<PAGE>
As filed with the Securities and Exchange Commission on January 5, 1996
Reg. No. 33-73756
Reg. No. 811-8262
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. _____ [ ]
Post-Effective Amendment No. 4 [x]
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 4 [x]
(Check appropriate box or boxes.)
THE CRABBE HUSON REAL ESTATE INVESTMENT FUND, INC.
(Exact Name of Registrant as Specified in Charter)
121 S.W. Morrison, Suite 1425
Portland, Oregon 97204
(Address, including Zip Code, of Principal Executive Offices)
(503) 295-0919
1-800-541-9732
(Registrant's Telephone Number, including Area Code)
Richard S. Huson
121 S.W. Morrison, Suite 1425
Portland, Oregon 97204
(Name and Address, including Zip Code, of Agent for Service)
Approximate Date of Proposed Public Offering: Commenced on April 1, 1994, the
effective date of the Registration Statement
It is proposed that this filing will become effective (check appropriate box)
___ immediately upon filing pursuant to paragraph (b)
___ on _____________________ pursuant to paragraph (b)
_X_ 60 days after filing pursuant to paragraph (a)
___ on February 28, 1996 pursuant to paragraph (a) of Rule 485
Please forward copies of communications to:
<PAGE>
David C. Baca
Davis Wright Tremaine
2300 First Interstate Tower
1300 S.W. Fifth Avenue
Portland, Oregon 97201
---------------------------
An indefinite number of shares of Common Stock have been registered by the
issuer pursuant to Rule 24f-2 of the Investment Company Act of 1940. The issuer
previously filed a Rule 24f-2 Notice for the fiscal year ended October 31, 1995.
Amount of Registration Fee: $ -0-
----------
<PAGE>
THE CRABBE HUSON REAL ESTATE INVESTMENT FUND, INC.
Cross-Reference Sheet Showing Location in Prospectus and
Statement of Additional Information of
Information Required by Items of the Registration Form
Form N-1A Item Number and Caption
- ---------------------------------
Part A Location in Prospectus
- ------ ----------------------
1 Cover Page. . . . . . . . . . . . . . . . . . . . . . . . . . . .Cover Page
2 Synopsis. . . . . . . . . . . . . . . . . .PROSPECTUS SUMMARY; EXPENSE DATA
3 Condensed Financial Information
3(a) Per share Income & Capital Changes. . . . . . . . CONDENSED FINANCIAL
INFORMATION
3(b) Debt History. . . . . . . . . . . . . . . . . . . . . .Not Applicable
3(c) Performance Data. . . . . . . . . . . . . . .PERFORMANCE INFORMATION;
YIELD; PERFORMANCE COMPARISONS
4 General Description of Registrant
4(a) Organization and Operation . . . . . . . . . . .INVESTMENT OBJECTIVES;
FUNDAMENTAL POLICIES; CAPITAL STOCK
4(b) Portfolio Emphasis. . . . . . . . . . . . . . . INVESTMENT OBJECTIVES
4(c) Risk Factors. . . . . . . . . . SPECIAL RISK FACTORS TO BE CONSIDERED
5 Management of the Fund
5(a) Board of Directors. . . . . . . . . . . . . . MANAGEMENT OF THE FUNDS
5(b) Investment Advisor. . . . . . . . . . . . . . MANAGEMENT OF THE FUNDS
5(c) Portfolio Manager(s). . . . . . . . . . . . . MANAGEMENT OF THE FUNDS
<PAGE>
Location in Prospectus
----------------------
5(d) Administrator(s). . . . . . . . . . . . . . . . . . . .Not Applicable
5(e) Transfer Agent, Dividend Paying Agent . . . CUSTODIAN, TRANSFER AGENT
AND DIVIDEND-DISBURSING AGENT
5(f) Expenses. . . . . . . . . . . . . . . . . . . MANAGEMENT OF THE FUNDS
5(g) Brokerage Commissions . . . . . . . . . . . . ALLOCATION OF BROKERAGE
5A Management's Discussion of Fund Performance . . . . . . . . .Not Applicable
6 Capital Stock and Other Securities
6(a) Rights and Restrictions . . . . . . . . . . . . . . . . CAPITAL STOCK
6(b) Control Persons . . . . . . . . . . . . . . . . . . . CONTROL PERSONS
6(c) Changes in Rights of Holders. . . . . . . . . . . . . .CAPITAL STOCK;
FUNDAMENTAL POLICIES
6(d) Other Classes of Securities . . . . . . . . . . . . . .Not Applicable
6(e) Shareholder Inquiries . . . . . . . . . . SPECIAL INVESTOR SERVICES -
Shareholder Inquiries
6(f) Dividends and Distributions . . . . . . . . . INVESTMENT OBJECTIVES -
Dividends and Distributions
6(g) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TAXES
7 Purchase of Securities Being Offered
7(a) Underwriter . . . . . . . . . . . . . . . .HOW TO INVEST IN THE FUNDS
7(b) Determination of Offering Price . . . . . . . . . . .NET ASSET VALUE;
WHEN TRANSACTIONS ARE
RECORDED IN YOUR ACCOUNT
7(c) Special Plans . . . . . . . SPECIAL INVESTOR SERVICES - Applications;
SYSTEMATIC WITHDRAWAL PLAN
<PAGE>
Location in Prospectus
----------------------
7(d) Minimum Investment. . . . . . . . . . . . .HOW TO INVEST IN THE FUNDS
- Minimum Investment
7(e) Trail Fee . . . . . . . . . . . . . . . . . . . . . . .Not Applicable
7(f) 12b-1 Fees. . . . . . . . . . . . . . . . .HOW TO INVEST IN THE FUNDS
- Sales Load and 12b-1 Fees
8 Redemption or Repurchase
8(a) Redemption Procedures and Charges . . . . . .HOW TO SELL YOUR SHARES;
HOW TO EXCHANGE YOUR SHARES
REDEMPTION OR EXCHANGE
BY TELEPHONE
8(b) Repurchase through Broker-Dealer. . . . . . . HOW TO SELL YOUR SHARES
8(c) Involuntary Redemption. . . . . . . . . . . . HOW TO SELL YOUR SHARES
8(d) Delay of Redemption . . . . . . . . . . . . . HOW TO SELL YOUR SHARES
9 Pending Legal Proceeding. . . . . . . . . . . . . . . . . . .Not Applicable
Part B Location in SAI
- ------ ---------------
10 Cover Page. . . . . . . . . . . . . . . . . . . . . . . . . . . .Cover Page
11 Table of Contents . . . . . . . . . . . . . . . . . . . . TABLE OF CONTENTS
12 General Information and History . . . . . . . . . . . . GENERAL INFORMATION
13 Investment Objectives and Policies
13(a) Description. . . . . . . . . . . . .ADDITIONAL INFORMATION REGARDING
CERTAIN INVESTMENTS BY THE FUNDS
13(b) Fundamental Policies . . . . . . . . . . . .INVESTMENT RESTRICTIONS;
LOANS OF PORTFOLIO SECURITIES
13(c) Significant Policies . . . . . . . .ADDITIONAL INFORMATION REGARDING
CERTAIN INVESTMENTS BY THE FUNDS
<PAGE>
Location in Prospectus
----------------------
13(d) Portfolio Turnover . . . . . . . . . . . . . .PORTFOLIO TRANSACTIONS
-Portfolio Turnover
14 Management of the Fund
14(a) Directors and Officers . . . . . . . . . . . . . . . . . .MANAGEMENT
14(b) Positions with Affiliates. . . . . . . . . . . . . . . . .MANAGEMENT
14(c) Compensation . . . . . . . . . . . . . . . . . . . . . . .MANAGEMENT
15 Control Persons and Principal Holders of Securities
15(a) Names and Addresses of Control Persons . . . . . CONTROL PERSONS AND
PRINCIPAL HOLDERS OF SECURITIES
15(b) Ownership of Fund. . . . . . . . . . . . . . . . CONTROL PERSONS AND
PRINCIPAL HOLDERS OF SECURITIES
15(c) Stock Holdings of Officers and Directors . . . . CONTROL PERSONS AND
PRINCIPAL HOLDERS OF SECURITIES
16 Investment Advisory and Other Services
16(a) Control Persons, Affiliates and Fee. . . . . . .SERVICES PROVIDED BY
THE ADVISOR
16(b) Services of Advisor. . . . . . . . . . . . . . .SERVICES PROVIDED BY
THE ADVISOR
16(c) Fees and Expenses. . . . . . . . . . . . . . . .SERVICES PROVIDED BY
THE ADVISOR
16(d) Other Management-Related Contracts . . . . . . . . . .Not Applicable
16(e) Other Persons Furnishing Advice for Compensation . . .Not Applicable
16(f) Expenses of Distribution . . . . . . . . .SYSTEMATIC WITHDRAWAL PLAN
-Distribution Plan
16(g) Nonbank or Trust Custodial Services. . . . . . . . . .Not Applicable
<PAGE>
Location in Prospectus
----------------------
16(h) Custodian and Accountant . . . . . . . . . . . .AUDITORS; CUSTODIAN,
TRANSFER AGENT, AND DIVIDEND-DISBURSING AGENT
17 Brokerage and other Allocations
17(a) Effecting Transactions . . . . . . . . . . . .PORTFOLIO TRANSACTIONS
17(b) Payments of Commissions to Affiliates. . . . . . . . .Not Applicable
17(c) Selection of Brokers . . . . . . . . . . . . .PORTFOLIO TRANSACTIONS
- General Considerations
17(d) Allocation . . . . . . . . . . . . . . . . . .PORTFOLIO TRANSACTIONS
- General Considerations
17(e) Acquisition of Broker's Securities . . . . . . . . . .Not Applicable
18 Capital Stock and Other Securities
18(a) Rights of Each Class of Stock. . . . . . . . . . GENERAL INFORMATION
18(b) Securities Other than Capital Stock. . . . . . . . . .Not Applicable
19 Purchase, Redemption and Pricing of Securities Being Offered
19(a) Manner of Offering . . . . . . . . . . . . . PURCHASE AND REDEMPTION
OF FUND SHARES
19(b) Valuation of Securities and Assets . . . . . . PRICING OF SECURITIES
BEING OFFERED
19(c) 18(f) Exemption. . . . . . . . . . . . . . . . . . . .Not Applicable
20 Tax Status. . . . . . . . . . . . . . . .DIVIDENDS, DISTRIBUTIONS AND TAXES
21 Underwriters
21(a) Obligation, Offering and Commissions . . . . PURCHASE AND REDEMPTION
OF FUND SHARES
<PAGE>
Location in Prospectus
----------------------
21(b) Compensation to Affiliated Underwriters. . . . . . . .Not Applicable
21(c) Other Payments . . . . . . . . . . . . . . . . . . . .Not Applicable
22 Calculation of Performance Data
22(a) Money Market Funds . . . . . . . . . . . . . . YIELD AND PERFORMANCE
22(b) Total Return and Yields. . . . . . . . . . . . YIELD AND PERFORMANCE
23 Financial Statements. . . . . . . . . . . . . . . . . .FINANCIAL STATEMENTS
<PAGE>
MAILING ADDRESS
CRABBE HUSON FUNDS
[CRABBE HUSON LOGO] P.O. BOX 8413
BOSTON, MA 02266-8413
INVESTMENT ADVISOR
CRABBE HUSON GROUP, INC.
121 S.W. MORRISON, SUITE 1400
PORTLAND, OR 97204
CRABBE HUSON
FUNDS DISTRIBUTOR
CRABBE HUSON SECURITIES, INC.
121 S.W. MORRISON, SUITE 1400
PORTLAND, OR 97204
THE CRABBE HUSON
SPECIAL FUND, INC. LEGAL COUNSEL
----------------------------
THE CRABBE HUSON DAVIS WRIGHT TREMAINE
REAL ESTATE FUND, INC. 1300 S.W. FIFTH AVENUE, SUITE 2300
---------------------------- PORTLAND, OR 97201
THE CRABBE HUSON
EQUITY FUND, INC. INDEPENDENT AUDITORS
----------------------------
THE CRABBE HUSON KPMG PEAT MARWICK LLP
ASSET ALLOCATION 1211 S.W. FIFTH AVENUE, SUITE 2000
FUND, INC. PORTLAND, OR 97204
----------------------------
THE OREGON MUNICIPAL TRANSFER AGENT &
BOND FUND, INC. INVESTOR SERVICES
----------------------------
THE CRABBE HUSON STATE STREET BANK AND TRUST COMPANY
INCOME FUND, INC. P.O. BOX 8413
---------------------------- BOSTON, MA 02266-8413
THE CRABBE HUSON
U.S. GOVERNMENT FUND DIRECTORS
INCOME FUND, INC.
---------------------------- WILLIAM W. WYATT, JR.
THE CRABBE HUSON LOUIS SCHERZER
U.S. GOVERNMENT MONEY RICHARD P. WOLLENBERG
MARKET FUND, INC. BOB L. SMITH
GARY L. CAPPS
RICHARD S. HUSON
JAMES E. CRABBE
FEB. 28, 1996 CRAIG P. STUVLAND
<PAGE>
CRABBE HUSON FUNDS
_________________________
PROSPECTUS
FEBRUARY 28, 1996
_________________________
This Prospectus contains information relating to eight different mutual
funds, collectively referred to as the Crabbe Huson Funds (the "Funds"), which
offer investors a range of investment opportunities with the following
objectives:
- THE CRABBE HUSON SPECIAL FUND, INC.
- THE CRABBE HUSON REAL ESTATE INVESTMENT FUND, INC.
- THE CRABBE HUSON EQUITY FUND, INC.
- THE CRABBE HUSON ASSET ALLOCATION FUND, INC.
- THE OREGON MUNICIPAL BOND FUND, INC.
- THE CRABBE HUSON INCOME FUND, INC.
- THE CRABBE HUSON U.S. GOVERNMENT INCOME FUND, INC.
- THE CRABBE HUSON U.S. GOVERNMENT MONEY MARKET FUND, INC.
AN INVESTMENT IN THE U.S. GOVERNMENT MONEY MARKET FUND IS NEITHER INSURED
NOR GUARANTEED BY THE U.S. GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE
FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
This Prospectus concisely sets forth information about each of the Funds
that an investor ought to know, and should be retained for future reference. A
Statement of Additional Information dated February 28, 1996 has been filed with
the Securities and Exchange Commission (the "SEC"). It may be obtained free of
charge from the Funds' distributor by calling (800) 541-9732. The Statement of
Additional Information, as it may be supplemented from time to time, is
incorporated by reference in this Prospectus.
THE FUNDS CHARGE NO SALES LOAD. SHARES OF THE FUNDS ARE SOLD AND REDEEMED
AT THEIR NET ASSET VALUE.
THE SPECIAL FUND CAN LEVERAGE FOR FUND ACTIVITY. THIS ACTIVITY COULD BE
CONSIDERED SPECULATIVE AND COULD RESULT IN GREATER COST TO THE FUND. SEE PAGE
39.
________________________________________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION, PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
________________________________________________________________________________
<PAGE>
SHARES OF THE OREGON MUNICIPAL BOND FUND ARE ONLY AVAILABLE FOR SALE TO
RESIDENTS OF OREGON.
________________________________________________________________________________
A COPY OF THIS PROSPECTUS MUST BE DELIVERED TO RESIDENTS OF CERTAIN STATES
PRIOR TO CONSUMMATION OF A SALE OF SHARES IN THE FUNDS.
________________________________________________________________________________
PROSPECTUS SUMMARY
The information below is qualified in its entirety by the detailed
information appearing elsewhere in this Prospectus and in the Funds' Statement
of Additional Information.
THE CRABBE HUSON SPECIAL FUND, INC. (the "Special Fund") seeks to provide
long-term capital appreciation. It pursues this objective through a flexible
policy of investing in a diversified portfolio of carefully selected stocks that
have small to medium market capitalization.
THE CRABBE HUSON REAL ESTATE INVESTMENT FUND, INC. (the "Real Estate Fund")
seeks to provide growth of capital and current income. It pursues this
objective by investing primarily in equity securities of real estate investment
trusts ("REITs") and other real estate industry companies.
THE CRABBE HUSON EQUITY FUND, INC. (the "Equity Fund") seeks to provide
long-term capital appreciation. It pursues this objective by investing in a
diversified portfolio of common stocks which are widely and actively traded and
that have large market capitalizations.
THE CRABBE HUSON ASSET ALLOCATION FUND, INC. (the "Asset Allocation Fund")
seeks preservation of capital, capital appreciation and income. It pursues
these objectives through a flexible policy of investing in stocks, fixed income
securities, and cash and cash equivalents.
THE OREGON MUNICIPAL BOND FUND, INC. (the "Oregon Bond Fund") seeks to
provide as high a level of income exempt from federal and Oregon income taxes as
is consistent with prudent investment management and the preservation of
capital. It pursues this objective by investing at least 80% of its assets in
tax-exempt municipal bonds issued by the State of Oregon and its political
subdivisions.
THE CRABBE HUSON INCOME FUND, INC. (the "Income Fund") seeks to provide the
highest level of current income that is consistent with preservation of capital.
It pursues this objective by investing primarily in a diversified portfolio of
fixed income securities, including convertible bonds and debentures.
THE CRABBE HUSON U.S. GOVERNMENT INCOME FUND, INC. (the "U.S. Government
Income Fund") seeks to provide a high level of current income and the
preservation of capital. It pursues this objective by investing substantially
all of its assets in short- and intermediate-term debt obligations of the United
States Government and its agencies or instrumentalities.
THE CRABBE HUSON U.S. GOVERNMENT MONEY MARKET FUND, INC. (the "U.S.
Government Money Market Fund") seeks to provide a high level of current income
and preservation of capital while maintaining shareholder liquidity. It pursues
this objective by investing in short-term money market instruments that are
direct or indirect obligations of the United States Government or its agencies
or instrumentalities, and repurchase agreements with respect to such
obligations.
Each of the Funds is an open-end, diversified registered investment company
(or mutual fund), with the exception of the Oregon Bond Fund, which is non-
diversified. Each Fund offers a single class of common stock pursuant to this
Prospectus, and each is managed by the Crabbe Huson Group, Inc. (the "Adviser").
The Funds are distributed by Crabbe Huson Securities, Inc. (the
"Distributor"), an affiliate of the Adviser. There is no sales load payable in
connection with the sale of shares of any of the Funds. For information about
-2-
<PAGE>
how to purchase shares of the Funds, see "HOW TO INVEST IN THE FUNDS." For
information about redemption and repurchase of shares, see "HOW TO SELL YOUR
SHARES."
RISK FACTORS
The Special, Equity and Asset Allocation Funds are subject to the risks of
investments in common stock, principally that the prices of stocks can fluctuate
dramatically in response to company, market, or economic news, and these Funds
historically have had turnover rates in their stock portfolios in excess of 75%
per year, resulting in potentially higher brokerage costs and the potential loss
of advantageous long-term capital gain treatment for tax purposes. See "Taxes."
In addition, the Special, Equity, Asset Allocation and Income Funds may each
invest up to 35% of their total assets in securities issued by foreign issuers.
The Real Estate Fund was incorporated in December 1993, and has a limited
operating history. In addition, the Real Estate Fund invests primarily in real
estate equity securities, and investments in that Fund are subject to certain
risks associated with the direct ownership of real estate. A significant risk
associated with investments in the Oregon Bond, Income and U.S. Government
Income Funds is that of increasing interest rates causing a decline in the net
asset value of the Fund. The Oregon Bond Fund is also subject to greater risks
resulting from economic difficulties in the State of Oregon, where most of its
securities are originated. The Special Fund may, from time to time, leverage
the assets it has by using borrowed money to increase its portfolio positions.
For additional information about specific risk factors associated with an
investment in each of the Funds, see "FUNDAMENTAL POLICIES," and "SPECIAL RISK
FACTORS TO BE CONSIDERED."
-3-
<PAGE>
EXPENSE DATA
The following table sets forth certain information about the expenses that
a shareholder of the Funds will incur, based upon their historical expenses for
the fiscal year ending October 31, 1995.
<TABLE>
<CAPTION>
U.S.
U.S. Government
Real Asset Oregon Government Money
Special Estate Equity Allocation Bond Income Income Market
Fund Fund Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
(as a percentage of offering price)
Maximum Sales Load Imposed on
Reinvested Dividends 0% 0% 0% 0% 0% 0% 0% 0%
Deferred Sales Load 0% 0% 0% 0% 0% 0% 0% 0%
Redemption Fees 0% 0% 0% 0% 0% 0% 0% 0%
Exchange Fees $0 $0 $0 $0 $0 $0 $0 $0
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees (after waiver)(1) .79% .61% .90% .96% .42% 0% 0% .05%
12b(1) Fees(2) .25% .25% .23% .25% .23% .25% .25% .25%
Other Expenses (after
reimbursement) .36% .64% .27% .27% .33% .55%(3) .50%(3) .40%
Total Fund Operating Expenses
(after reimbursement
or waiver)(4) 1.40% 1.50% 1.40% 1.48% .98% .80% .75% .75%
EXAMPLE: You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each period:(5)
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Special Fund 14 45 77 169
Real Estate Fund 15 48 82 180
Equity Fund 14 45 77 169
Asset Allocation Fund 15 47 81 178
Oregon Bond Fund 10 31 54 121
Income Fund 8 26 45 99
U.S. Government Income Fund 8 24 42 93
U.S. Government Money Market Fund 7 22 39 87
</TABLE>
-4-
<PAGE>
The purpose of the above table is to assist the investor in understanding
the various costs and expenses that an investor in the Funds will bear directly
or indirectly. Such costs and expenses include investment advisory fees and
administration costs. Additionally, a long-term shareholder should consider
that the fees and costs it will incur under the 12b-1 plan may result in the
shareholder paying more than the economic equivalent of the maximum front-end
sales charge permitted by the rules and regulations of the National Association
of Securities Dealers. See "Management of the Funds" and "Purchase of Shares."
(1) Reflects a waiver of fees by the Adviser of $697; $75,190; $-0-; $14,567;
$20,866; $49,011; $43,576; and $230,305 for the Special Fund, the Real
Estate Fund, the Equity Fund, the Asset Allocation Fund, the Oregon Bond
Fund, the Income Fund, the U.S. Government Income Fund, and the U.S.
Government Money Market Fund, respectively. If the waiver had not been
made these percentages would have been .79%, 1.00%, .90%, .97%, .50%, .75%,
.50%, and .50%, respectively.
(2) The maximum 12b-1 distribution fee that can be charged is .25% of a Fund's
average annual net assets.
(3) Reflects a reimbursement of Fund expenses by the Adviser of $33,287 and
$26,493 for the Income and the U.S. Government Income Funds, respectively.
If the reimbursement had not been made, these percentages would have been
.95% and .71%, respectively.
(4) As noted in footnotes 1 and 3, the Adviser voluntarily waived its fees
and/or reimbursed the Funds' expenses to the extent total operating
expenses exceed 1.50% for the Special, Real Estate, Equity and Asset
Allocation Funds, .98% for the Oregon Bond Fund, .80% for the Income Fund,
.75% for the U.S. Government Income Fund and .70% for the U.S. Government
Money Market Fund per annum of the Fund's net asset value. If the waivers
had not been made, total fund operating expenses would have been 1.40%,
1.89%, 1.40%, 1.49%, 1.08%, 1.95%, 1.46% and 1.16% for the Special Fund,
the Real Estate Fund, the Equity Fund, the Asset Allocation Fund, the
Oregon Bond Fund, the Income Fund, the U.S. Government Income Fund and the
U.S. Government Money Market Fund, respectively. See "Services Provided by
the Adviser" in the Fund's Statement of Additional Information. The
Adviser has terminated this waiver with respect to the Special, Equity and
Asset Allocation Funds. The Adviser has agreed that it will not terminate
this voluntary waiver except after 30 days notice to shareholders.
(5) THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
FUND EXPENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESSER
THAN THOSE SHOWN. MOREOVER, WHILE THE TABLE ASSUMES A 5% ANNUAL RETURN,
THE FUNDS' ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL RETURN
GREATER OR LESSER THAN 5%.
-5-
<PAGE>
CONDENSED FINANCIAL INFORMATION
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
The following information should be read in conjunction with the financial
statements and notes thereto appearing elsewhere in the Funds' Annual Report.
The calculations are based on average number of shares outstanding for each
period.
<TABLE>
<CAPTION>
NET ASSET NET REALIZED DIVIDENDS DIVIDENDS IN
VALUE NET & UNREALIZED TOTAL FROM FROM NET EXCESS OF NET
PERIOD BEGINNING OF INVESTMENT GAIN (LOSS) INVESTMENT INVESTMENT INVESTMENT
ENDING PERIOD INCOME (LOSS) ON SECURITIES OPERATIONS INCOME INCOME
_____________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
THE CRABBE HUSON SPECIAL FUND, INC.
10-31-95 $14.08 $ 0.2704 $(0.2894) $(0.0190) $0.0226 $0.0000
10-31-94 11.82 0.0513 2.3026 2.3539 0.0000 0.0000
10-31-93 8.36 (0.0774) 3.5374 3.4600 0.0000 0.0000
10-31-92 12.05 (0.0211) (1.6211) (1.6422) 0.0260 0.0000
10-31-91 8.78 0.0353 4.0155 4.0508 0.1453 0.0000
10-31-90 11.49 0.1546 (1.4317) (1.2771) 0.2240 0.0000
10-31-89 9.69 0.2100 1.5900 1.8000 0.0000 0.0000
10-31-88 8.13 (0.0515) 1.6115 1.5600 0.0000 0.0000
10-31-87(a) 10.00 (0.0409) (1.8300) (1.8709) 0.0000 0.0000
_______________________________________________________________________________________________
THE CRABBE HUSON REAL ESTATE INVESTMENT FUND, INC.
10-31-95 $ 9.50 $ 0.4436 $ 0.3065 $ 0.7501 $0.4379 $0.0000
10-31-94(c) 10.00 0.3664 (0.6394) (0.2730) 0.2287 0.0000
_________________________________________________________________________________________________
THE CRABBE HUSON EQUITY FUND, INC.
10-31-95 $16.44 $ 0.2185 $ 1.7476 $ 1.9661 $0.0880 $0.0000
10-31-94 16.08 0.1900 0.5668 0.7568 0.0344 0.0000
10-31-93 13.03 0.0981 3.4476 3.5457 0.1099 0.0000
10-31-92 12.57 0.1980 0.9186 1.1166 0.0937 0.0000
10-31-91 8.54 0.1861 4.1511 4.3372 0.3072 0.0000
10-31-90 10.50 0.2533 (1.6764) (1.4231) 0.3918 0.0000
10-31-89(d) 10.00 0.3146 0.1854 0.5000 0.0000 0.0000
_________________________________________________________________________________________________
THE CRABBE HUSON ASSET ALLOCATION FUND, INC.
10-31-95 $12.87 $ 0.3361 $ 1.2090 $ 1.5451 $0.3321 $0.0000
10-31-94 13.52 0.2990 (0.0817) 0.2173 0.2879 0.0000
10-31-93 11.68 0.2323 2.0889 2.3212 0.2373 0.0000
10-31-92 11.00 0.3468 0.8175 1.1643 0.3463 0.0000
10-31-91 9.24 0.4143 1.8208 2.2351 0.4335 0.0000
10-31-90 10.69 0.4561 (1.1200) (0.6639) 0.7159 0.0000
10-31-89(d) 10.00 0.3990 0.2910 0.6900 0.0000 0.0000
_________________________________________________________________________________________________
-6-
<PAGE>
<CAPTION>
DISTRIBU- NET ASSET
TIONS FROM TOTAL VALUE, NET ASSETS, PORTFOLIO
CAPITAL DISTRIBU- END OF TOTAL END OF TURNOVER
GAINS TIONS PERIOD RETURN PERIOD RATE
_________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
10-31-95 $0.2384 $0.2610 $13.80 1.78% $878,559,834 122.97%
10-31-94 0.0892 0.0892 14.08 22.40% 319,810,853 146.44%
10-31-93 0.0000 0.0000 11.82 41.39% 23,816,912 73.29%
10-31-92 2.0218 2.0478 8.36 8.11% 5,857,434 102.27%
10-31-91 0.6355 0.7808 12.05 49.58% 3,541,797 256.68%
10-31-90 1.2089 1.4329 8.78 -10.90% 2,926,457 314.73%
10-31-89 0.0000 0.0000 11.49 18.68% 3,356,417 275.62%
10-31-88 0.0000 0.0000 9.69 19.63% 4,392,920 155.12%
10-31-87(a) 0.0000 0.0000 8.13 -30.32%(b) 1,892,038 3.90%
_________________________________________________________________________________________________
10-31-95 $0.1222 $0.5601 $ 9.69 8.31% $ 18,985,514 59.53%
10-31-94(c) 0.0000 0.2287 9.50 -3.25% 18,279,500 43.30%
_________________________________________________________________________________________________
10-31-95 $0.1481 $0.2361 $18.17 13.37% $387,184,080 92.43%
10-31-94 0.3638 0.3982 16.44 7.89% 153,105,296 106.49%
10-31-93 0.3858 0.4957 16.08 29.90% 34,520,166 114.38%
10-31-92 0.5629 0.6566 13.03 12.48% 13,429,315 180.72%
10-31-91 0.0000 0.3072 12.57 52.44% 5,929,590 171.82%
10-31-90 0.1451 0.5369 8.54 -14.97% 2,944,344 265.25%
10-31-89(d) 0.0000 0.0000 10.50 6.72%(b) 5,018,337 90.54%
_________________________________________________________________________________________________
10-31-95 $0.4430 $0.7751 $13.64 13.00% $136,530,057 225.70%
10-31-94 0.5829 0.8708 12.87 2.66% 110,151,785 149.19%
10-31-93 0.2439 0.4812 13.52 20.93% 85,390,017 116.10%
10-31-92 O.1380 0.4843 11.68 11.25% 55,098,981 155.26%
10-31-91 0.0415 0.4750 11.00 24.55% 23,892,664 157.89%
10-31-90 0.0702 0.7861 9.24 -6.40% 13,173,923 161.72%
10-31-89(d) 0.0000 0.0000 10.69 9.30%(b) 12,577,962 88.14%
_________________________________________________________________________________________________
</TABLE>
-7-
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
NET ASSET NET REALIZED DIVIDENDS DIVIDENDS IN
VALUE, NET & UNREALIZED TOTAL FROM FROM NET EXCESS OF NET
PERIOD BEGINNING OF INVESTMENT GAIN (LOSS) INVESTMENT INVESTMENT INVESTMENT
ENDING PERIOD INCOME (LOSS) ON SECURITIES OPERATIONS INCOME INCOME
__________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
THE OREGON MUNICIPAL BOND FUND, INC.
10-31-95 $11.99 $0.5480 $ 0.6998 $ 1.2478 $0.5480 $0.0000
10-31-94 12.80 0.5418 (0.8001) (0.2583) 0.5419 0.0003
10-31-93 12.20 0.5683 0.6880 1.2563 0.5647 0.0000
10-31-92 12.14 0.6168 0.1521 0.7689 0.6168 0.0000
10-31-91 11.74 0.6385 0.4831 1.1216 0.6562 0.0000
10-31-90 11.72 0.6316 0.0522 0.6838 0.6401 0.0000
10-31-89 11.72 0.6794 0.0842 0.7636 0.6711 0.0000
10-31-88 11.08 0.6386 0.6411 1.2797 0.6386 0.0000
10-31-87(e) 12.15 0.7311 (0.9983) (0.2672) 0.7311 0.0000
9-30-87 11.93 0.7319 (0.8051) (0.0732) 0.7319 0.0000
9-30-86 10.43 0.7720 1.5265 2.2985 0.7720 0.0000
__________________________________________________________________________________________________
THE CRABBE HUSON INCOME FUND, INC.
10-31-95 $ 9.71 $0.5329 $ 0.5754 $ 1.1083 $0.5329 $0.0254
10-31-94 10.75 0.4995 (0.7669) (0.2674) 0.4995 0.0080
10-31-93 10.90 0.4637 0.3265 0.7902 0.4879 0.0000
10-31-92 10.63 0.6583 0.3569 1.0152 0.6588 0.0000
10-31-91 10.01 0.7038 0.6218 1.3256 0.7056 0.0000
10-31-90 10.27 0.6869 (0.2407) 0.4462 0.6840 0.0000
10-31-89(d) 10.00 0.5545 0.2761 0.8306 0.5606 0.0000
__________________________________________________________________________________________________
THE CRABBE HUSON U.S. GOVERNMENT INCOME FUND, INC.
10-31-95 $10.27 $0.5097 $ 0.4013 $0.9110 $0.5097 $0.0113
10-31-94 11.04 0.4648 (0.6515) (0.1867) 0.4647 0.0035
10-31-93 10.91 0.4755 0.2159 0.6914 0.4848 0.0000
10-31-92 10.69 0.5801 0.2921 0.8722 0.5839 0.0000
10-31-91 10.24 0.6722 0.4542 1.1264 0.6746 0.0000
10-31-90 10.28 0.6768 (0.0326) 0.6442 0.6736 0.0000
10-31-89(d) 10.00 0.5637 0.2852 0.8489 0.5689 0.0000
__________________________________________________________________________________________________
THE CRABBE HUSON U.S. GOVERNMENT MONEY MARKET FUND, INC.
10-31-95 $1.00 $0.0521 $ 0.0000 $0.0521 $0.0521 $0.0000
10-31-94 1.00 0.0339 0.0000 0.0339 0.0339 0.0000
10-31-93 1.00 0.0250 0.0000 0.0250 0.0250 0.0000
10-31-92 1.00 0.0332 0.0000 0.0332 0.0332 0.0000
10-31-91 1.00 0.0576 0.0000 0.0576 0.0576 0.0000
10-31-90 1.00 0.0737 0.0000 0.0737 0.0737 0.0000
10-31-89(d) 1.00 0.0633 0.0000 0.0633 0.0633 0.0000
__________________________________________________________________________________________________
</TABLE>
-8-
<PAGE>
<TABLE>
<CAPTION>
DISTRIBU-
TIONS FROM TOTAL NET ASSET, NET ASSETS PORTFOLIO
PERIOD CAPITAL DISTRIBU- END OF TOTAL END OF TURNOVER
ENDING GAINS TIONS PERIOD RETURN PERIOD RATE
__________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
10-31-95 $0.0698 $0.6178 $12.62 10.66% $28,070,371 22.91%
10-31-94 0.0090 0.5512 11.99 -2.06% 29,045,728 20.58%
10-31-93 0.0916 0.6563 12.80 10.71% 29,408,110 11.62%
10-31-92 0.0921 0.7089 12.20 6.51% 20,295,896 25.30%
10-31-91 0.0654 0.7216 12.14 9.85% 18,382,636 53.40%
10-31-90 0.0237 0.6638 11.74 6.00% 18,766,449 58.52%
10-31-89 0.0925 0.7636 11.72 6.67% 19,173,145 45.25%
10-31-88 0.0000 0.6386 11.72 12.02% 20,058,295 31.44%
10-31-87(e) 0.0760 0.8071 11.08 -1.95% 14,276,600 19.18%
10-31-86 0.0760 0.8079 11.05 -0.95% 14,165,161 18.73%
10-31-85 0.0255 0.7975 11.93 22.83% 8,861,258 24.20%
__________________________________________________________________________________________________
10-31-95 $0.0000 $0.5583 $10.26 11.92% $7,190,125 543.15%
10-31-94 0.2710 0.7785 9.71 -2.71% 5,273,407 306.79%
10-31-93 0.4523 0.9402 10.75 7.73% 5,696,555 260.22%
10-31-92 0.0864 0.7452 10.90 9.74% 5,634,372 227.45%
10-31-91 0.0000 0.7056 10.63 13.51% 5,485,830 115.76%
10-31-90 0.0222 0.7062 10.01 4.43% 2,123,203 73.76%
10-31-89(d) 0.0000 0.5606 10.27 10.43%(b) 1,356,008 86.60%
__________________________________________________________________________________________________
10-31-95 $0.0000 $0.5210 $10.66 9.12% $8,426,199 230.43%
10-31-94 0.1120 0.5802 10.27 -1.78% 9,249,212 76.09%
10-31-93 0.0766 0.5614 11.04 6.71% 11,217,912 81.74%
10-31-92 0.0683 0.6522 10.91 8.70% 8,958,757 105.52%
10-31-91 0.0018 0.6764 10.69 11.17% 3,748,244 114.81%
10-31-90 0.0106 0.6842 10.24 6.40% 2,069,435 87.71%
10-31-89(d) 0.0000 0.5689 10.28 11.15%(b) 1,717,128 40.42%
_________________________________________________________________________________________________
10-31-95 $0.0000 $0.0521 $1.00 5.30% $54,714,219 N/A
10-31-94 0.0000 0.0339 1.00 3.28% 32,382,552 N/A
10-31-93 0.0000 0.0250 1.00 2.53% 14,784,493 N/A
10-31-92 0.0000 0.0332 1.00 3.36% 12,395,326 N/A
10-31-91 0.0000 0.0576 1.00 13.76% 14,906,733 N/A
10-31-90 0.0000 0.0737 1.00 7.62% 21,405,713 N/A
10-31-89(d) 0.0000 0.0633 1.00 10.05%(b) 10,735,032 N/A
__________________________________________________________________________________________________
</TABLE>
-9-
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
RATIOS AND SUPPLEMENTAL DATA
<TABLE>
<CAPTION>
RATIOS IF FEES HAD NOT BEEN
WAIVED AND/OR REIMBURSED
---------------------------
RATIO OF NET RATIO OF NET
RATIO OF INVESTMENT RATIO OF INVESTMENT
EXPENSES INCOME TO EXPENSES INCOME TO
PERIOD TO AVERAGE AVERAGE TO AVERAGE AVERAGE
ENDING NET ASSETS NET ASSETS NET ASSETS NET ASSETS
_______________________________________________________________________________
<S> <C> <C> <C> <C>
THE CRABBE HUSON SPECIAL FUND, INC.
10-31-95 1.40% 1.95% 1.40% 1.95%
10-31-94 1.44% 0.39% 1.54% 0.29%
10-31-93 1.57% -0.73% 1.59% -0.75%
10-31-92 1.74% -0.25% 2.18% -0.69%
10-31-91 1.92% 0.32% 2.40% -0.15%
10-31-90 2.00% 1.55% 2.86% 0.70%
10-31-89 2.00% 1.96% 2.44% 1.53%
10-31-88 3.94% 3.34% N/A N/A
10-31-87(a) 2.60%(b) 0.05%(b) N/A N/A
_______________________________________________________________________________
THE CRABBE HUSON REAL ESTATE INVESTMENT FUND, INC.
10-31-95 1.50% 4.59% 1.89% 4.19%
10-31-94(c) 1.01%(b) 6.30%(b) 2.03%(b) 5.28%(b)
_______________________________________________________________________________
THE CRABBE HUSON EQUITY FUND, INC.
10-31-95 1.40% 1.30% N/A N/A
10-31-94 1.45% 1.18% 1.56% 1.06%
10-31-93 1.49% 0.67% 1.64% 0.52%
10-31-92 1.55% 1.57% 1.93% 1.18%
10-31-91 1.84% 1.60% 2.41% 1.03%
10-31-90 1.93% 2.56% 2.66% 1.83%
10-31-89(d) 1.69%(b) 3.98%(b) 1.97%(b) 3.68%(b)
_______________________________________________________________________________
THE CRABBE HUSON ASSET ALLOCATION FUND, INC.
10-31-95 1.48% 2.57% 1.49% 2.56%
10-31-94 1.44% 2.30% 1.52% 2.22%
10-31-93 1.46% 1.85% 1.54% 1.77%
10-31-92 1.52% 3.02% 1.62% 2.92%
10-31-91 1.76% 3.97% 1.79% 3.94%
10-31-90 1.90% 4.51% 1.93% 4.49%
10-31-89(d) 1.91%(b) 5.02%(b) 1.93%(b) 5.00%(b)
_______________________________________________________________________________
</TABLE>
NOTES TO FINANCIAL HIGHLIGHTS
(a) Commencement of operations - 4/9/87.
(b) Computed on an annualized basis.
(c) Commencemnt of operations - 4/4/94.
(d) Commencement of operations - 1/31/89.
(e) The Fund's Fiscal Year was changed from 9/30 to 10/31,
effective 10/31/87, which represents a conformed 12-month period.
N/A Not Applicable
-10-
<PAGE>
<TABLE>
<CAPTION>
RATIO IF FEES HAD NOT BEEN
WAIVED AND/OR REIMBURSED
--------------------------
RATIO OF NET RATIO OF NET
RATIO OF INVESTMENT RATIO OF INVESTMENT
EXPENSES INCOME TO EXPENSES INCOME TO
PERIOD TO AVERAGE AVERAGE TO AVERAGE AVERAGE
ENDING NET ASSETS NET ASSETS NET ASSETS NET ASSETS
_______________________________________________________________________________
<S> <C> <C> <C> <C>
THE OREGON MUNICIPAL BOND FUND, INC.
10-31-95 0.98% 4.45% 1.08% 4.35%
10-31-94 0.98% 4.37% 1.08% 4.26%
10-31-93 1.05% 4.51% 1.09% 4.46%
10-31-92 1.11% 5.04% 1.13% 5.01%
10-31-91 1.21% 5.36% 1.24% 5.34%
10-31-90 1.38% 5.41% 1.55% 5.23%
10-31-89 1.04% 5.82% 1.16% 5.71%
10-31-88 1.21% 5.53% 1.32% 5.42%
10-31-87(e) 1.14% 5.66% N/A N/A
9-30-87 1.31% 6.43% N/A N/A
9-30-86 1.06% 6.34% N/A N/A
_______________________________________________________________________________
THE CRABBE HUSON INCOME FUND, INC.
10-31-95 0.80% 5.47% 1.95% 4.32%
10-31-94 0.80% 4.92% 2.16% 3.56%
10-31-93 0.81% 4.34% 1.96% 3.19%
10-31-92 0.90% 6.09% 1.94% 5.06%
10-31-91 0.98% 6.82% 2.42% 5.38%
10-31-90 1.51% 6.89% 3.07% 5.33%
10-31-89(d) 1.15%(b) 7.23%(b) 4.56%(b) 3.81%(b)
_______________________________________________________________________________
THE CRABBE HUSON U.S. GOVERNMENT INCOME FUND, INC.
10-31-95 0.75% 4.85% 1.46% 4.14%
10-31-94 0.75% 4.39% 1.47% 3.66%
10-31-93 0.75% 4.33% 1.26% 3.81%
10-31-92 0.80% 5.35% 1.52% 4.63%
10-31-91 0.96% 6.44% 2.15% 5.25%
10-31-90 1.42% 6.72% 2.84% 5.31%
10-31-89(d) 1.14%(b) 7.35%(b) 3.40%(b) 5.09%(b)
_______________________________________________________________________________
THE CRABBE HUSON U.S. GOVERNMENT MONEY MARKET FUND, INC.
10-31-95 0.70% 5.21% 1.16% 4.75%
10-31-94 0.70% 3.39% 1.29% 2.81%
10-31-93 0.70% 2.51% 1.32% 1.88%
10-31-92 0.75% 3.32% 1.09% 2.98%
10-31-91 0.81% 5.76% 1.18% 5.38%
10-31-90 0.80% 7.57% 1.33% 7.04%
10-31-89(d) 0.60%(b) 8.43%(b) 1.34%(b) 7.69%(b)
_______________________________________________________________________________
</TABLE>
-11-
<PAGE>
PERFORMANCE INFORMATION
The annual report for the Funds contains additional information about the
performance of the Funds, and is available from the Distributor upon request and
without charge.
INVESTMENT OBJECTIVES AND POLICIES
The eight Funds described in this Prospectus have different investment
objectives that will largely determine the type of investments in each Fund's
portfolio. However, there is no assurance that the Funds will achieve their
investment objectives. Except for the Real Estate Fund, each Fund's policies,
including its investment objective, may be changed without shareholder vote to
the extent they are not described in this Prospectus under "Fundamental
Policies" or under "Investment Restrictions" in the Statement of Additional
Information. The shareholders of the Real Estate Fund must approve a change in
the Fund's investment objective.
THE CRABBE HUSON SPECIAL FUND, INC. is an open-end, diversified regulated
investment company incorporated under the laws of Oregon on January 29, 1987.
It began operations on April 9, 1987.
The Special Fund seeks long-term growth of capital through a flexible
policy of investing in a diversified portfolio of selected domestic and foreign
securities representing "special" situations, as described below (principally,
common stocks and, secondarily, preferred stocks and bonds). The production of
current income is secondary to the primary objective.
The Special Fund uses a basic value, contrarian approach in selecting its
investments. In its selection process, the Fund puts primary emphasis on
balance sheet and cash flow analysis and on the relationship between the market
price of a security and its value as a share of an ongoing business. This
approach, while not unique, contrasts with certain other methods of investment
analysis, which rely upon market timing, technical analysis, earnings forecasts,
or economic predictions.
The Special Fund seeks to invest up to 100%, and under normal conditions at
least 75%, of its assets in securities of companies that have small (under
$1,000,000,000) to medium (from $1,000,000,000 to $3,000,000,000) market
capitalization. These investments represent "special" situations or
opportunities that arise when companies, whose long-term financial structure is
intact, run into short-term difficulties that present an opportunity to buy
these companies' stocks at substantial discounts. The Special Fund's basic
value approach is based on the Adviser's belief that the securities of many
companies often sell at a discount from the securities' estimated theoretical
(intrinsic) value. The Fund attempts to identify and invest in such undervalued
securities, anticipating that capital appreciation will be realized as the
securities' prices rise to their estimated intrinsic value.
The Special Fund's investment policies are adapted to changing market
conditions. The Adviser believes that common stock will generally, over the
long-term, offer the greatest
-12-
<PAGE>
potential for capital appreciation and preservation of purchasing power, and
common stocks will usually constitute at least 75% of the Fund's investment
portfolio. However, for temporary defensive purposes, the Special Fund may
reduce its ownership of common stock if, in the opinion of the Fund, it would be
assuming undue risk in its ownership of common stock. In such a situation, the
Fund could invest up to 100% of its assets in fixed income securities, cash and
cash equivalents. The fixed income securities in which the Special Fund will
invest in such a situation shall consist of corporate debt securities (bonds,
debentures and notes), asset-backed securities, bank obligations, collateralized
bonds, loan and mortgage obligations, commercial paper, preferred stocks,
repurchase agreements, savings and loan obligations and U.S. Government and
agency obligations. At no time will the Fund have in excess of 20% of its total
assets invested in fixed income securities rated below investment grade (BBB by
Standard and Poor's ("S&P") and Baa by Moody's Investors Service ("Moody's")) or
in excess of 5% of its total assets invested in fixed income securities that are
unrated. The maturities of the fixed income securities shall be three years or
less.
The Special Fund may from time to time increase its assets for investment
through bank borrowing. Such bank borrowing may be collateralized by pledging
the Fund's portfolio securities to the lending bank. In no case will such
borrowings exceed one-third of the value of the Fund's total assets immediately
after any such borrowing. If, for any reason, the current value of the Special
Fund's total assets falls below an amount equal to three times the amount of its
indebtedness from money borrowed, the Fund will, within three days (not
including Saturdays, Sundays and holidays), reduce its indebtedness to the
extent necessary to satisfy the one-third test.
Using borrowed funds to increase the amount of securities that may be
purchased is known as leverage. Investment gains realized with borrowed funds
that exceed the interest cost for such borrowings will cause the net asset value
of Fund shares to increase more dramatically than would otherwise be the case.
On the other hand, leverage can cause the net asset value of Fund shares to
decrease more rapidly than normal if the securities purchased with borrowed
money decline in value or if the investment performance of such securities does
not cover the cost of borrowing.
By itself, the Special Fund does not constitute a balanced investment plan.
