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[LOGO]
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COLONIAL NEWPORT TIGER CUB FUND SEMIANNUAL REPORT
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February 28, 1998
NOT FDIC MAY LOSE VALUE
INSURED NO BANK GUARANTEE
<PAGE>
COLONIAL NEWPORT TIGER CUB FUND HIGHLIGHTS
SEPTEMBER 1, 1997 - FEBRUARY 28, 1998
INVESTMENT OBJECTIVE: Colonial Newport Tiger Cub Fund seeks capital appreciation
by investing primarily in equity securities of small companies (i.e., companies
with equity market capitalizations of U.S. $1 billion or less) located in the
nine Tiger markets of Asia: Hong Kong, Singapore, South Korea, Taiwan, Malaysia,
Thailand, Indonesia, China and the Philippines.
THE FUND IS DESIGNED TO OFFER:
|X| Access to entrepreneurial company stocks located in some of the world's
most dynamic economies
|X| Aggressive long-term growth potential
|X| Experienced investment management
PORTFOLIO MANAGER COMMENTARY: "An economic crisis in the Tiger region during
the period caused many markets to decline significantly. Despite the markets'
volatility, we stuck to our quality-oriented investment philosophy. First, the
majority of the Fund's assets remained invested in Hong Kong and Singapore,
areas with relatively stable economies where markets suffered smaller declines.
Second, we avoided companies with revenues tied to local, declining currencies
and economies, and focused instead on companies with strong ties to U.S.
dollar-linked economies." -- Robert Cameron
COLONIAL NEWPORT TIGER CUB FUND PERFORMANCE
CLASS A CLASS B CLASS C CLASS Z
Inception Date 6/3/96 6/3/96 6/3/96 6/3/96
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Six-month total returns, assuming (21.65)% (21.95)% (21.95)% (21.47)%
reinvestment of all distributions
and no sales charge or CDSC
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Six-month total returns, assuming (26.15)% (25.85)% (22.73)% (21.47)%
POP and CDSC1
Net asset value per share at 2/28/98 $7.13 $7.04 $7.04 $7.17
(1) Public offering price (POP) returns include the maximum sales charge of
5.75% for Class A shares. The contingent deferred sales charge (CDSC)
returns reflect the maximum charge of 5% and 1% for Class B and C shares
respectively. Past performance cannot predict future results. Returns and
value of an investment will fluctuate, resulting in a gain or loss on sale.
COUNTRY BREAKDOWN(2) TOP FIVE HOLDINGS(2)
(as of 2/28/98) (as of 2/28/98)
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1. Hong Kong ................... 66.0% 1. Johnson Elec. Hldgs. Ltd. .... 7.1%
2. Singapore ................... 11.3% 2. Varitronix Int'l Ltd. ........ 5.8%
3. Philippines ................. 6.5% 3. Hang Seng Bank ............... 5.4%
4. Thailand .................... 1.4% 4. Four Seas Merch. Hldgs. Ltd. . 5.1%
5. Indonesia ................... 0.8% 5. HKR International Ltd. ....... 4.5%
(2) Country and holdings breakdowns are calculated as a percentage of total net
assets. Because the Fund is actively managed, there can be no guarantee the
Fund will continue to hold these securities or invest in these countries in
the future.
<PAGE>
PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
[Photo of Harold W Cogger]
The economies of the Pacific Rim dominated headlines during the period. A Thai
currency collapse in July quickly spread to currency devaluations throughout the
region. These declining currencies exposed credit problems and a widespread need
for financial restructuring, in several cases with the assistance of the
International Monetary Fund (IMF).
Thailand, South Korea, Malaysia, Indonesia and the Philippines experienced
serious financial and market crises. Unfortunately, the market declines were not
limited to these nations as the "fear" of declining markets spilled over into
the fundamentally strong markets of Hong Kong and Singapore. Shaken investor
confidence resulted in institutional selling, particularly in Hong Kong where
large investments could be liquidated quickly. However, during January and
February there were some signs that Asian markets might be stabilizing as
several countries demonstrated a willingness to take the economic remedy
prescribed by the IMF. This attitude provided some support for Tiger currencies
and markets.
The Fund had over 75% of its assets invested in the stronger markets of Hong
Kong and Singapore, which shielded shareholders from some of the region's worst
decline. The economies of these nations share economic and investment
characteristics not found in the weaker Tiger markets, including steady growth,
low inflation and well-regulated banking systems. Furthermore, many high quality
companies with strong fundamentals are currently trading at attractive prices,
presenting the Fund with long-term growth potential.
Effective June 30, 1998, Colonial Newport Tiger Cub Fund will be renamed Newport
Tiger Cub Fund. While this new name does not in any way change the Fund's
investment approach or management style, it serves to underscore Newport Fund
Management's position as a leader in Asian investing.
The long-term benefits of investing in an international fund include an
opportunity to diversify your core portfolio. Despite the recent market and
financial crises in Southeast Asia, we believe the economies of the nine Tiger
countries of Asia will recover, although perhaps not all at the same time or at
the same rate. Progress towards higher standards of living, as well as
infrastructure needs in the Tiger countries, point to opportunities for
improving long-term market conditions. Thank you for the opportunity to serve
your investment needs.
Respectfully,
/s/ Harold W. Cogger
Harold W. Cogger
President
April 9, 1998
Because market conditions change frequently, there can be no assurance that the
trends described in this report will continue.
<PAGE>
PORTFOLIO MANAGEMENT REPORT
[Photo of Robert Cameron]
ROBERT CAMERON is portfolio manager of Colonial Newport Tiger Cub Fund and is a
senior vice president of Newport Fund Management, Inc.
