May 16, 1997
NEWPORT GREATER CHINA FUND
CLASS Z SHARES
PROSPECTUS
BEFORE YOU INVEST
Colonial Management Associates, Inc. (Administrator) and your full-service
financial adviser want you to understand both the risks and benefits of mutual
fund investing.
While mutual funds offer significant opportunities and are professionally
managed, they also carry risks including possible loss of principal. Unlike
savings accounts and certificates of deposit, mutual funds are not insured or
guaranteed by any financial institution or government agency.
Please consult your full-service financial adviser to determine how investing in
this mutual fund may suit your unique needs, time horizon and risk tolerance.
Newport Greater China Fund (Fund), a non-diversified portfolio of Colonial Trust
II (Trust), an open-end management investment company, seeks long-term growth of
capital by investing primarily in equity securities of companies located in, or
which derive a substantial portion of their revenue from business activity with
or in, the Greater China Region (i.e., Hong Kong, the People's Republic of China
and Taiwan).
The Fund is managed by Newport Fund Management, Inc. (Adviser), an investment
adviser since 1984 and an affiliate of the Administrator.
This Prospectus explains concisely what you should know before investing in the
Class Z shares of the Fund. Read it carefully and
GC-01/732D-0597
retain it for future reference. More detailed information about the Fund is in
the May 16, 1997 Statement of Additional Information which has been filed with
the Securities and Exchange Commission and is obtainable free of charge by
calling the Administrator at 1-800-426-3750. The Statement of Additional
Information is incorporated by reference in (which means it is considered to be
a part of) this Prospectus.
Class Z shares may be purchased only by (i) certain institutions (including
certain insurance companies and banks investing for their own account, trusts,
endowment funds, foundations and investment companies) and defined benefit
retirement plans investing a minimum of $5 million in the Fund and (ii) the
Adviser and its affiliates.
Contents Page
Summary of Expenses 2
The Fund's Investment Objective 3
How the Fund Pursues its Objective
and Certain Risk Factors 3
How the Fund Measures its Performance 7
How the Fund is Managed 7
How the Fund Values its Shares 8
Distributions and Taxes 9
How to Buy Shares 9
How to Sell Shares 10
How to Exchange Shares 11
Telephone Transactions 11
Organization and History 11
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NOT FDIC-INSURED MAY LOSE VALUE
NO BANK GUARANTEE
- ----------------------------- --------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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0
SUMMARY OF EXPENSES
Expenses are one of several factors to consider when investing in the Fund. The
following tables summarize your maximum transaction costs and your estimated
annual expenses for an investment in Class Z shares of the Fund. "Other
expenses" are based on estimated amounts for the current fiscal year. See "How
the Fund is Managed" for more complete descriptions of the Fund's various costs
and expenses.
Shareholder Transaction Expenses (1)(2)
Maximum Initial Sales Charge Imposed on a Purchase
(as a % of offering price) 0.00%
Maximum Contingent Deferred Sales Charge
(as a % of offering price) 0.00%
(1) For accounts less than $1,000 an annual fee of $10 may be deducted.
See "How to Buy Shares."
(2) Redemption proceeds exceeding $1,000 sent via federal funds wire will be
subject to a $7.50 charge per transaction.
Estimated Annual Operating Expenses (as a % of average net assets)
Management and administration fees (after expense reimbursement)(3) 1.30%
12b-1 fees 0.00
Other expenses (after expense reimbursement)(3) 0.60
----
Total operating expenses(3) 1.90%
====
(3) The Adviser and Administrator have voluntarily agreed until further
notice to waive their fees and bear Fund expenses so that the Fund's
total annual operating expenses, excluding commissions, taxes, 12b-1 fees
and any extraordinary expenses will not exceed 1.90%. Absent such waiver,
"Management and Administration fees" would be 1.40% and "Total operating
expenses" would be 2.00%.
Example
The following Example shows the cumulative expenses attributable to a
hypothetical $1,000 investment in the Class Z shares of the Fund for the periods
specified, assuming a 5% annual return with or without redemption at period end.
