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THE CRABBE HUSON FUNDS
CRABBE HUSON SPECIAL FUND (THE "SPECIAL FUND")
CRABBE HUSON SMALL CAP FUND (THE "SMALL CAP FUND")
CRABBE HUSON REAL ESTATE INVESTMENT FUND (THE "REAL ESTATE INVESTMENT FUND")
THE CRABBE HUSON EQUITY FUND (THE "EQUITY FUND")
CRABBE HUSON ASSET ALLOCATION FUND (THE "ASSET ALLOCATION FUND")
CRABBE HUSON INCOME FUND (THE "INCOME FUND")
CRABBE HUSON OREGON TAX-FREE FUND (THE "OREGON TAX-FREE FUND")
CRABBE HUSON U.S. GOVERNMENT INCOME FUND (THE "GOVERNMENT INCOME FUND")
CRABBE HUSON U.S. GOVERNMENT MONEY MARKET FUND (THE "MONEY MARKET FUND")
(COLLECTIVELY, THE "FUNDS")
On June 10, 1998, The Crabbe Huson Group, Inc. (the "Adviser"), the Funds'
present investment adviser, and certain shareholders of the adviser, entered
into an Asset Aquisition Agreement (the "Acquisition Agreement") with Liberty
Financial Companies, Inc ("Liberty") and LFC Acquisition Corp., a newly
formed wholly-owned subsidiary of Liberty (the "Acquisition Corp."). Under the
Acquisition Agreement, the Acquisition Corp. would acquire substantially all
of the assets of the Adviser, including its mutual fund advisory business
(the "Acquisition").
If the Acquisition occurs as contemplated, the Funds will be reorganized (the
"Reorganization"), as follows:
- The Special Fund, the Small Cap Fund, the Equity Fund, the Asset
Allocation Fund, the Real Estate Investment Fund and the Oregon
Tax-Free Fund (collectively, the "Surviving Funds") will transfer all
of their respective assets and liabilities to newly established
Colonial Funds in exchange for all of the shares of the new funds.
The new funds will have the same investment objectives and
substantially the same investment policies and restrictions as the
Surviving Funds. Shares in the newly established funds will be
distributed pro rata to the shareholders of the Surviving Funds.
- The Income Fund, the Government Income Fund and the Money Market Fund
(the "Merging Funds") will transfer all of their respective assets and
liabilities to the Colonial Income Fund, Colonial U.S. Government
Fund and Colonial Money Market Fund, respectively, in exchange for
shares of those existing funds with the same aggregate net
asset value. Those shares will be distributed pro rata to the
shareholders of the Merging Funds.
It is anticipated that the Reorganization will qualify as a tax-free
reorganization under Section 368 of the Internal Revenue Code of 1986.
If the Acquisition is consummated, the Acquisition Corp., which will be
renamed "The Crabbe Huson Group, Inc.", will be the investment adviser of the
newly established successors to the Surviving Funds, acting as successor to
the current Adviser and with the same portfolio managers and investment
process. Colonial Management Associates, Inc. ("Colonial") and its
affiliates will provide administrative, distribution and other non-investment
advisory services to the successor Funds. Colonial will continue to serve as
investment manager to the Merging Funds.
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The Acquisition cannot be consummated unless the Reorganization is approved
by the trustees/directors and the shareholders of the Funds and by the
trustees of the successor Colonial Funds. It is currently anticipated that
reorganization agreements will be submitted to the Board of Directors of the
Special Fund and the Boards of Trustees of the other Funds and the successor
Colonial Funds in June or early July of 1998.
If the Board of Directors of the Special Fund and the Boards of Trustees of
the other Funds and the successor Colonial Funds approve the Reorganization,
shareholders of the Funds will receive a proxy statement describing the
Reorganization in more detail and seeking shareholder approval. Subject to
the receipt of such approval and the satisfaction of other conditions
contained in the Acquisition Agreement, it is anticipated that the closing of
the Acquisition and the Reorganization will occur in the fourth quarter of
1998.
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