VOLATILE AND CHALLENGING ECONOMIC ENVIRONMENT IN SOUTHEAST ASIA
A collapse of Thailand's currency in July quickly led to currency devaluations
throughout the region. Stock market corrections were not limited to the
overheated economies of Thailand, Indonesia and Malaysia as nearly all Asian
currencies and markets declined significantly. Some Tiger markets lost as much
as 60% of their U.S. dollar value during this period, including Indonesia and
South Korea. The Fund has the majority of its assets invested in Hong Kong (66%)
and Singapore (11%). These markets were among the strongest Asian economies,
although they suffered declines of 18.7% and 3.8%, respectively.
As a result, the Fund generated a negative total return of 21.65% for Class A
shares based on net asset value. Although the Fund underperformed its
broad-based index, MSCI Pacific Region (Ex-Japan) Index, which had a negative
return of 14.38%, the Fund performed well against more specialized indices. For
instance, the Fund outperformed the HSBC James Capel Smaller Asia Companies S.E.
Asia Index, which was down 37.22%. We believe that the Fund's favorable relative
performance is due primarily to a larger proportion of assets invested in Hong
Kong and Singapore, both of which declined less than other Tiger markets.
Performance also benefited from the Fund's emphasis on companies where sales of
goods and services are denominated in U.S. dollar-linked currencies. The
revenues and earnings of these companies were less negatively affected by the
declining currencies and economies in their home region.
HIGH QUALITY, LONG-TERM INVESTMENT PHILOSOPHY SHIELDED THE FUND FROM THE WORST
OF THE REGION'S DECLINE
Our top-down approach leads us to select the highest quality countries followed
by the highest quality companies within those countries. This process served the
portfolio well. The Fund maintained sizeable positions in Hong Kong and
Singapore, with minimal exposure to the weakening markets of Thailand, Malaysia,
Indonesia and the Philippines. Both Hong Kong and Singapore have fundamentally
sound economies, stronger banking systems with better balance sheets and larger,
more liquid reserves. We think these countries are better able to weather the
economic storm. In addition, these markets contain a number of quality growth
companies with excellent management and strong balance sheets that we believe
offer strong growth prospects for the future.
PORTFOLIO CONCENTRATED IN THE TIGER REGION'S BEST SMALLER COMPANIES
We continued to hold a relatively small number of stocks in the portfolio. At
the end of the period, our 27 positions represented companies that we believe
are among the best managed and participate in the best growth businesses in
Asia. For example, Li & Fung Ltd., which comprises 2.9% of the portfolio, is a
Hong Kong-based trading company with 100% of its revenues denominated in U.S.
dollar-linked currencies. As a middleman for retail stores' private label
apparel, Li & Fung is able to source the manufacturing of its goods to countries
with cheaper currencies while selling the finished products to countries with a
strong link to the U.S. dollar. As a result, this company and others like it are
able to insulate their earnings from declining regional currencies and
economies.
We also like stocks that we believe will benefit from economic growth in China.
China's enormous economy is rich in terms of foreign reserves and high personal
savings. Recent announcements of an ambitious plan to stimulate the Chinese
economy should result in lower interest rates, more accessible credit and
improved liquidity. We believe many Hong Kong-based companies will experience
increased business from China's growing economy. For example, 4.1% of our
portfolio was invested in Glorious Sun Enterprises, a Hong Kong-based apparel
manufacturer that sells blue jeans and sweaters throughout its own stores in
China. With new store openings at the rate of two per week, Glorious Sun is
well-positioned to benefit from a long-term trend of an increased standard of
living and strengthening income levels for the Chinese.
QUALITY-ORIENTED INVESTMENT PHILOSOPHY IN THE TIGER ECONOMIES
While the magnitude of losses in the Asian market indicates serious financial
problems, economic conditions suggest that the worst of the crisis may be behind
us. However, we believe that several Tiger economies will take another year or
two to start their recovery. Therefore, in keeping with our quality-oriented
investment philosophy, we will continue to emphasize companies based in Hong
Kong and Singapore, two regions that we believe are well positioned to weather
this economic crisis.
We also believe that the current turmoil in Southeast Asia presents long-term
investors with some excellent growth opportunities. The market declines have
touched many quality companies with excellent management and significant
financial strength. This has resulted in very low stock prices relative to what
we think these companies are worth. We believe that these stocks offer good
opportunities for long-term price appreciation. We believe that the Tiger
markets will recover and appreciate your patience and long-term support.
COLONIAL NEWPORT TIGER CUB FUND INVESTMENT PERFORMANCE VS.
