruptions in the large-cap bull market,
interruptions that further prompted investors to shop around. The former gave us
an initial signal of shifting investor preferences, the latter a nod toward its
continuation.
Of more concern to you than the cause is the effect, which was sterling
performance from your equity funds from the spring through the summer and fall.
In our industry, good performance such as this is the result of preparation
meeting opportunity. We always have worked very hard to have portfolios fully
prepared to take advantage of market opportunities, and the last several months
are no exception. When opportunities presented themselves, we made an effort to
capitalize:
- - In late March and early April, when volatility corrected most equity sectors
by 10% or better, Crabbe Huson's equity family performed very well relative
to the market.
8
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- - Between the first of May and the end of June, the Equity Fund gained 18.33%,
while the S&P 500 Index appreciated by only 10.77%. Investors' preferences
continued to shift toward small-cap issues, boosting the already-strong
returns for our small-cap funds.
- - Our small-cap portfolios participated fully in the broadening. The Small Cap
Fund, in fact, posted one-year numbers that beat its benchmark index by more
than 13%.
- - The Special Fund's short positions provided an excellent hedge against
volatility, precisely as designed. For the three months ending April 30, the
fund gained 3.96%, versus respective losses of -6.77% and -8.63% for the
Russell 2000 and NASDAQ Composite Indices. The fund, on a relative basis,
also performed very well against the late October downturn.
- - In the October 27 correction, most funds in Crabbe Huson's equity family
ended the day ahead of the market. This is exactly the kind of cushion we
strive to provide through the contrarian style.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PERFORMANCE FOR 10/27/97
<S> <C>
Special -3.91%
Small Cap -5.63%
Russell 2000 Index -6.11%
NASDAQ -7.02%
Equity -7.06%
S&P 500 Index -6.86%
REIF Fund -2.86%
Morgan Stanley REIT
Index -3.22%
</TABLE>
SOURCE: INTERACTIVE DATA CORP., FRANK RUSSELL COMPANY, STATE
STREET BANK AND TRUST
Speaking of the late autumn downturn, it's the kind of activity no one WANTS to
see but absolutely should EXPECT to see from time to time. For the last 15
years, we've had the wind at our backs, experiencing only a few corrections of
any real significance and very little volatility. It has truly been an
extraordinary period in the history of the market.
This said, it probably is not unreasonable to expect an extended period of
overall negative performance from the market. A correction of 20% to 25%
certainly isn't out of the question. Disturbing as that can be, it's far from
the end of the world. The bigger problem, in our view, is that very few
investors (and
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remarkably few of today's asset managers) who currently are in the market have
experienced ANY period of sustained period of negative performance and may be
ill-prepared for any resulting damage to their portfolios.
We're very fortunate to have a management team who has been in the business for
many years and knows that volatility comes with the territory. Experience
doesn't make downturns any more fun to handle, but knowing that they're part of
the process gives us the perspective necessary to make the most of the
situation. We further know that turbulent markets can conclude very positively
for those who are prepared. And we intend to be prepared.
In the days following the late October downturn, the market's determination to
recover caused a great deal of buying in the blue chip sector, reconcentrating
assets in the large-cap stocks that drive the indices. By the end of the week
(which also was the end of our fiscal year), that trend had not yet reversed and
our portfolios lagged the indices a bit because of their orientation toward out-
of-favor issues. We find this is par for the course when the market plays its
hand in the manner it did that week.
As we look ahead to the market for 1998, it's of course impossible to say with
any certainty whether or not a bear market is approaching. Further volatility in
Asia could lead to more shake-ups here at home. At the time of this writing,
Pacific Rim countries are having a difficult time economically, with currencies
under pressure and new problems with unemployment and financial systems. We're
watching the developments in the Far East closely and will keep you up-to-date
regarding their effect on U.S. markets and your funds.
There has been recent concern in markets both about inflation and about the
Federal Reserve's (Fed) response to inflationary trends. However, in looking at
the economic numbers, we believe that inflation is relatively flat. While the
Fed certainly has done an excellent job of cooling inflation over the years,
that may be yesterday's war. In fact, there may be some risk that markets and
the Fed, in focusing on inflation, fear the wrong thing. The arguments we've
read recently, that DEFLATIONARY forces may be of more concern, are beginning to
gain credibility. If there is a deflationary bogeyman lurking in the bushes, the
stock market could fall on some hard times. Again, if this scenario develops, we
believe contrarian stocks are in the best position to benefit from the resulting
market changes.
Regardless of the developments in the equity market, trust that your investment
team is carefully monitoring current trends and is working to keep your
portfolios actively at work.
BOND MARKET
Crabbe Huson's bond fund lineup also had a strong year. Our Income Fund's
return, in the context of an ambivalent bond market, performed extremely well.
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Though the Oregon Tax-Free Fund lagged its benchmark slightly, the portfolio has
maintained a high-quality profile. Our government security funds, the U.S.
Government Income and U.S. Government Money Market Funds, also emphasized
quality issues for risk reduction and competitive return.
As we reported last April, the first half of the fiscal year was quiet for bond
markets. At mid-year, the bellwether 30-year Treasury bond yield stood at 6.95%,
up from 6.65% at the end of fiscal year 1996. The rise in coupon rate had offset
the drop in price, giving bonds a total yield of about 1.50% for the period.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
30-YEAR BONDS AND 90-DAY TREASURY
YIELDS
BONDS T-BILLS
<S> <C> <C>
10/31/94 7.97% 5.15%
11/30/94 8.00% 5.72%
12/31/94 7.88% 5.69%
1/31/95 7.70% 6.00%
2/28/95 7.45% 5.94%
3/31/95 7.43% 5.88%
4/30/95 7.34% 5.87%
5/31/95 6.65% 5.81%
6/30/95 6.62% 5.57%
7/31/95 6.85% 5.58%
8/31/95 6.65% 5.45%
9/30/95 6.50% 5.42%
10/31/95 6.33% 5.51%
11/30/95 6.13% 5.49%
12/31/95 5.95% 5.08%
1/31/96 6.03% 5.05%
2/28/96 6.47% 5.03%
3/31/96 6.67% 5.15%
4/28/96 6.91% 5.16%
5/30/96 6.99% 5.19%
6/30/96 6.87% 5.16%
7/31/96 6.97% 5.31%
8/31/96 7.12% 5.29%
9/30/96 6.93% 5.04%
10/31/96 6.64% 5.15%
11/30/96 6.35% 5.13%
12/31/96 6.64% 5.18%
1/31/97 6.79% 5.15%
2/28/97 6.80% 5.22%
3/31/97 7.10% 5.33%
4/30/97 6.96% 5.24%
5/30/97 6.35% 4.95%
6/30/97 6.23% 5.17%
7/30/97 5.79% 5.24%
8/30/97 6.09% 5.22%
9/30/97 5.85% 5.11%
10/31/97 5.69% 5.20%
</TABLE>
SOURCE: BLOOMBERG
In the latter half of the year, yields fell to 6.15%, their lowest point of the
reporting period. By October 31, the bond market had completed a strange year,
making four round trips between its high- and low-yield points. Some investors
who weren't used to the environment became impatient and sold, missing the gains
that followed; others became greedy and bought as bonds hit their top, then were
roughed up on the way down.
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EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
INDUSTRIAL
30-YEAR GOVT YIELD PRODUCTION(INDEX)
<S> <C> <C>
Jan-93 7.20 102.3
Feb-93 6.90 102.8
Mar-93 6.93 102.8
Apr-93 6.93 103.2
May-93 6.98 102.6
Jun-93 6.67 102.8
Jul-93 6.57 103.1
Aug-93 6.09 102.8
Sep-93 6.03 103.9
Oct-93 5.97 104.1
Nov-93 6.30 104.6
Dec-93 6.35 105.4
Jan-94 6.24 105.7
Feb-94 6.66 106.2
Mar-94 7.09 107
Apr-94 7.31 107.4
May-94 7.43 108.1
Jun-94 7.61 108.6
Jul-94 7.40 109.1
Aug-94 7.45 109.2
Sep-94 7.82 109.3
Oct-94 7.97 109.9
Nov-94 8.00 110.6
Dec-94 7.88 111.6
Jan-95 7.70 111.9
Feb-95 7.45 111.6
Mar-95 7.43 111.7
Apr-95 7.34 111.4
May-95 6.65 111.5
Jun-95 6.62 111.7
Jul-95 6.85 111.7
Aug-95 6.65 112.6
Sep-95 6.50 113
Oct-95 6.33 112.5
Nov-95 6.13 112.7
Dec-95 5.95 112.8
Jan-96 6.03 112.4
Feb-96 6.47 113.8
Mar-96 6.67 113.2
Apr-96 6.91 114.3
May-96 6.99 114.8
Jun-96 6.87 115.5
Jul-96 6.97 115.5
Aug-96 7.12 115.8
Sep-96 6.92 116
Oct-96 6.64 116.2
Nov-96 6.35 117.20
Dec-96 6.64 117.70
Jan-97 6.79 117.80
Feb-97 6.80 118.40
Mar-97 7.10 118.80
Apr-97 6.96 119.30
May-97 6.91 119.50
Jun-97 6.78 119.90
Jul-97 6.30 120.80
Aug-97 6.61 121.50
Sep-97 6.40 122.10
Oct-97 6.15 122.70
Nov-97 6.03
Dec-97
</TABLE>
SOURCE: FEDERAL RESERVE BOARD AND BLOOMBERG
We tried looking at the market differently. Since 1992, we've been acutely aware
of a real connection between industrial production and yields. In fact, the two
have moved up and down in tandem. In the last six months, though, we saw the
first break in that pattern: industry remains healthy and strong, but yields
have fallen off. This is another indication to us that concern over deflation is
replacing inflationary worries. We've worked to keep portfolios in a
constructive, interest rate-sensitive position.
In addition, we've seen a recent "flight to quality" trend among investors.
Uncertain about their current levels of equity exposure, some are reallocating a
portion of their investment assets to bonds, looking for a measure of insurance
for their portfolios. In this context, we believe it's important to point out
that investors should read bond portfolio labels carefully to ensure they're
getting what they pay for.
For instance, some of our competitors have shown very strong historical results
over the past five years. We suspect this is the result of an increased use of
high-yield bonds (also known as "junk" bonds, these are bonds rated below Baa by
Moody's) within a portfolio characterized as investment-grade quality. In fact,
the strategy has proven very effective -- junk bonds have enjoyed annualized
returns of 11.50% over the past five years, compared to 7% for investment-grade
bonds.
In contrast, Crabbe Huson has traditionally kept fixed income portfolios
concentrated in high-quality bonds (less than 5% of content graded Baa or below,
and 0% junk). This is nearly identical to the Lehman Aggregate Bond Index, a
commonly used investment-grade benchmark, in which only 5.3% of bonds are rated
Baa and below and which holds no junk.
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If a portfolio is composed of 10% to 30% Baa-rated bonds and 5% to 10% junk
bonds, it won't have any trouble outperforming the Lehman Aggregate Bond Index
under normal market conditions. The portfolio simply has taken on more credit
risk than has the index.
What should be of concern is the growing potential for volatility within these
"high quality" funds, should junk bonds weaken. Unsuspecting investors, who
thought they were investing in a high-quality portfolio, may have put more of
their money at risk when their intention was exactly the opposite. (In recent
months, there have been a number of articles in leading periodicals detailing
this growing trend.)
We're fully aware that investors look to bond funds for safety and current
income. You can be sure that regardless of the relative performance of your
Crabbe Huson bond fund, your money is managed in a manner that attempts to
maximize performance and minimize relative risk.
REAL ESTATE MARKET
Earlier this year, we reported that real estate investment trust (REIT) market
indices had begun a concentration trend, holding the contrarian-oriented Real
Estate Investment Fund in check. Markets opened up a bit later in the year,
giving our portfolio a better opportunity for participation. The fund finished
the fiscal year with performance numbers that were competitive with the equity
funds in our family.
This segment of financial markets is still developing rapidly. Investors are
attracted by the efficient manner of investing in real estate through
professionally managed vehicles. And despite the surge in equity capitalization
in 1997, experts believe the securitization of the real estate industry is still
in its infancy. While REITs and other vehicles begin to chip away at the
availability of properties, well-financed companies are positioned for
attractive growth.
What we do as a normal course of business is seek value. We're looking for
strong real estate investments in sectors that recently have been out of favor
and therefore offer good opportunities at attractive prices. At present, we
believe that the fund's positioning remains sound and offers an excellent tool
for portfolio diversification.
CLOSING THOUGHT
In our April message, we noted that financial markets were in uncharted
territory. This remains the case today, even with the increased level of
volatility. Our investment team confers regularly about the state of the market.
While we're quite sure of our role on your behalf -- to buy good companies at
good prices -- we're less sure about the energy left in the bull. True, the
economy still is flying high with the lowest unemployment level in 24 years,
almost no inflation, and a
13
<PAGE>
federal budget deficit that could be eradicated as early as next year. As one
would guess, companies are thriving in this environment, and that fact is
reflected (disproportionately, we believe) in the current equity market.
Perhaps it's the pragmatic nature of contrarians, but even when all seems right
with the world, we're compelled to watch for trouble. Though companies are
mostly healthy, some of their valuations aren't healthy for investors. There
remains a great deal of downside risk in certain areas of the market, a risk
that was barely affected by the recent mini-correction thanks to the bounce in
large-cap prices. If the market broadens again, as it did early in the year, we
believe our stocks will see good participation. If it doesn't rally further and
indeed we're headed for a downturn, we'd much rather own the reasonably priced
stocks we have now, as we think they afford better cushion for downward swings
than overpriced stocks. For the diversified investor who wants to be prudent but
doesn't want to sacrifice the long-term benefits of equity investing, we believe
Crabbe Huson's contrarian style is an excellent portfolio option.
14
<PAGE>
Investment results quoted are historical and include changes in share price and
reinvestment of dividends and capital gains (if any). Data quoted represents
past performance. Future returns and principal value will fluctuate so that an
investor's share, when redeemed, may be worth more or less than the original
cost.
15
<PAGE>
THE CRABBE HUSON SPECIAL FUND, INC.
INVESTMENT OBJECTIVE: TO PROVIDE SIGNIFICANT LONG-TERM CAPITAL APPRECIATION
THROUGH A FLEXIBLE POLICY OF INVESTING IN A DIVERSIFIED PORTFOLIO OF CAREFULLY
SELECTED STOCKS THAT HAVE SMALL TO MEDIUM MARKET CAPITALIZATIONS. THE FUND MAY
INVEST AS MUCH AS 100% OF ITS ASSETS IN STOCKS, AND MAY HOLD UP TO 25% OF ITS
ASSETS IN SHORT POSITIONS.(1)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000
INVESTMENT
IN THE CRABBE HUSON SPECIAL FUND, INC. AND THE
RUSSELL 2000 INDEX
(RESULTS ARE FOR FISCAL YEARS ENDING OCTOBER 31)
SPECIAL RUSSELL 2000
<S> <C> <C>
Begin $ 10,000 $ 10,000
1987 $ 8,100 $ 7,177
1988 $ 9,690 $ 9,123
1989 $ 11,500 $ 10,544
1990 $ 10,247 $ 7,665
1991 $ 15,327 $ 12,158
1992 $ 16,570 $ 13,312
1993 $ 23,428 $ 17,624
1994 $ 28,676 $ 17,569
1995 $ 29,187 $ 20,791
1996 $ 30,655 $ 24,247
1997 $ 38,815 $ 31,358
Annualized Total Return
1 Year: 26.62%
5 Year: 18.56%
Life of Fund: 13.70%
Fund Inception: 4/9/87
</TABLE>
HISTORICAL RESULTS ARE NOT INDICATIVE OF FUTURE RETURNS. FUTURE
RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S
SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE
ORIGINAL COST. THE ACCOMPANYING CHART COMPARES THE PERFORMANCE
OF THE SPECIAL FUND WITH THE RUSSELL 2000 INDEX, WHICH IS AN
UNMANAGED, BROAD-BASE INDEX OF STOCKS; THE SPECIAL FUND IS A
PROFESSIONALLY MANAGED MUTUAL FUND. THE INDEX PRESENTED HERE IS
NOT MANAGED, DOES NOT INCUR EXPENSES AND IS NOT AVAILABLE FOR
DIRECT INVESTMENT. HAD THE INDEX INCURRED TYPICAL OPERATING
EXPENSES, ITS PERFORMANCE WOULD HAVE BEEN LOWER.
The Special Fund closed fiscal year 1997 with a return of 26.62%, trailing
slightly the 29.33% gain posted by its Russell 2000 Index benchmark. Viewing it
in the context of its mission (long-term appreciation with a hedge against
volatility), we're extremely pleased with the fund's performance over the last
year. The slight lag is a small price to pay for having a portion of the fund
committed as a buffer against a serious market setback.
In the turbulent first half of the reporting period, the portfolio's short
position proved its value as an insurance policy, helping the fund to
significantly outperform the market both in absolute numbers and relative to the
index. For the three-month period ending April 30, the Special Fund was up
3.96%, versus losses of -6.77% for the Russell 2000 and -8.63% for the NASDAQ
Composite. When the market became violent again in late October, the fund again
held its ground, finishing ahead of the indices by 1.19% for the week ending
October 31.
- -------------------
(1) Selling short is a hedging technique whereby stocks are borrowed, sold at
current market value, then purchased at a later date. This strategy is followed
when it is believed a security's price will decline. If it does decline, the
security may be purchased at a lower price, resulting in a gain. If the price
rises, the security may be purchased at a higher price, resulting in a loss.
16
<PAGE>
The overall strategy of the Special Fund is to drive long-term performance with
the portfolio's long position while using the shorted stocks as a tactical
asset. The extreme and seemingly ever-increasing volatility of the general stock
market demonstrates how potentially valuable a short position can be.
In addition to good contrarian stock picking, the market's broadening interest
in small-cap issues helped the fund's long position perform well. Though the
turbulence of the fiscal year's final week refocused market attention on large-
cap issues, we believe that in the absence of a general market selloff, the
small-cap section of the market offers a comparatively good opportunity for
investors in the coming months.
Long position performance for the portfolio is highlighted by significant
positions in health care, transportation, and telecommunication stocks. In a
well-diversified portfolio, these stocks have performed admirably throughout the
year and continue to look promising going forward. In a few select cases,
particularly in the health care sector, the fund was significantly rewarded when
companies were acquired in takeovers. A takeover can be especially beneficial to
a contrarian investor, since the portfolio's cost basis for the stock is usually
much lower than that of other buyers and is far below the premium paid for the
shares by the acquiring company.
The portfolio's short position, which stands at 18.10% of total net assets,
remains concentrated in technology positions. As demonstrated more than once in
the last year, certain stocks in this sector are highly vulnerable when market
waters become choppy. We've been widely questioned (and rightly so) about taking
short positions in companies that have done so well in recent years. Without
question, high-tech companies have been tremendously successful. However, their
position in the market follows our "good companies don't necessarily make good
investments" rule. While we can't argue with their success, we believe we can
accurately point out that their valuations are unfairly inflated based on
traditional business measurements. We think there's too little room to move
upward in these stocks and considerable room to move downward. If we're going to
hold short positions in any area of the market, we're most comfortable that our
read on these stocks supports our thinking.
Looking ahead, we believe the increased attention toward the value segment of
the market (versus growth and momentum) should persist in the absence of any
serious market setback. We are keeping in mind, however, that the advanced
17
<PAGE>
stage of the market's upward trend and the possibility of further negatives from
the Asian currency crisis could alter the present market outlook. If such a
situation develops, our short position should be an extremely valuable asset.
<TABLE>
<S> <C>
[SIGNATURE] [SIGNATURE]
James E. Crabbe John W. Johnson, CFA
</TABLE>
18
<PAGE>
THE CRABBE HUSON SPECIAL FUND, INC.
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
SHARES OR
FACE VALUE SECURITIES DESCRIPTION MARKET VALUE
- -------------- --------------------------------------------------- --------------
<C> <S> <C>
COMMON STOCKS - 87.0%
- -----------------------------------------------------------------------------------
BASIC MATERIALS - 13.2%
464,400 Century Aluminum Co................................ $ 7,314,300
291,300 Huntco Inc. - Class A.............................. 4,078,200
457,700 *Ispat International NV(a)......................... 11,585,531
734,800 Longview Fibre Co.................................. 11,664,950
4,927,400 *Lytton Minerals, Ltd.(a).......................... 9,793,590
373,800 Oregon Steel Mills, Inc............................ 7,873,163
--------------
52,309,734
--------------
COMMUNICATIONS - 0.7%
50,600 *Brooks Fiber Properties........................... 2,827,275
--------------
CONSUMER CYCLICALS - 8.8%
904,800 *Bombay Company,................................... 5,485,350
153,900 Cato Corp. - Class A............................... 1,317,769
1,077,200 *Oakley, Inc....................................... 10,637,350
1,132,100 *Phillips-VanHeusen................................ 16,132,425
39,900 *Synthetic......................................... 1,117,200
--------------
34,690,094
--------------
CONSUMER STAPLES - 3.0%
702,100 *Fleming Companies................................. 11,847,937
--------------
ENERGY - 8.6%
578,300 *Enserch Exploration............................... 5,204,700
648,500 *Forest Oil Corp................................... 12,240,438
748,200 Snyder Oil Corp.................................... 16,553,925
--------------
33,999,063
--------------
FINANCIAL - 3.2%
503,200 *Arcadia Financial Ltd............................. 4,560,250
387,100 *Pico Holdings,.................................... 2,419,375
253,300 *Risk Capital Holdings,............................ 5,762,575
--------------
12,742,200
--------------
HEALTHCARE - 20.1%
1,225,500 *Coventry Corp..................................... 17,080,406
781,700 Integrated Health Services......................... 24,818,975
1,226,900 *Mid Atlantic Medical.............................. 17,866,731
1,010,500 *Sun Healthcare Group,............................. 20,083,688
--------------
79,849,800
--------------
</TABLE>
19
<PAGE>
THE CRABBE HUSON SPECIAL FUND, INC.
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
SHARES OR
FACE VALUE SECURITIES DESCRIPTION MARKET VALUE
- -------------- --------------------------------------------------- --------------
<C> <S> <C>
COMMON STOCKS - (CONTINUED)
- -----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<C> <S> <C>
INDUSTRIALS - 15.9%
1,108,500 Battle Mountain Gold............................... $ 6,789,563
183,800 *Flanders Corp..................................... 1,470,400
2,142,200 *Laidlaw Environmental Services.................... 10,844,887
518,563 *Motivepower Industries............................ 13,806,740
731,300 *Pegasus Gold, Inc................................. 3,382,263
895,500 Wabash National Corp............................... 26,753,062
--------------
63,046,915
--------------
REAL ESTATE INVESTMENT TRUST - 1.2%
270,500 *Catellus Development Corp......................... 4,649,219
--------------
TECHNOLOGY - 3.2%
169,700 *Actel Corp........................................ 2,534,894
231,400 *Input/Output, Inc................................. 6,204,412
329,200 *Mentor Graphics Corp.............................. 3,600,625
28,000 *Mylex Corp........................................ 241,500
--------------
12,581,431
--------------
TRANSPORTATION - 9.1%
766,900 Hunt (JB) Transportation Services, Inc............. 11,791,087
310,600 *Landstar System, Inc.............................. 7,765,000
608,900 *Yellow Corp....................................... 16,706,694
--------------
36,262,781
--------------
Total Common Stocks 344,806,449
--------------
(Cost $264,156,561)
SHORT TERM INVESTMENTS - 9.7%
- -----------------------------------------------------------------------------------
DISCOUNT NOTE - 3.8%
$ 15,000,000 Federal Home Loan Bank 5.680% 11/03/97(b).......... 14,995,333
--------------
INVESTMENT COMPANY - 0.5%
1,997,194 SSgA Money Market Fund 5.450%**.................... 1,997,194
--------------
</TABLE>
20
<PAGE>
THE CRABBE HUSON SPECIAL FUND, INC.
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
SHARES OR
FACE VALUE SECURITIES DESCRIPTION MARKET VALUE
- -------------- --------------------------------------------------- --------------
SHORT TERM INVESTMENTS - (CONTINUED)
- -----------------------------------------------------------------------------------
<C> <S> <C>
REPURCHASE AGREEMENT - 5.4%
$ 21,543,554 State Street Bank and Trust Company***(c) 5.000%
11/03/97......................................... $ 21,543,554
--------------
Total Short Term Investments 38,536,081
--------------
(Cost $38,536,081)
Total Investments - 96.7% 383,342,530
--------------
(Cost $302,692,642)****
SECURITIES SOLD SHORT - (18.1%)
- -----------------------------------------------------------------------------------
COMMON STOCKS
FINANCIAL - (2.7%)
86,600 *Citicorp.......................................... (10,830,412)
--------------
TECHNOLOGY - (15.4%)
81,800 *America Online, Inc............................... (6,298,600)
303,625 *Compaq Computers Corp............................. (19,356,094)
317,500 *Dell Computer Corp................................ (25,439,687)
138,850 *Gartner Group, Inc. - Class A..................... (3,922,513)
113,600 *Tellabs, Inc...................................... (6,134,400)
--------------
(61,151,294 )
--------------
Total Securities Sold Short - (18.1%) (71,981,706 )
--------------
(Proceeds $42,672,214)(d)
Other Assets and Liabilities, Net - 21.4%(e) 84,974,426
--------------
TOTAL NET ASSETS - 100.0% $ 396,335,250
--------------
--------------
</TABLE>
* Non-income producing security.
** Rate reflects 7 day yield as of October 31, 1997.
*** The repurchase agreement, dated 10/31/97, $21,543,554 due 11/03/97, is
collateralized by $21,815,000 U.S. Treasury Note, 6.125%, maturing
3/31/98, with a market value of $21,978,613.
**** The aggregate cost for federal income tax purposes is $303,066,709.
Aggregate gross unrealized appreciation is $86,558,369 and the
aggregate gross unrealized depreciation is $6,282,548, resulting in
net unrealized appreciation of $80,275,821.
(a) American Depository Receipt.
(b) Rate reflects purchase yield to maturity.
(c) Security segregated to collateralize short sales.
(d) The aggregate proceeds for federal income tax purposes is $39,635,262.
Aggregate gross unrealized appreciation is $763,660 and the gross
unrealized depreciation is $33,110,104, resulting in net unrealized
depreciation of $32,346,444.
(e) Includes $27,171,830 of assets segregated to collateralize short
sales.
See accompanying notes to financial statements.
21
<PAGE>
CRABBE HUSON SMALL CAP FUND
INVESTMENT OBJECTIVE: PROVIDE LONG-TERM CAPITAL APPRECIATION THROUGH A
DIVERSIFIED PORTFOLIO OF CAREFULLY SELECTED STOCKS WITH SMALL MARKET
CAPITALIZATIONS. THE FUND MAY HOLD UP TO 100% OF ITS ASSETS IN EQUITY
SECURITIES.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
THE
CRABBE HUSON SMALL CAP FUND AND THE RUSSELL 2000 INDEX
(RESULTS ARE FOR FISCAL YEARS ENDING OCTOBER 31)
<S> <C> <C>
Small Cap Russell 2000
Begin $ 10,000 $10,000
1996 $ 11,020 $11,662
1997 $ 15,690 $15,082
Total Return
1 Year: 42.38%
Life of Fund: 30.42%
Fund Inception: 2/16/96
</TABLE>
HISTORICAL RESULTS ARE FOR THE PRIMARY CLASS OF SHARES AND ARE
NOT INDICATIVE OF FUTURE RETURNS. THE INSTITUTIONAL CLASS OF
SHARES RETURNED 43.11% FOR THE FISCAL YEAR AND 39.74% ON AN
ANNUALIZED BASIS SINCE INCEPTION ON 10/10/96. FUTURE RETURNS AND
PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES,
WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST.