Securities that the Adviser believes have the greatest growth potential may be
regarded as speculative, and an investment in the Fund may involve greater risk
than is inherent in other mutual funds. The Special Fund's focus on small to
medium market capitalization stocks may cause it to be more volatile than other
funds with different strategies. Because the Fund invests primarily in common
stocks, it may be appropriate only for investors who can afford a longer term
investment horizon or perspective. For a further description of the risks
associated with an investment in the Special Fund, please see "SPECIAL RISK
FACTORS TO BE CONSIDERED."
The Special Fund also intends to sell securities "short." The technique of
selling short is subject to certain restrictions, and involves certain risks.
See "SPECIAL RISK FACTORS TO BE CONSIDERED--Short Sales."
-13-
<PAGE>
INVESTMENT RESTRICTIONS
The Special Fund's investment restrictions prohibit, among other things,
the investment of more than 5% of the Fund's total assets in the securities of
any one issuer, and prohibit the investment of more than 25% of the Fund's total
assets in any one industry (except U.S. Government securities). In addition to
common stock, the assets of the Special Fund will sometimes be invested in
convertible and nonconvertible preferred stocks and bonds, which may or may not
be rated. However, no more than 20% of the Special Fund's total assets may be
invested in fixed income or convertible securities which are rated below the
fourth highest grade by Moody's and S&P and no more than 5% of the Fund's total
assets may be invested in unrated fixed income or convertible securities. It
should be noted that obligations rated below the fourth highest grade (Baa by
Moody's or BBB by S&P) are considered to have speculative characteristics. See
"SPECIAL RISK FACTORS TO BE CONSIDERED." The Special Fund's investment
restrictions and policies are more fully described under "FUNDAMENTAL POLICIES"
and in the Statement of Additional Information.
DIVIDENDS AND DISTRIBUTIONS
The Special Fund expects to declare and distribute to shareholders each
December, substantially all of its net investment income and net realized
capital gains, if any. The amount distributed will vary according to the income
received from securities held by the Fund and capital gains realized from the
sale of securities.
All distributions are paid and reinvested in additional shares of the
Special Fund at net asset value at the close of business on the record date,
unless the shareholder has elected to receive payments in cash.
THE CRABBE HUSON REAL ESTATE INVESTMENT FUND, INC. is an open-end, diversified
regulated investment company incorporated under the laws of Oregon on December
29, 1993. It began operations on April 4, 1994.
INVESTMENT OBJECTIVE AND POLICIES
The Real Estate Fund's investment objective is to provide for its
shareholders capital appreciation and income. The Real Estate Fund seeks to
achieve this objective through a policy of investing in a diversified portfolio
consisting primarily of equity securities of REITs and other real estate
industry companies and, to a lesser extent, in debt securities of such companies
and in mortgage-backed securities.
The Real Estate Fund uses a basic value, contrarian approach in selecting
investments to the extent that such an approach is feasible in the real estate
market. In its selection process, the Real Estate Fund puts primary emphasis on
balance sheet and cash flow analysis and the relationship between the market
price of the security and its value as a share of an ongoing business, and/or on
securities which offer a high level of current income. This
-14-
<PAGE>
approach, while not unique, contrasts with certain other methods of investment
analysis which rely upon market timing, technical analysis, earnings forecasts,
or economic predictions. This Fund frequently focuses on companies or
industries that appear to be out of favor with the majority of the investment
community.
Under normal circumstances, at least 75% of the Real Estate Fund's total
assets will be invested in equity securities of REITs and other real estate
industry companies. For purposes of the Real Estate Fund's investments, a "real
estate industry company" is a company that derives at least 50% of its gross
revenues or net profits from either (a) the ownership, development,
construction, financing, management or sale of commercial, industrial or
residential real estate or (b) products or services related to the real estate
industry, like building supplies or mortgage servicing. The equity securities
of real estate industry companies in which the Real Estate Fund will invest
consist of common stock, shares of beneficial interests of real estate
investment trusts and securities with common stock characteristics, such as
preferred stock and debt securities convertible into common stock ("Real Estate
Equity Securities"). Real Estate Equity Securities are subject to unique risks.
See "SPECIAL RISK FACTORS TO BE CONSIDERED" for a discussion of these risks.
The Real Estate Fund may also invest up to 25% of its total assets in (a)
debt securities of real estate industry companies, (b) mortgage-backed
securities, such as mortgage pass-through certificates, real estate mortgage
investment conduit ("REMIC") certificates and collateralized mortgage
obligations ("CMOs"), and (c) short-term investments (as defined below). For
purposes of any investment in debt securities the Real Estate Fund does not
intend to invest any of its assets in debt securities that are unrated or that
are rated below Baa by Moody's or BBB by S&P. Investing in mortgage-backed
securities involves certain unique risks in addition to those associated with
investing in the real estate industry in general. These risks include the
failure of a counter-party to meet its commitments, adverse interest rate
changes and the effect of prepayments on mortgage cash flows and returns. For a
more complete discussion concerning mortgage-backed securities, see "SPECIAL
RISK FACTORS TO BE CONSIDERED."
Short-term investments that the Real Estate Fund may invest in consist of
the following: corporate commercial paper and other short-term commercial
obligations, in each case rated or issued by companies with similar securities
outstanding that are rated Prime-1, Aa or better by Moody's or A-1, AA or better
by S&P; obligations (including certificates of deposit, time deposits, demand
deposits and banker's acceptances) of banks with securities outstanding that are
rated Prime-1, Aa or better by Moody's, or A-1, AA or better by S&P; obligations
issued or guaranteed by the U.S. Government or its agencies or instrumentalities
with remaining maturities not exceeding 18 months; and repurchase agreements.
The Real Estate Fund's investment policies will be adapted to changing
market conditions. When as a result of market conditions the Adviser determines
that a temporary defensive position is warranted to help preserve capital, the
Real Estate Fund may invest up to 100% of its assets in fixed income securities,
cash and cash equivalents. The fixed income
-15-
<PAGE>
securities in which the Real Estate Fund will invest in such a situation shall
consist of corporate debt securities (bonds, debentures and notes), asset-backed
securities, bank obligations, collateralized bonds, loan and mortgage
obligations, commercial paper, preferred stocks, repurchase agreements, savings
and loan obligations and U.S. Government and agency obligations. The fixed
income securities will be rated investment grade or higher (BBB by S&P and Baa
by Moody's) and will have maturities of three years or less. When the Real
Estate Fund assumes a temporary defensive position, it is not invested in
securities designed to achieve its investment objective.
A more complete discussion concerning the investment objectives and
policies of the Real Estate Fund is included under "FUNDAMENTAL POLICIES" and in
the Statement of Additional Information.
INVESTMENT RESTRICTIONS
A description of the investment restrictions and policies of the Real
Estate Fund is included under "FUNDAMENTAL POLICIES" and in the Statement of
Additional Information.
DIVIDENDS AND DISTRIBUTIONS
The Real Estate Fund expects to declare and distribute to shareholders
dividends from net investment income on the last business day of each fiscal
quarter. Net capital gains realized by the Real Estate Fund, if any, will be
declared and distributed each December. The amount distributed will vary
according to the income received from securities held by the Real Estate Fund
and capital gains realized from the sale of securities.
All distributions are paid and reinvested in additional shares of the Real
Estate Fund at net asset value at the close of business on the record date,
unless the shareholder has elected to receive payments in cash.
THE CRABBE HUSON EQUITY FUND, INC. is an open-end, diversified regulated
investment company incorporated under the laws of Oregon on August 10, 1988. It
began operations on January 31, 1989.
The Equity Fund seeks long-term appreciation of shareholders' capital. The
Equity Fund will seek to achieve this objective by investing in a carefully
chosen portfolio consisting primarily of common stock. The Adviser will employ
a basic value, contrarian approach in selecting securities for purchase for the
Equity Fund's portfolio. It will focus its investments in widely and actively
traded stocks with large market capitalizations (primarily in excess of
$3,000,000,000). In the selection process, the Adviser places primary emphasis
on income statement and balance sheet analysis, and on the relationship between
the market price of a security and the Adviser's opinion of its underlying
value. This approach contrasts with certain other methods of investment
analysis, which rely upon market timing, technical analysis,
-16-
<PAGE>
earnings forecasts or economic predictions. This Fund frequently focuses on
companies or industries that appear to be out of favor with the majority of the
investment community.
Under normal market conditions, the Equity Fund intends to have at least
65% of its total assets invested in common stock. The Equity Fund will purchase
and hold for investment common stock of both domestic and foreign corporations,
and may also purchase convertible and nonconvertible preferred stocks and bonds
or debentures. The Fund may invest up to 35% of its total assets in foreign
securities. Although the Equity Fund intends to adapt to changing market
conditions, the Adviser believes that common stock will generally, over the
long-term, offer the greatest potential for capital appreciation. Therefore,
the Equity Fund may be appropriate for investors who can afford a longer term
investment horizon or perspective.
For temporary defensive purposes, the Equity Fund may reduce its ownership
of common stock substantially below the 65% level. When, as a result of market
conditions, the Adviser determines that a temporary defensive position is
warranted to help preserve capital, the Fund may, without limit, invest up to
100% of its assets in fixed income securities, cash, cash equivalents, and money
market instruments. The fixed income securities in which the Equity Fund will
invest in such a situation shall consist of corporate debt securities (bonds,
debentures and notes), asset-backed securities, bank obligations, collateralized
bonds, loan and mortgage obligations, commercial paper, preferred stocks,
repurchase agreements, savings and loan obligations and U.S. Government and
agency obligations. At no time will the Fund have in excess of 20% of its total
assets invested in fixed income securities rated below BBB by S&P and Baa by
Moody's or 5% of its total assets invested in fixed income securities that are
unrated. The maturities of the fixed income securities shall be three years or
less. In addition, for defensive purposes, the Equity Fund may purchase or
write covered put or call options on individual securities or widely traded
stock index futures. See "SPECIAL RISK FACTORS TO BE CONSIDERED."
INVESTMENT RESTRICTIONS
The Equity Fund's investment restrictions prohibit, among other things, the
investment of more than 5% of the Fund's total assets in the securities of any
one issuer, and prohibit the investment of more than 25% of the Fund's total
assets in any one industry (except U.S. Government securities). The investment
restrictions and policies of the Equity Fund are more fully described under
"FUNDAMENTAL POLICIES" and in the Statement of Additional Information.
DIVIDENDS AND DISTRIBUTIONS
The Equity Fund expects to declare and distribute to shareholders each
December, substantially all of its net investment income and net realized
capital gains, if any. The amount distributed will vary according to the income
received from securities held by the Fund and capital gains realized from the
sale of securities.
-17-
<PAGE>
All distributions are paid and reinvested in additional shares of the
Equity Fund at net asset value at the close of business on the record date,
unless the shareholder has elected to receive payments in cash.
THE CRABBE HUSON ASSET ALLOCATION FUND, INC. is an open-end, diversified
regulated investment company incorporated under the laws of Oregon on August 10,
1988. It began operations on January 31, 1989.
The Asset Allocation Fund seeks to provide for its shareholders
preservation of capital, capital appreciation and income. The Asset Allocation
Fund seeks to achieve these objectives by a flexible policy of investing in a
select portfolio of common stocks, fixed income securities and cash or cash
equivalents. Depending upon economic and market conditions, the Asset
Allocation Fund may invest as little as 20%, or as much as 75%, of its entire
portfolio in common stocks. The Adviser will purchase common stocks which, in
its opinion, have the greatest potential for capital appreciation. The
remaining portion of the portfolio will be invested in fixed income securities,
cash, or cash equivalents. The fixed income securities that the Asset
Allocation Fund will invest in shall consist of corporate debt securities
(bonds, debentures and notes) asset-backed securities, bank obligations,
collateralized bonds, loan and mortgage obligations, commercial paper, preferred
stocks, repurchase agreements, savings and loan obligations and U.S. Government
and agency obligations. There are no limitations on the average maturity of the
Fund's Portfolio of fixed income securities. Securities will be selected on the
basis of the Adviser's assessments of interest rate trends and the liquidity of
various instruments under prevailing market conditions.
No more than 20% of the Asset Allocation Fund's total assets may be
invested in fixed income or convertible securities which are rated lower than
the fourth highest grade by Moody's and S&P, and no more than 5% of its total
assets may be invested in unrated fixed income or convertible securities that
may be below investment grade. For a discussion of the fixed income and
convertible securities to be held by the Asset Allocation Fund, see
"FUNDAMENTAL POLICIES." It should be noted that obligations rated lower
than the fourth highest grade (Baa by Moody's or BBB by S&P), commonly
referred to as "junk bonds," are considered to have risks that make an
investment in such obligations predominantly speculative. See "SPECIAL RISK
FACTORS TO BE CONSIDERED."
The Adviser will employ a basic value, contrarian approach in selecting
purchases for the Asset Allocation Fund's equity portfolio. In the selection
process, the Adviser places primary emphasis on income statement and balance
sheet analysis, and the relationship between the market price of a security and
the Adviser's opinion of its underlying value. This approach contrasts with
certain other methods of investment analysis, which rely upon market timing,
technical analysis, earnings forecasts or economic predictions. This Fund
frequently focuses on companies or industries that appear to be out of favor
with the majority of the investment community.
Many factors will be considered in determining what portion of the
portfolio will be invested in stocks, fixed income securities, or cash and cash
equivalents. The Adviser will constantly monitor and adjust its weighting of
investments in any particular area to adapt to changing market and economic
conditions. The Fund's assets will be primarily invested in fixed income
securities if it is more likely to meet its objectives through such investments
rather than through investments in common stocks. Similarly, the Adviser will
primarily invest the Asset Allocation Fund's assets in cash and cash equivalents
if in its view market conditions become uncertain, such as in periods of rapidly
rising interest rates.
-18-
<PAGE>
Since its inception, the Asset Allocation Fund has generally invested its
net assets 45% to 55% in fixed income securities, 25% to 45% in common stocks,
and 5% to 30% in cash, cash equivalents or other money market instruments.
However, for temporary defensive purposes, the Fund may invest up to 100% of its
assets in fixed income securities, cash, cash equivalents or other money market
instruments. The Asset Allocation Fund may not invest more than 75% of its
total net assets in common stocks. For a description of the risks associated
with these types of investments, please see "SPECIAL RISK FACTORS TO BE
CONSIDERED" in this Prospectus.
Although it is the general policy of the Asset Allocation Fund to invest
for long-term capital appreciation and a modest amount of income, advantage will
be taken of opportunities to earn short-term profits if the Adviser believes
that such a strategy will benefit the Asset Allocation Fund's overall objective
in light of the increased tax and brokerage expenses associated with such a
strategy.
INVESTMENT RESTRICTIONS
The Asset Allocation Fund's investment restrictions include, among others,
a prohibition on investing more than 5% of its total assets in the securities of
any one issuer (except U.S. Government securities), or 25% of its total assets
in a single industry. The investment restrictions and policies of the Asset
Allocation Fund are more fully described under "FUNDAMENTAL POLICIES" in this
Prospectus and in the Statement of Additional Information.
DIVIDENDS AND DISTRIBUTIONS
The Asset Allocation Fund expects to declare and distribute dividends from
net investment income on the last business day of each fiscal quarter. Net
capital gains realized by the Asset Allocation Fund, if any, are declared and
distributed each December. The amount distributed will vary according to the
income received from securities held by the Asset Allocation Fund and capital
gains realized from the sale of securities.
All distributions are paid and reinvested in additional shares of the Asset
Allocation Fund at net asset value at the close of business on the record date,
unless the shareholder has elected to receive payments in cash.
THE OREGON MUNICIPAL BOND FUND, INC. is an open-end, non-diversified regulated
investment company incorporated under the laws of Oregon on October 24, 1983.
It began operations on October 3, 1984.
The Oregon Bond Fund's investment objective is to provide its shareholders
with as high a level of income exempt from federal and Oregon income taxes as is
consistent with prudent investment management and preservation of capital. The
Fund seeks to achieve this objective
-19-
<PAGE>
by investing primarily in a professionally managed portfolio of municipal
securities (including private activity bonds), the interest on which, in the
opinion of counsel for the issuer, is exempt from federal and Oregon income
taxes. It is the Fund's general policy to avoid purchasing bonds on which the
interest is subject to the federal alternative minimum tax. The Fund may,
however, purchase such bonds when their yield is sufficiently above the yield on
bonds not so taxed to compensate for the adverse tax consequences. For purposes
of its investment policy, the Fund considers a "bond" to be any municipal debt
security.
Under normal market conditions, at least 80% of the Oregon Bond Fund's
total assets will be invested in municipal securities, and at least 65% of its
total assets will be invested in municipal bonds issued by the state of Oregon
and its political subdivisions, agencies, authorities and instrumentalities.
Securities that are subject to the federal alternative minimum tax will not be
included in this calculation.
Municipal securities purchased for the Oregon Bond Fund's portfolio must,
at the time of purchase, be "investment-grade" municipal securities, rated no
lower than Baa by Moody's or BBB by S&P, or unrated municipal securities which
management believes to be comparable in quality to investment-grade municipal
securities. If any of the Oregon Bond Fund's securities fall below "investment
grade," the Fund will typically dispose of such securities, but it is not
required to do so. For a discussion concerning the rise factors associated with
municipal securities to be purchased by the Oregon Bond Fund, see "FUNDAMENTAL
POLICIES" and "SPECIAL RISK FACTORS TO BE CONSIDERED" in this Prospectus.
Under normal market conditions, the Oregon Bond Fund may invest up to 20%
of its net assets in the following categories of investments:
1. Municipal securities issued by entities other than the state of Oregon
or its political subdivisions, agencies, authorities, and
instrumentalities.
2. Notes of municipal issuers which have, at the time of purchase, an
issue of outstanding municipal bonds rated within the four highest
grades by Moody's or S&P and which are, if unrated, in the opinion of
the Adviser, of a quality comparable to municipal bonds rated in one
of the four highest categories by Moody's or S&P.
3. Temporary investments in fixed income obligations, the interest on
which is subject to federal income tax and which may be subject to
Oregon income tax. Investments in such taxable obligations will be in
short-term (less than one year) securities and may consist of
obligations issued or guaranteed by the United States Government, its
agencies, instrumentalities or authorities; commercial paper rated
Prime-1 by Moody's; certificates of deposit of United States banks
(including commercial banks and savings and loan associations) with
assets of at least $1 billion or more; and repurchase agreements in
respect of any of the foregoing with securities dealers or banks.
-20-
<PAGE>
Where market conditions, due to rising interest rates or other adverse
factors, would cause serious erosion of portfolio value, the Oregon Bond Fund's
assets may, on a temporary basis, as a defensive measure to preserve net asset
value, be substantially invested in temporary investments of the types described
above. There are specific risks involved in investments in municipal
securities, particularly those concentrated among issuers in a specific
geographic location. See "SPECIAL RISK FACTORS TO BE CONSIDERED" in this
Prospectus and "ADDITIONAL INFORMATION REGARDING CERTAIN INVESTMENTS BY THE
FUNDS" in the Statement of Additional Information.
In the last fiscal year, the average percentage of the Oregon Bond Fund's
assets invested in bonds of each rating was:
AAA 58.74% Non-rated 14.60%
AA 18.77% Cash 1.37%
A 6.52%
INVESTMENT RESTRICTIONS
The Oregon Bond Fund has adopted a number of restrictions on the manner in
which its assets may be invested. The investment restrictions and policies of
the Oregon Bond Fund are more fully described under "FUNDAMENTAL POLICIES" in
this Prospectus and in the Statement of Additional Information.
The Oregon Bond Fund's investment restrictions prohibits it from investing
in securities subject to legal or contractual restrictions on resale or in
repurchase agreements with a maturity of more than seven days if, as a result of
such investment, more than 10% of the Oregon Bond Fund's assets would be
invested in illiquid securities, including such agreements. The Oregon Bond
Fund's investment restrictions also prohibit it from investing more than 10% of
total assets in securities of issuers which, with their predecessors, have a
record of less than three years of continuous operation.
DIVIDENDS AND DISTRIBUTIONS
The Oregon Bond Fund declares dividends from its net investment income each
business day. The net investment income for Saturdays, Sundays, and holidays is
declared as a dividend on the next business day. Declared income dividends are
accrued through the last business day of each month and are distributed on that
date. If an investor requests redemption of all the shares in the investor's
account at any time during the month, all income dividends declared to the date
of redemption are paid, together with the proceeds of the redemption. There is
a possibility that shareholders may lose the tax-exempt status on the accrued
income of a municipal bond if they redeem their shares before a dividend has
been declared. All income dividends will automatically be reinvested in
additional shares of the Oregon Bond Fund at the
-21-
<PAGE>
net asset value next determined following declaration of such income dividend,
unless an investor has elected to receive dividends in cash.
Net capital gains realized by the Oregon Bond Fund, if any, will be
declared and distributed each December. Capital gains distributions are
reinvested in additional shares of the Fund at the net asset value next
determined following declaration of such capital gains distribution, unless an
investor has notified the Oregon Bond Fund in writing of his election to receive
such distributions in cash.
THE CRABBE HUSON INCOME FUND, INC. is an open-end, diversified regulated
investment company incorporated under the laws of Oregon on August 10, 1988. It
began operations on January 31, 1989.
The Income Fund seeks to provide shareholders a high level of current
income by investing in a diversified portfolio of fixed income securities (such
as bonds and notes of corporate and government issuers) and preferred or
convertible preferred stock while, at the same time, attempting to preserve
capital by varying the overall average maturity of the Income Fund's portfolio.
There are no limitations on the average maturity of the Income Fund's
portfolio. In general, the Income Fund will seek to lengthen the average
maturity of its portfolio as interest rates rise, and will shorten the average
maturity as interest rates decline.
The Income Fund invests in a variety of fixed income securities, including
domestic and foreign corporate bonds, debentures, convertible bonds and
debentures, foreign and U.S. Government securities, preferred and convertible
preferred stock, and short-term money market instruments.
At least 80% of the Income Fund's total assets must be invested in (1) debt
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities; (2) investment-grade debt securities, including convertible
securities and preferred or convertible preferred stock, which are rated "A" or
higher by the major recognized bond services (for a description of ratings, see
Appendix A); or (3) cash and cash equivalents (such as certificates of deposit,
repurchase agreements maturing in one week or less, and bankers' acceptances).
No more than 20% of the Income Fund's total assets may be invested in fixed
income or convertible securities which are rated lower than the fourth highest
grade by Moody's and S&P, and no more than 5% of the Income Fund's total assets
may be invested in unrated fixed income or convertible securities that may be
below investment grade. For a discussion of the fixed income securities and
convertible securities to be held by the Income Fund, see "FUNDAMENTAL POLICIES"
in this Prospectus It should be noted that obligations rated lower than the
fourth highest grade (Baa by Moody's or BBB by S&P), commonly referred to as
"junk bonds," are considered to have risks which make an investment in such
obligations
-22-
<PAGE>
predominantly speculative. See "SPECIAL RISK FACTORS TO BE CONSIDERED" in this
Prospectus.
It should also be noted that changes in interest rates have an inverse
effect on the value of interest-bearing securities such as those the Income Fund
intends to purchase. Any interest rate increase will decrease the value of the
Income Fund's securities, and therefore its total asset value. This effect
typically is more pronounced on securities having longer maturities.
INVESTMENT RESTRICTIONS
Not more than 5% of the Income Fund's total assets can be invested in the
securities of any one issuer, nor can more than 25% of the Income Fund's total
assets be invested in the securities of a single industry (excluding U.S.
Government securities).
Not more than 35% of the Income Fund's total assets may be invested in
foreign securities. See "SPECIAL RISK FACTORS TO BE CONSIDERED" in this
Prospectus. The investment restrictions and policies of the Income Fund are
more fully described under "FUNDAMENTAL POLICIES" in this Prospectus and in the
Statement of Additional Information.
DIVIDENDS AND DISTRIBUTIONS
The Income Fund declares and distributes dividends from its net investment
income on the last business day of each month. All income dividends will
automatically be reinvested in additional shares of the Income Fund at the net
asset value next determined following declaration of such income dividend,
unless an investor has elected to receive such payments in cash.
Net capital gains realized by the Income Fund, if any, will be declared and
distributed each December. Capital gains distributions are reinvested in
additional shares of the Income Fund at the net asset value next determined
following the declaration of such a capital gains distribution, unless an
investor has notified the Income Fund in writing of his election to receive such
distributions in cash.
THE CRABBE HUSON U.S. GOVERNMENT INCOME FUND, INC. is an open-end, diversified
regulated investment company incorporated under the laws of Oregon on August 10,
1988. It began operations on January 31, 1989.
The U.S. Government Income Fund seeks to provide shareholders with a high
level of current income and safety of principal. Shares of the Fund are not
issued or guaranteed by the U.S. Government.
The U.S. Government Income Fund intends to concentrate its investments in
direct obligations of the U.S. Government (treasury bills, treasury notes and
treasury bonds), which are supported by the full faith and credit of the United
States. The U.S. Government Income
-23-
<PAGE>
Fund may also invest in indirect obligations of the U.S. Government which are
debt obligations of various agencies or instrumentalities of the U.S.
Government, such as debt obligations issued by the Government National Mortgage
Association ("GNMA") or the Federal National Mortgage Association ("FNMA"),
which are supported only by the credit of the issuing agency or instrumentality.
Under normal circumstances, at least 65% of the value of the U.S. Government
Income Fund's assets will be invested in these U.S. Government securities.
Certain agency obligations, such as those of GNMA, are subject to prepayment by
the issuer and, therefore, to the risk of loss of any premium paid by the U.S.
Government Income Fund to acquire them. The U.S. Government Income Fund may
invest up to 10% of its total assets in repurchase agreements covering direct
obligations of the U.S. Government.
The U.S. Government Income Fund will generally invest in U.S. Government
securities with maturities of less than five years. The U.S. Government Income
Fund will purchase securities based generally on the Adviser's assessment of
interest rate trends. If the Adviser expects interest rates to rise, the U.S.
Government Income Fund may purchase securities with shorter maturities.
Conversely, if interest rates are expected to decline, the U.S. Government
Income Fund may purchase securities with longer maturities.
It should be noted that changes in interest rates have an inverse effect on
the value of interest-bearing securities such as those the U.S. Government
Income Fund intends to purchase. Any interest rate increase will result in a
decrease in the value of the U.S. Government Income Fund's securities, and
therefore in the U.S. Government Income Fund's total asset value. This effect
typically is more pronounced on securities having longer maturities.
INVESTMENT RESTRICTIONS
The investment restrictions and policies of the U.S. Government Income Fund
are more fully described under "FUNDAMENTAL POLICIES" in this Prospectus and in
the Statement of Additional Information. These restrictions include, but are
not limited to, limiting the portion of the portfolio which may be invested in
government securities with maturities of more than five years to 25% of total
assets.
DIVIDENDS AND DISTRIBUTIONS
The U.S. Government Income Fund declares and distributes dividends from its
net investment income on the last business day of each month. All income
dividends will automatically be reinvested in additional shares of the U.S.
Government Income Fund at the net asset value next determined following
declaration of such income dividend, unless an investor has elected to receive
such payments in cash.
Net capital gains realized by the Fund, if any, will be declared and
distributed each December. Capital gains distributions are reinvested in
additional shares of the U.S. Government Income Fund at the net asset value next
determined following
-24-
<PAGE>
declaration of such capital gains distribution, unless an investor has notified
the U.S. Government Income Fund in writing of his election to receive such
distributions in cash.
THE CRABBE HUSON U.S. GOVERNMENT MONEY MARKET FUND, INC. is an open-end,
diversified regulated investment company incorporated under the laws of Oregon
on August 10, 1988. It began operations on January 31, 1989.
The U.S. Government Money Market Fund is designed to provide investors with
a high level of current income while, at the same time, preserving capital and
allowing liquidity by investing in direct or indirect debt obligations of the
United States Government, or its agencies or instrumentalities, and repurchase
agreements with respect to those obligations. Shares of the U.S. Government
Money Market Fund are not issued or guaranteed by the U.S. Government. It is
the U.S. Government Money Market Fund's intent to maintain a constant one dollar
per share net asset value, but there is no assurance the Fund will be able to do
so.
The dollar weighted, average maturity of the U.S. Government Money Market
Fund's portfolio may not exceed 90 days. The U.S. Government Money Market Fund
intends to hold most of the securities in its portfolio until maturity.
However, securities may be traded if, in the opinion of the Adviser, increases
in current income can be achieved consistent with the objectives and
restrictions of the U.S. Government Money Market Fund.
To achieve its objective, the U.S. Government Money Market Fund invests in
short-term money market instruments that are direct or indirect obligations of
the U.S. Government and obligations of various agencies or instrumentalities of
the U.S. Government, such as obligations issued by GNMA or FNMA. Direct
obligations of the U.S. Government are supported by the full faith and credit of
the United States, while obligations of instrumentalities or agencies of the
U.S. Government are generally supported only by the credit of the issuing agency
or instrumentality.
The U.S. Government Money Market Fund intends to invest in treasury bills
which mature within one year of the time of issuance. Historically, these
securities have involved no risk of loss of principal if held to maturity.
Between issuance and maturity, however, the prices of these securities change in
response to changes in market interest rates. Coupon-bearing securities
generate current interest payments, and part of the U.S. Government Money Market
Fund's portfolio return may come from reinvesting interest earned on these
securities.
The U.S. Government Money Market Fund also intends to invest in zero-coupon
securities. Zero-coupon securities can either be direct or indirect obligations
of the U.S. Government. Zero-coupon U.S. Treasury securities are the unmatured
interest coupons and underlying principal portions of U.S. Treasury bonds.
Originally, these securities were created by broker-dealers who bought Treasury
bonds and deposited these securities with a custodian bank. The broker-dealers
then sold receipts representing ownership interests in the coupons or principal
portions of the bonds. Some examples of zero-coupon securities sold through
-25-
<PAGE>
custodial receipt programs are CATS (Certificates of Accrual on Treasury
Securities), TIGRs (Treasury Investment Growth Receipts), and generic Trs
(Treasury Receipts). The Fund does not consider these securities sold through
custodial receipt programs to be governmental securities.
The U.S. Treasury subsequently introduced its own form of zero-coupon
securities called Separate Trading of Registered Interest and Principal of
Securities (STRIPS), through which it exchanges eligible securities for their
component parts and then allows the component parts to trade in book-entry form.
(Book-entry trading eliminates the bank credit risks associated with broker-
dealer sponsored custodial receipt programs.) STRIPS are direct obligations of
the U.S. government and have the same credit risks as other U.S. Treasury
securities.
Principal and interest on bonds issued by the Resolution Funding
Corporation have also been separated and issued as zero-coupon securities. The
U.S. Government and its agencies may issue securities in zero-coupon form.
These securities are referred to as "original issue zero-coupon securities."
INVESTMENT RESTRICTIONS
The investment restrictions and policies of the U.S. Government Money
Market Fund are more fully described under "FUNDAMENTAL POLICIES" and in the
Statement of Additional Information. These restrictions include the prohibition
of purchasing any securities with a maturity greater than one year.
DIVIDENDS AND DISTRIBUTIONS
The U.S. Government Money Market Fund declares dividends from its net
investment income each business day. The net investment income for Saturdays,
Sundays and holidays is declared as a dividend on the prior business day.
Declared dividends are accrued through the last business day of each month and
are distributed on that date. All income dividends will automatically be
reinvested in additional shares of the U.S. Government Money Market Fund at the
net asset value next determined following declaration of such income dividend.
Since the U.S. Government Money Market Fund intends to maintain a constant
one dollar per share net asset value, it does not anticipate the declaration of
capital gains distributions.
FUNDAMENTAL POLICIES
The Funds have adopted a number of fundamental investment policies and
restrictions which may not be changed without a vote of the holders of "a
majority of the voting shares" of a particular Fund, as defined in the 1940 Act.
For a listing of additional policies, see "INVESTMENT RESTRICTIONS" in the
Statement of Additional Information.
ISSUER AND INDUSTRY RESTRICTIONS. The Funds' investment restrictions
(except for those of the Real Estate Fund and the Oregon Bond Fund) include a
prohibition on investing more
-26-
<PAGE>
than 5% of the total assets of any Fund (at the time of the purchase) in the
securities of any one issuer. The Real Estate Fund's investment restrictions
include a prohibition with respect to at least 75% of its total assets from
investing in individual issuers in which it has invested 5% of the value of its
total assets, or investing in more than 10% of the outstanding voting securities
of a single issuer. These policies, however, do not include investments in U.S.
Government securities. Each Fund (except the Real Estate Fund) is also
prohibited from investing more than 25% of its total assets in any one industry.
BORROWING RESTRICTIONS. Each Fund may borrow up to one-third of the value
of its total assets, although each Fund, except the Special Fund, can only
borrow in case of emergency. Further, each Fund (except the Special Fund) is
prohibited from purchasing securities when the total borrowings of the Fund
exceed 5% of the total assets.
FIXED INCOME SECURITIES. The Funds that intend to invest in fixed income
securities on a regular basis (the Asset Allocation, Income, and U.S. Government
Income Funds) will generally invest 80% or more of any assets being invested in
such securities in investment grade securities (those rated BBB or Baa or higher
by Moody's or S&P). The Real Estate Fund may invest in debt securities
(including convertible debt securities of real estate industry companies), but
it does not intend to invest any of its assets in debt securities that are
unrated or that are rated below Baa by Moody's or BBB by S&P. In the event a
debt security purchased by the Real Estate Fund is subsequently downgraded below
Baa by Moody's or BBB by S&P, the Adviser will consider whether the Real Estate
Fund should continue to hold the security. No Fund (other than the Oregon Bond
Fund) may invest more than 20% of its total assets in fixed income securities
that are either unrated or are rated less than Baa by Moody's or BBB by S&P, or
in commercial paper that is rated less than B-1 by Moody's or A- by S&P; not
more than 5% of a Fund's total assets may be invested in fixed income securities
that are unrated (including convertible stock). Securities rated Baa by Moody's
or BBB by S&P are considered medium-grade, neither highly protected nor poorly
secured, and they may contain some elements of uncertainty over any great length
of time and may have certain speculative characteristics. Securities rated
below the fourth highest grade, commonly referred to as "junk bonds," and
unrated securities (if the Adviser has deemed these securities to be of a
similar credit quality as those securities rated below the fourth highest grade)
must be considered predominantly speculative in nature and subject to a
significant risk of default as to payments of either principal or interest, or
both. Due to its unique nature of maintaining a stable net asset value, the
fixed income securities selected by the U.S. Government Money Market Fund must
have received the highest rating (Aaa by Moody's and AAA by S&P) from a least
two rating agencies (or one if only one has rated the obligation) or have
similar credit characteristics if not rated by either of these services. Most
of the instruments issued by Federal Farm Credit Agency, The Federal Home Loan
Bank and similar agencies are not rated but are believed to be of similar credit
quality. A description of the ratings assigned to securities by Moody's and S&P
is attached as Appendix A.
Funds that are permitted to purchase cash equivalents, bank obligations,
and money market instruments will apply the same investment criteria to these
instruments as are applied
-27-
<PAGE>
to fixed income securities. Bank obligations will be purchased only with
respect to banks: (1) that have total assets in excess of one billion dollars;
(2) that are rated A or better by either Moody's or S&P (AA or better with
respect to purchases made by the U.S. Government Money Market Fund); or (3)
whose deposits are insured by the Federal Depository Insurance Corporation.
Each Fund will only invest in securities permitted by the SEC.
WHEN ISSUED AND/OR DELAYED DELIVERY. All of the Funds may purchase and
sell securities on a when-issued and/or delayed-delivery basis. When-issued or
delayed-delivery transactions arise when securities are purchased or sold by a
Fund, with payment and delivery taking place in the future in order to secure
what is considered to be an advantageous price and yield to the Fund at the time
of entering into the transaction. When-issued securities are subject to market
fluctuations, and no interest accrues to a Fund until the time of delivery. The
value of the securities may be less at the time of delivery than the value of
the securities when the commitment was made. When a Fund engages in when-issued
and delayed-delivery transactions, it relies on the buyer or seller, as the case
may be, to consummate the sale. Failure to do so may result in the Fund missing
the opportunity of obtaining a price or yield considered to be advantageous. To
the extent any Fund engages in when-issued and delayed-delivery transactions, it
will do so for the purpose of acquiring portfolio securities consistent with its
investment objectives and policies, and not for the purpose of investment
leverage. No Fund may commit more than 25% of its total assets to the purchase
of when-issued and delayed-delivery securities.
ILLIQUID SECURITIES. No Fund may invest more than 10% of its total assets
in illiquid securities such as repurchase agreements with a maturity in excess
of seven days (other than the Real Estate Fund, which may invest up to 15% of
its total assets in such securities). All Funds are permitted to engage in
repurchase agreements. Repurchase agreements are agreements under which a
person purchases a security and simultaneously commits to resell that security
to the seller (a commercial bank or recognized securities dealer) at an agreed
upon price on an agreed upon date within a number of days (usually not more than
seven) from the date of purchase. The resale price reflects the purchase price
plus an agreed upon market rate of interest that is unrelated to the coupon rate
or maturity of the purchased security. A Fund will engage in repurchase
agreements only with banks or broker-dealers whose obligations would qualify for
direct purchase by that Fund. A repurchase agreement involves the obligation of
the seller to pay an agreed-upon price, which obligation is, in effect, secured
by the value of the underlying security. All repurchase agreements are fully
collateralized and marked to market daily, and may therefore be viewed by the
SEC or the courts as loans collateralized by the underlying security. There are
some risks associated with repurchase agreements. For instance, in the case of
default by the seller, the Fund could incur a loss or, if bankruptcy proceedings
are commenced against the seller, the Fund could incur costs and delays in
realizing upon the collateral.
PUT, CALL OPTIONS. The Special, Real Estate, Equity, Asset Allocation and
Income Funds may invest up to 10% of their total assets in put or call options.
These Funds may write call options on securities they own or have the right to
acquire, and may purchase put and call
-28-
<PAGE>
options on individual securities written by others. No Fund may write an
uncovered put or uncovered call option. Purchasing put or call options involves
greater risks than buying the underlying security because put and call options
expire in a relatively short period of time, which may result in the loss of the
entire investment in the put or call option upon expiration. In addition, if a
Fund writes a covered call option, that Fund may give up some or all of its
opportunity to profit from an increase in the market price of the underlying
security.
INTEREST RATE, STOCK MARKET FUTURES. The Special, Real Estate, Equity,
Asset Allocation and Income Funds may invest up to 10% of their total assets in
interest rate futures, and the Special, Real Estate, Equity and Asset Allocation
Funds may invest up to 10% of their total assets in stock market index futures
(other than over the counter). These Funds may invest in futures for hedging,
rather than investment purposes and may either purchase or sell futures for
hedging purposes. Investments in futures, like purchases of put or call
options, involve a greater risk of loss of the entire investment upon expiration
than purchases of securities. Investments in futures and options are
particularly dependent on the Adviser's ability to accurately predict future
yields and prices. If the Adviser is incorrect in its predictions, if a Fund's
positions are not well correlated to the securities being hedged, or if a Fund
is unable to close out a position due to an illiquid secondary market, the Fund
will be exposed to the risk of loss of the entire investment.
When required by SEC guidelines, each Fund that invests in options, futures
or repurchase agreements, or purchases or sells securities on a when-issued or
delayed-delivery basis, will set aside liquid assets (cash, U.S. government
securities, or liquid, high grade debt obligations) in a segregated account
with the Funds' custodian to secure its potential obligations under those
instruments or agreements.
OTHER INVESTMENT COMPANIES. Each of the Funds other than the U.S.
Government Income Fund and the U.S. Government Money Market Fund may invest in
the securities of other registered investment companies under the circumstances
described under "SECURITIES OF OTHER INVESTMENT COMPANIES" in the Statement of
Additional Information, and to the extent permitted under Section 12 of the 1940
Act (currently, no more than 10% of the total assets of a Fund may be so
invested, no more than 5% of total assets of a Fund may be invested in the
securities of any other single investment company, and no more than 3% of the
total outstanding voting stock of an investment company may be purchased).
Investments in the securities of other registered investment companies are or
may be subject to duplicate expenses resulting from the management of the
portfolio investment company as well as those of the acquiring Fund.
FUNDAMENTAL INVESTMENT POLICY OF REAL ESTATE FUND. Under normal
circumstances, the Real Estate Fund intends to invest at least 75% of its total
assets in equity securities of REITs and other real estate industry companies;
under all circumstances, at least 25% of the Fund's total assets will be
invested in such securities. The Real Estate Fund cannot underwrite securities
issued by other persons.
FUNDAMENTAL INVESTMENT POLICY OF THE OREGON BOND FUND. Under normal
circumstances, the Oregon Bond Fund intends to invest at least 80% of its
total assets in municipal securities, and at least 65% of its total assets in
municipal bonds issued by the state of Oregon and its political subdivisions,
agencies, authorities and instrumentalities.
-29-
<PAGE>
SPECIAL RISK FACTORS TO BE CONSIDERED
Each of the Funds has a different investment objective. However, there can
be no guarantee or assurance that any of the Funds' investment objectives can or
will be met. Each of the Funds is responsible and may be held liable for any
material misstatement, inaccuracy or incomplete disclosure in this Prospectus,
and the registration statement of which it is part, concerning any of the Funds.
Investments of the Funds may involve additional risk, as the Funds may invest in
securities of issuers of which the officers and directors, as a group, may own
beneficially more than five percent of the securities of that issuer.
LIMITED OPERATING HISTORY OF REAL ESTATE FUND. The Real Estate Fund began
operations on April 4, 1994, and has a limited operating history.
FOREIGN SECURITIES. Four of the Funds (the Special, Equity, Asset
Allocation and Income Funds) may invest up to 35% of their total assets in
foreign securities, including securities issued by any foreign government. Such
securities may or may not be listed on a recognized domestic or foreign
exchange. Moreover, investments in foreign securities may be subject to
special, extraordinary risks including, but not limited to, foreign taxes and
restrictions, illiquidity, and fluctuations in currency values. In addition,
the financial information available regarding issuers of foreign debt securities
is frequently not as accurate or complete as would be available for a comparable
domestic issuer. See "SPECIAL INVESTMENT RISKS" in the Statement of Additional
Information.
STRIPPED SECURITIES. The U.S. Government Money Market Fund may invest in
indirect obligations of the U.S. Government, often called "stripped securities."
Such indirect obligations are derivatives of direct U.S. Government obligations.
Stripped securities are issued at a discount to their face value and generally
experience greater price volatility than ordinary debt securities because of the
manner in which the principal and interest components of the underlying U.S.
Government obligation are separated. Privately-stripped securities are not
directly issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, and are therefore not Government Securities as defined in the
1940 Act.
LEVERAGE. The Special Fund may, from time to time, use borrowed money to
increase its portfolio positions. This practice is known as leverage, and it
can cause the net asset value of Fund shares to increase or decrease in value
more dramatically than would otherwise be the case.
RESTRICTED SECURITIES. The Real Estate Fund and The Oregon Bond Fund may
invest up to 5% of its total assets in "restricted securities" (i.e., securities
that would be required to be registered prior to distribution to the public),
excluding restricted securities eligible for resale to certain institutional
investors pursuant to Rule 144A of the Securities Act of 1933. However, no more
than 15% of the Fund's total assets may be invested in restricted securities,
including securities eligible for resale under Rule 144A. In addition, the Real
Estate Fund may invest up to 15% of its net assets in illiquid investments,
which includes "restricted securities,"
-30-
<PAGE>
securities that are not readily marketable, repurchase agreements maturing in
more than seven days and privately issued stripped mortgage-backed securities
("SMBS"). The Board of Directors may adopt guidelines and delegate to the
Adviser the daily function of determining and monitoring the liquidity of
restricted securities. The Board, however, will retain sufficient oversight
and be ultimately responsible for the determinations. In determining whether a
security, including a SMBS, is liquid, the Board shall consider whether the
security can be disposed of promptly in the ordinary course of business at a
value reasonably close to that used in the calculation of the net asset value
per share.
Since it is not possible to predict with assurance exactly how the market
for restricted securities sold and offered under Rule 144A will develop, the
Board will carefully monitor the Real Estate Fund's investments in these
securities, focusing on such important factors, among others, as valuation,
liquidity and availability of information. This investment practice could have
the effect of increasing the level of illiquidity in the Fund to the extent that
qualified institutional buyers become for a time uninterested in purchasing
these restricted securities.
PUT, CALL OPTIONS, STOCK INDEX FUTURES. The Special, Real Estate, Equity
and Asset Allocation Funds may invest up to 10% of their total assets in put or
call options and widely traded stock index futures, or write call options on
securities the Fund owns or has the right to acquire, or purchase interest rate
futures. The Income Fund may also invest up to 10% of its total assets in put
or call options, or write call options on securities the Fund owns or has the
right to acquire, or purchase interest rate futures. The purchase of puts,
calls or options can result in the entire loss of the investment in that
particular instrument or, in the case of writing covered options, can limit the
opportunity to earn a profit on the underlying security. The Funds cannot write
uncovered put or call options. The purchase of interest rate or stock index
futures can result in a potentially unlimited loss.
FIXED INCOME SECURITIES. The Special, Equity, Asset Allocation, Income,
U.S. Government Income, and U.S. Government Money Market Funds may invest up to
20% of their total assets in fixed income securities, including convertible
securities, that are either unrated or rated below the fourth highest category
by Moody's or S&P. Not more than 5% of a Fund's total assets may be invested in
fixed income securities that are unrated. Such high-yielding, lower-rated
securities present higher risk of untimely interest and principal payments,
default, and price volatility than higher-rated securities, and may present
problems as to liquidity and valuation. The value of such securities will vary
inversely with interest rates, and their value will tend to reflect short-term
economic and corporate developments to a greater extent than higher quality
fixed income securities.
INVESTMENT IN REAL ESTATE EQUITY SECURITIES. The Real Estate Fund does not
invest directly in real estate, but does invest primarily in Real Estate Equity
Securities. Therefore, an investment in the Fund may be subject to certain
risks associated with the direct ownership of real estate. These risks include,
among others: possible declines in the value of real estate; risks related to
general and local economic conditions; possible lack of availability of mortgage
funds; overbuilding; extended vacancies of properties; increases in competition;
property taxes
-31-
<PAGE>
and operating expenses; changes in zoning laws; costs resulting from the clean-
up of, and liability to third parties for damages resulting from, environmental
problems; casualty or condemnation losses; uninsured damages from floods,
earthquakes or other natural disasters; limitations on and variations in rents;
and changes in interest rates.
INVESTMENT IN REITS. The Real Estate, Special, Equity and Asset Allocation
Funds may invest in real estate investment trusts. For the Special, Equity and
Asset Allocation Funds, such an investment would be limited by each Funds'
restriction prohibiting it from investing more than 25% of its total assets in
any one industry. The Real Estate Fund may invest without limitation in shares
of REITs. REITs are pooled investment vehicles that invest primarily in income
producing real estate or real estate related loans or interests. REITs are
generally classified as equity REITs, mortgage REITs or a combination of equity
and mortgage REITs. Equity REITs invest the majority of their assets directly
in real property and derive income primarily from the collection of rents.
Equity REITs can also realize capital gains by selling properties that have
appreciated in value. Mortgage REITs invest the majority of their assets in
real estate mortgages and derive income from the collection of interest
payments. For federal income tax purposes, REITs attempt to qualify for
beneficial tax treatment by distributing 95% of their taxable income. If a REIT
is unable to qualify for such beneficial tax treatment, it would be taxed as a
corporation and distributions to its shareholders would therefore be reduced.