The 5% return and expenses in this Example should not be considered indicative
of actual or expected Fund performance or expenses, both of which will vary:
Period:
1 year $19
3 years $60
Without voluntary fee reductions by the Adviser and Administrator:
Period:
1 year $20
3 years $63
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
The Fund seeks long-term growth of capital by investing primarily in equity
securities of companies located in, or which derive a substantial portion of
their revenue from business activity with or in, the Greater China Region (i.e.,
Hong Kong, the People's Republic of China and Taiwan).
HOW THE FUND PURSUES ITS OBJECTIVE AND CERTAIN RISK FACTORS
The Fund normally invests at least 80% of its total assets in equity securities
of companies located in, or which derive a substantial portion (at least 50%) of
their revenue from business activity with or in, the Greater China Region. The
remaining 20% may be invested in equity securities of companies that are
otherwise expected to benefit from the Greater China Region's anticipated
economic growth. The Adviser currently anticipates that the Fund will invest
primarily in companies whose securities are listed and traded in Hong Kong, but
that the Adviser believes will benefit from growth opportunities in mainland
China.
The Fund generally invests in companies with at least $100 million in equity
market capitalization at the time of purchase, as well as both seasoned
companies and those with limited operating histories. The equity securities in
which the Fund invests include common and preferred stock, warrants (rights) to
purchase stock, debt securities convertible into stock, sponsored and
unsponsored American Depository Receipts (receipts issued in the U.S. by banks
or trust companies evidencing ownership of underlying foreign securities),
Global Depository Receipts (receipts issued by foreign banks or trust companies)
and shares of closed-end investment companies that invest primarily in the
foregoing securities. Dividend income will not be considered in choosing the
investments of the Fund.
An investment in the Fund involves a high degree of risk arising out of its
concentration of investments in companies located in or economically tied to the
Greater China Region. This Region currently is undergoing significant economic
and political change. The uncertainty surrounding such change, as well as any
adverse developments that may occur both within the Region as well as within
other parts of Southeast Asia, may negatively impact the Fund's return and the
value of the Fund's shares. See "The Greater China Region" below. An investment
in the Fund also involves special risks generally associated with foreign
investing and with investing in smaller, less-established companies. See
"Foreign Investing Generally" and "Small Companies" below.
The Greater China Region. Although Hong Kong, the People's Republic of China and
Taiwan are closely tied economically, they have different political and economic
systems and their markets and regulatory structures are at different stages of
development. Following is a summary of the major risks and uncertainties
associated with investing in each country.
Hong Kong. Although Hong Kong has the most developed securities markets of the
three countries in the Greater China Region, a substantial portion of its
economy is dependent on investments in or trade with China and other
less-developed Asian countries. Political and economic developments in those
countries including but not limited to inflation, recession or currency
fluctuations, could adversely impact the Fund's Hong Kong investments.
As of July 1, 1997, sovereignty over Hong Kong was transferred from Great
Britain to China and Hong Kong became a Special Administrative Region of China.
In connection with this transfer, China has agreed to maintain for 50 years Hong
Kong's existing economic and social systems, as well as most of the personal
freedoms previously enjoyed by Hong Kong residents. Nevertheless, it is
impossible to predict with certainty the ultimate effect Chinese sovereignty
will have on Hong Kong's business environment. Chinese sovereignty could result
in the imposition of significant restrictions on social or economic activity
within Hong Kong. These or other potential actions by China could adversely
affect the Fund's Hong Kong investments.
China. Since 1978, China's leaders have implemented economic reforms which have
transformed China from a socialist economy to one that is increasingly
market-based. These changes have included the creation of two domestic stock
exchanges and have stimulated strong economic growth. The continued development
of China's industrial and service sectors will depend on, among other things,
the extent to which governmental policies continue to support such development
and the pace at which economic reforms are implemented.
Investments in China also are significantly affected by domestic political
developments. As evidenced by the government's actions during the 1989 crisis in
Tiananmen Square, the Chinese government's reaction to domestic and
international events is unpredictable. Uncertainty exists particularly with
respect to China's relationship with Taiwan and the ultimate impact on Hong Kong
of the assumption of sovereignty by China. Dramatic action by China's leaders
could cause extreme short-run volatility in the value of the Fund's investments
and the Fund's shares, and also could significantly and adversely affect the
Fund's returns in the long run. Similarly, China's relations with its important
trading partners in the West (including the United States) could be adversely
affected if the Chinese government's human rights policies are perceived to be
deteriorating. Even if trading relations are not actually affected, threats to
impose trading restrictions could cause substantial short-term volatility in the
value of the Fund's China investments and of the Fund's shares.