THE ACCOMPANYING CHART COMPARES THE PERFORMANCE OF THE SMALL CAP
FUND WITH THE RUSSELL 2000 INDEX, WHICH IS AN UNMANAGED,
BROAD-BASE INDEX OF STOCKS; THE SMALL CAP FUND IS A
PROFESSIONALLY MANAGED MUTUAL FUND. THE INDEX PRESENTED HERE IS
NOT MANAGED, DOES NOT INCUR EXPENSES AND IS NOT AVAILABLE FOR
DIRECT INVESTMENT. HAD THE INDEX INCURRED TYPICAL OPERATING
EXPENSES, ITS PERFORMANCE WOULD HAVE BEEN LOWER.
In fiscal year 1997, the Small Cap Fund would have been hard-pressed to perform
any better. Returning 42.38% for the reporting period, the fund easily beat the
29.33% and 30.46% posted respectively by the Russell 2000 Index and NASDAQ
Composite. The Small Cap Fund's institutional class of shares returned 43.11%
for the fiscal year.
The portfolio was strong out of the gate in the first fiscal quarter, but it
then was held in check by an incredibly difficult small-cap market that led up
to the mid-year point. Still, true to its contrarian fashion, the fund stayed
ahead of the indices, closing the first half of the year in front of its nearest
benchmark by more than 10%.
As the environment calmed through the summer and into the early fall, the fund's
above-average performance continued to benefit from investors' greater
participation in the undervalued segment of the stock market. As part of a well-
diversified portfolio, the health care, transportation, and telecommunications
industries were major contributors to performance. The fund also benefited from
a number of takeovers of companies held in the portfolio.
We expect that interest in undervalued small cap stocks will continue, unless
the confidence of the overall market is undermined. In that regard, since the
22
<PAGE>
valuation levels of the general market are at or near historic highs, we believe
our best protection is to maintain our careful buy/sell disciplines, whereby we
purchase out-of-favor contrarian stocks and, once they return to market favor,
sell them to a reasonable, defined value buyer. At present, 24% of assets in the
broad category of basic materials and industrials, 11% each in consumer
cyclicals and technology, and 8.3% in health care highlight our industry
concentration.
Because of strict adherence to our disciplines and the positive cash flows into
the fund, we have at times experienced some difficulty in maintaining a fully
invested posture. However, we think the dynamic market will continue to present
opportunities for us to put new cash to work in a manner that will help us
produce strong results. If the bear does emerge from hibernation and the broader
market's performance recedes, we believe the fund is well positioned to weather
the downturn in a way that will produce comparatively good results.
<TABLE>
<S> <C>
[SIGNATURE] [SIGNATURE]
James E. Crabbe John W. Johnson, CFA
</TABLE>
23
<PAGE>
CRABBE HUSON SMALL CAP FUND
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
SHARES OR
FACE VALUE SECURITIES DESCRIPTION MARKET VALUE
- -------------- --------------------------------------------------- --------------
<C> <S> <C>
COMMON STOCKS - 74.9%
- -----------------------------------------------------------------------------------
BASIC MATERIALS - 12.7%
186,500 Century Aluminum Co................................ $ 2,937,375
133,000 Huntco Inc. - Class A.............................. 1,862,000
142,800 *Ispat International NV (a)........................ 3,614,625
2,128,300 *Lytton Minerals, Ltd. (a)......................... 4,230,161
87,200 *Oregon Steel Mills, Inc........................... 1,836,650
--------------
14,480,811
--------------
COMMUNICATIONS - 1.5%
15,200 *Brooks Fiber Properties........................... 849,300
24,600 *Iridium World Communications...................... 924,038
--------------
1,773,338
--------------
CONSUMER CYCLICALS - 11.0%
249,400 *Bombay Company, Inc............................... 1,511,988
115,500 *Boston Chicken, Inc............................... 1,032,281
115,200 Cato Corp. - Class A............................... 986,400
333,000 *Oakley, Inc....................................... 3,288,375
305,500 Phillips-Van Heusen................................ 4,353,375
49,400 *Synthetic Industries.............................. 1,383,200
--------------
12,555,619
--------------
CONSUMER STAPLES - 1.0%
64,700 *Fleming Companies................................. 1,091,813
--------------
ENERGY - 5.6%
142,800 *Forest Oil Corp................................... 2,695,350
41,200 Snyder Oil Corp.................................... 911,550
111,900 Western Gas Resources.............................. 2,762,531
--------------
6,369,431
--------------
FINANCIAL - 4.8%
256,300 *Arcadia Financial Ltd. (a)........................ 2,322,719
47,000 *CB Commercial Real Estate......................... 1,762,500
61,400 *Risk Capital Holdings, Inc........................ 1,396,850
--------------
5,482,069
--------------
HEALTHCARE - 8.3%
151,600 *Coventry Corp..................................... 2,112,925
16,600 *Integrated Health Services........................ 527,050
146,200 *Isolyser Company, Inc............................. 443,169
284,500 *Mid Atlantic Medical Services..................... 4,143,031
115,600 *Sun Healthcare Group, Inc......................... 2,297,550
--------------
9,523,725
--------------
</TABLE>
24
<PAGE>
CRABBE HUSON SMALL CAP FUND
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
SHARES OR
FACE VALUE SECURITIES DESCRIPTION MARKET VALUE
- -------------- --------------------------------------------------- --------------
COMMON STOCKS - (CONTINUED)
- -----------------------------------------------------------------------------------
<C> <S> <C>
INDUSTRIALS - 11.3%
482,700 Battle Mountain Gold............................... $ 2,956,537
93,200 *Flanders Corp..................................... 745,600
680,400 *Laidlaw Environmental Services.................... 3,444,525
422,000 *Pegasus Gold, Inc................................. 1,951,750
126,500 Wabash National Corp............................... 3,779,188
--------------
12,877,600
--------------
TECHNOLOGY - 11.0%
66,500 *Actel Corp........................................ 993,344
146,800 *CCC Information Services.......................... 2,734,150
61,400 *Checkpoint Systems................................ 982,400
87,000 *Input/Output, Inc................................. 2,332,687
284,300 *Mentor Graphics Corp.............................. 3,109,531
208,100 *Mylex Corp........................................ 1,794,863
65,000 *Picturetel Corp................................... 601,250
--------------
12,548,225
--------------
TRANSPORTATION - 7.7%
292,600 Hunt (JB) Transportation Services, Inc............. 4,498,725
33,900 Knightsbridge Tankers Ltd.......................... 1,017,000
86,000 *Landstar System, Inc.............................. 2,150,000
42,200 *Yellow Corp....................................... 1,157,862
--------------
8,823,587
--------------
Total Common Stocks 85,526,218
--------------
(Cost $75,704,680)
SHORT TERM INVESTMENTS - 25.1%
- -----------------------------------------------------------------------------------
DISCOUNT NOTE - 22.7%
$ 25,890,000 Federal Home Loan Bank 5.680%** 11/03/97........... 25,881,945
--------------
INVESTMENT COMPANY - 2.4%
2,771,384 SSgA Money Market Fund 5.450%***................... 2,771,384
--------------
Total Short Term Investments 28,653,329
--------------
(Cost $28,653,329)
Total Investments - 100.0% 114,179,547
(Cost $104,358,009)****
Other Assets and Liabilities, Net - 0.0% 38,729
--------------
TOTAL NET ASSETS - 100.0% $ 114,218,276
--------------
--------------
</TABLE>
* Non-income producing security.
** Rate reflects purchase yield to maturity.
*** Rate reflects 7 day yield as of October 31, 1997.
**** The aggregate cost for federal income tax purposes is identical.
Aggregate gross unrealized appreciation is $13,490,867 and the
aggregate gross unrealized depreciation is $3,669,329, resulting in
net unrealized appreciation of $9,821,538.
(a) American Depository Receipt
See accompanying notes to financial statements.
25
<PAGE>
CRABBE HUSON ASSET ALLOCATION FUND
INVESTMENT OBJECTIVE: PRESERVATION OF CAPITAL, CAPITAL APPRECIATION AND INCOME
THROUGH A PORTFOLIO OF STOCKS, FIXED INCOME SECURITIES, CASH AND CASH
EQUIVALENTS. THE FUND CAN HOLD AS MUCH AS 75% OR AS LITTLE AS 20% OF ITS ASSETS
IN COMMON STOCKS.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
THE
CRABBE HUSON ASSET ALLOCATION FUND THE S&P 500 AND THE
LEHMAN BROTHERS GOVT/CORP BOND INDEX
(RESULTS ARE FOR FISCAL YEARS ENDING OCTOBER 31)
<S> <C> <C> <C>
Asset Allocation S&P 500 Lehman Bros
Begin $ 10,000 $ 10,000 $ 10,000
1989 $ 10,690 $ 11,739 $ 11,156
1990 $ 10,006 $ 10,863 $ 11,763
1991 $ 12,462 $ 14,498 $ 13,578
1992 $ 13,864 $ 15,920 $ 15,006
1993 $ 16,766 $ 18,296 $ 17,052
1994 $ 17,212 $ 19,002 $ 16,260
1995 $ 19,450 $ 24,024 $ 18,888
1996 $ 21,192 $ 29,816 $ 19,906
1997 $ 25,418 $ 39,381 $ 21,660
Annualized Total Return
1 Year: 20.60%
5 Year: 13.01%
Life of Fund: 11.32%
Fund Inception: 1/31/89
</TABLE>
HISTORICAL RESULTS ARE FOR THE PRIMARY CLASS OF SHARES AND ARE
NOT INDICATIVE OF FUTURE RETURNS. THE INSTITUTIONAL CLASS OF
SHARES RETURNED 21.18% FOR THE FISCAL YEAR AND 21.63% ON AN
ANNUALIZED BASIS SINCE INCEPTION ON 10/28/96. FUTURE RETURNS AND
PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES,
WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST.
THE ACCOMPANYING CHART COMPARES THE PERFORMANCE OF THE ASSET
ALLOCATION FUND WITH THE S&P 500 AND LEHMAN BROTHERS
GOVERNMENT/CORPORATE BOND INDICES, WHICH ARE UNMANAGED,
BROAD-BASE INDICES OF STOCKS AND BONDS, RESPECTIVELY; THE ASSET
ALLOCATION FUND IS A PROFESSIONALLY MANAGED MUTUAL FUND. THE
INDICIES PRESENTED HERE ARE NOT MANAGED, DO NOT INCUR EXPENSES
AND ARE NOT AVAILABLE FOR DIRECT INVESTMENT. HAD THE INDICES
INCURRED TYPICAL OPERATING EXPENSES, THEIR PERFORMANCE WOULD
HAVE BEEN LOWER.
The Crabbe Huson Asset Allocation Fund, our medium-risk portfolio, returned
20.60% for fiscal year 1997, compared to advances of 32.08% for the S&P 500
Index and 8.81% for the Lehman Brothers Government/Corporate Bond Index. The
fund's institutional class of shares showed a gain of 21.18% for the year. As of
the date of this report, the Asset Allocation Fund holds 58% of its assets in
stocks, 40% in bonds, and the residual 2% in cash.
As was the case for most of Crabbe Huson's equity portfolios, the stock side of
the fund struggled against the dominance of the top tier of stocks in the S&P
500. Our belief in late April was that these leadership stocks eventually would
have to slow, and indeed they did with late May's sudden shift in preference. As
previously ignored equities began to rotate back into the market's favor, our
stocks rapidly picked up steam.
We continue to adhere to our contrarian philosophy, seeking out stocks not loved
by the crowd but nonetheless offering attractive valuations and interesting
stories. Since April 30, the fund's equities are up by more than 30%,
approximately double the return of the S&P 500. We've seen excellent
participation
26
<PAGE>
from our positions in industrials, telecommunications, and technology, the top
three areas of concentration for the equity side during the last six months.
Going forward, we'll maintain a cautiously optimistic stance for stock
performance, recognizing the potential danger for fallout if expectations are
not realized from an already inflated market. While a market decline over a
short period of time might take our stocks lower as well, we hope that by
focusing on stocks already out of favor and not in the mainstream, we will not
see our portfolio decline as sharply during a protracted down market.
On the bond side, we're mindful of the increasingly tenuous nature of the global
economy and of the possibility of a new deflationary trend, both of which could
be hard on low-quality bonds. Accordingly, we're keeping the fixed income
position concentrated in high-quality issues. Performance has not lagged of
late, and indeed it has been assisted by our insistence on quality: During the
fourth fiscal quarter, our bond position outperformed the Lehman Brothers
Government/Corporate Bond Index, rising 2.64% versus the index's 2.04%.
The overall strength of stocks has caused asset allocation funds to fall out of
favor over the last few years. Though stocks tend to outperform bonds over the
long term, stock valuations have reached a level at which bonds are becoming
more attractive on a relative basis.
As an illustration of the potential attractiveness of bonds, consider that for
the last 70-plus years (January 1, 1926 through June 30, 1997), stocks have
outperformed bonds by only 4.50% on an annualized basis -- not a very large
spread. For the two and a half years from January 1, 1995 to June 30, 1997,
however, that differential widened to more than 23%. Certainly, we know that
stocks can potentially return more than bonds, but for this differential to
persist over the life of a 30-year bond, a rough calculation tells us that
stocks would have to double in value every 2.4 years, an unlikely scenario. We
think the gap will narrow.
Unless bonds fully close that gap and then go on to outperform the stock market
(also unlikely), then equities still must get the nod as the preferred vehicle
for long-term performance. But bonds presumably provide a stabilizing element in
a portfolio, a sort of insurance policy. The opportunity cost of such insurance
27
<PAGE>
has been high in recent years, but investors shouldn't lose sight of the basic
need for insurance in portfolios -- a need that may grow as the stock market
continues to soar above long-term average returns.
<TABLE>
<S> <C>
[SIGNATURE] [SIGNATURE]
Richard S. Huson, CFA John E. Maack, Jr., CFA
[SIGNATURE] [SIGNATURE]
Marian L. Kessler Robert E. Anton
[SIGNATURE]
Garth R. Nisbet, CFA
</TABLE>
28
<PAGE>
CRABBE HUSON ASSET ALLOCATION FUND
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
SHARES OR
FACE VALUE SECURITIES DESCRIPTION MARKET VALUE
- -------------- --------------------------------------------------- --------------
<C> <S> <C>
FIXED INCOME SECURITIES - 39.5%
- -----------------------------------------------------------------------------------
AGENCIES - 5.6%
$ 1,000,000 Federal Home Loan Bank 5.850% 2/21/06.............. $ 985,730
900,000 Federal National Mortgage Association 6.080%
9/25/00.......................................... 904,410
1,200,000 Federal National Mortgage Association 8.250%
12/18/00......................................... 1,278,924
925,000 Federal National Mortgage Association 5.875%
2/02/06.......................................... 913,336
800,000 Interamerican Development Bank 6.125% 3/08/06...... 800,000
1,500,000 Student Loan Marketing Association Treasury Inverse
Floater 4.820%** 2/11/98......................... 1,492,485
550,000 Tennessee Valley Authority 6.125% 7/15/03.......... 545,875
--------------
6,920,760
--------------
ASSET-BACKED - 0.4%
500,000 Green Tree Financial 6.540% 7/15/19................ 504,709
--------------
COLLATERALIZED MORTGAGE OBLIGATION - 0.2%
247,668 Greenwich Capital Acceptance Inc. GNMA 1993
(Principal Only) - Class B-1 (Amortized Yield to
Maturity) 6.459% 1/26/15......................... 242,947
--------------
CORPORATE BONDS - 9.6%
500,000 GMAC 8.000% 10/01/99............................... 516,875
550,000 Upjohn Co. 5.875% 4/15/00.......................... 548,625
600,000 Pepsico, Inc. 5.875% 6/01/00....................... 597,750
400,000 American Express Credit 6.500% 8/01/00............. 404,000
800,000 Ford Motor Credit 6.250% 11/08/00.................. 802,000
600,000 WMX Technologies 6.700% 5/01/01.................... 607,500
755,000 GMAC 9.000% 10/15/02............................... 843,713
600,000 IBM Corp. 7.250% 11/01/02.......................... 627,750
550,000 JP Morgan & Co. 7.625% 9/15/04..................... 585,750
550,000 Pacific Bell 6.250% 3/01/05........................ 544,500
550,000 Anheuser Busch 7.000% 9/01/05...................... 567,875
660,000 US West Communications 6.625% 9/15/05.............. 674,025
550,000 Bear Stearns Co. 6.875% 10/01/05................... 561,687
550,000 Snap-On, Inc. 6.625% 10/01/05...................... 563,750
975,000 Walt Disney Co. 6.750% 3/30/06..................... 993,281
700,000 Teleport Communications 9.875% 7/01/06............. 767,375
550,000 Eli Lilly 8.375% 12/01/06.......................... 627,000
600,000 AT&T Corp. 7.750% 3/01/07.......................... 651,750
550,000 GTE South 6.000% 2/15/08........................... 532,813
--------------
12,018,019
--------------
</TABLE>
29
<PAGE>
CRABBE HUSON ASSET ALLOCATION FUND
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
SHARES OR
FACE VALUE SECURITIES DESCRIPTION MARKET VALUE
- -------------- --------------------------------------------------- --------------
FIXED INCOME SECURITIES - (CONTINUED)
- -----------------------------------------------------------------------------------
<C> <S> <C>
MORTGAGE PASS-THROUGH SECURITIES - 5.6%
$ 60,195 Federal Home Loan Mortgage Corp Pool #281037 9.250%
11/01/16......................................... $ 63,780
683,528 Federal Home Loan Mortgage Corp Pool #303033 9.000%
4/01/17.......................................... 723,863
1,181,094 Federal Home Loan Mortgage Corp Pool #C80344 7.500%
9/01/25.......................................... 1,206,536
1,232,183 Federal Home Loan Mortgage Corp Pool #D65456 7.000%
11/01/25......................................... 1,237,888
1,896,142 Federal Home Loan Mortgage Corp Pool #C80409 8.000%
6/01/26.......................................... 1,964,196
1,765,358 Federal Home Loan Mortgage Corp Pool #C00495 7.000%
1/01/27.......................................... 1,773,603
--------------
6,969,866
--------------
U.S. GOVERNMENT BONDS - 18.1%
745,000 U.S. Treasury Note 6.000% 6/30/99.................. 749,231
5,970,000 U.S. Treasury Note 5.875% 7/31/99.................. 5,989,343
5,410,000 U.S. Treasury Bond 6.000% 2/15/26.................. 5,255,382
3,490,000 U.S. Treasury Bond 6.750% 8/15/26.................. 3,743,514
530,000 U.S. Treasury Bond 6.500% 11/15/26................. 553,134
3,805,000 U.S. Treasury Bond 6.625% 2/15/27.................. 4,030,028
2,210,000 U.S. Treasury Bond 6.375% 8/15/27.................. 2,275,858
--------------
22,596,490
--------------
Total Fixed Income Securities 49,252,791
--------------
(Cost $47,626,295)
COMMON STOCKS - 57.5%
- -----------------------------------------------------------------------------------
BASIC MATERIALS - 8.1%
15,900 Asarco, Inc........................................ 435,263
100,500 *Bethlehem Steel Corp.............................. 1,005,000
37,300 Freeport McMoran Copper - Class B.................. 890,538
21,900 International Paper Co............................. 985,500
63,400 Louisiana Pacific Corp............................. 1,331,400
37,428 Lyondell Petrochemical............................. 959,093
13,300 Mead Corp.......................................... 804,650
55,100 *National Steel Corp. - Class B.................... 909,150
31,813 Newmont Mining Corp................................ 1,113,455
43,900 Placer Dome, Inc................................... 680,450
19,500 *USG Corp.......................................... 920,156
--------------
10,034,655
--------------
</TABLE>
30
<PAGE>
CRABBE HUSON ASSET ALLOCATION FUND
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
SHARES OR
FACE VALUE SECURITIES DESCRIPTION MARKET VALUE
- -------------- --------------------------------------------------- --------------
COMMON STOCKS - (CONTINUED)
- -----------------------------------------------------------------------------------
<C> <S> <C>
COMMUNICATIONS - 8.9%
28,800 *Airtouch Communications........................... $ 1,112,400
20,121 Bell Atlantic Corp................................. 1,607,165
33,503 *Cox Communications, Inc. - Class A................ 1,030,217
85,300 *LCI International, Inc............................ 2,207,138
16,400 Reuters Holdings PLC(a)............................ 1,078,300
44,979 *Tele-Communications Inc. - Group A................ 1,031,715
25,721 *Tele-Communications Ventures - Group A............ 593,181
95,650 *U.S. West Media Group............................. 2,415,162
--------------
11,075,278
--------------
CONSUMER CYCLICALS - 9.5%
19,000 Cooper Tire & Rubber............................... 402,562
27,800 *Costco Companies, Inc............................. 1,070,300
15,100 First Brands Corp.................................. 385,050
30,100 Ford Motor Co...................................... 1,314,994
30,300 Hasbro Inc......................................... 878,700
42,800 International Game Technology...................... 1,094,075
41,700 Limited, Inc....................................... 982,556
16,000 McDonald's Corp.................................... 717,000
3,900 Nike, Inc. - Class B............................... 183,300
38,600 *Outback Steakhouse, Inc........................... 1,044,613
59,900 Rubbermaid, Inc.................................... 1,441,344
35,600 *Saks Holdings, Inc................................ 760,950
10,100 Sears Roebuck & Co................................. 422,937
33,900 *Toys R Us, Inc.................................... 1,154,719
--------------
11,853,100
--------------
CONSUMER STAPLES - 3.7%
26,600 American Greetings Corp. - Class A................. 922,688
37,200 Deluxe Corp........................................ 1,218,300
32,200 *General Nutrition Companies....................... 1,014,300
12,500 Quaker Oats........................................ 598,437
47,700 Tyson Food, Inc. - Class A......................... 900,338
--------------
4,654,063
--------------
ENERGY - 6.1%
26,400 Burlington Resources, Inc.......................... 1,291,950
85,842 *Enserch Explorations.............................. 772,578
29,200 *Gulf Indonesia Resources, Ltd.(a)................. 613,200
40,400 McDermott International, Inc....................... 1,467,025
23,300 *Noble Drilling Corp............................... 828,606
51,900 Union Pacific Resources Group...................... 1,278,037
61,100 Union Texas Petroleum Holdings, Inc................ 1,390,025
--------------
7,641,421
--------------
</TABLE>
31
<PAGE>
CRABBE HUSON ASSET ALLOCATION FUND
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
SHARES OR
FACE VALUE SECURITIES DESCRIPTION MARKET VALUE
- -------------- --------------------------------------------------- --------------
COMMON STOCKS - (CONTINUED)
- -----------------------------------------------------------------------------------
<C> <S> <C>
HEALTHCARE - 3.6%
38,700 *Amgen Inc......................................... $ 1,905,975
33,100 *Chiron Corp....................................... 637,175
49,000 *Medpartners, Inc.................................. 1,246,437
20,800 Pharmacia & Upjohn, Inc............................ 660,400
--------------
4,449,987
--------------
INDUSTRIALS - 4.3%
26,000 Cincinnati Milacron, Inc........................... 721,500
28,100 Crown Cork & Seal Co. Inc.......................... 1,266,256
40,700 *Detroit Diesel Corp............................... 839,438
16,800 Fluor Corp......................................... 690,900
37,400 New Holland NV(a).................................. 1,063,562
35,200 Waste Management, Inc.............................. 822,800
--------------
5,404,456
--------------
REAL ESTATE INVESTMENT TRUST - 0.4%
12,800 Spieker Properties, Inc............................ 500,800
--------------
TECHNOLOGY - 6.3%
21,700 Adobe Systems, Inc................................. 1,036,175
22,400 AMP, Inc........................................... 1,008,000
13,400 *Cisco Systems, Inc................................ 1,099,219
44,900 Electronic Data Systems Corp....................... 1,737,069
16,900 Hewlett-Packard Co................................. 1,042,519
33,000 *National Semiconductor Corp....................... 1,188,000
72 *Siebel Systems, Inc............................... 2,920
46,300 *Silicon Graphics.................................. 680,031
--------------
7,793,933
--------------
TRANSPORTATION - 4.9%
8,800 *AMR Corp.......................................... 1,024,650
9,400 Burlington Northern Santa Fe....................... 893,000
36,700 *Gulfstream Aerospace Corp......................... 1,064,300
46,700 *Northwest Airlines Corp. - Class A................ 2,101,500
30,900 Southwest Airlines................................. 1,008,113
--------------
6,091,563
--------------
</TABLE>
32
<PAGE>
CRABBE HUSON ASSET ALLOCATION FUND
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
SHARES OR
FACE VALUE SECURITIES DESCRIPTION MARKET VALUE
- -------------- --------------------------------------------------- --------------
COMMON STOCKS - (CONTINUED)
- -----------------------------------------------------------------------------------
<C> <S> <C>
UTILITIES - 1.7%
40,100 Pacificorp......................................... $ 869,669
50,500 PG & E Corp........................................ 1,290,906
--------------
2,160,575
--------------
Total Common Stocks 71,659,831
--------------
(Cost $62,001,199)
SHORT TERM INVESTMENTS - 20.8%
- -----------------------------------------------------------------------------------
DISCOUNT NOTE - 2.4%
$ 2,999,067 Federal Home Loan Bank 5.680% 11/03/97***.......... 2,999,067
--------------
INVESTMENT COMPANY - 0.4%
435,435 SSgA Money Market Fund 5.450%(b)................... 435,435
--------------
OTHER INVESTMENTS - 18.0%
22,421,779 Navigator Securities Lending Trust-Prime Portfolio
5.650%(b)(c)..................................... 22,421,779
--------------
Total Short Term Investments 25,856,281
--------------
(Cost $25,856,281)
Total Investments - 117.8% 146,768,903
(Cost $135,483,775)(d)
Other Assets and (Liabilities), Net - (17.8%) (22,211,127 )
--------------
TOTAL NET ASSETS - 100.0% $ 124,557,776
--------------
--------------
</TABLE>
* Non-income producing security.
** Inverse floater represents a security that pays interest at a rate
that increases (decreases) in the same magnitude as a decline
(increase) in the 10-year Constant Maturity Treasuries rate minus 180
basis points.
*** Rates reflect purchase yield to maturity.
(a) American Depository Receipt
(b) Rate reflects 7 day yield as of October 31, 1997.
(c) Investment of collateral received for securities loaned in Navigator
Securities Lending Trust-Prime Portfolio. As of October 31, 1997, the
market value of the securities on loan is $22,128,473.
(d) The aggregate cost for federal income tax purposes is $135,714,272.
Aggregate gross unrealized appreciation is $13,223,351 and the
aggregate gross unrealized depreciation is $2,168,720 resulting in net
unrealized appreciation of $11,054,631.
See accompanying notes to financial statements.