Investing in REITs involves certain unique risks in addition to those risks
associated with investing in the real estate industry in general. Equity REITs
may be affected by changes in the value of the underlying property owned by the
REITs, while mortgage REITs may be affected by the quality of any credit
extended. All REITs are dependent upon management skills, are not diversified,
and are subject to the risks of financing projects. REITs are subject to heavy
cash flow dependency, default by borrowers, self-liquidation, and the
possibilities of failing to qualify for the exemption from tax for distributed
income under the Internal Revenue Code of 1986, as amended (the "Code") and
failing to maintain their exemptions from the 1940 Act.
MORTGAGE-BACKED SECURITIES. The Real Estate Fund may invest up to 25% of
its total assets in mortgage pass-through certificates and multiple-class pass-
through securities, such as REMIC pass-through certificates, CMOs and SMBS, and
other types of mortgage-backed securities that may be available in the future
(collectively, "Mortgage-Backed Securities").
Mortgage pass-through securities represent participation interests in pools
of residential mortgage loans. They are issued by U.S. Governmental or private
lenders and guaranteed by the U.S. Government or one of its agencies or
instrumentalities, including but not limited to the GNMA, the FNMA and the
Federal Home Loan Mortgage Corporation ("Freddie Mac"). They are also issued by
private lenders. GNMA certificates are guaranteed by the full faith and credit
of the United States Government for timely payment of principal and interest on
the certificates. FNMA certificates are guaranteed by the FNMA, a federally
chartered and privately-owned corporation, for full and timely payment of
principal and interest on the
-32-
<PAGE>
certificates. Freddie Mac certificates are guaranteed by Freddie Mac, a
corporate instrumentality of the United States Government, for timely payment of
interest and the ultimate collection of all principal of the related mortgage
loans.
CMOs and REMIC pass-through or participation certificates may be issued by,
among others, U.S. Government agencies and instrumentalities. CMOs and REMIC
certificates are issued in multiple classes, and the principal of and interest
on the mortgage assets may be allocated among the several classes of CMOs or
REMIC certificates in various ways. Each class of CMOs or REMIC certificates,
often referred to as a "tranche," is issued at a specific adjustable or fixed
interest rate and must be fully retired no later than its final distribution
date. Generally, interest is paid or accrues on all classes of CMOs or REMIC
certificates on a monthly basis.
Typically, CMOs are collateralized by GNMA, FNMA or Freddie Mac
certificates, but they also may be collateralized by other mortgage assets such
as whole loans or private mortgage pass-through securities. Debt service on
CMOs is provided from payments of principal and interest on collateral of
mortgaged assets and any reinvestment income thereon.
REMICs are CMOs that qualify for special tax treatment under the Code, and
they invest in certain mortgages primarily secured by interests in real property
and other permitted investments. Investors may purchase "regular" and
"residual" interest shares of beneficial interest in REMIC trusts, although the
Fund does not intend to invest in residual interests.
SMBS are derivative multiple-class mortgage-backed securities. SMBS are
usually structured with two classes that receive different proportions of
interest and principal distributions on a pool of mortgage assets. A typical
SMBS will have one class receiving some of the interest and most of the
principal, while the other class will receive most of the interest and the
remaining principal. In the most extreme case, one class will receive all of
the interest (the "interest only" class), while the other class will receive all
of the principal (the "principal only" class).
Investing in Mortgage-Backed Securities involves certain unique risks in
addition to those risks associated with investing in the real estate industry in
general. These risks include the failure of a counter-party to meet its
commitments, adverse interest rate changes and the effects of prepayment on
mortgage cash flows. In addition, investing in the lowest tranche of CMOs and
REMIC certificates involves risks similar to those associated with investing in
equity securities. When interest rates decline, the value of an investment in
fixed rate obligations can be expected to rise. Conversely, when interest rates
rise, the value of an investment in fixed rate obligations can be expected to
decline. In contrast, as interest rates on adjustable rate mortgage loans are
reset periodically, yields on investments in such loans will gradually align
themselves to reflect changes in market interest rates, causing the value of
such investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.
-33-
<PAGE>
Further, the yield characteristics of Mortgage-Backed Securities, such as
those in which the Fund may invest, differ from those of traditional fixed
income securities. The major differences typically include more frequent
interest and principal payments (usually monthly), the adjustability of interest
rates, and the possibility that prepayments of principal may be made
substantially earlier than their final distribution dates.
Prepayment rates are influenced by changes in current interest rates and a
variety of economic, geographic, social and other factors, and cannot be
predicted with certainty. Both adjustable rate mortgage loans and fixed rate
mortgage loans may be subject to a greater rate of principal prepayments in a
declining interest rate environment, and to a lesser rate of principal
prepayments in an increasing interest rate environment. Under certain interest
rate and prepayment rate scenarios, the Fund may fail to recoup fully its
investment in Mortgage-Backed Securities, notwithstanding any direct or indirect
governmental or agency guarantee. When the Fund reinvests amounts representing
payments and unscheduled prepayments of principal, it may receive a rate of
interest that is lower than the rate on existing adjustable rate mortgage pass-
through securities. Thus, Mortgage-Backed Securities, and adjustable rate
mortgage pass-through securities in particular, may be less effective than other
types of U.S. Government securities as a means of "locking in" interest rates.
SHORT SALES. The Special Fund intends from time to time to sell securities
short. A short sale is effected when it is believed that the price of a
particular security will decline, and involves the sale of a security which the
Fund does not own in the hope of purchasing the same security at a later date at
a lower price. To make delivery to the buyer, the Special Fund must borrow the
security. The Fund is then obligated to return the security to the lender, and
therefore it must subsequently purchase the same security.
When the Special Fund makes a short sale, it must leave the proceeds from
the short sale with the broker, and it must deposit with the broker a certain
amount of cash or government securities to collateralize its obligation to
replace the borrowed securities which have been sold. In addition, the Fund
must put in a segregated account (with the Fund's custodian) an amount of cash
or U.S. Government securities equal to the difference between the market value
of the securities sold short at the time they were sold short and any cash or
government securities deposited as collateral with the broker in connection with
the short sale (not including the proceeds from the short sale). Furthermore,
until the Fund replaces the borrowed security, it must daily maintain the
segregated account at a level so that (1) the amount deposited in it plus the
amount deposited with the broker (not including the proceeds from the short
sale) will equal the current market value of the securities sold short, (2) the
amount deposited in it plus the amount deposited with the broker (not including
the proceeds from the short sale) will not be less than the market value of the
securities at the time they were sold short. As a result of these requirements,
the Special Fund will not gain any leverage merely by selling short, except to
the extent that it earns interest on the immobilized cash or government
securities while also being subject to the possibility of gain or loss from the
securities sold short. The amount of the Fund's net assets that will at any
time be in the type of deposits described above (that is, collateral deposits or
segregated accounts) will not exceed
-34-
<PAGE>
25%. These deposits do not have the effect of limiting the amount of money that
the Fund may lose on a short sale, as the Fund's possible losses may exceed the
total amount of deposits.
The Special Fund will incur a loss as a result of a short sale if the price
of a security sold short increases between the date of the short sale and the
date on which the Fund purchases a security to replace the borrowed security.
The Special Fund will realize a gain if the security declines in price between
those dates. The amount of any gain will be decreased and the amount of any
loss increased by any premium or interest that the Fund may be required to pay
in connection with a short sale. It should be noted that possible losses from
short sales differ from those that could arise from a cash investment in a
security in that the former may be limitless, while the latter cannot exceed the
total amount of the Fund's investment in the security. For example, if the Fund
purchases a $10 security, potential loss is limited to $10. However, if the
Fund sells a $10 security short, it may have to purchase the security for return
to the lender when the market value of that security is $50, thereby incurring a
loss of $40.
The Special, Real Estate, Equity, and Asset Allocation Fund may also engage
in short sales "against the box." While a short sale is made by selling a
security the Special Fund does not own, a short sale is "against the box" to the
extent that the Fund contemporaneously owns or has the right to obtain at no
added cost securities identical to those sold short.
MUNICIPAL SECURITIES. Because the Oregon Bond Fund intends to focus its
investments in Oregon municipal securities, the Fund and the value of its shares
will be significantly affected by any economic, political, or regulatory
developments that affect the ability of Oregon issuers to pay interest or repay
principal on their obligations. Historically, the Oregon economy has been
highly dependent on the recession-sensitive forest products industry. Recently
proposed federal administrative action that would impose restrictions on the
level of timber harvests on federal and private lands, if adopted, and the
application of the Endangered Species Act could have a general negative economic
effect, particularly in those counties that receive significant direct revenues
based on timber harvests. These proposed actions, and the application of the
Endangered Species Act, are currently the subject of litigation, and the outcome
is unknown.
Certain municipal securities purchased by the Oregon Bond Fund from Oregon
issuers may rely in whole or in part on ad valorem real property taxes as a
source of revenue for the payment of principal and interest. There are
constitutional and statutory limitations on the issuance of securities payable
from tax revenues. In 1990, a voter initiative in Oregon was passed which
restricts the ability of taxing entities to increase real property taxes by
placing a limit on the property tax rate. This initiative did, however, exempt
from the property tax rate limit assessments to pay bonded indebtedness.
However, implementation of this limit may adversely impact the property tax
revenues of certain issuers of Oregon municipal securities and might have an
adverse effect on the market value and marketability of some of the municipal
securities (other than general obligation bonds) held in the Fund's portfolio,
the Fund's net asset value per share, and the interest income realized by the
Fund.
-35-
<PAGE>
NONDIVERSIFIED PORTFOLIO; TRADING MARKET FOR PORTFOLIO SECURITIES. The
Oregon Bond Fund is a nondiversified investment company, meaning that it is not
subject to the provisions of the 1940 Act with respect to diversification of its
investments. However, as a matter of fundamental policy, the Fund will not (1)
invest more than 25% of its total assets in the securities of any one issuer, or
(2) with respect to at least 50% of its total assets, invest in individual
issuers (excluding United States Government securities) in which it has invested
5% of the value of its total assets. For purposes of these limitations, each
governmental subdivision (i.e., state, territory or possession of the United
States or any political subdivision of any of the foregoing, including agencies,
authorities, instrumentalities or similar entities) will be considered a
separate issuer if its assets and revenues are separate from those of the
government body creating it and if the securities are backed only by its own
assets and revenues. In the case of a private activity bond, if the security is
backed only by the assets and revenues of a nongovernmental user, then such
nongovernmental user will be deemed to be the sole issuer. However, if a
private activity bond or governmental issue is guaranteed by a governmental or
some other entity, such guarantee will be considered a separate security issued
by the guarantor as well as the nongovernmental user, subject to limited
exclusions allowed by the 1940 Act.
Because the Fund's "nondiversified status" permits the investment of a
greater portion of the Fund's assets in the securities of individual issuers
than would be permissible under a "diversified status," the Fund's shareholders
are considered to be subject to a greater degree of risk. The Fund reserves the
right to operate as a diversified investment company if such a course appears
desirable in the opinion of the Board of Directors; in that event, 75% of the
Fund's total assets would have to be invested in securities issued by entities
in which the Fund had not invested 5% or more of its total assets.
With the exception of general obligation securities issued by the state of
Oregon, most issues of municipal securities in Oregon are relatively small in
size. Due to the small size of some issues, only a limited trading market in
the securities develops following their issuance. When there is only a limited
trading market for a particular security, a small change in the supply of or
demand for that security can result in a relatively large change in the market
price of the security. If the Oregon Bond Fund is required to sell portfolio
securities for which there is only a limited trading market, the market value of
such securities (and of securities which are part of the same issue which are
retained in the Fund's portfolio) could be adversely affected, which could
result in a decrease in the net asset value of the Fund's shares. In order to
enhance the liquidity of the Fund's portfolio, a portion of its assets will be
maintained in general obligation securities of the state of Oregon and in other
issues for which an active trading market is expected to be maintained. The
Fund expects that approximately 25% of its net assets will normally be invested
in general obligation securities of the state of Oregon. A portion of the
Oregon Bond Fund's assets may also be invested, on a temporary basis, in assets
other than municipal securities in order to increase the liquidity of the Fund's
portfolio. However, there is no assurance that these strategies will completely
eliminate the risks associated with investing in municipal securities for which
only a limited trading market exists.
-36-
<PAGE>
MANAGEMENT OF THE FUNDS
The Funds are managed by their Boards of Directors, and all powers and
authorities are exercised by or under the direction of the Boards of Directors.
The Adviser is the investment adviser to the funds under investment
advisory agreements originally dated September 27, 1988 for the Special, Equity
and Oregon Bond Funds, August 7, 1988 for the Asset Allocation, Income, U.S.
Government Income and U.S. Government Money Market Funds and March 4, 1994 for
the Real Estate Fund. The Adviser was incorporated in 1980 and has been engaged
in the business of providing investment advice since July 1, 1980. The address
of the Adviser is 121 S.W. Morrison, Suite 1415, Portland, Oregon 97204, mailing
address: P.O. Box 6559, Portland, Oregon 97228-6559. The Distributor of the
Funds, is affiliated with the Adviser.
James E. Crabbe and Richard S. Huson are controlling shareholders of the
Adviser. Together, they own 100% of the stock of the Distributor of the Funds.
James E. Crabbe and Richard S. Huson are primarily responsible for the day-
to-day management of the Adviser. Mr. Crabbe is President and a Director of the
Adviser and Mr. Huson is Secretary and a Director. Mr. Crabbe and Mr. Huson
have been primarily responsible since the inception of the Adviser. Both Mr.
Crabbe and Mr. Huson have served in various management positions with the
Adviser since 1980.
Each Fund pays the Adviser a fee for its services that accrues daily and is
payable bi-monthly. Fees are based on a percentage of the average daily net
assets of each Fund, as set forth below:
SPECIAL FUND
REAL ESTATE FUND
EQUITY FUND
ASSET ALLOCATION FUND
Net Asset Value Annual Rate
--------------- -----------
First $100 million 1.00%
Next $400 million 0.85%
Amounts over $500 million 0.60%
-37-
<PAGE>
INCOME FUND
First $100 million 0.75%
Next $400 million 0.60%
Amounts over $500 million 0.50%
OREGON BOND FUND
U.S. GOVERNMENT INCOME FUND
U.S. GOVERNMENT MONEY MARKET FUND
First $500 million 0.50%
Next $500 million 0.45%
Amounts over $1 billion 0.40%
Fees paid by the Special, Real Estate, Equity, Asset Allocation and Income Funds
are higher than those paid by most other mutual funds, although the fees charged
by these Funds are comparable to mutual funds with similar objectives and
policies. The Adviser has undertaken to reimburse a Fund or to waive all or a
portion of its management fee to the extent that the total operating expenses
exceed a stated percentage per annum of a Fund's net asset value in effect with
respect to each Fund. This undertaking may be canceled upon 30 days written
notice. Additionally, many states require that mutual funds meet certain
expense limitations. The Funds, their Adviser, Distributor, and Transfer Agent
intend to qualify, meet, or conform to any individual state requirements while
the Funds are registered in that state.
On September 6, 1995, the shareholders of the Real Estate Fund approved a
Subadvisory Agreement among the Adviser, the Real Estate Fund and Aldrich,
Eastman & Waltch, L.P. ("AEW"). Pursuant to the Subadvisory Agreement, AEW will
be responsible for the day-to-day investment management of the Real Estate Fund,
subject to the overall supervision of the Adviser and the Real Estate Fund's
Board of Directors.
AEW is a registered investment adviser founded in 1981. AEW is dedicated
exclusively to building and managing real estate investment portfolio for
institutional investors. AEW currently manages approximately $4.4 billion in
assets.
The general partner of AEW is AEW Holdings L.P. ("AEW Holdings"). The
general partner of AEW Holdings is Aldrich, Eastman & Waltch, Inc. ("AEW INC").
The Shareholders of AEW INC include certain current and former executive
employees of AEW. AEW's business address is 225 Franklin Street, Boston, MA
02110-2803.
As compensation for its services, the Adviser will pay to AEW, at the end
of each calendar month, an annualized fee equal to the greater of (a) 37.5% of
one percent of the average daily net asset value of the Fund (the "ADNAV") up
to the first $100 million of net asset value, 31.88% of one percent of the
ADNAV for the next $400 million of net asset value, and 22.5% of one percent of
the ADNAV for amounts in excess of $500 million of net asset value, or (b) 50%
of
-38-
<PAGE>
the actual fees paid by the Fund to the Adviser. The fee paid by the Adviser
will not increase any of the fees incurred by the Fund, and will not affect the
Adviser's agreement, terminable on 30 days' notice, to waive certain of its fees
and/or reimburse expenses.
The Funds' Distributor pays the marketing expenses of the Funds. A certain
portion of these expenses may be borne by the Funds under a distribution plan
adopted pursuant to Rule 12b-1 under the 1940 Act. See "HOW TO INVEST IN THE
FUNDS" in this Prospectus. The Funds bear all other expenses incurred in their
operation as they are incurred, other than those assumed by the Adviser or
Distributor.
Management of the Special Fund portfolio is handled on a day-to-day basis
by a team consisting of James E. Crabbe and John W. Johnson. Mr. Crabbe is
coordinator of the team. Mr. Crabbe has served in various management positions
with the Adviser since 1980. Mr. Crabbe has managed the Special Fund's
portfolio since January 1, 1990. Prior to joining the Adviser, Mr. Johnson was
a private investment banker from November, 1991 to May, 1995. Between August,
1988 and November 1991, Mr. Johnson was Director of Equity Investments for
Kennedy Associates.
The Oregon Bond, Income, U.S. Government Income and U.S. Government Money
Market Funds are managed on a day to day basis by a team consisting of Mr. Huson
and Garth R. Nesbit. Mr. Huson is the coordinator of the team. Mr. Nesbit
joined the Adviser in April, 1995. Between February, 1993 and March, 1995 Mr.
Nesbit worked for Capital Consultants, Inc. as a portfolio manager of its fixed
income portfolio. Prior to joining Capital Consultants, Inc., Mr. Nesbit was a
Vice President and the fixed income portfolio manager at Lincoln National
Investment Management.
The Equity and Asset Allocation Fund portfolios are managed on a day-to-day
basis by a team consisting of John E. Maack, Jr., Marian Kessler, John Anton and
Mr. Huson. Mr. Huson is the coordinator of the team. Mr. Maack has been
employed as a portfolio manager and securities analyst by the Adviser since
1988. Ms. Kessler joined the Adviser in August, 1995. From September, 1993
until July, 1995, Ms. Kessler was a portfolio manager with Safeco Asset
Management. Between August, 1986 and June, 1993, Ms. Kessler was an equity
analyst for IDS Financial Services. She brings more than 10 years experience to
the team. Mr. Anton joined the Adviser in June, 1995. Prior to joining the
Adviser, Mr. Anton served 17 years as Chief Investment Officer, Portfolio
Manager at Financial Aims Corporation.
-39-
<PAGE>
The Funds have retained State Street Bank and Trust Company ("State
Street") to provide administrative services to the Fund. Such services relate
to accounting, operations and compliance. For such services, the Funds have
agreed to pay State Street a fee based on the total Fund assets managed by the
Adviser. The fee shall be as follows: first $500 million managed by Adviser -
.06%; next $500 million - .03%; thereafter - .01%. Each Fund pays its pro rata
share of such fee.
CONTROL PERSONS
As of December 20, 1995, Enele Co. owned 50.82% of the outstanding shares
of the Real Estate Fund and 29.28% of the outstanding shares of the U.S.
Government Money Market Fund, and Charles Schwab & Co. Inc. owned 33.61% of the
outstanding shares of the Special Fund and 25.77% of the outstanding shares of
the Equity Fund. No person owned, directly or indirectly, 25% or more of the
voting securities of any other Fund. Enele Co. and Charles Schwab & Co. Inc.
holds these shares as nominee for independent investors. These independent
investors, who are the beneficial owners of the shares owned by Enele Co.,
exercise complete voting control over the shares. The Funds have no record
concerning the actual share ownership of these beneficial owners.
NET ASSET VALUE
The net asset value per share of each Fund is determined as of 4 p.m.,
Eastern Time, on each day during which securities are traded on the New York
Stock Exchange (the "NYSE"). The net asset value per share is computed by
dividing the value of all assets of the Fund, less its liabilities, by the
number of shares outstanding.
The U.S. Government Money Market Fund will value its assets using the
amortized cost method by adjusting the cost of each debt security for
amortization of discount or premium and accrued interest (unless unusual
circumstances indicate that another method of determining fair value should be
considered by the Directors of the U.S. Government Money Market Fund). The
Fund's Board of Directors has established procedures designed to stabilize, to
the extent reasonably possible, the net asset value of the shares of the U.S.
Government Money Market Fund at one dollar per share. The U.S. Government Money
Market Fund intends to maintain its net asset value at a constant one dollar per
share, although there is no assurance that it will be able to do so. See "U.S.
GOVERNMENT MONEY MARKET FUND" in the Statement of Additional Information.
The value of securities listed or traded on a registered securities
exchange are valued at the last sale price on the day of the computation. This
includes over-the-counter securities for which last sale information is
available. Where last sale information is not available, the best bid price
will be used. Securities and assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or under the
direction of the Board of Directors of the Fund. Such valuations and procedures
will be reviewed periodically
-40-
<PAGE>
by the Board of Directors. The Funds may retain the services of an outside
pricing service to value their portfolio securities.
WHEN TRANSACTIONS ARE RECORDED IN YOUR ACCOUNT
Your trade date is the date when transactions are recorded in your account.
Your shares are purchased, redeemed or exchanged at the net asset value
determined on your trade date.
If your purchase, redemption or exchange is received in good order by the
Transfer Agent prior to 4 p.m., Eastern Time, or the close of business on the
NYSE, whichever is earlier, your trade date is the date of receipt. If your
purchase, redemption or exchange is received in good order after 4 p.m., Eastern
Time, or the close of business on the NYSE, whichever is earlier, your trade
date is the next business day.
HOW TO INVEST IN THE FUNDS
All of the Funds (with the exception of the Oregon Bond Fund) are designed
so that shareholders have the option of making fund investments within or
outside of tax-advantaged retirement accounts. The Oregon Bond Fund is only
available for investment outside of a tax-deferred retirement plan.
Crabbe Huson Securities, Inc. (the "Distributor"), Portland, Oregon, an
affiliate of the Adviser and a corporation organized under the laws of Oregon,
is the distributor of the Funds' shares.
Shares of the Funds are offered continuously with no sales load at their
next determined net asset value after receipt of an order with payment by the
Transfer Agent. The Funds' shares are offered by the Distributor directly to
the public or through broker-dealers who enter into sales agreements with the
Distributor. Each Fund reserves the right to reject any order to purchase
shares.
MINIMUM INVESTMENT: The minimum initial investment in any Fund is $2,000.
Individuals who establish an Individual Retirement Account ("IRA") using an IRA
plan available through the Transfer Agent must make a minimum initial investment
of $2,000. Additional investments in any Fund must be in amounts of at least
$500, unless the investor is enrolled in an automatic investment program such as
the "Invest-O-Matic" program described below. Additional investments should
always be identified by the shareholder's name, Fund, and account number. For
investors enrolled in "Invest-O-Matic," additional investments of as little as
$100 can be accepted by the Funds. The Adviser, in its sole discretion, may
waive any minimum purchase requirements. The Funds reserve the right to vary
the initial and subsequent investment minimums at any time. The Funds will
provide shareholders with written notice of any such change.
-41-
<PAGE>
INVESTING BY CHECK OR CRABBE HUSON INSTANT ACCESS: Investors who desire to
purchase shares directly from the Funds by check should follow these
instructions.
- INITIAL INVESTMENT: Complete the Account Application. Be sure to
indicate the Fund(s) in which you want to invest and the dollar amount
you want to invest by Fund. As noted on the Application, please make
a separate check payable to each Fund. Mail your check together with
your completed account application to the following address:
Crabbe Huson Funds
P.O. Box 8413
Boston, MA 02266-8413
Should you wish to overnight mail your investment, please use the following
address:
Crabbe Huson Funds
Two Heritage Drive
Quincy, MA 02171
- SUBSEQUENT INVESTMENTS:
By check. Detach and complete the stub attached to your statement.
Make a separate check payable to each Fund, write your shareholder
account number on your check, and include your investment stub(s) or a
note designating how the amount of your check is to be invested by
Fund and indicating your account number. A charge may be imposed if
any check used for investment does not clear.
By Crabbe Huson Instant Access. An investor who desires to purchase
additional shares may also do so by calling (800) 235-2442 and using
the Fund's "INSTANT ACCESS" automated information service. The
purchase will occur the following business day. Only investors who
have provided current ACH bank information and authorizations can
utilize this service.
In order to prevent lengthy processing delays caused by the clearing of
foreign checks, the Funds will only accept a foreign check which has been drawn
in U.S. dollars and has been issued by a foreign bank with a U.S. correspondent
bank. The name of the U.S. correspondent bank must be printed on the face of
the check.
-42-
<PAGE>
INVESTING BY WIRE: The Transfer Agent will accept wire orders for purchase
of the Funds' shares prior to 4 p.m., New York time. A wire purchase will be
made at the offering price based on the next calculation of net asset value of
the shares after the purchase order has been received by the dealer. Any dealer
submitting an order is obligated to do so promptly. The following wire
instructions should be followed and include your investment account number and
your investor shareholder registration.
State Street Bank & Trust Co.
225 Franklin Street
Boston, MA 02110
ABA No. 011 0000 28
FOR CREDIT: Crabbe Huson
DDA No. 99051039
Since the U.S. Government Money Market Fund and the U.S. Government Income
Fund invest in obligations normally requiring payment in Federal Funds, purchase
orders will not be processed unless received in Federal Funds or until converted
by or paid to the Fund in Federal Funds. Shares in these two funds are
purchased on the day Federal Funds are received by the Funds at the next
determined net asset value. Checks or negotiable U.S. drafts may require up to
three business days to convert to Federal Funds. Checks drawn on banks that are
not members of the Federal Reserve system may take up to four business days to
convert into Federal Funds. Prior to conversion into Federal Funds, funds will
not be invested. Information about Federal Funds is available from any bank
that is a member of the Federal Reserve System.
RETIREMENT AND QUALIFIED PLANS: Investors may invest in any of the Funds
(except the Oregon Bond Fund) through the Crabbe Huson IRA Pension. Investments
in the Funds may also be made in connection with established retirement plans.
For further information on these plans, call the Transfer Agent at (800) 541-
9732.
In addition, an authorized broker-dealer may offer various tax deferred
retirement plans, including 401(k) plans or "tax sheltered accounts" under
section 403(b)(7) of the Internal Revenue Code. Investments in the Funds may
also be made in connection with established retirement plans. For further
information regarding these plans, contact your broker-dealer. If you are
considering adopting such a plan, you should consult with your own legal or tax
adviser, with respect to the establishment and maintenance of such a plan.
INVESTING THROUGH AN AUTHORIZED BROKER-DEALER: Fund shares are offered
without a front end sales load through selected broker-dealers who have entered
into sales agreements with the Distributor. Investors should contact an
authorized broker-dealer directly for appropriate purchase instructions, as well
as information pertaining to accounts and any
-43-
<PAGE>
service or transaction fees that may be charged by them. It is the
responsibility of dealers to transmit such orders promptly.
CERTIFICATES: The issuance of shares is recorded on the books of the Funds
in full and fractional shares carried to the third decimal place. To avoid
additional operating costs, and for investor convenience, share certificates are
not issued.
SALES LOAD AND 12B-1 FEES: There is no front end sales load charged with
respect to any of the Funds. However, although there are no sales charges
levied directly by the Funds, approved broker-dealers or other intermediaries,
including financial institutions, may charge the investor a transaction-based
fee or other fees at either the time of purchase or the time of redemption.
Such charges may vary among broker-dealers but in all cases will be retained by
the broker-dealer and not remitted to the Funds, the Distributor, or the
Adviser.
Each Fund has adopted a distribution plan pursuant to rule 12b-1 under the
1940 Act (the "Plans"). Under the Plans, the Distributor is entitled to
reimbursement for its actual expenses incurred in the distribution and promotion
of the Funds' shares, and the Funds may reimburse directly broker-dealers,
investment advisers and others that actively promote the sale of Fund shares.
These expenses include, but are not limited to, expenses incurred in the
printing of prospectuses and statements of additional information for persons
other than then-current shareholders, expenses related to preparation and
printing of sales literature, and other distribution-related expenses. A
portion of the expenses reimbursed and paid to the Distributor are paid by the
Distributor on a quarterly basis to broker-dealers that have entered into sales
agreements with the Distributor, and may be paid to investment executives of the
Distributor. Total payments pursuant to the Plans is computed separately for
each Fund, and may not exceed .25% per annum of the average daily net assets of
each respective Fund. Distribution expenses that are not allocable to a
specific Fund are allocated to a Fund based on the percentage of new accounts
established to purchase shares in that Fund during the fiscal year.
In the event expenses for a Fund in any one year exceed the maximum
reimbursable under the Plan, such expenses may not be carried forward to the
following year. The Funds cannot be charged for any financing charges on any
unreimbursed expenses payable pursuant to the Plans.
-44-
<PAGE>
HOW TO SELL YOUR SHARES
Shares of the Funds may be redeemed at any time without charge at the net
asset value per share next determined after receipt by the Fund's Transfer Agent
of a redemption request in proper form from the investor. Payment for all
shares redeemed, except shares of the U.S. Government Money Market Fund, will be
made by a Fund within seven days after receipt of a redemption request
in proper form except (as outlined by the 1940 Act) during a period when 1)
trading on the NYSE is restricted or the NYSE is closed for other than customary
weekends and holidays, 2) the SEC has by order permitted such suspension for the
protection of the Fund's shareholders, or 3) an emergency exists making disposal
of portfolio securities or valuation of net assets of the Funds not reasonably
practicable.
Payment for redemptions of shares of the U.S. Government Money Market Fund
will be made on the day after your trade date. See "WHEN TRANSACTIONS ARE
RECORDED IN YOUR ACCOUNT." Shares of the U.S. Government Money Market Fund may
be redeemed in response to a redemption request, as set forth above, or by using
share drafts. Share drafts will be provided through the U.S. Government Money
Market Fund's bank, will be subject to the bank's rules and regulations, and may
be negotiated by shareholders of the U.S. Government Money Market Fund much like
a check is negotiated. However, share drafts are not "checks," and the bank's
intermediary status does not create an "account" between the shareholder and the
bank. Share drafts will be honored only if made payable for amounts of $500.00
or more.
When a request for redemption is made shortly after the purchase of shares,
the Funds will not distribute the redemption proceeds until the check(s)
received for the shares purchased has cleared. Under such circumstances, it may
take as long as 15 days for a shareholder to receive the proceeds of a
redemption. Investors may avoid such delays by purchasing shares of the Funds
with a certified or cashier's check or by investing by wire.
The market value of the securities in the Funds' portfolios is subject to
daily fluctuations, and the net asset value of the Funds' shares change
accordingly. The U.S. Government Money Market Fund will attempt to maintain its
net asset value at a constant one dollar per share. However, there is no
assurance that it will be able to do so.
-45-
<PAGE>
REDEMPTION BY MAIL: To be in proper form, written requests for redemption
must 1) state the total dollar value of shares or the total number of shares to
be redeemed, 2) provide the investor's account number, and 3) be signed by each
registered owner exactly as the shares are registered. If the proceeds of the
redemption (a) exceed $15,000, (b) result from a 100% redemption of the account,
(c) are to be paid to a person other than the record owner, (d) are to be sent
to an address other than the address on the Transfer Agent's records, or (e) are
to be paid to a corporation, partnership, trust or fiduciary, the signature(s)
on the redemption request and on the certificates, if any, or stock power must
be guaranteed by an "eligible guarantor institution." An "eligible guarantor
institution" includes any bank, broker, dealer or credit union that is a
participant in the STAMP and Medallion signature program. The Transfer Agent
reserves the right to request additional information from, and make reasonable
inquiries of, any eligible guarantor institution. The Transfer Agent may
require additional supporting documents for redemptions made by corporations,
executors, administrators, trustees, or guardians. A redemption request will
not be deemed to have been submitted until the Transfer Agent receives all
required documents in proper form. All documents and correspondence concerning
redemptions should be sent to the Funds' Transfer Agent at the following
address:
Crabbe Huson Funds
P.O. Box 8413
Boston, MA 02266-8413
Redemptions may also be requested by telephone. See "Redemption or Exchange by
Telephone." Depending on the purchase price or other tax basis of the shares
redeemed, the investor may realize a capital gain or loss on each redemption.
Should you wish to receive instructions on how to obtain your funds by
wire, please call the Transfer Agent at (800) 541-9732.
INVOLUNTARY REDEMPTION: In order to reduce expenses of the Funds, a Fund
may redeem all of the shares of any shareholder, other than a shareholder which
is an IRA or other tax-deferred retirement plan, in any Fund account which has a
net asset value of less than $2,000 due to a redemption. The relevant Fund will
give such shareholders 60 days' prior written notice in which to purchase
sufficient additional shares to avoid such redemption.
A Fund may also compel the redemption of shares if, in its opinion, such
action would prevent the Fund from becoming a personal holding company, as
defined by the Internal Revenue Code.
REDEMPTIONS (BY SECURITIES DEALERS): The Funds accept redemption orders by
telephone from securities dealers who have entered into sales agreements with
the Distributor. Such redemption orders should be placed by the dealer with the
Transfer Agent. Shares will be redeemed at the net asset value determined on a
shareholder's
-46-
<PAGE>
trade date. Except with respect to shares of the U.S. Government Money Market
Fund, the seven-day period within which the proceeds of the redemption will be
sent to the shareholder or shareholder's dealer will begin on the day of the net
asset value calculation, unless the Transfer Agent has not received a written
request in proper form from the dealer by the seventh day. In that event, the
proceeds of the redemption will be sent to the shareholder or the shareholder's
dealer immediately upon the Transfer Agent's receipt of the written request in
proper form. Payment for redemptions of shares of the U.S. Government Money
Market Fund will be made on the day following the trade date. Dealers are
responsible for the prompt transmittal of redemption orders to the Transfer
Agent. Dealers not affiliated with the Funds may charge a fee for handling
redemptions.
HOW TO EXCHANGE YOUR SHARES
The proceeds from the redemption of shares of any of the Funds may be used
to purchase shares of any of the other Funds on the shareholder's trade date.
See "WHEN TRANSACTIONS ARE RECORDED IN YOUR ACCOUNT."
BEFORE MAKING AN EXCHANGE TO ANOTHER FUND, THE INVESTOR SHOULD READ THE
PORTIONS OF THIS PROSPECTUS RELATING TO THE FUND OR FUNDS INTO WHICH SHARES ARE
BEING EXCHANGED.
The exchange of shares of one Fund for shares of another Fund is treated
for federal and state income tax purposes as a sale on which an investor may
realize a capital gain or loss.
In order to protect shareholders from investors that may abuse the exchange
privilege to the detriment of the Funds and their shareholders, each Fund
reserves the right to terminate or modify the exchange privilege applicable to
all shareholders at any time upon 60 days' notice. This exchange privilege may
be temporarily or permanently suspended with respect to any shareholder that
engages in more than ten exchanges in any 12-month period.
Any written exchange request, in proper form, may be mailed to the Transfer
Agent at the following address:
Crabbe Huson Funds
P.O. Box 8413
Boston, MA 02266-8413
Should you wish to overnight mail your redemption request, please use the
following address:
Crabbe Huson Funds
Two Heritage Drive
Quincy, MA 02171
-47-
<PAGE>
REDEMPTION OR EXCHANGE BY TELEPHONE
All or part of an investor's account may be redeemed or exchanged for
shares in another Fund by telephone if the investor has completed and placed on
file with the Transfer Agent the appropriate authorization.
The Funds and the Transfer Agent will employ reasonable procedures to
confirm that instructions communicated by telephone are properly authorized.
The failure of any of the Funds to do so may result in the Fund being liable for
losses due to unauthorized or fraudulent telephone transactions. However, the
Funds and the Transfer Agent will not be liable for executing telephonic
instructions that are deemed to be authorized after following reasonable
procedures. The Funds have instituted an "Instant Access" Automated Information
Service which allows an investor to make redemptions and exchanges by telephone
by use of a 4-digit Personal Identification Number.
Telephone redemptions and exchanges may be made by calling the Crabbe Huson
"Instant Access" number, (800) 235-2442. Using the "Instant Access" system, an
investor may redeem by check or by ACH Redemption. If an investor redeems by
check, he or she must have on file with the Funds Transfer Agent the appropriate
authorization. The check will always be mailed to the address listed on the
account. The daily maximum redemption is $100,000. An investor can make an ACH
redemption by telephone if an appropriate telephone authorization and current
ACH bank information are on file with the Funds' Transfer Agent.
An investor may make an exchange from one fund to another within the same
account provided you have the appropriate telephone authorization on file with
the Funds Transfer Agent.
Exchanges or redemptions by telephone may become difficult or impossible to
effect during periods of severe economic or market changes. If a shareholder is
unable to reach the Funds by telephone, redemptions or exchanges may be effected
either through the broker-dealer from which the shares were purchased, or by
sending a written redemption or exchange request in proper form by mail directly
to the Funds' Transfer Agent at the following address:
-48-
<PAGE>
Crabbe Huson Funds
P.O. Box 8413
Boston, MA 02266-8413
Should you wish to overnight mail your redemption request, please use the
following address:
Crabbe Huson Funds
Two Heritage Drive
Quincy, MA 02171
ALLOCATION OF BROKERAGE
The Adviser is responsible for the overall management of the portfolio of
each Fund and determines which brokers will execute the purchases and sales of
the portfolio securities. The Adviser's foremost responsibility is to place
orders so as to achieve prompt execution at the most favorable price. However,
the Adviser may place orders with brokers that provide special brokerage and
research services, with brokers that promote the sale of the Funds' shares, or
with brokers that agree to pay designated Fund expenses. The Adviser is
authorized, in recognition of the value of brokerage and research services
provided, to pay commissions to a broker in excess of the amounts which another
broker might have charged for effecting the same transaction.
A broker affiliated with the Adviser may be employed to execute brokerage
transactions on behalf of the Funds, as long as commissions paid are reasonable
and fair compared to the commissions received by other brokers in connection
with comparable transactions involving similar securities being purchased or
sold on a securities exchange during a comparable period of time. Additional
information about portfolio brokerage is included in the Statement of Additional
Information.
SPECIAL INVESTOR SERVICES
SHAREHOLDER INQUIRIES: Inquiries regarding specific information that
cannot be handled directly through an authorized broker-dealer of the Fund can
be directed to the Transfer Agent at the Crabbe Huson Funds, P.O. Box 8413,
Boston, MA 02266-8413. The Transfer Agent's toll-free telephone number is (800)
541-9732.
APPLICATIONS: Applications for all of the Funds and the special programs
listed below are available through authorized broker-dealers or through the
Funds' Transfer Agent at the address and phone number listed above.
THE CRABBE HUSON IRA (INDIVIDUAL RETIREMENT ACCOUNT): Certain individuals
who earn income may establish an Individual Retirement Account using an IRA plan
adopted by the Fund. These individuals may invest up to the lesser of $2,000 or
100% of the
-49-
<PAGE>
individual's annual earnings in shares of the Funds. The plan is also available
for a Spousal IRA, transfer of an existing IRA, and for certain rollover
contributions from other qualified plans.
INVEST-O-MATIC: With Invest-O-Matic, a shareholder may make regular
monthly purchases of the Fund's shares in amounts as little as $100 via an
automatic debit to a bank account. Invest-O-Matic accounts may be modified or
terminated by the shareholder at any time.
GROUP INVESTMENT PLAN: Group Investment Plans are available for the
purchase of Fund shares by employee or other groups, using systematic payroll
deductions or other systematic payment arrangements. The Funds may, depending
upon the size of the plan, waive their minimum, initial and additional purchase
requirements.
CRABBE HUSON "INSTANT ACCESS": By calling (800) 235-2442, a current
investor can receive account information, purchase, redeem and exchange Fund
shares. See "HOW TO INVEST IN THE FUNDS" and "REDEMPTION OR EXCHANGE BY
TELEPHONE."
SYSTEMATIC WITHDRAWAL PLAN
A shareholder owning shares of any Fund with a total value of not less than
$5,000 may participate in a systematic withdrawal plan providing for fixed
payments to such shareholder of $100 or more at regular monthly intervals (the
"Systematic Withdrawal Plan"). The shareholder may realize a capital gain or
loss on each fixed-amount payment. Additional information concerning the
Systematic Withdrawal Plan is set forth in the Statement of Additional
Information. Shareholders desiring to participate in the Systematic Withdrawal
Plan may do so by completing and submitting the appropriate application to the
Transfer Agent. The Systematic Withdrawal Plan is voluntary and may be
terminated at any time by the shareholder.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
Investor's Fiduciary Trust Co., 127 West 10th Street, Kansas City, Missouri
64105, as Custodian of the cash and securities of each of the Funds.
State Street Bank and Trust Company, 225 Franklin Street, Boston, MA 02110,
800-541-9732, acts as Transfer Agent and Dividend Disbursing Agent for each of
the Funds. The Transfer Agent uses Boston Financial Data Services as its
servicing agent in carrying out the Transfer Agent's responsibilities to the
Funds. The Funds may also enter into agreements with various broker-dealers and
financial institutions to act as sub-transfer agents with respect to their
customers who invest in the Funds.
-50-
<PAGE>
LENDING OF PORTFOLIO SECURITIES
The Funds may loan portfolio securities to broker-dealers or other
institutional investors if at least 100% cash (or cash equivalent) collateral is
pledged and maintained by the borrower. The Funds believe that the cash
collateral would minimize the risk of lending their portfolio securities. Such
loans of portfolio securities may not be made if the aggregate of such loans
would exceed 20% of the value of a Fund's total assets. If the borrower
defaults, there may be delays in recovery of loaned securities or even a loss of
the securities loaned, in which case the Funds would pursue the cash (or cash
equivalent) collateral. While there is some risk in loaning portfolio
securities, loans will be made only to firms or broker-dealers deemed by the
Adviser, in consultation with the Adviser, to be of good standing and will not
be made unless, in the judgment of the Adviser the consideration to be earned
from such loans would justify the risk. For additional disclosure, see
"INVESTMENT RESTRICTIONS - LOANS OF PORTFOLIO SECURITIES" in the Statement of
Additional Information.
PORTFOLIO TURNOVER
The Funds generally do not trade in securities with the goal of obtaining
short-term profits, but when circumstances warrant, securities will be sold
without regard to the length of time the security has been held.
The Funds anticipate that, except in periods of unusual market conditions,
their annual portfolio turnover (the lesser of purchase or sales of portfolio
securities for the year divided by the monthly average of the value of the
portfolio securities owned by the Funds during the year) will generally range
between 20 and 150%, although Funds with smaller portfolios may have portfolio
turnover in excess of this range. A higher portfolio turnover rate may involve
correspondingly greater transaction costs, which would be borne directly by the
Funds, as well as additional realized gains and/or losses to shareholders.
YIELD
The SEC has imposed a number of rules and policies regarding the
calculation of yield. The Funds intend to continually comply with these rules
and policies in their quotation of yield. For an explanation of the method of
yield calculation, see "Yield and Performance" in the Statement of Additional
Information.
-51-
<PAGE>
TAXES
The Funds individually intend to qualify each year as "regulated
investment companies" under the Internal Revenue Code so they will not pay
federal taxes on either income or capital gains distributed to shareholders,
although there can be no assurance that they will so qualify.
The Funds would be subject to a 4% excise tax on a portion of their
undistributed income if they fail to meet certain annual distribution
requirements. The Funds intend to make distributions in a timely manner and,
accordingly, do not expect to be subject to the excise tax.
For federal income tax purposes, all Fund distributions (except
distributions from the Oregon Bond Fund) are reportable as adjusted gross income
whether a shareholder elects to take them in cash or reinvest them in additional
shares of the Funds.
Distributions representing net investment income (including short-term
capital gains) are taxable as ordinary income. Distributions derived from net
long-term capital gains that are properly designated by the Funds as such will
be taxable to shareholders as long-term capital gains, whether received in cash
or reinvested in additional shares, regardless of how long the shareholder has
held the shares.
Under the Revenue Reconciliation Act of 1993 (the "Act"), potentially
favorable income tax treatment on distributions representing long-term capital
gains has been restored, effective for tax years beginning after 1992. Under
the Act, ordinary income may be taxed at marginal rates significantly (up to
11.6%) higher than the marginal rate at which long-term capital gains are taxed.
Accordingly, distributions representing net long-term capital gains may be
subject to a reduced rate of tax to shareholders.
The Special Fund may engage in short sales of securities. In general, a
short sale is a contract for the sale of a security that the seller does not own
or does not desire to transfer. The seller, therefore, borrows the security to
be delivered to the buyer. At a later date, the seller either (i) purchases an
identical quantity of the same security previously sold by him so that he can
"cover" the sale and delivers the security to the lender or (ii) delivers the
security which he already held but did not desire to transfer at the earlier
date. A short sale is consummated, or closed, upon the seller's delivery of the
security to the lender. The seller's gain or loss will be measured by the
difference between the amount he received upon his short sale of the security
and the amount he paid for the security ultimately used to cover the sale. The
seller's gain/loss will be realized when the short sale is closed, not when the
seller sells short and is paid by the purchaser of the security. The Code
contains various provisions governing, among other things, the characterization
of short sale gain/loss as ordinary gain/loss or capital gain/loss and the
treatment of short sale capital gain/loss as long-term gain/loss or short-term
gain/loss. The Special Fund will annually provide shareholders with a statement
concerning the appropriate characterization of any distributions of gains or
losses. Shareholders are therefore urged to consult their own tax advisers.
-52-
<PAGE>
Shareholders may be subject to a $50 penalty under the Internal Revenue
Code and the Funds may be required to withhold and remit to the U.S. Treasury a
portion (31%) of any redemption or repurchase proceeds (including the value of
shares exchanged into another fund for whom the Adviser acts as Adviser) and of
any dividend or distribution on any account, where the shareholder failed to
provide a correct taxpayer identification number or to make certain required
certifications.
The foregoing relates only to federal income tax consequences for
shareholders who are U.S. citizens or corporations. Shareholders should consult
their own tax advisers regarding these matters, and regarding state, local, and
other applicable tax laws.
The Funds will issue annually, in January, a full report to each
shareholder detailing the tax status of each distribution to the shareholder
during the calendar year. The Funds do not assume any responsibility for the
calculation of any taxable gain (or loss) from the purchase and sale of Fund
shares, including purchases made with reinvested dividends and/or capital gains.
Every shareholder should consult with their tax adviser concerning such
calculations and tax consequences.
THE OREGON MUNICIPAL BOND FUND, INC.
The Oregon Bond Fund intends to qualify under Subchapter M of the Code each
fiscal year to allow it to pay "exempt interest dividends" to its shareholders.
Shareholders receiving distributions properly designated by the Oregon Bond Fund
as exempt interest dividends representing net tax-exempt interest received on
municipal securities will not be required to include such distributions in their
gross income for federal income tax purposes. However, a portion of the
interest dividends earned by the Oregon Bond Fund may be subject to the federal
alternative minimum tax. Distributions representing net taxable income of the
Oregon Bond Fund from sources other than municipal securities, such as temporary
investments and income from securities loans, or capital gains, will be taxable
to shareholders as ordinary income.
The Oregon Bond Fund anticipates that distributions which represent tax-
exempt interest on municipal securities issued by the state of Oregon and its
political subdivisions, agencies, authorities and instrumentalities will not be
subject to the Oregon personal income tax. However, it is expected that other
types of income received from the Oregon Bond Fund will be subject to the Oregon
personal income tax. The Oregon Bond Fund anticipates that corporations which
are subject to the Oregon corporation excise tax will be subject to that tax on
all income from the Oregon Bond Fund, including income that is exempt from
federal income taxes.