THE MSCI PACIFIC REGION (EX-JAPAN) INDEX
Change in Value of $10,000 from 6/30/96 - 2/28/98
CLASS A SHARES BASED ON NAV AND POP
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- ----------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS as of 2/28/98
Inception 6/3/96 NAV POP
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1 YEAR (26.34)% (30.58)%
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SINCE INCEPTION (17.65) (20.40)
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MSCI
PACIFIC
REGION
(EX-JAPAN)
NAV POP INDEX
- -----------------------------------------------------------------
Jun 30, 96 $10,000 $ 9,425 $10,000
Jul 31, 96 9,425 8,883 9,496
Aug 31, 96 9,405 8,864 9,920
Sep 30, 96 9,516 8,968 10,173
Oct 31, 96 9,162 8,636 10,449
Nov 30, 96 9,606 9,054 11,007
Dec 31, 96 9,728 9,168 11,028
Jan 31, 97 9,899 9,330 10,895
Feb 28, 97 9,768 9,206 11,049
Mar 31, 97 9,354 8,816 10,536
Apr 30, 97 9,273 8,740 10,320
May 31, 97 9,798 9,235 10,961
Jun 30, 97 9,929 9,358 11,201
Jul 31, 97 10,303 9,710 11,170
Aug 31, 97 9,183 8,655 9,620
Sep 30, 97 9,435 8,892 9,948
Oct 31, 97 7,639 7,200 7,838
Nov 30, 97 7,538 7,104 7,590
Dec 31, 97 6,983 6,581 7,609
Jan 31, 98 5,782 5,450 7,139
Feb 28, 98 7,195 6,781 8,237
CLASS B SHARES BASED ON NAV AND W/CDSC
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AVERAGE ANNUAL TOTAL RETURNS as of 2/28/98
Inception 6/3/96 NAV w/CDSC
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1 YEAR (26.90)% (30.55)%
- ----------------------------------------------
SINCE INCEPTION (18.24) (20.14)
- ----------------------------------------------
MSCI
PACIFIC
REGION
(EX-JAPAN)
NAV W/ CDSC INDEX
- -----------------------------------------------------------------
Jun 30, 96 $10,000 $10,000 $10,000
Jul 31, 96 9,425 9,425 9,496
Aug 31, 96 9,384 9,384 9,920
Sep 30, 96 9,495 9,495 10,173
Oct 31, 96 9,142 9,142 10,449
Nov 30, 96 9,576 9,576 11,007
Dec 31, 96 9,697 9,697 11,028
Jan 31, 97 9,849 9,849 10,895
Feb 28, 97 9,717 9,717 11,049
Mar 31, 97 9,304 9,304 10,536
Apr 30, 97 9,213 9,213 10,320
May 31, 97 9,728 9,728 10,961
Jun 30, 97 9,859 9,859 11,201
Jul 31, 97 10,212 10,212 11,170
Aug 31, 97 9,102 9,102 9,620
Sep 30, 97 9,334 9,334 9,948
Oct 31, 97 7,558 7,558 7,838
Nov 30, 97 7,457 7,457 7,590
Dec 31, 97 6,902 6,902 7,609
Jan 31, 98 5,711 5,711 7,139
Feb 28, 98 7,104 6,820 8,237
CLASS C SHARES BASED ON NAV AND W/CDSC
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- ----------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS as of 2/28/98
Inception 6/3/96 NAV w/CDSC
- ----------------------------------------------
1 YEAR (26.97)% (27.70)%
- ----------------------------------------------
SINCE INCEPTION (18.24) (18.24)
- ----------------------------------------------
MSCI
PACIFIC
REGION
NAV (EX-JAPAN)
W/ CDSC INDEX
- -------------------------------------------------------
Jun 30, 96 $10,000 $10,000
Jul 31, 96 9,425 9,496
Aug 31, 96 9,384 9,920
Sep 30, 96 9,495 10,173
Oct 31, 96 9,142 10,449
Nov 30, 96 9,576 11,007
Dec 31, 96 9,697 11,028
Jan 31, 97 9,859 10,895
Feb 28, 97 9,728 11,049
Mar 31, 97 9,304 10,536
Apr 30, 97 9,213 10,320
May 31, 97 9,738 10,961
Jun 30, 97 9,859 11,201
Jul 31, 97 10,222 11,170
Aug 31, 97 9,102 9,620
Sep 30, 97 9,344 9,948
Oct 31, 97 7,558 7,838
Nov 30, 97 7,457 7,590
Dec 31, 97 6,902 7,609
Jan 31, 98 5,711 7,139
Feb 28, 98 7,104 8,237
A hypothetical $10,000 investment in Class Z shares made on 6/30/96 at net asset
value (NAV) would amount to $7,235 on 2/28/98.
MSCI Pacific Region (Ex-Japan) Index is a broad-based, unmanaged index that
tracks the performance of stocks in the Pacific Rim in countries other than
Japan. Unlike mutual funds, indexes are not investments, do not incur fees or
expenses, and it is not possible to invest in an index.
Past performance cannot predict future results. Returns and value of an
investment will vary, resulting in a gain or loss on sale. All results shown
assume reinvestment of distributions. NAV returns do not include sales charges
or contingent deferred sales charges (CDSC). Public offering price (POP) returns
include the maximum initial sales charge of 5.75% for Class A shares. The CDSC
returns reflect the applicable charges of: 5% for one year and 4% since
inception for Class B shares, and 1% for one year for Class C shares.
<PAGE>
INVESTMENT PORTFOLIO
FEBRUARY 28, 1998 (UNAUDITED, IN THOUSANDS)
COMMON STOCKS - 86.0% COUNTRY SHARES VALUE
- -------------------------------------------------------------------------------
FINANCE, INSURANCE & REAL ESTATE - 39.1%
DEPOSITORY INSTITUTIONS - 13.1%
Hang Seng Bank HK 80 $ 757
JCG Holdings Ltd. HK 670 340
Oversea-Chinese Banking Corp. Ltd. Si 100 595
Singapore Finance Ltd. Si 205 148
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1,840
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HOLDING & OTHER INVESTMENT COMPANIES - 2.8%
Dickson Concepts International Ltd. HK 223 386
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HOLDING COMPANIES - 3.8%
Cheung Kong Holdings Ltd. HK 75 526
-------
INSURANCE CARRIERS - 1.3%
Thai Reinsurance Co., Ltd. Th 100 188
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REAL ESTATE - 18.1%
China Resources Enterprises Ltd. HK 150 328
City Developments Ltd. Si 54 245
HKR International Ltd. HK 849 636
New World Development Co., Ltd. HK 50 184
SM Prime Holdings, Inc. Ph 3,000 557
Sun Hung Kai Properties Ltd. HK 79 592
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2,542
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...............................................................................