33
<PAGE>
CRABBE HUSON EQUITY FUND
INVESTMENT OBJECTIVE: TO PROVIDE LONG-TERM CAPITAL APPRECIATION THROUGH A
DIVERSIFIED PORTFOLIO OF WIDELY AND ACTIVELY TRADED COMMON STOCKS WITH MEDIUM TO
LARGE MARKET CAPITALIZATIONS. THE FUND MAY HAVE UP TO 100% OF ITS ASSETS
INVESTED IN COMMON STOCKS.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN
THE CRABBE HUSON EQUITY FUND AND THE S&P 500 INDEX
(RESULTS ARE FOR FISCAL YEARS ENDING OCTOBER 31)
<S> <C> <C>
Equity S&P 500
Begin $ 10,000 $ 10,000
1989 $ 10,500 $ 11,739
1990 $ 8,928 $ 10,863
1991 $ 13,610 $ 14,498
1992 $ 15,309 $ 15,920
1993 $ 19,886 $ 18,296
1994 $ 21,455 $ 19,002
1995 $ 24,323 $ 24,024
1996 $ 27,675 $ 29,816
1997 $ 35,942 $ 39,381
Annualized Total Return
1 Year: 29.87%
5 Year: 18.61%
Life of Fund: 15.74%
Fund Inception: 1/31/89
</TABLE>
HISTORICAL RESULTS ARE FOR THE PRIMARY CLASS OF SHARES AND ARE
NOT INDICATIVE OF FUTURE RETURNS. THE INSTITUTIONAL CLASS OF
SHARES RETURNED 30.35% FOR THE FISCAL YEAR AND 25.98% ON AN
ANNUALIZED BASIS SINCE INCEPTION ON 10/3/96. FUTURE RETURNS AND
PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES,
WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST.
THE ACCOMPANYING CHART COMPARES THE PERFORMANCE OF THE EQUITY
FUND WITH THE S&P 500 INDEX, WHICH IS AN UNMANAGED, BROAD-BASE
INDEX OF STOCKS; THE EQUITY FUND IS A PROFESSIONALLY MANAGED
MUTUAL FUND. THE INDEX PRESENTED HERE IS NOT MANAGED, DOES NOT
INCUR EXPENSES AND IS NOT AVAILABLE FOR DIRECT INVESTMENT. HAD
THE INDEX INCURRED TYPICAL OPERATING EXPENSES, ITS PERFORMANCE
WOULD HAVE BEEN LOWER.
For fiscal year 1997, the Crabbe Huson Equity Fund returned a very solid 29.87%,
lagging slightly the 32.08% return posted by its comparative benchmark, the S&P
500 Index. The fund's institutional class of shares gained 30.35% for the year.
During the second half of the fiscal year, the fund gained roughly 26% (almost
11% better than the S&P 500 Index), an impressive short-term run. While the last
year has been another good one for stocks, it was marked by two important
phenomena. First, there was an increase in volatility; second, investor
preference shifted away from the largest stocks, allowing a broader list of
names to provide performance. One can't ask for a better contrarian scenario.
The shift in preferences set the stage for our stocks to perform well: We held a
strong selection of equities from very good companies, particularly in the
mid-cap value area, and they thrived on the new attention.
The third fiscal quarter was particularly rewarding as the trend strengthened
further. We closed that quarter well ahead of the index, thanks especially to
good performance from the fund's concentration in industrial and
telecommunication issues. The fourth quarter wasn't as spectacular, but even
with an
34
<PAGE>
essentially unchanged result by the end of October, the fund finished ahead of
the index, which lost ground for the last three months of the year. The
portfolio's industry concentrations remained roughly the same in the fourth
fiscal quarter.
Several recent surveys of investor attitudes indicate that the stock market
returns of the past few years are now expected as the norm. We can't let this
observation pass without comment. The stock market returns of the past five
years have been nothing short of extraordinary and have been supported by a
near-perfect economy (some commentators even have resorted to calling the strong
economic picture a "Goldilocks economy"). Though valuations for our own stock
market are at historically high levels, we're beginning to see economic turmoil
in Asia. If that commotion spreads to other parts of the world, the resulting
shortfall in expectations could be very damaging. We certainly don't expect
investors' love affair with stocks to end overnight, but if they do elect to put
assets elsewhere, the overall market could see a downturn.
Rarely, in our opinion, has there been a more suitable time for including the
contrarian style as a section of your portfolio, not only for the sake of
long-term performance but also as a short-term cushion against a downturn. Our
cautiously optimistic stance isn't an easy one to manage, but it's one we
believe is essential for success in the next fiscal year.
<TABLE>
<S> <C>
[SIGNATURE] [SIGNATURE]
Richard S. Huson, CFA John E. Maack, Jr., CFA
[SIGNATURE] [SIGNATURE]
Marian L. Kessler Robert E. Anton
</TABLE>
35
<PAGE>
CRABBE HUSON EQUITY FUND
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
SHARES OR
FACE VALUE SECURITIES DESCRIPTION MARKET VALUE
- -------------- --------------------------------------------------- --------------
<C> <S> <C>
COMMON STOCKS - 98.6%
- -----------------------------------------------------------------------------------
BASIC MATERIALS - 14.5%
84,600 Asarco, Inc........................................ $ 2,315,925
539,300 *Bethlehem Steel Corp.............................. 5,393,000
199,300 Freeport McMoran Copper - Class B.................. 4,758,288
128,400 International Paper Corp........................... 5,778,000
382,800 Louisiana-Pacific Corp............................. 8,038,800
216,517 Lyondell Petrochemical............................. 5,548,248
76,500 Mead Corp.......................................... 4,628,250
327,300 *National Steel Corp. - Class B.................... 5,400,450
194,830 Newmont Mining Corp................................ 6,819,050
269,800 Placer Dome, Inc................................... 4,181,900
118,000 *USG Corp.......................................... 5,568,125
--------------
58,430,036
--------------
COMMUNICATIONS - 14.5%
162,000 *Airtouch Communications........................... 6,257,250
43,803 Bell Atlantic Corp................................. 3,498,765
201,919 *Cox Communications, Inc. - Class A................ 6,209,009
472,400 *LCI International, Inc............................ 12,223,350
100,700 Reuters Holdings PLC(a)............................ 6,621,025
258,616 *Tele-Communications Inc. - Group A................ 5,932,000
147,884 *Tele-Communications Ventures Group A.............. 3,410,579
579,000 *U.S. West Media Group............................. 14,619,750
--------------
58,771,728
--------------
CONSUMER CYCLICALS - 15.7%
112,000 Cooper Tire & Rubber............................... 2,373,000
171,500 *Costco Companies, Inc............................. 6,602,750
86,100 First Brands Corp.................................. 2,195,550
190,000 Ford Motor Company................................. 8,300,625
173,800 Hasbro Incorporated................................ 5,040,200
168,200 International Game Technology...................... 4,299,612
241,500 Limited, Inc....................................... 5,690,344
89,300 McDonald's Corp.................................... 4,001,756
15,900 Nike Inc. Class B.................................. 747,300
206,000 *Outback Steakhouse, Incorporated.................. 5,574,875
331,600 Rubbermaid, Inc.................................... 7,979,125
71,400 *Saks Holdings Inc................................. 1,526,175
50,200 Sears Roebuck & Co................................. 2,102,125
209,500 *Toys R Us, Inc.................................... 7,136,094
--------------
63,569,531
--------------
CONSUMER STAPLES - 6.7%
162,600 American Greetings Corp. - Class A................. 5,640,188
203,600 Deluxe Corp........................................ 6,667,900
197,600 *General Nutrition Companies....................... 6,224,400
79,000 Quaker Oats........................................ 3,782,125
</TABLE>
36
<PAGE>
CRABBE HUSON EQUITY FUND
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
SHARES OR
FACE VALUE SECURITIES DESCRIPTION MARKET VALUE
- -------------- --------------------------------------------------- --------------
COMMON STOCKS - (CONTINUED)
- -----------------------------------------------------------------------------------
<C> <S> <C>
CONSUMER STAPLES - (CONTINUED)
258,200 Tyson Foods, Inc. - Class A........................ $ 4,873,525
--------------
27,188,138
--------------
ENERGY - 10.1%
141,800 Burlington Resources, Inc.......................... 6,939,337
497,809 *Enserch Exploration............................... 4,480,281
237,200 McDermott International, Inc....................... 8,613,325
147,800 *Noble Drilling Corp............................... 5,256,138
304,800 Union Pacific Resources Group, Inc................. 7,505,700
353,200 Union Texas Petroleum Holdings, Inc................ 8,035,300
--------------
40,830,081
--------------
HEALTHCARE - 5.1%
117,000 *Amgen, Inc........................................ 5,762,250
194,100 *Chiron Corp....................................... 3,736,425
288,300 *Medpartners, Inc.................................. 7,333,631
118,100 Pharmacia & Upjohn, Inc............................ 3,749,675
--------------
20,581,981
--------------
INDUSTRIALS - 7.7%
184,100 Cincinnati Milacron, Inc........................... 5,108,775
135,000 Crown Cork & Seal Co. Inc.......................... 6,083,437
241,900 *Detroit Diesel Corp............................... 4,989,188
103,000 Fluor Corp......................................... 4,235,875
220,700 New Holland NV(a).................................. 6,276,156
188,200 Waste Management Technologies, Inc................. 4,399,175
--------------
31,092,606
--------------
REAL ESTATE INVESTMENT TRUST - 0.9%
97,100 Spieker Properties, Inc............................ 3,799,038
--------------
TECHNOLOGY - 11.1%
116,600 Adobe Systems, Inc................................. 5,567,650
138,700 AMP, Inc........................................... 6,241,500
84,000 *Cisco Systems, Inc................................ 6,890,625
234,800 Electronic Data Systems Corp....................... 9,083,825
90,900 Hewlett-Packard Co................................. 5,607,394
200,700 *National Semiconductor Corp....................... 7,225,200
388 *Siebel Systems, Inc............................... 15,692
274,300 *Silicon Graphics.................................. 4,028,781
--------------
44,660,667
--------------
TRANSPORTATION - 9.3%
55,300 *AMR Corp.......................................... 6,438,994
58,400 Burlington Northern Santa Fe....................... 5,548,000
237,300 *Gulfstream Aerospace Corp......................... 6,881,700
274,800 Northwest Airlines Corp. - Class A................. 12,366,000
189,300 Southwest Airlines................................. 6,175,912
--------------
37,410,606
--------------
</TABLE>
37
<PAGE>
CRABBE HUSON EQUITY FUND
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
SHARES OR
FACE VALUE SECURITIES DESCRIPTION MARKET VALUE
- -------------- --------------------------------------------------- --------------
COMMON STOCKS - (CONTINUED)
- -----------------------------------------------------------------------------------
<C> <S> <C>
UTILITIES - 3.0%
224,400 Pacificorp......................................... $ 4,866,675
287,400 PG & E Corp........................................ 7,346,663
--------------
12,213,338
--------------
Total Common Stocks 398,547,750
--------------
(Cost $341,352,178)
SHORT TERM INVESTMENTS - 9.1%
- -----------------------------------------------------------------------------------
DISCOUNT NOTES** - 1.7%
FEDERAL HOME LOAN BANK - 1.7%
$ 7,000,000 5.680% 11/03/97.................................... 6,997,822
5,000 5.119% 11/13/97.................................... 4,991
--------------
7,002,813
--------------
INVESTMENT COMPANY - 0.2%
815,870 SSgA Money Market Fund 5.450%***................... 815,870
--------------
OTHER INVESTMENTS - 7.2%
29,057,823 Navigator Securities Lending Trust-Prime Portfolio
5.650% (b)***.................................... 29,057,823
--------------
Total Short Term Investments 36,876,506
--------------
(Cost $36,876,506)
Total Investments - 107.7% 435,424,256
(Cost $378,228,684)****
Other Assets and (Liabilities), Net - (7.7%) (31,293,130 )
--------------
TOTAL NET ASSETS - 100.0% $ 404,131,126
--------------
--------------
</TABLE>
* Non-income producing security.
** Rates reflect purchase yield to maturity.
*** Rate reflects 7 day yield as of October 31, 1997.
**** The aggregate cost for federal income tax purposes is $379,955,191.
Aggregate gross unrealized appreciation is $67,361,795 and the
aggregate gross unrealized depreciation is $11,892,730, resulting in
net unrealized appreciation of $55,469,065.
(a) American Depository Receipt
(b) Investment of collateral received for securities loaned in Navigator
Securities Lending Trust-Prime Portfolio. As of October 31, 1997, the
market value of the securities on loan is $28,231,399.
See accompanying notes to financial statements.
38
<PAGE>
CRABBE HUSON REAL ESTATE INVESTMENT FUND
INVESTMENT OBJECTIVE: TO PROVIDE CURRENT INCOME AND POTENTIAL CAPITAL
APPRECIATION THROUGH EQUITY SECURITIES OF REAL ESTATE INVESTMENT TRUSTS (REITS)
AND OTHER REAL ESTATE INDUSTRY COMPANIES. UNDER NORMAL CIRCUMSTANCES, AT LEAST
75% OF THE FUND WILL BE INVESTED IN SUCH SECURITIES.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
THE
CRABBE HUSON REAL ESTATE INVESTMENT FUND AND THE MORGAN
STANLEY REAL ESTATE INVESTMENT TRUST INDEX
(RESULTS ARE FOR FISCAL YEARS ENDING OCTOBER 31)
<S> <C> <C>
REIF Morgan Stanley
Begin $ 10,000 $ 10,000
1994 $ 9,675 $ 9,515
1995 $ 10,479 $ 10,550
1996 $ 13,140 $ 13,226
1997 $ 17,021 $ 17,654
Annualized Total Return
1 Year:
Life of Fund: 30.56%
Fund Inception: 4/1/94 16.36%
</TABLE>
HISTORICAL RESULTS ARE NOT INDICATIVE OF FUTURE RETURNS. FUTURE
RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S
SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE
ORIGINAL COST. THE ACCOMPANYING CHART COMPARES THE PERFORMANCE
OF THE REAL ESTATE INVESTMENT FUND WITH THE MORGAN STANLEY REIT
INDEX, WHICH IS AN UNMANAGED, BROAD-BASE INDEX OF REAL ESTATE
INVESTMENT TRUST SECURITIES; THE REAL ESTATE INVESTMENT FUND IS
A PROFESSIONALLY MANAGED MUTUAL FUND. THE INDEX PRESENTED HERE
IS NOT MANAGED, DOES NOT INCUR EXPENSES AND IS NOT AVAILABLE FOR
DIRECT INVESTMENT. HAD THE INDEX INCURRED TYPICAL OPERATING
EXPENSES, ITS PERFORMANCE WOULD HAVE BEEN LOWER.
The Real Estate Investment Fund finished its second consecutive year of
outstanding returns, closing the reporting period with a return of 30.56%,
trailing the 33.48% gain of the Morgan Stanley REIT Index.
Interestingly, the REIT market's behavior closely mirrored that of the stock
market for the last year: both markets displayed consolidation trends for the
first half of the fiscal year, leading to strong performance for the indices.
Market interest broadened in the spring, allowing the portfolio to close the gap
with the indices.
A favorable interest rate environment and positive investor sentiment have made
for dynamic times in the REIT industry, and investors have responded with their
dollars. The flow of funds into the REIT market has grown steadily over the last
six to 12 months (except during the final week of October). We believe this
trend will continue as more investors become comfortable with REITs as an option
for portfolio diversification.
In addition, the market's final half of the year was marked by its growing
maturity, as characterized by heady consolidation and offering activity. As
39
<PAGE>
REITs play a rapidly growing role in both the investment and real estate
development/management industries, we look for more doors to open for interested
investors.
Performance for the Real Estate Investment Fund benefited significantly from the
broadening trend that developed during the second half of the year. Apartments
and office sectors were primary areas of concentration for the portfolio, as
they were at the time of our last report. We also owned a significant number of
retail-oriented REITs. Many of these companies have not participated in the
strong progress of the real estate sector and now, to us, represent solid value.
The mini-panic of late October had a mixed impact on the REIT market. At the
time, there were significant new offerings in the process of coming to market,
offerings that were mostly unaffected by the drop in the stock market. Existing
issues, however, were negatively impacted somewhat, and the new offerings have
slightly slowed a rebound. Toward the end of 1997, though, real estate companies
will begin to close their books for the year. The rate of new offerings should
slow to a crawl, helping to refocus investors' attention on existing issues.
Going forward, we think the market will shake off any lasting effects of the
stock market downturn and will reflect underlying fundamentals, which look very
strong. We also believe that the combination of lower interest rates and the
current strength of the bond market will be positive for the REIT market in the
coming months.
We're pleased with the performance of this fund over the last three-plus years
and are confident that the real estate market will continue to present mutual
fund investors with competitive performance and an added degree of portfolio
diversification.
[SIGNATURE]
Richard S. Huson, CFA
40
<PAGE>
CRABBE HUSON REAL ESTATE INVESTMENT FUND
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
SHARES OR
FACE VALUE SECURITIES DESCRIPTION MARKET VALUE
- -------------- --------------------------------------------------- --------------
<C> <S> <C>
COMMON STOCKS - 91.0%
- -----------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST - 91.0%
APARTMENT - 25.0%
10,600 Ambassador Apartments, Inc......................... $ 227,237
45,600 Evans Withycombe Residential....................... 1,151,400
14,500 Merry Land & Investment Co......................... 316,281
60,400 Oasis Residential, Inc............................. 1,351,450
16,500 Pacific Gulf Properties, Inc....................... 373,313
27,675 Post Properties, Inc............................... 1,001,489
68,500 Security Capital Atlantic.......................... 1,494,156
8,905 *Security Capital Atlantic Rights.................. 42,855
28,700 Smith Charles Residential.......................... 979,388
47,700 Summit Properties, Inc............................. 986,794
46,006 United Dominion Realty Trust....................... 638,333
--------------
8,562,696
--------------
LODGING - 5.4%
13,700 Boykin Lodging Trust, Inc.......................... 365,619
20,650 FelCor Suite Hotels, Inc........................... 756,306
3,519 *Homestead Village, Inc............................ 56,304
35,000 RFS Hotel Investors, Inc........................... 686,875
--------------
1,865,104
--------------
MALLS - 5.8%
30,740 Simon DeBartolo Group, Inc......................... 951,019
81,950 Taubman Centers, Inc............................... 1,024,375
--------------
1,975,394
--------------
OFFICE/INDUSTRIAL - 33.9%
38,700 CarrAmerica Realty Corp............................ 1,153,744
9,600 Cousin Properties, Inc............................. 301,200
67,000 Equity Office Properties Trust..................... 2,047,687
18,200 Highwoods Properties, Inc.......................... 627,900
56,600 Kilroy Realty Corp................................. 1,499,900
53,100 Liberty Property Trust............................. 1,486,800
52,000 Prentiss Properties................................ 1,478,750
62,218 Security Capital Industrial........................ 1,528,230
20,000 *Security Capital Industrial Rights................ 640,000
28,100 Weeks Corp......................................... 843,000
--------------
11,607,211
--------------
TRIPLE NET LEASE - 0.7%
7,700 CCA Prison Realty Trust............................ 265,650
--------------
OUTLET CENTERS - 11.3%
15,900 Horizon Group, Inc................................. 211,669
130,400 Prime Retail, Inc.................................. 1,947,850
</TABLE>
41
<PAGE>
CRABBE HUSON REAL ESTATE INVESTMENT FUND
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
SHARES OR
FACE VALUE SECURITIES DESCRIPTION MARKET VALUE
- -------------- --------------------------------------------------- --------------
COMMON STOCKS - (CONTINUED)
- -----------------------------------------------------------------------------------
<C> <S> <C>
REAL ESTATE INVESTMENT TRUST - (CONTINUED)
OUTLET CENTERS - (CONTINUED)
59,700 Tanger Factory Outlet Center....................... $ 1,701,450
--------------
3,860,969
--------------
SHOPPING CENTER - 6.4%
78,950 Glimcher Realty Trust.............................. 1,751,703
23,200 Kranzco Realty Trust............................... 450,950
--------------
2,202,653
--------------
STORAGE - 2.5%
17,800 Shurgard Storage................................... 502,850
13,500 Storage Trust Realty............................... 345,094
--------------
847,944
--------------
Total Common Stocks 31,187,621
--------------
(Cost $26,971,024)
SHORT TERM INVESTMENTS - 23.4%
- -----------------------------------------------------------------------------------
DISCOUNT NOTE - 6.4%
$2,200,000 Federal Home Loan Bank 5.680% 11/03/97(a).......... 2,199,316
--------------
INVESTMENT COMPANY - 0.3%
102,281 SSgA Money Market Fund 5.450%**.................... 102,281
--------------
OTHER INVESTMENTS - 16.7%
5,714,731 Navigator Securities Lending Trust-Prime Portfolio
5.650%(**)***.................................... 5,714,731
--------------
Total Short Term Investments 8,016,328
--------------
(Cost $8,016,328)
Total Investments - 114.4% 39,203,949
(Cost $34,987,352)****
Other Assets and (Liabilities), Net - (14.4)% (4,945,397 )
--------------
TOTAL NET ASSETS - 100.0% $ 34,258,552
--------------
--------------
</TABLE>
* Non-income producing security.
** Rate reflects 7 day yield as of October 31, 1997.
*** Investment of collateral received for securities loaned in Navigator
Securities Lending Trust-Prime Portfolio. As of October 31, 1997, the
market value of the securities on loan is $5,496,673.
**** The aggregate cost for federal income tax purposes is
$34,987,713.Aggregate gross unrealized appreciation is $4,349,186 and
the aggregate gross unrealized depreciation is $132,950, resulting in
net unrealized appreciation of $4,216,236.
(a) Rate reflects purchase yield to maturity.
See accompanying notes to financial statements.
42
<PAGE>
CRABBE HUSON OREGON TAX-FREE FUND
INVESTMENT OBJECTIVE: TO PROVIDE CAPITAL PRESERVATION AND A HIGH LEVEL OF
CURRENT INCOME BY INVESTING AT LEAST 80% OF ITS ASSETS IN TAX-EXEMPT MUNICIPAL
BONDS ISSUED BY THE STATE OF OREGON AND ITS POLITICAL SUBDIVISIONS. TYPICALLY,
THE ONLY TAXABLE INCOME EARNED BY THE FUND IS THROUGH OVERNIGHT INTEREST ON
TEMPORARY CASH. SHARES OF THE FUND ARE AVAILABLE ONLY TO RESIDENTS OF THE STATE
OF OREGON.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN
THE CRABBE HUSON OREGON TAX-FREE FUND AND THE
LEHMAN BROTHERS 7-YEAR MUNICIPAL BOND INDEX
(RESULTS ARE FOR FISCAL YEARS ENDING OCTOBER 31)
<S> <C> <C>
OR Tax-Free Lehman Bros
Begin $ 10,000 $ 10,000
1984 $ 10,150 $ 10,339
1985 $ 11,452 $ 12,161
1986 $ 14,018 $ 14,575
1987 $ 13,744 $ 14,515
1988 $ 15,396 $ 16,046
1989 $ 16,423 $ 17,057
1990 $ 17,409 $ 18,367
1991 $ 19,123 $ 20,365
1992 $ 20,368 $ 21,989
1993 $ 22,550 $ 24,601
1994 $ 22,085 $ 23,531
1995 $ 24,439 $ 27,025
1996 $ 25,278 $ 28,565
1997 $ 26,964 $ 30,688
Annualized Total Return
1 Year: 6.67%
5 Year: 5.77%
Life of Fund: 7.87%
Fund Inception: 10/4/84
</TABLE>
HISTORICAL RESULTS ARE NOT INDICATIVE OF FUTURE RETURNS. FUTURE
RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S
SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE
ORIGINAL COST. THE ACCOMPANYING CHART COMPARES THE PERFORMANCE
OF THE OREGON TAX-FREE FUND WITH THE LEHMAN BROTHERS MUNICIPAL
BOND INDEX, WHICH IS AN UNMANAGED, BROAD-BASE INDEX OF BONDS;
THE OREGON TAX-FREE FUND IS A PROFESSIONALLY MANAGED MUTUAL
FUND. THE INDEX PRESENTED HERE IS NOT MANAGED, DOES NOT INCUR
EXPENSES AND IS NOT AVAILABLE FOR DIRECT INVESTMENT. HAD THE
INDEX INCURRED TYPICAL OPERATING EXPENSES, ITS PERFORMANCE WOULD
HAVE BEEN LOWER.
The Oregon Tax-Free(1) Fund's return for fiscal year 1997 was 6.67%. This
compares to the 8.49% return of the Lehman Brothers Municipal Bond Index (index
average maturity: 10 years).
The fund's comparison to the index is useful for context; however, it's not an
entirely accurate gauge because the index is a composite of municipal bonds from
every state, not just from Oregon. Further, the index often includes bonds of
lower quality, while the Oregon Tax-Free Fund owns only investment-grade issues.
Our content focuses on quality: 60% of our bonds either are rated AAA or are
pre-refunded in U.S. Treasury obligations.
At present, the fund's weighted average maturity stands at 10 years (many
municipal bond funds keep average maturities in the 10- to 15-year range). The
fund's average maturity is slightly longer that what it was at the fiscal
half-year mark. We have extended the maturity to enhance the yield provided by
the fund
- -------------------
(1) Shareholders may be subject to capital gains, ordinary income and
alternative minimum taxes. Consult your tax advisor.
43
<PAGE>
as well as to position the portfolio where we perceive value to be found on the
yield curve. We're mindful of the fund's high credit quality and its position
relative to our competition.
The recent trend in the municipal bond market has been toward higher prices and,
thus, lower yields. The prospect for a slowing economy, continued low inflation,
and limited supply have fixed income investors anticipating lower rates in the
future. Recently, strong supply and a more pronounced "rate shock" environment
have "cheapened" municipal bonds relative to maturities along the taxable yield
curve. Rate shock is experienced by municipal investors when they perceive the
return to be too low (even after adjusting for the tax-free status of municipal
securities).
For now, the Oregon bond market is maintaining consistent supply/demand
characteristics within the context of a strong economy, both locally in Portland
and statewide. The voters' passage of Measure 50 in May 1997 (a repeal of the
revenue-limiting Measure 47 passed in November 1996) will help supply to remain
stable.
Looking ahead, we see little on the horizon that may seriously tamper with the
general outlook for Oregon municipal issues. We believe the fund is positioned
properly to perform well in the market and should continue to serve as a
productive component of your portfolio.