Shareholders of the Oregon Bond Fund that are obligated to pay state or
local taxes outside Oregon may be required to pay such taxes on distributions
from the Oregon Bond Fund, even if such distributions are exempt from federal
and Oregon income taxes.
-53-
<PAGE>
Statements regarding the federal income tax status of each shareholder's
dividends and distributions will be mailed annually.
Interest on indebtedness incurred or continued by a shareholder to purchase
or carry shares of the Oregon Bond Fund will not be deductible for federal
income tax purposes.
PERFORMANCE COMPARISONS
The Funds may compare their performance to other mutual funds with similar
investment objectives and to the mutual fund industry as a whole, as quoted by
ranking services and publications of general interest. For example, these
services or publications may include Lipper Analytical Services, Inc.,
Schabacker's Total Investment Service, CDA Technologies, SEI, Frank Russell
Trust, BARRON'S BUSINESS WEEK, CHANGING TIMES, THE FINANCIAL TIMES, FINANCIAL
WORLD, FORBES, INVESTOR'S DAILY, MONEY, MORNINGSTAR MUTUAL FUNDS, PERSONAL
INVESTOR, THE ECONOMIST, THE WALL STREET JOURNAL, INDIVIDUAL INVESTOR, LOUIS
RUKEYSER'S WALL STREET, FINANCIAL WORLD, and USA TODAY. These ranking services
and publications rank the performance of the Funds against all other funds over
specified periods and against funds in specified categories.
The Funds may also either include presentations of, or may compare their
performance or the performance of the Funds' Adviser to, a recognized stock or
bond index, including the Standard & Poor's 500, Standard & Poor's Mid-Cap,
Value Line, Dow Jones, and NASDAQ stock indices and the Shearson Lehman and
Salomon bond indices. The comparative material found in advertisements, sales
literature, or in reports to shareholders may contain past or present
performance ratings. This is not to be considered representative or indicative
of future results or future performance.
The Funds may also compare their performance to other income-producing
securities such as (i) money market funds; (ii) various bank products (based on
average rates of bank and thrift institution certificates of deposit, money
market deposit accounts, and NOW accounts as reported by the Bank Rate Monitor
and other financial reporting services, including newspapers); and (iii) U.S.
treasury bills or notes. There are differences between these income-producing
alternatives and the Funds other than their yields, some of which are summarized
below.
The performance of a specific Fund will be calculated as required by the
rules of the SEC. Current yield for the U.S. Government Money Market Fund is
calculated by dividing the net change in the value of an account of one share
during an identified seven-calendar day period by the value of the one share
account at the beginning of the same period and multiplying that base return by
365/7. Current yield for the Real Estate, Income, U.S. Government Income and
Oregon Bond Funds is calculated by dividing the net investment income per share
earned during an identified 30-day period by the maximum offering price per
share on the last day of the same period. The Funds may also publish average
annual total return quotations for recent one, five and ten-year periods that
would equate the initial amount
-54-
<PAGE>
invested to the ending redeemable value. These standardized calculations do not
reflect the impact of federal or state income taxes. Such performance data will
include the effect of any sales or distribution charges.
The yields of each of the Funds are not fixed and will fluctuate. The
principal value of an investment in each Fund (except, under normal
circumstances, the U.S. Government Money Market Fund) at redemption may be more
or less than its original cost. In addition, investments in the Funds are not
insured and an investor's yield is not guaranteed. Although the yields of bank
money market deposit accounts and NOW accounts will fluctuate, principal will
not fluctuate and is insured by the Federal Deposit Insurance Corporation up to
$100,000. Bank passbook savings accounts normally offer a fixed rate of
interest, and their principal and interest are also guaranteed and insured.
Bank certificates of deposit offer fixed or variable rates for a set term.
Principal and fixed rates are guaranteed and insured. There is no fluctuation
in principal value. Withdrawal of these deposits prior to maturity will
normally be subject to a penalty.
The Fund's investment results will vary from time to time depending on
market conditions, the composition of the Fund's portfolio, and operating
expenses of the Fund. These factors and possible differences in the methods
used in calculating investment results should be considered when comparing
performance information regarding the Fund to information published for other
investment companies and other investment vehicles. You should also consider
return quotations relative to changes in the value of the Fund's shares and the
risks associated with the Fund's investment objectives and policies. At any
time in the future, return quotations may be higher or lower than past return
quotations, and there may be no assurance that any historical return-quotation
will continue in the future.
For more information about the calculation methods used to compute the
Fund's investment results, see "YIELD AND PERFORMANCE" in the Statement of
Additional Information.
CAPITAL STOCK
Each Fund has authorized and issued a single class of $.001 per share par
value voting common stock. Shareholders of each Fund are entitled to one vote
for each full share held and fractional votes for fractional shares held for
that particular Fund. Shareholders of each Fund vote on the election of
directors and any other matter submitted to a shareholder vote. Shares issued
are fully paid and nonassessable and have no preemptive or conversion rights.
Each share is entitled to participate equally in dividends and distributions
declared by that Fund and in the net assets of that Fund upon liquidation or
dissolution after satisfaction of outstanding liabilities. Certain rights of
shareholders may be modified, pursuant to the 1940 Act, by a vote of the
shareholders, including a vote of the lesser of (i) two-thirds of any quorum at
a shareholders' meeting of more than 50% of the shares issued and outstanding or
(ii) a majority of the shares issued and outstanding (including any change in a
Fund's fundamental policies and investment restrictions). In general, Oregon
law permits modifications to the rights of
-55-
<PAGE>
shareholders by amendment to the Articles of Incorporation of the Fund, which
requires a vote of the majority of the shares present at any meeting at which a
quorum (50% plus 1 of the outstanding shares) is present.
-56-
<PAGE>
No person has been authorized to give any information or make any
representations not contained in this Prospectus, or in the Statement of
Additional Information incorporated herein by reference, in connection with the
offering made by this Prospectus and, if given or made, such representations
must not be relied upon as having been authorized by the Funds or their
Distributor. This Prospectus does not constitute an offering by the Funds or by
their Distributor in any jurisdiction in which such offering may not lawfully be
made.
TABLE OF CONTENTS
Page
----
PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
EXPENSE DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
CONDENSED FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . 6
PERFORMANCE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . . . . . . . . . 12
FUNDAMENTAL POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SPECIAL RISK FACTORS TO BE CONSIDERED. . . . . . . . . . . . . . . . . . . . 30
MANAGEMENT OF THE FUNDS. . . . . . . . . . . . . . . . . . . . . . . . . . . 37
CONTROL PERSONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
NET ASSET VALUE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
WHEN TRANSACTIONS ARE RECORDED IN YOUR ACCOUNT . . . . . . . . . . . . . . . 41
HOW TO INVEST IN THE FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . 41
HOW TO SELL YOUR SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . 45
HOW TO EXCHANGE YOUR SHARES. . . . . . . . . . . . . . . . . . . . . . . . . 47
REDEMPTION OR EXCHANGE BY TELEPHONE. . . . . . . . . . . . . . . . . . . . . 48
ALLOCATION OF BROKERAGE. . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SPECIAL INVESTOR SERVICES. . . . . . . . . . . . . . . . . . . . . . . . . . 49
SYSTEMATIC WITHDRAWAL PLAN . . . . . . . . . . . . . . . . . . . . . . . . . 50
CUSTODIAN, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT. . . . . . . . . . . 50
LENDING OF PORTFOLIO SECURITIES. . . . . . . . . . . . . . . . . . . . . . . 51
PORTFOLIO TURNOVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
YIELD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
PERFORMANCE COMPARISONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 54
CAPITAL STOCK. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
THE CRABBE HUSON
FUNDS
The Crabbe Huson Special Fund, Inc.
- --------------------------------------------------------
The Crabbe Huson Real Estate Investment Fund, Inc.
- --------------------------------------------------------
The Crabbe Huson Equity Fund, Inc.
- --------------------------------------------------------
The Crabbe Huson Asset Allocation Fund, Inc.
- --------------------------------------------------------
The Oregon Municipal Bond Fund, Inc.
- --------------------------------------------------------
The Crabbe Huson Income Fund, Inc.
- --------------------------------------------------------
The Crabbe Huson U.S. Government Income Fund, Inc.
- --------------------------------------------------------
The Crabbe Huson U.S. Government Money Market Fund, Inc.
- --------------------------------------------------------
PROSPECTUS
FEBRUARY 28, 1996
<PAGE>
APPENDIX A
BOND RATING AGENCIES
The following is a description of the bond ratings employed by Moody's
Investors Service, Inc. ("Moody's").
Aaa: Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or exceptionally stable margin, and
principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present that
make the long-term risks appear somewhat larger than in Aaa securities.
A: Bonds rated A possess many favorable investment attributes and are to
be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present that
suggest a susceptibility to impairment sometime in the future.
Baa: Bonds rated Baa are considered as medium-grade obligations (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well.
Ba: Bonds rated Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often ~the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.
Ca: Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C: Bonds rated C are the lowest rated class of bonds and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.
Moody's applies the numerical modifiers "1", "2", and "3" in each generic
rating classification from Aa through B. The modifier "1" indicates that the
security ranks in the higher end of its generic rating category; the modifier
"2" indicates a mid-range ranking; and the modifier "3" indicates that the issue
ranks in the lower end of its generic rating category.
The following is a description of the bond ratings employed by Standards &
Poor's Corporation ("S&P").
AAA: Bonds rated AAA are highest-grade obligations. Capacity to pay
interest and repay principal is extremely strong.
AA: Bonds rated AA have a very strong capacity to pay interest and repay
principal, and differ from the highest rated issues only in small degree.
A: Bonds rated A have a strong capacity to pay interest and repay
principal, although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
<PAGE>
BBB: Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in higher rated categories.
BB, B, CCC, CC, C: Debt rated BB, B, CCC, CC, and C is regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and C the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
BB: Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
B: Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
BB or BB- rating.
CCC: Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial, or economic conditions, it is not likely to have
the capacity to pay interest and repay principal. The CCC rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied B or B- rating.
CC: The rating CC is typically applied to debt subordinated to senior debt
that is assigned an actual or implied CCC rating.
C: The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating. The C rating may be
used to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.
C1: The rating C1 is reserved for income bonds on which no interest is
being paid.
D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
C: Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarding as having extremely poor prospects of ever attaining
any real investment standing.
The S&P letter rating may be modified by the addition of a plus (+) or
minus sign (-), which is used to show relative standing within rating categories
between AA to CCC.
From time to time a bond rating agency may adjust its rating of a
particular bond issue. Subsequent to a Fund's purchase of a bond, such a bond
may have its rating reduced (down graded) to a category not permitted to be
owned by that Fund, or it may cease to be rated. Neither case would require
that a Fund eliminate such a bond from its portfolio. However, the Fund's
Adviser will consider such an event in determining whether or not the Fund
should continue to hold such a security.
<PAGE>
------------------
CRABBE HUSON FUNDS
------------------
The Crabbe Huson Special Fund, Inc.
The Crabbe Huson Real Estate Investment Fund, Inc.
The Crabbe Huson Equity Fund, Inc.
The Crabbe Huson Asset Allocation Fund, Inc.
The Oregon Municipal Bond Fund, Inc.
The Crabbe Huson Income Fund, Inc.
The Crabbe Huson U.S. Government Income Fund, Inc.
The Crabbe Huson U.S. Government Money Market Fund, Inc.
<PAGE>
-----------------------------------
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------
February 28, 1996
This Statement of Additional Information of the
Crabbe Huson Funds (the "Funds") is not a
prospectus but should be read in conjunction with
the Prospectus of the Funds, dated the same date
as this Statement of Additional Information, which
has been filed with the Securities and Exchange
Commission (the "SEC") and which is available
without charge upon request by calling (800) 541-
9732 or writing the Funds at the Crabbe Huson
Funds, P.O. Box 8413, Boston, MA 02266-8413. This
Statement of Additional Information has been
incorporated by reference into the Prospectus.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
DIRECTORS AND OFFICERS OF THE FUNDS. . . . . . . . . . . . . . . . . . . 5
SERVICES PROVIDED BY THE ADVISER . . . . . . . . . . . . . . . . . . . . 7
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES. . . . . . . . . . . 11
SYSTEMATIC WITHDRAWAL PLAN . . . . . . . . . . . . . . . . . . . . . . . 16
PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . 18
INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . . 21
LOANS OF PORTFOLIO SECURITIES. . . . . . . . . . . . . . . . . . . . . . 35
PURCHASE AND REDEMPTION OF FUND SHARES . . . . . . . . . . . . . . . . . 36
U.S. GOVERNMENT MONEY MARKET FUND. . . . . . . . . . . . . . . . . . . . 37
PRICING OF SECURITIES BEING OFFERED. . . . . . . . . . . . . . . . . . . 38
YIELD AND PERFORMANCE. . . . . . . . . . . . . . . . . . . . . . . . . . 38
DIVIDENDS, DISTRIBUTIONS AND TAXES . . . . . . . . . . . . . . . . . . . 45
3
<PAGE>
SPECIAL INVESTOR SERVICES. . . . . . . . . . . . . . . . . . . . . . . . 49
GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 49
COUNSEL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
CUSTODIAN, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT . . . . . . . . 51
ADDITIONAL INFORMATION REGARDING CERTAIN INVESTMENTS BY THE FUNDS . . . 52
SPECIAL INVESTMENT RISKS . . . . . . . . . . . . . . . . . . . . . . . . 53
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 55
</TABLE>
4
<PAGE>
----------
MANAGEMENT
----------
The directors and officers of the Funds are listed below, together
with information about their principal business occupations during the last
five years.
DIRECTORS AND OFFICERS OF THE FUNDS
- -----------------------------------
RICHARD S. HUSON,* 55, is a Director and President of each of the
----------------
Funds. Mr. Huson is a chartered financial analyst. Mr. Huson is a director
and Secretary of the Crabbe Huson Group, Inc., the Funds' Adviser. Mr. Huson
has, since 1980, served in various management positions with the Adviser.
His business address is 16 NW Oregon Avenue, Bend, Oregon 97709.
JAMES E. CRABBE,* 50, is a Director and Vice President of each of the
----------------
Funds. He is a director and President of the Crabbe Huson Group, Inc., the
Funds' Adviser. Mr. Crabbe has, since 1980, served in various management
positions with the Adviser. His business address is 121 SW Morrison, Suite
1400, Portland, Oregon 97204.
GARY L. CAPPS, 60, is a Director of each of the Funds. Mr. Capps has
-------------
been the Executive Director of the Bend Chamber of Commerce since July 1992.
Mr. Capps was the owner and Chief Executive Officer of ten radio stations in
Oregon, Idaho and Washington from 1964 until 1986. He has been a director of
Bank of the Cascades in Bend, Oregon since 1980, and has served as Chairman
since 1983. His business address is 63085 N. Hwy 97, Bend, Oregon 97701.
- -----------------------------
*The person indicated are "interested persons" of the Fund, as defined in the
Investment Company Act of 1940 (the ("1940 Act") as amended. They receive no
directors' fees or salaries from the Fund.
5
<PAGE>
CHERYL BURGERMEISTER,* 44, is Treasurer of the Funds. Ms.
--------------------
Burgermeister has been employed by the Crabbe Huson Group for the past eight
years, and has been the chief financial officer of the Group since 1989. Ms.
Burgermeister's business address is 121 SW Morrison, Suite 1400, Portland,
Oregon 97204.
LOUIS SCHERZER, 75, is a Director of each of the Funds. Mr. Scherzer
--------------
is an officer of Scherzer Partners, Inc., a real estate development and
management firm located at 5440 SW Westgate Drive, Suite 222, Portland,
Oregon 97221. Mr. Scherzer was employed by the Benjamin Franklin Federal
Savings and Loan Association from 1946 to 1980, where he served as Senior
Executive Vice President and Director from 1980 to 1985.
ROBERT L. SMITH, 57, is a Director of each of the Funds. Mr. Smith
---------------
has been President of VIP's Industries since 1968, and has been a Director of
Western Security Bank since 1980, a Director of KeyCorp since 1988 and a
Director of Blue Cross/Blue Shield of Oregon since 1984. His business
address is 280 Liberty Street S.E., Salem, Oregon 97301.
CRAIG P. STUVLAND,* 40, is a Director and Secretary of each of the
-----------------
Funds. Mr. Stuvland has been employed by the Advisor since June, 1987; he is
currently Executive Vice President and a director. Mr. Stuvland's business
address is 121 S.W. Morrison, Suite 1400, Portland, Oregon 97204. Mr.
Stuvland is President and a director of Crabbe Huson Securities, Inc., the
Funds' Distributor.
RICHARD P. WOLLENBERG, 79, is a Director of each of the Funds. Mr.
---------------------
Wollenberg has been Chairman and Chief Executive Officer of Longview Fibre
Company since 1978, and a Trustee of Reed College since 1962. His business
address is Longview Fibre Company, P.O. Box 606, Longview, Washington 98632.
WILLIAM WENDELL WYATT, Jr., 45, is a Director of each of the Funds.
---------------------
Mr. Wyatt has been Chief of Staff, Office of the Governor, State of Oregon,
since April, 1995. From 1987 to 1995, he was President of the Oregon
Business Council. From 1981 to September 1987, Mr. Wyatt was the Executive
Director of the Association for Portland Progress. His business address is
254 State Capitol, Salem, Oregon 97310-0370.
6
<PAGE>
The members of the Funds' Boards of Directors are elected annually by
the Funds' shareholders. The Boards of Directors are responsible for the
overall management of the Funds, including general supervision and review of
their investment policies and activities. The Boards of Directors elect the
officers of the Funds who are responsible for supervising and administering
the Funds' day-to-day operations. In November of 1994, each Board of
Directors created an audit committee that reviews the report and management
letters of the auditors, reviews the terms of the auditor's engagement and
makes recommendations to the Boards concerning the terms of the auditor's
engagements. The audit committees currently consist of Messrs. Scherzer,
Smith and Wyatt. The Funds currently pay each of the directors who are not
"interested persons" on a per meeting basis:
COMPENSATION OF OFFICERS AND DIRECTORS
The following table sets forth compensation received by the disinterested
directors of the Funds during the fiscal year ended October 31, 1995. No
officer of any of the Funds received compensation in excess of $60,000.
COMPENSATION TABLE
<TABLE>
<CAPTION>
TOTAL
COMPENSATION
FROM FUND
AGGREGATE COMPENSATION FROM FUND, COMPLEX PAID
NAME OF PERSON, POSITION PER DIRECTOR TO DIRECTORS
- ------------------------ --------------------------------- ------------
<S> <C> <C>
Wollenberg, Smith Special Fund - $1,800 $7,200
Cappa, Scherzer, Real Estate Fund - $600
Directors Equity Fund - $1,600
Asset Allocation Fund - $1,600
Oregon Bond Fund - $600
Income Fund - $200
U.S. Government Income Fund - $200
U.S. Government Money Market
Fund - $600
Wyatt, Director Special Fund - $1,400 5,450
Real Estate Fund - $450
Equity Fund - $1,200
Asset Allocation Fund - $1,200
Oregon Bond Fund - $450
Income Fund - $150
U.S. Government Income Fund - $150
U.S. Government Money Market
Fund - $450
</TABLE>
The Funds also reimburse directors' expenses for attending shareholder and
director meetings for directors who are not officers, directors, or employees
of the Adviser or the Distributor.
See "Control Persons and Principal Holders of Securities" in this
Statement of Additional Information.
--------------------------------
SERVICES PROVIDED BY THE ADVISER
--------------------------------
The Adviser is the investment advisor to the Funds under investment
advisory agreements originally dated September 27, 1988, for the Special,
Equity and Oregon Municipal Bond Funds, August 7, 1988 for the Asset
Allocation, Income, U.S. Government Income and U.S. Government Money Market
Funds, and March 4, 1994 for the Real Estate Investment Fund. The Adviser
was incorporated in 1980 and has been engaged in the business of providing
investment advice since July 1, 1980. The address of the Adviser is 121 SW
Morrison, Suite 1425, Portland, Oregon 97204, mailing address: P.O. Box
6559, Portland, Oregon 97228-6559.
7
<PAGE>
Crabbe Huson Securities, Inc., the Distributor of the Funds, is affiliated
with the Adviser.
James E. Crabbe and Richard S. Huson are controlling shareholders
of the Adviser. Together, they own 100% of the stock of the Distributor of
the Funds.
James E. Crabbe and Richard S. Huson are primarily responsible for the
day-to-day management of the Adviser. Mr. Crabbe is President and a Director
of the Adviser and Mr. Huson is Secretary and a Director. Mr. Crabbe and Mr.
Huson have been primarily responsible since the inception of the Adviser.
Both Mr. Crabbe and Mr. Huson have served in various management positions
with the Adviser since 1980.
The Adviser has agreed to waive its fee and/or reimburse each Fund,
other than the Special, Equity and Asset Allocation Funds, for the amount, if
any, by which the total operating expenses of such Fund (including the
Adviser's compensation and any amounts paid pursuant to the Rule 12b-1 plan)
for any fiscal year exceed certain annual rates applied to the average daily
net assets of the Funds. The annual rates in effect are as follows: 1.50% of
the average daily net assets of The Crabbe Huson Real Estate Investment Fund,
Inc. (the "Real Estate Fund"); .98% of the average daily net assets of The
Oregon Municipal Bond Fund, Inc. (the "Oregon Bond Fund"); .80% of the
average daily net assets of The Crabbe Huson Income Fund, Inc. (the "Income
Fund"); .75% of the average daily net assets of The Crabbe Huson U.S.
Government Income Fund, Inc. (the "U.S. Government Income Fund"); and .70% of
the average daily net assets of The Crabbe Huson U.S. Government Money Market
Fund, Inc. (the "U.S. Government Money Market Fund"). This waiver may be
withdrawn at any time upon 30 days' written notice to the shareholders of the
affected Fund. Even in the event of discontinuance of this agreement, the
Funds may still be subject to the laws of certain states, which require that
if a mutual fund's expenses (including advisory fees but excluding interest,
taxes, brokerage commissions and extraordinary expenses) exceed certain
percentages of average net assets, the Fund must be reimbursed for such
excess expenses.
Under the Advisory Agreements, the Adviser determines the structure of
the Funds' portfolios, the nature and timing of the changes in it, and the
manner of implementing such changes (subject to any directions it may receive
from the Funds' Board of Directors); provides the Funds with investment
advisory research and related services for the
8
<PAGE>
investment of assets; furnishes (without expense to the Funds) the
services of such members of its organization as may be duly elected officers
or directors of the Funds; and pays all executive officers' salaries and
expenses. Additional information about the services provided by the Adviser
is described under "MANAGEMENT OF THE FUNDS" in the Prospectus.
As compensation for its services under the Advisory Agreements, the
Adviser receives a semi-monthly fee based on the annual schedule of fees
outlined in the Prospectus. For the year ended October 31, 1993, the Funds
paid the following investment advisory fees to the Adviser:
<TABLE>
<CAPTION>
Amount
Fee Waived Total
---- ------- -----
<S> <C> <C> <C>
Special Fund $ 129,227 $ 2,238 $ 126,989
Equity Fund 217,212 32,826 184,386
Asset Allocation Fund 683,280 54,592 628,688
Oregon Bond Fund 120,660 11,421 109,239
Income Fund 40,195 40,195 -0-
U.S. Government
Income Fund 54,023 54,023 -0-
U.S. Government
Money Market Fund 53,882 53,882 -0-
</TABLE>
For the year ended October 31, 1994, the Funds paid the
following investment advisory fees to the Adviser:
9
<PAGE>
<TABLE>
<CAPTION>
Amount
Fee Waived Total
---- ------- ------
<S> <C> <C> <C>
Special Fund $ 963,723 $ 85,038 $878,685
Real Estate Fund 94,916 50,426 44,490
Equity Fund 782,419 68,033 714,386
Asset Allocation Fund 1,034,183 53,227 980,956
Oregon Bond Fund 152,868 31,708 121,160
Income Fund 43,957 43,957 -0-
U.S. Government
Income Fund 51,245 51,245 -0-
U.S. Government
Money Market Fund 107,853 107,853 -0-
</TABLE>
For the year ended October 31, 1995, the Funds paid the
following investment advisory fees to the Adviser:
<TABLE>
<CAPTION>
Amount
Fee Waived Total
--- ------- ------
<S> <C> <C> <C>
Special Fund $5,398,048 $ 697 $5,397,351
Real Estate Fund 190,619 75,190 115,429
Equity Fund 2,471,465 -0- 2,471,465
Asset Allocation Fund 1,183,215 14,567 1,168,648
Oregon Bond Fund 134,042 20,866 113,176
Income Fund 49,011 49,011 -0-
U.S. Government
Income Fund 43,576 43,576 -0-
U.S. Government
Money Market Fund 253,198 230,305 22,893
</TABLE>
The Real Estate Fund entered into a subadvisory agreement with Aldrich
Eastman Waltch, L.P. on September 6, 1995. In the year ending October 31,
1995, advisory fees of $11,560.07 were paid by the Adviser to this subadviser
out of the advisory fees collected from that Fund.
On August 1, 1995 the Funds entered into an Administration Agreement
with State Street Bank and Trust Company. Under this Agreement, State Street
provides a number of administrative and
10
<PAGE>
compliance services to the Funds, including maintenance of certain Fund books
and records, preparation of Fund tax returns, performing expense allocation
and payment of expenses, preparation of reports to shareholders, preparation
of Fund financial statements, preparation of reports to the directors of the
Funds, maintaining state registration of Fund shares, and monitoring
compliance with investment restrictions and Internal Revenue Code
requirements for registered investment company status. The Funds paid State
Street Bank the following fees under the Administration Agreement during the
fiscal year ended October 31, 1995:
<TABLE>
<CAPTION>
<S> <C>
Special Fund $ 62,430
Equity Fund $ 26,144
Asset Allocation Fund $ 9,297
Real Estate Fund $ 1,353
Oregon Bond Fund $ 1,889
Income Fund $ 482
U.S. Government Income Fund $ 569
U.S. Government Money Market Fund $ 3,767
Total: $105,935
</TABLE>
---------------------------------------------------
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
---------------------------------------------------
The following table shows the persons known by the Funds to
beneficially own 5% or more of any class of any of the Funds' voting
securities, and the ownership of the officers and directors of each Fund, as
a group, as of December 20, 1995. Those shareholders marked with an asterisk
are nominees holding shares for beneficial owners and the Funds have no
records concerning the actual beneficial owners. The Oregon Bond Fund has no
shareholders of record of more than 5% of the outstanding Shares of that
Fund, or who are officers or directors of that Fund as of December 20, 1995.
THE CRABBE HUSON SPECIAL FUND, INC.
<TABLE>
<CAPTION>
Approximate Approximate
Number of Shares Percent of
Beneficial Owners Beneficially Owned Shares
- ----------------- ------------------ -----------
<S> <C> <C>
Charles Schwab 22,023,954 33.61%
& Co. Inc.*
Special Custody A/C
Attn: Mutual Funds
101 Montgomery Street
San Francisco, California 94104-4122
Gary L. Capps, Director 24,116 .01%
Richard Huson, President 7,294 .01%
Robert L. Smith, Director 853 .01%
11
<PAGE>
Craig Stuvland, Secretary 2,743 .01%
Richard P. Wollenberg, Director 12,492 .01%
William Wendell Wyatt, Director 411 .01%
Officers and Directors
as a group 47,909 .01%
</TABLE>
THE CRABBE HUSON REAL ESTATE INVESTMENT FUND, INC.
<TABLE>
<CAPTION>
Approximate Approximate
Number of Shares Percent of
Beneficial Owners Beneficially Owned Shares
- ----------------- ------------------ ------------
<S> <C> <C>
Enele Co. C/F* 996,057 50.82%
Copper Mountain Financial Group, Inc.
1211 SW Fifth Avenue, Suite 1900
Portland, Oregon 97204
Gary Capps, Director 1,843 .01%
Richard Huson, President 5,065 .01%
Richard P. Wollenberg, Director 2,086 .01%
Officers and Directors
as a group 8,995 .01%
</TABLE>
THE CRABBE HUSON EQUITY FUND, INC.
<TABLE>
<CAPTION>
Approximate Approximate
Number of Shares Percent of
Beneficial Owners Beneficially Owned Shares
- ----------------- ------------------- -----------
<S> <C> <C>
Charles Schwab & Co., Inc.* 5,995,144 25.77%
Special Custody A/C
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104-4122
Gary Capps, Director 5,295 .01%
Richard Huson, President 5,410 .01%
Richard P. Wollenberg, Director 5,652 .01%
12
<PAGE>
Officers and Directors
as a group 16,357 .01%
</TABLE>
THE CRABBE HUSON ASSET ALLOCATION FUND, INC.
<TABLE>
<CAPTION>
Approximate Approximate
Number of Shares Percent of
Beneficial Owners Beneficially Owned Shares
- ----------------- ------------------- ------------
<S> <C> <C>
Enele Co. C/F* 980,303 9.02%
Copper Mountain Financial Group, Inc.
1211 SW Fifth Avenue, Suite 1900
Portland, Oregon 97204
Gary L. Capps, Director 5,006 .01%
William Wendell Wyatt, Director 296 .01%
Officers and Directors 5,302 .01%
as a group
</TABLE>
13
<PAGE>
THE CRABBE HUSON INCOME FUND, INC.
<TABLE>
<CAPTION>
Approximate Approximate
Number of Shares Percent of
Beneficial Owners Beneficially Owned Shares
- ----------------- ------------------ ------------
<S> <C> <C>
Klamath Medical Service Bureau 36,936 5.20%
2500 Daggett Street
Klamath Falls, Oregon 97601
South Coast Orthopedic 43,463 6.12%
Assoc. PC 401K Plan
FBO Curtis D. Adams
4225 Cape Arago Hwy.
Coos Bay, Oregon 97420-9698
Enele Co. C/F* 41,648 5.87%
Copper Mountain Financial Group, Inc.
1211 SW Fifth Avenue, Suite 1900
Portland, Oregon 97204
Enele Co. FBO 73,398 10.34%
Blackwell NA Ret A/C 5326
121 S.W. Morrison, Suite 1450
Portland, Oregon 97204-3144
Officers and Directors,
as a group None
</TABLE>
14
<PAGE>
THE CRABBE HUSON U.S. GOVERNMENT INCOME FUND, INC.
<TABLE>
<CAPTION>
Approximate Approximate
Number of Shares Percent of
Beneficial Owners Beneficially Owned Shares
- ----------------- ------------------ -----------
<S> <C> <C>
Klamath Medical Service 51,746 6.59%
Bureau
2500 Daggett Street
Klamath Falls, Oregon 97601
Tillamook County 41,537 5.29%
Smoker, Inc.
15500 Miami Foley Road
Bay City, Oregon 97107-9708
Enele Co. C/F* 77,778 9.90%
Copper Mountain Financial Group, Inc.
1211 SW Fifth Avenue, Suite 1900
Portland, Oregon 97204
State Street Bank and Trust Co. 51,787 6.59%
C/F Beverly M. Hodge
369 Kubli Road
Grants Pass, Oregon 97527
Officers and Directors
as a group None
</TABLE>
THE CRABBE HUSON U.S. GOVERNMENT MONEY MARKET FUND, INC.
<TABLE>
<CAPTION>
Approximate Approximate
Number of Shares Percent of
Beneficial Owners Beneficially Owned Shares
- ----------------- ------------------ ------------
<S> <C> <C>
Enele Co. 15,555,108 29.28%
Copper Mountain Financial Group, Inc.
1211 SW Fifth Avenue, Suite 1900
Portland, Oregon 97204
James E. Crabbe, Vice President 617,036 1.16%
Richard S. Huson, President 470,711 .89%
Louis Scherzer, Director 29,157 .01%
Officers and Directors,
as a group 1,116,904 2.10%
</TABLE>
15
<PAGE>
--------------------------
SYSTEMATIC WITHDRAWAL PLAN
--------------------------
A shareholder owning or purchasing shares of any Fund having a net
asset value of $5,000 or more may participate in a systematic withdrawal plan
providing regular monthly payments in the amount of $100 or more from the
shares held in any Fund (the "Systematic Withdrawal Plan"). An application
form containing details of the Systematic Withdrawal Plan is available upon
request from State Street Bank and Trust Company (the "Transfer Agent"), the
Funds' transfer agent. The Plan is voluntary and may be terminated at any
time by the shareholders.
Income dividends and capital gain distributions on shares of the Funds
held in a Systematic Withdrawal Plan are automatically reinvested in
additional shares of the relevant Fund at net asset value. A Systematic
Withdrawal Plan is not an annuity and does not and cannot protect against
loss in declining markets. Amounts paid to a shareholder from the Systematic
Withdrawal Plan represent the proceeds from redemptions of Fund shares, and
the value of the shareholder's investment in a Fund will be reduced to the
extent that the payments exceed any increase in the aggregate value of the
shareholder's shares (including shares purchased through reinvestment of
dividends and distributions). If a shareholder receives payments that are
greater than the appreciation in value of his or her shares, plus the income
earned on the shares, the shareholder may eventually withdraw his or her
entire account balance. This will occur more rapidly in a declining market.
For tax purposes, depending upon the shareholder's cost basis and date of
purchase, each withdrawal will result in a capital gain or loss. See
"DIVIDENDS, DISTRIBUTIONS AND TAXES" in this Statement of Additional
Information and "TAXES" in the Funds' Prospectus.
DISTRIBUTION PLAN
- -----------------
Rule 12b-1 under the Investment Company Act of 1940 (the "1940 Act")
requires that any payments made by the Funds in connection with financing the
distribution of their shares may only be made pursuant to a written plan
describing all aspects of the proposed financing of distribution, and also
requires that all agreements with any person relating to the implementation
of the plan must be in writing. Because some of the payments described below
to be made by the Funds are distribution expenses within the meaning of Rule
12b-1, the Funds have entered into distribution agreements with Crabbe Huson
Securities, Inc. (the "Distributor") that provides for certain payments to
the Distributor pursuant to a distribution plan (the "Plan") adopted in
accordance with such Rule.
Rule 12b-1 requires that the Plan be approved by a majority of a Fund's
outstanding shares, and requires that
16
<PAGE>
the Plan, together with any related agreements, be approved by a vote of the
directors of the Funds who are not interested persons of the Funds and who
have no direct or indirect financial interest in the operation of the Plan or
in the agreements related to the Plan, cast in person at a meeting called for
the purpose of voting on such plan or agreement. The Plan and any agreement
related to it must provide, in substance:
(a) that it shall continue in effect for a period of more than
one year from the date of its execution or adoption only so long as such
continuance is specifically approved at least annually in the manner
described in the Rule;
(b) that any person authorized to direct the disposition of
moneys paid or payable by the Funds pursuant to the Plan or any related
agreement shall provide to the Funds' Board of Directors, and the
Directors shall review, at least quarterly, a written report of the
amounts so expended and the purposes for which such expenditures were
made; and
(c) in the case of the Plan, that it may be terminated at any
time by a vote of a majority of the members of the Board of Directors of
the Fund who are not interested persons of the Fund and who have no Direct
or indirect financial interest in the operation of the Plan or in any
agreements related to the Plan, or by a vote of a majority of the
outstanding voting securities of a Fund.
The Plan may not be amended to increase materially the amount to be
spent for distribution without shareholder approval, and all material
amendments to the Plan must be approved in the manner described in the Rule.
The Funds may rely upon Rule 12b-1 only if the selection and nomination
of the Funds' disinterested directors is committed to the discretion of the
disinterested Directors. The Funds may implement or continue a plan pursuant
to Rule 12b-1 only if the directors who vote to approve such implementation
or continuation conclude, in the exercise of reasonable business judgment and
in light of their fiduciary duties under state law, and under Sections 36(a)
and (b) of the 1940 Act, that there is a reasonable likelihood that the plan
will benefit the Funds and their shareholders. The Boards of Directors have
concluded that there is a reasonable likelihood that a distribution plan will
benefit each Fund.
Pursuant to the provisions of the Plan, each participating Fund may pay
up to .25% of its average daily net assets to the Distributor to reimburse
the Distributor for actual expenses incurred in the distribution and
promotion of such Fund's shares, and to other broker-dealers,
17
<PAGE>
investment advisors or others that actively promote the sale of Fund shares.
Expenses for which the Distributor will be reimbursed under the Plan
include, but are not limited to, expenses incurred in the printing of
prospectuses and statements of additional information for persons other than
then-current shareholders, expenses related to preparation and printing of
sales literature, and other distribution-related expenses. Compensation will
be paid out on a quarterly basis to the Distributor, to broker-dealers which
have entered into sales agreements with the Distributor, to investment
executives of the Distributor, and to other entities that actively promote
the sale of Funds shares.
----------------------
PORTFOLIO TRANSACTIONS
----------------------
GENERAL CONSIDERATIONS
- ----------------------
The Adviser is responsible for decisions to buy and sell securities for
the Funds, the selection of brokers and dealers to effect the transactions
and the negotiation of brokerage commissions, if any. Purchases and sales of
securities on a securities exchange are effected through brokers who charge a
negotiated commission for their services. Orders may be directed to any
broker.
In the over-the-counter market, debt and equity securities are
generally traded on a "net" basis with dealers acting as principal for their
own accounts without a stated commission, although the price of a security
usually includes a profit to the dealer. A Fund may also pay a mark-up
(sometimes referred to as a dealer's "turn") in principal transactions and in
transactions in the over-the-counter market. In underwritten offerings,
securities are purchased at a fixed price which includes an amount of
compensation to the underwriter, generally referred to as the underwriter's
concession or discount. On occasion, certain money market instruments may be
purchased directly from an issuer, in which case no commissions or discounts
are paid.
The primary considerations in the selection of a broker or dealer for
portfolio transactions are the availability of the desired security and the
prompt execution of orders in an effective manner at the most favorable
prices. Subject to those considerations, dealers that provide supplemental
investment research and statistical or other services to the Adviser may
receive orders for portfolio transactions by the Funds. Such services may
include advice concerning the value of securities; the advisability of
investing in, purchasing, or selling securities; the availability of
securities; purchasers or sellers of securities; and the furnishing of
analysis and reports concerning industries, economic facts and trends, and
portfolio strategies. There is no formula
18
<PAGE>
for such allocation. The research information received from brokers or
dealers may or may not be useful to the Funds and the Adviser in a number of
ways. The information may be in written form or may be obtained through
direct contact with individuals, and may include information on particular
issuers as well as market and general economic information. The Adviser will
not be deemed to have breached its obligations to the Funds solely by reason
of having caused the Funds to pay a broker or dealer an amount of commission
for effecting a securities transaction in excess of the amount of commission
another broker or dealer could have charged for effecting that transaction,
if the Adviser has determined in good faith that such amount of commission
was reasonable in relation to the value of the brokerage and research
services provided to the Funds and to other accounts of the Adviser.
In addition to placing the Funds' brokerage business with firms that
provide the above research, market and statistical services to the Adviser,
the Funds' brokerage business may also be placed with firms that promote the
sale of the Funds' shares or that agree to pay a portion of certain Fund
expenses, consistent with achieving the best price and execution.
In the fiscal year ended October 31, 1993, the Special Fund paid
$113,857, the Equity Fund paid $115,701, the Asset Allocation Fund paid
$225,228, the Income Fund paid $603, and the U.S. Government Income Fund paid
$384 in brokerage commissions. None of these commissions were paid to the
Funds' Distributor. The Oregon Bond Fund and the U.S. Government Money
Market Fund did not pay any brokerage commissions during the year ended
October 31, 1993, as these Funds executed all portfolio transactions on a
principal basis. The Real Estate Fund began operations in 1994.
In the fiscal year ended October 31, 1994, the Special Fund paid
$766,879, the Equity Fund paid $444,904, the Asset Allocation Fund paid
$309,181, the Income Fund paid $3,407, the U.S. Government Income Fund paid
$318, and the Real Estate Fund paid $71,851 in brokerage commissions. None
of these commissions were paid to the Funds' Distributor. The Oregon Bond
Fund and the U.S. Government Money Market Fund did not pay any brokerage
commissions in the year ended
19
<PAGE>
October 31, 1994, as these Funds executed all portfolio transactions on a
principal basis. Of the commissions paid in the fiscal year ending October
31, 1994 the Special Fund paid $550,799, the Equity Fund paid $253,908, the
Asset Allocation Fund paid $183,915, and the Real Estate Fund paid $60,795 in
commissions as a result of research provided by the brokers. None of the
other Funds directed brokerage on the basis of research provided by a broker.
In the fiscal year ended October 31, 1995, the Special Fund paid
$4,610,652, the Equity Fund paid $1,228,492, the Asset Allocation Fund paid
$279,948, the Income Fund paid $416, the U.S. Government Fund paid $144, and
the Real Estate Fund paid $60,139 in brokerage commissions. None of these
commissions were paid to the Funds' Distributor. The Oregon Bond Fund and
the U.S. Government Money Market Fund did not pay any brokerage commissions
in the year ended October 31, 1995, as these Funds executed all portfolio
transactions on a principal basis. Of the commissions paid in the fiscal
year ending October 31, 1995, the Special Fund paid $1,594,562, the Equity
Fund paid $754,846, the Asset Allocation Fund paid $180,671, and the Real
Estate Fund paid $44,614 in commissions as a result of research provided by
the brokers. None of the other Funds directed brokerage on the basis of
research provided by a broker.
Under the 1940 Act, persons affiliated with the Funds are prohibited
from dealing with the Funds as principals in the purchase or sale of
securities. The Funds or broker-dealers affiliated with the Adviser will not
deal with affiliated parties, including the Distributor, in connection with
principal transactions.
The SEC has the authority to issue and amend regulations involving
transactions with affiliates of the Funds. While there is no indication that
it will do so, the SEC may issue regulations at any time that would prohibit
the Funds from executing portfolio transactions through an affiliate. The
Funds' Boards of Directors will review all transactions with affiliates at
least quarterly and determine the overall reasonableness of any brokerage
commissions paid.
Even though investment decisions for the Funds are made independently
from those of the other accounts managed by the Adviser or its affiliates,
securities of the same issuer may be purchased, held, or sold by the Funds
and the other accounts, because the same security may be suitable for all of
them. When the Funds and such other accounts are simultaneously engaged in
purchase or sale of the same security, efforts will be made to allocate price
and amounts in an equitable manner. In some cases, this procedure may
adversely affect the price paid or received by the Funds or the size of the
position purchased or sold by the Funds.
20
<PAGE>
PORTFOLIO TURNOVER
- ------------------
The Funds generally do not trade in securities with the goal of
obtaining short-term profits, but when circumstances warrant, securities will
be sold without regard to the length of time the security has been held.
The Funds anticipate that, except in periods of unusual market
conditions, their annual portfolio turnover rate (the lesser of purchase or
sales of portfolio securities for the year divided by the monthly average of
the value of the portfolio securities owned by the Funds during the year)
will generally range between 20% and 150%, although Funds with smaller
portfolios may have portfolio turnover in excess of this range. However, the
rate of turnover will not be a limiting factor when the Funds deem it
desirable to purchase or sell securities. A higher portfolio turnover rate
may involve correspondingly greater transaction costs, which would be borne
directly by the Funds, as well as additional realized gains and/or losses to
shareholders.
-----------------------
INVESTMENT RESTRICTIONS
-----------------------
The investment restrictions described below have been adopted by the
Funds as fundamental investment policies. These fundamental investment
policies may not be changed without the approval of the holders of the lesser
of a majority of a Fund's outstanding shares or 67% of the shares represented
at a meeting of shareholders at which the holders of more than 50% of the
shares are represented.
If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage beyond the specified limit resulting
from a change in values of assets will not be considered a violation of the
investment restrictions relating to purchases of portfolio securities.
Each Fund, except the Special Fund, is prohibited from purchasing
securities when the total borrowings of that Fund exceed 5% of its total
assets.
Each Fund (except the Oregon Bond Fund and the Real Estate Fund) is
prohibited from investing more than 20% of its total assets in fixed income
securities, including convertible stock, that are rated less than Moody's Baa
or S&P BBB, or in commercial paper that is rated less than B-1 by Moody's or
A- by S&P; not more than 5% of a Fund's total assets may be invested in fixed
income securities that are unrated. Securities rated below the fourth
highest grade and unrated fixed income securities have speculative
characteristics and additional risks. These are described in "SPECIAL RISK
FACTORS TO BE CONSIDERED" in the Prospectus. The Oregon Bond and Real Estate
Funds are subject to more restrictive quality limitations as set forth below.
21
<PAGE>
THE CRABBE HUSON SPECIAL FUND, INC.
- -----------------------------------
THE CRABBE HUSON EQUITY FUND, INC.
- ----------------------------------
THE CRABBE HUSON ASSET ALLOCATION FUND, INC.
- --------------------------------------------
These Funds may not:
1. Invest an amount that exceeds 5% of the value
of a Fund's total assets in the securities of
any one issuer. This restriction does not
apply to holdings of U.S. Government
securities.
2. Invest more than 25% of their total assets in
any one industry. This restriction does not
apply to holdings of U.S. Government
securities.
3. Issue any senior securities, as defined in
the 1940 Act.
4. Purchase the securities of any issuer for the
purpose of exercising control of management,
and a Fund may not acquire or own more than
10% of any class of the securities of any
issuer.
5. Sell securities short, except in the case of
the Special Fund, as permitted in the
Prospectus.
6. Invest in any security that would subject a
Fund to unlimited liability, although the
Special Fund may sell securities short and
the Special, Equity and Asset Allocation may
invest in interest rate and stock market
futures.
7. Underwrite the securities of other issuers or
invest more than 10% of net assets in
illiquid securities, such as repurchase
agreements with a maturity in excess of seven
days. Notwithstanding the above, these Funds
may not invest in restricted securities
(including, but not limited to, nonpublicly
traded debt securities).
8. Invest in securities of other investment
companies, except as set forth in the
Statement of Additional Information under
"SECURITIES OF OTHER INVESTMENT COMPANIES."
9. Purchase securities on margin.
10. Write uncovered put or uncovered call
options.
22
<PAGE>
11. Purchase portfolio securities from or sell
securities directly to any of a Fund's, or
the Adviser's, officers, directors, or
employees as a principal for their own
account.
12. Purchase or sell commodities or commodity
contracts (stock index and interest rate
futures will not be considered commodity
contracts).
13. Purchase or sell real estate or real estate
mortgages, provided that the Fund may invest
in marketable securities, such as obligations
of the Government National Mortgage
Association, that are secured by real estate
or interests therein or are issued by
companies which invest in real estate or
interests therein, such as publicly traded
real estate investment trusts.
14. Purchase or sell interests in oil, gas, or
other mineral exploration or development
programs.
15. Lend portfolio securities, except as
described in the Statement of Additional
Information under "LOANS OF PORTFOLIO
SECURITIES."
16. Make loans to other persons, provided that,
for purposes of this restriction, the
acquisition of bonds, debentures, or other
corporate debt securities and investment in
government obligations, short-term commercial
paper, certificates of deposit, bankers'
acceptances, and repurchase agreements will
not be deemed to be the making of a loan.
17. Borrow money, except in an emergency or as
set forth in the Funds' Prospectus. In no
case will borrowing exceed one-third of the
value of a Fund's total assets immediately
after any such borrowing. If, for any
reason, the current value of a Fund's total
assets falls below an amount equal to three
times the amount of its indebtedness for
money borrowed, a Fund will, within three
days (not including Saturdays, Sundays and
holidays), reduce its indebtedness to the
extent necessary to satisfy the one-third
test.
18. Invest more than 10% of a Fund's total assets
in put or call options.
19. Invest more than 35% of a Fund's total assets
in foreign securities.
23
<PAGE>
20. Invest more than 10% of a Fund's total assets
in stock index futures.
21. Invest more than 10% of its total assets in
interest rate futures contracts.
THE CRABBE HUSON REAL ESTATE INVESTMENT FUND, INC.