MANUFACTURING - 25.3%
ELECTRONIC & COMPONENTS - 8.3%
Music Corp. (a) Ph 900 350
Varitronix International Ltd. HK 386 810
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1,160
-------
FABRICATED METAL - 2.3%
Sinocan Holdings Ltd. HK 1,758 322
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FOOD & KINDRED PRODUCTS - 5.1%
Four Seas Mercantile Holdings Ltd. HK 1,754 719
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FURNITURE & FIXTURES - 1.4%
Lamex Holdings Ltd. HK 1,500 190
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LIGHTING EQUIPMENT - 4.2%
Clipsal Industries Ltd. Si 307 596
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MEASURING & ANALYZING INSTRUMENTS - 3.1%
China Hong Kong Photo Products HK 1,898 436
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RUBBER & PLASTIC - 0.9%
PT Dynaplast - Foreign Reg. In 1,816 $ 117
Srithai Superware Public Co., Ltd. (Foreign) Th 19 6
-------
123
-------
...............................................................................
RETAIL TRADE - 4.1%
APPAREL & ACCESSORY STORES
Glorious Sun Enterprises HK 1,900 571
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...............................................................................
SERVICES - 3.7%
COMPUTER SOFTWARE
Vanda Systems & Communication
Holdings Ltd. HK 1,416 512
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...............................................................................
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 3.8%
GAS SERVICES
Hong Kong and China Gas Co., Ltd. HK 296 532
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...............................................................................
WHOLESALE TRADE - 10.0%
DURABLE GOODS
Johnson Electric Holdings Ltd. HK 279 992
Li & Fung Ltd. HK 272 411
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1,403
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TOTAL COMMON STOCKS (cost of $15,631) (b) 12,046
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SHORT-TERM OBLIGATIONS - 13.3% PAR
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Federal National Mortgage Assoc.
(cost of $1,857) 5.610%(c) 03/02/98 $ 1,858 1,857
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OTHER ASSETS & LIABILITIES, NET - 0.7% 99
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NET ASSETS - 100% $14,002
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<PAGE>
NOTES TO INVESTMENT PORTFOLIO:
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(a) Non-income producing.
(b) Cost for federal income tax purposes is the same.
(c) Rate represents yield at day of purchase.
Summary of Securities
by Country Country Value % of Total
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Hong Kong HK $ 9,244 76.7
Singapore Si 1,584 13.2
Philippines Ph 907 7.5
Thailand Th 194 1.6
Indonesia In 117 1.0
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$12,046 100.0
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Certain securities are listed by country of underlying exposure but may trade
predominantly on other exchanges.
See notes to financial statements.
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
FEBRUARY 28, 1998 (UNAUDITED)
(in thousands except for per share amounts and footnotes)
ASSETS
Investments at value (cost $15,631) $ 12,046
Short-term obligations 1,857
--------
13,903
Cash including foreign currencies (cost $54) 54
Receivable for:
Fund shares sold 73
Dividends 4
Expense reimbursement due from
Adviser/Administrator 10
Deferred organization expenses 1 142
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Total Assets 14,045
LIABILITIES
Payable for:
Fund shares repurchased 19
Accrued:
Management fee 15
Administration fee 3
Transfer agent fee 3
Bookkeeping fee 2
Other 1
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Total Liabilities 43
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NET ASSETS $ 14,002
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Net asset value & redemption price per share -
Class A ($6,611/927) $7.13
======
Maximum offering price per share - Class A
($7.13/0.9425) $7.56(a)
======
Net asset value & offering price per share -
Class B ($6,337/900) $7.04(b)
======
Net asset value & offering price per share -
Class C ($1,000/142) $7.04(b)
======
Net asset value, offering & redemption price
per share - Class Z ($54/8) $7.17
======
(a) On sales of $50,000 or more the offering price is reduced.
(b) Redemption price per share is equal to net asset value less any
applicable contingent deferred sales charge.
See notes to financial statements.
<PAGE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED FEBRUARY 28, 1998
(UNAUDITED)
(in thousands)
INVESTMENT INCOME
Dividends:
Dickson Concepts International Ltd. $ 18
Four Seas Mercantile 19
Hon Kwok Land Investment 19
Li & Fung Ltd. 18
Sun Hung Kai Properties Ltd. 17
Other 134
Interest 73
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Total Investment Income 298
EXPENSES
Management fee $ 76
Administration fee 16
Service fee - Class A, Class B, Class C 18
Distribution fee - Class B 25
Distribution fee - Class C 4
Transfer agent fee 16
Bookkeeping fee 12
Trustees fee 4
Audit fee 9
Legal fee 1
Custodian fee 30
Registration fee 28
Reports to shareholders 5
Other 3
------
247
Fees and expenses waived or borne
by the Adviser/Administrator (43) 204
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Net Investment Income 94
-------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized loss on:
Investments (1,084)
Foreign currency transactions (43)
-------
Net Realized Loss (1,127)
Net unrealized appreciation (depreciation)
during the period on:
Investments (3,117)
Foreign currency transactions 6
-------
Net Unrealized Depreciation (3,111)
-------
Net Loss (4,238)
-------
Decrease in Net Assets from Operations $(4,144)
=======
See notes to financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
(Unaudited)
Six months Year
ended ended
(in thousands) February 28 August 31
------------ -------------
INCREASE (DECREASE) IN NET ASSETS 1998 1997 (a)
Operations:
Net investment income $ 94 $ 47
Net realized loss (1,127) (592)
Net unrealized depreciation (3,111) (157)
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Net Decrease from Operations (4,144) (702)
------- --------
Fund Share Transactions:
Receipts for shares sold - Class A 3,123 9,296
Cost of shares repurchased - Class A (3,357) (3,860)
------ --------
(234) 5,436
------ --------
Receipts for shares sold - Class B 3,962 7,205
Cost of shares repurchased - Class B (3,559) (1,884)
------- --------
403 5,321
------- --------
Receipts for shares sold - Class C 1,304 1,323
Cost of shares repurchased - Class C (1,285) (722)
------- --------
19 601
------- --------
Receipts for shares sold - Class Z 10 114
Cost of shares repurchased - Class Z (872) (50)
------- --------
(862) 64
------- --------
Net Increase (Decrease) from Fund
Share Transactions (674) 11,422
------- --------
Total Increase (Decrease) (4,818) 10,720
NET ASSETS
Beginning of period 18,820 8,100
------- --------
End of period (including accumulated
net investment loss of $42 and $93,
respectively) $14,002 $18,820
======= =======
NUMBER OF FUND SHARES
Sold - Class A 437 979
Repurchased - Class A (461) (408)
------- --------
(24) 571
------- --------
Sold - Class B 527 765
Repurchased - Class B (477) (200)
------- --------
50 565
------- --------
Sold - Class C 180 140
Repurchased - Class C (182) (75)
------- --------
(2) 65
------- --------
Sold - Class Z 1 12
Repurchased - Class Z (125) (5)
------- --------
(124) 7
------- --------
(a) Effective July 1, 1997, Class D shares were redesignated Class C shares.