<TABLE>
<S> <C>
[SIGNATURE] [SIGNATURE]
Garth R. Nisbet, CFA Richard S. Huson, CFA
</TABLE>
44
<PAGE>
CRABBE HUSON OREGON TAX-FREE FUND
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
SHARES OR
FACE VALUE SECURITIES DESCRIPTION MARKET VALUE
- -------------- --------------------------------------------------- --------------
<C> <S> <C>
FIXED INCOME SECURITIES - 98.3%
- -----------------------------------------------------------------------------------
EDUCATION - 36.4%
$ 340,000 Hood River County Oregon School District 6.000%
6/01/03 (AMBAC).................................. $ 371,025
210,000 Washington & Clackamas School District 5.250%
6/01/03.......................................... 218,400
300,000 Deschutes G.O. School District #1 5.800% 2/01/04... 318,000
300,000 Jefferson County School District #509J 6.500%
6/15/04 (FSA).................................... 336,750
250,000 Washington County School District 6.200%
9/01/04*......................................... 267,813
15,000 Washington & Clackamas School District 5.000%
1/01/05.......................................... 15,319
400,000 University Puerto Rico Services 5.100% 6/01/05
(MBIA)........................................... 418,500
250,000 Clackamas & Washington County School District #003
7.200% 10/01/05*................................. 264,375
125,000 Marion & Polk County School District 5.700%
10/01/05*........................................ 132,969
160,000 Marion County Oregon School District 6.000%
11/01/05 (FGIC).................................. 176,200
200,000 Clackamas Community College 5.100% 12/01/05........ 208,250
435,000 Jefferson County Oregon School District 5.400%
6/15/06 (FSA).................................... 457,837
135,000 Portland Oregon Community College 5.800% 7/01/06... 142,425
150,000 Marion & Polk County Oregon School District 4.750%
10/01/06*........................................ 152,062
435,000 Multnomah County School District 5.000% 3/01/07.... 444,244
335,000 Jackson County Oregon School District 5.200%
6/01/07 (FSA).................................... 347,981
450,000 Josephine County Oregon School District 5.750%
6/01/07 (FGIC)................................... 491,625
1,000,000 Salem Keizer School District #24-J 5.500% 6/01/07
(FGIC)........................................... 1,053,750
185,000 Washington County School District 4.950% 6/01/07
(FSA)............................................ 191,475
950,000 Multnomah County School District 5.600% 12/01/07
(FGIC)........................................... 1,012,937
300,000 Yamhill County S.D. #40 6.000% 06/01/08............ 333,375
240,000 Lane County Area Education District 4.850%
6/01/08.......................................... 242,700
160,000 Marion County Oregon School District 4.850% 6/01/08
(AMBAC).......................................... 161,200
200,000 Clackamas & Washington County School District #003
7.250% 10/01/09*................................. 211,500
765,000 Salem Educational Facility (Revenue) 6.000%
4/01/10.......................................... 808,988
225,000 Marion & Polk County School District #24-J 6.000%
10/01/10*........................................ 242,156
100,000 Washington County School District 6.100% 6/01/12
(FSA)............................................ 108,500
</TABLE>
45
<PAGE>
CRABBE HUSON OREGON TAX-FREE FUND
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
SHARES OR
FACE VALUE SECURITIES DESCRIPTION MARKET VALUE
- -------------- --------------------------------------------------- --------------
FIXED INCOME SECURITIES - (CONTINUED)
- -----------------------------------------------------------------------------------
<C> <S> <C>
EDUCATION - (CONTINUED)
$ 500,000 Clackamas Oregon Community College 5.400%
06/01/15......................................... $ 511,250
--------------
9,641,606
--------------
ELECTRIC UTILITY - 3.3%
310,000 Emerald Peoples Utility District 6.300%
11/01/01*........................................ 331,700
250,000 Emerald Peoples Utility District 5.450% 11/01/03
(AMBAC).......................................... 265,937
250,000 Emerald Peoples Utility District 6.500%
11/01/03*........................................ 271,250
--------------
868,887
--------------
HEALTH & HOSPITAL - 3.4%
250,000 Clackamas County Hospital Facility Revenue 5.800%
3/01/02 (MBIA)................................... 265,937
300,000 Clackamas County Hospital (Sisters of Providence)
6.200% 10/01/02.................................. 325,500
293,000 St. Charles Memorial Hospital 6.75% 1/01/06........ 319,370
--------------
910,807
--------------
MISCELLANEOUS - 15.7%
250,000 City of Portland 6.950% 4/01/99.................... 260,000
100,000 State of Oregon G.O. 9.000% 4/01/03................ 122,000
175,000 State of Oregon G.O. 7.200% 7/01/04................ 203,219
205,000 State of Oregon G.O. 8.200% 7/01/04................ 249,331
110,000 State of Oregon G.O. 6.000% 8/01/04................ 120,037
200,000 State of Oregon G.O. 9.000% 10/01/04............... 218,750
355,000 State of Oregon G.O. 6.750% 5/01/05................ 404,700
250,000 State of Oregon G.O. (Veterans) 7.250% 7/01/06..... 298,438
300,000 Salem Oregon - Series A 5.875% 1/01/07............. 312,375
200,000 State of Oregon G.O. 7.250% 1/01/07................ 239,000
200,000 State of Oregon G.O. (Veterans) 8.250% 1/01/07..... 253,000
100,000 State of Oregon G.O. (Alt Energy) 6.400% 1/01/08... 102,625
180,000 State of Oregon G.O. 9.200% 4/01/08................ 245,025
100,000 Oregon State Veterans Welfare 5.550% 4/01/09....... 105,750
1,000,000 Northern Oregon Corrections 5.400% 9/15/16......... 1,020,000
--------------
4,154,250
--------------
OTHER REVENUE BOND - 4.2%
500,000 Molalla Oregon Water Revenue 5.200% 8/01/17........ 502,500
300,000 Oregon State Housing & Community SVCS. Dept. Mtg
5.150% 7/01/13................................... 301,125
300,000 Puerto Rico Public Buildings Authority Revenue
5.000% 7/01/13................................... 299,625
--------------
1,103,250
--------------
</TABLE>
46
<PAGE>
CRABBE HUSON OREGON TAX-FREE FUND
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
SHARES OR
FACE VALUE SECURITIES DESCRIPTION MARKET VALUE
- -------------- --------------------------------------------------- --------------
FIXED INCOME SECURITIES - (CONTINUED)
- -----------------------------------------------------------------------------------
<C> <S> <C>
PUBLIC IMPROVEMENTS - 7.1%
$ 335,000 Central Lincoln PUD 6.500% 1/01/02................. $ 358,031
350,000 City of Portland (Urban Renewal) 5.700% 6/01/04.... 373,187
400,000 Metro Oregon Open Spaces Program 4.900% 9/01/07.... 405,500
270,000 Port of Morrow (Pollution Control) 6.375%
4/01/08*......................................... 291,600
160,000 Portland Oregon Building Service 4.750% 4/01/08.... 160,600
150,000 Metro Oregon Regional Center 5.000% 8/01/10........ 147,563
135,000 Bend County Library 5.375% 6/01/11 (AMBAC)......... 139,556
--------------
1,876,037
--------------
REFUNDING BONDS - 9.3%
400,000 Metropolitan Service District 7.000% 7/01/01*...... 430,500
400,000 Oregon State Department General Services 6.100%
9/01/06.......................................... 431,500
250,000 Oregon State Revenue - Series B 6.250% 1/01/08*.... 269,688
270,000 Metropolitan Service District 6.600% 7/01/11*...... 286,200
185,000 Oregon Economic Development Dept-Series B 6.350%
1/01/13*......................................... 200,262
265,000 Canby Oregon Sewer Revenue 5.1500% 12/01/14........ 264,669
100,000 Oregon State Department General Services 7.200%
1/15/15*......................................... 108,250
485,000 Oregon City Oregon Sewer 5.200% 10/01/15........... 489,244
--------------
2,480,313
--------------
SEWER AND WATER - 12.5%
260,000 Portland Oregon Sewer System Revenue 5.550%
6/01/04.......................................... 275,600
350,000 Portland Oregon Sewer System 5.750% 10/01/05
(FGIC)........................................... 378,875
500,000 Washington County Sewer System 5.800% 10/01/05
(AMBAC).......................................... 541,250
255,000 Washington County Sewer System 5.900% 10/01/06
(AMBAC).......................................... 277,631
95,000 Washington County Sewer System 5.900% 10/01/06
(AMBAC).......................................... 102,600
640,000 McMinnville Sewer System 4.700% 2/01/07 (FGIC)..... 649,600
100,000 Portland Oregon Sewer System Revenue 5.150%
3/01/08.......................................... 101,875
100,000 Portland Oregon Sewer System Revenue 5.100%
8/01/08.......................................... 102,500
350,000 Portland Oregon Sewer System 6.000% 10/01/12
(FGIC)........................................... 381,938
500,000 McMinnville Sewer System 5.000% 2/01/14 (FGIC)..... 496,875
--------------
3,308,744
--------------
TRANSPORTATION - 6.4%
545,000 Oregon State Light Rail 7.000% 6/01/04............. 628,113
</TABLE>
47
<PAGE>
CRABBE HUSON OREGON TAX-FREE FUND
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
SHARES OR
FACE VALUE SECURITIES DESCRIPTION MARKET VALUE
- -------------- --------------------------------------------------- --------------
FIXED INCOME SECURITIES - (CONTINUED)
- -----------------------------------------------------------------------------------
<C> <S> <C>
TRANSPORTATION - (CONTINUED)
$1,000,000 Tri-Met Light Rail 5.900% 7/01/06.................. $ 1,070,000
--------------
1,698,113
--------------
Total Fixed Income Securities 26,042,007
--------------
(Cost $24,602,663)
SHORT TERM INVESTMENT - 0.4%
- -----------------------------------------------------------------------------------
INVESTMENT COMPANY - 0.4%
92,922 DreyfusTax-Exempt Cash Management Fund 3.530%**.... 92,922
--------------
Total Investments - 98.7% 26,134,929
(Cost $24,695,585)***
Other Assets and Liabilities, Net - 1.3% 352,318
--------------
TOTAL NET ASSETS - 100.0% $ 26,487,247
--------------
--------------
</TABLE>
AMBAC - American Municipal Bond Assurance Corp.
FGIC - Financial Guaranty Insurance Corp.
FSA - Financial Security Assurance
G.O. - General Obligation
MBIA - Municipal Bond Insurance Assoc.
PUD - Public Utility District
* Dates reflect pre-refunded dates.
** Rate reflects 7 day yield as of October 31, 1997.
*** The aggregate cost for federal income tax purposes is identical.
Aggregate gross unrealized appreciation is $1,439,344 and the
aggregate gross unrealized depreciation is $0, resulting in net
unrealized appreciation of $1,439,344.
See accompanying notes to financial statements.
48
<PAGE>
CRABBE HUSON INCOME FUND
INVESTMENT OBJECTIVE: TO PROVIDE CAPITAL PRESERVATION AND A HIGH LEVEL OF
CURRENT INCOME THROUGH A DIVERSIFIED PORTFOLIO OF FIXED INCOME SECURITIES,
INCLUDING CONVERTIBLE BONDS AND DEBENTURES.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000
INVESTMENT IN THE CRABBE HUSON INCOME FUND AND
THE LEHMAN BROTHERS GOVT/CORP BOND INDEX
(RESULTS ARE FOR FISCAL YEARS ENDING OCTOBER
31)
<S> <C> <C>
Income Lehman Bros
Begin $ 10,000 $ 10,000
1989 $ 10,772 $ 11,156
1990 $ 11,249 $ 11,763
1991 $ 12,769 $ 13,578
1992 $ 14,013 $ 15,006
1993 $ 15,096 $ 17,052
1994 $ 14,687 $ 16,260
1995 $ 16,437 $ 18,888
1996 $ 17,249 $ 19,906
1997 $ 18,923 $ 21,660
Annualized Total Return
1 Year: 10.25%
5 Year: 6.30%
Life of Fund: 7.62%
Fund Inception: 1/31/89
</TABLE>
HISTORICAL RESULTS ARE NOT INDICATIVE OF FUTURE RETURNS. FUTURE
RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S
SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE
ORIGINAL COST. THE ACCOMPANYING CHART COMPARES THE PERFORMANCE
OF THE INCOME FUND WITH THE LEHMAN BROTHERS GOVERNMENT/CORPORATE
BOND INDEX, WHICH IS AN UNMANAGED, BROAD-BASE INDEX OF BONDS;
THE INCOME FUND IS A PROFESSIONALLY MANAGED MUTUAL FUND. THE
INDEX PRESENTED HERE IS NOT MANAGED, DOES NOT INCUR EXPENSES AND
IS NOT AVAILABLE FOR DIRECT INVESTMENT. HAD THE INDEX INCURRED
TYPICAL OPERATING EXPENSES, ITS PERFORMANCE WOULD HAVE BEEN
LOWER.
The Crabbe Huson Income Fund closed fiscal year 1997 with a return of 10.25%,
outpacing by more than a percentage point the Lehman Brothers
Government/Corporate Bond Index, which had a return of 8.81%. It was an
impressive return for the fund, especially when viewed on a risk-adjusted basis.
Its credit quality (the overall quality of the portfolio's corporate borrower)
is more conservative than that of the benchmark index.
For the first half of the year, we kept the fund's average maturity fairly
consistent, electing to maintain the position we established in the fall of
1996. Our patience and constructive stance was tested early in 1997, but we were
rewarded as the year concluded. Rapid economic growth in early 1997 reignited
the Federal Reserve's fear of inflation, and in late March, the Board of
Governors voted to increase rates by a quarter of a point.
Bond rates peaked in April, when the bellwether 30-year Treasury bond yield
approached 7.20%. Since then, yields have come down significantly. This is the
result of a number of factors, including the lack of a significant inflation
threat, falling gold prices, and lessening pressures on commodities and oil
worldwide. The continued growth in global commerce naturally encouraged fierce
price
49
<PAGE>
competition, sending the U.S. inflation rate from the 3% level of the past
several years to only 2% recently. Bond yields mirrored the inflation rate and
fell off accordingly.
The Income Fund ended the last reporting period with a return of an even 1%,
only slightly underperforming its benchmark in an environment of weak returns.
Since then, however, the fund has moved well ahead of the index. Last spring, we
saw clues that tipped us off to an upcoming fall in rates, a reading that (true
to our stripes) was contrary to that of the overall market. We wanted to be
ready to capitalize on the shift in the market, so we extended maturities as
rates increased, taking advantage of good prices on long-term bonds.
It was the right move at the right time. We were in a favorable position when
rising prices and falling rates surprised the rest of the market. This enabled
the fund to steadily build performance and finish the year well ahead of both
the index and the competition.
Looking ahead, we'll be cautious about possible deflationary trends that may be
developing in the market and have maintained the portfolio's constructive
posture. We'll continue to watch for trends in the market unseen by other
investors in an effort to provide competitive yields without sacrificing
portfolio credit quality.
<TABLE>
<S> <C>
[SIGNATURE] [SIGNATURE]
Garth R. Nisbet, CFA Richard S. Huson, CFA
</TABLE>
50
<PAGE>
CRABBE HUSON INCOME FUND
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
SHARES OR
FACE VALUE SECURITIES DESCRIPTION MARKET VALUE
- -------------- --------------------------------------------------- --------------
<C> <S> <C>
FIXED INCOME SECURITIES - 96.3%
- -----------------------------------------------------------------------------------
AGENCY - 1.5%
$ 50,000 Interamerican Development Bank 6.125% 3/08/06...... $ 50,000
--------------
ASSET-BACKED - 0.9%
30,000 Green Tree Financial 6.540% 7/15/19................ 30,283
--------------
CORPORATE BONDS - 24.1%
100,000 WMX Technologies 6.700% 5/01/01.................... 101,250
50,000 IBM Corp. 7.250% 11/01/02.......................... 52,312
100,000 JP Morgan & Co. 7.625% 9/15/04..................... 106,500
50,000 Pacific Bell 6.250% 3/01/05........................ 49,500
50,000 Anheuser Busch 7.000% 9/01/05...................... 51,625
50,000 Bear Stearns Co. 6.875% 10/01/05................... 51,062
50,000 Snap-on, Inc. 6.625% 10/01/05...................... 51,250
50,000 Walt Disney Co. 6.750% 3/30/06..................... 50,938
50,000 Sysco Corp. 7.000% 5/01/06......................... 52,250
50,000 Teleport Communications 9.875% 7/01/06............. 54,813
50,000 Wal-Mart Stores 8.000% 9/15/06..................... 55,750
50,000 Eli Lilly 8.375% 12/01/06.......................... 57,000
50,000 GTE South 6.000% 2/15/08........................... 48,437
--------------
782,687
--------------
MORTGAGE PASS-THROUGH SECURITIES - 30.6%
73,453 Federal National Mortgage Association Pool #30333
9.250% 9/01/16................................... 77,972
90,491 Federal Home Loan Mortgage Corp Pool #302029 9.500%
10/01/16......................................... 96,027
117,218 Federal Home Loan Mortgage Corp Pool #303033 9.000%
4/01/17.......................................... 124,136
208,373 Federal Home Loan Mortgage Corp Pool #301538
10.000% 7/01/17.................................. 224,064
126,022 Federal Home Loan Mortgage Corp Pool #C80344 7.500%
09/01/25......................................... 128,737
132,020 Federal Home Loan Mortgage Corp Pool #D65456 7.000%
11/01/25......................................... 132,631
203,158 Federal Home Loan Mortgage Corp Pool #C80409 8.000%
06/01/26......................................... 210,449
--------------
994,016
--------------
</TABLE>
51
<PAGE>
CRABBE HUSON INCOME FUND
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
SHARES OR
FACE VALUE SECURITIES DESCRIPTION MARKET VALUE
- -------------- --------------------------------------------------- --------------
FIXED INCOME SECURITIES - (CONTINUED)
- -----------------------------------------------------------------------------------
<C> <S> <C>
U.S. GOVERNMENT BONDS - 39.2%
175,000 U.S. Treasury Bond 6.750% 8/15/26.................. $ 187,712
380,000 U.S. Treasury Bond 6.500% 11/15/26................. 396,587
650,000 U.S. Treasury Bond 6.625% 2/15/27.................. 688,441
--------------
1,272,740
--------------
Total Fixed Income Securities 3,129,726
--------------
(Cost $2,996,287)
SHORT TERM INVESTMENT - 17.8%
- -----------------------------------------------------------------------------------
INVESTMENT COMPANY - 0.7%
21,780 SSgA U.S. Government Money Market Fund 5.180%*..... 21,780
--------------
OTHER INVESTMENTS - 17.1%
555,470 Navigator Securities Lending Trust-Prime Portfolio
5.650%(*)**...................................... 555,470
--------------
Total Short Term Investments 577,250
--------------
(Cost $577,250)
Total Investments - 114.1% 3,706,976
(Cost $3,573,537)***
Other Assets and (Liabilities), Net - (14.1)% (458,824 )
--------------
TOTAL NET ASSETS - 100.0% $ 3,248,152
--------------
--------------
</TABLE>
* Rate reflects 7 day yield as of October 31, 1997.
** Investment of collateral received for securities loaned in Navigator
Securities Lending Trust-Prime Portfolio. As of October 31, 1997, the
market value of the securities on loan is $548,146.
*** The aggregate cost for federal income tax purposes is identical.
Aggregate gross unrealized appreciation is $134,496 and the aggregate
gross unrealized depreciation is $1,057, resulting in net unrealized
appreciation of $133,439.
See accompanying notes to financial statements.
52
<PAGE>
CRABBE HUSON U.S. GOVERNMENT INCOME FUND
INVESTMENT OBJECTIVE: TO PROVIDE A HIGH LEVEL OF CURRENT INCOME, CONSISTENT WITH
CAPITAL PRESERVATION, THROUGH A PORTFOLIO OF SHORT- AND INTERMEDIATE-TERM DEBT
OBLIGATIONS OF THE UNITED STATES GOVERNMENT AND ITS AGENCIES OR
INSTRUMENTALITIES. AT LEAST 75% OF THE FUND'S ASSETS MUST HAVE MATURITIES OF
FIVE YEARS OR LESS.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN
THE CRABBE HUSON U.S. GOVERNMENT INCOME FUND AND THE
RYAN LABS 3-YEAR TREASURY INDEX
(RESULTS ARE FOR FISCAL YEARS ENDING OCTOBER 31)
<S> <C> <C>
U.S. Govt. Ryan Lab
Begin $ 10,000 $ 10,000
1989 $ 10,825 $ 10,966
1990 $ 11,518 $ 11,830
1991 $ 12,804 $ 13,336
1992 $ 13,918 $ 14,611
1993 $ 14,852 $ 15,719
1994 $ 14,588 $ 15,576
1995 $ 15,918 $ 17,283
1996 $ 16,643 $ 18,245
1997 $ 17,669 $ 19,513
Annualized Total Return
1 Year: 6.65%
5 Year: 4.98%
Life of Fund: 6.78%
Fund Inception: 1/31/89
</TABLE>
HISTORICAL RESULTS ARE NOT INDICATIVE OF FUTURE RETURNS. FUTURE
RETURNS AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S
SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THE
ORIGINAL COST. THE ACCOMPANYING CHART COMPARES THE PERFORMANCE
OF THE U.S. GOVERNMENT INCOME FUND WITH THE RYAN LABS 3-YEAR
TREASURY INDEX, WHICH IS AN UNMANAGED, BROAD-BASE INDEX OF
BONDS; THE U.S. GOVERNMENT INCOME FUND IS A PROFESSIONALLY
MANAGED MUTUAL FUND. THE INDEX PRESENTED HERE IS NOT MANAGED,
DOES NOT INCUR EXPENSES AND IS NOT AVAILABLE FOR DIRECT
INVESTMENT. HAD THE INDEX INCURRED TYPICAL OPERATING EXPENSES,
ITS PERFORMANCE WOULD HAVE BEEN LOWER.
The U.S. Government(1) Income Fund posted a return of 6.65% for fiscal year
1997. The Ryan Labs Three-Year Treasury Index, the appropriate benchmark for the
fund, slightly outpaced the fund with a return of 6.95% for the year.
The average maturity for the fund's content is slightly longer than that of the
index. At present, maturities approximate a three-year average, versus two to
two and a half years for most competitor portfolios. Our election is to stay
relatively long (three years for this short-term category) and is based on our
constructive view of the market for the last 18 months.
The fund's approach, both in absolute terms and relative to other markets, is
highly conservative. We take no credit risk, expose the portfolio to very little
interest rate risk, and avoid high-yield ("junk") or emerging-market debt
completely. In light of the fund's name, this would seem obvious. However, there
has been an unfortunate trend in the past several years by some bond funds to
hold securities with risks higher than the "name" of the fund would suggest. We
advise all shareholders to re-examine their bond fund holdings to ensure that
they own a bond fund that is consistent with the risks they expect.
- -------------------
(1) An investment in the fund is neither insured nor guaranteed by the U.S.
Government.
53
<PAGE>
Our positioning for the fund going forward remains constructive. We'll continue
to scan the horizon for attractive opportunities, particularly during times of
bond or equity market volatility, which usually are good times to find
contrarian bargains.
We're also monitoring the economy's potential deflationary trends. If the
Federal Reserve realizes that the economy is slowing and reacts accordingly, or
if recessionary forces become further pronounced, the fund will be positioned to
perform well over the next fiscal year. In light of our conservative approach
and the growing potential for volatility in the equity market, the fund offers
an excellent option for short-term capital preservation and current income.
<TABLE>
<S> <C>
[SIGNATURE] [SIGNATURE]
Garth R. Nisbet, CFA Richard S. Huson, CFA
</TABLE>
54
<PAGE>
CRABBE HUSON U.S. GOVERNMENT INCOME FUND
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
FACE VALUE SECURITIES DESCRIPTION MARKET VALUE
- -------------- --------------------------------------------------- --------------
<C> <S> <C>
FIXED INCOME SECURITIES - 98.8%
- -----------------------------------------------------------------------------------
AGENCIES - 46.7%
$ 220,000 Federal Home Loan Bank 6.290% 2/21/02.............. $ 223,414
200,000 Federal Home Loan Bank 6.490% 1/08/04.............. 204,000
50,000 Federal Home Loan Bank 7.590% 3/10/05.............. 54,633
300,000 Federal National Mortgage Association 8.250%
12/18/00......................................... 319,731
150,000 Federal National Mortgage Association 4.950%
9/30/98.......................................... 148,943
200,000 Federal National Mortgage Association 6.340%
12/23/99......................................... 200,062
200,000 Federal National Mortgage Association 6.256%
2/25/00.......................................... 200,026
120,000 Federal National Mortgage Association 6.080%
9/25/00.......................................... 120,588
200,000 Federal National Mortgage Association 5.800%
12/10/03......................................... 197,814
50,000 Federal National Mortgage Association 7.375%
3/28/05.......................................... 54,025
200,000 Federal National Mortgage Association 5.875%
2/02/06.......................................... 197,478
180,000 Tennessee Valley Authority 6.125% 7/15/03.......... 178,650
--------------
2,099,364
--------------
U.S. GOVERNMENT NOTE -52.1%
70,000 U. S. Treasury Note 5.000% 1/31/98................. 69,918
30,000 U. S. Treasury Note 5.125% 2/28/98................. 29,968
125,000 U. S. Treasury Note 6.250% 7/31/98................. 125,641
425,000 U. S. Treasury Note 6.125% 8/31/98................. 426,908
500,000 U. S. Treasury Note 6.000% 9/30/98................. 502,020
265,000 U. S. Treasury Note 5.875% 7/31/99................. 265,859
140,000 U. S. Treasury Note 6.250% 8/31/00................. 141,824
100,000 U. S. Treasury Note 5.625% 11/30/00................ 99,590
100,000 U. S. Treasury Note 5.625% 2/28/01................. 99,616
560,000 U. S. Treasury Note 6.500% 10/15/06................ 581,538
--------------
2,342,882
--------------
Total Fixed Income Securities 4,442,246
--------------
(Cost $4,408,337)
SHORT TERM INVESTMENT - 0.3%
- -----------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 0.3%
13,835 State Street Bank and Trust Company* 4.250%
11/03/97......................................... 13,835
--------------
Total Investments - 99.1% 4,456,081
(Cost $4,422,172)**
Other Assets and Liabilities, Net - 0.9% 38,138
--------------
TOTAL NET ASSETS - 100.0% $ 4,494,219
--------------
--------------
</TABLE>
* The repurchase agreement, dated 10/31/97, $13,835 due 11/03/97, is
collateralized by $15,000 U.S. Treasury Note, 6.250%, maturing
7/31/98, with a market value of $15,077.
** The aggregate cost for federal income tax purposes is $4,422,645.
Aggregate gross unrealized appreciation is $37,978 and the aggregate
gross unrealized depreciation is $4,542, resulting in net unrealized
appreciation of $33,436.
See accompanying notes to financial statements on page.
55
<PAGE>
CRABBE HUSON U.S. GOVERNMENT MONEY MARKET FUND
INVESTMENT OBJECTIVE: TO PROVIDE CAPITAL PRESERVATION AND A HIGH LEVEL OF
CURRENT INCOME WHILE MAINTAINING SHAREHOLDER LIQUIDITY BY INVESTING IN
SHORT-TERM MONEY MARKET INSTRUMENTS THAT ARE DIRECT OBLIGATIONS OF THE UNITED
STATES GOVERNMENT OR ITS AGENCIES OR INSTRUMENTALITIES, AND IN REPURCHASE
AGREEMENTS WITH RESPECT TO SUCH OBLIGATIONS. THE AVERAGE MATURITY OF THE FUND
CANNOT EXCEED 90 DAYS.
During a period of relatively low and stable interest rates, the U.S.
Government(1) Money Market Fund closed the fiscal year with a return of 4.83%.
On a risk-adjusted basis, the number is competitive, given the recent
low-yielding money market environment.
The short end of the debt market has remained fairly stable recently. Short
rates were relatively unchanged in the period, though long-term rates are down.
Early in the fiscal year, we kept the fund's average maturity steady at
approximately 60 days, and we minimized trading costs to maximize yields to the
shareholder. We maintained our conservative stance through the mid-year mark and
toward the autumn, carefully monitoring any Fed action that could affect yields.