- --------------------------------------------------
This Fund may not:
1. With respect to at least 75% of the Fund's
total assets, invest an amount that exceeds
5% of the value of the Fund's total assets in
the securities of any one issuer or invest in
more than 10% of the outstanding voting
securities of any one issuer. This
restriction does not apply to holdings of
government securities.
2. Issue any senior securities, except as
permitted by paragraph 13 below. For
purposes of this restriction, the issuance of
shares of stock in multiple classes or
series, the purchase or sale of options,
future contracts and options on future
contracts, forward commitments and repurchase
agreements entered into in accordance with
the Fund's investment policy and the rules
and regulations of the SEC, and the pledge,
mortgage or hypothecation of the Fund's
assets within the meaning of paragraph 18
below, are not deemed to be senior
securities.
3. Purchase the securities of any issuer for the
purpose of exercising control of management,
and the Fund may not acquire or own more
than 10% of any class of the securities of
any company.
4. Sell securities short.
5. Invest in any security that would subject the
Fund to unlimited liability, although the
Fund may invest in interest rate and stock
market futures.
6. Purchase securities on margin.
7. Write uncovered put or uncovered call
options.
8. Purchase portfolio securities from or sell
securities directly to any of the Adviser,
officers, directors, or employees as a
principal for their own account.
24
<PAGE>
9. Purchase or sell commodities or commodity
contracts (stock index and interest rate
futures will not be considered commodity
contracts).
10. Purchase or sell real estate, real estate
limited partnership interests, or real estate
mortgages, provided that the Fund may invest
in securities that are secured by real estate
or interests therein and may purchase and
sell mortgage-related securities and may hold
and sell real estate acquired by the Fund as
a result of the ownership of securities.
11. Purchase or sell interests in oil, gas, or
other mineral exploration or development
programs.
12. Make loans to other persons, other than loans
resulting from the acquisition of bonds,
debentures, or other corporate debt
securities and investment in government
obligations, short-term commercial paper,
certificates of deposit, bankers'
acceptances, repurchase agreements (in
conformance with the Fund's investment policy
and the rules and regulations of the SEC) and
the lending of portfolio securities, as
described under "Loans of Portfolio
Securities" in the Statement of Additional
Information as set forth on the effective
date of the Registration Statement.
13. Borrow money, except as set forth below. The
Fund may borrow money from a bank as a
temporary measure for extraordinary defensive
purposes in amounts not to exceed 33-1/3% of
the Fund's total assets (including the amount
borrowed) taken at market value. The Fund
shall not use leverage to increase income and
will not purchase securities while
outstanding borrowings exceed 5% of the
Fund's total assets. If, for any reason, the
current value of the Fund's total assets
falls below an amount equal to three times
the amount of its indebtedness for money
borrowed, the Fund will, within three days
(not including Saturdays, Sundays and
holidays), reduce its indebtedness to the
extent necessary to satisfy the one-third
test.
14. Invest more than 10% of its total assets in
put or call options.
25
<PAGE>
15. Invest more than 10% of its total assets in
stock index or interest rate futures.
16. Pledge, mortgage or hypothecate its assets,
except to secure indebtedness permitted by
paragraph 13, and then only if such pledging,
mortgaging or hypothecating does not exceed
33-1/3% of the Fund's total assets taken at
market value.
17. Invest more than 5% of its total assets in
"restricted securities" (I.E., securities
that would be required to be registered prior
to distribution to the public), excluding
restricted securities eligible for resale to
certain institutional investors pursuant to
Rule 144A of the Securities Act of 1933;
provided, however, that no more than 15% of
the Fund's total assets may be invested in
restricted securities, including securities
eligible for resale under Rule 144A. In
addition, the Fund may invest up to 15% of
its net assets in illiquid investments, which
includes securities that are not readily
marketable, repurchase agreements maturing in
more than seven days and privately issued
SMBS, based upon a determination by the Board
that the SMBS is illiquid. The Board of
Directors shall adopt guidelines and delegate
to the Adviser the daily function of
determining and monitoring the liquidity of
its investments. The Board, however, will
retain sufficient oversight and will be
ultimately responsible for the
determinations.
18. Invest more than 25% of its total asset value
in the purchase of when-issued and delayed-
delivery securities.
THE OREGON MUNICIPAL BOND FUND, INC.
- ------------------------------------
This Fund may not:
1. Purchase common stocks, preferred stocks,
warrants, or other equity securities.
2. Purchase securities of any issuer (other than
obligations of, or guaranteed by, the United
States Government, its agencies, or
instrumentalities) if, as a result, more than
25% of the value of the Fund's total assets
would be invested in securities of that
issuer. For purposes of this limitation,
each governmental subdivision (I.E., state,
territory, possession of the United States,
or any
26
<PAGE>
political subdivision of any of the
foregoing, including agencies, authorities,
instrumentalities, or similar entities) will
be considered a separate issuer if its assets
and revenues are separate from those of the
government body creating it and the
securities are backed only by its own assets
and revenues. In the case of an industrial
development bond, if the security is backed
only by the assets and revenues of a
nongovernmental user, then such
nongovernmental user will be deemed to be the
sole issuer. However, if an industrial
development bond or governmental issue is
guaranteed by a governmental or some other
entity, such guaranty shall be considered a
separate security issued by the guarantor as
well as the nongovernmental user, subject to
limited exclusions allowed by the 1940 Act.
3. With respect to at least 50% of the Fund's
total assets, purchase securities of any
issuer (except securities issued or
guaranteed by the United States government or
its agencies or instrumentalities) if, as a
result, more than 5% of the value of the
Fund's total assets would be invested in
securities of that issuer.
4. Invest more than 10% of the Fund's total
assets in securities of issuers that, with
their predecessors, have a record of less
than 3 years of continuous operation.
5. Lend its funds or other assets to others
(except through the purchase of debt
obligations or repurchase agreements in
accordance with its investment objectives and
policies). Although such loans are not
presently intended, this prohibition will not
preclude the Fund from loaning securities to
broker-dealers or other institutional
investors if at least 100% cash collateral is
pledged and maintained by the borrower,
provided such security loans may not be made
if, as a result, the aggregate of such loans
exceeds 10% of the value of the Fund's total
assets.
6. Borrow money, except from banks as a
temporary measure for extraordinary or
emergency purposes, and then only in an
amount up to one-third of the value of its
total assets, in order to meet redemption
requests without immediately selling any
portfolio securities.
27
<PAGE>
If, for any reason, the current value of
the Fund's total assets falls below an
amount equal to three times the amount of
its indebtedness from money borrowed, the
Fund will, within three days (not
including Saturdays, Sundays, and
holidays), reduce its indebtedness to the
extent necessary to satisfy the one-third
test. The Fund will not borrow for
leverage purposes and will not make any
additional investments while borrowings
exceed 5% of the value of its total assets.
7. Pledge, mortgage, or hypothecate its assets,
except that, to secure borrowing permitted by
paragraph six above, the Fund may pledge up
to 10% of the value of its total assets.
8. Make short sales of securities, or purchase
any securities on margin except to obtain
such short-term credits as may be necessary
for the clearance of transactions.
9. Write, purchase, or sell puts, calls, or
combinations thereof, except rights to resell
municipal securities to the persons from whom
they are purchased.
10. Concentrate more than 25% of the value of its
total assets in any one industry; PROVIDED
HOWEVER, that, for purposes of this
limitation, tax-exempt municipal securities
and United States Government obligations are
not considered to be part of any industry.
For purposes of this restriction, industrial
development bonds, where the payment of
principal and interest is the ultimate
responsibility of companies within the same
industry, are grouped together as one
"industry."
11. Purchase or retain the securities of any
issuer if those individual officers or
directors of the Fund, the Adviser, each
owning beneficially more than 1/2 of 1% of
the securities of such issuer, together own
more than 5% of the securities of such
issuer.
12. Invest in securities subject to legal or
contractual restrictions on resale or in
repurchase agreements maturing in more than
seven days if, as a result of such
investment, more than 10% of the net assets
of the Fund would be invested in such
securities.
28
<PAGE>
13. Invest in companies for the purpose of
exercising control or management.
14. Invest in commodities or commodity futures
contracts or oil, gas, or other mineral
exploration or development programs or in
real estate or interests therein.
15. Invest in securities of other investment
companies, except as set forth in the
Statement of Additional Information under
"Securities of Other Investment Companies."
16. Underwrite securities issued by others,
except to the extent the Fund may be deemed
to be an underwriter under the federal
securities laws, in connection with the
disposition of portfolio securities.
17. Issue senior securities, as defined in the
1940 Act.
THE CRABBE HUSON INCOME FUND, INC.
- ---------------------------------
This Fund may not:
1. Buy or sell common stock.
2. Issue any senior securities, as defined in
the 1940 Act.
3. Sell securities short.
4. Purchase securities on margin.
5. Purchase or sell commodities or commodity
contracts (except interest rate futures
contracts as defined in the Statement of
Additional Information).
6. Invest an amount that exceeds 5% of the value
of the Fund's total assets in the securities
of any one issuer. This restriction does not
apply to holdings of U.S. Government
securities.
7. Invest more than 25% of its total assets in
any one industry (except U.S. Government
securities).
8. Purchase the securities of any issuer for the
purpose of exercising control of management,
and the Fund may not acquire or own more than
10% of any class of the securities of any
issuer.
29
<PAGE>
9. Invest in any security that would subject the
Fund to unlimited liability.
10. Underwrite the securities of other issuers or
invest more than 10% of its net assets in
illiquid securities, such as repurchase
agreements with a maturity in excess of seven
days. Notwithstanding the above, the Fund
may not invest in restricted securities
(including, but not limited to, nonpublicly
traded debt securities).
11. Invest in securities of other investment
companies, except as set forth in the
Statement of Additional Information under the
heading "SECURITIES OF OTHER INVESTMENT
COMPANIES."
12. Write uncovered put or uncovered call
options.
13. Purchase portfolio securities from or sell
securities directly to any of the Funds', or
the Adviser's, officers, directors, or
employees as principal for their own account.
14. Purchase or sell real estate or real estate
mortgages, provided that the Fund may invest
in marketable fixed income securities that
are secured by real estate or interests
therein.
15. Purchase or sell interests in oil, gas, or
other mineral exploration or development
programs.
16. Lend portfolio securities, except as
described in the Statement of Additional
Information under "LOANS OF PORTFOLIO
SECURITIES."
17. Make loans to other persons, provided that,
for purposes of this restriction, the
acquisition of bonds, debentures, or other
corporate debt securities and investment in
government obligations, short-term commercial
paper, certificates of deposit, bankers'
acceptances, and repurchase agreements will
not be deemed to be the making of a loan.
18. Invest more than 10% of the Fund's total
assets in interest rate futures.
19. Borrow money, except in an emergency. In no
case will borrowing exceed one-third of the
value of the Fund's total assets immediately
after any such borrowing. If, for any
reason, the current value of a Fund's total
assets
30
<PAGE>
falls below an amount equal to 3 times
the amount of its indebtedness for money
borrowed, a Fund will, within 3 days (not
including Saturdays, Sundays and holidays),
reduce its indebtedness to the extent
necessary to satisfy the one-third test.
20. Invest more than 35% of the Fund's total
assets in foreign securities.
THE CRABBE HUSON U.S. GOVERNMENT INCOME FUND, INC.
- --------------------------------------------------
This Fund may not:
1. Buy or sell common stock.
2. Issue any senior securities, as defined in
the 1940 Act.
3. Sell securities short.
4. Purchase securities on margin.
5. Invest in any security that would subject the
Fund to unlimited liability.
6. Underwrite the securities of other issuers or
invest more than 10% of its net assets in
illiquid securities, such as repurchase
agreements with a maturity in excess of seven
days. Notwithstanding the above, the Fund
may not invest in restricted securities
(including, but not limited to, nonpublicly
traded debt securities).
7. Invest in securities of other investment
companies.
8. Write uncovered put or uncovered call
options.
9. Purchase securities that are other than
direct or indirect obligations of the United
States Government or its agencies or
instrumentalities and repurchase agreements
with respect to those obligations.
10. Borrow money, except in an emergency. In no
case will borrowing exceed one-third of the
value of a Fund's total assets immediately
after any such borrowing. If, for any
reason, the current value of a Fund's total
assets falls below an amount equal to three
times the amount of its indebtedness of money
borrowed, a Fund will, within three days (not
including Saturdays, Sundays and holidays),
reduce its
31
<PAGE>
indebtedness to the extent
necessary to satisfy the one-third test.
11. Purchase portfolio securities from or sell
securities directly to any of the Funds', or
the Adviser's, officers, directors, or
employees as principal for their own account.
12. Purchase or sell commodities or commodity
contracts.
13. Lend portfolio securities, except as
described in the Statement of Additional
Information under "Loans of Portfolio
Securities."
14. Invest more than 10% of the Fund's total
assets in repurchase agreements.
15. Invest more than 25% of the Fund's total
assets in government securities maturing in
more than five years.
16. Purchase or sell real estate or real estate
mortgages, provided that the Fund may invest
in marketable fixed income securities that
are secured by real estate or interests
therein.
THE CRABBE HUSON U.S. GOVERNMENT MONEY MARKET FUND, INC.
- -------------------------------------------------------
This Fund may not:
1. Buy or sell common stock.
2. Issue any senior securities, as defined in
the 1940 Act.
3. Sell securities short.
4. Purchase securities on margin.
5. Purchase or sell commodities or commodity
contracts.
6. Invest an amount that exceeds 5% of the value
of the Fund's total assets in the securities
of any one issuer (excluding U.S. Government
securities).
7. Invest more than 25% of its total assets in
any one industry (excluding U.S. Government
securities).
8. Purchase securities that are other than
direct or indirect obligations of the United
States Government or its agencies or
32
<PAGE>
instrumentalities and repurchase agreements
with respect to those obligations.
9. Purchase the securities of any issuer for the
purpose of exercising control of management,
and the Fund may not acquire or own more than
10% of any class of the securities of any
issuer.
10. Invest in any security that would subject the
Fund to unlimited liability.
11. Underwrite the securities of other issuers or
invest more than 10% of its net assets in
illiquid securities, such as repurchase
agreements with a maturity in excess of seven
days. Notwithstanding the above, the Fund
may not invest in restricted securities
(including, but not limited to, nonpublicly
traded debt securities).
12. Invest in securities of other investment
companies.
13. Write uncovered put or uncovered call
options.
14. Purchase portfolio securities from or sell
securities directly to any of the Funds', or
the Adviser's, officers, directors, or
employees as principal for their own account.
15. Purchase or sell real estate or real estate
mortgages, provided that the Fund may invest
in marketable securities that are secured by
real estate or interests therein or are
issued by companies which invest in real
estate or interests therein, such as publicly
traded real estate investment trusts.
16. Purchase or sell interests in oil, gas, or
other mineral exploration or development
programs.
17. Lend portfolio securities, except as
described in the Statement of Additional
Information under "LOANS OF PORTFOLIO
SECURITIES."
18. Make loans to other persons, provided that,
for purposes of this restriction, the
acquisition of bonds, debentures, or other
corporate debt securities and investment in
government obligations, short-term commercial
paper, certificates of deposit, bankers'
acceptances, and repurchase agreements will
not be deemed to be the making of a loan.
33
<PAGE>
19. Borrow money, except as set forth in the
Funds' Prospectus. In no case will borrowing
exceed one third of the value of a Fund's
total assets immediately after any such
borrowing. If, for any reason, the current
value of a Fund's total assets falls below an
amount equal to three times the amount of its
indebtedness of money borrowed, a Fund will,
within three days (not including Saturdays,
Sundays and holidays), reduce its
indebtedness to the extent necessary to
satisfy the one-third test.
20. Purchase any corporate debt security rated
less than AA by S&P or Aa by Moody's.
21. Purchase any debt security with a maturity in
excess of one year from the date of purchase.
22. Purchase any short-term, unsecured promissory
notes of corporations, including variable
amount master demand notes, which at the date
of investment are rated less than A-1 by S&P
or B-1 by Moody's or, if not so rated, which
the Board has determined are of comparable
quality to such rated securities.
SECURITIES OF OTHER INVESTMENT COMPANIES
- ----------------------------------------
The Funds will not invest in securities of other investment companies
(I.E., mutual funds), except in connection with a merger, consolidation,
reorganization, or acquisition of assets, and except to the extent permitted
by Section 12 of the 1940 Act (which currently provides that no more than 10%
of the total assets of a Fund may be invested in securities of other
investment companies, no more than 5% of the total assets of a Fund may be
invested in securities of any other single investment company, and no more
than 3% of total outstanding voting stock of any one investment company may
be purchased). All such securities must be acquired by a Fund in the open
market in transactions involving no commissions or discounts to a sponsor or
dealer (other than customary brokerage commissions). The issuers of
investment company securities acquired by a Fund are not required to redeem
such securities in an amount exceeding 1% of such issuers' total outstanding
securities during any period of less than 30 days, and a Fund will vote all
proxies with respect to such securities in the same proportion as the vote of
all other holders of such securities. The U.S. Government Income Fund and
the U.S. Government Money Market Fund may not purchase the securities of
other investment companies.
34
<PAGE>
-----------------------------
LOANS OF PORTFOLIO SECURITIES
-----------------------------
Loan transactions involve the lending of securities to
a broker-dealer or institutional investor for its use in
connection with short sales, arbitrage or other securities
transactions. Loans of portfolio securities of the Funds
will be made, if at all, in strict conformity with
applicable federal and state rules and regulations. The
term of any such loans will generally not exceed nine
months.
The Funds will engage in loan transactions only if the
following conditions are met: (1) a Fund must receive at
least 100% collateral in the form of cash or cash
equivalents (e.g., U.S. Treasury bills or notes) from the
borrower; (2) the borrower must increase the collateral
whenever the market value of the securities loaned
(determined on a daily basis) rises above the level of the
collateral; (3) a Fund must be able to terminate the loan
after notice at any time; (4) a Fund must receive reasonable
interest on the loan or a flat fee from the borrower, as
well as amounts equivalent to any dividends, interest or
other distributions on the securities loaned and any
increase in the market value of the securities; (5) a Fund
may pay only reasonable custodian fees in connection with
the loan; and (6) voting rights on the securities loaned may
pass to the borrower. If a material event affecting the
investment occurs, the directors of a Fund must be able to
terminate the loan and vote proxies or enter into an
alternative arrangement with the borrower to enable the
directors to vote proxies. Excluding items (1) and (2),
these practices may be amended from time to time as
regulatory provisions dictate.
While there may be delays in recovery of loaned
securities or even a loss of the securities loaned should
the borrower default, loans will be made only to firms or
broker-dealers deemed by the Adviser to be of good standing
and will not be made unless, in the judgment of the Adviser,
the consideration to be earned from such loans would justify
the risk. Such loan transactions are referred to in this
section as "qualified loan transactions."
The purpose of a qualified loan transaction is to
afford a Fund the opportunity to continue to earn income on
the securities loaned and, at the same time, to earn income
on the collateral held by it. In furtherance of this
purpose, the cash collateral acquired through qualified loan
transactions may be invested in any obligation in which a
Fund is authorized to invest in accordance with its
investment objectives. The investment of the cash
collateral in other obligations subjects that investment, as
well as the security loaned, to market forces, I.E., capital
appreciation or depreciation, just like any other portfolio
security.
35
<PAGE>
--------------------------------------
PURCHASE AND REDEMPTION OF FUND SHARES
--------------------------------------
Information concerning the purchase and redemption of
each Fund's shares is set forth under "HOW TO INVEST IN THE
FUNDS" and "HOW TO SELL YOUR SHARES" in the Funds'
Prospectus.
Each Fund has entered into a distribution agreement
with the Distributor. These agreements obligate the
Distributor to pay certain expenses in connection with the
offering of shares of the Funds, including expenses related
to the printing of prospectuses and statements of additional
information, the preparation and printing of sales
literature, and other distribution-related expenses. Shares
of the Funds are offered continuously to the public by the
Distributor and broker-dealers who enter into sales
agreements with the Distributor. Additional information
about the distribution plans is provided under "HOW TO
INVEST IN THE FUNDS" in the Prospectus.
36
<PAGE>
During the fiscal year ended October 31, 1995, the
Funds paid no sales commissions and paid the following amounts under the
Funds' 12b-1 plan:
<TABLE>
<CAPTION>
To Advisers
Printing/Mailing Broker/Dealer Salesperson Bank/S&L for Literature
Total Advertising Prospectus Payments Payments Payments Expenses
--------- ----------- ---------------- ------------- ----------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Special 1,701,991 68,080 919,075 612,717 17,020 85,100 --
--------- ------- -------- ------- -------- --------- ----------
Real Estate 5,085 153 2,085 2,644 -- -- 203
--------- ------- -------- ------- -------- --------- ----------
Equity 621,908 18,657 242,544 323,392 12,438 -- 24,876
--------- ------- -------- ------- -------- --------- ----------
Asset Allocation 303,887 3,039 51,661 243,110 -- -- 6,078
--------- ------- -------- ------- -------- --------- ----------
Oregon Bond 61,567 616 6,772 53,563 -- -- 616
--------- ------- -------- ------- -------- --------- ----------
Income 16,337 163 9,475 6,698 -- -- --
--------- ------- -------- ------- -------- --------- ----------
U.S. Government Income 21,788 654 8,933 11,330 -- -- 872
--------- ------- -------- ------- -------- --------- ----------
U.S. Government Money
Market 19,022 761 9,511 7,799 -- -- 951
--------- ------- -------- ------- -------- --------- ----------
</TABLE>
---------------------------------
U.S. GOVERNMENT MONEY MARKET FUND
---------------------------------
The U.S. Government Money Market Fund uses the amortized
cost method of valuing its investments, which facilitates the
maintenance of the Fund's per share net asset value at $1.00.
The U.S. Government Money Market Fund intends to maintain its net
asset value at a constant one dollar per share, although there is
no assurance that it will be able to do so.
The extent of deviation between the U.S. Government Money
Market Fund's net asset value based upon available market
quotations or market equivalents and $1.00 per share based on
amortized cost will be periodically examined by the Directors.
If such deviation exceeds 1/2 of 1%, the Directors will promptly
consider what action, if any, will be initiated. In the event the
37
<PAGE>
Directors determine that a deviation exists which may result
in material dilution or other unfair results to investors or
existing shareholders, they will cause the U.S. Government Money
Market Fund to take such corrective action as they regard to be
necessary and appropriate to eliminate or reduce to the extent
reasonably practicable such dilution or unfair results. Such
action may include the sale of U.S. Government Money Market Fund
instruments prior to maturity to realize capital gains or losses
or to shorten average portfolio maturity; withholding part or all
of dividends or payment of distributions from capital or capital
gains; redemptions of shares in kind; or establishing a net asset
value per share by using available market quotations or
equivalents. In addition, in order to stabilize the net asset
value per share at $1.00, the Directors have the authority (i) to
reduce or increase the number of shares outstanding on a pro rata
basis, and (ii) to offset each shareholder's pro rata portion of
the deviation between the net asset value per share and $1.00
from the shareholder's accrued dividend account or from future
dividends.
-----------------------------------
PRICING OF SECURITIES BEING OFFERED
-----------------------------------
The price for shares of a Fund is the next determined net
asset value of the Fund per share.
Each Fund's net asset value per share is computed by
dividing the value of the securities held by the Fund plus any
cash or other assets (including interest and dividends accrued
but not yet received) minus all liabilities (including accrued
expenses) by the total number of shares outstanding at such time.
Expenses, including the fees payable to the Adviser, are accrued
daily to the extent practicable.
Dividends receivable are treated as assets from the date on
which securities go ex-dividend and interest on bonds is accrued
daily.
---------------------
YIELD AND PERFORMANCE
---------------------
The Funds will from time to time advertise or quote their
respective yields and total return performance. These figures
are calculated according to SEC rules standardizing such
computations and represent historical data. The investment
return and principal value (except for the U.S. Government Money
Market Fund) will fluctuate so that shares when redeemed may be
worth more or less than their original cost.
The Funds may, from time to time, include in such
advertisements or quotes comparisons of a Fund's yield or total
return performance against one or more indices of stock or bond
performance. Such indices include, for example, the Standard &
Poor's 500 Stock Index, Dow Jones Industrial, Value Line Rates,
and the Shearson Lehman Government/Corporate Bond Index.
38
<PAGE>
THE U.S. GOVERNMENT MONEY MARKET FUND
- -------------------------------------
Current yield is calculated by dividing the net change in
the value of an account of one share during an identified seven-
calendar-day period by the value of the one share account at the
beginning of the same period ($1.00) and multiplying that base
period return by 365/7, I.E.:
net change in value of account with one share x 365 = Current
- --------------------------------------------- ---
value of account at beginning of period 7 Yield
Compounded effective yield is calculated by daily
compounding of the base period return referred to above.
This calculation is made by adding 1 to the base period
return, raising the sum to a number equal to 365 divided by
7, and subtracting 1 from the result, I.E.:
[(base period return + 1) 365/7] -1 = Compounded Effective Yield
The determination of net change in the value of an
account for purposes of the U.S. Government Money Market
Fund yield calculations reflects the value of additional
shares purchased with income dividends from the original
share, and income dividends declared on both the original
share and such additional shares. The determination of net
change does not reflect realized gains or losses from the
sale of securities or realized appreciation or depreciation.
The U.S. Government Money Market Fund includes unrealized
appreciation or depreciation, as well as unrealized gains or
losses, in the determination of actual daily dividends.
Therefore, the quoted yields as calculated above may differ
from the actual dividends paid.
The U.S. Government Money Market Fund's seven-day yield
and effective yield as of the date of the most recent
statement of assets and liabilities included in this
registration statement is 4.98% and 5.11%, respectively.
YIELD
- -----
Current yield of the Oregon Bond Fund, the Income Fund
and the U.S. Government Income Fund is calculated by
dividing the net investment income per share earned during
an identified 30-day period by the maximum offering price
per share on the last day of the same period, according to
the following formula:
6
YIELD = 2 [( a-b + 1) -1]
---
cd
39
<PAGE>
Where: a = dividends and interest earned
during the period.
b = expenses accrued for the period
(net of reimbursements).
c = the average daily number of shares
outstanding during the period that
were entitled to receive dividends.
d = the maximum offering price per
share on the last day of the
period.
The Funds use generally accepted accounting principles
in determining actual income paid, which differ in some
instances from SEC rules for computing income for the above
yield calculations. Therefore, the quoted yields as
calculated above may differ from the actual dividends paid.
The Oregon Bond, Income and U.S. Government Income
Funds' yields for the 30-day period ended the date of the
most recent statement of assets and liabilities included in
this registration statement were 7.41%, 5.60%, and 5.17%,
respectively.
The Real Estate Fund's yield is computed by dividing
the Fund's net investment income per share during a base
period of 30 days, or one month, by the maximum offering
price per share of the Fund on the last day of such base
period in accordance with the following formula:
6
YIELD = 2 [( a-b + 1) -1]
---
cd
Where: a = interest earned during the period
b = net expenses accrued for the period
c = the average daily number of shares
outstanding during the period that
were entitled to receive dividends
d = the maximum offering price per
share on the last day of the period
For purposes of calculating interest earned on debt
obligations as provided in item "a" above:
(i) The yield to maturity of each obligation held by
the Fund is computed based on the market value of the
obligation (including actual accrued interest, if any) at
the close of business each day during the 30-day base
period, or, with respect to obligations purchased during the
month, the purchase price (plus actual accrued interest, if
any) on
40
<PAGE>
settlement date, and with respect to obligations
sold during the month the sale price (plus actual accrued
interest, if any) between the trade and settlement dates.
(ii) The yield to maturity of each obligation is then
divided by 360 and the resulting quotient is multiplied by
the market value of the obligation (including actual accrued
interest, if any) to determine the interest income on the
obligation for each day. The yield to maturity calculation
has been made on each obligation during the 30-day base
period.
(iii) Interest earned on all debt obligations during
the 30-day or one month period is then totaled.
(iv) The maturity of an obligation with a call
provision(s) is the next call date on which the obligation
reasonably may be expected to be called or, if none, the
maturity date.
With respect to the treatment of discount and premium
on mortgage or other receivables-backed obligations which
are expected to be subject to monthly payments of principal
and interest ("pay downs"), the Fund accounts for gain or
loss attributable to actual monthly pay downs as an increase
or decrease to interest income during the period. In
addition, the Fund may elect (i) to amortize the discount or
premium remaining on a security, based on the cost of the
security, to the weighted average maturity date, if such
information is available, or to the remaining term of the
security, if the weighted average maturity date is not
available, or (ii) not to amortize the remaining discount or
premium on a security.
The Fund's yield for the 30-day period ended the date
of the most recent statement of assets and liabilities
included in this registration statement was 4.15%.
The Oregon Bond Fund may publish a tax equivalent yield
for Oregon shareholders that represents the yield that an
investor would have to receive on a fully taxable investment
to achieve the same after-tax results at the highest then-
existing marginal combined Oregon and Federal income tax
rates, calculated according to the following formula:
Tax Equivalent Yield = a + c + e + g
--- --- ---
1-b 1-d 1-f
Where: a = that portion of the current yield of the
Fund that is exempt from Federal and
Oregon income tax.
b = highest then-existing marginal combined
Federal and Oregon income tax rate.
41
<PAGE>
c = that portion of the current yield of the
Fund that is only exempt from Federal
gross income tax.
d = highest then-existing Federal income tax
rate.
e = that portion of the current yield of the
Fund that is only exempt from Oregon
gross income tax.
f = highest then-existing Oregon income tax
rate.
g = that portion of the current yield of the
Fund that is not tax exempt.
The tax equivalent yield for the 30-day period ended
the date of the most recent statement of assets and
liabilities included in this registration statement was
3.83%.
The Oregon Bond Fund may also publish a tax equivalent
yield for residents of Oregon that represents the yield that
an investor would have to receive on a fully taxable
investment to achieve the same after-tax results of the
highest then-existing marginal Federal income tax rate,
calculated according to the following formula:
Tax Equivalent Yield = a + c
---
1-b
Where: a = that portion of the current yield of the
Fund that is exempt from Federal income
tax.
b = highest then-existing marginal Federal
income tax rate
c = that portion of the current yield of the
Fund that is not tax exempt.
The tax equivalent yield for the Oregon Bond Fund,
calculated according to the above formula, for the 30-day
period ended the date of the most recent statement of assets
and liabilities included in this registration statement was
6.34%.
The U.S. Government Income Fund may publish a tax
equivalent yield for residents of Oregon that represents the
yield that an investor would have to receive on a fully
taxable investment to achieve the same after-tax results of
the highest then-existing marginal Oregon income tax rate,
calculated according to the following formula:
Tax Equivalent Yield = a + c
---
1-b
42
<PAGE>
Where: a = that portion of the current yield of the
Fund that is exempt from Federal income
tax.
b = highest then-existing marginal Oregon
income tax rate
c = that portion of the current yield of the
Fund that is not tax exempt.
The tax equivalent yield for the U.S. Government Income
Fund, calculated according to the above formula, for the 30-
day period ended October 31, 1995 was 5.17%.
TOTAL RETURN
- ------------
The Funds may also publish average annual total return
quotations for recent one, five and ten year periods
computed by finding the average annual compounded rates of
return over the one, five and ten year periods that would
equate the initial amount invested to the ending redeemable
value, according to the following formula:
P(1+T)(n) = ERV
Where: P = a hypothetical initial payment of
$1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a
hypothetical $1,000 payment made at
the beginning of the 1, 5 or 10
year periods (or fractional portion
thereof)
Total return figures may also be published for recent
one, five and ten year periods where the total return
figures represent the percentage return for the one, five
and ten year periods that would equate the initial amount
invested to the ending redeemable value. Total return
percentages for periods of less than one year are usually
annualized.
If a Fund's registration statement under the 1940 Act
has been in effect less than one, five or ten years, the
time period during which the registration statement has been
in effect will be substituted for the period stated.
The average annual total return for the one- and five-
year periods ended the date of the most recent statement of
assets and liabilities included in this statement was, for
the Special Fund, 1.78%, and 23.29%, respectively; for the
Equity Fund, 13.37%, and 22.19%, respectively; for the Asset
Allocation Fund,
43
<PAGE>
13.0% and 14.22%, respectively; for the
Oregon Bond Fund, 10.66% and 7.02%, respectively; for the
Income Fund, 11.92% and 7.88%, respectively; for the U.S.
Government Income Fund, 9.12% and 6.68%, respectively; and
for the U.S. Government Money Market Fund, 5.30% and 4.03%,
respectively. The average annual total return for the
Special Fund for the seven year period ended on the same
date was 17.06%. The average annual total return for the
Oregon Bond Fund for the ten-year period ended on the same
date was 7.87%. The average annualized total return for the
Real Estate Fund for the one-year period ended on the same
date was 8.31%.
OTHER QUOTATIONS, COMPARISONS AND GENERAL INFORMATION
- -----------------------------------------------------
From time to time, in advertisements, in sales
literature, or in reports to shareholders, the past
performance of the Funds may be illustrated and/or compared
with that of other mutual funds with similar investment
objectives, and to stock or other relevant indices. For
example, a Fund's total return may be compared to averages
or rankings prepared by Lipper Analytical Services, Inc., a
widely recognized independent service which monitors mutual
fund performance; the Standard & Poor's 500 Stock Index, an
unmanaged index of common stocks; or the Dow Jones
Industrial Average, a recognized unmanaged index of common
stock of 30 industrial companies listed on the New York
Stock Exchange (the "NYSE").
In addition, the performance of the Funds may be
compared to alternative investment or savings vehicles
and/or to indexes or indicators of economic activity, e.g.,
inflation or interest rates. Performance rankings and
listings reported in newspapers or national business and
financial publications, such as Barron's, Business Week,
Consumer's Digest, Consumer's Report, Financial World,
Forbes, Fortune, Investor's Business Daily, Kiplinger's,
Personal Finance Magazine, Money Magazine, the New York
Times, Smart Money, USA Today, U.S. News and World Report,
The Wall Street Journal and Worth may also be cited (if the
Fund is listed in any such publication) or used for
comparison, as well as performance listings and rankings
from various other sources, including Bloomberg Financial
Systems, CDA/Wiesenberger Investment Companies Service,
Donoghue's Mutual Fund Almanac, Investment Company Data,
Inc., Johnson's Charts, Kanon Bloch Carre & Co., Micropal,
Inc., Morningstar, Inc., Schabacker Investment Management,
Towers Data Systems and Weisenberger Investment Companies
Service.
In addition, from time to time, quotations from
articles from financial publications, such as those listed
above, may be used in advertisements, in sales literature or
in reports to shareholders of the Funds.
44
<PAGE>
----------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
----------------------------------
GENERAL
- -------
Each of the Funds intends to qualify as a regulated
investment company under Part I of Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"), but
there is no assurance that they will be able to do so. In
general, to qualify for this treatment, the Fund must, among
other things, derive at least 90% of its gross income from
dividends, interest, gains from the sale of securities, and
certain related income; derive less than 30% of its gross
income from the sale of securities held less than three
months; invest in securities within certain statutory
limits; and distribute to its shareholders at least 90% of
its taxable income and 90% of its net exempt interest
income, if any, for the taxable year. If the Fund does not
so qualify, it will be treated for tax purposes as an
ordinary corporation and will receive no tax deduction for
payments made to shareholders.
As regulated investment companies, the Funds will be
taxed at regular corporate rates only on the undistributed
portion of their net income and capital gains.
If a Fund is required to pay federal income taxes on
any retained Net Capital Gain (I.E., the excess of net long-
term capital gains over net short-term capital losses and
any capital loss carryover), that Fund may elect to treat
such gain as having been distributed to its shareholders.
The election will cause such amounts to be taxed to the
shareholders. Each shareholder may claim a credit against
his income taxes equal to such shareholder's proportionate
share of the federal income tax liability that is paid by
that Fund, and will generally be entitled to increase the
adjusted tax basis of his shares in that Fund by the
difference between his pro rata share of such gains and his
tax credit.
The Code requires a regulated investment company to pay
a nondeductible 4% excise tax if such company does not
distribute at least 98% of its ordinary income, determined
on a calendar year basis, and 98% of its capital gains,
determined, in general, on an October 31 year-end. The tax
is generally applied against the excess of this required
distribution over the amount actually distributed. The
Funds intend to distribute an amount of income and capital
gains that is sufficient to avoid imposition of the 4%
excise tax.
The value of any shares redeemed by the Funds or
repurchased or otherwise sold may be more or less than the
shareholder's tax basis in the shares at the time the
redemption, repurchase or sale is made. Any gain or loss
will generally be taxable for federal income tax purposes.
45
<PAGE>
Any loss realized on the sale, redemption or repurchase of
shares of the Funds that have been held by the shareholder
for six months or less will be treated for tax purposes as a
long-term capital loss to the extent of any net long-term
capital gains distributions received by the shareholder with
respect to such shares. Losses on the redemption or on the
sale of shares of the Funds are not deductible if, and to
the extent that, within a period beginning 30 days before
the date of the redemption or sale and ending 30 days after
such date, the taxpayer acquires other Fund shares.
The writing of call options and other investment
techniques and practices which some Funds may utilize, as
described in the Prospectus under "Fundamental Policies,"
may create "straddles" for United States federal income tax
purposes and may affect the character and timing of the
recognition of gains and losses by such Funds. Such
transactions may increase the amount of short-term capital
gain realized by such Funds, which is taxed as ordinary
income when distributed to shareholders.
Dividends paid by the Funds will qualify for the
dividends-received deductions for corporations to the extent
they are derived from dividends paid by domestic
corporations.
Distributions, if any, of net long-term capital gains
from the sale of the Funds' securities are taxable to
shareholders of the Funds at capital gains rates, regardless
of the length of time the shareholder has owned shares of
the Funds and regardless of whether the distributions are
reinvested in shares of the Funds.
The Funds are required by federal law to obtain from
each of their shareholders certification of the
shareholder's correct taxpayer identification number and
certain other information. If a shareholder fails to
certify such number or to provide the necessary information
to the Funds, or if the Funds receive certain notices from
the Internal Revenue Service, the Funds will be required to
withhold and pay to the United States Treasury 20% of any
reportable dividends or interest paid to such shareholder.
THE OREGON MUNICIPAL BOND FUND, INC.
- ------------------------------------
As stated in the Prospectus, the Oregon Bond Fund
expects to qualify in the current and future fiscal years as
a regulated investment company under the Code. If it does
not so qualify, it will be treated for tax purposes as an
ordinary corporation and will receive no tax deduction for
payments made to shareholders and will be unable to pay
"exempt interest dividends," as discussed in the Prospectus.
From time to time, proposals have been introduced
before Congress and the Internal Revenue Service for the
purpose of
46
<PAGE>
restricting or eliminating the federal income tax
exemption for interest on municipal securities, including
private activity bonds. It is likely that similar proposals
will be introduced in the future. If such a proposal were
enacted, the availability of municipal securities for
investment by the Fund and the value of the Fund's portfolio
could be adversely affected. In such event, the Fund would
re-evaluate its investment objectives and policies and
consider recommending to its shareholders changes in the
structure of the Fund.
Section 147 of the Code prohibits exemption from
taxation of interest on certain governmental obligations
paid to persons who are "substantial users" (or persons
related thereto) of facilities financed by such obligations.
"Substantial user" is generally defined to include a
"nonexempt person" who is entitled to use more than 5% of a
facility financed from the proceeds of industrial
development bonds. No investigation as to the substantial
users of the facilities financed by bonds in the Fund's
portfolio will be made by the Fund. Potential investors who
may be, or may be related to, substantial users of such
facilities should consult their tax advisors before
purchasing shares of the Fund.
Each distribution is accompanied by a brief explanation
of the form and character of the distribution. The Fund
provides each shareholder with an annual statement of the
federal income tax status of all distributions, including a
statement of percentage of the prior year's distributions
designated by the Fund to be treated as tax-exempt interest
or long-term capital gain. The dollar amounts of tax-exempt
and taxable dividends and distributions paid by the Fund
that are reported annually to shareholders will vary for
each shareholder, depending upon the size and duration of
the shareholder's investment in the Fund. To the extent
that the Fund derives investment income from taxable
interest, it intends to designate as the actual taxable
income the same percentage of each day's dividend as the
actual taxable income bears to the total investment income
earned on that day. The percentage of the dividend
designated as taxable (if any), therefore, may vary from day
to day.
Individuals, trusts, and estates who or which are
residents of the state of Oregon will not be subject to the
Oregon personal income tax on distributions from the Fund
representing tax-exempt interest paid on municipal
securities issued by the State of Oregon and its political
subdivisions. Distributions to Oregon residents
representing earnings of the Fund from sources other than
such tax-exempt interest will be subject to the Oregon
personal income tax. In addition, the Fund anticipates that
all distributions from the Fund, from any source, to
corporations subject to the Oregon Corporation excise tax
will be subject to that tax. For purposes of the Oregon
personal income tax and the Oregon
47
<PAGE>
corporate excise tax, income from Fund distributions of
interest paid on municipal securities issued by a state,
other than Oregon, and its political subdivisions will be
reduced by interest on indebtedness incurred to carry
such securities and expenses incurred to produce such income.
The Oregon Corporate Excise Tax Act generally taxes
corporations on income received from municipal securities,
including those issued by the state of Oregon and its
political subdivisions. Since the Fund is a corporation, it
would generally be subject to such a tax. However, the
Oregon Department of Revenue has adopted an administrative
rule (Oregon Administrative Rule 150.317,010(10)) which
provides that a registered investment company may deduct
from its income an amount equal to the exempt interest
dividends paid to its shareholders. The Fund expects to
distribute substantially all of its interest income as
dividends to its shareholders and, therefore, does not
expect to be liable for Oregon Corporate Excise tax.
Under the Code, interest on indebtedness incurred or
continued to purchase or carry shares of an investment
company paying "exempt interest dividends," such as the
Fund, is not deductible by the investor. Under rules used
by the Internal Revenue Service, the purchase of shares may
be considered to have been made with borrowed funds even
though the borrowed funds are not directly traceable to the
purchase of shares. In addition, under Sections 265 and 291
of the Code, certain financial institutions acquiring shares
may be subject to a reduction in the amount of interest
expense that would otherwise be allowable as a deduction for
federal income tax purposes.
FOREIGN TAXES
- -------------
As described below in "Special Investment Risks --
Foreign Securities," certain Funds may be subject to foreign
withholding taxes which would reduce the yield on their
investments. Tax treaties between certain countries and the
United States may reduce or eliminate such taxes. It is
expected that shareholders of the Funds who are subject to
United States federal income tax will not be entitled to
claim a federal income tax credit or deduction for foreign
taxes paid by the Funds.
Gains and losses realized by any of the Funds on
certain transactions, including sales of foreign debt
securities and certain transactions involving foreign
currency, will be treated as ordinary income or loss for
federal income tax purposes to the extent, if any, that such
gains or losses are attributable to changes in exchange
rates for foreign currencies. Accordingly, distributions
taxable as ordinary income will include the net amount, if
any, of such foreign
48
<PAGE>
exchange gains and will be reduced by the net amount, if
any, of such foreign exchange losses.
If any of the Funds purchases shares in certain foreign
investment entities, called "passive foreign investment
companies", it may be subject to United States federal
income tax on a portion of any "excess distribution" or gain
from the disposition of such share, even if such income is
distributed as a taxable dividend by such Fund to its
shareholders. Additional charges in the nature of interest
may be imposed on either the Fund or its shareholders in
respect of deferred taxes arising from such distributions or
gains.
If any of the Funds were to invest in a passive foreign
investment company with respect to which the Fund elected to
make a "qualified electing fund" election, in lieu of the
foregoing requirement, such Fund might be required to
include in income each year a portion of the ordinary
earnings and net capital gains of the qualified electing
fund, even if such amount were not distributed to such Fund.
-------------------------
SPECIAL INVESTOR SERVICES
-------------------------
The Funds offer certain shareholder services, which are
designed to facilitate investment in their shares. Each of
the options is described in the Funds' Prospectus. All of
these special services may be terminated by either the Funds
or the shareholder without any prior written notice.
-------------------
GENERAL INFORMATION
-------------------
The Funds were incorporated under Oregon law on the
dates listed below.
<TABLE>
<CAPTION>
Date
Incorporated
------------
<S> <C>
The Crabbe Huson Special Fund, Inc. 1/29/87
The Crabbe Huson Real Estate Investment Fund, Inc. 12/29/93
The Crabbe Huson Equity Fund, Inc. 8/10/88
The Crabbe Huson Asset Allocation Fund, Inc. 8/10/88
The Oregon Municipal Bond Fund, Inc. 10/24/83
The Crabbe Huson Income Fund, Inc. 8/10/88
The Crabbe Huson U.S. Government Income Fund, Inc. 8/10/88
The Crabbe Huson U.S. Government Money Market
Fund, Inc. 8/10/88
</TABLE>
During the last five years, the following Funds have
changed their names on the approximate dates indicated:
49
<PAGE>
The Crabbe Huson Special Fund, Inc.
Formerly The Crabbe Huson Growth Fund, Inc. until 2/23/93
Formerly The PNCG Growth Fund, Inc. until 6/14/90
The Crabbe Huson Equity Fund, Inc.
Formerly The PNCG Equity Fund, Inc. until 6/14/90
The Crabbe Huson Asset Allocation Fund, Inc.
Formerly The PNCG Asset Allocation Fund, Inc. until 6/14/90
The Crabbe Huson Income Fund, Inc.
Formerly The PNCG Income Fund, Inc. until 6/14/90
The Crabbe Huson U.S. Government Income Fund, Inc.
Formerly The Crabbe Huson U.S. Government Income Fund, Inc.
until 6/14/90
The Crabbe Huson U.S. Government Money Market Fund, Inc.
Formerly The Crabbe Huson Money Market Fund, Inc.
until 2/23/93
Formerly The PNCG Money Market Fund, Inc. until 6/14/90
Each Fund has an authorized capital of 100 million
shares of common stock (except the Real Estate Fund, which
has an authorized capital of 1 billion shares; the Oregon
Bond Fund, which has an authorized capital of 10 million
shares with a par value of $.001 per share; and the U.S.
Government Money Market Fund, which has an authorized
capital of 2 billion shares). All shares of each fund are
of the same class, although the Real Estate Fund may
establish other classes in the future. Shareholders of each
Fund are entitled to one vote for each full share held and
fractional votes for fractional shares held for that
particular Fund. Shareholders of each Fund vote on the
election of directors and any other matter submitted to a
shareholder vote. Shares issued are fully paid and
nonassessable, and have no preemptive or conversion rights.
Each share is entitled to participate equally in dividends
and distributions declared by that Fund, and in the net
assets of that Fund upon liquidation or dissolution after
satisfaction of outstanding liabilities.
The authorized shares of the Real Estate Fund may be
divided into such separate series as the Fund's Board of
Directors may establish. The Board of Directors may
establish additional classes or series of shares, and may
divide or combine the shares into a greater or lesser number
of shares without changing the proportionate interest of a
shareholder. The holders of any additional shares would
participate equally in the earnings, dividends and assets of
the particular series, and would be entitled to vote
separately to approve investment advisory agreements or
changes in investment restrictions, but shareholders of all
series would vote together in the election of directors and
accountants.
50
<PAGE>
-------
COUNSEL
-------
The law firm of Davis Wright Tremaine, Portland,
Oregon, will pass on certain legal matters in connection
with the issuance of shares of the Funds and will also act
as counsel to the Funds and as counsel to the Adviser and
the Distributor in connection with their relationship with
the Funds and certain matters.
--------
AUDITORS
--------
KPMG Peat Marwick LLP, Portland, Oregon, acts as the
Funds' independent auditors. In such capacity, KPMG Peat
Marwick LLP performs the annual audit of each Fund's
financial statements and assists in the preparation of tax
returns.