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1998 (UNAUDITED)
NOTE 1. INTERIM FINANCIAL STATEMENTS
...............................................................................
In the opinion of management of Colonial Newport Tiger Cub Fund (the Fund), a
series of Colonial Trust II, the accompanying financial statements contain all
normal and recurring adjustments necessary for the fair presentation of the
financial position of the Fund at February 28, 1998, and the results of its
operations, the changes in its net assets and the financial highlights for the
six months then ended.
NOTE 2. ACCOUNTING POLICIES
...............................................................................
ORGANIZATION: The Fund is a diversified portfolio of a Massachusetts business
trust, registered under the Investment Company Act of 1940, as amended, as an
open-end, management investment company. The Fund's investment objective is to
seek capital appreciation by investing primarily in equity securities of small
companies (i.e. companies with equity market capitalization's of U.S. $1 billion
or less) located in the nine Tigers of Asia (Hong Kong, Singapore, South Korea,
Taiwan, Malaysia, Thailand, Indonesia, China and the Philippines). The Fund may
issue an unlimited number of shares. The Fund offers four classes of shares:
Class A, Class B, Class C, and Class Z. Class A shares are sold with a front-end
sales charge and Class B shares are subject to an annual distribution fee and a
contingent deferred sales charge. Class B shares will convert to Class A shares
when they have been outstanding approximately eight years. Effective July 1,
1997, Class D shares were redesignated Class C shares. Class C shares are
subject to a contingent deferred sales charge on redemptions made within one
year after purchase and an annual distribution fee. Class Z shares are offered
continuously at net asset value. There are certain restrictions on the purchase
of Class Z shares, please refer to the prospectus.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the period. Actual results
could differ from those estimates. The following is a summary of significant
accounting policies that are consistently followed by the Fund in the
preparation of its financial statements.
SECURITY VALUATION AND TRANSACTIONS: Equity securities generally are valued at
the last sale price or, in the case of unlisted or listed securities for which
there were no sales during the day, at current quoted bid prices. In certain
countries, the Fund may hold foreign designated shares. 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. In addition, if
the values of foreign securities have been materially affected by events
occurring after the closing of a foreign market, the foreign securities may be
valued at their current value.
Forward currency contracts are valued based on the weighted value of the
exchange traded contracts with similar durations.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
The value of all assets and liabilities quoted in foreign currencies are
translated into U.S. dollars at that day's exchange rates. In certain countries,
the Fund may hold portfolio positions for which market quotations are not
readily available. Such securities are valued at fair value under procedures
approved by the Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains and losses are based upon the specific
identification method for both financial statement and federal income tax
purposes.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS: All income,
expenses (other than the Class A, Class B and Class C service fees and Class B
and Class C distribution fees), and realized and unrealized gains (losses) are
allocated to each class proportionately on a daily basis for purposes of
determining the net asset value of each class.
The per share data was calculated using average shares outstanding during the
period. In addition, Class A, Class B and Class C net investment income per
share data reflects the service fee per share applicable to Class A, Class B and
Class C shares and the distribution fee applicable to Class B and Class C shares
only.
Class A, Class B and Class C ratios are calculated by adjusting the expense and
net investment income ratios for the Fund for the entire period by the service
fee applicable to Class A, Class B and Class C shares and the distribution fee
applicable to Class B and Class C shares only.
FEDERAL INCOME TAXES: Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable income, no
federal income tax has been accrued.
DEFERRED ORGANIZATION EXPENSES: The Fund incurred $1,000 of expenses in
connection with its organization. These expenses were deferred and are being
amortized on a straight-line basis over five years.
DISTRIBUTIONS TO SHAREHOLDERS: Distributions to shareholders are
recorded on the ex-date.
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforwards) under income tax regulations.
FOREIGN CURRENCY TRANSACTIONS: Net realized and unrealized gains (losses) on
foreign currency transactions includes the fluctuation in exchange rates on
gains (losses) between trade and settlement dates on securities transactions,
gains (losses) arising from the disposition of foreign currency and currency
gains (losses) between the accrual and payment dates on dividends and interest
income and foreign withholding taxes.
The Fund does not distinguish that portion of gains (losses) on investments
which is due to changes in foreign exchange rates from that which is due to
changes in market prices of the investments. Such fluctuations are included with
the net realized and unrealized gains (losses) from investments.