Ironically, if the Fed indeed lowers yields in the coming months, the fund may
underperform relative to longer-maturity bond funds, which have "locked in"
higher rates. Conversely, the fund would benefit in both absolute and relative
terms if the Fed elects to raise short-term rates.
At present, the economy continues to appear healthy and we see no hint of Fed
action over the near term. Our outlook is for continuing competitive returns
that will make the fund a good option for investors seeking tax-exempt money
market returns while preserving capital.
<TABLE>
<S> <C>
[SIGNATURE] [SIGNATURE]
Garth R. Nisbet, CFA Richard S. Huson, CFA
</TABLE>
- -------------------
(1) An investment in the fund is neither insured nor guaranteed by the U.S.
Government. Although the fund intends to maintain a stable one-dollar-per-share
net asset value, there is no assurance it will be able to do so.
56
<PAGE>
CRABBE HUSON U.S. GOVERNMENT MONEY MARKET FUND
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
SHARES OR
FACE VALUE SECURITIES DESCRIPTION MARKET VALUE
- -------------- --------------------------------------------------- --------------
<C> <S> <C>
FIXED INCOME SECURITIES* - 99.8%
- -----------------------------------------------------------------------------------
U.S. GOVERNMENT & AGENCY - 99.8%
DISCOUNT NOTES - 99.8%
FEDERAL HOME LOAN BANK
$3,680,000 5.600% 11/03/97.................................... $ 3,678,863
2,000,000 5.410% 11/04/97.................................... 1,999,099
495,000 5.460% 11/13/97.................................... 494,099
1,000,000 5.340% 11/19/97.................................... 997,330
2,000,000 5.360% 12/17/97.................................... 1,986,302
3,000,000 5.360% 12/19/97.................................... 2,978,560
1,500,000 5.370% 12/23/97.................................... 1,488,365
1,000,000 5.410% 1/02/98..................................... 990,683
2,500,000 5.370% 1/05/98..................................... 2,475,679
1,000,000 5.350% 1/07/98..................................... 990,043
1,000,000 5.360% 1/09/98..................................... 989,727
2,000,000 5.390% 1/12/98..................................... 1,978,440
1,000,000 5.380% 1/13/98..................................... 989,091
2,000,000 5.380% 1/14/98..................................... 1,977,882
1,000,000 5.440% 1/21/98..................................... 987,760
1,500,000 5.450% 2/13/98..................................... 1,476,383
--------------
26,478,306
--------------
FEDERAL FARM CREDIT BUREAU
2,000,000 5.390% 12/09/97.................................... 1,988,621
--------------
Total Fixed Income 28,466,927
(Cost $28,466,927)
OTHER INVESTMENTS - 0.1%
- -----------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 0.1%
33,472 State Street Bank and Trust Company** 4.250%
11/03/97......................................... 33,472
--------------
Total Investments - 99.9% 28,500,399
(Cost $28,500,399)***
Other Assets and Liabilities, Net - 0.1% 37,441
--------------
TOTAL NET ASSETS - 100.0% $ 28,537,840
--------------
--------------
</TABLE>
* Rates reflect purchase yield to maturity.
** The repurchase agreement, dated 10/31/97, $33,472 due 11/03/97, is
collateralized by $30,000 U.S. Treasury Note, 8.750%, maturing
8/15/20, with a market value of $39,300.
*** Aggregate cost for federal income tax purposes is identical.
See accompanying notes to financial statements.
57
<PAGE>
- -----------------------------------------------------------------------------
CRABBE HUSON FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
October 31, 1997
<TABLE>
<CAPTION>
THE CRABBE CRABBE HUSON
HUSON SPECIAL SMALL CAP
FUND, INC. FUND
----------------- ----------------
<S> <C> <C>
ASSETS:
Investment securities, at market $ 383,342,530 $114,179,547
Deposits with brokers for securities
sold short 48,715,384 --
Receivables:
Dividends and interest 222,384 52,511
Fund shares sold 511,399 121,135
Investment securities sold 2,332,088 --
Proceeds from securities sold short 42,672,214 --
Organization expenses (Note 1) -- 110,410
Prepaid Expenses 5,720 780
----------------- ----------------
$ 477,801,719 $ 114,464,383
----------------- ----------------
LIABILITIES:
Securities sold short, at market 71,981,706 --
Payables:
Investment advisory fees (Note 2) -- 9,393
Investment securities purchased 8,959,983 80,409
Fund shares redeemed 283,663 118,947
Deposits for securities loaned -- --
Directors/Trustees fees (Note 2) 8,254 1,554
Income dividend -- --
Distribution fees (Note 2) 45 1,285
Accrued liabilities 232,818 34,519
----------------- ----------------
81,466,469 246,107
----------------- ----------------
NET ASSETS: $ 396,335,250 $ 114,218,276
----------------- ----------------
----------------- ----------------
NET ASSETS CONSIST OF:
Capital shares 23,524 --
Capital paid in 307,030,766 93,275,638
Undistributed (distributed in excess
of) net investment income 2,158,210 239,000
Undistributed net realized gain (loss)
on investments 35,782,354 10,882,100
Net unrealized appreciation on
investments and short sales 51,340,396 9,821,538
----------------- ----------------
$ 396,335,250 $ 114,218,276
----------------- ----------------
----------------- ----------------
PRIMARY CLASS
Net Assets $ 396,335,250 $ 42,563,586
Shares outstanding (Note 3) 23,597,046 2,749,895
----------------- ----------------
----------------- ----------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE $ 16.80 $ 15.48
---------------- ---------------
---------------- ---------------
INSTITUTIONAL CLASS
Net Assets -- $ 71,654,690
Shares outstanding (Note 3) -- 4,612,610
---------------- ---------------
---------------- ---------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE -- $ 15.53
----------------- ----------------
----------------- ----------------
INVESTMENTS, AT COST $ 302,692,642 $ 104,358,009
</TABLE>
See accompanying notes to financial statements.
58
<PAGE>
- ---------------------------------------------------------------------
<TABLE>
<CAPTION>
CRABBE HUSON
CRABBE HUSON CRABBE REAL ESTATE
ASSET ALLOCATION HUSON EQUITY INVESTMENT
FUND FUND FUND
---------------- ------------ ------------
<S> <C> <C> <C>
ASSETS:
Investment securities, at market $146,768,903 $435,424,256 $39,203,949
Deposits with brokers for securities
sold short -- -- --
Receivables:
Dividends and interest 737,659 435,958 117,247
Fund shares sold 20,726 409,527 191,567
Investment securities sold 630,751 4,068,805 462,933
Proceeds from securities sold short -- -- --
Organization expenses (Note 1) 5,074 5,023 46,301
Prepaid Expenses 1,934 6,056 569
---------------- ------------ ------------
$148,165,047 $440,349,625 $40,022,566
---------------- ------------ ------------
LIABILITIES:
Securities sold short, at market -- -- --
Payables:
Investment advisory fees (Note 2) -- 6,882 --
Investment securities purchased 1,077,984 6,719,562 --
Fund shares redeemed 28,602 233,352 21,793
Deposits for securities loaned 22,421,779 29,057,823 5,714,731
Directors/Trustees fees (Note 2) 2,447 7,955 664
Income dividend 41,669 -- 12,453
Distribution fees (Note 2) 34 71,136 --
Accrued liabilities 34,756 121,789 14,373
---------------- ------------ ------------
23,607,271 36,218,499 5,764,014
---------------- ------------ ------------
NET ASSETS: $124,557,776 $404,131,126 $34,258,552
---------------- ------------ ------------
---------------- ------------ ------------
NET ASSETS CONSIST OF:
Capital shares -- -- --
Capital paid in 98,365,937 265,419,581 26,307,814
Undistributed (distributed in excess
of) net investment income (20,757) 895,302 39,437
Undistributed net realized gain (loss)
on investments 14,927,468 80,620,671 3,694,704
Net unrealized appreciation on
investments and short sales 11,285,128 57,195,572 4,216,597
---------------- ------------ ------------
$124,557,776 $404,131,126 $34,258,552
---------------- ------------ ------------
---------------- ------------ ------------
PRIMARY CLASS
Net Assets $ 95,959,936 $380,046,662 $34,258,552
Shares outstanding (Note 3) 6,423,388 16,298,398 2,430,942
---------------- ------------ ------------
---------------- ------------ ------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE $ 14.94 $ 23.32 $ 14.09
---------------- ------------ ------------
---------------- ------------ ------------
INSTITUTIONAL CLASS
Net Assets $ 28,597,840 $24,084,464 --
Shares outstanding (Note 3) 1,914,454 1,029,364 --
---------------- ------------ ------------
---------------- ------------ ------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE $ 14.94 $ 23.40 --
---------------- ------------ ------------
---------------- ------------ ------------
INVESTMENTS, AT COST $135,483,775 $378,228,684 $34,987,352
</TABLE>
See accompanying notes to financial statements.
59
<PAGE>
- ---------------------------------------------------------------------
CRABBE HUSON FUNDS
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
October 31, 1997
<TABLE>
<CAPTION>
CRABBE HUSON CRABBE
OREGON TAX-FREE HUSON INCOME
FUND FUND
--------------- ------------
<S> <C> <C>
ASSETS:
Investment securities, at market $26,134,929 $3,706,976
Receivables:
Dividends and interest 425,953 48,686
Fund shares sold 4,499 40,168
Investment securities sold -- 17,153
Prepaid Expenses 410 57
--------------- ------------
$26,565,791 $3,813,040
--------------- ------------
LIABILITIES:
Payables:
Investment advisory fees (Note 2) 20,976 1,558
Fund shares redeemed 18,907 173
Deposits for securities loaned -- 555,470
Directors/Trustees fees (Note 2) 540 74
Income dividend 21,739 232
Distribution fees (Note 2) 1,528 --
Accrued liabilities 14,854 7,381
--------------- ------------
78,544 564,888
--------------- ------------
NET ASSETS: $26,487,247 $3,248,152
--------------- ------------
--------------- ------------
NET ASSETS CONSIST OF:
Capital paid in 24,806,683 3,103,530
Undistributed net investment income 169,838 90,911
Undistributed net realized gain (loss)
on investments 71,382 (79,728)
Net unrealized appreciation on
investments 1,439,344 133,439
--------------- ------------
$26,487,247 $3,248,152
--------------- ------------
--------------- ------------
PRIMARY CLASS
Shares outstanding (Note 3) 2,072,951 306,970
--------------- ------------
--------------- ------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE $ 12.78 $ 10.58
--------------- ------------
--------------- ------------
INVESTMENTS, AT COST $24,695,585 $3,573,537
</TABLE>
See accompanying notes to financial statements.
60
<PAGE>
- ---------------------------------------------------------------------
<TABLE>
<CAPTION>
CRABBE HUSON
CRABBE HUSON U.S. GOVERNMENT
U.S. GOVERNMENT MONEY MARKET
INCOME FUND FUND
--------------- ---------------
<S> <C> <C>
ASSETS:
Investment securities, at market $4,456,081 $28,500,399
Receivables:
Dividends and interest 56,550 --
Fund shares sold 28 232,913
Investment securities sold -- --
Prepaid Expenses 114 531
--------------- ---------------
$4,512,773 $28,733,843
--------------- ---------------
LIABILITIES:
Payables:
Investment advisory fees (Note 2) 2,845 19,574
Fund shares redeemed 501 115,149
Deposits for securities loaned -- --
Directors/Trustees fees (Note 2) 148 679
Income dividend 7,188 28,238
Distribution fees (Note 2) -- 9,905
Accrued liabilities 7,872 22,458
--------------- ---------------
18,554 196,003
--------------- ---------------
NET ASSETS: $4,494,219 $28,537,840
--------------- ---------------
--------------- ---------------
NET ASSETS CONSIST OF:
Capital paid in 4,470,229 28,540,782
Undistributed net investment income 20,416 0
Undistributed net realized gain (loss)
on investments (30,335) (2,942)
Net unrealized appreciation on
investments 33,909 --
--------------- ---------------
$4,494,219 $28,537,840
--------------- ---------------
--------------- ---------------
PRIMARY CLASS
Shares outstanding (Note 3) 415,851 28,537,840
--------------- ---------------
--------------- ---------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE $ 10.81 $ 1.00
--------------- ---------------
--------------- ---------------
INVESTMENTS, AT COST $4,422,172 $28,500,399
</TABLE>
See accompanying notes to financial statements.
61
<PAGE>
- -----------------------------------------------------------------------------
CRABBE HUSON FUNDS
STATEMENTS OF OPERATIONS
For the year ended October 31, 1997
<TABLE>
<CAPTION>
THE CRABBE CRABBE HUSON
HUSON SPECIAL SMALL CAP
FUND, INC. FUND
------------- ------------
<S> <C> <C>
INVESTMENT INCOME
Interest $ 7,062,646 $ 699,836
Securities Lending -- --
Dividends (net of foreign taxes
withheld of $0; $0; $7,307; $41,402;
and $0, respectively) 2,556,128 292,880
------------- ------------
9,618,774 992,716
------------- ------------
EXPENSES
Investment advisory fees (Note 2) 3,610,036 628,441
Distribution fees - Primary (Note 2) 636,830 61,209
Transfer agent - Primary 729,263 46,811
Institutional -- 14,392
Administration (Note 2) 173,678 27,644
Printing & Postage 198,733 5,503
Custody 414,826 35,626
Legal 36,886 3,374
Interest 120,583 1,085
Auditing 31,001 9,813
Insurance 23,018 1,568
Trustees fees (Note 2) 32,185 5,351
Registration fees - Primary 37,810 26,196
Institutional -- 23,758
Amortization of organization expenses
-
Primary 213,534 28,684
Institutional -- 12,648
Miscellaneous 164,526 6,195
------------- ------------
6,422,908 938,298
Fees waived by investment advisor
(Note 2) (315,157) (123,853)
Expenses reimbursed by investment
advisor (Note 2) -- (39,285)
Fees paid indirectly (Note 2) -- (1,276)
------------- ------------
NET EXPENSES 6,107,751 773,884
------------- ------------
NET INVESTMENT INCOME 3,511,023 218,832
------------- ------------
REALIZED AND UNREALIZED GAIN:
Net realized gain on investments 91,965,679 10,883,028
Net realized loss on short sales (56,583,447) --
Net change in unrealized appreciation
of investments and short sales 57,974,639 9,736,622
------------- ------------
NET GAIN ON INVESTMENTS 93,356,871 20,619,650
------------- ------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 96,867,894 $20,838,482
------------- ------------
------------- ------------
</TABLE>
See accompanying notes to financial statements.
62
<PAGE>
- ---------------------------------------------------------------------
<TABLE>
<CAPTION>
CRABBE HUSON
CRABBE HUSON CRABBE REAL ESTATE
ASSET ALLOCATION HUSON EQUITY INVESTMENT
FUND FUND FUND
---------------- ------------ ------------
<S> <C> <C> <C>
INVESTMENT INCOME
Interest $ 3,461,098 $1,318,459 $ 42,896
Securities Lending 37,866 105,486 16,991
Dividends (net of foreign taxes
withheld of $0; $0; $7,307; $41,402;
and $0, respectively) 949,815 5,537,370 1,319,954
---------------- ------------ ------------
4,448,779 6,961,315 1,379,841
---------------- ------------ ------------
EXPENSES
Investment advisory fees (Note 2) 1,179,986 3,616,892 311,646
Distribution fees - Primary (Note 2) 264,915 964,533 77,911
Transfer agent - Primary 87,884 348,736 34,947
Institutional 13,629 12,346 --
Administration (Note 2) 56,699 178,498 13,243
Printing & Postage 8,846 55,875 7,900
Custody 79,097 167,203 23,017
Legal 8,413 26,958 2,637
Interest 2,410 7,555 5,417
Auditing 12,448 34,850 5,578
Insurance 5,972 18,922 1,335
Trustees fees (Note 2) 10,205 33,748 2,869
Registration fees - Primary 14,553 23,706 19,468
Institutional 14,844 16,010 --
Amortization of organization expenses
-
Primary 59,384 228,705 39,377
Institutional 13,176 12,443 --
Miscellaneous 24,530 82,035 4,320
---------------- ------------ ------------
1,856,992 5,829,015 549,666
Fees waived by investment advisor
(Note 2) (161,653) (77,683 ) (81,894)
Expenses reimbursed by investment
advisor (Note 2) (41,810) (40,968 ) --
Fees paid indirectly (Note 2) (147) (9,882 ) (305)
---------------- ------------ ------------
NET EXPENSES 1,653,381 5,700,482 467,467
---------------- ------------ ------------
NET INVESTMENT INCOME 2,795,398 1,260,833 912,374
---------------- ------------ ------------
REALIZED AND UNREALIZED GAIN:
Net realized gain on investments 14,919,865 80,765,002 3,694,705
Net realized loss on short sales -- -- --
Net change in unrealized appreciation
of investments and short sales 4,353,683 22,494,641 2,968,799
---------------- ------------ ------------
NET GAIN ON INVESTMENTS 19,273,548 103,259,643 6,663,504
---------------- ------------ ------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $22,068,946 $104,520,476 $7,575,878
---------------- ------------ ------------
---------------- ------------ ------------
</TABLE>
See accompanying notes to financial statements.
63
<PAGE>
- ---------------------------------------------------------------------
CRABBE HUSON FUNDS
STATEMENTS OF OPERATIONS (CONTINUED)
For the year ended October 31, 1997
<TABLE>
<CAPTION>
CRABBE HUSON CRABBE
OREGON TAX-FREE HUSON INCOME
FUND FUND
--------------- ------------
<S> <C> <C>
INVESTMENT INCOME
Interest $1,366,179 $246,353
Securities Lending -- 1,805
--------------- ------------
1,366,179 248,158
--------------- ------------
EXPENSES
Investment advisory fees (Note 2) 130,584 27,528
Distribution fees (Note 2) 44,316 7,200
Transfer agent 33,621 24,234
Administration (Note 2) 10,914 1,570
Printing & Postage 6,392 651
Custody 28,674 13,006
Legal 1,912 220
Interest 567 151
Auditing 5,624 3,307
Insurance 1,224 169
Trustees fees (Note 2) 2,207 299
Registration fees 44 11,712
Amortization of organization expenses 15,150 10,781
Miscellaneous 5,310 1,355
--------------- ------------
286,539 102,183
Fees waived by investment advisor
(Note 2) (30,594) (27,528)
Expenses reimbursed by investment
advisor (Note 2) -- (45,292)
--------------- ------------
NET EXPENSES 255,945 29,363
--------------- ------------
NET INVESTMENT INCOME 1,110,234 218,795
--------------- ------------
REALIZED AND UNREALIZED GAIN:
Net realized gain on investments 72,541 108,239
Net change in unrealized appreciation
of investments 514,167 21,295
--------------- ------------
NET GAIN ON INVESTMENTS 586,708 129,534
--------------- ------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $1,696,942 $348,329
--------------- ------------
--------------- ------------
</TABLE>
See accompanying notes to financial statements.
64
<PAGE>
- ---------------------------------------------------------------------
<TABLE>
<CAPTION>
CRABBE HUSON
CRABBE HUSON U.S. GOVERNMENT
U.S. GOVERNMENT MONEY MARKET
INCOME FUND FUND
--------------- ---------------
<S> <C> <C>
INVESTMENT INCOME
Interest $358,832 $1,855,060
Securities Lending -- --
--------------- ---------------
358,832 1,855,060
--------------- ---------------
EXPENSES
Investment advisory fees (Note 2) 32,186 170,924
Distribution fees (Note 2) 12,397 51,943
Transfer agent 23,697 56,781
Administration (Note 2) 2,955 15,129
Printing & Postage 890 5,217
Custody 12,199 24,908
Legal 541 2,332
Interest 99 501
Auditing 2,862 5,687
Insurance 335 1,593
Trustees fees (Note 2) 576 2,758
Registration fees 12,789 19,667
Amortization of organization expenses 10,950 33,960
Miscellaneous 1,881 8,873
--------------- ---------------
114,357 400,273
Fees waived by investment advisor
(Note 2) (32,186) (127,020)
Expenses reimbursed by investment
advisor (Note 2) (33,893) (33,960)
--------------- ---------------
NET EXPENSES 48,278 239,293
--------------- ---------------
NET INVESTMENT INCOME 310,554 1,615,767
--------------- ---------------
REALIZED AND UNREALIZED GAIN:
Net realized gain on investments 27,462 --
Net change in unrealized appreciation
of investments 26,940 --
--------------- ---------------
NET GAIN ON INVESTMENTS 54,402 --
--------------- ---------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $364,956 $1,615,767
--------------- ---------------
--------------- ---------------
</TABLE>
See accompanying notes to financial statements.
65
<PAGE>
- -----------------------------------------------------------------------------
CRABBE HUSON FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
For the year ended October 31, 1997, and year or period ended October 31, 1996.
<TABLE>
<CAPTION>
THE CRABBE HUSON
SPECIAL FUND, INC.
-----------------------------------
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
---------------- ----------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 3,511,023 $ 5,381,244
Net realized gain on investments 35,382,232 13,551,901
Net change in unrealized appreciation
or depreciation of investments and
short sales 57,974,639 32,571,427
---------------- ----------------
Increase in net assets resulting from
operations 96,867,894 51,504,572
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income-
Primary shares (4,324,808) (13,309,478)
Institutional shares -- --
From net realized gain on investments-
Primary shares (9,866,077) (36,164,306)
Institutional shares -- --
CAPITAL SHARE TRANSACTIONS, NET (Note 3) (167,381,164) (399,551,217)
---------------- ----------------
Total increase (decrease) in net
assets (84,704,155) (397,520,429)
FUND NET ASSETS, BEGINNING OF PERIOD 481,039,405 878,559,834
---------------- ----------------
FUND NET ASSETS, END OF PERIOD** $ 396,335,250 $ 481,039,405
---------------- ----------------
---------------- ----------------
**Including undistributed (distribution
in excess of) net investment income
of: $ 2,158,210 $ 2,964,508
---------------- ----------------
---------------- ----------------
</TABLE>
<TABLE>
<CAPTION>
CRABBE HUSON
EQUITY FUND
-----------------------------------
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
---------------- ----------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 1,260,833 $ 2,620,900
Net realized gain on investments 80,765,002 33,226,713
Net change in unrealized appreciation
or depreciation of investments 22,494,641 19,590,608
---------------- ----------------
Increase in net assets resulting from
operations 104,520,476 55,438,221
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income-
Primary shares (1,478,593) (3,692,079)
Institutional shares (19,410) --
From net realized gain on investments-
Primary shares (33,083,445) (20,585,296)
Institutional shares (348,809) --
CAPITAL SHARE TRANSACTIONS, NET (Note 3) (106,452,034) 22,648,015
---------------- ----------------
Total increase (decrease) in net
assets (36,861,815) 53,808,861
FUND NET ASSETS, BEGINNING OF PERIOD 440,992,941 387,184,080
---------------- ----------------
FUND NET ASSETS, END OF PERIOD** $ 404,131,126 $440,992,941
---------------- ----------------
---------------- ----------------
**Including undistributed net investment
income of: $ 895,302 $ 1,315,080
---------------- ----------------
---------------- ----------------
</TABLE>
* For the period from February 20, 1996 (commencement of operations) to
October 31, 1996.
See accompanying notes to financial statements.
66
<PAGE>
- ---------------------------------------------------------------------
<TABLE>
<CAPTION>
CRABBE HUSON CRABBE HUSON
SMALL CAP FUND ASSET ALLOCATION FUND
------------------------------------ -----------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996* OCTOBER 31, 1997 OCTOBER 31, 1996
---------------- ----------------- ---------------- ----------------
<S> <C> <C> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 218,832 $ 45,933 $ 2,795,398 $ 3,151,042
Net realized gain on investments 10,883,028 379,409 14,919,865 6,464,101
Net change in unrealized appreciation
or depreciation of investments and
short sales 9,736,622 84,916 4,353,683 2,105,152
---------------- ----------------- ---------------- ----------------
Increase in net assets resulting from
operations 20,838,482 510,258 22,068,946 11,720,295
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income-
Primary shares (37,544) -- (2,327,127) (3,082,300)
Institutional shares (21,320) -- (458,657) (14,792)
From net realized gain on investments-
Primary shares (281,168) -- (6,443,097) (11,438,421)
Institutional shares (99,170) -- (189,266) --
CAPITAL SHARE TRANSACTIONS, NET (Note 3) 73,149,261 20,059,477 (15,636,696) (6,171,166)
---------------- ----------------- ---------------- ----------------
Total increase (decrease) in net
assets 93,548,541 20,569,735 (2,985,897) (8,986,384)
FUND NET ASSETS, BEGINNING OF PERIOD 20,669,735 100,000 127,543,673 136,530,057
---------------- ----------------- ---------------- ----------------
FUND NET ASSETS, END OF PERIOD** $114,218,276 $20,669,735 $124,557,776 $127,543,673
---------------- ----------------- ---------------- ----------------
---------------- ----------------- ---------------- ----------------
**Including undistributed (distribution
in excess of) net investment income
of: $ 239,000 $ 49,849 $ (20,757) $ (44,394)
---------------- ----------------- ---------------- ----------------
---------------- ----------------- ---------------- ----------------
</TABLE>
<TABLE>
<CAPTION>
CRABBE HUSON REAL
ESTATE INVESTMENT FUND
-----------------------------------
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
---------------- ----------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 912,374 $ 594,037
Net realized gain on investments 3,694,705 1,149,515
Net change in unrealized appreciation
or depreciation of investments 2,968,799 2,224,902
---------------- ----------------
Increase in net assets resulting from
operations 7,575,878 3,968,454
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income-
Primary shares (908,865) (594,037)
Institutional shares -- --
From net realized gain on investments-
Primary shares (1,144,248) (238,357)
Institutional shares -- --
CAPITAL SHARE TRANSACTIONS, NET (Note 3) 8,086,847 (1,472,634)
---------------- ----------------
Total increase (decrease) in net
assets 13,609,612 1,663,426
FUND NET ASSETS, BEGINNING OF PERIOD 20,648,940 18,985,514
---------------- ----------------
FUND NET ASSETS, END OF PERIOD** $34,258,552 $20,648,940
---------------- ----------------
---------------- ----------------
**Including undistributed net investment
income of: $ 39,437 $ 11,251
---------------- ----------------
---------------- ----------------
</TABLE>
67
<PAGE>
- ---------------------------------------------------------------------
CRABBE HUSON FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
For the year ended October 31, 1997, and year or period ended October 31, 1996.
