<PAGE>
[Graphic Omitted]
NEWPORT GREATER CHINA FUND ANNUAL REPORT
August 31, 1998
-----------------------------
Not FDIC May Lose Value
Insured No Bank Guarantee
-----------------------------
<PAGE>
- --------------------------------------------------------------------------------
NEWPORT GREATER CHINA FUND HIGHLIGHTS
SEPTEMBER 1, 1997 - AUGUST 31, 1998
INVESTMENT OBJECTIVE: 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 their revenue from business activity with
or in, the Greater China Region (i.e., Hong Kong, the People's Republic of China
and Taiwan).
PORTFOLIO MANAGER COMMENTARY: "Economic turmoil in Southeast Asia continued to
negatively affect stock prices during the period. We have been encouraged,
however, by the steps China and Hong Kong have taken to boost economic growth."
-- Tim Tuttle, Chris Legallet and Tony Zhang, Co-Managers
NEWPORT GREATER CHINA FUND PERFORMANCE(1)
LOAD-
MODIFIED
CLASS A CLASS B CLASS C CLASS Z CLASS A
Inception dates 5/16/97 5/16/97 5/16/97 5/16/97 7/25/97
- --------------------------------------------------------------------------------
Distributions declared $0.061 $0.054 $0.055 $0.067 $0.061
per share
- --------------------------------------------------------------------------------
12-month total returns, (64.42)% (64.36)% (64.46)% (64.19)% (64.42)%
assuming reinvestment of all
distributions and no sales
charge or contingent
deferred sales charge (CDSC)
- --------------------------------------------------------------------------------
12-month total returns, (66.46)% (66.13)% (64.82)% (64.19)% (65.12)%(3)
assuming POP and CDSC (2)
- --------------------------------------------------------------------------------
Net asset value per $6.34 $6.34 $6.32 $6.38 $6.34
share on 8/31/98
TOP FIVE HOLDINGS(4) TOP SECTORS(4), (5)
(AS OF 8/31/98) (AS OF 8/31/98)
- -------------------------------------- ------------------------------------
1. Zhejiang S.E. Elec.Pwr.Co. .... 7.6% 1. Consumer Cyclicals ........ 34.1%
2. President Chain Store Corp. ... 7.3% 2. Utilities ................. 19.3%
3. China Telecom Ltd. ............ 7.0% 3. Financials ................ 13.9%
4. Cheung Kong Holdings Ltd. ..... 6.7% 4. Capital Goods ............. 6.7%
5. Smartone Telecom. Holdings Ltd. 6.0% 5. Technologies .............. 5.7%
(1) Performance results reflect any voluntary waivers or reimbursement of Fund
expenses by the Advisor. Absent these waivers or reimbursement arrangements,
performance results would have been lower.
(2) Public offering price (POP) returns include the maximum sales charge of
5.75% for Class A shares. The CDSC returns reflect the maximum charges of 5%
and 1% for Class B and Class 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.
(3) The load-modified Class A total return is shown without a front-end sales
charge but with a 2% CDSC. Class B, C and Z shares were not available during
the subscription rights offering period.
(4) Holdings and sector 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 sectors in
the future.
(5) Industry sectors in the following financial statements are based upon the
standard industrial classifications (SIC) as published by the U.S. Office of
Management and Budget. The sector classifications used on this page are
based upon the Advisor's defined criteria.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
[Photo of Stephen E. Gibson]
In June 1998, Harold Cogger retired as president of Newport Greater China Fund.
I would like to take this opportunity to thank him for his guidance over the
past few years and wish him well. As the new president of the Fund, I present
you with the annual report for Newport Greater China Fund for the 12-month
period ended August 31, 1998.
The past year represents one of the most difficult investment periods in recent
history for all of Southeast Asia. Volatility that began with the Asian currency
crisis in mid- to late-1997 persisted during the period. Falling currency values
and stagnant economic growth had a noticeable impact on stock prices throughout
the region. Many of the smaller markets within Southeast Asia continue to suffer
from financial and political woes, which has depressed stock prices even
further. While the economies of Greater China have also been impacted, we
believe they possess political and financial foundations that are more developed
than those of their weaker neighbors. Moreover, China and Hong Kong appear to
have strategic, long-term plans in place and are taking the necessary steps to
grow their economies at a reasonable, controlled pace.
We understand that shareholders who have participated in this declining market
may feel discouraged, as no one likes to see the value of an investment fall.
While your investment managers remain keenly aware of current events and
investor sentiment within Southeast Asia, they also continue their search for
pockets of opportunity and remain focused on the long-term growth potential
within the region. Few investment managers possess the experience, level of
knowledge and strong local relationships in Southeast Asia that Newport Fund
Management has developed over the past 25 years. Participating in numerous
economic and market cycles has given them the patience and expertise necessary
to manage effectively during this challenging time.