FORWARD CURRENCY CONTRACTS: The Fund may enter into forward currency contracts
to purchase or sell foreign currencies at predetermined exchange rates in
connection with the settlement of purchases and sales of securities. The
contracts are used to minimize the exposure to foreign exchange rate
fluctuations during the period between trade and settlement date of the
contracts. The Fund may also enter into forward currency contracts to hedge
certain other foreign currency denominated assets. All contracts are
marked-to-market daily, resulting in unrealized gains (losses) which become
realized at the time the forward currency contracts are closed or mature.
Realized and unrealized gains (losses) arising from such transactions are
included in net realized and unrealized gains (losses) on foreign currency
transactions. Forward currency contracts do not eliminate fluctuations in the
prices of the Fund's portfolio securities. While the maximum potential loss from
such contracts is the aggregate face value in U.S. dollars at the time the
contract is opened, exposure is typically limited to the change in value of the
contract (in U.S. dollars) over the period it remains open. Risks may also arise
if counterparties fail to perform their obligations under the contracts.
OTHER: Corporate actions are recorded on the ex-date (except for certain foreign
securities which are recorded as soon after ex-date as the Fund becomes aware of
such), net of nonrebatable tax withholdings. Where a high level of uncertainty
as to collection exists, income on securities is recorded net of all tax
withholdings with any rebates recorded when received.
The Fund's custodian takes possession through the federal book-entry system of
securities collateralizing repurchase agreements. Collateral is marked-to-market
daily to ensure that the market value of the underlying assets remains
sufficient to protect the Fund. The Fund may experience costs and delays in
liquidating the collateral if the issuer defaults or enters bankruptcy.
NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES
...............................................................................
MANAGEMENT FEE: Newport Fund Management (the Adviser) is the investment Adviser
of the Fund and receives a monthly fee equal to 1.15% annually of the Fund's
average net assets.
ADMINISTRATION FEE: Colonial Management Associates, Inc. (the
Administrator), an affiliate of the Adviser, provides accounting and other
other services for a monthly fee equal to 0.25% annually of the Fund's
average net assets.
BOOKKEEPING FEE: The Administrator provides bookkeeping and pricing services for
$27,000 per year plus 0.035% of the Fund's average net assets over $50 million.
TRANSFER AGENT: Colonial Investors Service Center, Inc. (the Transfer
Agent), an affiliate of the Administrator, provides shareholder services
for a monthly fee equal to 0.25% annually of the Fund's average net
assets and receives reimbursement for certain out of pocket expenses.
Effective October 1, 1997 and continuing through September 30, 1998, the
Transfer Agent fee will be reduced by 0.0012% in cumulative monthly increments,
resulting in a decrease in the fee from 0.25% to 0.236% annually.
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES: Liberty Financial
Investments, Inc. (the Distributor), a subsidiary of the Administrator, is the
Fund's principal underwriter. For the six months ended February 28, 1998, the
Fund has been advised that the Distributor retained net underwriting discounts
of $6,725 on sales of the Fund's Class A shares and received contingent deferred
sales charges (CDSC) of $24,213 and $3,535 on Class B and Class C share
redemptions, respectively.
The Fund has adopted a 12b-1 plan which requires it to pay the Distributor a
service fee equal to 0.25% annually on Class A, Class B and Class C net assets
as of the 20th of each month. The plan also requires the payment of a
distribution fee to the Distributor equal to 0.75% annually of the average net
assets attributable to Class B and Class C shares only.
The CDSC and the fees received from the 12b-1 plan are used principally as
repayment to the Distributor for amounts paid by the Distributor to dealers who
sold such shares.
EXPENSE LIMITS: The Adviser/Administrator have agreed, until further notice, to
waive fees and bear certain Fund expenses to the extent that total expenses
(exclusive of service fees, distribution fees, brokerage commissions, interest,
taxes and extraordinary expenses, if any) exceed 2.00% annually of the Fund's
average net assets.
OTHER: The Fund pays no compensation to its officers, all of whom are
employees of the Adviser or Administrator.
The Fund's Trustees may participate in a deferred compensation plan which may be
terminated at any time. Obligations of the plan will be paid solely out of the
Fund's assets.
NOTE 4. PORTFOLIO INFORMATION
...............................................................................
Investment activity: During the six months ended February 28, 1998, purchases
and sales of investments, other than short-term obligations, were $4,835,980 and
$3,327,610, respectively.
Unrealized appreciation (depreciation) at February 28, 1998, based on cost of
investments for both financial statement and federal income tax purposes was:
Gross unrealized appreciation $ 857,922
Gross unrealized depreciation (4,442,776)
-----------
Net unrealized depreciation $(3,584,854)
===========
CAPITAL LOSS CARRYFORWARDS: At August 31, 1997, capital loss carryforwards
available (to the extent provided in regulations) to offset future realized
gains were approximately as follows:
Year of Capital loss
expiration carryforward
---------- ------------
2005 $ 38,000
Expired capital loss carryforwards, if any, are recorded as a reduction of
capital paid in.
To the extent loss carryforwards are used to offset any future realized gains,
it is unlikely that such gains would be distributed since they may be taxable to
shareholders as ordinary income.
OTHER: There are certain additional risks involved when investing in foreign
securities that are not inherent with investments in domestic securities. These
risks may involve foreign currency exchange rate fluctuations, adverse political
and economic developments and the possible prevention of currency exchange or
other foreign governmental laws or restrictions.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
NOTE 5. LINE OF CREDIT
...............................................................................
The Fund may borrow up to 10% of its net assets under a line of credit for
temporary or emergency purposes. Any borrowings bear interest at one of the
following options determined at the inception of the loan: (1) federal fund rate
plus 1/2 of 1%, (2) the lending bank's base rate or (3) IBOR offshore loan rate
plus 1/2 of 1%. There were no borrowings under the line of credit during the six
months ended February 28, 1998.