<TABLE>
<CAPTION>
CRABBE HUSON
OREGON TAX-FREE FUND
-----------------------------------
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
---------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income $ 1,110,234 $ 1,203,459
Net realized gain on investments 72,541 152,573
Net change in unrealized appreciation
or depreciation of investments 514,167 (440,577)
---------------- ----------------
Increase in net assets resulting from
operations 1,696,942 915,455
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (957,659) (1,203,459)
In excess of net investment income -- --
From net realized gain on investments (152,575) (3,019)
CAPITAL SHARE TRANSACTIONS, NET (Note 3) (234,482) (1,644,327)
---------------- ----------------
Total increase (decrease) in net
assets 352,226 (1,935,350)
FUND NET ASSETS, BEGINNING OF PERIOD 26,135,021 28,070,371
---------------- ----------------
FUND NET ASSETS, END OF PERIOD** $26,487,247 $26,135,021
---------------- ----------------
---------------- ----------------
**Including undistributed net investment
income of: $ 169,838 $ 956
---------------- ----------------
---------------- ----------------
</TABLE>
<TABLE>
<CAPTION>
CRABBE HUSON U.S. GOVERNMENT
MONEY MARKET FUND
-----------------------------------
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
---------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income $ 1,615,767 $ 2,216,779
---------------- ----------------
Increase in net assets resulting from
operations 1,615,767 2,216,779
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (1,615,767) (2,216,779)
CAPITAL SHARE TRANSACTIONS, NET (Note 3) (13,632,856) (12,543,523)
---------------- ----------------
Total increase (decrease) in net
assets (13,632,856) (12,543,523)
FUND NET ASSETS, BEGINNING OF PERIOD 42,170,696 54,714,219
---------------- ----------------
FUND NET ASSETS, END OF PERIOD $ 28,537,840 $ 42,170,696
---------------- ----------------
---------------- ----------------
</TABLE>
See accompanying notes to financial statements.
68
<PAGE>
- ---------------------------------------------------------------------
<TABLE>
<CAPTION>
CRABBE HUSON CRABBE HUSON U.S.
INCOME FUND GOVERNMENT INCOME FUND
----------------------------------- -----------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996 OCTOBER 31, 1997 OCTOBER 31, 1996
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income $ 218,795 $ 318,070 $ 310,554 $ 362,431
Net realized gain on investments 108,239 73,271 27,462 99,961
Net change in unrealized appreciation
or depreciation of investments 21,295 (111,166) 26,940 (96,510)
---------------- ---------------- ---------------- ----------------
Increase in net assets resulting from
operations 348,329 280,175 364,956 365,882
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (222,046) (315,728) (310,554) (362,431)
In excess of net investment income -- -- (1,592) (599)
From net realized gain on investments -- -- -- --
CAPITAL SHARE TRANSACTIONS, NET (Note 3) (1,571,637) (2,461,066) (4,075,647) 88,005
---------------- ---------------- ---------------- ----------------
Total increase (decrease) in net
assets (1,445,354) (2,496,619) (4,022,837) 90,857
FUND NET ASSETS, BEGINNING OF PERIOD 4,693,506 7,190,125 8,517,056 8,426,199
---------------- ---------------- ---------------- ----------------
FUND NET ASSETS, END OF PERIOD** $ 3,248,152 $ 4,693,506 $ 4,494,219 $8,517,056
---------------- ---------------- ---------------- ----------------
---------------- ---------------- ---------------- ----------------
**Including undistributed net investment
income of: $ 90,911 $ 3,560 $ 20,416 $ 93
---------------- ---------------- ---------------- ----------------
---------------- ---------------- ---------------- ----------------
</TABLE>
See accompanying notes to financial statements.
69
<PAGE>
CRABBE HUSON FUNDS
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION: The Crabbe Huson Special Fund, Inc. ("Special Fund"), Crabbe
Huson Small Cap Fund ("Small Cap Fund"), Crabbe Huson Asset Allocation Fund
("Asset Allocation Fund"), Crabbe Huson Equity Fund ("Equity Fund"), Crabbe
Huson Real Estate Investment Fund ("Real Estate Fund"), Crabbe Huson Oregon
Tax-Free Fund ("Oregon Tax-Free Fund") Crabbe Huson Income Fund ("Income Fund"),
Crabbe Huson U.S. Government Income Fund ("U.S. Government Income Fund") and
Crabbe Huson U.S. Government Money Market Fund ("Money Market Fund") are
registered under the Investment Company Act of 1940, as amended. All of the
Funds (other than the Oregon Tax-Free Fund) are open-end diversified investment
companies. The Oregon Tax-Free Fund is registered under the Investment Company
Act of 1940, as amended, as an open-end non-diversified investment company. Each
of the Funds (other than the Special Fund) is a separate series of the Crabbe
Huson Funds, a Delaware business trust offering an unlimited number of shares of
beneficial interest without par value. The Special Fund is an Oregon Corporation
which currently is authorized to issue 100,000,000 shares of common stock with
$.001 par value. All of the Funds offer shares of the Primary Class. The Small
Cap, Asset Allocation, and Equity Funds also offer shares of the Institutional
Class. The two classes of shares differ principally in the distribution fees and
shareholder servicing fees.
The following is a summary of significant accounting policies consistently
followed by the Funds in preparation of financial statements.
SECURITY VALUATION--MONEY MARKET FUND: The securities owned by the Fund are
valued based upon the amortized cost method. Pursuant to this method, a security
is valued by reference to the acquisition cost as adjusted for amortization of
premium or accretion of discount. Although the Fund seeks to maintain the net
asset value per share at $1.00, there can be no assurance that the net asset
value per share will not vary.
SECURITY VALUATION--ALL OTHER FUNDS: Securities listed or traded on a
registered securities exchange, including over-the-counter securities, are
valued at the last reported sales price on the date of computation. Where last
sale information is not available, the best bid price is used. Securities and
assets for which market quotations are not readily available are valued at fair
market value as determined in good faith by or under the direction of the Board
of Trustees/Directors of the Funds.
SECURITY TRANSACTIONS, INVESTMENT INCOME AND EXPENSES: Security transactions
are accounted for on the trade date. Interest income, consisting of interest
accrued plus the accretion of original issue discount and market discount minus
the amortization of investment premium, is recorded daily on the accrual basis.
Dividends are recorded on the ex-dividend date. Dividends declared on short
positions existing on the record date are recorded on the ex-dividend date as an
expense. Net realized gains and losses on investments are computed on the
first-in, first-out, method. For Funds with more than
70
<PAGE>
CRABBE HUSON FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1997
one class, investment income and realized and unrealized gains and losses are
allocated to each class based upon the relative daily net assets of each class
of share. Expenses that are directly attributable to a specific fund or class
are charged only to that fund or class. Expenses not directly attributable to a
specific fund or class are allocated to each fund or class based either on its
relative daily net assets or evenly over the Funds or classes.
DIVIDENDS AND DISTRIBUTIONS: The Oregon Tax-Free 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 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 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.
Net capital gains realized by the Fund, if any, are declared and distributed on
an annual basis, usually in December.
The Income Fund and U.S. Government Income Fund 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 Asset Allocation Fund and Real Estate Fund declare and distribute dividends
from net investment income on the last business day of each fiscal quarter. Net
capital gains realized by the Funds, if any, are declared and distributed on an
annual basis, usually in December. The Asset Allocation Fund's dividends are
determined on a class level and capital gains are determined on a fund level.
The Special Fund, Small Cap Fund and Equity Fund declare and distribute to
shareholders in December substantially all of the net investment income and net
realized capital gains, if any. The Small Cap and Equity Funds' dividends are
determined on a class level and capital gains are determined on a fund level.
SHORT SALES: The Special Fund sold securities short during the period.
Outstanding short sales at October 31, 1997 are listed in the schedule of
investments. A short sale is effected when it is believed that the price of a
particular security will decline, and involves the sale of a security which the
Fund does not own in the hope of purchasing the same security at a later date at
a lower price. To make delivery to the buyer, the Fund must borrow the security.
The Fund is then obligated to return the security to the lender, and therefore
it must subsequently purchase the same security.
Proceeds from the sale of a borrowed security remain on deposit with the broker
loaning that security. Additional deposits may be required in the event that the
value of the securities sold short exceeds a percentage of the amount on deposit
with the broker. In
71
<PAGE>
CRABBE HUSON FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1997
addition, the borrowing fund is required to segregate cash or U.S. Government
securities in an amount equal to the market value of all borrowed securities
less any amounts on deposit with brokers. As a result of these activities, the
borrowing fund will not be deemed to create leverage merely by entering into a
short selling transaction, except to the extent that income is earned on amounts
on deposit with the broker. The amount on deposit with the broker plus the value
of the segregated securities may not exceed 25% of Net Assets.
OPTIONS: The Special, Small Cap, Real Estate, Equity, Asset Allocation and
Income Funds may write call options on securities they own or have the right to
acquire, and may purchase put and call options on individual securities and
indexes written by others. The purchase of any of these instruments can result
in the entire loss on the investment in that particular instrument or, in the
case of writing covered options, can limit the opportunity to earn a profit on
the underlying security.
When an option is written (sold), an amount equal to the premium received is
recorded as a liability. The amount of liability is adjusted daily to reflect
the current market value of the option written. When an option written by the
Fund expires on its stipulated expiration date, the Fund realizes a gain equal
to the net premium received for the option. When the Fund enters into a closing
purchase transaction, the Fund realizes a gain or loss equal to the difference
between the cost of a closing purchase transaction and the premium received when
the call option was written. In the case of either expiration of a written
option or a closing purchase transaction, the liability related to such option
is extinguished.
Call or put options purchased are accounted for in the same manner as marketable
portfolio securities. When a call or put option is exercised, the proceeds from
the underlying securities bought or sold are decreased by the premium paid in
determining the gain or loss.
Options on stock indices differ from options on securities in that the exercise
of an option on a stock index is settled in cash and does not involve delivery
of the actual underlying security.
REPURCHASE AGREEMENTS: Each of the Funds may engage in repurchase agreement
transactions. Repurchase agreements are agreements under which a Fund 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. 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. All repurchase agreements are
fully collateralized and marked to market daily, and may therefore be viewed by
the SEC or the courts as loans collateralized by the underlying security. There
are some risks associated with repurchase agreements. For instance, in the case
of default by the seller, a Fund could incur a loss or, if bankruptcy by the
seller, a Fund could incur costs and delays in realization of collateral.
72
<PAGE>
CRABBE HUSON FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1997
LOANS OF PORTFOLIO SECURITIES: Each of the Funds may lend portfolio securities,
up to 20% (10% for Oregon Tax-Free Fund) of the value of a Fund's total assets.
The Funds receive total collateral in an amount at least equal to 100% of the
market value of the securities loaned at the inception of the loan. The value of
the portfolio securities loaned is marked to market on a daily basis and
additional collateral is received from the borrower, as necessary, to ensure
that its value is at least equal to 100% of the securities loaned at all times.
Cash collateral received is invested in a short-term instrument, Navigator
Securities Lending Trust-Prime Portfolio, a regulated investment company offered
by State Street Bank and Trust Company. Interest income earned on the investment
of the collateral plus reimbursement for management fees associated with such
investment, in excess of rebates to the borrower, is recorded on an accrual
basis. Income earned on non-cash collateral is based on a percentage of the
market value of the securities loaned and is recorded on an accrual basis. If
the borrower defaults and the value of the portfolio securities increases in
excess of the collateral received or if bankruptcy proceedings commence with
respect to the borrower of the security, realization of the value of the
securities loaned may be delayed or limited.
ORGANIZATION COSTS: Expenses incurred in connection with the original
organization of the Funds are amortized using the sum of the years digits
method. As of October 31, 1997 the initial organization costs for all Funds
except for Small Cap Fund and Real Estate Fund have been fully amortized. The
Crabbe Huson Group, Inc., the Fund's investment advisor, has agreed that, in the
event any of the initial shares are redeemed during the 60-month period for
amortizing the Fund's organization costs, the Fund will be reimbursed by the
investment advisor for the unamortized balances of such costs in the same
proportion as the number of shares reduced bears to the number of initial shares
outstanding at the time of redemption.
On February 27, 1996 at a joint annual meeting of the shareholders of record at
the close of business on December 20, 1995, of all Funds except for Special Fund
and Small Cap Fund, shareholders approved an Agreement and Plan of
Reorganization and Liquidation (the "Reorganization") in which each Fund would
become a separate series of the Crabbe Huson Funds, a business trust organized
under the laws of the State of Delaware (the "Trust"). The reorganization became
effective on October 1, 1996. All of the expenses incurred in connection with
the reorganization were paid by each of the respective series' of the Trust and
were amortized over a one year period.
The expenses incurred in connection with the addition of the Institutional Class
are being amortized over a 60 month period. The costs associated with state
registration of shares will be amortized over a period of 12 months.
LINE OF CREDIT: The Funds participate in a $30 million line of credit provided
by State Street Corporation, primarily for temporary or emergency purposes, $20
million of which is unsecured. Under the agreement, each of the Funds except
Special Fund, may borrow up to the lesser of 15% of each Fund's total assets or
the remaining unused balance of the $20 million unsecured line of credit.
Special Fund may borrow the lesser
73
<PAGE>
CRABBE HUSON FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1997
of $30 million or 33 1/3% of its total assets on a secured basis. As of November
3, 1997, Special Fund may borrow the lesser of $40 million or 33 1/3% of its
total assets on a secured basis. Interest is payable at the Overnight Federal
Funds rate plus 0.75%, on an annualized basis. The Funds are charged quarterly,
a negotiated aggregate commitment fee on the daily unutilized credit balance. At
October 31, 1997, the Funds had no borrowings under this line of credit.
When the Special Fund borrows it must put in a segregated account (with the
Fund's custodian) debt securities, domestic or foreign equities, or commercial
paper in an amount equal to at least 200% of the amount borrowed. The Fund must
daily maintain the segregated account to ensure that its value is at least equal
to 200% of the funds borrowed at all times. No single issuer, other than U.S.
Government and U.S. Government agencies, can comprise in excess of 10% of the
segregated account.
FEDERAL INCOME TAXES: It is each Fund's policy to distribute substantially all
of its taxable income to shareholders and otherwise comply with the provisions
of the Internal Revenue Code applicable to regulated investment companies.
Therefore, no provision has been made for Federal income or excise taxes. 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) are 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 on the Statements of Changes in Net
Assets.
For Federal income tax purposes, Income Fund, U.S. Government Income Fund, and
U.S. Government Money Market Fund have capital loss carryforwards of $79,728,
$29,862, and $2,942, respectively, to be used to offset future realized gains.
These losses expire in 2002, 2002, and 2005, respectively.
On the Statement of Assets and Liabilities, as a result of permanent book-to-tax
differences, reclassification adjustments have been made, between the capital
paid in, undistributed net investment income and undistributed net realized gain
(loss) on investments accounts.
ESTIMATES: The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
income and expenses at the date of the financial statements. Actual results
could differ from these estimates.
RECLASSIFICATIONS: Certain reclassifications were made to the 1996 financial
statements and financial highlights to conform to the 1997 presentation.
74
<PAGE>
CRABBE HUSON FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1997
NOTE 2. INVESTMENT ADVISOR, OTHER TRANSACTIONS WITH
AFFILIATES, AND SERVICE PROVIDERS
INVESTMENT ADVISOR: The Funds have entered into an investment advisory
agreement with The Crabbe Huson Group, Inc. (the "Advisor"), an affiliated
company. The investment advisory fee of each Fund is accrued daily and paid
semi-monthly. The annual investment advisory fee for each Fund is described
below:
ASSET ALLOCATION FUND
SPECIAL FUND
SMALL CAP FUND
EQUITY FUND
REAL ESTATE FUND
1.00% of average daily net assets up to $100,000,000
.85 of 1% of average daily net assets between $100,000,000 and $500,000,000
.60 of 1% of average daily net assets over $500,000,000
INCOME FUND
.75 of 1% of average daily net assets up to $100,000,000
.60 of 1% of average daily net assets between $100,000,000 and $500,000,000
.50 of 1% of average daily nets assets over $500,000,000
U.S. GOVERNMENT INCOME FUND
MONEY MARKET FUND
OREGON TAX-FREE FUND
.50 of 1% of average daily net assets up to $500,000,000
.45 of 1% of average daily net assets between $500,000,000 and $1,000,000,000
.40 of 1% of average daily net assets over $1,000,000,000
Through October 31, 1997, the Advisor had agreed to reimburse "Other Expenses,"
including management fees as necessary, to the extent Total Fund Operating
Expenses exceed 1.00% of average daily net assets for Small Cap Fund -
Institutional Class, Asset Allocation Fund - Institutional Class, and Equity
Fund - Institutional Class. With respect to the other funds, and effective
November 1, 1997 for the Institutional Class of the Small Cap, Asset Allocation,
and Equity Funds, the Advisor may at times voluntarily waive its advisory fees
or reimburse a Fund's expenses.
DISTRIBUTOR: The Funds have entered into a distribution agreement with Crabbe
Huson Securities, Inc. (the "Distributor"), an affiliated company. The Primary
Class shares of each Fund have each adopted a distribution plan pursuant to Rule
12b-1 under the 1940 Act (the "Plan"). Under the Plan, each of the participating
Funds' Primary Class shares
75
<PAGE>
CRABBE HUSON FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1997
may pay up to 0.25% of such class's average daily net assets to the Distributor
as reimbursement for its actual expenses incurred in the distribution and
promotion of such class's shares. There is no distribution fee for the
Institutional Class shares.
ADMINISTRATOR: State Street Bank and Trust Company (the "Administrator") serves
as Administrator of the Funds. The Administrator provides services for the Funds
that relate to administration, operations and compliance. The Funds pay the
Administrator a fee at the rate of 0.06% of the average net assets of the Funds
managed by the Advisor up to $500 million, 0.03% of the next $500 million, and
0.01% of those assets in excess of $1 billion, plus $7,500 for each class of
share excluding the initial class of share, and certain out of pocket costs.
Each Fund pays its pro rata share of such fee.
DIRECTORS/TRUSTEES FEES: Each of the disinterested trustees/directors are paid
an annual retainer of $17,000 and are reimbursed for expenses incurred in
attending meetings. Each Fund pays its pro rata share of such fees and expenses
based upon its relative asset amounts. For the year ended October 31, 1997, the
Funds incurred aggregate fees of $90,198.
FEES PAID INDIRECTLY: The Funds have entered into a custodian, recordkeeping,
and pricing agreement with Investors Fiduciary Trust Company ("IFTC"). IFTC's
fees for these services are subject to reduction by credits earned by each Fund,
based on the cash balances of the Funds held by IFTC as Custodian. For the year
ended October 31, 1997, credits earned were $1,276, $5,608 and $305 for Small
Cap Fund, Equity Fund, and Real Estate Fund, respectively. The Funds could have
invested the assets used in connection with this agreement in an income
producing asset if it had not entered into such an agreement.
The Special Fund, Asset Allocation Fund, Equity Fund, and Real Estate Fund, have
entered into a directed brokerage agreement with State Street Brokerage
Services, Inc. ("SSBSI"). Under this arrangement, SSBSI will pay the Funds a
percentage of commissions generated as credits used to offset all or a portion
of certain outside service providers fees incurred by the Funds. For the year
ended October 31, 1997, credits earned of $0, $147, $4,274 and $0 for Special
Fund, Asset Allocation Fund, Equity Fund and Real Estate Fund, respectively,
were used to offset transfer agency fees.
76
<PAGE>
CRABBE HUSON FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1997
NOTE 3. CAPITAL SHARE TRANSACTIONS
Transactions in capital shares of the Funds were as follows:
<TABLE>
<CAPTION>
THE CRABBE HUSON
SPECIAL FUND, INC.
-------------------------------------------------------------
SHARES AMOUNT
-------------------------------------------------------------
<S> <C> <C> <C> <C>
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 1996 1997 1996
-------------------------------------------------------------
Shares sold 6,932,446 16,617,712 $ 107,701,421 $ 233,860,994
Shares issued in reinvestment of
dividends 963,254 3,308,309 13,533,694 45,480,552
-------------------------------------------------------------
7,895,700 19,926,021 121,235,115 279,341,546
Shares redeemed (19,397,928) (48,496,931) (288,616,279) (678,892,763)
-------------------------------------------------------------
Net increase (decrease) (11,502,228) (28,570,910) $ (167,381,164) $ (399,551,217)
-------------------------------------------------------------
-------------------------------------------------------------
<CAPTION>
CRABBE HUSON SMALL CAP FUND
PRIMARY CLASS
--------------------------------------------------------
SHARES AMOUNT
--------------------------------------------------------
<S> <C> <C> <C> <C>
YEAR PERIOD YEAR
ENDED ENDED ENDED PERIOD ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 1996* 1997 1996*
--------------------------------------------------------
Shares sold 2,953,831 2,043,129 $ 41,485,452 $22,018,325
Shares issued in reinvestment of
dividends 27,329 0 315,372 0
--------------------------------------------------------
2,981,160 2,043,129 41,800,824 22,018,325
Shares redeemed (1,969,881) (314,513) (27,110,004) (3,478,097)
--------------------------------------------------------
Net increase (decrease) 1,011,279 1,728,616 $ 14,690,820 $18,540,228
--------------------------------------------------------
--------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CRABBE HUSON SMALL CAP FUND
INSTITUTIONAL CLASS
------------------------------------------------------
SHARES AMOUNT
------------------------------------------------------
<S> <C> <C> <C> <C>
YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 1996** 1997 1996**
------------------------------------------------------
Shares sold 4,486,781 137,489 $58,662,035 $1,519,249
Shares issued in reinvestment of
dividends 10,450 0 120,489 0
------------------------------------------------------
4,497,231 137,489 58,782,524 1,519,249
Shares redeemed (22,110) 0 (324,083) 0
------------------------------------------------------
Net increase (decrease) 4,475,121 137,489 $58,458,441 $1,519,249
------------------------------------------------------
------------------------------------------------------
<CAPTION>
CRABBE HUSON ASSET ALLOCATION FUND
PRIMARY CLASS
--------------------------------------------------------
SHARES AMOUNT
--------------------------------------------------------
<S> <C> <C> <C> <C>
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 1996 1997 1996
--------------------------------------------------------
Shares sold 937,862 3,015,467 $ 12,837,676 $39,902,669
Shares issued in reinvestment of
dividends 586,343 969,482 7,726,444 12,786,682
--------------------------------------------------------
1,524,205 3,984,949 20,564,120 52,689,351
Shares redeemed (4,438,152) (4,657,739) (60,508,773) (61,385,618)
--------------------------------------------------------
Net increase (decrease) (2,913,947) (672,790) $ (39,944,653) $(8,696,267)
--------------------------------------------------------
--------------------------------------------------------
</TABLE>
* For the period from February 20, 1996 (commencement of operations) to October
31, 1996.
** For the period from October 10, 1996 (commencement of operations) to October
31, 1996.
77
<PAGE>
CRABBE HUSON FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1997
Transactions in capital shares of the Funds were as follows:
<TABLE>
<CAPTION>
CRABBE HUSON ASSET ALLOCATION FUND
INSTITUTIONAL CLASS
------------------------------------------------------
SHARES AMOUNT
------------------------------------------------------
<S> <C> <C> <C> <C>
YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 1996* 1997 1996*
------------------------------------------------------
Shares sold 2,050,335 187,617 $28,620,172 $2,510,320
Shares issued in reinvestment of
dividends 47,267 1,105 653,385 14,781
------------------------------------------------------
2,097,602 188,722 29,273,557 2,525,101
Shares redeemed (371,870) 0 (4,965,600) 0
------------------------------------------------------
Net increase (decrease) 1,725,732 188,722 $24,307,957 $2,525,101
------------------------------------------------------
------------------------------------------------------
<CAPTION>
CRABBE HUSON EQUITY FUND
PRIMARY CLASS
-------------------------------------------------------------
SHARES AMOUNT
-------------------------------------------------------------
<S> <C> <C> <C> <C>
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 1996 1997 1996
-------------------------------------------------------------
Shares sold 3,378,328 11,091,787 $ 69,639,410 $ 208,125,323
Shares issued in reinvestment of
dividends 1,692,739 1,173,785 31,671,157 21,649,846
-------------------------------------------------------------
5,071,067 12,265,572 101,310,567 229,775,169
Shares redeemed (11,156,760) (11,190,672) (223,126,227) (211,612,310)
-------------------------------------------------------------
Net increase (decrease) (6,085,693) 1,074,900 $ (121,815,660) $ 18,162,859
-------------------------------------------------------------
-------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CRABBE HUSON EQUITY FUND
INSTITUTIONAL CLASS
------------------------------------------------------
SHARES AMOUNT
------------------------------------------------------
<S> <C> <C> <C> <C>
YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 1996** 1997 1996**
------------------------------------------------------
Shares sold 1,162,016 232,349 $22,817,326 $4,605,156
Shares issued in reinvestment of
dividends 19,670 0 368,216 0
------------------------------------------------------
1,181,686 232,349 23,185,542 4,605,156
Shares redeemed (378,595) (6,076) (7,821,916) (120,000)
------------------------------------------------------
Net increase (decrease) 803,091 226,273 $15,363,626 $4,485,156
------------------------------------------------------
------------------------------------------------------
<CAPTION>
CRABBE HUSON REAL ESTATE
INVESTMENT FUND
PRIMARY CLASS
---------------------------------------------------------
SHARES AMOUNT
---------------------------------------------------------
<S> <C> <C> <C> <C>
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 1996 1997 1996
---------------------------------------------------------
Shares sold 2,581,854 1,378,623 $ 33,065,740 $ 14,907,333
Shares issued in reinvestment of
dividends 149,238 48,016 1,860,225 498,344
---------------------------------------------------------
2,731,092 1,426,639 34,925,965 15,405,677
Shares redeemed (2,083,483) (1,603,237) (26,839,118) (16,878,311)
---------------------------------------------------------
Net increase (decrease) 647,609 (176,598) $ 8,086,847 $ (1,472,634)
---------------------------------------------------------
---------------------------------------------------------
</TABLE>
* For the period from October 28, 1996 (commencement of operations) to October
31, 1996.
** For the period from October 3, 1996 (commencement of operations) to October
31, 1996.