The following report will provide you with more specific information on your
Fund's performance and the markets in which the Fund has focused its efforts. As
always, we thank you for choosing Newport Greater China Fund and for giving us
the opportunity to serve your investment needs.
Respectfully,
/s/ Stephen E. Gibson
Stephen E. Gibson
President
October 12, 1998
Because market and economic conditions change, there can be no assurance that
the trends described above or on the following pages will continue.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT REPORT
[Photo of Tim Tuttle]
TIM TUTTLE is managing director of Newport Fund Management, Inc., and lead
portfolio manager of Newport Greater China Fund. He has more than 20 years of
experience investing in Asian markets and is a Chartered Financial Analyst.
[Photo of Chris Legallet]
CHRIS LEGALLET is a senior vice president of Newport Fund Management, Inc., and
a co-manager of Newport Greater China Fund. He is a former managing director for
Asian Investment for Jupiter Tyndall (Asia) Ltd. in Hong Kong and prior to that,
was a vice president of Salomon Inc., in New York.
[Photo of Xiaodong (Tony) Zhang]
XIAODONG (TONY) ZHANG is a senior investment officer -- Greater China, of
Newport Fund Management, Inc. He is also a co-manager of Newport Greater China
Fund. He is a former project manager of overseas investments for Hongmei
Electronic Corporation in China.
CONTINUED VOLATILITY CREATED A CHALLENGING INVESTMENT ENVIRONMENT
The 12-month period ended August 31, 1998, was a difficult one for investment
managers focused on Southeast Asia. Together, falling stock prices and lower
currency values served to depress economies throughout the region. For the 12
months ended August 31, 1998, the Fund generated a negative total return of
64.42% for Class A shares, based on net asset value.
ENCOURAGING SIGNS IN CHINA
The growth of the Chinese economy has slowed considerably, but it is still
growing at an annual rate of 6%, according to an estimate by Mellon Bank. The
sheer size of the country and the vast resources it possesses allow China to
generate much of its growth internally. And, unlike the smaller, less-developed
countries of Southeast Asia, China and Hong Kong possess substantial financial
reserves. We believe that Chinese consumers have the money to spend, but aren't
likely to do so until they see signs of economic improvement. The biggest
challenge for China is to find a way to renew consumer confidence, and it
appears that the Chinese government is beginning to address this issue by taking
fiscal steps to stimulate growth. For example, the government has cut interest
rates and made investments in infrastructure, telecommunications, transportation
and education.
One very noticeable and positive story in China involves private housing.
Historically, China has subsidized housing for people living in urban areas,
with rental payments representing as little as 1% of household income. Earlier
this year, the Chinese government announced a plan to reduce rental subsidies,
which could increase demand for housing. This would help stimulate the economy
by boosting demand for household goods. The government is offering to let
current occupants purchase their rented units at a deep discount. With almost
300 million of China's 1 billion people living in urban areas, it is expected
that approximately 20 to 30 million people may qualify as potential buyers.
While we are beginning to see some signs pointing to increased growth in China,
there are still hurdles to overcome, particularly in the banking sector. China
has a liquid, but currently inadequate, banking system. While there are reforms
in place, 20% to 25% of loans are in default. As China continues to clean up its
banking system, capital should be distributed more efficiently to a broader
group of economic sectors.
BUILDING A HIGHLY FOCUSED PORTFOLIO
At the beginning of the 12-month period, approximately 14% of the portfolio was
in cash. As stock prices began to decline, we put these assets to work by taking
advantage of what we believed were attractive buying opportunities. In this
environment, we've seen companies that are trading at extraordinarily low
valuations, yet which have strong balance sheets. Using bottom-up analysis and
strict selection criteria, we are continuing to search for financially sound
companies offering solid management teams and the potential to emerge from this
crisis in dominant market positions.
POSITIONED FOR FUTURE GROWTH
We believe the Greater China region is positioned for future growth. Many
healthy companies are writing off losses in an effort to clean up their balance
sheets to start fresh in 1999. Moreover, companies that are currently in good
financial shape are trading at historically low valuations, providing what we
believe are attractive value opportunities for long-term investors.
MAINTAIN A LONG-TERM VIEW OF THE ASIAN MARKETS
The past 12 months may have discouraged some Greater China investors. In any
equity market, including the U.S., periods of volatility are expected. The
decline of nearly 20% in large-capitalization U.S. stocks in late July and
August of this year and the dramatic price swings that followed are good
examples. Economies throughout the world move in cycles. How each country reacts
to the ups and downs of these cycles helps determine each country's longer-term
economic success. As dedicated Asian-market investors, Newport Fund Management
is familiar with the volatile cycles of an emerging region and strives to invest
in economies and companies it believes can recover from such cycles.