-------------------------------------------------------
CUSTODIAN, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
-------------------------------------------------------
Investors Fiduciary Trust Co. serves as the custodian
(the "Custodian") of the Funds' cash and securities. State
Street Bank and Trust Company serves as the Funds' transfer
agent and dividend-disbursing agent (the "Transfer Agent").
Boston Financial Data Services serves as the Transfer
Agent's Servicing Agent in carrying out the Transfer Agent's
responsibilities to the Funds. The Transfer Agent processes
requests for the purchase or redemption of a Fund's shares,
sends statements of ownership to shareholders, and performs
other administrative duties on behalf of the Funds. Neither
the Custodian nor the Transfer Agent plays any role in
establishing the investment policies of the Funds or in
determining which securities are to be purchased or sold by
the Funds. All fees and expenses of the Custodian and the
Transfer Agent are paid by the Funds. For its custodial
services to the Funds, the Custodian receives monthly fees
based upon the Funds' month-end, aggregate net asset value,
plus certain charges for securities transactions. For its
services as transfer agent and dividend-disbursing agent,
the Transfer Agent receives fees from the Funds based upon
the number of shareholder accounts maintained and the number
of transactions effected. The Custodian and the Transfer
Agent are also reimbursed by the Funds for out-of-pocket
expenses, including the expense of clerical and
administrative services provided to the Funds.
51
<PAGE>
--------------------------------
ADDITIONAL INFORMATION REGARDING
CERTAIN INVESTMENTS BY THE FUNDS
--------------------------------
GOVERNMENT SECURITIES
- ---------------------
The taxable fixed-income obligations in which the Funds
may invest on a short-term basis may include obligations
issued or guaranteed by the United States government, its
agencies, instrumentalities, or authorities. Any such
obligations in which the Funds invest will consist of bills,
notes, and bonds issued by the United States Treasury or
obligations issued by other agencies of the United States
Government. Examples of other government agencies in whose
obligations the Funds may invest include Federal Home Loan
Intermediate Credit banks, Federal Land Banks, Federal Home
Loan Banks, and the Federal National Mortgage Association.
Obligations issued by the United States Treasury are
guaranteed by the full faith and credit of the United States
Government. Obligations issued by other federal agencies
are direct obligations of such agencies and are not
guaranteed by the United States Government.
MUNICIPAL SECURITIES (The Oregon Municipal Bond Fund, Inc.)
- --------------------
The term "municipal securities," as used in this
Statement of Additional Information, means obligations
issued by or on behalf of states, territories and
possessions of the United States and the District of
Columbia and their political subdivisions, agencies, or
instrumentalities or multi-state agencies, or authorities.
These obligations are issued to fund various public projects
(such as construction of airports, highways, bridges,
schools, and housing), refund outstanding municipal
obligations, obtain funds for general operating expenses,
and for loans to other public institutions and facilities.
Municipal securities are of varying maturities and differ in
investment quality, depending upon the credit worthiness of
the obligation's issuer.
The two principal classifications of municipal
securities are "general obligation bonds" and "revenue
bonds." General obligation bonds are secured by the
issuer's pledge of its full credit and taxing power for the
payment of principal and interest. Revenue bonds are
payable only from the revenues derived from a particular
facility or class of facilities or project or, in a few
cases, from the proceeds of a special excise or other tax,
but are not supported by the issuer's power to levy general
taxes.
One type of revenue bond is the "private activity bond"
(formerly referred to as "industrial development bonds").
These obligations are issued by a governmental or quasi-
governmental issuer, but all or a major portion of the
proceeds realized upon the sale of these obligations are
52
<PAGE>
used, directly or indirectly, to fund the trade or business
of a private enterprise, generally by financing the
acquisition of a facility to be used by that enterprise.
The payment of principal and interest on private activity
bonds is dependent on the ability of the private enterprise
to meet those obligations and is usually secured by an
interest in the financed facility or in payments, such as
lease payments, received with respect to that property. The
issuer of the bonds does not pledge its full credit and
taxing power for the payment of principal and interest.
Under current federal income laws, the interest received on
certain small issues and obligations used to finance certain
exempt facilities which may be leased to or used by persons
other than the issuer is exempt from federal income tax.
The Oregon Bond Fund intends to purchase tax-exempt private
activity bonds if, in the opinion of the Adviser, such
obligations are appropriate for the Fund's securities
portfolios. No limit has been placed upon the amount of
private activity bonds that may be purchased by the Oregon
Bond Fund, and a significant percentage of the Oregon Bond
Fund's total assets may be invested in such obligations.
However, no more than 25% of the Oregon Bond Fund's total
assets may be invested in private activity bonds where the
payment of principal and interest is the ultimate
responsibility of companies within the same industry.
------------------------
SPECIAL INVESTMENT RISKS
------------------------
FOREIGN SECURITIES
- ------------------
The Special, Equity, Asset Allocation and Income Funds
may invest up to 35% of their total assets in foreign
securities, which may or may not be traded on an exchange.
These Funds may purchase securities issued by issuers in any
country. Securities of foreign companies are frequently
denominated in foreign currencies, and these Funds may
temporarily hold uninvested reserves in bank deposits in
foreign currencies. As a result, these Funds will be
affected favorably or unfavorably by changes in currency
rates and in exchange control regulations, and they may
incur expenses in connection with conversion between various
currencies. Subject to their investment restrictions, these
Funds may invest in other investment companies that invest
in foreign securities. These Funds do not expect to invest
more than 5% of their respective assets in such investment
companies.
Foreign securities may be subject to foreign government
taxes that would reduce the income yield on such securities.
Certain foreign governments levy withholding taxes against
dividend and interest income. Although in some countries a
portion of these taxes is recoverable, the non-recovered
portion of any foreign withholding taxes would reduce the
53
<PAGE>
income the affected Fund received from any foreign
investments.
Foreign investments involve certain risks, such as
political or economic instability of the issuer or of the
country of the issuer, difficulty of predicting
international trade patterns, and the possibility of
imposition of exchange controls. Such securities may also
be subject to greater fluctuations in price than securities
of domestic corporations or of the United States Government.
In addition, the net asset value of these Funds is
determined and shares of these Funds can be redeemed only on
days during which securities are traded on the NYSE.
However, foreign securities held by these Funds may be
traded on Saturdays or other holidays when the NYSE is
closed. Accordingly, the net asset value of these Funds may
be significantly affected on days when an investor has no
access to these Funds.
In addition, there may be less publicly available
information about a foreign company than about a domestic
company. Foreign companies generally are not subject to
uniform accounting, auditing and financial reporting
standards comparable to those applicable to domestic
companies. There is generally less government regulation of
stock exchanges, brokers and listed companies abroad than in
the United States, and the absence of negotiated brokerage
commissions in certain countries may result in higher
brokerage fees. With respect to certain foreign countries,
there is a possibility of expropriation, nationalization, or
confiscatory taxation, which could affect investment in
those countries.
FUTURES CONTRACTS
- -----------------
Stock Index Futures
- -------------------
The Special, Real Estate, Equity and Asset Allocation
Funds may invest up to 10% of their total assets in futures
contracts of broad based stock market indices. Purchasing
such contracts involves greater risks than buying the
underlying securities because futures contracts expire in a
relatively short period of time and may result in the loss
of the entire investment in such contracts. These Funds
intend to use such contracts primarily for hedging and
defensive purposes.
Interest Rate Futures
- ---------------------
The Special, Real Estate, Equity, Asset Allocation and
Income Funds may invest up to 10% of their total assets in
futures contracts on fixed income securities such as U.S.
Government Bonds, bills or notes. These Funds intend to use
such contracts for hedging or defensive purposes.
54
<PAGE>
Interest rate futures contracts carry the risk of loss
of the entire amount of investment since they have a limited
expiration date.
--------------------
FINANCIAL STATEMENTS
--------------------
Following are the financial statements of the Crabbe
Huson Funds as of October 31, 1995.
55
<PAGE>
THE OREGON MUNICIPAL BOND FUND, INC.
SCHEDULE OF INVESTMENTS
October 31, 1995
<TABLE>
<CAPTION>
Face Market
Value Securities Description Value
---------- ----------------------------------------------------- -----------
<C> <S> <C>
FIXED INCOME SECURITIES - 98.3%
PRE-REFUNDED BONDS - 18.7%*
$ 40,000 Multnomah County
School District #1
9.200% 12/15/95 .................................. $ 40,255
1,000,000 Multnomah County
School District #1
9.300% 12/15/95 .................................. 1,006,490
295,000 Metropolitan Service District
5.750% 7/01/99 ................................... 314,912
270,000 Metropolitan Service District
6.600% 7/01/99 ................................... 295,987
250,000 Clackamas & Washington County
School District #003
7.200% 10/01/99 .................................. 275,937
200,000 Clackamas & Washington County
School District #003
7.250% 10/01/99 .................................. 221,000
400,000 Metropolitan Service District
7.000% 1/01/00 ................................... 446,000
353,000 Deschutes County (St.
Charles Medical Center)
6.750% 1/01/00 ................................... 390,947
100,000 Oregon State Department
General Services
7.200% 1/15/00 ................................... 112,500
150,000 Clackamas County School
District #12 6.500%
06/01/00 .......................................... 163,312
310,000 Emerald Peoples Utility
District 6.300%
11/01/00 .......................................... 339,450
125,000 Oregon Economic Development
Dept-Ser B 6.350%
1/01/01 ........................................... 137,500
250,000 Washington County School District
# 48J 6.200% 9/01/01 ........................... 272,187
250,000 Emerald Peoples Utility
District 6.500%
11/01/01 .......................................... 276,563
270,000 Port of Morrow (Pollution
Control) 6.375%
04/01/02 .......................................... 297,000
125,000 Marion & Polk County School
District #24J 5.700% 10/01/02 .................... 133,438
225,000 Marion & Polk County
School District #24-J
6.000% 10/01/02 .................................. 244,125
250,000 Oregon State Revenue
Series B 6.250%
1/01/08 ........................................... 273,750
-----------
5,241,353
-----------
INSURED BONDS - 43.8%
200,000 Jackson County School District
6.000% 6/01/01 (FSA) ............................. 215,250
250,000 Clackamas County Hospital
Facility Revenue 5.800%
3/01/02 (MBIA) .................................... 266,563
<CAPTION>
Face Market
Value Securities Description Value
------------ --------------------------------------------------------- -----------
<C> <S> <C>
$ 1,000,000 Portland Hospital Facility
Legacy Health System
6.400% 5/01/02 (AMBAC) ............................... $1,105,000
200,000 Yamhill County
School District #29J
4.800% 6/01/02 (FSA) ................................. 201,250
1,240,000 Hood River County Oregon
School District 6.000%
6/01/03 (AMBAC)........................................ 1,346,950
250,000 Emerald Peoples Utility
District 5.450%
11/01/03 (AMBAC)....................................... 263,750
500,000 Deschutes/Jefferson County
School Dist. 5.300%
6/01/04 (MBIA)......................................... 519,375
260,000 Hood River County Oregon
School Dist. 6.000%
6/01/04 (AMBAC) ...................................... 282,100
545,000 Jefferson County School District
#509J 6.500%
6/15/04 (FSA) ........................................ 609,038
400,000 University Puerto Rico Ser
5.100% 6/01/05 (MBIA)................................... 406,500
350,000 Portland Oregon Sewer System
(Revenue) 5.750%
10/01/05 (FGIC) ...................................... 377,125
500,000 Washington County Sewer System
(Revenue) 5.800%
10/01/05 (AMBAC) ..................................... 532,500
1,015,000 Crook County Oregon School
District 4.700%
2/01/06 (FSA).......................................... 984,550
400,000 Oregon State Facility
Series A 6.100%
9/01/06 (AMBAC) ...................................... 429,500
350,000 Washington County Sewer System
(Revenue) 5.900%
10/01/06 (AMBAC) ..................................... 373,625
1,065,000 McMinnville Sewer System
(Revenue) 4.700%
2/01/07 (FGIC) ....................................... 1,043,700
335,000 Jackson County School District
5.200% 6/01/07 (FSA) ................................. 340,025
1,000,000 Salem Keizer School
District #24-J 5.500%
6/01/07 (FGIC) ....................................... 1,028,750
1,100,000 Multnomah County S.D. Park Rose
5.600% 12/01/07 (FGIC)................................ 1,153,625
350,000 Portland Sewer System
6.000% 10/01/12 (FGIC)................................ 366,188
500,000 McMinnville Sewer System
(Revenue) 5.000%
2/01/14 (FGIC) ...................................... 472,500
12,317,864
CERTIFICATE OF PARTICIPATION BONDS - 1.0%
250,000 City of Portland
6.950% 04/01/99 ...................................... 272,813
</TABLE>
*Dates reflect pre-refunded dates.
See accompanying notes to financial statements.
56
<PAGE>
THE OREGON MUNICIPAL BOND FUND, INC.
SCHEDULE OF INVESTMENTS
October 31, 1995
<TABLE>
<CAPTION>
Face Market
Value Securities Description Value
----------- ---------------------------------------------------- -----------
<C> <S> <C>
STATE OF OREGON
GENERAL OBLIGATION - 9.4%
$ 240,000 State of Oregon G. O.
7.700% 03/01/02................................... $ 253,800
100,000 State of Oregon G. O.
9.000% 04/01/03 ................................. 126,750
205,000 State of Oregon G.O.
8.200% 07/01/04................................... 254,969
150,000 State of Oregon G.O.
7.200% 07/01/04................................... 176,250
110,000 State of Oregon G.O.
6.000% 08/01/04................................... 119,625
200,000 State of Oregon G. O.
9.000% 10/01/04 .................................. 230,500
345,000 State of Oregon G.O.
6.750% 05/01/05................................... 395,025
250,000 State of Oregon G. O.
(Veterans) 7.250% 07/01/06 ........................ 299,063
200,000 State of Oregon G. O.
(Veterans) 8.250% 01/01/07 ........................ 254,000
200,000 State of Oregon G. O.
(Veterans) 7.250% 01/01/07 ....................... 239,750
100,000 State of Oregon G.O. (Alt Energy)
6.400% 01/01/08 .................................. 106,125
130,000 State of Oregon G.O.
9.200% 04/01/08 .................................. 178,588
-----------
2,634,445
-----------
REVENUE BONDS - 2.7%
545,000 Oregon State Light Rail
7.000% 06/01/04 .................................. 627,431
125,000 Oregon State Fair & Expo
Revenue 7.375% 10/01/06 ........................... 128,154
-----------
755,585
-----------
OTHER BONDS
GENERAL OBLIGATION - 12.7%
225,000 City of Portland Water G.O.
3.700% 12/01/00 .................................. 230,062
330,000 Puerto Rico G.O.
7.125% 07/01/02 .................................. 350,625
445,000 Washington & Clackamas School
District 5.250% 6/01/03 .......................... 460,019
300,000 Deschutes G.O. School
District #1 5.800% 02/01/04 ...................... 316,875
400,000 Washington & Clackamas School
District 5.250 6/01/05 .......................... 407,000
200,000 Clackamas Community College
5.100% 12/01/05 ................................... 203,750
1,000,000 Tri-Met Light Rail
5.900% 07/01/06 .................................. 1,053,750
300,000 Salem Oregon Series A
5.875% 1/01/07 ................................... 310,875
230,000 Lane County Area Education District
4.850% 6/01/08 ................................... 224,825
-----------
3,557,781
-----------
<CAPTION>
Face Market
Value Securities Description Value
----------- --------------------------------------------------------- -----------
<C> <S> <C>
OTHER REVENUE BONDS - 10.0%
$ 200,000 City of Portland (Hydro Electric
Power) 6.500% 10/01/97 ............................ $ 201,780
335,000 Central Lincoln PUD
6.500% 01/01/02 .................................. 367,662
600,000 Clackamas County Hospital (Sisters
of Providence) 6.200% 10/01/02 .................... 646,500
350,000 City of Portland (Urban Renewal)
5.700% 06/01/04 .................................. 370,125
420,000 Multnomah County School District
5.000% 3/01/07 ................................... 417,375
765,000 Salem Educational Facility (Revenue)
6.000% 04/01/10 .................................. 797,512
-----------
2,800,954
-----------
Total Investments - 98.3% 27,580,795
(Cost $26,215,041)**
Other Assets and (Liabilities), Net - 1.7% 489,576
-----------
TOTAL NET ASSETS - 100.0% $28,070,371
-----------
-----------
</TABLE>
<TABLE>
<S> <C>
PORTFOLIO ALLOCATION TABLE:
Education................................................ 43.7%
General Obligation....................................... 10.6
General Services......................................... 8.2
Hospital................................................. 8.7
Public Utility........................................... 5.2
Transportation........................................... 6.0
Economic Development..................................... 3.8
Water & Sewer............................................ 12.1
Total Investments........................................ 98.3%
</TABLE>
**Aggregate cost for Federal income tax purposes is identical.
See accompanying notes to financial statements.
57
<PAGE>
THE CRABBE HUSON SPECIAL FUND, INC.
SCHEDULE OF INVESTMENTS
October 31, 1995
<TABLE>
<CAPTION>
Market
Shares Securities Description Value
- ---------------------- ----------------------------------------------- --------------
<S> <C> <C>
CONVERTIBLE PREFERRED - 0.5%
----------------------------
50,000 Olympic Financial Ltd ......................... $ 4,237,500
--------------
COMMON STOCK - 74.5%
--------------------
CONSUMER CYCLICALS
Automotive - 0.5%
91,800 Exide Corp .................................... 4,027,725
--------------
Consumer Products - 2.9%
783,100 * General Instrument Corp........................ 14,878,900
745,500 Juno Lighting, Inc ............................ 10,809,750
25,688,650
Retail - 7.6%
1,275,600 * Ann Taylor .................................... 14,031,600
1,536,900 * Bombay Co, Inc ................................ 9,029,288
1,122,100 * Burlington Coat Factory ....................... 12,483,363
753,100 Cato Corp CL A ................................ 4,612,738
1,496,000 Phillips-Van Heusen ........................... 15,147,000
631,600 Ross Stores, Inc .............................. 9,908,225
220,700 * Sports & Recreation Inc ....................... 1,627,663
--------------
66,839,877
--------------
CONSUMER STAPLES - 5.0%
771,900 * Fred Meyer Inc ................................ 14,376,638
679,200 Hudson Foods Inc CL A ......................... 9,593,700
592,400 * Paragon Trade Brands, Inc ..................... 9,404,350
1,870,400 * Payless Cashways, Inc ......................... 10,754,800
--------------
44,129,488
--------------
BASIC MATERIALS & INDUSTRIAL
Building Materials - 1.4%
164,900 Fleetwood Enterprises ......................... 3,380,450
1,393,900 Morrison Knudsen Corp ......................... 9,060,350
--------------
12,440,800
--------------
Chemicals -1.1%
781,200 Crompton & Knowles Corp ....................... 9,862,650
--------------
Equipment & Machinery - 3.4%
810,800 Giddings & Lewis, Inc ......................... 13,074,150
1,341,500 MK Rail Corp .................................. 9,558,188
213,500 Stewart & Stevenson Serv ...................... 4,857,125
89,800 Wabash National Corp .......................... 2,278,675
--------------
29,768,138
--------------
Forest Products & Packaging - 1.9%
783,900 Longview Fibre Co ............................. 11,366,550
332,800 TJ International, Inc ......................... 5,761,600
--------------
17,128,150
--------------
Metals & Mining - 5.0%
791,600 Battle Mountain Gold .......................... 6,035,950
504,600 Huntco, Inc ................................... 6,559,800
817,500 Oregon Steel Mills Inc ........................ 11,649,375
182,200 * Pegasus Gold Inc .............................. 2,004,200
1,757,500 Sante Fe Pacific Gold Co ...................... 17,355,313
--------------
43,604,638
--------------
Pollution Control - 2.0%
5,167,800 * Rollins Environmental Services ................ 17,441,325
--------------
ENERGY - 5.5%
189,600 Anadarko Petroleum Corp ....................... 8,223,900
98,400 Asarco, Inc ................................... 3,173,400
18,300 Devon Energy Corp ............................. 398,025
</TABLE>
<TABLE>
<CAPTION>
Market
Shares Securities Description Value
- ---------------------- ----------------------------------------------- --------------
<S> <C> <C>
ENERGY - (continued)
916,900 * Forcenergy Gas Exploration ..................... $ 8,939,775
589,500 Holly Corp ..................................... 12,821,625
432,500 * Oryx Energy Corp ............................... 4,973,750
983,400 Snyder Oil Corp ................................ 10,079,850
--------------
48,610,325
--------------
FINANCIAL - 8.4%
347,000 American Financial Group Inc.................... 9,716,000
544,200 * Citation Insurance Group ....................... 2,414,888
795,000 John Alden Financial Corp....................... 16,496,250
112,600 * Olympic Financial Ltd .......................... 2,054,950
620,700 * Risk Capital Holdings Inc ...................... 13,655,400
739,300 * 20th Century Industries ........................ 12,290,863
581,900 * Zurich Reinsurance Centre ...................... 16,729,625
--------------
73,357,976
--------------
HEALTHCARE - 12.7%
288,100 * Cor Therapeutices .............................. 2,989,038
1,452,800 * Coventry Corp .................................. 28,511,200
330,500 * Grancare Inc ................................... 4,833,563
291,700 Grupo Casa Autrey - ADR ........................ 3,719,175
918,100 Integrated Health Services ..................... 21,001,538
756,500 * Perrigo Co ..................................... 9,267,125
252,400 * Scherer R.P. Corp .............................. 11,231,800
720,800 * Sofamor Danek Group, Inc ....................... 17,659,600
1,073,100 * Sun Healthcare Group, Inc ...................... 12,743,063
--------------
111,956,102
--------------
REAL ESTATE INVESTMENT TRUST - 2.9%
1,626,600 * Catellus Development Corp ...................... 8,946,300
317,700 Crown American Realty .......................... 2,422,463
629,600 Prime Residential, Inc ......................... 11,018,000
217,000 Prime Retail, Inc .............................. 2,631,125
--------------
25,017,888
--------------
TECHNOLOGY - 5.1%
1,014,800 * 3D0 Co ......................................... 10,909,100
1,108,800 * Cray Research .................................. 23,007,600
1,271,700 * Zenith Electronics Corp ........................ 10,650,480
--------------
44,567,180
--------------
TRANSPORTATION - 9.1%
1,154,300 Airborne Freight Corp .......................... 30,300,375
906,600 * Alaska Air Group ............................... 13,485,675
268,600 Hunt (JB) Transportation Serv .................. 4,163,300
698,500 * Landstar System Inc ............................ 18,335,625
308,900 Teekay Shipping Corp ........................... 7,181,925
115,900 TNT Freightways Corp ........................... 2,086,200
359,900 Yellow Corp .................................... 4,723,688
--------------
80,276,788
--------------
Total Common Stocks 654,717,700
--------------
OPTIONS - 2.5%
--------------
Put Options
70,000 Cypress Semiconductor Corp
@ 45, expiring 12/15/95 ........................ 691,250
14,269,400 Morgan Stanley High Tech Index
@ 350, expiring 6/21/96 ........................ 4,913,240
15,804,800 Morgan Stanley High Tech Index
@ 316, expiring 6/21/96 ........................ 2,985,527
15,384,615 Morgan Stanley High Tech Index
@ 325, expiring 6/21/96 ........................ 3,380,000
45,839,300 Morgan Stanley High Tech Index
@ 327, expiring 6/21/96 ........................ 10,483,448
--------------
22,453,465
--------------
</TABLE>
*Non-income producing
See accompanying notes to financial statements.
58
<PAGE>
THE CRABBE HUSON SPECIAL FUND, INC.
SCHEDULE OF INVESTMENTS
October 31, 1995
<TABLE>
<CAPTION>
Shares
or face Market
Value Securities Description Value
- ---------------------- ----------------------------------------------- --------------
<S> <C> <C>
SHORT-TERM INVESTMENTS - 9.8% **
--------------------------------
Treasury Bills - 1.3%
U.S. Treasury Bill
$ 5,000,000 5.270% 11/24/95 ............................. $ 4,983,148
4,000,000 5.160% 12/21/95 ............................. 3,971,333
2,285,000 5.260% 10/17/96 ............................. 2,167,460
--------------
11,121,941
--------------
Discount Notes - 8.5%
Federal Farm Credit
3,000,000 5.480% 12/15/95 ............................. 2,979,907
3,500,000 5.500% 12/22/95 ............................. 3,472,729
865,000 5.520% 12/07/95 ............................. 860,225
500,000 5.530% 11/28/95 ............................. 497,926
1,000,000 5.550% 11/03/95 ............................. 999,692
4,010,000 5.560% 11/09/95 - 1/04/96 ................... 3,984,053
8,660,000 5.570% 11/27/95 - 1/04/96 ................... 8,615,496
1,000,000 5.590% 11/17/95 ............................. 997,516
305,000 5.610% 11/13/95 ............................. 304,430
Federal Home Loan
2,000,000 5.470% 1/22/96 .............................. 1,975,081
1,590,000 5.480% 12/28/95 ............................. 1,576,204
4,000,000 5.490% 1/30/96 .............................. 3,945,100
3,500,000 5.500% 12/29/95 ............................. 3,468,986
3,250,000 5.520% 12/08/95 - 12/13/95 .................. 3,230,028
3,155,000 5.540% 11/24/95 - 12/18/95 .................. 3,141,414
7,000,000 5.550% 1/02/96 - 1/3/96 ..................... 6,932,552
11,450,000 5.560% 11/07/95 - 1/25/96 ................... 11,347,657
6,000,000 5.570% 11/06/95 - 1/10/96 ................... 5,945,460
4,445,000 5.580% 1/05/96 - 1/08/96..................... 4,399,585
1,500,000 5.590% 11/13/95 ............................. 1,497,205
4,465,000 5.620% 11/01/95 - 11/15/95................... 4,463,984
--------------
74,635,230
--------------
Total Short-Term Investments 85,757,171
--------------
Total Investments -87.3% 767,165,836
(Cost 789,902,314)***
Cash - 0.2% 2,028,004
--------------
SECURITIES SOLD SHORT - (15.1%)
-------------------------------
COMMON STOCKS
Computers - 3.6%
180,700 Computer Associates Intl, Inc ................. (9,938,500)
107,700 Micro Warehouse Inc ........................... (4,792,650)
222,500 Sun Microsystems, Inc ......................... (17,355,000)
--------------
(32,086,150)
--------------
</TABLE>
<TABLE>
<CAPTION>
Shares
or face Market
Value Securities Description Value
- ---------------------- ----------------------------------------------- --------------
<S> <C> <C>
Semiconductors - 4.3%
408,150 Alliance Semiconductor ......................... ($12,550,611)
410,100 Cypress Semiconductor .......................... (14,456,025)
96,200 Microchip Technology Inc ....................... (3,817,938)
100,000 Micron Technology .............................. (7,062,500)
--------------
(37,887,074)
--------------
Software - 7.2%
150,000 Adobe Systems, Inc ............................. (8,550,000)
93,200 Broderbund Software ............................ (6,465,750)
431,900 Gartner Group Inc CL A ......................... (18,841,638)
854,000 Tellabs, Inc ................................... (29,036,000)
--------------
(62,893,388)
--------------
Total Securities Sold Short - (15.1%) (132,866,612)
--------------
(Proceeds $116,397,420)****
Other Assets and (Liabilities), Net - 27.6% 242,232,606
--------------
TOTAL NET ASSETS - 100.0% $878,559,834
--------------
--------------
</TABLE>
**Rates reflect purchase yield to maturity.
***Aggregate cost for Federal income tax purposes is $790,872,568.
****Aggregate proceeds for Federal income tax purposes is $119,775,124.
See accompanying notes to financial statements.
59
<PAGE>
THE CRABBE HUSON ASSET ALLOCATION FUND, INC.
SCHEDULE OF INVESTMENTS
October 31, 1995
<TABLE>
<CAPTION>
Face Market
Value Securities Description Value
- ----------------------- ---------------------------------------- --------------
FIXED INCOME SECURITIES - 50.2%
------------------------------
GOVERNMENT BONDS - 33.2%
$ 10,765,000 U.S. Treasury Note
6.000% 8/31/97 ........................ $ 10,834,218
7,465,000 U.S. Treasury Note
6.250% 8/31/00 ........................ 7,615,046
3,870,000 U.S. Treasury Note
6.500% 8/15/05 ........................ 4,005,837
21,300,000 U.S. Treasury Bond
6.875% 8/15/25 ........................ 22,861,290
-------------
45,316,391
-------------
CORPORATE BONDS - 7.4%
600,000 Baxter International
7.500% 5/01/97 ........................ 612,000
500,000 GMAC
8.000% 10/01/99 ....................... 527,500
550,000 Upjohn Co
5.875% 4/15/00 ........................ 539,687
550,000 Pepsico, Inc
5.875% 6/01/00 ........................ 543,812
400,000 American Express Credit
6.500% 8/01/00 ........................ 404,500
700,000 Ford Motor Credit
6.250% 11/08/00 ....................... 696,500
725,000 GMAC
9.000% 10/15/02 ....................... 815,625
550,000 IBM Corp
7.250% 11/01/02 ....................... 576,812
550,000 Tennessee Valley Authority
6.125% 7/15/03 ........................ 540,375
550,000 JP Morgan & Company
7.625% 9/15/04 ........................ 585,062
550,000 Pacific Bell
6.250% 3/01/05 ........................ 539,687
550,000 Anheuser Busch
7.000% 9/01/05 ........................ 566,500
550,000 Bear Stearns Co.
6.875% 10/01/05 ...................... 549,312
600,000 Snap-on, Inc
6.625% 10/01/05 ....................... 609,000
600,000 Wal-Mart Stores
8.000% 9/15/06 ........................ 672,000
550,000 Eli Lilly
8.375% 12/01/06 ....................... 633,187
600,000 AT&T Corp
7.750 3/01/07 ......................... 653,250
-------------
10,064,809
-------------
AGENCIES - 5.6%
420,000 International Bank Recon.
& Dev. Floater 5.890%**
8/07/97 ............................... 378,415
1,400,000 Federal Home Loan Bank
8.220% 12/22/97 ...................... 1,403,430
1,500,000 SLMA Treasury Ind. Floater
(10-Year Treasury - 180 BP)
4.680% 2/11/98 ....................... 1,470,000
Shares
or Face Market
Value Securities Description Value
- ----------------------- ---------------------------------------- --------------
<S> <C> <C>
$ 900,000 Federal National Mortgage Association
6.080% 9/25/00................................. $ 902,205
1,200,000 Federal National Mortgage Association
8.25% 12/18/00................................. 1,314,960
1,000,000 Federal Home Loan Bank
7.590% 3/10/05 ................................ 1,088,060
1,000,000 Federal National Mortgage Association
7.375% 3/28/05 ................................ 1,071,160
-------------
7,628,230
-------------
FHLMC - 2.9%
109,807 FHLMC Pool #281037
9.250% 11/01/16 ............................... 114,007
1,067,640 FHLMC Pool #303033
9.000% 4/01/17 ................................ 1,103,480
1,400,000 FHLMC Pool #TBA
7.000% 10/01/25 ............................... 1,388,406
1,400,000 FHLMC Pool #TBA
7.500% 10/01/25 ............................... 1,415,093
-------------
4,020,986
-------------
CMO - 1.1%
1,645,000 GCA GNMA 1993 - PO 1 - B 1,515,970
-------------
Total Fixed Income Securities 68,546,386
-------------
CONVERTIBLE PREFERRED - 0.8%
----------------------------
20,000 Delta Air Lines ................................. 1,107,500
------------
COMMON STOCK - 45.3%
---------------------
CONSUMER CYCLICALS
Automotive - 1.5%
47,300 General Motors Corp ............................. 2,069,375
------------
Consumer Products - 2.2%
23,200 Bausch & Lomb, Inc .............................. 803,300
29,300 Brunswick Corp .................................. 571,350
5,500 Quaker Oats ..................................... 187,687
15,000 Rubbermaid, Inc ................................. 391,875
72,800 Sunbeam Corporation ............................. 1,092,000
-------------
3,046,212
-------------
Retail - 3.4%
8,500 Dayton-Hudson ................................... 584,375
27,600 Limited, Inc .................................... 507,150
41,400 Liz Claiborne, Inc .............................. 1,174,725
68,300 * Price/Costco, Inc ............................... 1,161,100
34,500 Wal-Mart Stores, Inc ............................ 746,062
34,100 Woolworth Corp .................................. 498,712
-------------
4,672,124
-------------
BASIC MATERIALS AND INDUSTRIAL
Building Materials - 2.1%
100,000 * USG Corp ........................................ 2,912,500
-------------
Chemicals -0.2%
34,600 * Uniroyal Chemical Corp .......................... 263,825
-------------
Equipment & Machinery - 0.4%
27,100 * Detroit Diesel Corp ............................. 481,025
-------------
</TABLE>
*Non-income producing
**Zero-coupon bonds- rates reflect purchase yield to maturity.
See accompanying notes to financial statements.
60
<PAGE>
THE CRABBE HUSON ASSET ALLOCATION FUND, INC.
SCHEDULE OF INVESTMENTS
October 31, 1995
<TABLE>
<CAPTION>
Market
Shares Securities Description Value
- ----------------------- ---------------------------------------- --------------
<S> <C> <C>
COMMON STOCK - (continued)
--------------------------
BASIC MATERIALS AND INDUSTRIAL - (continued)
Forest Products & Packaging - 2.3%
56,100 * Domtar, Inc ............................. $ 511,912
111,400 Louisiana Pacific Corp .................. 2,659,675
-------------
3,171,587
-------------
Metals & Mining - 4.1%
107,200 * Bethlehem Steel Corp .................... 1,407,000
79,000 J & L Specialty Steel ................... 1,293,625
135,600 * National Steel Corp - Class B ........... 1,796,700
22,800 Nucor Corp .............................. 1,097,250
-------------
5,594,575
-------------
ENERGY - 7.1%
35,000 Apache Corp ............................. 892,500
55,900 Burlington Resources, Inc ............... 2,012,400
62,600 Dresser Industries ...................... 1,298,950
52,100 Enserch Corp ............................ 755,450
84,400 * Enserch Exploration ..................... 833,450
63,300 Occidental Petroleum Corp ............... 1,360,950
25,300 Tenneco, Inc ............................ 1,110,037
24,300 Union Texas Petro Hldgs ................. 437,400
35,300 Unocal Corp ............................. 926,625
-------------
9,627,762
-------------
FINANCIAL - 6.4%
56,700 Ahmanson (H.F.) & Co .................... 1,417,500
48,220 Bear Stearns Cos, Inc ................... 958,372
119,500 Equitable Companies ..................... 2,539,375
4,300 * Prudential Reinsurance Hlds ............. 87,612
34,600 Salomon, Inc ............................ 1,249,925
68 * Transport Holdings ...................... 2,669
13,700 Travelers, Inc .......................... 691,850
58,900 U.S. Bancorp ............................ 1,744,929
-------------
8,692,232
-------------
HEALTHCARE - 2.7%
30,500 Allergan, Inc ........................... 895,937
14,700 * Apria Healthcare Group .................. 317,887
66,700 * Humana, Inc ............................. 1,409,037
27,600 U S Healthcare .......................... 1,062,600
-------------
3,685,461
-------------
REAL ESTATE INVESTMENT TRUST - 2.0%
52,100 Debartolo Realty Corp ................... 677,300
38,200 First Industrial Realty Trust ........... 778,325
53,400 Spieker Properties ...................... 1,294,950
-------------
2,750,575
-------------
TECHNOLOGY - 1.1%
36,400 * Tandem Computers, Inc ................... 409,500
43,100 * Unisys Corp ............................. 242,437
89,900 * Zenith Electronics ...................... 752,912
-------------
1,404,849
-------------
TELECOMMUNICATIONS - 4.0%
21,800 AT&T Corp ............................... 1,395,200
65,500 Comcast Corp Special Class A ............ 1,170,812
51,703 * Cox Communications, Inc Class A ......... 969,431
22,500 Time Warner, Inc ........................ 821,250
80,700 Westinghouse Electric ................... 1,139,887
-------------
5,496,580
-------------
Shares
or Face Market
Value Securities Description Value
- ----------------------- ---------------------------------------- --------------
<S> <C> <C>
TRANSPORTATION - 5.8%
23,800 * AMR Corp ........................................ $ 1,570,800
13,800 Burlington Northern Santa Fe .................... 1,157,475
79,800 Consolidated Freightways ........................ 1,855,350
23,000 Delta Air Lines, Inc ............................ 1,509,375
38,900 Ryder System .................................... 938,462
40,707 * Southern Pacific Rail Corp ...................... 905,730
-------------
7,937,192
-------------
Total Common Stocks 61,805,874
-------------
SHORT-TERM INVESTMENTS - 0.7%
-----------------------------
TREASURY BILLS - 0.7%
1,000,000 U.S. Treasury Bill
5.070% 10/17/96 ............................... 948,560
-------------
Total Investments - 97.0% 132,408,320
(Cost $127,582,027)***
Cash - 4.6% 6,303,890
Other Assets and (Liabilities), Net - (1.6%) (2,182,153)
-------------
TOTAL NET ASSETS - 100.0% $136,530,057
-------------
-------------
</TABLE>
*Non-income producing
***Aggregate cost for Federal income tax purposes is $127,567,346.
See accompanying notes to financial statements.
61
<PAGE>
THE CRABBE HUSON EQUITY FUND, INC.
SCHEDULE OF INVESTMENTS
October 31, 1995
<TABLE>
<CAPTION>
Market
Shares Securities Description Value
- ------------------------ -------------------------------------- --------------
<S> <C> <C>
COMMON STOCK - 84.0%
CONSUMER CYCLICALS
AUTOMOTIVE - 2.7%
240,800 General Motors Corp ................... $ 10,535,000
--------------
CONSUMER PRODUCTS - 4.2%
138,900 Bausch & Lomb, Inc .................... 4,809,413
135,300 Brunswick Corp ........................ 2,638,350
33,700 Quaker Oats ........................... 1,150,012
81,900 Rubbermaid, Inc ....................... 2,139,637
375,500 Sunbeam Corp .......................... 5,632,500
--------------
16,369,912
--------------
RETAIL - 6.5%
42,700 Dayton-Hudson Corp .................... 2,935,625
141,500 Limited, Inc .......................... 2,600,063
239,000 Liz Claiborne, Inc .................... 6,781,625
334,400 * Price/Costco, Inc ..................... 5,684,800
205,200 Wal-Mart Stores, Inc .................. 4,437,450
190,100 Woolworth Corp ........................ 2,780,212
--------------
25,219,775
--------------
BASIC MATERIALS AND INDUSTRIAL
BUILDING MATERIALS - 3.9%
523,200 * USG Corp .............................. 15,238,200
--------------
CHEMICALS - 0.3%
170,000 * Uniroyal Chemical Corp ................ 1,296,250
--------------
EQUIPMENT & MACHINERY - 0.7%
142,600 * Detroit Diesel Corp ................... 2,531,150
--------------
FOREST PRODUCTS & PACKAGING - 4.2%
288,900 * Domtar, Inc ........................... 2,636,212
562,200 Louisiana Pacific Corp ................ 13,422,525
--------------
16,058,737
--------------
METALS & MINING - 7.5%
570,500 * Bethlehem Steel Corp .................. 7,487,812
403,700 J & L Specialty Steel ................. 6,610,587
660,400 * National Steel Corp - Class B ......... 8,750,300
128,400 Nucor Corp ............................ 6,179,250
--------------
29,027,949
--------------
ENERGY - 13.8%
207,200 Apache Corp ........................... 5,283,600
282,600 Burlington Resources, Inc ............. 10,173,600
344,500 Dresser Industries, Inc ............... 7,148,375
282,100 Enserch Corp .......................... 4,090,450
472,400 * Enserch Exploration ................... 4,664,950
354,900 Occidental Petroleum Corp ............. 7,630,350
147,700 Tenneco Inc ........................... 6,480,339
151,000 Union Texas Petro Hldgs Inc ........... 2,718,000
198,200 Unocal Corp ........................... 5,202,750
--------------
53,392,414
--------------
FINANCIAL - 12.2%
337,200 Ahmanson (H.F.) & Co .................. 8,430,000
294,275 Bear Stearns Cos, Inc ................. 5,848,715
605,900 Equitable Companies ................... 12,875,375
24,500 * Prudential Reinsurance Hlds ........... 499,187
195,100 Salomon, Inc .......................... 7,047,987
327 * Transport Holdings .................... 12,834
Shares
Or Face Market
Value Securities Description Value
- ------------------------ -------------------------------------- --------------
<S> <C> <C>
FINANCIAL - (continued)
65,500 Travelers, Inc ........................ $ 3,307,750
311,400 U.S. Bancorp .......................... 9,225,225
--------------
47,247,073
--------------
HEALTHCARE - 4.8%
151,100 Allergan, Inc ......................... 4,438,563
77,000 * Apria Healthcare Group ................ 1,665,125
330,900 * Humana, Inc ........................... 6,990,263
142,500 U S Healthcare ........................ 5,486,250
--------------
18,580,201
--------------
REAL ESTATE INVESTMENT TRUST - 3.5%
255,900 DeBartolo Realty Corp ................. 3,326,700
149,300 First Industrial Realty Trust ......... 3,041,989
294,300 Spieker Properties .................... 7,136,775
--------------
13,505,464
--------------
TECHNOLOGY- 1.7%
209,600 * Tandem Computers, Inc ................. 2,358,000
216,500 * Unisys Corp ........................... 1,217,812
369,100 * Zenith Electronics Corp ............... 3,091,212
--------------
6,667,024
--------------
TELECOMMUNICATIONS - 7.6%
123,000 AT&T Corp ............................. 7,872,000
363,600 Comcast Corp Special Class A .......... 6,499,350
264,219 * Cox Communications, Inc Class A ....... 4,954,110
117,100 Time Warner, Inc ...................... 4,274,150
406,800 Westinghouse Electric Corp ............ 5,746,050
--------------
29,345,660
--------------
TRANSPORTATION - 9.6%
122,500 * AMR Corp .............................. 8,085,000
69,500 Burlington Northern RR, Inc ........... 5,829,312
413,100 Consolidated Freightways .............. 9,604,575
59,000 Delta Air Lines, Inc .................. 3,871,875
193,000 Ryder System .......................... 4,656,125
223,610 * Southern Pacific Rail Corp ............ 4,975,322
--------------
37,022,209
--------------
UTILITIES - 0.8%
94,700 BCE Inc ............................... 3,184,289
--------------
Total Common Stocks 325,221,307
--------------
CONVERTIBLE PREFERRED - 1.3%
----------------------------
92,100 Delta Air Lines ....................... 5,100,037
--------------
SHORT TERM INVESTMENTS** - 14.4%
--------------------------------
TREASURY BILLS & NOTES - 2.3%
U. S. TREASURY NOTE
$ 2,500,000 5.125% 11/15/95 ..................... $ 2,499,550
5,915,000 5.260% 10/17/96 ..................... 5,610,732
1,000,000 5.330% 12/07/95 ..................... 994,665
--------------
9,104,947
--------------
DISCOUNT NOTES - 12.1%
FEDERAL FARM CREDIT
600,000 5.510% 12/04/95 ..................... 596,970
900,000 5.520% 11/28/95 ..................... 896,274
415,000 5.530% 11/28/95 ..................... 413,279
490,000 5.540% 12/20/95 ..................... 486,305
500,000 5.500% 12/22/95 ..................... 496,104
100,000 5.560% 11/03/95 ..................... 99,969
7,945,000 5.570% 11/01/95 - 12/07/95........... 7,912,672
</TABLE>
*Non-income producing
**Rates reflect purchase yield to maturity.
See accompanying notes to financial statements.
62
<PAGE>
THE CRABBE HUSON EQUITY FUND, INC.
SCHEDULE OF INVESTMENTS
October 31, 1995
<TABLE>
<CAPTION>
Face Market
Value Securities Description Value
- ------------------------ -------------------------------------- --------------
<S> <C> <C>
DISCOUNT NOTES - (CONTINUED)
FEDERAL HOME LOAN
$ 1,250,000 5.420% 2/16/96 ...................... $ 1,229,865
250,000 5.430% 2/20/96 ...................... 245,814
700,000 5.450% 1/22/96 ...................... 691,310
250,000 5.470% 1/22/96 ...................... 246,885
1,950,000 5.480% 12/28/95 - 1/17/96 ........... 1,928,361
1,000,000 5.490% 1/16/96 ...................... 988,410
985,000 5.500% 12/29/95 - 1/10/96 ........... 975,016
675,000 5.520% 12/13/95 ..................... 670,653
480,000 5.530% 12/05/95 ..................... 477,493
3,645,000 5.540% 11/24/95 - 12/19/95 .......... 3,624,808
7,075,000 5.550% 11/02/95 - 1/29/96 ........... 7,514,523
5,695,000 5.560% 11/02/95 - 1/29/96 ........... 5,668,512
5,470,000 5.570% 11/06/95 - 1/30/96 ........... 6,419,637
500,000 5.580% 1/08/96 ...................... 494,730
2,035,000 5.590% 11/13/95 - 1/09/96 ........... 2,018,367
1,000,000 5.620% 11/15/95 ..................... 997,814
1,600,000 5.630% 11/21/95 ..................... 1,594,996
--------------
46,688,767
--------------
Total Short Term Investments 55,793,714
--------------
Total Investments - 99.7% 386,115,058
(Cost $371,004,735)***
Cash - 1.1% 4,226,599
Other Assets and (Liabilities), Net - 0.8% (3,157,577)
--------------
TOTAL NET ASSETS - 100.0% $ 387,184,080
--------------
--------------
</TABLE>
***Aggregate cost for Federal income tax purposes is $371,627,627.
See accompanying notes to financial statements.
63
<PAGE>
THE CRABBE HUSON INCOME FUND, INC.
SCHEDULE OF INVESTMENTS
October, 31 1995
<TABLE>
<CAPTION>
Face Market
Value Securities Description Value
- ------------------------- ----------------------------------------------- -------------
<S> <C> <C>
FIXED INCOME SECURITIES - 97.1%
GOVERNMENT BONDS - 52.6%
$ 1,000,000 U.S. Treasury Note 6.000%
8/31/97 ................................... $ 1,006,430
1,000,000 U.S. Treasury Bond 7.625%
2/15/25 ................................... 1,160,390
1,500,000 U.S. Treasury Bond 6.875%
8/15/25 ................................... 1,609,950
-------------
3,776,770
-------------
CORPORATE BONDS - 20.2%
100,000 Baxter International
7.500% 5/01/97 ............................ 102,000
100,000 GMAC
8.000% 10/01/99 .......................... 105,500
100,000 Upjohn Company
5.875% 4/15/00 ............................ 98,125
100,000 Pepsico, Inc
5.875% 6/01/00 ............................ 98,875
100,000 American Express Credit
6.500% 8/01/00 ............................ 101,125
100,000 IBM Corp
7.250% 11/01/02 ........................... 104,875
100,000 JP Morgan & Company
7.625% 9/15/04 ............................ 106,375
100,000 Pacific Bell
6.250% 3/01/05 ............................ 98,125
100,000 Anheuser Busch
7.000% 9/01/05 ............................ 103,000
100,000 Bear Stearns Co
6.875% 10/01/05 .......................... 99,875
100,000 Snap-on, Inc
6.625% 10/01/05 ........................... 101,500
100,000 Wal-Mart Stores
8.000% 9/15/06 ............................ 112,000
100,000 Eli Lilly
8.375% 12/01/06 ........................... 115,125
100,000 AT&T Corp
7.750% 3/01/07 ........................... 108,875
-------------
1,455,375
-------------
INSURED BONDS - 2.2%
160,000 City of Lincoln Oregon
5.800% 6/01/97
(AMBAC) .................................... 160,000
-------------
Face Market
Value Securities Description Value
- ------------------------- ----------------------------------------------- -------------
<S> <C> <C>
AGENCIES - 22.1%
$ 320,000 International Bank Recon &
Dev Floater 6.170%*
8/07/97 .................................... $ 288,317
300,000 FHLMC Strips
11/15/99 .................................. 235,905
100,000 Tennessee Valley Authority
6.125% 7/15/03 ............................ 98,250
81,539 FNMA Pool #30333
9.250% 9/01/16 ........................... 85,264
123,549 FHLMC Pool #302029
9.500% 10/01/16 .......................... 128,952
183,090 FHLMC Pool #303033
9.000% 4/01/17 ........................... 189,236
241,386 FHLMC Pool #301538
10.000% 7/01/17 .......................... 259,625
150,000 FHLMC Pool TBA
7.000% 10/01/25 .......................... 148,758
150,000 FHLMC Pool TBA
7.500% 10/01/25 .......................... 151,617
-------------
1,585,924
Total Investments - 97.1% 6,978,069
(Cost $6,754,759)**
Cash - 5.8% 417,578
Other Assets and (Liabilities), Net - (2.9)% (205,522)
-------------
TOTAL NET ASSETS - 100.0% $ 7,190,125
-------------
-------------
</TABLE>
*Zero-coupon bonds-rates reflect purchase yield to maturity.