Taiwan. The Taiwan Stock Exchange is owned by government-controlled enterprises
and private banks and has only recently begun to allow direct foreign investment
in listed Taiwan securities. Substantial restrictions on such investment remain,
including limitations on the percentage of shares of a company that may be
foreign-owned and prohibitions on foreign ownership of companies in certain
industries.
Taiwan's economy is heavily dependent on exports. Any deterioration in Taiwan's
relationships with its trading partners could adversely impact Taiwan's economy
and the Fund's Taiwan investments. In particular, Taiwan has become increasingly
dependent on direct and indirect trade with China and other Asian countries.
Adverse economic or political developments in those countries could negatively
impact the Fund's Taiwan investments.
Investments in Taiwan could be affected by Taiwan's political relationship with
China. Uncertainty exists between Taiwan and China over the issue of political
reunification. Uncertainty over the prospects for such reunification could make
the value of the Fund's Taiwan investments and of its shares particularly
volatile and could negatively impact returns, especially if China threatens
political or military action. Such reunification, if it were to occur, also
could negatively impact the Fund's Taiwan investments.
General. Countries both within the Greater China Region and in other parts of
Southeast Asia have experienced rapid economic growth. While these countries are
expected to continue to grow economically over the long-term, they can be
expected to do so at varying rates and to experience periods of high inflation,
economic recession and currency fluctuations along the way. Such periods may be
associated with greater, and sometimes extreme fluctuations in the value of
investments in the Region, compared to investments in more developed economies.
Further, events in one country may impact investments in other countries.
Monetary, fiscal and other governmental policies adopted by the countries in and
around the Region in response to such economic developments could exacerbate any
such fluctuations.
Foreign Investing Generally. In addition to the specific risks described above,
investing in foreign securities generally entails special risks not associated
with investing in U.S. securities. As a result, the prices of foreign securities
and, therefore, the value of Fund shares, may fluctuate substantially more than
the prices of securities of issuers based in the U.S. Special risks associated
with foreign investing include, among others, the possibility of unfavorable
movements in currency exchange rates, difficulties in enforcing judgments
abroad, the existence of less liquid and less regulated markets, the
unavailability of reliable information about issuers, the existence of different
accounting, auditing and legal standards in foreign countries, the existence (or
potential imposition) of exchange control regulations (including currency
blockage or other restrictions on repatriation of capital), and political and
economic instability. In addition, transactions in foreign securities may be
more costly due to currency conversion costs and higher brokerage and custodial
costs and may be subject to delays and disruptions in securities settlement
procedures. See "Foreign Securities" and "Foreign Currency Transactions" in the
Statement of Additional Information for more information about foreign
investments.
Small Companies. The smaller, less well-established companies in which the Fund
may invest may offer greater opportunities for capital appreciation than larger,
better-established companies, but may also involve certain special risks. Such
companies often have limited product lines, markets or financial resources and
depend heavily on a small management group. Their securities may trade less
frequently, in smaller volumes, and fluctuate more sharply in value than
exchange-listed securities of larger companies.
Other Investment Companies. Up to 10% of the Fund's total assets may be invested
in shares of closed-end investment companies. Such investments will involve the
payment of duplicative fees through the indirect payment of a portion of the
expenses, including advisory fees, of such investment companies.
Foreign Currency Transactions. In connection with its investments in equity
securities, the Fund may purchase and sell (i) foreign currencies on a spot or
forward basis, (ii) foreign currency futures contracts, and (iii) options on
foreign currencies and foreign currency futures. Such transactions will be
entered into (i) to lock in a particular foreign exchange rate pending
settlement of a purchase or sale of a foreign security or pending the receipt of
interest, principal or dividend payments on a foreign security held by the Fund,
or (ii) to hedge against a decline in the value, in U.S. dollars or in another
currency, of a foreign currency in which securities held by the Fund are
denominated. The Fund will not attempt, nor would it be able, to eliminate all
foreign currency risk. Further, although hedging may lessen the risk of loss if
the hedged currency's value declines, it limits the potential gain from currency
value increases. See the Statement of Additional Information for information
relating to the Fund's obligations in entering into such transactions.