- --------------------------------------------------------------------------------
<PAGE>
NEWPORT GREATER CHINA FUND'S INVESTMENT PERFORMANCE
VS. HANG SENG INDEX AND MSCI PACIFIC REGION (EX-JAPAN) INDEX
Change in Value of $10,000 from 5/31/97 to 8/31/98
CLASS A SHARES BASED ON NAV AND POP
- --------------------------------------------------------------------------------
MSCI
PACIFIC
REGION HANG
(EX-JAPAN) SENG
NAV POP INDEX INDEX
--- --- ---------- -------
May 31, 1997 $10,000 $10,000 $10,000 $10,000
June 30, 1997 10,741 10,123 $10,215 10,305
July 31, 1997 11,256 10,608 10,181 11,125
August 29, 1997 9,999 9,424 8,777 9,548
September 30, 1997 10,211 9,624 9,055 10,258
October 31, 1997 7,563 7,128 7,450 7,263
November 28, 1997 7,178 6,765 8,924 7,255
December 31, 1997 7,369 6,945 8,942 7,401
January 30, 1998 5,797 5,464 8,513 6,697
February 27, 1998 7,806 7,357 8,616 7,930
March 31, 1998 7,711 7,267 7,425 8,004
April 30, 1998 6,970 6,569 6,907 7,244
May 29, 1998 5,921 5,580 6,192 8,271
June 30, 1998 5,107 4,813 6,782 8,026
July 31, 1998 4,445 4,189 5,585 5,800
August 31, 1998 3,558 3,353 4,812 5,170
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE OF A $10,000 INVESTMENT MADE ON 5/31/97
As of 8/31/98
- --------------------------------------------------------------------------------------------------------
LOAD-MODIFIED
CLASS A CLASS B CLASS C CLASS Z CLASS A
NAV POP NAV W/CDSC NAV W/CDSC NAV NAV W/CDSC
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$3,558 $3,353 $3,557 $3,416 $3,547 $3,547 $3,581 $3,558 $3,487
- --------------------------------------------------------------------------------------------------------
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
As of 8/31/98
- ---------------------------------------------------------------------------------------------------------
LOAD-MODIFIED
CLASS A CLASS B CLASS C CLASS Z CLASS A
INCEPTION 5/16/97 5/16/97 5/16/97 5/16/97 7/25/97
NAV POP NAV W/CDSC NAV W/CDSC NAV NAV W/CDSC(1)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 YR (64.42)% (66.46)% (64.36)% (66.13)% (64.46)% (64.82)% (64.19)% (64.42)% (65.12)%
- ---------------------------------------------------------------------------------------------------------
Life (43.46) (45.99) (43.46) (45.21) (43.60) (43.60) (43.17) (64.62) (65.26)
- ---------------------------------------------------------------------------------------------------------
(1) The Load Modified Class A total return is shown without a front-end sales
charge but with a 2% contingent deferred sales charge (CDSC).
</TABLE>
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. Net asset value (NAV) returns do not
include sales charges or CDSCs. Public offering price (POP) returns include the
maximum initial sales charge of 5.75% for Class A shares. The CDSC returns
reflect the maximum charges of: 5% for one year and 4% for life of Class B
shares and 1% for one year for Class C shares.
Performance results reflect any voluntary waivers or reimbursement of Fund
expenses by the Advisor. Absent these waivers or reimbursement arrangements,
performance results would have been lower. Performance for different share
classes will vary based on differences in sales charges and fees associated with
each class.
The Hang Seng Index is a capitalization-weighted index of 33 companies that
represent approximately 70% of the total market capitalization of the Stock
Exchange of Hong Kong. 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 and
do not incur fees or expenses. It is not possible to invest in an index.