**Aggregate cost for Federal income tax purposes is $6,774,069.
See accompanying notes to financial statements.
64
<PAGE>
THE CRABBE HUSON U.S. GOVERNMENT INCOME FUND, INC.
SCHEDULE OF INVESTMENTS
October 31, 1995
<TABLE>
<CAPTION>
Face Market
Value Securities Description Value
------------- --------------------------------------------------------- -------------
<C> <S> <C>
FIXED INCOME SECURITIES - 98.4%
U.S. GOVERNMENT AND AGENCY
$ 255,000 International Bank Recon & Dev
Floater 5.390%* 08/07/97 ............................. $ 229,752
4,655,000 U. S. Treasury Note
6.000% 8/31/97 ....................................... 4,684,932
150,000 Federal National Mortgage
Assoc. 4.950% 9/30/98 ................................ 146,148
1,045,000 U. S. Treasury Note
6.250% 8/31/00 ....................................... 1,066,005
120,000 Federal National Mortgage
Assoc. Medium Term Note
6.080% 9/25/00 ........................................ 120,294
100,000 Federal National Mortgage
Assoc. 8.250% 12/18/00 ............................... 109,580
50,000 Federal Home Loan Bank
7.590% 3/10/05 ........................................ 54,403
50,000 Federal National Mortgage
Assoc. 7.375% 3/28/05 ................................ 53,558
1,700,000 U. S. Treasury Bond
6.875% 8/15/25 ....................................... 1,824,610
-------------
8,289,282
-------------
Total Investments - 98.4% 8,289,282
(Cost $8,185,803)**
Cash - 0.4% 32,860
Other Assets and (Liabilities), Net - 1.2% 104,057
-------------
TOTAL NET ASSETS - 100.0% $ 8,426,199
-------------
-------------
</TABLE>
*Zero-coupon bond-rate reflects purchase yield to maturity.
**Aggregate cost for Federal income tax purposes is $8,186,756.
See accompanying notes to financial statements.
65
<PAGE>
THE CRABBE HUSON U.S. GOVERNMENT MONEY MARKET FUND, INC.
SCHEDULE OF INVESTMENTS
October 31, 1995
<TABLE>
<CAPTION>
Face Market
Value Securities Description Value
--------------- ------------------------------------------------ -------------
<C> <S> <C>
FIXED INCOME SECURITIES* - 99.6%
U.S. GOVERNMENT & AGENCY
Treasury Bills - 10.2%
$ 1,000,000 U. S. Treasury Bill
5.540% 7/25/96 ................................ $ 958,912
4,850,000 U. S. Treasury Bill
5.260% 10/17/96 ............................... 4,601,268
-------------
5,560,180
-------------
Discount Notes - 89.4%
Federal Farm Credit
400,000 5.510% 12/04/95 ............................... 397,980
235,000 5.520% 11/28/95 - 12/07/95 .................... 233,841
585,000 5.530% 11/28/95 ............................... 582,574
510,000 5.540% 12/20/95 ............................... 506,154
1,890,000 5.560% 11/03/95 - 1/04/96 ..................... 1,888,023
7,395,000 5.570% 11/01/95 - 1/04/96 ..................... 7,363,603
695,000 5.610% 11/13/95 ............................... 693,700
Federal Home Loan
750,000 5.420% 2/16/96 ................................ 737,918
3,250,000 5.430% 1/17/96 - 2/20/96 ...................... 3,203,279
800,000 5.450% 1/22/96 ................................ 790,069
750,000 5.470% 1/22/96 ................................ 740,655
1,460,000 5.480% 12/28/95 - 1/17/96 ..................... 1,445,962
795,000 5.490% 1/16/96 ................................ 785,786
2,515,000 5.500% 12/29/95 - 1/10/96 ..................... 2,488,470
1,075,000 5.520% 12/08/95 - 12/13/95 .................... 1,068,652
2,270,000 5.530% 12/05/95 - 1/18/96 ..................... 2,249,696
3,200,000 5.540% 11/24/95 - 12/19/95 .................... 3,179,455
7,145,000 5.550% 11/02/95 - 2/01/96 ..................... 7,077,470
5,225,000 5.560% 11/08/95 - 1/26/96 ..................... 5,183,831
3,740,000 5.570% 11/16/95 - 1/30/96 ..................... 3,707,315
2,055,000 5.580% 1/05/96 - 1/08/96 ...................... 2,033,765
650,000 5.590% 11/22/95 ............................... 647,880
535,000 5.620% 11/15/95 ............................... 533,831
1,400,000 5.630% 11/21/95 ............................... 1,395,621
-------------
48,935,530
-------------
Total Investments - 99.6% 54,495,710
(Cost $54,495,710)**
Cash - 0.4% 233,521
Other Assets and (Liabilities), Net 0.0% (15,012)
-------------
TOTAL NET ASSETS - 100.0% $ 54,714,219
-------------
-------------
</TABLE>
*Rates reflect purchase yield to maturity.
**Aggregate cost for Federal income tax purposes is identical.
See accompanying notes to financial statements.
66
<PAGE>
THE CRABBE HUSON REAL ESTATE INVESTMENT FUND, INC.
SCHEDULE OF INVESTMENTS
October 31, 1995
<TABLE>
<CAPTION>
Market
Shares Securities Description Value
---------- ------------------------------------------------- -------------
<C> <S> <C>
COMMON STOCK - 98.1%
REAL ESTATE INVESTMENT TRUST
APARTMENT - 23.5%
20,000 Camden Property Trust ........................... $ 415,000
25,000 Pacific Gulf Properties, Inc .................... 378,125
20,000 Paragon Group, Inc .............................. 345,000
15,000 Post Properties ................................. 450,000
60,000 Prime Residential, Inc .......................... 1,050,000
20,000 SouthWest Property Trust ........................ 242,500
35,000 Summit Properties, Inc .......................... 647,500
73,500 Town & Country Trust ............................ 937,125
-------------
4,465,250
-------------
INDUSTRIAL - 16.1%
10,000 Cali Realty Corp ................................ 195,000
25,900 Carr Realty Corp ................................ 492,100
33,500 First Industrial Realty Trust ................... 682,562
19,000 Liberty Property Trust .......................... 384,750
17,000 Reckson Associates Realty Corp .................. 456,875
24,000 Spieker Properties, Inc ......................... 582,000
10,000 Trinet Corp. Realty Trust ...................... 267,500
-------------
3,060,787
-------------
LODGING - 4.3%
30,000 Starwood Lodging Trust .......................... 817,500
-------------
MALLS - 12.2%
62,100 Crown American Realty ........................... 473,512
71,400 DeBartolo Realty Corp ........................... 928,200
5,000 Macerich Company ................................ 100,625
35,000 Simon Property Group Inc ........................ 813,750
-------------
2,316,087
-------------
MANUFACTURED HOUSING - 0.9%
10,000 Manufactured Home Communities.................... 165,000
-------------
OUTLET CENTERS - 10.2%
35,200 Factory Stores of America ....................... 677,600
15,000 Mills Corp ...................................... 256,875
63,000 Prime Retail, Inc ............................... 763,875
10,000 Tanger Factory Outlet Center .................... 235,000
-------------
1,933,350
-------------
SHOPPING CENTER - 30.9%
11,200 Burnham Pacific Property, Inc ................... 126,000
28,700 Commercial Net Lease Realty ..................... 365,925
12,700 Developers Diversified Realty ................... 361,950
5,000 Excel Realty Trust, Inc ......................... 94,375
36,100 Federal Realty Investment Trust ................. 731,025
44,250 Glimcher Realty Trust ........................... 796,500
43,700 JDN Realty Corp ................................. 890,387
60,000 Kranzco Realty Trust ............................ 915,000
55,000 Malan Realty Investors, Inc ..................... 770,000
28,750 Mark Centers Trust .............................. 309,064
30,000 Regency Realty Corp ............................. 510,000
-------------
5,870,226
-------------
Total Investments - 98.1% 18,628,200
(Cost $19,605,304)*
Cash - 0.5% 99,391
Other Assets and (Liabilities), Net - 1.4% 257,923
-------------
TOTAL NET ASSETS - 100.0% $ 18,985,514
-------------
-------------
</TABLE>
*Aggregate cost for Federal income tax purposes is $19,610,488.
See accompanying notes to financial statements.
67
<PAGE>
CRABBE HUSON FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
October 31, 1995
<TABLE>
<CAPTION>
THE OREGON THE THE
MUNICIPAL CRABBE HUSON CRABBE HUSON
BOND SPECIAL ASSET ALLOCATION
FUND, INC. FUND, INC. FUND, INC.
--------------- ---------------- ----------------
<S> <C> <C> <C>
ASSETS:
Investment securities,
at market (cost $26,215,041; $789,902,314;
$127,582,027; $371,004,735; $6,754,759;
$8,185,803; $54,495,710 and $19,605,304
respectively) $ 27,580,795 $ 767,165,836 $ 132,408,320
Cash ---- 2,028,004 6,303,890
Deposits with brokers for securities sold short ---- 184,796,646 ----
Receivables:
Dividends and Interest 509,615 849,007 857,351
Fund shares sold 25,000 4,090,362 405,209
Investment securities sold ---- 4,355,170 920,708
Due from distributor (Note 2) ---- ---- ----
Due from investment advisor (Note 2) ---- ---- ----
Proceeds from securities sold short ---- 116,397,420 ----
Organization expenses ---- ---- ----
Prepaid Expenses 1,362 44,011 6,508
--------------- ---------------- ----------------
$ 28,116,772 $ 1,079,726,456 $ 140,901,986
--------------- ---------------- ----------------
LIABILITIES:
Securities sold short,
at market (proceeds $116,397,420) ---- 132,866,612 ----
Payables:
Investment securities payable ---- 40,952,158 4,284,356
Fund shares redeemed ---- 9,144,015 42,751
Short sales closed ---- 17,711,422 ----
Payable to affiliates and directors (Note 2) 778 1,027 2,027
Accrued liabilities 45,623 491,388 42,795
--------------- ---------------- ----------------
46,401 201,166,622 4,371,929
--------------- ---------------- ----------------
NET ASSETS: $ 28,070,371 $ 878,559,834 $ 136,530,057
--------------- ---------------- ----------------
--------------- ---------------- ----------------
NET ASSETS CONSIST OF:
Capital shares 2,225 63,670 10,010
Capital paid in 26,699,373 874,136,535 120,240,658
Undistributed accumulated net
investment income ---- 11,747,830 ----
Undistributed accumulated net
realized gain (loss) on investments 3,019 31,817,469 11,453,096
Net unrealized appreciation
(depreciation) on investments and short sales(Note 5) 1,365,754 (39,205,670) 4,826,293
--------------- ---------------- ----------------
$ 28,070,371 $ 878,559,834 $ 136,530,057
--------------- ---------------- ----------------
--------------- ---------------- ----------------
CAPITAL SHARES, PAR VALUE $.001
Authorized 10,000,000 100,000,000 100,000,000
Outstanding (Note 4) 2,225,010 63,670,184 10,010,125
--------------- ---------------- ----------------
NET ASSET VALUE PER SHARE $ 12.62 $ 13.80 $ 13.64
--------------- ---------------- ----------------
--------------- ---------------- ----------------
</TABLE>
See accompanying notes to financial statements.
68
<PAGE>
CRABBE HUSON FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
October 31, 1995
<TABLE>
<CAPTION>
THE THE THE CRABBE HUSON
CRABBE HUSON CRABBE HUSON U.S. GOVERNMENT
EQUITY FUND, INC. INCOME FUND, INC. INCOME FUND, INC.
----------------- ----------------- -----------------
<S> <C> <C> <C>
ASSETS:
Investment securities,
at market (cost $26,215,041; $789,902,314;
$127,582,027; $371,004,735; $6,754,759;
$8,185,803; $54,495,710 and $19,605,304
respectively) $ 386,115,058 $ 6,978,069 $ 8,289,282
Cash 4,226,599 417,578 32,860
Deposits with brokers for securities sold short ---- ---- ----
Receivables:
Dividends and Interest 154,250 89,712 88,913
Fund shares sold 1,109,039 3,376 6,658
Investment securities sold 919,085 ---- ----
Due from distributor (Note 2) 60,875 ---- ----
Due from investment advisor (Note 2) ---- 7,411 8,384
Proceeds from securities sold short ---- ---- ----
Organization expenses ---- ---- ----
Prepaid Expenses 17,515 359 434
---------------- ----------------- -----------------
$ 392,602,421 $ 7,496,505 $ 8,426,531
---------------- ----------------- -----------------
LIABILITIES:
Securities sold short,
at market (proceeds $116,397,420) ---- ---- ----
Payables:
Investment securities payable 4,885,161 301,803 ----
Fund shares redeemed 393,222 4,253 ----
Short sales closed ---- ---- ----
Payable to affiliates and directors (Note 2) 2,027 277 277
Accrued liabilities 137,931 47 55
---------------- ----------------- -----------------
5,418,341 306,380 332
---------------- ----------------- -----------------
NET ASSETS: $ 387,184,080 $ 7,190,125 $ 8,426,199
---------------- ----------------- -----------------
---------------- ----------------- -----------------
NET ASSETS CONSIST OF:
Capital shares 21,309 702 790
Capital paid in 349,459,104 7,146,824 8,468,549
Undistributed accumulated net
investment income 2,666,550 ---- 690
Undistributed accumulated net
realized gain (loss) on investments 19,926,794 (180,711) (147,309)
Net unrealized appreciation
(depreciation) on investments and short sales(Note 5) 15,110,323 223,310 103,479
---------------- ----------------- -----------------
$ 387,184,080 $ 7,190,125 $ 8,426,199
---------------- ----------------- -----------------
---------------- ----------------- -----------------
CAPITAL SHARES, PAR VALUE $.001
Authorized 100,000,000 100,000,000 100,000,000
Outstanding (Note 4) 21,309,191 700,892 790,370
---------------- ----------------- -----------------
---------------- ----------------- -----------------
NET ASSET VALUE PER SHARE $ 18.17 $ 10.26 $ 10.66
---------------- ----------------- -----------------
---------------- ----------------- -----------------
<CAPTION>
THE CRABBE HUSON THE CRABBE HUSON
U.S. GOVERNMENT REAL ESTATE
MONEY MARKET INVESTMENT
FUND, INC. FUND, INC.
---------------- ----------------
<S> <C> <C>
ASSETS:
Investment securities,
at market (cost $26,215,041; $789,902,314;
$127,582,027; $371,004,735; $6,754,759;
$8,185,803; $54,495,710 and $19,605,304
respectively) $ 54,495,710 $ 18,628,200
Cash 233,521 99,391
Deposits with brokers for securities sold short ---- ----
Receivables:
Dividends and Interest 646 110,797
Fund shares sold ---- 7,204
Investment securities sold ---- 133,980
Due from distributor (Note 2) ---- ----
Due from investment advisor (Note 2) ---- ----
Proceeds from securities sold short ---- ----
Organization expenses ---- 89,606
Prepaid Expenses 2,612 219
---------------- ----------------
$ 54,732,489 $ 19,069,397
---------------- ----------------
LIABILITIES:
Securities sold short,
at market (proceeds $116,397,420) ---- ----
Payables:
Investment securities payable ---- 74,647
Fund shares redeemed ---- ----
Short sales closed ---- ----
Payable to affiliates and directors (Note 2) 778 778
Accrued liabilities 17,492 8,458
---------------- ----------------
18,270 83,883
---------------- ----------------
NET ASSETS: $ 54,714,219 $ 18,985,514
---------------- ----------------
---------------- ----------------
NET ASSETS CONSIST OF:
Capital shares 54,714 1,960
Capital paid in 54,659,505 19,720,169
Undistributed accumulated net
investment income ---- 7,309
Undistributed accumulated net
realized gain (loss) on investments ---- 233,180
Net unrealized appreciation
(depreciation) on investments and short sales(Note 5) ---- (977,104)
---------------- ----------------
$ 54,714,219 $ 18,985,514
---------------- ----------------
---------------- ----------------
CAPITAL SHARES, PAR VALUE $.001
Authorized 2,000,000,000 1,000,000,000
Outstanding (Note 4) 54,714,219 1,959,931
---------------- ----------------
---------------- ----------------
NET ASSET VALUE PER SHARE $ 1.00 $ 9.69
---------------- ----------------
---------------- ----------------
</TABLE>
See accompanying notes to financial statements.
69
<PAGE>
STATEMENTS OF OPERATIONS
For the year ended October 31, 1995
<TABLE>
<CAPTION>
THE OREGON THE THE
MUNICIPAL CRABBE HUSON CRABBE HUSON
BOND SPECIAL ASSET ALLOCATION
FUND, INC. FUND, INC. FUND, INC.
----------------- ----------------- -----------------
<S> <C> <C> <C>
INVESTMENT INCOME
Interest $ 1,455,231 $ 18,261,908 $ 3,701,179
Dividends (net of foreign taxes withheld of
$0; $3,347; $18,635; $55,166; $0; $0; $0; and
$0 respectively) -- 4,558,333 1,226,139
----------------- ----------------- -----------------
1,455,231 22,820,241 4,927,318
----------------- ----------------- -----------------
EXPENSES
Investment advisory fees (Note 2) 134,042 5,398,048 1,183,215
Transfer agent 32,241 953,607 115,803
Printing 10,074 269,190 35,347
Postage 7,606 200,609 25,533
Custody 2,860 54,216 18,637
Legal 3,836 140,115 26,247
Auditing 5,081 43,092 11,792
Insurance 1,254 27,016 5,467
Directors' fees 3,118 8,118 8,113
Registration fees 1,067 203,324 28,117
Amortization of organization expenses -- -- --
Miscellaneous 3,992 194,903 19,119
Distribution fees (Note 2) 61,567 1,701,991 303,887
Administration 16,852 57,617 33,456
Short sales dividends -- 286,184 --
----------------- ----------------- -----------------
283,590 9,538,030 1,814,733
Fees waived by investment advisor (Note 2) (20,866) (697) (14,567)
Expenses reimbursed by investment advisor (Note 2) -- -- --
----------------- ----------------- -----------------
NET EXPENSES 262,724 9,537,333 1,800,166
----------------- ----------------- -----------------
NET INVESTMENT INCOME 1,192,507 13,282,908 3,127,152
----------------- ----------------- -----------------
REALIZED AND UNREALIZED GAIN:
Net realized gain (loss) on investments 3,019 31,170,355 11,435,123
Net change in unrealized appreciation
or depreciation of investments and short sales 1,454,370 (51,415,104) 20,021
----------------- ----------------- -----------------
NET GAIN (LOSS) ON INVESTMENTS 1,457,389 (20,244,749) 11,455,144
----------------- ----------------- -----------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 2,649,896 ($ 6,961,841) $ 14,582,296
----------------- ----------------- -----------------
----------------- ----------------- -----------------
See accompanying notes to financial statements.
</TABLE>
70
<PAGE>
<TABLE>
<CAPTION>
THE CRABBE HUSON THE CRABBE HUSON
THE THE THE CRABBE HUSON U.S. GOVERNMENT REAL ESTATE
CRABBE HUSON CRABBE HUSON U.S. GOVERNMENT MONEY MARKET INVESTMENT
EQUITY FUND, INC. INCOME FUND, INC. INCOME FUND, INC. FUND, INC. FUND, INC.
---------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Interest $ 3,253,320 $ 398,333 $ 487,929 $ 2,990,307 $ 20,613
Dividends (net of foreign taxes
withheld of $0; $3,347; $18,635;
$55,166; $0; $0; $0; and $0
respectively) 4,154,003 11,688 -- -- 1,139,451
---------------- ---------------- ---------------- ---------------- ----------------
7,407,323 410,021 487,929 2,990,307 1,160,064
---------------- ---------------- ---------------- ---------------- ----------------
EXPENSES
Investment advisory fees (Note 2) 2,471,465 49,011 43,576 253,198 190,619
Transfer agent 299,262 28,160 27,224 67,713 53,365
Printing 79,105 6,057 5,146 25,002 6,313
Postage 53,732 3,328 3,200 20,094 4,249
Custody 30,335 2,294 1,817 8,789 2,960
Legal 57,142 1,938 2,392 10,985 9,089
Auditing 19,826 3,479 3,688 6,134 4,741
Insurance 11,152 294 414 2,157 869
Directors' fees 8,118 1,118 1,118 3,118 3,118
Registration fees 84,568 19,398 20,464 37,880 20,584
Amortization of organization expenses -- -- -- -- 10,868
Miscellaneous 80,371 2,827 3,944 19,022 5,085
Distribution fees (Note 2) 621,908 16,337 21,788 126,599 47,655
Administration 23,057 551 726 4,090 1,603
Short sales dividends -- -- -- -- --
---------------- ---------------- ---------------- ---------------- ----------------
3,840,041 134,792 135,497 584,781 361,118
Fees waived by investment advisor (Note 2) -- (49,011) (43,576) (230,305) (75,190)
Expenses reimbursed by investment
advisor (Note 2) -- (33,287) (26,493) -- --
---------------- ---------------- ---------------- ---------------- ----------------
NET EXPENSES 3,840,041 52,494 65,428 354,476 285,928
---------------- ---------------- ---------------- ---------------- ----------------
NET INVESTMENT INCOME 3,567,282 357,527 422,501 2,635,831 874,136
---------------- ---------------- ---------------- ---------------- ----------------
REALIZED AND UNREALIZED GAIN:
Net realized gain (loss) on investments 19,596,449 108,710 7,624 -- 51,165
Net change in unrealized appreciation
or depreciation of investments and
short sales 9,278,013 304,184 324,469 -- 565,011
---------------- ---------------- ---------------- ---------------- ----------------
NET GAIN (LOSS) ON INVESTMENTS 28,874,462 412,894 332,093 -- 616,176
---------------- ---------------- ---------------- ---------------- ----------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 32,441,744 $ 770,421 $ 754,594 $ 2,635,831 $ 1,490,312
---------------- ---------------- ---------------- ---------------- ----------------
---------------- ---------------- ---------------- ---------------- ----------------
See accompanying notes to financial statements.
</TABLE>
71
<PAGE>
CRABBE HUSON FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
THE OREGON THE CRABBE HUSON
MUNICIPAL BOND FUND, INC. SPECIAL FUND, INC.
------------------------------------ ------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 1995 OCTOBER 31, 1994 OCTOBER 31, 1995 OCTOBER 31, 1994
------------------------------------ ------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS:
Net investment income $ 1,192,507 $ 1,335,320 $ 13,282,908 $ 396,099
Net realized gain (loss) on investments 3,019 151,835 31,170,355 11,534,530
Net change in unrealized appreciation
or depreciation of investments and short sales 1,454,370 (2,209,050) (51,415,104) 8,747,502
----------------------------------- -----------------------------------
Increase (decrease) in net assets
resulting from operations 2,649,896 (721,895) (6,961,841) 20,678,131
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (1,192,507) (1,335,320) (1,107,597) --
In excess of net investment income -- (770) -- --
From net realized gain on investments (151,835) (22,243) (11,710,943) (687,990)
In excess of net realized gain on investments -- -- -- --
CAPITAL SHARE TRANSACTIONS, NET (Note 4) (2,280,911) 1,717,846 578,529,362 276,003,800
----------------------------------- -----------------------------------
Total increase (decrease) in net assets (975,357) (362,382) 558,748,981 295,993,941
FUND NET ASSETS, BEGINNING OF PERIOD 29,045,728 29,408,110 319,810,853 23,816,912
----------------------------------- -----------------------------------
FUND NET ASSETS, END OF PERIOD $ 28,070,371 $ 29,045,728 $ 878,559,834 $ 319,810,853
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
<CAPTION>
THE CRABBE HUSON
THE CRABBE HUSON U.S. GOVERNMENT
INCOME FUND, INC. INCOME FUND, INC.
------------------------------------ ------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 1995 OCTOBER 31, 1994 OCTOBER 31, 1995 OCTOBER 31, 1994
------------------------------------ ------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS:
Net investment income $ 357,527 $ 288,002 $ 422,501 $ 449,352
Net realized gain on investments 108,710 (283,625) 7,624 (148,628)
Net change in unnrealized appreciation
or depreciation of investments and short sales 304,184 (169,542) 324,469 (480,026)
----------------------------------- -----------------------------------
Increase (decrease) in net assets
resulting from operations 770,421 (165,165) 754,594 (179,302)
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (357,527) (288,002) (422,501) (449,352)
In excess of net investment income (17,066) (4,622) (9,331) (3,373)
From net realized gain on investments -- (156,271) -- (108,276)
In excess of net realized gain on investments -- -- -- --
CAPITAL SHARE TRANSACTIONS, NET (Note 4) 1,520,890 190,912 (1,145,775) (1,228,397)
----------------------------------- -----------------------------------
Total increase (decrease) in net assets 1,916,718 (423,148) (823,013) (1,968,700)
FUND NET ASSETS, BEGINNING OF PERIOD 5,273,407 5,696,555 9,249,212 11,217,912
----------------------------------- -----------------------------------
FUND NET ASSETS, END OF PERIOD $ 7,190,125 $ 5,273,407 $ 8,426,199 $ 9,249,212
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
</TABLE>
See accompanying notes to financial statements.
72
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
THE CRABBE HUSON THE CRABBE HUSON
ASSET ALLOCATION FUND, INC. EQUITY FUND, INC.
------------------------------------ ------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 1995 OCTOBER 31, 1994 OCTOBER 31, 1995 OCTOBER 31, 1994
------------------------------------ ------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS:
Net investment income $ 3,127,152 $ 2,402,334 $ 3,567,282 $ 940,474
Net realized gain (loss) on investments 11,435,123 4,008,708 19,596,449 2,406,325
Net change in unrealized appreciation
or depreciation of investments and short sales 20,021 (3,975,212) 9,278,013 1,406,726
----------------------------------- -----------------------------------
Increase (decrease) in net assets
resulting from operations 14,582,296 2,435,830 32,441,744 4,753,525
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (3,090,031) (2,313,253) (1,413,080) (170,079)
In excess of net investment income -- -- -- --
From net realized gain on investments (4,120,955) (4,683,410) (2,376,723) (1,800,301)
In excess of net realized gain on investments -- -- -- --
CAPITAL SHARE TRANSACTIONS, NET (Note 4) 19,006,962 29,322,601 205,426,843 115,801,985
----------------------------------- -----------------------------------
Total increase (decrease) in net assets 26,378,272 24,761,768 234,078,784 118,585,130
FUND NET ASSETS, BEGINNING OF PERIOD 110,151,785 85,390,017 153,105,296 34,520,166
----------------------------------- -----------------------------------
FUND NET ASSETS, END OF PERIOD $ 136,530,057 $ 110,151,785 $ 387,184,080 $ 153,105,296
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
<CAPTION>
THE CRABBE HUSON THE CRABBE HUSON
U.S. GOVERNMENT REAL ESTATE
MONEY MARKET FUND, INC. INVESTMENT FUND, INC.
------------------------------------ ------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
OCTOBER 31, 1995 OCTOBER 31, 1994 OCTOBER 31, 1995 OCTOBER 31, 1994*
------------------------------------ ------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS:
Net investment income $ 2,635,831 $ 731,382 $ 874,136 $ 598,957
Net realized gain on investments -- -- 51,165 206,890
Net change in unnrealized appreciation
or depreciation of investments and short sales -- -- 565,011 (1,550,914)
----------------------------------- -----------------------------------
Increase (decrease) in net assets
resulting from operations 2,635,831 731,382 1,490,312 (745,067)
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (2,635,831) (731,382) (862,995) (373,869)
In excess of net investment income -- -- -- --
From net realized gain on investments -- -- (240,802) --
In excess of net realized gain on investments -- -- -- --
CAPITAL SHARE TRANSACTIONS, NET (Note 4) 22,331,667 17,598,059 319,499 19,298,436
----------------------------------- -----------------------------------
Total increase (decrease) in net assets 22,331,667 17,598,059 706,014 18,179,500
FUND NET ASSETS, BEGINNING OF PERIOD 32,382,552 14,784,493 18,279,500 100,000
----------------------------------- -----------------------------------
FUND NET ASSETS, END OF PERIOD $ 54,714,219 $ 32,382,552 $ 18,985,514 $ 18,279,500
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
</TABLE>
*For the period from April 4, 1994 (commencement of operations) to October 31,
1994.
73
<PAGE>
CRABBE HUSON FUNDS
NOTES TO FINANCIAL STATEMENTS
October 31, 1995
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION: The Oregon Municipal Bond Fund, Inc. is registered under the
Investment Company Act of 1940, as amended, as an open-end non-diversified
investment company. The Crabbe Huson Special Fund, Inc., The Crabbe Huson Asset
Allocation Fund, Inc., The Crabbe Huson Equity Fund, Inc., The Crabbe Huson
Income Fund, Inc., The Crabbe Huson U.S. Government Income Fund, Inc., The
Crabbe Huson U.S. Government Money Market Fund, Inc. and The Crabbe Huson Real
Estate Investment Fund, Inc. are registered under the Investment Company Act of
1940, as amended, as open-end diversified investment companies.
The following is a summary of significant accounting policies consistently
followed by the Funds in preparation of financial statements.
SECURITY VALUATION--THE CRABBE HUSON U.S. GOVERNMENT MONEY MARKET FUND, INC.:
The Fund seeks to maintain a constant net asset value of $1.00 and values its
assets using the amortized cost method by adjusting the cost of each security
for accretion of discount or amortization of premium.
SECURITY VALUATION--OTHER FUNDS: Securities listed or traded on a registered
securities exchange are valued at the last price on the date of the
computation. This includes over-the-counter securities for which last sale
information is available. Where last sale information is not available, the
best bid price is used. Securities and assets for which market quotations are
not readily available are valued at fair market value as determined in good
faith by or under the direction of the Board of Directors of the Funds. Cash
equivalents relating to Firm Commitment Purchase Agreements are segregated by
the custodian and may not be sold while the current commitment is outstanding.
SECURITY TRANSACTIONS AND INVESTMENT INCOME: Security transactions are
accounted for on the trade date, the date the order to buy or sell is executed.
Interest income is recorded daily on the accrual basis. Interest income
consists of interest accrued plus the accretion of original issue discount and
minus the amortization of investment premium, both calculated on an effective
interest basis. Dividend income and distributions to shareholders are recorded
on the ex-dividend date. Net realized gains and losses on investments are
computed on the first-in, first-out, method.
DIVIDENDS AND DISTRIBUTIONS: The Oregon Municipal Bond Fund, Inc. declares
dividends from its net investment income each business day. The net investment
income for Saturdays, Sundays and holidays is declared as a dividend on the next
business day. Declared dividends are accrued through the last business day of
each month and are distributed on that date. Net capital gains realized by the
Fund, if any, are declared and distributed on an annual basis, usually in
December.
The Crabbe Huson Special Fund, Inc. and The Crabbe Huson Equity Fund, Inc.
expect to declare and distribute to shareholders, once a year in December,
substantially all of the net investment income and net realized capital gains,
if any.
The Crabbe Huson Asset Allocation Fund, Inc. and The Crabbe Huson Real Estate
Investment Fund, Inc. expect to declare and distribute dividends from net
investment income on the last business day of each fiscal quarter. Net capital
gains realized by the Funds, if any, are declared and distributed on an annual
basis, usually in December.
The Crabbe Huson Income Fund, Inc. and The Crabbe Huson U.S. Government Income
Fund, Inc. declare and distribute dividends from net investment income on the
last business day of each month. Net capital gains realized by the Funds, if
any, are declared and distributed on an annual basis, usually in December.
The Crabbe Huson U.S. Government Money Market Fund, Inc. declares dividends from
its net investment income each business day. The net investment income for
Saturdays, Sundays and holidays is declared as a dividend on the prior business
day. Declared dividends are accrued through the last business day of each month
and are distributed on that date. Net capital gains realized by the Fund, if
any, are declared and distributed on an annual basis, usually in December.
SHORT SALES: Crabbe Huson Special Fund during the year sold securities short.
A short sale is effected when it is believed that the price of a particular
security will decline, and involves the sale of a security which the Fund does
not own in the hope of purchasing the same security at a later date at a lower
price. To make delivery to the buyer, the Fund must borrow the security. The
Fund is then obligated to return the security to the lender, and therefore it
must subsequently purchase the same security.
When the Special Fund makes a short sale, it must leave the proceeds from the
short sale with the broker, and it must deposit with the broker a certain amount
of cash or government securities to collateralize its obligation to replace the
borrowed securities which have been sold.
74
<PAGE>
CRABBE HUSON FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1995
SHORT SALES - (CONTINUED): In addition, the Fund must put in a segregated
account (with the Fund's custodian) an amount of cash or U.S. Government
securities equal to the difference between the market value of the securities
sold short at the time they were sold short and any cash or government
securities deposited as collateral with the broker in connection with the short
sale (not including the proceeds from the short sale). Furthermore, until the
Fund replaces the borrowed security, it must daily maintain the segregated
account at a level so that (1) the amount deposited in it plus the amount
deposited with the broker (not including the proceeds from the short sale) will
equal the current market value of the securities sold short, (2) the amount
deposited in it plus the amount deposited with the broker (not including the
proceeds from the short sale) will not be less than the market value of the
securities at the time they were sold short. As a result of these requirements,
the Special Fund will not gain any leverage merely by selling short, except to
the extent that it earns interest on the immobilized cash or government
securities while also being subject to the possibility of gain or loss from the
securities sold short. The amount of the Special Fund's net assets that will at
any time be in the type of deposits described above (that is, collateral
deposits or segregated accounts) will not exceed 25%.
OPTIONS: The Special, Real Estate, Equity, Asset Allocation and Income Funds
may write call options on securities they own or have the right to acquire, and
may purchase put and call options on individual securities and indexes written
by others. The purchase of any of these instruments can result in the entire
loss on the investment in that particular instrument or, in the case of writing
covered options, can limit the opportunity to earn a profit on the underlying
security.
When an option is written (sold), an amount equal to the premium received is
recorded as a liability. The amount of liability is adjusted daily to reflect
the current market value of the option written. When an option written by the
Fund, expires on its stipulated expiration date, the Fund realizes a gain equal
to the net premium received for the option. When the Fund enters into a closing
purchase transaction, the Fund realizes a gain or loss equal to the difference
between the cost of a closing purchase transaction and the premium received when
the call option was written. In the case of either expiration of a written
option or a closing purchase transaction, the liability related to such option
is extinguished.
Call or put options purchased are accounted for in the same manner as marketable
portfolio securities. When a call or put option is exercised, the proceeds from
the underlying securities bought or sold are decreased by the premium paid in
determining the gain or loss.
Options on stock indexes differ from options on securities in that the exercise
of an option on a stock index does not involve delivery of the actual underlying
security and are settled in cash only.
During the year the Crabbe Huson Special Fund, Inc. purchased put options.
Outstanding put options at October 31, 1995 are disclosed in the schedule of
investments.
ORGANIZATION COSTS: Expenses incurred in connection with the organization of
the Funds are amortized over a sixty-month period. The amortization is
calculated based upon the projected growth in net assets of the Funds. As of
October 31, 1995 organization costs for all Funds except for The Crabbe Huson
Real Estate Investment Fund, Inc. have been fully amortized. The Crabbe Huson
Real Estate Investment Fund, Inc. has amortized $10,868 through October 31,
1995. The Crabbe Huson Group, Inc., the Fund's investment advisor, has agreed
that, in the event any of the initial shares are redeemed during the 60-month
period for amortizing the Fund's organization costs, the Fund will be reimbursed
by the investment advisor for the unamortized balances of such costs in the same
proportion as the number of shares reduced bears to the number of initial shares
outstanding at the time of redemption.
REORGANIZATION COSTS: On July 7, 1995 the Board of Directors approved the
reorganization of the Oregon Municipal Bond Fund, Inc., The Crabbe Huson Special
Fund, Inc., The Crabbe Huson Asset Allocation Fund, Inc. The Crabbe Huson Equity
Fund, Inc., The Crabbe Huson Income Fund, Inc., The Crabbe Huson U.S. Government
Income Fund, Inc., The Crabbe Huson U.S. Government Money Market Fund, Inc. and
The Crabbe Huson Real Estate Investment Fund, Inc., ("the Fund") into a single
Delaware business trust which will operate as a series company. The record date
of this reorganization is December 20, 1995 and the costs related to the
reorganization will be incurred by the Funds.
FEDERAL INCOME TAXES: It is each Fund's policy to distribute substantially all
of its taxable income to shareholders and otherwise comply with the provisions
of the Internal Revenue Code applicable to regulated investment companies.
Therefore, no provision has been made for Federal income tax or excise taxes.
75
<PAGE>
CRABBE HUSON FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1995
FEDERAL INCOME TAXES - (CONTINUED): Due to the timing of dividend distributions
and the differences in accounting for income and realized gains (losses) for
financial statement and federal income tax purposes, the fiscal year in which
amounts are distributed may differ from the year in which the income and
realized gains (losses) were recorded by the funds. The differences between the
income or gains distributed on a book versus tax basis are shown as excess
distributions of net investment income and net realized gain on sales of
investments in the Statement of Changes in Net Assets.
On the Statement of Assets and Liabilities, as a result of permanent book-to-tax
differences, reclassification adjustments have been made as shown in Table A.
NOTE 2. INVESTMENT ADVISOR AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISOR: The Funds have entered into an investment advisory
agreement with The Crabbe Huson Group, Inc. (the "Advisor"), an affiliated
company. The investment advisory fee of each Fund is accrued daily and paid
semi-monthly. The annual investment advisory fee for each Fund is described
below:
THE CRABBE HUSON ASSET ALLOCATION FUND, INC.
THE CRABBE HUSON SPECIAL FUND, INC.
THE CRABBE HUSON EQUITY FUND, INC.
THE CRABBE HUSON REAL ESTATE INVESTMENT FUND, INC.
1.00% of daily net assets up to $100,000,000
.85 of 1% of daily net assets between $100,000,000 and $500,000,000
.60 of 1% of daily net assets over $500,000,000
THE CRABBE HUSON INCOME FUND, INC.
.75 of 1% of daily net assets up to $100,000,000
.60 of 1% of daily net assets up to $500,000,000
.50 of 1% of daily nets assets over $500,000,000
THE CRABBE HUSON U.S. GOVERNMENT INCOME FUND, INC.
THE CRABBE HUSON U.S. GOVERNMENT MONEY MARKET FUND, INC.
THE OREGON MUNICIPAL BOND FUND, INC.
.50 of 1% of daily net assets up to $500,000,000
.45 of 1% of daily net assets between $500,000,000 and $1,000,000,000
.40 of 1% of daily net assets over $1,000,000,000
The Advisor has voluntarily agreed to waive its management fee and/or reimburse
each Fund for the amount, if any, by which the total operating and management
expenses of such Fund (including the Advisor's compensation and any amounts paid
pursuant to the participating Funds' Rule 12b-1 plan but excluding interest,
taxes, brokerage fees and commissions, and extraordinary expenses) exceed
certain annual rates applied to the average daily net assets of the Funds.
The annual expense limit for each Fund is listed below:
The Oregon Municipal Bond Fund, Inc. 0.98%
The Crabbe Huson Special Fund, Inc. 1.50%
The Crabbe Huson Asset Allocation Fund, Inc. 1.50%
The Crabbe Huson Equity Fund, Inc. 1.50%
The Crabbe Huson Income Fund, Inc. 0.80%
The Crabbe Huson U.S. Government Income Fund, Inc. 0.75%
The Crabbe Huson U.S. Government Money
Market Fund, Inc. 0.70%
The Crabbe Huson Real Estate Investment Fund, Inc. 1.50%
DISTRIBUTOR: The Funds have entered into a distribution agreement with Crabbe
Huson Securities, Inc. (the "Distributor"), an affiliated company. Under the
Distribution Plan, each of the participating Funds may pay up to 1/4 of 1% of
such Fund's average daily net assets to the Distributor as reimbursement for its
actual expenses incurred in the distribution and promotion of such Fund's
shares.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
TABLE A UNDISTRIBUTED UNDISTRIBUTED
ACCUMULATED ACCUMULATED NET
CAPITAL NET INVESTMENT REALIZED GAIN ON
PAID IN INCOME INVESTMENTS
------------- -------------- ---------------------
<S> <C> <C> <C>
The Oregon Municipal Bond Fund, Inc. -- -- --
The Crabbe Huson Special Fund, Inc. $ 79,005 $ (726,118) $ 647,113
The Crabbe Huson Asset Allocation Fund, Inc. (108,605) (37,121) 145,726
The Oregon Equity Fund, Inc. 29,829 (360,174) 330,345
The Crabbe Huson Income Fund, Inc. 38,846 17,066 (55,912)
The Crabbe Huson U.S. Government Income Fund, Inc. (3,715) 10,021 (6,306)
The Crabbe Huson U.S. Government Money Market Fund, Inc. -- -- --
The Crabbe Huson Real Estate Investment Fund, Inc. (182,383) (3,832) 177,416
</TABLE>
76
<PAGE>
CRABBE HUSON FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1995
ADMINISTRATOR: State Street Bank and Trust Company (the "Administrator") serves
as administrator of the Funds. The Administrator performs certain
administrative services for the Funds. The Funds pays the Administrator a fee
at the rate of 0.06% of the Fund's average net assets up to $500 million, 0.03%
of the next $500 million, and 0.01% of those assets in excess of $1 billion,
plus certain out of pocket costs.
DIRECTORS FEES: As of October 31, 1995, fees payable to the disinterested
directors were $778, $1,027, $2,027, $2,027, $277, $277, $778 and $778 for The
Oregon Municipal Bond Fund, Inc., The Crabbe Huson Special Fund, Inc., The
Crabbe Huson Asset Allocation Fund, Inc., The Crabbe Huson Equity Fund, Inc.,
The Crabbe Huson Income Fund, Inc., The Crabbe Huson U.S. Government Income
Fund, Inc., The Crabbe Huson U.S. Government Money Market Fund, Inc. and The
Crabbe Huson Real Estate Investment Fund, Inc., respectively.
NOTE 3. DISTRIBUTIONS TO SHAREHOLDERS (Unaudited)
THE OREGON MUNICIPAL BOND FUND, INC. Of the Fund's distributions paid to
shareholders from net investment income during the fiscal year ended October 31,
1995, 99.3% was attributable to investments in municipal bonds issued by the
state of Oregon and its political subdivisions, agencies authorities and
instrumentalities and other municipal securities.
THE CRABBE HUSON SPECIAL FUND, INC. Of the Fund's net investment income earned
during the fiscal year ended October 31, 1995, 22.6% was attributable to
investments in direct or indirect debt obligations of the United States
Government, or its agencies or instrumentalities.
THE CRABBE HUSON ASSET ALLOCATION FUND, INC. Of the Fund's net investment
income earned during the fiscal year ended October 31, 1995, 60.1% was
attributable to investments in direct or indirect debt obligations of the United
States Government, or its agencies or instrumentalities.
THE CRABBE HUSON EQUITY FUND, INC. Of the Fund's net investment income earned
during the fiscal year ended October 31, 1995, 40.9% was attributable to
investments in direct or indirect debt obligations of the United States
Government, or its agencies or instrumentalities.
THE CRABBE HUSON INCOME FUND, INC. Of the Fund's net investment income earned
during the fiscal year ended October 31, 1995, 50.4% was attributable to
investments in direct or indirect debt obligations of the United States
Government, or its agencies or instrumentalities.
THE CRABBE HUSON U.S. GOVERNMENT INCOME FUND, INC. Of the Fund's net investment
income earned during the fiscal year ended October 31, 1995, 95.8% was
attributable to investments in direct or indirect debt obligations of the United
States Government, or its agencies or instrumentalities.
THE CRABBE HUSON U.S. GOVERNMENT MONEY MARKET FUND, INC. Of the Fund's net
investment income earned during the fiscal year ended October 31, 1995, 98.2%
was attributable to investments in direct or indirect debt obligations of the
United States Government, or its agencies or instrumentalities.
THE CRABBE HUSON REAL ESTATE INVESTMENT FUND, INC. Of the Fund's net investment
income earned during the fiscal year ended October 31, 1995, none was
attributable to investments in direct or indirect debt obligations of the United
States Government, or its agencies or instrumentalities.
On December 6, 1995 the following distributions were declared from net realized
capital gains from investment transactions. The dividend was paid on December
6, 1995, to shareholders of record on December 5, 1995, as shown in Table B.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TABLE B PER SHARE DOLLARS
-----------------------------------------------------------------------------
SHORT-TERM LONG-TERM SHORT-TERM LONG-TERM
CAPITAL GAIN CAPITAL GAIN CAPITAL GAIN CAPITAL GAIN
DISTRIBUTION (1) DISTRIBUTION DISTRIBUTION (1) DISTRIBUTION
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
The Oregon Municipal Bond Fund, Inc. -- -- -- --
The Crabbe Huson Special Fund, Inc. 0.3764 0.1983 $23,686,427 $12,479,000
The Crabbe Huson Asset Allocation Fund, Inc. 0.5232 0.6046 5,306,597 6,131,818
The Crabbe Huson Equity Fund, Inc. 0.6038 0.3385 13,191,040 7,394,039
The Crabbe Huson Income Fund, Inc. -- -- -- --
The Crabbe Huson U.S. Government Income Fund, Inc. -- -- -- --
The Crabbe Huson Real Estate Investment Fund, Inc. 0.1225 -- 238,364 --
</TABLE>
(1)Short-term capital gains are taxable to shareholders as ordinary income
dividends.
77
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 1995
NOTE 4. CAPITAL SHARE TRANSACTIONS
Transactions in capital shares of the Funds were as follows:
<TABLE>
<CAPTION>
THE OREGON
MUNICIPAL BOND FUND, INC.
------------------------------------------------------------------------
SHARES AMOUNT
------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1995 1994 1995 1994
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 552,364 858,058 $ 6,744,052 $10,795,284
Shares issued in
reinvestment of dividends 73,838 85,380 906,976 1,057,544
------------------------------------------------------------------------
626,202 943,438 7,651,028 11,852,828
Shares redeemed (822,850) (818,671) (9,931,939) (10,134,982)
------------------------------------------------------------------------
Net increase (decrease) (196,648) 124,767 ($ 2,280,911) $ 1,717,846
------------------------------------------------------------------------
------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
THE CRABBE HUSON
INCOME
FUND, INC.