Futures Contracts and Options. The Fund may purchase and sell foreign stock
index futures contracts and options on such contracts. Such transactions will be
entered into to gain exposure to a particular foreign equity market pending
investment in individual securities or to hedge against market declines. A
futures contract creates an obligation by the seller to deliver and the buyer to
take delivery of a type of instrument at the time and in the amount specified in
the contract. A sale of a futures contract can be terminated in advance of the
specified delivery date by subsequently purchasing a similar contract; a
purchase of a futures contract can be terminated by a subsequent sale. Gain or
loss on a contract generally is realized upon such termination. An option on a
futures contract generally gives the option holder the right, but not the
obligation, to purchase or sell the futures contract prior to the option's
specified expiration date. If the option expires unexercised, the holder will
lose any amount it paid to acquire the option. Transactions in futures and
related options may not precisely achieve the goals of hedging or gaining market
exposure to the extent there is an imperfect correlation between the price
movements of the contracts and of the underlying securities. In addition,
hedging against a market decline will limit the Fund's return if the market
instead appreciates.
Borrowing of Money. The Fund may borrow money from banks for temporary or
emergency purposes up to 10% of its net assets; however, the Fund will not
purchase additional portfolio securities while borrowings exceed 5% of net
assets.
Temporary/Defensive Investments. Temporarily available cash may be invested in
U.S. dollar or foreign currency denominated demand deposits, certificates of
deposit, bankers' acceptances and high-quality, short-term debt securities, as
well as in Treasury bills and repurchase agreements. Some or all of the Fund's
assets may be invested in such investments during periods of unusual market
conditions. Under a repurchase agreement, the Fund buys a security from a bank
or dealer, which is obligated to buy it back at a fixed price and time. The
security is held in a separate account at the Fund's custodian and, constitutes
the Fund's collateral for the bank's or dealer's repurchase obligation.
Additional collateral will be added so that the obligation will at all times be
fully collateralized. However, if the bank or dealer defaults or enters
bankruptcy, the Fund may experience costs and delays in liquidating the
collateral and may experience a loss if it is unable to demonstrate its right to
the collateral in a bankruptcy proceeding. Not more than 15% of the Fund's net
assets will be invested in repurchase agreements maturing in more than seven
days and other illiquid assets.
Other. The Fund may not always achieve its investment objective. The Fund's
investment objective and non-fundamental investment policies may be changed
without shareholder approval. The Fund will notify investors in connection with
any material change in the Fund's investment objective or investment policies.
If there is a change in the investment objective or investment policies,
shareholders should consider whether the Fund remains an appropriate investment
in light of their financial position and needs. Shareholders may incur a
contingent deferred sales charge if shares are redeemed in response to a change
in investment objective or investment policies. The Fund's fundamental
investment policies listed in the Statement of Additional Information cannot be
changed without the approval of a majority of the Fund's outstanding voting
securities. Additional information concerning certain of the securities and
investment techniques described above is contained in the Statement of
Additional Information.
HOW THE FUND MEASURES ITS PERFORMANCE
Performance may be quoted in sales literature and advertisements. Average annual
total returns are calculated in accordance with the Securities and Exchange
Commission's formula and assume the reinvestment of all distributions. Other
total returns differ from average annual total return only in that they may
relate to different time periods and may represent aggregate as opposed to
average annual total returns.
Yield, which differs from total return because it does not consider changes in
net asset value, is calculated in accordance with the Securities and Exchange
Commission's formula. the distribution rate is calculated by dividing the most
recent twelve months' distributions by the net asset value at the end of the
period. Performance may be compared to various indices. Quotations from various
publications may be included in sales literature and advertisements. See
"Performance Measures" in the Statement of Additional Information.
All performance information is historical and does not predict future results.
HOW THE FUND IS MANAGED
The Trustees formulate the Fund's general policies and oversee the Fund's
affairs as conducted by the Adviser.
The Adviser is an indirect subsidiary of Liberty Financial Companies, Inc.
(Liberty Financial) which in turn is an indirect subsidiary of Liberty Mutual
Insurance Company (Liberty Mutual). The Administrator is a subsidiary of The
Colonial Group, Inc. which in turn is a direct subsidiary of Liberty Financial.