- --------------------------------------------------------------------------------
<PAGE>
INVESTMENT PORTFOLIO
AUGUST 31, 1998 (IN THOUSANDS)
COMMON STOCKS - 96.5% COUNTRY SHARES VALUE
- -----------------------------------------------------------------------------
CONSTRUCTION - 2.0%
BUILDING CONSTRUCTION
Shenzen Fangda Co., Ltd., Class B Ch 1,078 $ 659
--------
- -----------------------------------------------------------------------------
FINANCE, INSURANCE & REAL ESTATE - 36.1%
DEPOSITORY INSTITUTIONS - 6.5%
Bank Sinopac (a) Tw 76 32
Dah Sing Financial HK 681 487
Hang Seng Bank HK 270 1,366
Wing Hang Bank Ltd. HK 356 287
--------
2,172
--------
HOLDING COMPANIES - 17.8%
China Resources Enterprises Ltd. HK 1,538 1,045
Citic Pacific Ltd. HK 1,532 1,840
Guangdong Investments HK 4,098 686
Guangzhou Investment Company Ltd. HK 4,400 264
Hutchison Whampoa Ltd. HK 422 1,720
Shanghai Industrial Holdings Ltd. HK 311 392
--------
5,947
--------
INSURANCE CARRIERS - 1.4%
National Mutual Asia Ltd. HK 1,330 484
--------
REAL ESTATE - 10.4%
Cheung Kong Holdings Ltd. HK 615 2,238
New World Development Co., Ltd. HK 295 299
Sun Hung Kai Properties Ltd. HK 326 941
--------
3,478
--------
- -----------------------------------------------------------------------------
MANUFACTURING - 4.2%
FABRICATED METAL - 0.4%
Sinocan Holdings Ltd. HK 8,444 125
--------
HOUSEHOLD APPLIANCES - 3.6%
Guangdong Kelon Electric Holdings, Class H HK 2,551 1,207
--------
LEATHER - 0.2%
Guangdong Tannery Ltd. HK 1,822 64
--------
MINING & ENERGY - 2.7%
COAL MINING
Yanzhou Coal Mining Co., Ltd., Class H Ch 8,900 896
--------
- -----------------------------------------------------------------------------
RETAIL TRADE - 10.0%
APPAREL & ACCESSORY STORES - 2.7%
Glorious Sun Enterprises HK 6,248 902
--------
FOOD STORES - 7.3%
President Chain Store Corp. Tw 927 2,447
--------
- -----------------------------------------------------------------------------
SERVICES - 0.5%
COMPUTER SOFTWARE
Founder Hong Kong Ltd. HK 1,055 170
--------
- -----------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 36.0%
ELECTRIC SERVICES - 8.0%
Huaneng Power International, Inc. ADR (a) HK 20 131
Zhejiang Southeast Electric Power Co.,
Class B (a) Ch 15,685 2,541
--------
2,672
--------
GAS SERVICES - 5.3%
Hong Kong and China Gas Co., Ltd. HK 1,806 1,775
--------
LOCAL & SUBURBAN TRANSIT - 1.5%
Shanghai Dazhong Taxi Co. (a) Ch 1,353 512
--------
RAILROAD - 1.9%
Guangshen Railway Co., Ltd., Class H HK 7,330 640
--------
TELECOMMUNICATION - 13.0%
China Telecom Ltd. (a) HK 1,880 2,326
Smartone Telecommunications Holdings Ltd. HK 1,019 2,014
--------
4,340
--------
TRANSPORTATION SERVICES - 6.3%
New World Infrastructure Ltd. (a) HK 458 246
Road King Infrastructure Ltd. HK 1,546 619
Zhejiang Expressway Co. Ltd., Class H HK 12,720 1,219
--------
2,084
--------
- -----------------------------------------------------------------------------
WHOLESALE TRADE - 5.0%
NONDURABLE GOODS
Li & Fung Ltd. HK 1,498 1,654
--------
TOTAL COMMON STOCKS (cost of $92,481) 32,228
--------
RIGHTS (a) - 0.0%
- -----------------------------------------------------------------------------
FINANCE, INSURANCE & REAL ESTATE - 0.0%
DEPOSITORY INSTITUTIONS
Bank Sinopac (cost of $0) Tw 123 $ (b)
--------
TOTAL INVESTMENTS (cost of $92,481)(c) 32,228
--------
SHORT-TERM OBLIGATIONS - 0.8% PAR
- -----------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
5.700% (d) 09/01/98 $ 277 277
--------
FORWARD CURRENCY CONTRACTS (e) - 0.2% 50
- -----------------------------------------------------------------------------
OTHER ASSETS & LIABILITIES, NET - 2.5% 843
- -----------------------------------------------------------------------------
NET ASSETS - 100.0% $ 33,398
========
NOTES TO INVESTMENT PORTFOLIO:
- -----------------------------------------------------------------------------
(a) Non-income producing.
(b) Rounds to less than one.
(c) Cost for federal income tax purposes is $92,503.
(d) Rate represents yield at date of purchase.
(e) As of August 31, 1998, the Fund had entered into the following forward
currency exchange contracts:
Net Unrealized
Appreciation
Contracts In Exchange Settlement (Depreciation)
to Deliver For Date (US$)
---------- --- ---- -----
HK 98,686 US$ 12,500 11/30/1998 $ 56
HK 79,343 US$ 10,000 11/30/1998 (5)
HK 19,835 US$ 2,500 11/30/1998 (1)
--------
$ 50
========
Summary of Securities
by Country Country Value % of Total
- -------------------------------------------------------------------------------
Hong Kong HK $ 25,141 78.0
Taiwan Tw 2,479 7.7
China Ch 4,608 14.3
-------- -----
$ 32,228 100.0
======== =====
Certain securities are listed by country of underlying exposure but may trade
predominantly on other exchanges.
Acronym Name
------- ----
ADR American Depositary Receipt
See notes to financial statements.