NOTE 6. COMPOSITION OF NET ASSETS
...............................................................................
Capital paid in $ 19,215
Accumulated net investment loss (42)
Accumulated net realized loss (1,586)
Net unrealized depreciation (3,585)
--------
$ 14,002
========
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout the period are as
follows:
(Unaudited)
Six months ended February 28
- -----------------------------------------------------------------------------
1998
Class A Class B Class C Class Z
------- ------- ------- -------
Net asset value -
Beginning of period $ 9.100 $ 9.020 $ 9.020 $ 9.130
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income (a)(b)(d) 0.060 0.032 0.032 0.068
Net realized and
unrealized loss (2.030) (2.012) (2.012) (2.028)
------- ------- ------- -------
Total from Investment
Operations (1.970) (1.980) (1.980) (1.960)
------- ------- ------- -------
Net asset value -
End of period $ 7.130 $ 7.040 $ 7.040 $ 7.170
======= ======= ======= =======
Total return (e)(f) (21.65)%(g) (21.95)%(g) (21.95)%(g) (21.47)%(g)
======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS
Expenses (h) 2.25%(i) 3.00%(i) 3.00%(i) 2.00%(i)
Net investment
income (loss) (h) 1.55%(i) 0.80%(i) 0.80%(i) 1.80%(i)
Fees and expenses
waived or borne by
the Adviser/Administrator (h) 0.55%(i) 0.55%(i) 0.55%(i) 0.55%(i)
Portfolio turnover 26%(g) 26%(g) 26%(g) 26%(g)
Average commission rate $0.0041 $0.0041 $0.0041 $0.0041
Net assets at end
of period (000) $ 6,611 $ 6,337 $ 1,000 $ 54
(a) Net of fees and expenses waived or borne by the Adviser/Administrator
which amounted to: $ 0.021 $ 0.021 $ 0.021 $ 0.021
(b) Per share data was calculated using average shares outstanding during the
period.
(c) Effective July 1, 1997, Class D shares were redesignated Class
C shares.
(d) 1998 information includes distributions from Dickson Concepts Intl., Four
Seas Mercantile, Hon Kwok Land Investment, Li & Fung Ltd., and Sun Hung Kai
Properties Ltd. which amounted to $0.055 per share. 1997 information
includes distributions from Srithai Superware Public Co., Ltd. and
Varitronix International Ltd. which amounted to $0.039 per share.
(e) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(f) Had the Adviser/Administrator not waived or reimbursed a portion of
expenses, total return would have been reduced.
(g) Not annualized.
(h) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(i) Annualized.
<PAGE>
FINANCIAL HIGHLIGHTS -- CONT.
Year ended August 31
- -----------------------------------------------------------------------------
1997
Class A Class B Class C Class Z
------- ------- ------- -------
$ 9.320 $ 9.300 $ 9.300 $ 9.320
------- ------- ------- -------
0.059 (0.012) (0.012) 0.083
(0.279) (0.268) (0.268) (0.273)
------- ------- ------- -------
(0.220) (0.280) (0.280) (0.190)
------- ------- ------- -------
$ 9.100 $ 9.020 $ 9.020 $ 9.130
======= ======= ======= =======
(2.36)% (3.01)% (3.01)% (2.04)%
======= ======= ======= =======
2.25% 3.00% 3.00% 2.00%
0.62% (0.13)% (0.13)% 0.87%
1.09% 1.09% 1.09% 1.09%
96% 96% 96% 96%
$0.0053 $0.0053 $ 0.0053 $ 0.0053
$ 8,653 $ 7,664 $ 1,300 $ 1,203
$ 0.105 $ 0.105 $ 0.105 $ 0.105
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period are
as follows:
Period ended August 31
----------------------------------------------
1996 (c)
Class A Class B Class C Class Z
------- ------- ------- -------
Net asset value -
Beginning of period $10.000 $10.000 $10.000 $10.000
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income (loss) (a)(b) 0.016 (0.002) (0.002) 0.021
Net realized and
unrealized loss (0.696) (0.698) (0.698) (0.701)
------- ------- ------- -------
Total from Investment
Operations (0.680) (0.700) (0.700) (0.680)
------- ------- ------- -------
Net asset value -
End of period $ 9.320 $ 9.300 $ 9.300 $ 9.320
======= ======= ======= =======
Total return (d)(e)(f) (6.80)% (7.00)% (7.00)% (6.80)%
======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS
Expenses (g)(h) 2.25% 3.00% 3.00% 2.00%
Net investment
income (loss) (g)(h) 0.62% (0.13)% (0.13)% 0.87%
Fees and expenses
waived or borne by the
Adviser/Administrator (g)(h) 5.16% 5.16% 5.16% 5.16%
Portfolio turnover (f) 3% 3% 3% 3%
Average commission rate $0.0049 $0.0049 $0.0049 $ 0.0049
Net assets at end
of period (000) $ 3,542 $ 2,654 $ 738 $ 1,166
(a) Net of fees and expenses waived or borne by the Adviser/Administrator
which amounted to: $ 0.123 $ 0.123 $ 0.123 $ 0.123
(b) Per share data was calculated using average shares outstanding during the
period.
(c) The Fund commenced investment operations on June 3, 1996. (d) Total return
at net asset value assuming all distributions reinvested and no initial
sales charge or contingent deferred sales charge.
(e) Had the Adviser/Administrator not waived or reimbursed a portion of
expenses, total return would have been reduced.
(f) Not annualized.
(g) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(h) Annualized.
<PAGE>
SHAREHOLDER SERVICES
TO MAKE INVESTING EASIER
Your fund has one of the most extensive selections of shareholder services
available. Your financial advisor can help you arrange for any of these
services, or you can call Colonial Investors Service Center directly at
1-800-345-6611.