Liberty Mutual is considered to be the controlling entity of the Adviser, the
Administrator and their affiliates. Liberty Mutual is an underwriter of workers'
compensation insurance and a property and casualty insurer in the U.S.
Liberty Financial Investments, Inc. (Distributor), a subsidiary of the
Administrator, serves as the distributor for the Fund's shares. Colonial
Investors Service Center, Inc. (Transfer Agent), an affiliate of the
Administrator, serves as the shareholder services and transfer agent for the
Fund.
The Adviser furnishes the Fund with investment management services at the
Adviser's expense. For these services, the Fund pays the Adviser a monthly fee
at an annual rate of 1.15% of the Fund's average daily net assets. The fee is
comparable to that paid by many investment companies investing in foreign
securities, although it is higher than that paid by most other investment
companies.
The Fund's portfolio management team consists of three co-managers: Thomas R.
Tuttle, as lead portfolio manager, and Xiaodong (Tony) Zhang and Christopher
Legallet.
Mr. Tuttle is Senior Vice President of the Adviser and of Newport Pacific
Management, Inc. ("Newport Pacific"), the Adviser's immediate parent. Mr. Tuttle
has been affiliated with the Adviser since 1983.
Mr. Zhang is a Senior Investment Officer and Greater China Analyst of the
Adviser and of Newport Pacific. Mr. Zhang has been affiliated with the Adviser
since 1993. Prior to his affiliation with the Adviser, Mr. Zhang was Project
Manager of overseas investments for Hongmei Electric Corporation in China from
1990 to 1992.
Mr. Legallet recently joined with the Adviser as a Senior Vice President. Prior
to his affiliation with the Adviser, Mr. Legallet was a Managing Director of
Jupiter Tyndall (Asia) LTD. in Hong Kong serving as lead manager for investment
in Asia, and prior to 1992, a Vice President of Solomon Inc. in New York.
The Administrator provides certain administrative services to the Fund, for
which the Fund pays the Administrator a monthly fee at the annual rate of 0.236%
of the Fund's average daily net assets for such services. The Administrator also
provides pricing and bookkeeping services to the Fund for a monthly fee of
$2,250 plus a percentage of the Fund's average net assets over $50 million.
The Transfer Agent provides transfer agency and shareholder services to the Fund
for a monthly fee at the annual rate of 0.25% of average daily net assets plus
certain out-of-pocket expenses. Commencing in October, 1997, the fee for such
transfer agency and shareholder services will be reduced monthly through
September, 1998 until the fee reaches 0.236%
Each of the foregoing fees is subject to any reimbursement or fee waiver to
which the Adviser and its affiliates may agree.
The Adviser places all orders for the purchase and sale of portfolio securities.
In selecting broker-dealers, the Adviser may consider research and brokerage
services furnished by such broker-dealers to the Adviser and its affiliates. In
recognition of the research and brokerage services provided, the Adviser may
cause the Fund to pay the selected broker-dealer a higher commission than would
have been charged by another broker-dealer not providing such services. The
Adviser may use the services of AlphaTrade Inc., its registered broker-dealer
subsidiary, when buying or selling equity securities for the Fund's portfolio,
pursuant to procedures adopted by the Trustees and Investment Company Act Rule
17e-1. Subject to seeking best execution, the Adviser may consider sales of
shares of the Fund (and of certain other Colonial funds) in selecting
broker-dealers for portfolio security transactions.
Fund expenses consist of management, administration, pricing and bookkeeping,
shareholder service and transfer agent fees discussed above, and all other
expenses, fees, charges, taxes, organization costs and liabilities incurred or
arising in connection with the Fund or Trust or in connection with the
management thereof, including but not limited to, trustees' compensation and
expenses and auditing, counsel, custodian and other expenses deemed necessary
and proper by the Trustees.
HOW THE FUND VALUES ITS SHARES
Per share net asset value is calculated by dividing the total value attributable
to Class Z shares by the number of Class Z shares outstanding. Shares of the
Fund are valued as of the close of the New York Stock Exchange (Exchange)
(normally 4:00 p.m. Eastern time) each day the Exchange is open. Portfolio
securities for which market quotations are readily available are valued at
current market value. Short-term investments maturing in 60 days or less are
valued at amortized cost when the Adviser determines, pursuant to procedures
adopted by the Trustees, that such cost approximates current market value. In
certain countries, the Fund may hold shares designated for foreign ownership. If
the foreign share prices are not readily available as a result of limited share
activity, the securities are valued at the last sale price of the local shares
in the principal market in which such securities are normally traded. All other
securities and assets are valued at their fair value following procedures
adopted by the Trustees.