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
AUGUST 31, 1998
(in thousands except for per share amounts and footnotes)
ASSETS
Investments at value (cost $92,481) $ 32,228
Short-term obligations 277
--------
32,505
Cash including foreign currencies (cost $606) $ 605
Unrealized appreciation on forward
currency contracts 56
Receivable for:
Investments sold 1,034
Expense reimbursement due from
Advisor/Administrator 218
Dividends 138
Fund shares sold 29
Deferred organization expenses 9
Other 5 2,094
------ --------
Total Assets 34,599
LIABILITIES
Foreign currencies (cost $371) 371
Unrealized depreciation on forward
currency contracts 6
Payable for:
Investments purchased 419
Fund shares repurchased 319
Accrued:
Management fee 36
Administration fee 8
Transfer agent fee 7
Bookkeeping fee 2
Other 33
------
Total Liabilities 1,201
--------
NET ASSETS $ 33,398
========
See notes to financial statements.
<PAGE>
STATEMENT OF ASSETS & LIABILITIES - CONT.
Net asset value & redemption price per share -
Class A ($31,214/4,921) $6.34(a)
========
Maximum offering price per share - Class A
($6.34/0.9425) $6.73(b)
========
Net asset value & offering price per share -
Class B ($1,692/267) $6.34(a)
========
Net asset value & offering price per share -
Class C ($443/70) $6.32(a)
========
Net asset value, offering & redemption price per share -
Class Z ($49/8) $6.38
========
COMPOSITION OF NET ASSETS
Capital paid in $114,768
Undistributed net investment income 313
Accumulated net realized loss (21,479)
Net unrealized appreciation (depreciation) on:
Investments (60,253)
Foreign currency transactions 49
--------
$ 33,398
========
(a) Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
(b) On sales of $50,000 or more the offering price is reduced.
See notes to financial statements.
<PAGE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 1998
(in thousands)
INVESTMENT INCOME
Dividends:
Cheung Kong Holdings Ltd. $ 115
Citic Pacific Ltd. 214
Guangshen Railway Co., Ltd. 106
Henderson Land Development Co., Ltd. 117
Other 1,463
Interest 101
---------
Total Investment Income (net of nonreclaimable
foreign taxes withheld at source which
amounted to $3) 2,116
EXPENSES
Management fee $ 842
Administration fee 183
Service fee - Class A, Class B, Class C 183
Distribution fee - Class B 16
Distribution fee - Class C 5
Transfer agent fee 245
Bookkeeping fee 36
Trustees fee 7
Custodian fee 125
Audit fee 15
Legal fee 8
Registration fee 54
Reports to shareholders 12
Amortization of deferred
organization expenses 2
Other 95
--------
1,828
Fees and expenses waived or borne by
the Advisor/Administrator (231) 1,597
--------- ---------
Net Investment Income 519
---------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS Net realized loss
on:
Investments (21,480)
Foreign currency transactions (17)
--------
Net Realized Loss (21,497)
Net unrealized appreciation (depreciation)
during the period on:
Investments (47,018)
Foreign currency transactions 50
--------
Net Unrealized Depreciation (46,968)
---------
Net Loss (68,465)
---------
Decrease in Net Assets from Operations $ (67,946)
=========
See notes to financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
Year Period
ended ended
(in thousands) August 31 August 31
--------- ---------
INCREASE (DECREASE) IN NET ASSETS 1998 1997 (a)
Operations:
Net investment income $ 519 $ 111
Net realized gain (loss) (21,497) 578
Net unrealized depreciation (46,968) (13,236)
-------- --------
Net Decrease from Operations (67,946) (12,547)
-------- --------
Distributions:
From net investment income - Class A (356) --
From net investment income - Class B (9) --
From net investment income - Class C (2) --
From net investment income - Class Z (b) --
-------- --------
(68,313) --
-------- --------
Fund Share Transactions:
Receipts for shares sold - Class A 11,106 134,419
Value of distributions reinvested - Class A 231 --
Cost of shares repurchased - Class A (29,994) (7,769)
-------- --------
(18,657) 126,650
-------- --------
Receipts for shares sold - Class B 4,627 --
Value of distributions reinvested - Class B 5 --
Cost of shares repurchased - Class B (1,277) --
-------- --------
3,355 --
-------- --------
Receipts for shares sold - Class C 2,192 --
Value of distributions reinvested - Class C 1 --
Cost of shares repurchased - Class C (1,285) --
-------- --------
908 --
-------- --------
Receipts for shares sold - Class Z 1 --
Value of distributions reinvested - Class Z 1 --
-------- --------
2 --
-------- --------
Net Increase (Decrease) from Fund Share
Transactions (14,392) 126,650
-------- --------
Total Increase (Decrease) (82,705) 114,103
NET ASSETS
Beginning of period 116,103 2,000
-------- --------
End of period (including undistributed net
investment of $313 and $134, respectively) $ 33,398 $116,103
======== ========
(a) The Fund commenced investment operations on May 12, 1997. The activity shown
is from the effective date of registration (May 16, 1997) with the
Securities and Exchange Commission.