AFFORDABLE ADDITIONAL INVESTMENTS: Add to your account with as little as $50 on
most funds; $25 for an IRA account.
FREE EXCHANGES(1): Exchange all or part of your account into the same
share class of another fund distributed by Liberty Financial Investments, by
phone or mail.
EASY ACCESS TO YOUR MONEY(1): Make withdrawals from your account by phone, by
mail or, for certain funds, by check.
ONE-YEAR REINSTATEMENT PRIVILEGE: If you need access to your money, but
then choose to return it within one year, you can reinvest in any fund
distributed by Liberty Financial Investments of the same share class without any
penalty or sales charge.
FUNDAMATIC: Make periodic investments as low as $50 from your checking account
to your Fund account.
SYSTEMATIC WITHDRAWAL PLAN (SWP): Receive monthly, quarterly or semiannual
payments via check or bank transmission. There is a $5,000 account value
required, but no minimum for the payment amount. The maximum annual withdrawal
is 12% of account balance at time SWP is established. SWPs by check are
processed on the 10th calendar day of each month unless the 10th falls on a
non-business day or the first business day of the week. If this occurs, the
processing date will be the previous business day. Dividends and capital gains
must be reinvested.
AUTOMATED DOLLAR COST AVERAGING: Transfer money on a monthly basis from any fund
with a balance of $5,000 into the same share class of up to four other funds
distributed by Liberty Financial Investments. Minimum for each transfer is $100.
RETIREMENT PLANS: Choose from a broad range of retirement plans,
including IRAs.
(1) Redemptions and exchanges are made at the next determined net asset value
after the request is received by the Transfer Agent. Proceeds may be more or
less than your original cost. The exchange privilege may be terminated at
any time. Exchanges are not available on all funds. Investors who purchase
Class B or C shares, or $1 million or more of Class A shares, may be subject
to a contingent deferred sales charge.
<PAGE>
SHAREHOLDER COMMUNICATIONS
TO KEEP YOU INFORMED
To make recordkeeping easy and keep you up-to-date on the performance of your
investments, you can expect to receive the following information about your
account:
TRANSACTION CONFIRMATIONS: Each time you make a purchase, sale or exchange, you
receive a confirmation statement within just a few days.
QUARTERLY STATEMENTS: Every three months, if any transactions are made that
affect your share balance, this statement reports on your account activity
during the quarter (including any reinvestment of dividends). This statement
also provides year-to-date information.
LIBERTY FINANCIAL INVESTMENTS INVESTOR OPPORTUNITIES: Mailed with your quarterly
account statements, this newsletter highlights timely investment strategies,
portfolio manager commentary and shareholder service updates.
TAX FORMS AND YEAR-END TAX GUIDE: Easy-to-use forms and timely information are
designed to make tax reporting simpler. (Usually mailed in January.)
AVERAGE COST BASIS STATEMENTS: If you sold or exchanged shares during the year,
this statement may help you calculate your gain/loss for tax purposes. (Usually
mailed in February.)
<PAGE>
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Colonial Newport Tiger Cub Fund is:
Colonial Investors Service Center, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Colonial Newport Tiger Cub Fund mails one shareholder report to each shareholder
address. If you would like more than one report, please call
1-800-426-3750 to order additional reports.
This report has been prepared for shareholders of Colonial Newport Tiger Cub
Fund. It may also be used as sales literature when preceded or accompanied by
the current prospectus which provides sales charges, investment objectives and
operating policies of the Fund and the
most recent copy of Liberty Financial Investments' Performance Update.
<PAGE>
TRUSTEES
ROBERT J. BIRNBAUM
Retired (formerly Special Counsel, Dechert, Price & Rhoads; President and Chief
Operating Officer, New York Stock Exchange, Inc.)
TOM BLEASDALE
Retired (formerly Chairman of the Board and Chief Executive Officer, Shore Bank
& Trust Company)
LORA S. COLLINS
Attorney (formerly Attorney, Kramer, Levin, Naftalis, Nessen, Kamin & Frankel)
JAMES E. GRINNELL
Private Investor (formerly Senior Vice President-Operations, The Rockport
Company)
WILLIAM D. IRELAND, JR.
Retired (formerly Chairman of the Board, Bank of New England-Worcester)
RICHARD W. LOWRY
Private Investor (formerly Chairman and Chief Executive Officer, U.S. Plywood
Corporation)
WILLIAM E. MAYER
Partner, Development Capital, L.L.C. (formerly Dean, College of Business and
Management, University of Maryland; Dean, Simon Graduate School of Business,
University of Rochester; Chairman and Chief Executive Officer, CS First Boston
Merchant Bank; and President and Chief Executive Officer, The First Boston
Corporation)
JAMES L. MOODY, JR.
Retired (formerly Chairman of the Board and Chief Executive Officer, Hannaford
Bros. Co.)
JOHN J. NEUHAUSER
Dean, Boston College School of Management
GEORGE L. SHINN
Financial Consultant (formerly Chairman, Chief Executive Officer and Consultant,
The First Boston Corporation)
ROBERT L. SULLIVAN
Retired Partner, Peat Marwick Main & Co. (formerly Management Consultant,
Saatchi and Saatchi Consulting Ltd. and Principal and International Practice
Director, Management Consulting, Peat Marwick Main & Co.)
SINCLAIR WEEKS, JR.
Chairman of the Board, Reed & Barton Corporation
[LOGO] LIBERTY FINANCIAL INVESTMENT, INC. (C)1998
Distributor for Colonial Funds, Stein Roe Advisor Funds and Newport Funds
One Financial Center, Boston, MA 02111-2621
Visit us at www.libertyfunds.com
CF-03/993E-0298 (4/98) 98/370