78
<PAGE>
CRABBE HUSON FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1997
Transactions in capital shares of the Funds were as follows:
<TABLE>
<CAPTION>
CRABBE HUSON OREGON TAX-FREE FUND
PRIMARY CLASS
-------------------------------------------------------
SHARES AMOUNT
-------------------------------------------------------
<S> <C> <C> <C> <C>
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 1996 1997 1996
-------------------------------------------------------
Shares sold 222,132 261,030 $ 2,788,786 $ 3,286,985
Shares issued in reinvestment of
dividends 66,932 75,204 844,070 941,352
-------------------------------------------------------
289,064 336,234 3,632,856 4,228,337
Shares redeemed (306,846) (470,511) (3,867,338) (5,872,664)
-------------------------------------------------------
Net increase (decrease) (17,782) (134,277) $ (234,482) $(1,644,327)
-------------------------------------------------------
-------------------------------------------------------
<CAPTION>
CRABBE HUSON INCOME FUND
PRIMARY CLASS
-------------------------------------------------------
SHARES AMOUNT
-------------------------------------------------------
<S> <C> <C> <C> <C>
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 1996 1997 1996
-------------------------------------------------------
Shares sold 107,712 192,421 $ 1,092,232 $ 1,964,440
Shares issued in reinvestment of
dividends 19,273 27,472 196,574 279,126
-------------------------------------------------------
126,985 219,893 1,288,806 2,243,566
Shares redeemed (280,175) (460,625) (2,860,443) (4,704,632)
-------------------------------------------------------
Net increase (decrease) (153,190) (240,732) $(1,571,637) $(2,461,066)
-------------------------------------------------------
-------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CRABBE HUSON U.S. GOVERNMENT
INCOME FUND
PRIMARY CLASS
-------------------------------------------------------
SHARES AMOUNT
-------------------------------------------------------
<S> <C> <C> <C> <C>
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 1996 1997 1996
-------------------------------------------------------
Shares sold 69,750 257,510 $ 743,485 $ 2,731,392
Shares issued in reinvestment of
dividends 20,527 28,445 218,495 302,807
-------------------------------------------------------
90,277 285,955 961,980 3,034,199
Shares redeemed (473,104) (277,647) (5,037,627) (2,946,194)
-------------------------------------------------------
Net increase (decrease) (382,827) 8,308 $(4,075,647) $ 88,005
-------------------------------------------------------
-------------------------------------------------------
<CAPTION>
CRABBE HUSON U.S. GOVERNMENT
MONEY MARKET FUND
PRIMARY CLASS
---------------------------------------------------------------
SHARES AMOUNT
---------------------------------------------------------------
<S> <C> <C> <C> <C>
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 1996 1997 1996
---------------------------------------------------------------
Shares sold 90,566,952 116,487,103 $ 90,566,952 $ 116,487,103
Shares issued in reinvestment of
dividends 1,163,552 1,506,752 1,163,552 1,506,752
---------------------------------------------------------------
91,730,504 117,993,855 91,730,504 117,993,855
Shares redeemed (105,363,360) (130,537,378) (105,363,360) (130,537,378)
---------------------------------------------------------------
Net increase (decrease) (13,632,856) (12,543,523) $ (13,632,856) $ (12,543,523)
---------------------------------------------------------------
---------------------------------------------------------------
</TABLE>
79
<PAGE>
CRABBE HUSON FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1997
NOTE 4. INVESTMENT TRANSACTIONS
For the year ended October 31, 1997, Crabbe Huson U.S. Government Money Market
Fund had aggregate security purchases and sales (including maturities) of
$289,682,129 and $305,010,352, respectively. Aggregate purchases, sales and
maturities for the period ended October 31, 1997 (excluding short-term
securities) for the remaining Funds, are as follows:
<TABLE>
<CAPTION>
THE CRABBE CRABBE HUSON
HUSON SPECIAL CRABBE HUSON ASSET ALLOCATION CRABBE HUSON
FUND, INC. SMALL CAP FUND FUND EQUITY FUND
<S> <C> <C> <C> <C>
----------------------------------------------------------------------
Purchases: $118,439,921 $82,391,236 $134,248,378 $490,323,021
----------------------------------------------------------------------
----------------------------------------------------------------------
Sales and Maturities: 343,199,799 32,459,411 148,059,308 596,199,496
----------------------------------------------------------------------
----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CRABBE HUSON CRABBE HUSON CRABBE HUSON
REAL ESTATE OREGON TAX-FREE CRABBE HUSON U.S. GOVERNMENT
INVESTMENT FUND FUND INCOME FUND INCOME FUND
<S> <C> <C> <C> <C>
----------------------------------------------------------------------
Purchases: $31,194,265 $4,395,808 $2,053,189 $2,868,919
----------------------------------------------------------------------
----------------------------------------------------------------------
Sales and Maturities: 23,919,892 4,600,159 3,529,859 6,843,559
----------------------------------------------------------------------
----------------------------------------------------------------------
</TABLE>
NOTE 5. SUBSEQUENT EVENTS
On November 18, 1997, the Board of Trustees of the Real Estate Investment
Fund approved to terminate the Subadvisory Agreement between AEW Capital
Management, L.P. and the Crabbe Huson Group, Inc.
80
<PAGE>
THE CRABBE HUSON SPECIAL FUND, INC.
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. For the
year or period ending on or after 10/31/96, calculations are based on a share
outstanding during the period. For years or periods ending prior to 11/1/95,
calculations are based on average number of shares outstanding for each period.
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------------------------
10/31/97 10/31/96 10/31/95 10/31/94 10/31/93
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.................... $13.71 $13.80 $14.08 $11.82 $8.36
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income................................... 0.15 0.14 0.27 0.05 (0.08)
Net Realized & Unrealized Gain (Loss) on Investments.... 3.41 0.55 (0.29) 2.30 3.54
------------------------------------------------------------
Total from Investment Operations.................... 3.56 0.69 (0.02) 2.35 3.46
LESS DISTRIBUTIONS
Distributions from Net Investment Income................ 0.14 0.21 0.02 0.00 0.00
Distributions in excess of Net Investment Income........ 0.00 0.00 0.00 0.09 0.00
Distributions from Capital Gains........................ 0.33 0.57 0.24 0.00 0.00
------------------------------------------------------------
Total Distributions................................. 0.47 0.78 0.26 0.09 0.00
------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD.......................... $16.80 $13.71 $13.80 $14.08 $11.82
------------------------------------------------------------
------------------------------------------------------------
TOTAL RETURN............................................ 26.62% 5.03% 1.78% 22.40% 41.39%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000's)....................... $396,335 $481,039 $878,560 $319,811 $238,167
Ratio of Expenses to Average Net Assets................. 1.50% 1.37%(a) 1.40% 1.44% 1.57%
Ratio of Net Investment Income to Average Net Assets.... 0.86% 0.72% 1.95% 0.39% (0.73)%
Portfolio Turnover Rate................................. 32.76% 32.88% 122.97% 146.44% 73.29%
Average Commission Rate (b)............................. $0.0428 $0.0358 -- -- --
<CAPTION>
10/31/92 10/31/91 10/31/90 10/31/89 10/31/88
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.................... $12.05 $8.78 $11.49 $9.69 $8.13
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income................................... (0.02) 0.04 0.15 0.21 (0.05)
Net Realized & Unrealized Gain (Loss) on Investments.... (1.62) 4.01 (1.43) 1.59 1.61
Total from Investment Operations.................... (1.64) 4.05 (1.28) 1.80 1.56
LESS DISTRIBUTIONS
Distributions from Net Investment Income................ 0.03 0.14 0.22 0.00 0.00
Distributions in excess of Net Investment Income........ 2.02 0.64 1.21 0.00 0.00
Distributions from Capital Gains........................ 0.00 0.00 0.00 0.00 0.00
Total Distributions................................. 2.05 0.78 1.43 0.00 0.00
NET ASSET VALUE, END OF PERIOD.......................... $8.36 $12.05 $8.78 $11.49 $9.69
TOTAL RETURN............................................ 8.11% 49.58% (10.90)% 18.68% 19.63%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000's)....................... $5,857 $3,542 $2,926 $3,356 $4,393
Ratio of Expenses to Average Net Assets................. 1.74% 1.92% 2.00% 2.00% 3.94%
Ratio of Net Investment Income to Average Net Assets.... (0.25)% 0.32% 1.55% 1.96% 3.34%
Portfolio Turnover Rate................................. 102.27% 256.68% 314.73% 275.62% 155.12%
Average Commission Rate (b)............................. -- -- -- -- --
</TABLE>
81
<PAGE>
THE CRABBE HUSON SPECIAL FUND, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------------------------
10/31/97 10/31/96 10/31/95 10/31/94 10/31/93
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
RATIOS/SUPPLEMENTAL DATA (cont.)
Average Number of Shares Outstanding.................... 27,679,105* -- -- -- --
Amount of Debt Outstanding.............................. $0 -- -- -- --
Average Amount of Debt Outstanding During the Period.... $1,701,322* -- -- -- --
Average Amount of Debt Per Share During the Period...... $0.06 -- -- -- --
RATIOS IF FEES HAD NOT BEEN WAIVED AND/OR REIMBURSED
Ratio of Expenses to Average Net Assets................. 1.58% 1.37%(a) 1.40% 1.54% 1.59%
Ratio of Net Investment Income to Average Net Assets.... 0.78% 0.72% 1.95% 0.29% (0.75)%
RATIOS NET OF FEES PAID INDIRECTLY
Ratio of Expenses to Average Net Assets................. 1.50% 1.37% -- -- --
Ratio of Net Investment Income to Average Net Assets.... 0.86% 0.72% -- -- --
<CAPTION>
10/31/92 10/31/91 10/31/90 10/31/89 10/31/88
<S> <C> <C> <C> <C> <C>
RATIOS/SUPPLEMENTAL DATA (cont.)
Average Number of Shares Outstanding.................... -- -- -- -- --
Amount of Debt Outstanding.............................. -- -- -- -- --
Average Amount of Debt Outstanding During the Period.... -- -- -- -- --
Average Amount of Debt Per Share During the Period...... -- -- -- -- --
RATIOS IF FEES HAD NOT BEEN WAIVED AND/OR REIMBURSED
Ratio of Expenses to Average Net Assets................. 2.18% 2.40% 2.86% 2.44% --
Ratio of Net Investment Income to Average Net Assets.... (0.69)% (0.15)% 0.70% 1.53% --
RATIOS NET OF FEES PAID INDIRECTLY
Ratio of Expenses to Average Net Assets................. -- -- -- -- --
Ratio of Net Investment Income to Average Net Assets.... -- -- -- -- --
</TABLE>
- -------------------
(a) Ratios include expenses paid indirectly through directed brokerage and
certain expense offset arrangements.
(b) Disclosure of the average commission rate paid relates to the purchase
and sale of investment securities and is required for funds that
invest greater than 10% of average net assets in equity transactions.
This disclosure is required for fiscal periods beginning on or after
September 1, 1995.
(c) Computed on an annualized basis.
(d) Commencement of operations - 2/20/96.
(e) Commencement of operations - 10/10/96.
(f) Commencement of operations - 1/31/89.
(g) Commencement of operations - 10/28/96.
(h) Commencement of operations - 10/3/96.
(i) Commencement of operations - 4/4/94.
* Computed on a daily basis.
82
<PAGE>
CRABBE HUSON SMALL CAP FUND - PRIMARY CLASS
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
------------ ------------
10/31/97 10/31/96(d)
-----------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................ $11.02 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income....................................... 0.00 0.03
Net Realized & Unrealized Gain (Loss) on Investments........ 4.62 0.99
-----------------------------
Total from Investment Operations........................ 4.62 1.02
LESS DISTRIBUTIONS
Distributions from Net Investment Income.................... 0.02 0.00
Distributions from Capital Gains............................ 0.14 0.00
-----------------------------
Total Distributions..................................... 0.16 0.00
-----------------------------
NET ASSET VALUE, END OF PERIOD.............................. $15.48 $11.02
-----------------------------
-----------------------------
TOTAL RETURN................................................ 42.38% 10.20%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000's)........................... $42,563 $19,156
Ratio of Expenses to Average Net Assets..................... 1.50%(a) 1.50%(a)(c)
Ratio of Net Investment Income to Average Net Assets........ 0.03% 0.70%(c)
Portfolio Turnover Rate..................................... 65.11% 39.34%
Average Commission Rate (b)................................. $0.0363 $0.0275
RATIOS IF FEES HAD NOT BEEN WAIVED AND/OR REIMBURSED
Ratio of Expenses to Average Net Assets..................... 1.73%(a) 2.32%(a)(c)
Ratio of Net Investment Income to Average Net Assets........ (0.20)% (0.11)%(c)
RATIOS NET OF FEES PAID INDIRECTLY
Ratio of Expenses to Average Net Assets..................... 1.50% 1.51%(c)
Ratio of Net Investment Income to Average Net Assets........ 0.03% 0.71%(c)
</TABLE>
See footnotes on page 82.
83
<PAGE>
CRABBE HUSON SMALL CAP FUND - INSTITUTIONAL CLASS
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
------------ ------------
10/31/97 10/31/96(e)
-----------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................ $11.01 $11.05
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income....................................... 0.07 0.00
Net Realized & Unrealized Gain (Loss) on Investments........ 4.62 (0.04)
-----------------------------
Total from Investment Operations........................ 4.69 (0.04)
LESS DISTRIBUTIONS
Distributions from Net Investment Income.................... 0.03 0.00
Distributions from Capital Gains............................ 0.14 0.00
-----------------------------
Total Distributions..................................... 0.17 0.00
-----------------------------
NET ASSET VALUE, END OF PERIOD.............................. $15.53 $11.01
-----------------------------
-----------------------------
TOTAL RETURN................................................ 43.11% (0.36)%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000's)........................... $71,655 $1,514
Ratio of Expenses to Average Net Assets..................... 1.00%(a) 1.00%(a)(c)
Ratio of Net Investment Income to Average Net Assets........ 0.60% (0.43)%(c)
Portfolio Turnover Rate..................................... 65.11% 39.34%
Average Commission Rate (b)................................. $0.0363 $0.0275
RATIOS IF FEES HAD NOT BEEN WAIVED AND/OR REIMBURSED
Ratio of Expenses to Average Net Assets..................... 1.28%(a) 3.55%(a)(c)
Ratio of Net Investment Income to Average Net Assets........ 0.32% (2.98)%(c)
RATIOS NET OF FEES PAID INDIRECTLY
Ratio of Expenses to Average Net Assets..................... 1.00% 1.00%(c)
Ratio of Net Investment Income to Average Net Assets........ 0.60% (0.43)%(c)
</TABLE>
See footnotes on page 82.
84
<PAGE>
CRABBE HUSON ASSET ALLOCATION FUND - PRIMARY CLASS
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------------------------------
10/31/97 10/31/96 10/31/95 10/31/94 10/31/93
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD......... $13.39 $13.64 $12.87 $13.52 $11.68
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income........................ 0.32 0.30 0.34 0.30 0.23
Net Realized & Unrealized Gain (Loss) on 2.29 0.88 1.21 (0.08) 2.09
Investments.................................
----------------------------------------------------------------
Total from Investment Operations......... 2.61 1.18 1.55 0.22 2.32
LESS DISTRIBUTIONS
Distributions from Net Investment Income..... 0.32 0.30 0.33 0.29 0.24
Distributions from Capital Gains............. 0.74 1.13 0.45 0.58 0.24
----------------------------------------------------------------
Total Distributions...................... 1.06 1.43 0.78 0.87 0.48
----------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD............... $14.94 $13.39 $13.64 $12.87 $13.52
----------------------------------------------------------------
----------------------------------------------------------------
TOTAL RETURN................................. % 20.60 8.96% 13.00% 2.66% 20.93%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000's)............ $95,960 $125,018 $136,530 $110,152 $85,390
Ratio of Expenses to Average Net Assets...... %(a1.42) 1.47%(a) 1.48% 1.44% 1.46%
Ratio of Net Investment Income to Average Net % 2.25 2.22% 2.57% 2.30% 1.85%
Assets......................................
Portfolio Turnover Rate...................... %118.65 252.29% 225.70% 149.19% 116.10%
Average Commission Rate (b).................. $0.0529 $0.0536 -- -- --
Average Number of Shares Outstanding 8,772,675* -- -- -- --
(Composite).................................
Amount of Debt Outstanding................... $0 -- -- -- --
Average Amount of Debt Outstanding During the *$3,460 -- -- -- --
Period......................................
Average Amount of Debt Per Share During the $0.00 -- -- -- --
Period......................................
RATIOS IF FEES HAD NOT BEEN WAIVED AND/OR REIMBURSED
Ratio of Expenses to Average Net Assets...... %(a1.55) 1.47%(a) 1.49% 1.52% 1.54%
Ratio of Net Investment Income to Average Net % 2.12 2.22% 2.56% 2.22% 1.77%
Assets......................................
RATIOS NET OF FEES PAID INDIRECTLY
Ratio of Expenses to Average Net Assets...... % 1.42 1.46% -- -- --
Ratio of Net Investment Income to Average Net % 2.25 2.22% -- -- --
Assets......................................
<CAPTION>
PERIOD
ENDED
-----------
10/31/92 10/31/91 10/31/90 10/31/89(f)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD......... $11.00 $9.24 $10.69 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income........................ 0.35 0.41 0.46 0.40
Net Realized & Unrealized Gain (Loss) on 0.82 1.82 (1.12) 0.29
Investments.................................
Total from Investment Operations......... 1.17 2.23 (0.66) 0.69
LESS DISTRIBUTIONS
Distributions from Net Investment Income..... 0.35 0.43 0.72 0.00
Distributions from Capital Gains............. 0.14 0.04 0.07 0.00
Total Distributions...................... 0.49 0.47 0.79 0.00
NET ASSET VALUE, END OF PERIOD............... $11.68 $11.00 $9.24 $10.69
TOTAL RETURN................................. 11.25% 24.55% (6.40)% 9.30%(c)
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000's)............ $55,099 $23,893 $13,174 $12,578
Ratio of Expenses to Average Net Assets...... 1.52% 1.76% 1.90% 1.91%(c)
Ratio of Net Investment Income to Average Net 3.02% 3.97% 4.51% 5.02%(c)
Assets......................................
Portfolio Turnover Rate...................... 155.26% 157.89% 161.72% 88.14%
Average Commission Rate (b).................. -- -- -- --
Average Number of Shares Outstanding -- -- -- --
(Composite).................................
Amount of Debt Outstanding................... -- -- -- --
Average Amount of Debt Outstanding During the -- -- -- --
Period......................................
Average Amount of Debt Per Share During the -- -- -- --
Period......................................
RATIOS IF FEES HAD NOT BEEN WAIVED AND/OR REI
Ratio of Expenses to Average Net Assets...... 1.62% 1.79% 1.93% 1.93%(c)
Ratio of Net Investment Income to Average Net 2.92% 3.94% 4.49% 5.00%(c)
Assets......................................
RATIOS NET OF FEES PAID INDIRECTLY
Ratio of Expenses to Average Net Assets...... -- -- -- --
Ratio of Net Investment Income to Average Net -- -- -- --
Assets......................................
</TABLE>
See footnotes on page 82.
85
<PAGE>
CRABBE HUSON ASSET ALLOCATION FUND - INSTITUTIONAL CLASS
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
--------------- ------------------
10/31/97 10/31/96(g)
-----------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD......... $13.39 $13.38
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income........................ 0.42 0.01
Net Realized & Unrealized Gain (Loss) on 2.24 0.08
Investments.................................
-----------------------------------
Total from Investment Operations......... 2.66 0.09
LESS DISTRIBUTIONS
Distributions from Net Investment Income..... 0.37 0.08
Distributions from Capital Gains............. 0.74 0.00
-----------------------------------
Total Distributions...................... 1.11 0.08
-----------------------------------
NET ASSET VALUE, END OF PERIOD............... $14.94 $13.39
-----------------------------------
-----------------------------------
TOTAL RETURN................................. 21.18% 0.59%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000's)............ $28,598 $2,526
Ratio of Expenses to Average Net Assets...... 1.00%(a) 1.00%(a)(c)
Ratio of Net Investment Income to Average Net 2.70% 2.87%(c)
Assets......................................
Portfolio Turnover Rate...................... 118.65% 252.29%
Average Commission Rate (b).................. $0.0529 $0.0536
Average Number of Shares Outstanding 8,772,675 * --
(Composite).................................
Amount of Debt Outstanding................... $0 --
Average Amount of Debt Outstanding During the $3,460 * --
Period......................................
Average Amount of Debt Per Share During the $0.00 --
Period......................................
RATIOS IF FEES HAD NOT BEEN WAIVED AND/OR REIMBURSED
Ratio of Expenses to Average Net Assets...... 1.42%(a) 2.00%(a)(c)
Ratio of Net Investment Income to Average Net 2.28% 1.87%(c)
Assets......................................
RATIOS NET OF FEES PAID INDIRECTLY
Ratio of Expenses to Average Net Assets...... 1.00% 1.00%(c)
Ratio of Net Investment Income to Average Net 2.70% 2.87%(c)
Assets......................................
</TABLE>
See footnotes on page 82.
86
<PAGE>
CRABBE HUSON EQUITY FUND - PRIMARY CLASS
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------------------------------
10/31/97 10/31/96 10/31/95 10/31/94 10/31/93
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD....................... $19.50 $18.17 $16.44 $16.08 $13.03
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income...................................... 0.07 0.11 0.22 0.19 0.10
Net Realized & Unrealized Gain (Loss) on Investments....... 5.36 2.33 1.75 0.57 3.45
------------------------------------------------------------------
Total from Investment Operations....................... 5.43 2.44 1.97 0.76 3.55
LESS DISTRIBUTIONS
Distributions from Net Investment Income................... 0.07 0.17 0.09 0.04 0.11
Distributions from Capital Gains........................... 1.54 0.94 0.15 0.36 0.39
------------------------------------------------------------------
Total Distributions.................................... 1.61 1.11 0.24 0.40 0.50
------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD............................. $23.32 $19.50 $18.17 $16.44 $16.08
------------------------------------------------------------------
------------------------------------------------------------------
TOTAL RETURN............................................... % 29.87 13.78% 13.37% 7.89% 29.90%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000's).......................... $380,047 $436,578 $387,184 $153,105 $34,520
Ratio of Expenses to Average Net Assets.................... %(a1.42) 1.38%(a) 1.40% 1.45% 1.49%
Ratio of Net Investment Income to Average Net Assets....... % 0.29 0.56% 1.30% 1.18% 0.67%
Portfolio Turnover Rate.................................... %128.65 117.00% 92.43% 106.49% 114.38%
Average Commission Rate (b)................................ $0.0537 $0.0530 -- -- --
Average Number of Shares Outstanding (composite)........... 19,623,834* -- -- -- --
Amount of Debt Outstanding................................. $0 -- -- -- --
Average Amount of Debt Outstanding During the Period....... $21,750* -- -- -- --
Average Amount of Debt Per Share During the Period......... $0.00 -- -- -- --
RATIOS IF FEES HAD NOT BEEN WAIVED AND/OR REIMBURSED
Ratio of Expenses to Average Net Assets.................... %(a1.44) 1.38%(a) 1.30% 1.56% 1.64%
Ratio of Net Investment Income to Average Net Assets....... % 0.27 0.56% 1.28% 1.06% 0.52%
RATIOS NET OF FEES PAID INDIRECTLY
Ratio of Expenses to Average Net Assets.................... % 1.42 1.37% -- -- --
Ratio of Net Investment Income to Average Net Assets....... % 0.29 0.57% -- -- --
<CAPTION>
PERIOD
ENDED
------------
10/31/92 10/31/91 10/31/90 10/31/89(f)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD....................... $12.57 $8.54 $10.50 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income...................................... 0.20 0.19 0.25 0.31
Net Realized & Unrealized Gain (Loss) on Investments....... 0.92 4.15 (1.67) 0.19
Total from Investment Operations....................... 1.12 4.34 (1.42) 0.50
LESS DISTRIBUTIONS
Distributions from Net Investment Income................... 0.10 0.31 0.39 0.00
Distributions from Capital Gains........................... 0.56 0.00 0.15 0.00
Total Distributions.................................... 0.66 0.31 0.54 0.00
NET ASSET VALUE, END OF PERIOD............................. $13.03 $12.57 $8.54 $10.50
TOTAL RETURN............................................... 12.48% 52.44% (14.97)% 6.72%(c)
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000's).......................... $13,429 $5,930 $2,944 $5,018
Ratio of Expenses to Average Net Assets.................... 1.55% 1.84% 1.93% 1.69%(c)
Ratio of Net Investment Income to Average Net Assets....... 1.57% 1.60% 2.56% 3.98%(c)
Portfolio Turnover Rate.................................... 180.72% 171.82% 265.25% 90.54%
Average Commission Rate (b)................................ -- -- -- --
Average Number of Shares Outstanding (composite)........... -- -- -- --
Amount of Debt Outstanding................................. -- -- -- --
Average Amount of Debt Outstanding During the Period....... -- -- -- --
Average Amount of Debt Per Share During the Period......... -- -- -- --
RATIOS IF FEES HAD NOT BEEN WAIVED AND/OR REIMBURSED
Ratio of Expenses to Average Net Assets.................... 1.93% 2.41% 2.66% 1.97%(c)
Ratio of Net Investment Income to Average Net Assets....... 1.18% 1.03% 1.83% 3.68%(c)
RATIOS NET OF FEES PAID INDIRECTLY
Ratio of Expenses to Average Net Assets.................... -- -- -- --
Ratio of Net Investment Income to Average Net Assets....... -- -- -- --
</TABLE>
See footnotes on page 82.
87
<PAGE>
CRABBE HUSON EQUITY FUND - INSTITUTIONAL CLASS
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
-------------- --------------
10/31/97 10/31/96(h)
-------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD......... $19.51 $19.82
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income........................ 0.21 0.00
Net Realized & Unrealized Gain (Loss) on 5.31 (0.31)
Investments.................................
-------------------------------
Total from Investment Operations......... 5.52 (0.31)
LESS DISTRIBUTIONS
Distributions from Net Investment Income..... 0.09 0.00
Distributions from Capital Gains............. 1.54 0.00
-------------------------------
Total Distributions...................... 1.63 0.00
-------------------------------
NET ASSET VALUE, END OF PERIOD............... $23.40 $19.51
-------------------------------
-------------------------------
TOTAL RETURN................................. % 30.35 (1.56)%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000's)............ $24,084 $4,415
Ratio of Expenses to Average Net Assets...... %(a1.00) 1.00%(a)(c)
Ratio of Net Investment Income to Average Net % 0.71 0.15%(c)
Assets......................................
Portfolio Turnover Rate...................... %128.65 117.00%
Average Commission Rate (b).................. $0.0537 $0.0530
Average Number of Shares Outstanding 19,623,834* --
(composite).................................
Amount of Debt Outstanding................... $0 --
Average Amount of Debt Outstanding During the $21,750* --
Period......................................
Average Amount of Debt Per Share During the $0.00 --
Period......................................
RATIOS IF FEES HAD NOT BEEN WAIVED AND/OR REIMBURSED
Ratio of Expenses to Average Net Assets...... %(a1.23) 1.58%(a)(c)
Ratio of Net Investment Income to Average Net % 0.48 (0.43%)(c)
Assets......................................
RATIOS NET OF FEES PAID INDIRECTLY
Ratio of Expenses to Average Net Assets...... % 1.00 1.00%(c)
Ratio of Net Investment Income to Average Net % 0.71 0.15%(c)
Assets......................................
</TABLE>
See footnotes on page 82.
88
<PAGE>
CRABBE HUSON REAL ESTATE INVESTMENT FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
---------------------------------------------------- --------------
10/31/97 10/31/96 10/31/95 10/31/94(i)
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD......... $11.58 $9.69 $9.50 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income........................ 0.38 0.38 0.44 0.37
Net Realized & Unrealized Gain (Loss) on 3.02 2.01 0.31 (0.64)
Investments.................................
-----------------------------------------------------------------------
Total from Investment Operations......... 3.40 2.39 0.75 (0.27)
LESS DISTRIBUTIONS
Distributions from Net Investment Income..... 0.38 0.38 0.44 0.23
Distributions from Capital Gains............. 0.51 0.12 0.12 0.00
-----------------------------------------------------------------------
Total Distributions...................... 0.89 0.50 0.56 0.23
-----------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD............... $14.09 $11.58 $9.69 $9.50
-----------------------------------------------------------------------
-----------------------------------------------------------------------
TOTAL RETURN................................. 30.56% 25.39% 8.31% (3.25)%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000's)............ $34,259 $20,649 $18,986 $18,280
Ratio of Expenses to Average Net Assets...... 1.50%(a) 1.50%(a) 1.50% 1.01%(c)
Ratio of Net Investment Income to Average Net 2.93% 3.59% 4.59% 6.30%(c)
Assets......................................
Portfolio Turnover Rate...................... 80.01% 120.19% 59.53% 43.30%
Average Commission Rate (b).................. $0.0617 $0.0570 -- --
Average Number of Shares Outstanding......... 2,494,659* -- -- --
Amount of Debt Outstanding................... $0 -- -- --
Average Amount of Debt Outstanding During the $72,728* -- -- --
Period......................................