(b) Rounds to less than one.
See notes to financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS - CONT.
Year Period
ended ended
(in thousands) August 31 August 31
--------- ---------
1998 1997 (a)
NUMBER OF FUND SHARES
Sold - Class A 953 6,708
Issued for distributions reinvested - Class A 18 --
Repurchased - Class A (2,514) (372)
-------- --------
(1,543) 6,336
-------- --------
Sold - Class B 382 --
Issued for distributions reinvested - Class B (b) --
Repurchased - Class B (123) --
-------- --------
259 --
-------- --------
Sold - Class C 194 --
Issued for distributions reinvested - Class C (b) --
Repurchased - Class C (132) --
-------- --------
62 --
-------- --------
Sold - Class Z (b) --
Issued for distributions reinvested - Class Z (b) --
-------- --------
(b) --
-------- --------
(a) The Fund commenced investment operations on May 12, 1997. The activity shown
is from the effective date of registration (May 16, 1997) with the
Securities and Exchange Commission.
(b) Rounds to less than one.
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1998
NOTE 1. ACCOUNTING POLICIES
- -------------------------------------------------------------------------------
ORGANIZATION: Newport Greater China Fund (the Fund), a series of Colonial Trust
II, 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 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 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 a 1.00% contingent deferred
sales charge on redemptions made within eighteen months on an original purchase
of $1 million to $5 million. 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. 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 reporting 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 fair value. Because of events occurring after the close of the
Hong Kong markets on August 31, 1998, the Fund adjusted the value of certain
securities held by the Fund which traded on the Hong Kong exchange. This
adjustment was made pursuant to procedures established by the Board of Trustees.
These securities represented approximately 79.5% of the Fund's total net assets
at August 31, 1998.
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 is
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 reflect 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 $11,352 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 include the fluctuations 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 2. FEES AND COMPENSATION PAID TO AFFILIATES
- -------------------------------------------------------------------------------
MANAGEMENT FEE: Newport Fund Management, Inc. (the Advisor) is the investment
Advisor 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 Advisor, provides accounting and 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.
Average Net Assets Annual Fee Rate
- ----------------------------- -------------------------
First $50 million No charge
Next $950 million 0.035%
TRANSFER AGENT: Liberty Funds Services Inc., formerly 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 was 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 Funds
Distributor, Inc., formerly Liberty Financial Investments, Inc. (the
Distributor), a subsidiary of the Administrator, is the Fund's principal
underwriter. For the year ended August 31, 1998, the Fund has been advised that
the Distributor retained net underwriting discounts of $35,299 on sales of the
Fund's Class A shares and received contingent deferred sales charges (CDSC) of
$207,063, $11,446 and $6,846 on Class A, 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 Advisor/Administrator have agreed, until further notice, to
waive fees and bear certain Fund expenses to the extent that total expenses
(exclusive of service and distribution fees, brokerage commissions, interest,
taxes and extraordinary expenses, if any) exceed 1.90% annually of the Fund's
average net assets.
OTHER: The Fund pays no compensation to its officers, all of whom are
employees of the Advisor 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
the Fund's assets.
NOTE 3. PORTFOLIO INFORMATION
- -------------------------------------------------------------------------------
INVESTMENT ACTIVITY: During the year ended August 31, 1998, purchases and sales
of investments, other than short-term obligations, were $40,641,328 and
$40,805,788, respectively.
Unrealized appreciation (depreciation) at August 31, 1998, based on cost of
investments for federal income tax purposes was:
Gross unrealized appreciation $ 95,528
Gross unrealized depreciation (60,370,530)
-------------
Net unrealized depreciation $ (60,275,002)
=============
CAPITAL LOSS CARRYFORWARDS: At August 31, 1998, 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
------------ --------------
2006 $ 829,000
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 4. STOCK SPLIT
- -------------------------------------------------------------------------------
On July 25, 1997, the Trustees declared and effected a 1.50 for 1 stock split on
shares of beneficial interest outstanding.
NOTE 5. OTHER OPERATIONAL AND CAPITAL ACTIVITY
- -------------------------------------------------------------------------------
For the period May 12, 1997 through May 16, 1997, the Fund had net investment
income of $1,182 and net realized and unrealized losses of $535. The following
is a summary of capital activity from May 12, 1997 through May 16, 1997,
adjusted to reflect the stock split described in Note 4.