DISTRIBUTIONS AND TAXES
The Fund intends to qualify as a "regulated investment company" under the
Internal Revenue Code and to distribute to shareholders net income and any net
realized gain, at least annually.
Distributions are invested in additional Class Z shares at net asset value
unless the shareholder elects to receive cash. Regardless of the shareholder's
election, distributions of $10 or less will not be paid in cash to shareholders
but will be invested in additional Class Z shares at net asset value. If a
shareholder has elected to receive dividends and/or capital gain distributions
in cash and the postal or other delivery service selected by the Transfer Agent
is unable to deliver checks to the shareholder's address of record, such
shareholder's distribution option will automatically be converted to having all
dividend and other distributions reinvested in additional shares. No interest
will accrue on amounts represented by uncashed distribution or redemption
checks. To change your election, call the Transfer Agent for information.
Whether you receive distributions in cash or in additional Fund shares, you must
report them as taxable income unless you are a tax-exempt institution. If you
buy shares shortly before a distribution is declared, the distribution will be
taxable although it is, in effect, a partial return of the amount invested. Each
January, information on the amount and nature of distributions for the prior
year is sent to shareholders.
HOW TO BUY SHARES
Class Z shares are offered continuously at net asset value without a sales
charge. Orders received in good form prior to the time at which the Fund values
its shares (or placed with the financial service firm before such time and
transmitted by the financial service firm before the Fund processes that day's
share transactions) will be processed based on that day's closing net asset
value. Certificates will not be issued for Class Z shares. The Fund may refuse
any purchase order for its shares. See the Statement of Additional Information
for more information.
Shareholder Services and Account Fees. A variety of shareholder services are
available. For more information about these services or your account call
1-800-345-6611. Some services are described in the attached account application.
A shareholder's manual explaining all available services will be provided upon
request.
In June of any year, the Fund may deduct $10 (payable to the Transfer Agent)
from accounts valued at less than $1,000 unless the account value has dropped
below $1,000 solely as a result of share value depreciation. Shareholders will
receive 60 days' written notice to increase the account value before the fee is
deducted. The Fund may deduct annual maintenance and processing fees (payable to
the Transfer Agent) in connection with certain retirement plan accounts. See
"Special Purchase Programs/Investor Services" in the Statement of Additional
Information for more information.
Other Classes of Shares. In addition to Class Z shares, the Fund offers three
other classes of shares, Classes A, B and C, through a separate Prospectus.
Which Class is more beneficial to an investor depends on the amount and intended
length of the investment. In general, anyone eligible to purchase Class Z
shares, which do not bear 12b-1 fees or contingent deferred sales charges,
should do so in preference over other classes.
Financial service firms may receive different compensation rates for selling
different classes of shares. The Distributor may pay additional compensation to
financial service firms which have made or may make significant sales. Initial
or contingent deferred sales charges may be reduced or eliminated for certain
persons or organizations purchasing Fund shares alone or in combination with
certain other Colonial funds. See the Statement of Additional Information for
more information.
HOW TO SELL SHARES
Shares of the Fund may be sold on any day the Exchange is open, either directly
to the Fund or through your financial service firm. Sale proceeds generally are
sent within seven days (usually on the next business day after your request is
received in good form). However, for shares recently purchased by check, the
Fund will send proceeds as soon as the check has cleared (which may take up to
15 days).
Selling Shares Directly To The Fund. Send a signed letter of instruction or
stock power form to the Transfer Agent, along with any certificates for shares
to be sold. The sale price is the net asset value next calculated after the Fund
receives the request in proper form. Signatures must be guaranteed by a bank, a
member firm of a national stock exchange or another eligible guarantor
institution. Stock power forms are available from financial service firms, the
Transfer Agent and many banks. Additional documentation is required for sales by
corporations, agents, fiduciaries, surviving joint owners and individual
retirement account holders. For details contact:
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Selling Shares Through Financial Service Firms. Financial service firms must
receive requests prior to the time at which the Fund values its shares to
receive that day's price, are responsible for furnishing all necessary
documentation to the Transfer Agent and may charge for this service.