Average Amount of Debt Per Share During the $0.03 -- -- --
Period......................................
RATIOS IF FEES HAD NOT BEEN WAIVED AND/OR REIMBURSED
Ratio of Expenses to Average Net Assets...... 1.76%(a) 1.88%(a) 1.89% 2.03%(c)
Ratio of Net Investment Income to Average Net 2.66% 3.21% 4.20% 5.28%(c)
Assets......................................
RATIOS NET OF FEES PAID INDIRECTLY
Ratio of Expenses to Average Net Assets...... 1.50% 1.50% -- --
Ratio of Net Investment Income to Average Net 2.93% 3.59% -- --
Assets......................................
</TABLE>
See footnotes page 82.
89
<PAGE>
CRABBE HUSON OREGON TAX-FREE FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------------------------
10/31/97 10/31/96 10/31/95 10/31/94
-----------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD......... $12.50 $12.62 $11.99 $12.80
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income........................ 0.54 0.54 0.55 0.54
Net Realized & Unrealized Gain (Loss) on 0.28 (0.12) 0.70 (0.80)
Investments.................................
-----------------------------------------------
Total from Investment Operations......... 0.82 0.42 1.25 (0.26)
LESS DISTRIBUTIONS
Distributions from Net Investment Income..... 0.47 0.54 0.55 0.54
Distributions from Capital Gains............. 0.07 0.00 0.07 0.01
-----------------------------------------------
Total Distributions...................... 0.54 0.54 0.62 0.55
-----------------------------------------------
NET ASSET VALUE, END OF PERIOD............... $12.78 $12.50 $12.62 $11.99
-----------------------------------------------
-----------------------------------------------
TOTAL RETURN................................. 6.67% 3.43% 10.66% (2.06)%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000's)............ $26,487 $26,135 $28,070 $29,046
Ratio of Expenses to Average Net Assets...... 0.98% 0.98% 0.98% 0.98%
Ratio of Net Investment Income to Average Net 4.25% 4.33% 4.45% 4.37%
Assets......................................
Portfolio Turnover Rate...................... 17.19% 15.64% 22.91% 20.58%
Average Number of Shares Outstanding......... 2,073,284* -- -- --
Amount of Debt Outstanding................... $0 -- -- --
Average Amount of Debt Outstanding During the $2,734* -- -- --
Period......................................
Average Amount of Debt Per Share During the $0.00 -- -- --
Period......................................
RATIOS IF FEES HAD NOT BEEN WAIVED AND/OR REIMBURSED
Ratio of Expenses to Average Net Assets...... 1.10% 1.04% 1.08% 1.08%
Ratio of Net Investment Income to Average Net 4.13% 4.27% 4.35% 4.26%
Assets......................................
RATIOS NET OF FEES PAID INDIRECTLY
Ratio of Expenses to Average Net Assets...... 0.98% 0.98% -- --
Ratio of Net Investment Income to Average Net 4.25% 4.33% -- --
Assets......................................
</TABLE>
See footnotes on page 82.
90
<PAGE>
CRABBE HUSON OREGON TAX-FREE FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED
-------------------------------------------------------------------------
10/31/93 10/31/92 10/31/91 10/31/90 10/31/89 10/31/88
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD......... $12.20 $12.14 $11.74 $11.72 $11.72 $11.08
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income........................ 0.57 0.62 0.64 0.63 0.68 0.64
Net Realized & Unrealized Gain (Loss) on 0.69 0.15 0.48 0.05 0.08 0.64
Investments.................................
-------------------------------------------------------------------------
Total from Investment Operations......... 1.26 0.77 1.12 0.68 0.76 1.28
LESS DISTRIBUTIONS
Distributions from Net Investment Income..... 0.57 0.62 0.65 0.64 0.67 0.64
Distributions from Capital Gains............. 0.09 0.09 0.07 0.02 0.09 0.00
-------------------------------------------------------------------------
Total Distributions...................... 0.66 0.71 0.72 0.66 0.76 0.64
-------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD............... $12.80 $12.20 $12.14 $11.74 $11.72 $11.72
-------------------------------------------------------------------------
-------------------------------------------------------------------------
TOTAL RETURN................................. 10.71% 6.51% 9.85% 6.00% 6.67% 12.02%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000's)............ $29,408 $20,296 $18,383 $18,766 $19,173 $20,058
Ratio of Expenses to Average Net Assets...... 1.05% 1.11% 1.21% 1.38% 1.04% 1.21%
Ratio of Net Investment Income to Average Net 4.51% 5.04% 5.36% 5.41% 5.82% 5.53%
Assets......................................
Portfolio Turnover Rate...................... 11.62% 25.30% 53.40% 58.52% 45.25% 31.44%
Average Number of Shares Outstanding......... -- -- -- -- -- --
Amount of Debt Outstanding................... -- -- -- -- -- --
Average Amount of Debt Outstanding During the -- -- -- -- -- --
Period......................................
Average Amount of Debt Per Share During the -- -- -- -- -- --
Period......................................
RATIOS IF FEES HAD NOT BEEN WAIVED AND/OR REIMBURSED
Ratio of Expenses to Average Net Assets...... 1.09% 1.13% 1.24% 1.55% 1.16% 1.32%
Ratio of Net Investment Income to Average Net 4.46% 5.01% 5.34% 5.23% 5.71% 5.42%
Assets......................................
RATIOS NET OF FEES PAID INDIRECTLY
Ratio of Expenses to Average Net Assets...... -- -- -- -- -- --
Ratio of Net Investment Income to Average Net -- -- -- -- -- --
Assets......................................
</TABLE>
See footnotes on page 82.
91
<PAGE>
CRABBE HUSON INCOME FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------------------------
10/31/97 10/31/96 10/31/95 10/31/94 10/31/93
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF $10.20 $10.26 $9.71 $10.75 $10.90
PERIOD............................
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income.............. 0.62 0.54 0.53 0.50 0.46
Net Realized & Unrealized Gain 0.38 (0.05) 0.58 (0.76) 0.33
(Loss) on Investments.............
------------------------------------------------------------
Total from Investment 1.00 0.49 1.11 (0.26) 0.79
Operations....................
LESS DISTRIBUTIONS
Distributions from Net Investment 0.62 0.55 0.53 0.50 0.49
Income............................
Distributions in excess of Net 0.00 0.00 0.03 0.01 0.00
Investment Income.................
Distributions from Capital Gains... 0.00 0.00 0.00 0.27 0.45
------------------------------------------------------------
Total Distributions............ 0.62 0.55 0.56 0.78 0.94
------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD..... $10.58 $10.20 $10.26 $9.71 $10.75
------------------------------------------------------------
------------------------------------------------------------
TOTAL RETURN....................... 10.25% 4.94% 11.92% (2.71%) 7.73%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period $3,248 $4,694 $7,190 $5,273 $5,697
(000's)...........................
Ratio of Expenses to Average Net 0.80% 0.80% 0.80% 0.80% 0.81%
Assets............................
Ratio of Net Investment Income to 5.96% 5.31% 5.47% 4.92% 4.34%
Average Net Assets................
Portfolio Turnover Rate............ 56.37% 468.75% 543.15% 306.79% 260.22%
Average Number of Shares 359,151* -- -- -- --
Outstanding.......................
Amount of Debt Outstanding......... $0 -- -- -- --
Average Amount of Debt Outstanding $1,408* -- -- -- --
During the Period.................
Average Amount of Debt Per Share $0.00 -- -- -- --
During the Period.................
RATIOS IF FEES HAD NOT BEEN WAIVED AND/OR REIMBURSED
Ratio of Expenses to Average Net 2.78% 2.29% 1.95% 2.16% 1.96%
Assets............................
Ratio of Net Investment Income to 3.98% 3.82% 4.32% 3.56% 3.19%
Average Net Assets................
RATIOS NET OF FEES PAID INDIRECTLY
Ratio of Expenses to Average Net 0.80% 0.80% -- -- --
Assets............................
Ratio of Net Investment Income to 5.96% 5.31% -- -- --
Average Net Assets................
<CAPTION>
PERIOD
ENDED
-----------
10/31/92 10/31/91 10/31/90 10/31/89(f)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF $10.63 $10.01 $10.27 $10.00
PERIOD............................
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income.............. 0.66 0.70 0.69 0.55
Net Realized & Unrealized Gain 0.36 0.62 (0.24) 0.28
(Loss) on Investments.............
Total from Investment 1.02 1.32 0.45 0.83
Operations....................
LESS DISTRIBUTIONS
Distributions from Net Investment 0.66 0.70 0.69 0.56
Income............................
Distributions in excess of Net 0.00 0.00 0.00 0.00
Investment Income.................
Distributions from Capital Gains... 0.09 0.00 0.02 0.00
Total Distributions............ 0.75 0.70 0.71 0.56
NET ASSET VALUE, END OF PERIOD..... $10.90 $10.63 $10.01 $10.27
TOTAL RETURN....................... 9.74% 13.51% 4.43% 10.43%(c)
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period $5,634 $5,486 $2,123 $1,356
(000's)...........................
Ratio of Expenses to Average Net 0.90% 0.98% 1.51% 1.15%(c)
Assets............................
Ratio of Net Investment Income to 6.09% 6.82% 6.89% 7.23%(c)
Average Net Assets................
Portfolio Turnover Rate............ 227.45% 115.76% 73.76% 86.60%
Average Number of Shares -- -- -- --
Outstanding.......................
Amount of Debt Outstanding......... -- -- -- --
Average Amount of Debt Outstanding -- -- -- --
During the Period.................
Average Amount of Debt Per Share -- -- -- --
During the Period.................
RATIOS IF FEES HAD NOT BEEN WAIVED
Ratio of Expenses to Average Net 1.94% 2.42% 3.07% 4.56%(c)
Assets............................
Ratio of Net Investment Income to 5.06% 5.38% 5.33% 3.81%(c)
Average Net Assets................
RATIOS NET OF FEES PAID INDIRECTLY
Ratio of Expenses to Average Net -- -- -- --
Assets............................
Ratio of Net Investment Income to -- -- -- --
Average Net Assets................
</TABLE>
See footnotes on page 82.
92
<PAGE>
CRABBE HUSON U.S. GOVERNMENT INCOME FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------------------
10/31/97 10/31/96 10/31/95 10/31/94 10/31/93
--------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF $10.66 $10.66 $10.27 $11.04 $10.91
PERIOD.............................
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income............... 0.53 0.47 0.51 0.46 0.47
Net Realized & Unrealized Gain 0.16 0.00 0.40 (0.65) 0.22
(Loss) on Investments..............
--------------------------------------------------
Total from Investment 0.69 0.47 0.91 (0.19) 0.69
Operations.....................
LESS DISTRIBUTIONS
Distributions from Net Investment 0.54 0.47 0.51 0.47 0.48
Income.............................
Distributions in excess of Net 0.00 0.00 0.01 0.00 0.00
Investment Income..................
Distributions from Capital Gains.... 0.00 0.00 0.00 0.11 0.08
--------------------------------------------------
Total Distributions............. 0.54 0.47 0.52 0.58 0.56
--------------------------------------------------
NET ASSET VALUE, END OF PERIOD...... $10.81 $10.66 $10.66 $10.27 $11.04
--------------------------------------------------
--------------------------------------------------
TOTAL RETURN........................ 6.65% 4.55% 9.12% (1.78)% 6.71%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000's)... $4,494 $8,517 $8,426 $9,249 $11,218
Ratio of Expenses to Average Net 0.75% 0.75% 0.75% 0.75% 0.75%
Assets.............................
Ratio of Net Investment Income to 4.82% 4.44% 4.85% 4.39% 4.33%
Average Net Assets.................
Portfolio Turnover Rate............. 45.42% 226.37% 230.43% 76.09% 81.74%
Average Number of Shares 602,738* -- -- -- --
Outstanding........................
Amount of Debt Outstanding.......... $0 -- -- -- --
Average Amount of Debt Outstanding $50* -- -- -- --
During the Period..................
Average Amount of Debt Per Share $0.00 -- -- -- --
During the Period..................
RATIOS IF FEES HAD NOT BEEN WAIVED AND/OR REIMBURSED
Ratio of Expenses to Average Net 1.78% 1.63% 1.46% 1.47% 1.26%
Assets.............................
Ratio of Net Investment Income to 3.79% 3.56% 4.14% 3.66% 3.81%
Average Net Assets.................
RATIOS NET OF FEES PAID INDIRECTLY
Ratio of Expenses to Average Net 0.75% 0.75% -- -- --
Assets.............................
Ratio of Net Investment Income to 4.82% 4.44% -- -- --
Average Net Assets.................
<CAPTION>
PERIOD
ENDED
-----------
10/31/92 10/31/91 10/31/90 10/31/89(f)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF $10.69 $10.24 $10.28 $10.00
PERIOD.............................
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income............... 0.58 0.67 0.68 0.56
Net Realized & Unrealized Gain 0.29 0.45 (0.04) 0.29
(Loss) on Investments..............
Total from Investment 0.87 1.12 0.64 0.85
Operations.....................
LESS DISTRIBUTIONS
Distributions from Net Investment 0.58 0.67 0.67 0.57
Income.............................
Distributions in excess of Net 0.00 0.00 0.00 0.00
Investment Income..................
Distributions from Capital Gains.... 0.07 0.00 0.01 0.00
Total Distributions............. 0.65 0.67 0.68 0.57
NET ASSET VALUE, END OF PERIOD...... $10.91 $10.69 $10.24 $10.28
TOTAL RETURN........................ 8.70% 11.17% 6.40% 11.15%(c)
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000's)... $8,959 $3,748 $2,069 $1,717
Ratio of Expenses to Average Net 0.80% 0.96% 1.42% 1.14%(c)
Assets.............................
Ratio of Net Investment Income to 5.35% 6.44% 6.72% 7.35%(c)
Average Net Assets.................
Portfolio Turnover Rate............. 105.52% 114.81% 87.71% 40.42%
Average Number of Shares -- -- -- --
Outstanding........................
Amount of Debt Outstanding.......... -- -- -- --
Average Amount of Debt Outstanding -- -- -- --
During the Period..................
Average Amount of Debt Per Share -- -- -- --
During the Period..................
RATIOS IF FEES HAD NOT BEEN WAIVED A
Ratio of Expenses to Average Net 1.52% 2.15% 2.84% 3.40%(c)
Assets.............................
Ratio of Net Investment Income to 4.63% 5.25% 5.31% 5.09%(c)
Average Net Assets.................
RATIOS NET OF FEES PAID INDIRECTLY
Ratio of Expenses to Average Net -- -- -- --
Assets.............................
Ratio of Net Investment Income to -- -- -- --
Average Net Assets.................
</TABLE>
See footnotes on page 82.
93
<PAGE>
CRABBE HUSON U.S. GOVERNMENT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------------------------------------
10/31/97 10/31/96 10/31/95 10/31/94 10/31/93
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.... $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income................... 0.05 0.05 0.05 0.03 0.03
Net Realized & Unrealized Gain (Loss) on 0.00 0.00 0.00 0.00 0.00
Investments............................
-----------------------------------------------------------
Total from Investment Operations.... 0.05 0.05 0.05 0.03 0.03
LESS DISTRIBUTIONS
Distributions from Net Investment 0.05 0.05 0.05 0.03 0.03
Income.................................
Distributions in excess of Net 0.00 0.00 0.00 0.00 0.00
Investment Income......................
-----------------------------------------------------------
Total Distributions................. 0.05 0.05 0.05 0.03 0.03
-----------------------------------------------------------
NET ASSET VALUE, END OF PERIOD.......... $1.00 $1.00 $1.00 $1.00 $1.00
-----------------------------------------------------------
-----------------------------------------------------------
TOTAL RETURN............................ 4.83% 4.81% 5.30% 3.28% 2.53%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000's)....... $28,538 $42,171 $54,714 $32,383 $14,784
Ratio of Expenses to Average Net 0.70%(a) 0.70%(a) 0.70% 0.70% 0.70%
Assets.................................
Ratio of Net Investment Income to 4.73% 4.74% 5.21% 3.39% 2.51%
Average Net Assets.....................
RATIOS IF FEES HAD NOT BEEN WAIVED AND/OR REIMBURSED
Ratio of Expenses to Average Net 1.14%(a) 1.06%(a) 1.16% 1.29% 1.32%
Assets.................................
Ratio of Net Investment Income to 4.29% 4.38% 4.75% 2.81% 1.88%
Average Net Assets.....................
RATIOS NET OF FEES PAID INDIRECTLY
Ratio of Expenses to Average Net 0.70% 0.70% -- -- --
Assets.................................
Ratio of Net Investment Income to 4.73% 4.74% -- -- --
Average Net Assets.....................
<CAPTION>
PERIOD
ENDED
---------
10/31/92 10/31/91 10/31/90 10/31/89(f)
<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................... 0.03 0.06 0.07 0.06
Net Realized & Unrealized Gain (Loss) on 0.00 0.00 0.00 0.00
Investments............................
Total from Investment Operations.... 0.03 0.06 0.07 0.06
LESS DISTRIBUTIONS
Distributions from Net Investment 0.03 0.06 0.07 0.06
Income.................................
Distributions in excess of Net 0.00 0.00 0.00 0.00
Investment Income......................
Total Distributions................. 0.03 0.06 0.07 0.06
NET ASSET VALUE, END OF PERIOD.......... $1.00 $1.00 $1.00 $1.00
TOTAL RETURN............................ 3.36% 13.76% 7.62% 10.05%(c)
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000's)....... $12,395 $14,907 $21,406 $10,735
Ratio of Expenses to Average Net 0.75% 0.81% 0.80% 0.60%(c)
Assets.................................
Ratio of Net Investment Income to 3.32% 5.76% 7.57% 8.43%(c)
Average Net Assets.....................
RATIOS IF FEES HAD NOT BEEN WAIVED AND/O
Ratio of Expenses to Average Net 1.09% 1.18% 1.33% 1.34%(c)
Assets.................................
Ratio of Net Investment Income to 2.98% 5.38% 7.04% 7.69%(c)
Average Net Assets.....................
RATIOS NET OF FEES PAID INDIRECTLY
Ratio of Expenses to Average Net -- -- -- --
Assets.................................
Ratio of Net Investment Income to -- -- -- --
Average Net Assets.....................
</TABLE>
See footnotes on page 82.
94
<PAGE>
------------------------------------------
INDEPENDENT AUDITORS' REPORT
----------------------------------
The Shareholders and Board of Directors
The Crabbe Huson Special Fund, Inc.
The Shareholders and Board of Trustees
Crabbe Huson Funds:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments of The Crabbe Huson Special Fund, Inc. and Crabbe
Huson Funds (comprised of Crabbe Huson Small Cap Fund, Crabbe Huson Asset
Allocation Fund, Crabbe Huson Equity Fund, Crabbe Huson Real Estate Investment
Fund, Crabbe Huson Oregon Tax-Free Fund, Crabbe Huson Income Fund, Crabbe Huson
U.S. Government Income Fund and Crabbe Huson U.S. Government Money Market Fund)
as of October 31, 1997, and the related statements of operations for the year
then ended, the statements of changes in net assets for each of the years in the
two year period then ended, except for Crabbe Huson Small Cap Fund, which is for
the year ended October 31, 1997 and for the period from February 20, 1996
(commencement of operations) to October 31, 1996, and the financial highlights
for The Crabbe Huson Special Fund, Inc. and Crabbe Huson Oregon Tax-Free Fund
for each of the nine years ended October 31, 1997, the financial highlights of
Crabbe Huson Asset Allocation Fund, Crabbe Huson Equity Fund, Crabbe Huson
Income Fund, Crabbe Huson U.S. Government Income Fund and Crabbe Huson U.S.
Government Money Market Fund for each of the years or periods in the eight years
ended October 31, 1997 and for the period from January 31, 1989 (commencement of
operations) to October 31, 1989, the financial highlights of Real Estate
Investment Fund for each of the three years ended October 31, 1997 and for the
period from April 4, 1994 (commencement of operations) to October 31, 1994, and
the financial highlights of Crabbe Huson Small Cap Fund for the year ended
October 31, 1997 and for the period from February 20, 1996 (commencement of
operations) to October 31, 1996. These financial statements and financial
highlights are the responsibility of The Crabbe Huson Special Fund, Inc. and
Crabbe Huson Funds management. Our responsibility is to express an opinion on
these financial statements and financial highlights based upon our audits. The
financial highlights for The Crabbe Huson Special Fund, Inc. and Crabbe Huson
Oregon Tax-Free Fund for the year ended October 31, 1988 were audited by other
auditors whose reports dated December 28, 1988 and December 29, 1988,
respectively, expressed unqualified opinions on such financial highlights.
95
<PAGE>
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 from material misstatement. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
verification of securities owned as of October 31, 1997 by examination and other
appropriate audit procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Crabbe Huson Special Fund, Inc. and each of the Crabbe Huson Funds as of October
31, 1997, the results of their operations, the changes in their net assets and
their financial highlights for the periods indicated above, in conformity with
generally accepted accounting principles.
[LOGO]
Portland, Oregon
December 3, 1997
96
<PAGE>
CRABBE HUSON FUNDS
PROXY VOTING RESULTS (UNAUDITED)
At the annual meeting of the shareholders of The Crabbe Huson Special Fund,
Inc., (the "Fund"), on October 30, 1997, the following proposals were voted
upon:
PROPOSAL 1 To elect a Board of Directors for the Fund for the ensuing year or
portion thereof consisting of eight Directors.
<TABLE>
<CAPTION>
FOR WITHHELD
<S> <C> <C>
-----------------------------
Gary L. Capps 13,354,426.160 431,072.614
James E. Crabbe 13,348,853.150 436,645.624
Richard Huson 13,310,931.277 474,567.497
Louis Scherzer 13,277,885.709 507,613.065
Bob L. Smith 13,346,498.636 440,000.138
Craig P. Stuvland 13,351,506.802 433,991.972
Richard P. Wollenberg 13,313,005.498 472,493.276
William Wendell Wyatt, Jr. 13,300,622.451 484,876.323
</TABLE>
PROPOSAL 2 To change the fundamental policy to permit the Fund to deposit with
broker and in the segregated account cash and liquid securities of any type,
rather than cash and U.S. Government securities.
<TABLE>
<CAPTION>
% OF SHARES TO
TOTAL % OF SHARES TO
NUMBER OF OUTSTANDING TOTAL
SHARES SHARES SHARES VOTED
---------------------------------------------------
<S> <C> <C> <C>
For 10,405,856.1404 43.5248% 75.4841%
Against 778,038.5270 3.2543% 5.6439%
Abstain 1,111,152.1070 4.6476% 8.0603%
Delivered not Voted 1,490,542.0000 6.2345% N/A
</TABLE>
PROPOSAL 3 To ratify the appointment by the Board of Directors of the Fund of
KPMG Peat Marwick LLP as independent auditors of the Fund.
<TABLE>
<CAPTION>
% OF SHARES TO
TOTAL % OF SHARES TO
NUMBER OF OUTSTANDING TOTAL
SHARES SHARES SHARES VOTED
---------------------------------------------------
<S> <C> <C> <C>
For 13,015,352.8174 54.4396% 94.4134%
Against 228,407.5600 0.9554% 1.6569%
Abstain 540,812.3970 2.2621% 3.9231%
Delivered not Voted 926.0000 0.0039% N/A
</TABLE>
97
<PAGE>
CRABBE HUSON FUNDS
DISTRIBUTIONS TO SHAREHOLDERS (UNAUDITED)
OREGON TAX-FREE FUND Of the Fund's distributions paid to shareholders from net
investment income during the fiscal year ended October 31, 1997, 86.3% 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.
CORPORATE DIVIDENDS RECEIVED DEDUCTION For the fiscal year ended October 31,
1997, 77.4% of the dividends distributed by the Special Fund, 2.7% of the
dividends distributed by the Small Cap Fund, 8.7% of the dividends distributed
by the Asset Allocation Fund and 13.8% of the dividends distributed by the
Equity Fund, qualify for the dividends-received deduction for corporate
shareholders.
LONG-TERM CAPITAL GAIN DISTRIBUTIONS On December 20, 1996 the following
distributions were declared and paid to shareholders of record on December 19,
1996 from net realized long term capital gains.
<TABLE>
<CAPTION>
FUND LONG-TERM CAPITAL GAIN PER SHARE
<S> <C> <C>
- ------------------------------------------------------------------------------------
Special $ 9,865,507 $ 0.32523
Small Cap -- --
Asset Allocation $ 5,593,932 $ 0.62470
Equity $ 20,713,449 $ 0.95402
Real Estate Investment -- --
Oregon Tax-Free $ 142,151 $ 0.06914
Income -- --
U.S. Government Income -- --
U.S. Government Money Market -- --
</TABLE>
INCOME DERIVED FROM U.S. GOVERNMENT OBLIGATIONS Of each Fund's net investment
income earned during the Fiscal year ended October 31, 1997, listed below are
the percentages attributable to investments in direct or indirect debt
obligations of the United States Government, or its agencies or
instrumentalities.
<TABLE>
<CAPTION>
OTHER
INDIRECT TOTAL
U.S. STUDENT LOAN U.S. U.S.
TREASURY MARKETING GOVERNMENT GOVERNMENT
FUND OBLIGATIONS ASSOCIATION OBLIGATIONS INCOME
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Special 0.0% 0.0% 1.5% 1.5%
Small Cap 0.0 0.0 5.4 5.4
Asset Allocation 10.7 0.7 3.6 15.0
Equity 0.0 0.0 2.8 2.8
Real Estate Investment 0.0 0.0 1.1 1.1
Oregon Tax-Free 0.0 0.0 0.0 0.0
Income 22.4 0.0 0.0 22.4
U.S. Government Income 67.5 0.0 9.9 77.4
U.S. Government Money Market 1.4 0.0 98.3 99.7
</TABLE>
98
<PAGE>
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NOTES
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<PAGE>
CRABBE HUSON FUNDS
MAILING ADDRESS
CRABBE HUSON FUNDS
P.O. BOX 8413
BOSTON, MA 02266-8413
INVESTMENT ADVISOR
THE CRABBE HUSON GROUP, INC.
121 S.W. MORRISON, SUITE 1400
PORTLAND, OR 97204
DISTRIBUTOR
CRABBE HUSON SECURITIES, INC.
121 S.W. MORRISON, SUITE 1410
PORTLAND, OR 97204
LEGAL COUNSEL
DAVIS WRIGHT TREMAINE
1300 S.W. FIFTH AVENUE, SUITE 2300
PORTLAND, OR 97201
TRANSFER AGENT &
INVESTOR SERVICES
STATE STREET BANK AND TRUST COMPANY
P.O. BOX 8413
BOSTON, MA 02266-8413
FUND DIRECTORS
WILLIAM W. WYATT, JR.
LOUIS SCHERZER
RICHARD P. WOLLENBERG
BOB L. SMITH
GARY L. CAPPS
RICHARD S. HUSON
JAMES E. CRABBE
CRAIG P. STUVLAND
<PAGE>
FOR MORE INFORMATION:
1-800-541-9732
OR VISIT US ONLINE AT:
WWW.CONTRARIAN.COM
THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE
INVESTORS UNLESS PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS.
DISTRIBUTED BY CRABBE HUSON SECURITIES, INC.