Shares
Receipts for shares sold - Class A $ 1,700,000 127,500
Receipts for shares sold - Class B $ 100,000 7,500
Receipts for shares sold - Class C $ 100,000 7,500
Receipts for shares sold - Class Z $ 100,000 7,500
NOTE 6. SUBSCRIPTION OFFERING
- -------------------------------------------------------------------------------
From June 16, 1997 (the record date) through July 25, 1997, the Fund offered the
common shareholders of each of the Participating Funds (Colonial Investment
Grade Municipal Trust, Colonial Municipal Income Fund, Colonial High Income
Municipal Trust, Colonial Intermediate High Income Fund, Colonial Intermarket
Income Trust I, Newport Tiger Fund, Newport Tiger Cub Fund, Newport Japan
Opportunities Fund, Liberty All-Star Equity Fund and Liberty All-Star Growth
Fund, Inc.) the right to subscribe for Class A shares of the Fund, without
paying an up-front sales charge, at the rate of one Load-Waived Class A share of
the Fund for each common share of a Participating Fund held on the record date.
The Load-Waived Class A shares issued are subject to a contingent deferred sales
charge (CDSC) of 2.00% if such shares are redeemed prior to July 31, 1999.
NOTE 7. OTHER RELATED PARTY TRANSACTIONS
- -------------------------------------------------------------------------------
From May 12, 1997 to July 25, 1997 Colonial Management Associates, Inc., an
affiliate of the Fund, was the sole shareholder. During that period the Fund's
operations produced net realized and unrealized gains of $980,279 and net
investment income of $657. A subscription offering of the shares provided
additional capital of $119,548,718 to the Fund on July 25, 1997.
NOTE 8. FINANCIAL HIGHLIGHTS INFORMATION
- -------------------------------------------------------------------------------
The amount of net realized and unrealized gain shown for a share outstanding for
the period ended August 31, 1997 does not correspond with the aggregate net loss
on investments for the period due to the timing of sales and repurchases of Fund
shares in relation to fluctuating market values of the investments of the Fund.
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
Year ended August 31
----------------------------------------------------
1998
Class A Class B Class C Class Z
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net asset value -
Beginning of period $ 17.900 $ 17.860 $ 17.860 $ 17.910
-------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income
(loss) (a)(b)(c) 0.092 0.012 0.013 0.123
Net realized and unrealized loss (11.591) (11.478) (11.498) (11.586)
-------- -------- -------- --------
Total from Investment
Operations (11.499) (11.466) (11.485) (11.463)
-------- -------- -------- --------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income (0.061) (0.054) (0.055) (0.067)
-------- -------- -------- --------
Net asset value - End of period $ 6.340 $ 6.340 $ 6.320 $ 6.380
======== ======== ======== ========
Total return (d)(e) (64.42)% (64.36)% (64.46)% (64.19)%
======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS
Expenses (f) 2.15% 2.90% 2.90% 1.90%
Net investment income (loss) (f) 0.74% (0.01)% (0.01)% 0.99%
Fees and expenses waived or borne
by the Advisor/Administrator (f) 0.31% 0.31% 0.31% 0.31%
Portfolio turnover 58% 58% 58% 58%
Net assets at end of period (000) $ 31,214 $ 1,692 $ 443 $ 49
(a) Net of fees and expenses waived or borne by the Advisor/Administrator
which amounted to: $ 0.039 $ 0.039 $ 0.039 $ 0.039
(b) Per share data was calculated using average shares outstanding during the
period. (c) 1998 information includes distributions from Cheung Kong Holdings
Ltd., Citic Pacific
Ltd., Guangshen Railway Co., Ltd. and Henderson Land Development Co., Ltd., which
amounted to $0.019, $0.036, $0.018 and $0.020 per share, respectively.
(d) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(e) Had the Advisor/Administrator not waived or reimbursed a portion of
expenses, total return would have been reduced.
(f) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS - CONT.
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
Period ended August 31
----------------------------------------------------
1997 (d)
Class A Class B Class C Class Z
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net asset value -
Beginning of period $ 13.340 $ 13.330 $ 13.330 $ 13.340
-------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment
income (loss) (a)(b)(c) 0.052 (0.004) (0.004) 0.065
Net realized and
unrealized gain (e) 4.508 4.534 4.534 4.505
-------- -------- -------- --------
Total from Investment
Operations 4.560 4.530 4.530 4.570
-------- -------- -------- --------
Net asset value -
End of period 17.900 17.860 17.860 17.910
======== ======== ======== ========
Total return (f)(g)(h) 34.22% 33.98% 33.98% 34.29%
======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS
Expenses (i)(j) 2.15% 2.90% 2.90% 1.90%
Net investment
income (loss) (i)(j) 0.89% 0.14% 0.14% 1.14%
Fees and expenses
waived or borne by the
Advisor/Administrator (i)(j) 0.59% 0.59% 0.59% 0.59%
Portfolio turnover (h) 4% 4% 4% 4%
Net assets at end
of period (000) $115,699 $ 135 $ 134 $ 135
(a) Net of fees and expenses waived or borne by the Advisor/Administrator
which amounted to: $ 0.034 $ 0.034 $ 0.034 $ 0.034
(b) Per share data was calculated using average shares outstanding during the period.