------------------------------------------------------------------------
SHARES AMOUNT
------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1995 1994 1995 1994
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 398,837 323,868 $3,890,790 $3,312,857
Shares issued in
reinvestment of dividends 33,473 28,426 329,268 289,053
------------------------------------------------------------------------
432,310 352,294 4,220,058 3,601,910
Shares redeemed (274,572) (338,813) (2,699,168) (3,410,998)
------------------------------------------------------------------------
Net increase (decrease) 157,738 13,481 $1,520,890 $ 190,912
------------------------------------------------------------------------
------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
THE CRABBE HUSON
SPECIAL FUND, INC.
------------------------------------------------------------------------
SHARES AMOUNT
------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1995 1994 1995 1994
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 65,374,197 23,946,462 $928,135,711 $318,927,086
Shares issued in
reinvestment of dividends 78,213 51,007 1,030,774 610,047
------------------------------------------------------------------------
65,452,410 23,997,469 929,166,485 319,537,133
Shares redeemed (24,491,886) (3,303,144) (350,637,123) (43,533,333)
------------------------------------------------------------------------
Net increase (decrease) 40,960,524 20,694,325 $578,529,362 $276,003,800
------------------------------------------------------------------------
------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
THE CRABBE HUSON
U.S. GOVERNMENT
INCOME FUND, INC.
------------------------------------------------------------------------
SHARES AMOUNT
------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1995 1994 1995 1994
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 320,552 318,425 $3,315,281 $3,370,107
Shares issued in
reinvestment of dividends 33,757 46,002 351,187 488,454
------------------------------------------------------------------------
354,309 364,427 3,666,468 3,858,561
Shares redeemed (464,645) (480,229) (4,812,243) (5,086,958)
------------------------------------------------------------------------
Net increase (decrease) (110,336) (115,802) ($1,145,775) ($1,228,397)
------------------------------------------------------------------------
------------------------------------------------------------------------
</TABLE>
78
<PAGE>
<TABLE>
<CAPTION>
THE CRABBE HUSON ASSET
ALLOCATION FUND, INC.
------------------------------------------------------------------------
SHARES AMOUNT
------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1995 1994 1995 1994
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 3,651,020 4,625,388 $47,567,984 $60,156,367
Shares issued in
reinvestment of dividends 213,856 460,871 2,807,183 5,964,138
------------------------------------------------------------------------
3,864,876 5,086,259 50,375,167 66,120,505
Shares redeemed (2,415,859) (2,842,271) (31,368,205) (36,797,904)
------------------------------------------------------------------------
Net increase (decrease) 1,449,017 2,243,988 $19,006,962 $29,322,601
------------------------------------------------------------------------
------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
THE CRABBE HUSON
U.S. GOVERNMENT
MONEY MARKET FUND, INC.
------------------------------------------------------------------------
SHARES AMOUNT
------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1995 1994 1995 1994
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 166,147,604 99,391,599 $166,147,604 $99,391,599
Shares issued in
reinvestment of dividends 1,738,682 391,037 1,738,682 391,037
------------------------------------------------------------------------
167,886,286 99,782,636 167,886,286 99,782,636
Shares redeemed (145,554,619) (82,184,578) (145,554,619) (82,184,578)
------------------------------------------------------------------------
Net increase (decrease) 22,331,667 17,598,058 $ 22,331,667 $17,598,058
------------------------------------------------------------------------
------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
THE CRABBE HUSON
EQUITY FUND, INC.
------------------------------------------------------------------------
SHARES AMOUNT
------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1995 1994 1995 1994
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 16,135,368 8,303,990 $277,119,565 $134,306,739
Shares issued in
reinvestment of dividends 79,947 105,277 1,237,639 1,635,783
------------------------------------------------------------------------
16,215,315 8,409,267 278,357,204 135,942,522
Shares redeemed (4,218,957) (1,243,034) (72,930,361) (20,140,537)
------------------------------------------------------------------------
Net increase (decrease) 11,996,358 7,166,233 $205,426,843 $115,801,985
------------------------------------------------------------------------
------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
THE CRABBE HUSON
REAL ESTATE
INVESTMENT FUND, INC.
------------------------------------------------------------------------
SHARES AMOUNT
------------------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1995 1994 1995 1994
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 821,200 2,006,502 $7,937,889 $20,250,921
Shares issued in
reinvestment of dividends 36,962 33,284 357,391 323,473
------------------------------------------------------------------------
858,162 2,039,786 8,295,280 20,574,394
Shares redeemed (822,760) (125,257) (7,975,781) (1,275,958)
------------------------------------------------------------------------
Net increase (decrease) 35,402 1,914,529 $ 319,499 $19,298,436
------------------------------------------------------------------------
------------------------------------------------------------------------
</TABLE>
*For the period from April 4, 1994 (commencement of operations) to October 31,
1994.
79
<PAGE>
80
<PAGE>
CRABBE HUSON FUNDS
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 1995
NOTE 5. INVESTMENT TRANSACTIONS
For the year ended October 31, 1995, The Crabbe Huson U.S. Government Money
Market Fund, Inc. had aggregate security purchases and sales (including
maturities) of $443,976,883 and $424,658,448, respectively. Aggregate
purchases, sales and maturities for the year ended October 31, 1995
(excluding short-term securities) for the remaining funds, are as follows:
<TABLE>
<CAPTION>
THE OREGON THE CRABBE THE CRABBE THE CRABBE
MUNICIPAL HUSON HUSON ASSET HUSON
BOND SPECIAL ALLOCATION EQUITY
FUND, INC. FUND, INC. FUND, INC. FUND, INC.
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Purchases: $5,984,368 $959,620,834 $274,278,333 $397,589,397
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------
Sales and Maturities: 8,735,890 572,783,341 248,155,111 200,246,630
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------
Gross unrealized appreciation and depreciation on securites held by the Funds at October 31, 1995 are as follows:
Unrealized Appreciation (Depreciation):
For book purposes
Appreciation 1,399,431 65,671,560 6,773,143 27,705,429
Depreciation (33,677) (104,877,230) (1,946,850) (12,595,106)
--------------- --------------- --------------- ---------------
Net unrealized appreciation (depreciation) $1,365,754 ($ 39,205,670) $ 4,826,293 $ 15,110,323
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------
Unrealized Appreciation (Depreciation):
For Federal income tax purposes
Appreciation 1,399,431 64,232,281 6,797,897 27,259,001
Depreciation (33,677) (107,785,909) (1,956,923) (12,771,570)
--------------- --------------- --------------- ---------------
Net unrealized appreciation (depreciation) $1,365,754 ($ 43,553,628) $ 4,840,974 $ 14,487,431
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------
<CAPTION>
THE CRABBE THE
THE CRABBE HUSON U.S. CRABBE HUSON
HUSON GOVERNMENT REAL ESTATE
INCOME INCOME INVESTMENT
FUND, INC. FUND, INC. FUND, INC.
--------------- --------------- ---------------
<S> <C> <C> <C>
Purchases: $34,477,754 $19,009,336 $11,936,969
--------------- --------------- ---------------
--------------- --------------- ---------------
Sales and Maturities: 32,908,584 20,219,537 10,862,375
--------------- --------------- ---------------
--------------- --------------- ---------------
Gross unrealized appreciation and depreciation on securites held by the Funds at October 31, 1995 are as follows:
Unrealized Appreciation (Depreciation):
For book purposes
Appreciation 223,991 107,717 636,791
Depreciation (681) (4,238) (1,613,895)
--------------- --------------- ---------------
Net unrealized appreciation (depreciation) $ 223,310 $ 103,479 ($977,104)
--------------- --------------- ---------------
--------------- --------------- ---------------
Unrealized Appreciation (Depreciation):
For Federal income tax purposes
Appreciation 204,681 106,764 634,056
Depreciation (681) (4,238) (1,616,344)
--------------- --------------- ---------------
Net unrealized appreciation (depreciation) $ 204,000 $ 102,526 ($982,288)
--------------- --------------- ---------------
--------------- --------------- ---------------
</TABLE>
81
<PAGE>
CRABBE HUSON FUNDS
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
The following information has been derived from the Fund's financial statements
and notes included in the 1995 Annual Report. These financial statements and
the notes for the periods beginning after October 31, 1988 have been audited by
KPMG Peat Marwick, LLP, whose report thereon is included with the financial
statements in the Statement of Additional Information.
(a) The Fund's Fiscal Year was changed from 9/30 to 10/31, effective 10/31/87,
which represents a conformed 12-month period.
(b) Computed on an annualized basis.
(c) Commencement of operations - 4/9/87.
(d) Commencement of operations - 1/31/89.
(e) Commencement of operations - 4/4/94.
THE OREGON MUNICIPAL BOND FUND, INC.
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
10/31/89 10/31/88 10/31/87(a) 9/30/87 9/30/86 10/31/90
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.99 $12.80 $12.20 $12.14 $11.74 $11.72
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
NET INVESTMENT INCOME 0.5480 0.5418 0.5683 0.6168 0.6385 0.6316
NET REALIZED & UNREALIZED
GAIN (LOSS) ON SECURITIES 0.6998 (0.8001) 0.6880 0.1521 0.4831 0.0522
----------- ----------- ----------- ----------- ----------- -----------
TOTAL FROM INVESTMENT OPERATIONS 1.2478 (0.2583) 1.2563 0.7689 1.1216 0.6838
LESS DISTRIBUTIONS
- ------------------
DISTRIBUTIONS FROM NET INVESTMENT INCOME 0.5480 0.5419 0.5647 0.6168 0.6562 0.6401
DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME 0.0000 0.0003 0.0000 0.0000 0.0000 0.0000
DISTRIBUTIONS FROM CAPITAL GAINS 0.0698 0.0090 0.0916 0.0921 0.0654 0.0237
----------- ----------- ----------- ----------- ----------- -----------
TOTAL DISTRIBUTIONS 0.6178 0.5512 0.6563 0.7089 0.7216 0.6638
----------- ----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $12.62 $11.99 $12.80 $12.20 $12.14 $11.74
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
TOTAL RETURN 10.66% -2.06% 10.71% 6.51% 9.85% 6.00%
RATIOS/SUPPLEMENTAL DATA
- ------------------------
NET ASSETS, END OF PERIOD $28,070,371 $29,045,728 $29,408,110 $20,295,896 $18,382,636 $18,766,449
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.98% 0.98% 1.05% 1.11% 1.21% 1.38%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 4.45% 4.37% 4.51% 5.04% 5.36% 5.41%
PORTFOLIO TURNOVER RATE 22.91% 20.58% 11.62% 25.30% 53.40% 58.52%
RATIOS IF FEES HAD NOT BEEN WAIVED AND/OR REIMBURSED
- ----------------------------------------------------
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.08% 1.08% 1.09% 1.13% 1.24% 1.55%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 4.35% 4.26% 4.46% 5.01% 5.34% 5.23%
82
<PAGE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
10/31/89 10/31/88 10/31/87(a) 09/30/87 09/30/86
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.72 $11.08 $12.15 $11.93 $10.43
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
NET INVESTMENT INCOME 0.6794 0.6386 0.7311 0.7319 0.7720
NET REALIZED & UNREALIZED ENDED
GAIN (LOSS) ON SECURITIES 0.0842 0.6411 (0.9983) (0.8051) 1.5265
----------- ----------- ----------- ----------- -----------
TOTAL FROM INVESTMENT OPERATIONS 0.7636 1.2797 (0.2672) (0.0732) 2.2985
LESS DISTRIBUTIONS
- ------------------
DISTRIBUTIONS FROM NET INVESTMENT INCOME 0.6711 0.6386 0.7311 0.7319 0.7720
DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME 0.0000 0.0000 0.0000 0.0000 0.0000
DISTRIBUTIONS FROM CAPITAL GAINS 0.0925 0.0000 0.0760 0.0760 0.0255
----------- ----------- ----------- ----------- -----------
TOTAL DISTRIBUTIONS 0.7636 0.6386 0.8071 0.8079 0.7975
----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $11.72 $11.72 $11.08 $11.05 $11.93
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
TOTAL RETURN 6.67% 12.02% -1.95% -0.95% 22.83%
RATIOS/SUPPLEMENTAL DATA
- ------------------------
NET ASSETS, END OF PERIOD $19,173,145 $20,058,295 $14,276,600 $14,165,161 $8,861,258
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.04% 1.21% 1.14% 1.31% 1.06%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 5.82% 5.53% 5.66% 6.43% 6.34%
PORTFOLIO TURNOVER RATE 45.25% 31.44% 19.18% 18.73% 24.20%
RATIOS IF FEES HAD NOT BEEN WAIVED AND/OR REIMBURSED
- ----------------------------------------------------
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.16% 1.32% ---- ---- ----
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 5.71% 5.42% ---- ---- ----
</TABLE>
83
<PAGE>
CRABBE HUSON FUNDS
FINANCIAL HIGHLIGHTS
(Continued)
THE CRABBE HUSON SPECIAL FUND, INC.
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
10/31/95 10/31/94 10/31/93 10/31/92
------------ ------------ ----------- ----------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $14.08 $11.82 $8.36 $12.05
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (LOSS) 0.2704 0.0513 (0.0774) (0.0211)
NET REALIZED & UNREALIZED
GAIN (LOSS) ON SECURITIES (0.2894) 2.3026 3.5374 (1.6211)
------------ ------------ ----------- ----------
TOTAL FROM INVESTMENT OPERATIONS (0.0190) 2.3539 3.4600 (1.6422)
LESS DISTRIBUTIONS
DISTRIBUTIONS FROM NET INVESTMENT INCOME 0.0226 0.0000 0.0000 0.0260
DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME 0.0000 0.0892 0.0000 2.0218
DISTRIBUTIONS FROM CAPITAL GAINS 0.2384 0.0000 0.0000 0.0000
------------ ------------ ----------- ----------
TOTAL DISTRIBUTIONS 0.2610 0.0892 0.0000 2.0478
------------ ------------ ----------- ----------
NET ASSET VALUE, END OF PERIOD $13.80 $14.08 $11.82 $8.36
------------ ------------ ----------- ----------
------------ ------------ ----------- ----------
TOTAL RETURN 1.78% 22.40% 41.39% 8.11%
RATIOS/SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $878,559,834 $319,810,853 $23,816,912 $5,857,434
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.40% 1.44% 1.57% 1.74%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 1.95% 0.39% -0.73% -0.25%
PORTFOLIO TURNOVER RATE 122.97% 146.44% 73.29% 102.27%
RATIOS IF FEES HAD NOT BEEN WAIVED AND/OR REIMBURSED
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.40% 1.54% 1.59% 2.18%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 1.95% 0.29% -0.75% -0.69%
84
<PAGE>
<CAPTION>
YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED
10/31/91 10/31/90 10/31/89 10/31/88 10/31/87(c)
------------ ------------ ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $8.78 $11.49 $9.69 $8.13 $10.00
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (LOSS) 0.0353 0.1546 0.2100 (0.0515) (0.0409)
NET REALIZED & UNREALIZED
GAIN (LOSS) ON SECURITIES 4.0155 (1.4317) 1.5900 1.6115 (1.8300)
------------ ------------ ----------- ---------- -----------
TOTAL FROM INVESTMENT OPERATIONS 4.0508 (1.2771) 1.8000 1.5600 (1.8709)
LESS DISTRIBUTIONS
DISTRIBUTIONS FROM NET INVESTMENT INCOME 0.1453 0.2240 0.0000 0.0000 0.0000
DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME 0.6355 1.2089 0.0000 0.0000 0.0000
DISTRIBUTIONS FROM CAPITAL GAINS 0.0000 0.0000 0.0000 0.0000 0.0000
------------ ------------ ----------- ---------- ----------
TOTAL DISTRIBUTIONS 0.7808 1.4329 0.0000 0.0000 0.0000
------------ ------------ ----------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $12.05 $8.78 $11.49 $9.69 $8.13
------------ ------------ ----------- ---------- ----------
------------ ------------ ----------- ---------- ----------
TOTAL RETURN 49.58% -10.90% 18.68% 19.63% -30.32%(b)
RATIOS/SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $3,541,797 $2,926,457 $3,356,417 $4,392,920 $1,892,038
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.92% 2.00% 2.00% 3.94% 2.60%(b)
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 0.32% 1.55% 1.96% 3.34% 0.05%(b)
PORTFOLIO TURNOVER RATE 256.68% 314.73% 275.62% 155.12% 3.90%
RATIOS IF FEES HAD NOT BEEN WAIVED AND/OR REIMBURSED
RATIO OF EXPENSES TO AVERAGE NET ASSETS 2.40% 2.86% 2.44%(b) ---- ----
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS -0.15% 0.70% 1.53%(b) ---- ----
</TABLE>
85
<PAGE>
CRABBE HUSON FUNDS
FINANCIAL HIGHLIGHTS
(Continued)
THE CRABBE HUSON ASSET ALLOCATION FUND, INC.
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
10/31/95 10/31/94 10/31/93 10/31/92
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.87 $13.52 $11.68 $11.00
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
NET INVESTMENT INCOME 0.3361 0.2990 0.2323 0.3468
NET REALIZED & UNREALIZED
GAIN (LOSS) ON SECURITIES 1.2090 (0.0817) 2.0889 0.8175
----------- ----------- ----------- -----------
TOTAL FROM INVESTMENT OPERATIONS 1.5451 0.2173 2.3212 1.1643
LESS DISTRIBUTIONS
- ------------------
DISTRIBUTIONS FROM NET INVESTMENT INCOME 0.3321 0.2879 0.2373 0.3463
DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME 0.0000 0.0000 0.0000 0.0000
DISTRIBUTIONS FROM CAPITAL GAINS 0.4430 0.5829 0.2439 0.1380
----------- ----------- ----------- -----------
TOTAL DISTRIBUTIONS 0.7751 0.8708 0.4812 0.4843
----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $13.64 $12.87 $13.52 $11.68
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
TOTAL RETURN 13.00% 2.66% 20.93% 11.25%
RATIOS/SUPPLEMENTAL DATA
- ------------------------
NET ASSETS, END OF PERIOD $136,530,057 $110,151,785 $85,390,017 $55,098,981
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.48% 1.44% 1.46% 1.52%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 2.57% 2.30% 1.85% 3.02%
PORTFOLIO TURNOVER RATE 225.70% 149.19% 116.10% 155.26%
RATIOS IF FEES HAD NOT BEEN WAIVED AND/OR REIMBURSED
- ----------------------------------------------------
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.49% 1.52% 1.54% 1.62%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 2.56% 2.22% 1.77% 2.92%
86
<PAGE>
<CAPTION>
YEAR YEAR PERIOD
ENDED ENDED ENDED
10/31/91 10/31/90 10/31/89 (d)
----------- ----------- -----------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $9.24 $10.69 $10.00
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
NET INVESTMENT INCOME 0.4143 0.4561 0.3990
NET REALIZED & UNREALIZED
GAIN (LOSS) ON SECURITIES 1.8208 (1.1200) 0.2910
----------- ----------- -----------
TOTAL FROM INVESTMENT OPERATIONS 2.2351 (0.6639) 0.6900
LESS DISTRIBUTIONS
- ------------------
DISTRIBUTIONS FROM NET INVESTMENT INCOME 0.4335 0.7159 0.0000
DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME 0.0000 0.0000 0.0000
DISTRIBUTIONS FROM CAPITAL GAINS 0.0415 0.0702 0.0000
----------- ----------- -----------
TOTAL DISTRIBUTIONS 0.4750 0.7861 0.0000
----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $11.00 $9.24 $10.69
----------- ----------- -----------
----------- ----------- -----------
TOTAL RETURN 24.55% -6.40% 9.30%(b)
RATIOS/SUPPLEMENTAL DATA
- ------------------------
NET ASSETS, END OF PERIOD $23,892,664 $13,173,923 $12,577,962
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.76% 1.90% 1.91%(b)
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 3.97% 4.51% 5.02%(b)
PORTFOLIO TURNOVER RATE 157.89% 161.72% 88.14%
RATIOS IF FEES HAD NOT BEEN WAIVED AND/OR REIMBURSED
- ----------------------------------------------------
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.79% 1.93% 1.93%(b)
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 3.94% 4.49% 5.00%(b)
</TABLE>
87
<PAGE>
CRABBE HUSON FUNDS
FINANCIAL HIGHLIGHTS
(Continued)
THE CRABBE HUSON EQUITY FUND, INC.
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
10/31/95 10/31/94 10/31/93 10/31/92
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $16.44 $16.08 $13.03 $12.57
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
NET INVESTMENT INCOME 0.2223 0.1900 0.0981 0.1980
NET REALIZED & UNREALIZED
GAIN (LOSS) ON SECURITIES 1.7438 0.5668 3.4476 0.9186
------------ ------------ ----------- -----------
TOTAL FROM INVESTMENT OPERATIONS 1.9661 0.7568 3.5457 1.1166
LESS DISTRIBUTIONS
- ------------------
DISTRIBUTIONS FROM NET INVESTMENT INCOME 0.0880 0.0344 0.1099 0.0937
DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME 0.0000 0.0000 0.0000 0.0000
DISTRIBUTIONS FROM CAPITAL GAINS 0.1481 0.3638 0.3858 0.5629
------------ ------------ ----------- ----------
TOTAL DISTRIBUTIONS 0.2361 0.3982 0.4957 0.6566
------------ ------------ ----------- -----------
NET ASSET VALUE, END OF PERIOD $18.17 $16.44 $16.08 $13.03
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
TOTAL RETURN 13.37% 7.89% 29.90% 12.48%
RATIOS/SUPPLEMENTAL DATA
- ------------------------
NET ASSETS, END OF PERIOD $387,184,080 $153,105,296 $34,520,166 $13,429,315
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.40% 1.45% 1.49% 1.55%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 1.30% 1.18% 0.67% 1.57%
PORTFOLIO TURNOVER RATE 92.43% 106.49% 114.38% 180.72%
RATIOS IF FEES HAD NOT BEEN WAIVED AND/OR REIMBURSED
- ----------------------------------------------------
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.40% 1.56% 1.64% 1.93%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 1.28% 1.06% 0.52% 1.18%
88
<PAGE>
<CAPTION>
YEAR YEAR PERIOD
ENDED ENDED ENDED
10/31/91 10/31/90 10/31/89 (d)
------------ ------------ -----------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $8.54 $10.50 $10.00
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
NET INVESTMENT INCOME 0.1861 0.2533 0.3146
NET REALIZED & UNREALIZED
GAIN (LOSS) ON SECURITIES 4.1511 (1.6764) 0.1854
------------ ------------ -----------
TOTAL FROM INVESTMENT OPERATIONS 4.3372 (1.4231) 0.5000
LESS DISTRIBUTIONS
- ------------------
DISTRIBUTIONS FROM NET INVESTMENT INCOME 0.3072 0.3918 0.0000
DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME 0.0000 0.0000 0.0000
DISTRIBUTIONS FROM CAPITAL GAINS 0.0000 0.1451 0.0000
------------ ------------ -----------
TOTAL DISTRIBUTIONS 0.3072 0.5369 0.0000
------------ ------------ -----------
NET ASSET VALUE, END OF PERIOD $12.57 $8.54 $10.50
------------ ------------ -----------
------------ ------------ -----------
TOTAL RETURN 52.44% -14.97% 6.72%(b)
RATIOS/SUPPLEMENTAL DATA
- ------------------------
NET ASSETS, END OF PERIOD $5,929,590 $2,944,344 $5,018,337
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.84% 1.93% 1.69%(b)
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 1.60% 2.56% 3.98%(b)
PORTFOLIO TURNOVER RATE 171.82% 265.25% 90.54%
RATIOS IF FEES HAD NOT BEEN WAIVED AND/OR REIMBURSED
- ----------------------------------------------------
RATIO OF EXPENSES TO AVERAGE NET ASSETS 2.41% 2.66% 1.97%(b)
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 1.03% 1.83% 3.68%(b)
</TABLE>
89
<PAGE>
CRABBE HUSON FUNDS
FINANCIAL HIGHLIGHTS
(Continued)
THE CRABBE HUSON INCOME FUND, INC.
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
10/31/95 10/31/94 10/31/93 10/31/92
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $9.71 $10.75 $10.90 $10.63
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
NET INVESTMENT INCOME 0.5329 0.4995 0.4637 0.6583
NET REALIZED & UNREALIZED
GAIN (LOSS) ON SECURITIES 0.5754 (0.7669) 0.3265 0.3569
------------ ------------ ------------ ------------
TOTAL FROM INVESTMENT OPERATIONS 1.1083 (0.2674) 0.7902 1.0152
LESS DISTRIBUTIONS
- ------------------
DISTRIBUTIONS FROM NET INVESTMENT INCOME 0.5329 0.4995 0.4879 0.6588
DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME 0.0254 0.0080 0.0000 0.0000
DISTRIBUTIONS FROM CAPITAL GAINS 0.0000 0.2710 0.4523 0.0864
------------ ------------ ------------ ------------
TOTAL DISTRIBUTIONS 0.5583 0.7785 0.9402 0.7452
------------ ------------ ------------ ------------
NET ASSET VALUE, END OF PERIOD $10.26 $9.71 $10.75 $10.90
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
TOTAL RETURN 11.92% -2.71% 7.73% 9.74%
RATIOS/SUPPLEMENTAL DATA
- ------------------------
NET ASSETS, END OF PERIOD $7,190,125 $5,273,407 $5,696,555 $5,634,372
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.80% 0.80% 0.81% 0.90%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 5.47% 4.92% 4.34% 6.09%
PORTFOLIO TURNOVER RATE 543.15% 306.79% 260.22% 227.45%
RATIOS IF FEES HAD NOT BEEN WAIVED AND/OR REIMBURSED
- ----------------------------------------------------
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.95% 2.16% 1.96% 1.94%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 4.32% 3.56% 3.19% 5.06%
90
<PAGE>
<CAPTION>
YEAR YEAR PERIOD
ENDED ENDED ENDED
10/31/91 10/31/90 10/31/89 (d)
------------ ----------- -----------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.01 $10.27 $10.00
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
NET INVESTMENT INCOME 0.7038 0.6869 0.5545
NET REALIZED & UNREALIZED
GAIN (LOSS) ON SECURITIES 0.6218 (0.2407) 0.2761
------------ ----------- -----------
TOTAL FROM INVESTMENT OPERATIONS 1.3256 0.4462 0.8306
LESS DISTRIBUTIONS
- ------------------
DISTRIBUTIONS FROM NET INVESTMENT INCOME 0.7056 0.6840 0.5606
DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME 0.0000 0.0000 0.0000
DISTRIBUTIONS FROM CAPITAL GAINS 0.0000 0.0222 0.0000
------------ ----------- -----------
TOTAL DISTRIBUTIONS 0.7056 0.7062 0.5606
------------ ----------- -----------
NET ASSET VALUE, END OF PERIOD $10.63 $10.01 $10.27
------------ ----------- -----------
------------ ----------- -----------
TOTAL RETURN 13.51% 4.43% 10.43%(b)
RATIOS/SUPPLEMENTAL DATA
- ------------------------
NET ASSETS, END OF PERIOD $5,485,830 $2,123,203 $1,356,008
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.98% 1.51% 1.15%(b)
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 6.82% 6.89% 7.23%(b)
PORTFOLIO TURNOVER RATE 115.76% 73.76% 86.60%
RATIOS IF FEES HAD NOT BEEN WAIVED AND/OR REIMBURSED
- ----------------------------------------------------
RATIO OF EXPENSES TO AVERAGE NET ASSETS 2.42% 3.07% 4.56%(b)
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 5.38% 5.33% 3.81%(b)
</TABLE>
91
<PAGE>
CRABBE HUSON FUNDS
FINANCIAL HIGHLIGHTS
(Continued)
THE CRABBE HUSON U.S. GOVERNMENT INCOME FUND, INC.
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
10/31/95 10/31/94 10/31/93 10/31/92
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.27 $11.04 $10.91 $10.69
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
NET INVESTMENT INCOME 0.5097 0.4648 0.4755 0.5801
NET REALIZED & UNREALIZED
GAIN (LOSS) ON SECURITIES 0.4013 (0.6515) 0.2159 0.2921
------------- ------------- ------------- -------------
TOTAL FROM INVESTMENT OPERATIONS 0.9110 (0.1867) 0.6914 0.8722
LESS DISTRIBUTIONS
- ------------------
DISTRIBUTIONS FROM NET INVESTMENT INCOME 0.5097 0.4647 0.4848 0.5839
DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME 0.0113 0.0035 0.0000 0.0000
DISTRIBUTIONS FROM CAPITAL GAINS 0.0000 0.1120 0.0766 0.0683
------------- ------------- ------------- -------------
TOTAL DISTRIBUTIONS 0.5210 0.5802 0.5614 0.6522
------------- ------------- ------------- -------------
NET ASSET VALUE, END OF PERIOD $10.66 $10.27 $11.04 $10.91
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
TOTAL RETURN 9.12% -1.78% 6.71% 8.70%
RATIOS/SUPPLEMENTAL DATA
- ------------------------
NET ASSETS, END OF PERIOD $8,426,199 $9,249,212 $11,217,912 $8,958,757
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.75% 0.75% 0.75% 0.80%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 4.85% 4.39% 4.33% 5.35%
PORTFOLIO TURNOVER RATE 230.43% 76.09% 81.74% 105.52%
RATIOS IF FEES HAD NOT BEEN WAIVED AND/OR REIMBURSED
- ----------------------------------------------------
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.46% 1.47% 1.26% 1.52%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 4.14% 3.66% 3.81% 4.63%
92
<PAGE>
<CAPTION>
YEAR YEAR PERIOD
ENDED ENDED ENDED
10/31/91 10/31/90 10/31/89 (d)
------------- ------------- -------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.24 $10.28 $10.00
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
NET INVESTMENT INCOME 0.6722 0.6768 0.5637
NET REALIZED & UNREALIZED
GAIN (LOSS) ON SECURITIES 0.4542 (0.0326) 0.2852
------------- ------------- -------------
TOTAL FROM INVESTMENT OPERATIONS 1.1264 0.6442 0.8489
LESS DISTRIBUTIONS
- ------------------
DISTRIBUTIONS FROM NET INVESTMENT INCOME 0.6746 0.6735 0.5689
DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME 0.0000 0.0000 0.0000
DISTRIBUTIONS FROM CAPITAL GAINS 0.0018 0.0106 0.0000
------------- ------------- -------------
TOTAL DISTRIBUTIONS 0.6764 0.6842 0.5689
------------- ------------- -------------
NET ASSET VALUE, END OF PERIOD 10.69 10.24 10.28
------------- ------------- -------------
------------- ------------- -------------
TOTAL RETURN 11.17% 6.40% 11.15%(b)
RATIOS/SUPPLEMENTAL DATA
- ------------------------
NET ASSETS, END OF PERIOD $3,748,244 $2,069,435 $1,717,128
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.96% 1.42% 1.14%(b)
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 6.44% 6.72% 7.35%(b)
PORTFOLIO TURNOVER RATE 114.81% 87.71% 40.42%
RATIOS IF FEES HAD NOT BEEN WAIVED AND/OR REIMBURSED
- ----------------------------------------------------
RATIO OF EXPENSES TO AVERAGE NET ASSETS 2.15% 2.84% 3.40%(b)
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 5.25% 5.31% 5.09%(b)
</TABLE>
93
<PAGE>
CRABBE HUSON FUNDS
FINANCIAL HIGHLIGHTS
(Continued)
THE CRABBE HUSON U.S. GOVERNMENT MONEY MARKET FUND, INC.
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
10/31/95 10/31/94 10/31/93 10/31/92
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
NET INVESTMENT INCOME 0.0512 0.0339 0.0250 0.0332
NET REALIZED & UNREALIZED
GAIN (LOSS) ON SECURITIES 0.0000 0.0000 0.0000 0.0000
----------- ----------- ----------- -----------
TOTAL FROM INVESTMENT OPERATIONS 0.0512 0.0339 0.0250 0.0332
LESS DISTRIBUTIONS
- ------------------
DISTRIBUTIONS FROM NET INVESTMENT INCOME 0.0512 0.0339 0.0250 0.0332
DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME 0.0000 0.0000 0.0000 0.0000
----------- ----------- ----------- -----------
TOTAL DISTRIBUTIONS 0.0512 0.0339 0.0250 0.0332
----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
TOTAL RETURN 5.30% 3.28% 2.53% 3.36%
RATIOS/SUPPLEMENTAL DATA
- ------------------------
NET ASSETS, END OF PERIOD $54,714,219 $32,382,552 $14,784,493 $12,395,326
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.70% 0.70% 0.70% 0.75%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 5.21% 3.39% 2.51% 3.32%
RATIOS IF FEES HAD NOT BEEN WAIVED AND/OR REIMBURSED
- ----------------------------------------------------
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.16% 1.29% 1.32% 1.09%
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 4.75% 2.81% 1.88% 2.98%
94
<PAGE>
<CAPTION>
YEAR YEAR PERIOD
ENDED ENDED ENDED
10/31/91 10/31/90 10/31/89 (d)
----------- ----------- -----------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
NET INVESTMENT INCOME 0.0576 0.0737 0.0633
NET REALIZED & UNREALIZED
GAIN (LOSS) ON SECURITIES 0.0000 0.0000 0.0000
----------- ----------- -----------
TOTAL FROM INVESTMENT OPERATIONS 0.0576 0.0737 0.0633
LESS DISTRIBUTIONS
- ------------------
DISTRIBUTIONS FROM NET INVESTMENT INCOME 0.0576 0.0737 0.0633
DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME 0.0000 0.0000 0.0000
----------- ----------- -----------
TOTAL DISTRIBUTIONS 0.0576 0.0737 0.0633
----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00
----------- ----------- -----------
----------- ----------- -----------
TOTAL RETURN 13.76% 7.62% 10.05%(b)
RATIOS/SUPPLEMENTAL DATA
- ------------------------
NET ASSETS, END OF PERIOD $14,906,733 $21,405,713 $10,735,032
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.81% 0.80% 0.60%(b)
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 5.76% 7.57% 8.43%(b)
RATIOS IF FEES HAD NOT BEEN WAIVED AND/OR REIMBURSED
- ----------------------------------------------------
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.18% 1.33% 1.34%(b)
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 5.38% 7.04% 7.69%(b)
</TABLE>
95
<PAGE>
CRABBE HUSON FUNDS
FINANCIAL HIGHLIGHTS
(Continued)
THE CRABBE HUSON REAL ESTATE INVESTMENT FUND, INC.
<TABLE>
<CAPTION>
YEAR PERIOD
ENDED ENDED
10/31/95 10/31/94 (e)
----------- -----------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $9.50 $10.00
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
NET INVESTMENT INCOME 0.4436 0.3664
NET REALIZED & UNREALIZED
GAIN (LOSS) ON SECURITIES 0.3065 (0.6394)
----------- -----------
TOTAL FROM INVESTMENT OPERATIONS 0.7501 (0.2730)
LESS DISTRIBUTIONS
- ------------------
DISTRIBUTIONS FROM NET INVESTMENT INCOME 0.4379 0.2287
DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME 0.0000 0.0000
DISTRIBUTIONS FROM CAPITAL GAINS 0.1222 0.0000
----------- -----------
TOTAL DISTRIBUTIONS 0.5601 0.2287
----------- -----------
NET ASSET VALUE, END OF PERIOD $9.69 $9.50
----------- -----------
----------- -----------
TOTAL RETURN 8.31% -3.25%
RATIOS/SUPPLEMENTAL DATA
- ------------------------
NET ASSETS, END OF PERIOD $18,985,514 $18,279,500
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.50% 1.01%(b)
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 4.59% 6.30%(b)
PORTFOLIO TURNOVER RATE 59.53% 43.30%
RATIOS IF FEES HAD NOT BEEN WAIVED AND/OR REIMBURSED
- ----------------------------------------------------
RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.89% 2.03%(b)
RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS 4.20% 5.28%(b)
</TABLE>
96
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholders and Boards of Directors
Crabbe Huson Funds -
The Oregon Municipal Bond Fund, Inc.
The Crabbe Huson Special Fund, Inc.
The Crabbe Huson Asset Allocation Fund, Inc.
The Crabbe Huson Equity Fund, Inc.
The Crabbe Huson Income Fund, Inc.
The Crabbe Huson U.S. Government Income Fund, Inc.
The Crabbe Huson U.S. Government Money Market Fund, Inc.
The Crabbe Huson Real Estate Investment Fund, Inc.:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments of each of the Crabbe Huson Funds, as of October
31, 1995, and the related statements of operations for the year then ended, the
statements of changes in net assets for The Oregon Municipal Bond Fund, Inc.,
The Crabbe Huson Special Fund, Inc., The Asset Allocation Fund, Inc., The Crabbe
Huson Equity Fund, Inc., The Crabbe Huson Income Fund, Inc., The Crabbe Huson
U.S. Government Fund, Inc. and The Crabbe Huson U.S. Government Money Market
Fund, Inc. for each of the two years then ended, and for The Real Estate
Investment Fund, Inc. for the year ended October 31, 1995 and for the period
from April 4, 1994 (commencement of operations) to October 31, 1994, and the
financial highlights for The Oregon Municipal Bond Fund, Inc. and The Crabbe
Huson Special Fund, Inc. for each of the seven years ended October 31, 1995, The
Crabbe Huson Asset Allocation Fund, Inc., The Crabbe Huson Equity Fund, Inc.,
The Crabbe Huson Income Fund, Inc., The Crabbe Huson U.S. Government Income
Fund, Inc. and The Crabbe Huson U.S. Government Money Market Fund, Inc. for each
of the six years ended October 31, 1995 and for the period from January 31, 1989
(commencement of operations) to October 31, 1989 and for the Crabbe Huson Real
Estate Investment Fund, Inc. for the year ended October 31, 1995 and for the
period from April 4, 1994 (commencement of operations) to October 31, 1994.
These financial statements and financial highlights are the responsibility of
the management of the Crabbe Huson Funds. Our responsibility is to express an
opinion on these financial statements and financial highlights based upon our
audits. The financial highlights for The Oregon Municipal Bond Fund, Inc. and
The Crabbe Huson Special Fund, Inc. for the periods ended October 31, 1988 and
prior were audited by other auditors whose reports expressed unqualified
opinions on the financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included verification of
securities owned as of October 31, 1995, by examination and other appropriate
audit procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the Crabbe Huson Funds as of October 31, 1995, the results of their
operations, the changes in their net assets and their financial highlights for
the periods indicated above, in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
Portland, Oregon
December 8, 1995
97
<PAGE>
--------------------------------------
PART C
OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
Page
----
(a) Index to Financial Statement.
The following financial information of the Registrant is included in Part A
of the Registration Statement:
Page
----
Per Share Income and Capital Changes
The following financial statements of the Registrant are included in Part B
of the Registration Statement:
Statement of Assets and Liabilities at 10/31/95
Statement of Operations for period ended 10/31/95
Statement of Changes in Net Assets for periods ended
10/31/94 and 10/31/95
Schedule of Selected Per Share Data and Ratios
at 10/31/95
Investments in Securities at 10/31/95
Notes to the Financial Statements for period
ended 10/31/95
Report of Independent Certified Public Accountants
(b) Exhibits: Sequentially Numbered
Page
---------------------
1 Registrant's Certificate of
Incorporation (incorporated)(1)
2(a) Bylaws (incorporated)(1)
Amendment to Registrant's Bylaws (2)
3 Voting Trust Agreement (not applicable)
4 Specimen Stock Certificate (not applicable)
- ------------------------
1 Filed as an exhibit to the Pre-Effective Registration Statement filed
with the Securities and Exchange Commission on January 3, 1994.
2 Filed as an exhibit to the Pre-Effective Registration Statement filed
with the Securities and Exchange Commission on March 9, 1994.
<PAGE>
5 Form of Investment Advisory Contract (attached)
6(a) Form of Distribution Agreement (incorporated)(1)
6(b) Form of Selected Dealer Agreement (incorporated)(1)
7 None
8 Form of Custodian Agreement (attached)
9(a) Form of Transfer Agent and Service Agreement
(attached)
9(b) Form of Accounting Services Agreement (incorporated)(1)
9(c) Form of Investment Accounting Agreement (attached)
9(d) Form of Administration Agreement (attached)
10 Opinion and Consent of Davis Wright Tremaine, Counsel
to Registrant (incorporated)(2)
11 Consent of Accountants (attached)
12 Omitted Financial Statements (not applicable)
13 Written assurance from Registrant's initial shareholder that its purchase
was made for investment purposes without any present intention of redeeming
or reselling (incorporated)(2)
14 Retirement Plans (1)
15 Form of Distribution Plan (attached)
16 Computation Schedule (not applicable)
17 Rule 483 Financial Data Schedule (attached)
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Registrant does not have any subsidiaries and does not control any other company
or person.
Item 26. NUMBER OF HOLDERS OF SECURITIES
As of December 20, 1995 there are 618 record holders of the Crabbe Huson Real
Estate Investment Fund, Inc. shares.
Item 27. INDEMNIFICATION
The Articles of Incorporation of the Registrant contain the following
provisions:
<PAGE>
"(a) INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS
The Corporation shall indemnify to the fullest extent provided in the Act, any
director or officer who was or is a party or is threatened to be made a party to
any proceeding by reason of or arising from the fact that he or she is or was a
director or officer of the Corporation. The determination and authorization of
indemnification shall be made as provided in the Act; provided,
however, that this Article 11 does not protect any director or officer of the
Corporation against any liability to the Corporation or its shareholders to
which he or she would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his or her office.
"The Corporation shall pay for or reimburse the reasonable expenses incurred by
a director or officer who is a party to a proceeding in advance of final
disposition of the proceeding as provided in the Act.
"The indemnification referred to in this Article shall be deemed to be in
addition to and not in lieu of any other rights to which those indemnified may
be entitled under a statute, rule of law or equity, agreement, vote of the
shareholder or board of directors or otherwise. The Corporation, its officers,
directors, employees or agents shall be fully protected in taking any action or
making any payment under this Article, or in refusing to do so upon the advice
of counsel. In any case in which the Corporation shall be obligated by these
Articles of Incorporation or otherwise to indemnify any person by reason of such
person having, at the Corporation's request, served as director, officer,
trustee or agent of any other enterprise or trust, in which a similar obligation
shall fall upon the other enterprise or trust by reason of such conduct or
omission, in such event, the obligation of the other enterprise or trust shall
be primary and the Corporation's obligation shall be deemed excess."
"(b) INSURANCE OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS The Corporation may
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against such person and incurred by such person
in or arising out of his or her position. However, in no event will the
Corporation purchase insurance to indemnify any such person for any Act for
which the Corporation itself is not permitted to indemnify such person."
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provision or otherwise, the Registrant has
been advised that in the
<PAGE>
opinion of the Securities & Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liability (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of whether such indemnification
by it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
The Registrant has made application for insurance to indemnify the directors and
officers of the registrant against liabilities incurred as a result of serving
in such capacity.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
The business and other connections of the officers, directors of the
Registrant's investment advisor, Crabbe Huson Group, Inc., are listed on the
Form ADV of Crabbe Huson Group, Inc. as currently on file with the Commission
(File No. 801-15154), the text of which is incorporated herein by reference.
The following sections of Form ADV are incorporated herein by reference: (a)
Items 1 and 2 of Part 2, and (b) Section 6, Business Background of each Schedule
D.
Item 29. PRINCIPAL UNDERWRITER
(a) Registrant's Distributor, Crabbe Huson Securities, Inc., also acts as
exclusive distributor of The Crabbe Huson Special Fund, Inc., The
Oregon Municipal Bond Fund, Inc., The Crabbe Huson Asset Allocation
Fund, Inc., The Crabbe Huson Real Estate Investment Fund, Inc., The
Crabbe Huson U.S. Government Money Market Fund, Inc., The Crabbe Huson
Income Fund, Inc., The Crabbe Huson U.S. Government Income Fund,
Inc., Oregon corporations registered under the Securities Act of 1933
and the Investment Company Act of 1940, and Crabbe Huson Funds, a
Delaware business trust registered under the Securities Act of 1933
and the Investment Company Act of 1940.
b) The directors and officers of Crabbe Huson Securities, Inc., as of the
date of this Registration Statement, are as follows:
<PAGE>
<TABLE>
<CAPTION>
(1) (2) (3)
Positions and
Name and Principal Position and Office with Office with
Business Address Crabbe Huson Securities, Inc. Registrant
- ---------------- ----------------------------- -----------
<S> <C> <C>
Craig R. Stuvland President and Director Secretary and
121 SW Morrison Director
Suite 1410
Portland, OR 97204
Cheryl Burgermeister Vice President, Treasurer
121 SW Morrison Treasurer and Director
Suite 1410
Portland, OR 97204
Thomas Biesiadecki Secretary None
121 SW Morrison
Suite 1410
Portland, OR 97204
Craig Kalzow Vice President Asst. Treasurer
121 SW Morrison
Suite 1410
Portland, OR 97204
</TABLE>
(c) Not applicable.
Item 30. LOCATION OF ACCOUNTS AND RECORDS
The accounts, books and other documents required to be maintained by the Fund
pursuant to section 31(a) of the Investment Company Act of 1940 and the rules
thereunder will be maintained at the offices of the Fund at 121 SW Morrison,
Suite 1415, Portland, Oregon 97204, and at the offices of the Custodian, First
Interstate Bank of Oregon, 1300 S.W. Fifth Avenue, Portland, Oregon 97201.
Item 31. MANAGEMENT SERVICES
Not applicable.
Item 32. UNDERTAKINGS
(a) Not applicable.
(b) Not applicable.
(c) The Registrant undertakes to furnish to each person to whom a
prospectus is delivered a copy of the Registrant's latest annual
report to shareholders, upon request and without charge.
<PAGE>
SIGNATURES AND CERTIFICATION
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Post
Effective Amendment No. 4 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Portland, Oregon on
December 29, 1995.
THE CRABBE HUSON REAL ESTATE INVESTMENT
FUND, INC.
By: /s/ Richard S. Huson
-------------------------------------
Richard S. Huson, President
We, the undersigned Directors and Officers of THE CRABBE HUSON REAL
ESTATE INVESTMENT FUND, INC., do hereby constitute and appoint Richard S. Huson
our true and lawful attorney and agent, to do any and all acts and things in our
name and behalf in our capacities as Directors and Officers, and to execute any
and all instruments for us and in our name in the capacities indicated below,
which said attorney and agent may deem necessary or advisable to enable said
Fund to comply with the Securities Act of 1933, as amended, the Investment
Company Act of 1940 and any rules, regulations and requirements of the
Securities and Exchange Commission, in connection with this Registration
Statement, including specifically, but not without limitation, the power and
authority to sign for us or any of us in our names in the capacities indicated
below, any and all amendments (including post-effective amendment) hereto; and
we do hereby ratify and confirm that said attorney and agent shall do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 4 to the Registration Statement has been signed
below on December 29, 1995 by the following persons in the capacities
indicated:
(1) Principal Executive Officers:
/s/ Richard S. Huson President
-------------------------------
Richard S. Huson
Page 1 - SIGNATURES AND CERTIFICATION
<PAGE>
(2) Principal Accounting and
Financial Officer
/s/ Cheryl A. Burgermeister Treasurer
-----------------------------------
Cheryl A. Burgermeister
(3) Directors:
/s/ Richard P. Wollenberg Director
-----------------------------------
Richard P. Wollenberg
/s/ Bob L. Smith Director
-----------------------------------
Bob L. Smith
/s/ Louis Scherzer Director
-----------------------------------
Louis Scherzer
/s/ William Wendell Wyatt Director
-----------------------------------
William Wendell Wyatt
/s/ Gary L. Capps Director
-----------------------------------
Gary L. Capps
/s/ Richard S. Huson Director
-----------------------------------
Richard S. Huson
/s/ James E. Crabbe Director
-----------------------------------
James E. Crabbe
/s/ Craig Stuvland Director
-----------------------------------
Craig Stuvland
Page 2 - SIGNATURES AND CERTIFICATION
