<PAGE>
[graphic omitted]
China's history dates back more than
5,000 years. Today's global investors
are most interested in the growth
potential created over the last twenty.
NEWPORT GREATER CHINA FUND Annual Report
August 31, 1999
<PAGE>
- --------------------------------------------------------------------------------
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
{Photo of Stephen E. Gibson]
Dear Shareholder:
We are pleased to present the annual report for Newport Greater China Fund. This
report covers the 12 months ended August 31, 1999.
China's efforts to restructure its economy are moving the country forward. The
dismantling of the old system, in which the state no longer provides an
individual's basic needs, is a very positive long-term development for China's
economy. However, it is not an overnight job and does not come without some
pain. This year, the Chinese economy has been burdened by a lack of consumer
spending because of continued high household savings rates.
Despite a year of mediocre growth for China, the Chinese stock markets have
rallied, focusing on low valuations, a general recovery in Asian economies, the
long-term benefits of restructuring and the government's efforts to revive
domestic consumption. These efforts include large infrastructure spending, cuts
in interest rates on deposits, and further development of the stock market. The
Fund performed well, outperforming all other funds in its Lipper peer group for
the 12-month period.(1)
The Fund continues to focus on quality growth companies listed on the
better-regulated exchanges in the Greater China region -- primarily in Hong Kong
and Taiwan. Our approach reflects our belief in the long-term potential of the
Greater China region as well as our understanding of the volatility that is
inherent when investing in developing economies. However, with stock valuations
far lower than those in the U.S. stock market, we believe China continues to
offer significant return potential.
The following report provides more specifics about the Fund and the strategies
and events that contributed to its strong performance. As always, we thank you
for your confidence and we look forward to serving your future investment needs.
Sincerely,
/s/ Stephen E. Gibson
Stephen E.Gibson
President
October 12,1999
(1) Lipper,Inc.,a widely respected data provider for the industry,calculates an
average total return for mutual funds with similar investment objectives as
the Fund. The average total return calculated for funds in the Lipper China
Region Funds category was 80.25%for the 12 months ended August 31,1999. The
Fund's Class A, B and C shares ranked in the first quartile for one year
(ranked 2,3 and 1, respectively out of 25 funds). Rankings do not include
any sales charges. Performance for different share classes will vary with
fees associated with each class. Past performance cannot guarantee future
results.
Because market and economic conditions change,there can be no assurance
that the trends described in this report will continue or come to pass.
<PAGE>
TABLE OF CONTENTS
1 HIGHLIGHTS
2 PORTFOLIO MANAGERS' REPORT
4 PERFORMANCE
5 PORTFOLIO OF INVESTMENTS
6 FINANCIAL STATEMENTS
8 NOTES TO FINANCIAL STATEMENTS
11 FINANCIAL HIGHLIGHTS
---------------------------
Not FDIC May Lose Value
Insured No Bank Guarantee
---------------------------
<PAGE>
- --------------------------------------------------------------------------------
HIGHLIGHTS
- --------------------------------------------------------------------------------
o A GENERAL RECOVERY IN ASIAN ECONOMIES AND CAPITAL MARKETS
Beginning in the second half of 1998, interest rates throughout Asia began
to decline from the worrisome levels reached during the financial crisis~of
1997. An infusion of capital from the International Monetary Fund was
instrumental in bringing rates sharply lower.
o CHINESE GOVERNMENT SHOWS WILL TO RESTRUCTURE ECONOMY
The Chinese government has made significant progress toward restructuring
the country's economy over the past year. Leaders have embraced private
enterprise to a greater extent than ever before, and they continue to
support the development of China's capital markets. In addition, the
government is making progress toward attaining membership in the World Trade
Organization.
o ASIAN RECOVERY A HELPFUL FORCE
Over half of China's exports go to Asia, including a significant percentage
to Japan. The general recovery of Asian economies has been very helpful to
China during this period and will continue to be a critical factor. Exports
to Japan began to rise in the spring of 1999 following many months of
sluggishness.
o STRONG PERFORMANCE IN ITS CATEGORY
Good stock selection and an emphasis on the markets of Hong Kong and Taiwan
helped the Fund's Class A shares significantly outperform the average
performance of funds in their Lipper category.