(c) Includes distributions from China Light & Power Co., Ltd., Dah Sing Financial, Glorious
Sun Enterprises and Hang Seng Bank Ltd., which amounted to $0.078 per share.
(d) The Fund commenced investment operations on May 12, 1997. The activity shown is from
the effective date of registration (May 16, 1997) with the Securities and
Exchange Commission. The per share information reflects the 1.5 for 1 stock
split effective July 25, 1997.
(e) Please see Note 8 in Notes to the Financial Statements.
(f) Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(g) Had the Advisor/Administrator not waived or reimbursed a portion of
expenses, total return would have been reduced.
(h) Not annualized.
(i) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(j) Annualized.
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
T0 THE TRUSTEES OF COLONIAL TRUST II AND THE SHAREHOLDERS OF
NEWPORT GREATER CHINA FUND
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Newport Greater China Fund (the
"Fund") ( a series of Colonial Trust II) at August 31, 1998, the results of its
operations, the changes in its net assets and the financial highlights for the
periods indicated, in conformity with generally accepted accounting principles.
These financial statements and the financial highlights (hereafter referred to
as "financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of portfolio positions
at August 31, 1998 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
October 12, 1998
<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 Liberty Funds Services 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 Funds Distributor, Inc. 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 Funds Distributor 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 Funds Distributor. 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>
HOW TO REACH US
BY PHONE OR BY MAIL
BY TELEPHONE
CUSTOMER CONNECTION - 1-800-345-6611
For 24-hour account information, call from your touch-tone phone. (Rotary
callers will be automatically connected to a representative during business
hours.) A recorded message will guide you through the menu:
For fund prices, dividends and capital gains information ......... press [1]
For account information .......................................... press [2]
To speak to a service representative ............................. press [3]
For yield and total return information ........................... press [4]
For duplicate statements or new supply of checks ................. press [5]
To order duplicate tax forms and year-end statements ............. press [6]
(February through May)
To review your options at any time during your call .............. press [*]
To speak with a shareholder services representative about your account, call
Monday to Friday, 8:00 a.m. to 8:00 p.m. ET, and Saturdays from February through
mid-April, 10:00 a.m. to 2:00 p.m. ET.
TELEPHONE TRANSACTION DEPARTMENT - 1-800-422-3737
To purchase, exchange or sell shares by telephone, call Monday to Friday, 9:00
a.m. to 7:00 p.m. ET. Transactions received after the close of the New York
Stock Exchange will receive the next business day's closing price.
LITERATURE - 1-800-426-3750
To request literature on any fund distributed by Liberty Funds Distributor,
Inc., call Monday to Friday, 8:30 a.m. to 6:30 p.m. ET.
BY MAIL
LIBERTY FUNDS SERVICES, INC.
P.O. BOX 1722
BOSTON, MA 02105-1722
<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 FUNDS DISTRIBUTOR 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 Newport Greater China Fund is:
Liberty Funds Services, Inc.*
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
Newport Greater China Fund mails one shareholder report to each shareholder
address. If you would like more than one report, please call 1-800-426-3750 and
additional reports will be sent to you.
This report has been prepared for shareholders of Newport Greater China Fund.
This report may also be used as sales literature when preceded or accompanied by
the current prospectus which provides details of sales charges, investment
objectives and operating policies of the Fund and with the most recent copy of
the Liberty Funds Distributor, Inc. Performance Update.
*Effective October 1, 1998, Colonial Investors Service Center, Inc. -- the
Transfer Agent for Colonial, Stein Roe Advisor and Newport Funds -- changed its
name to Liberty Funds Services, Inc.
<PAGE>
- --------------------------------------------------------------------------------
TRUSTEES
ROBERT J. BIRNBAUM
Consultant (formerly Special Counsel, Dechert, Price & Rhoads; President and
Chief Operating Officer, New York Stock Exchange, Inc.; President, American
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, & Frankel)
JAMES E. GRINNELL
Private Investor (formerly Senior Vice President-Operations, The Rockport
Company)
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, Chief Executive Officer and Director,
Hannaford Bros. Co.)
JOHN J. NEUHAUSER
Dean, Boston College School of Management
ROBERT L. SULLIVAN
Retired Partner, KPMG Peat Marwick LLP (formerly Management Consultant, Saatchi
and Saatchi Consulting Ltd. and Principal and International Practice Director,
Management Consulting, Peat Marwick Main & Co.)
[Logo] LIBERTY
COLONIAL o CRABBE HUSON o NEWPORT o STEIN ROE ADVISOR
Liberty Funds Distributor, Inc. (C)1998
One Financial Center, Boston, MA 02111-2621, 1-800-426-3750
Visit us at www.libertyfunds.com
GC-02/942F-1098 M (10/98) 98/1047
- --------------------------------------------------------------------------------