General. The sale of shares is a taxable transaction for income tax purposes.
See the Statement of Additional Information for more information. Under unusual
circumstances, the Fund may suspend repurchases or postpone payment for up to
seven days or longer, as permitted by federal securities law.
<PAGE>
HOW TO EXCHANGE SHARES
Class Z shares may be exchanged at net asset value for the Class A shares of any
other Colonial fund. Carefully read the prospectus of the fund into which the
exchange will go before submitting the request. Call 1-800-426-3750 to receive a
prospectus and an exchange authorization form. Call 1-800-422-3737 to exchange
shares by telephone. An exchange is a taxable capital transaction. The exchange
service may be changed, suspended or eliminated on 60 days' written notice. The
Fund will terminate the exchange privilege as to a particular shareholder if it
is determined by the Adviser, in its sole and absolute discretion, that the
shareholder's exchange activity is likely to adversely impact the Adviser's
ability to manage the Fund's investments in accordance with its objectives or
otherwise harm the Fund or its remaining shareholders.
TELEPHONE TRANSACTIONS
All shareholders and/or their financial advisers are automatically eligible to
exchange Fund shares by calling 1-800-422-3737 toll-free any business day
between 9:00 a.m. and the time at which the Fund values its shares. Telephone
redemption privileges may be elected on the account application. The Transfer
Agent will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine and may be liable for losses related to
unauthorized transactions in the event reasonable procedures are not employed.
Such procedure include restrictions on where proceeds of telephone redemptions
may be sent, limitations on the ability to redeem by telephone lines and
requirements that the redeeming shareholder and/or his or her financial adviser
provide certain identifying information. Shareholders and/or their financial
advisers wishing to redeem or exchange shares by telephone may experience
difficulty in reaching the Fund at its toll-free telephone number during periods
of drastic economic or market changes. In that event, shareholders and/or their
financial advisers should follow the procedures for redemption or exchange by
mail as described above under "How to Sell Shares." The Adviser, the
Administrator, the Transfer Agent and the Fund reserve the right to change,
modify or terminate the telephone redemption or exchange services at any time
upon prior written notice to shareholders. Shareholders and/or their financial
advisers are not obligated to transact by telephone.
ORGANIZATION AND HISTORY
The Trust is a Massachusetts business trust organized in 1980. The Fund
commenced investment operations in 1997 as a separate portfolio of the Trust.
The Trust is not required to hold annual shareholder meetings, but special
meetings may be called for certain purposes. Shareholders receive one vote for
each Fund share. Shares of the Trust vote together except when required by law
to vote separately by fund or by class. Shareholders owning in the aggregate ten
percent of Trust shares may call meetings to consider removal of Trustees. Under
certain circumstances, the Trust will provide information to assist shareholders
in calling such a meeting. See the Statement of Additional Information for more
information.
<PAGE>
Investment Adviser
Newport Fund Management, Inc.
580 California Street, Suite 1960
San Francisco, CA 94104
Administrator
Colonial Management Associates, Inc.
One Financial Center
Boston, MA 02111-2621
Distributor
Liberty Financial Investments, Inc.
One Financial Center
Boston, MA 02111-2621
Custodian
Boston Safe Deposit and Trust Company
One Boston Place
Boston, MA 02108-2624
Shareholder Services and Transfer Agent
Colonial Investors Service Center, Inc.
One Financial Center
Boston, MA 02111-2621
1-800-345-6611
Independent Accountants
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110-2624
Legal Counsel
Ropes & Gray
One International Place
Boston, MA 02110-2624
Your financial service firm is:
Printed in U.S.A
May 16, 1997
NEWPORT GREATER CHINA FUND
CLASS Z SHARES
PROSPECTUS
Newport Greater China Fund seeks long-term growth of capital by investing
primarily in equity securities of companies located in, or which derive a
substantial portion of revenue from business activity with or in, the Greater
China Region (i.e., Hong Kong, the People's Republic of China and Taiwan).
For more detailed information about the Fund, call the Administrator at
1-800-426-3750 for the May 16, 1997 Statement of Additional Information.
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NOT FDIC-INSURED MAY LOSE VALUE
NO BANK GUARANTEE
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