NEWPORT GREATER CHINA FUND PERFORMANCE VS.
LIPPER CHINA REGION FUNDS CATEGORY AVERAGE: 8/31/98 - 8/31/99
Lipper China Region Funds 121.59%
Newport Greater China Fund 80.25%
Source: Lipper, Inc. The Fund's Class A share return is compared to the Lipper
China Region Funds category average. Returns do not include sales charges.
Performance for all other share classes will vary.
Past performance cannot predict future investment results. Returns and value of
an investment will vary, resulting in a gain or loss on sale. All results shown
assume reinvestment of distributions.
<PAGE>
NET ASSET VALUE PER SHARE ON 8/31/99
Class A $13.94
- --------------------------------
Class B $13.88
- --------------------------------
Class C $14.10
- --------------------------------
Class Z $14.01
- --------------------------------
DISTRIBUTIONS DECLARED PER SHARE FROM 9/1/98 - 8/31/99
Class A $0.082
- --------------------------------
Class B $0.000
- --------------------------------
Class C $0.000
- --------------------------------
Class Z $0.106
- --------------------------------
<PAGE>
ANNUAL REPORT: NEWPORT GREATER CHINA FUND
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS' REPORT
- --------------------------------------------------------------------------------
CHANGE IN TOP EQUITY SECTORS:
8/31/99 VS. 8/31/98
FUND AS FUND AS
OF 8/31/99 OF 8/31/98
- ------------------------------------------------------
REAL ESTATE 15.5% 10.4%
DURABLE GOODS 11.2% 0.0%
HOLDING COMPANIES 11.0% 17.8%
FINANCIALS 10.5% 6.5%
ELECTRIC & GAS SERVICES 9.2% 13.3%
TELE-COMMUNICATIONS 8.9% 13.0%
RETAIL TRADE 6.0% 10.0%
Sector breakdowns are calculated as a percentage of net assets. Because the Fund
is actively managed,there can be no guarantee the Fund will continue to maintain
the current sector breakdown in the future.
BOUGHT
JOHNSON ELECTRIC (3.9% of net assets), based in Hong Kong, is a leading
manufacturer of micromotors for such items as blow dryers, computers and car
seats. The company increased its earnings during the recent crisis and used its
cash build-up to double its size via acquisition.
FUND DRAMATICALLY OUTPERFORMED FOR THE PERIOD
During the fiscal year ended August 31, 1999, Newport Greater China Fund's Class
A shares rose 121.59%, without a sales charge. In addition, it was the
top-ranked fund in its category, according to Lipper, Inc. By comparison, the
average return in the Lipper China Region Funds category was 80.25% for the same
period.
"GREATER CHINA" CONCEPT VALIDATED
We continue to believe that Greater China offers attractive investment
opportunities. The region combines the financial know-how of Hong Kong with~the
manufacturing expertise of Taiwan and the abundance of natural resources and
strong labor force in mainland China. These interlocking factors have been a
powerful force during the region's recent recovery period.
Hong Kong, in particular, has positioned itself to take advantage of China's
growth and reforms. It has adjusted from the Chinese takeover in 1997 and the
Asian economic crisis. Companies have cut costs and have become much more
competitive. Hang Seng Bank (3.8% of net assets) -- a relatively recent addition
to the Fund that has become a core holding -- has had business dealings in China
for over 100 years with the distinction of having more foreign branches than any
other Hong Kong bank. The bank provides the Fund with relatively low-risk
exposure to many of China's growing industries.
GROWTH OPPORTUNITIES FROM CHINA
One especially interesting area of growth in China is infrastructure, a field
that combines government initiatives with private enterprise. A good example of
this partnership is the expressway companies, which are growth businesses with
low risk. We believe these characteristics make expressway companies well-suited
investments for the Fund. Expressway companies are typically Chinese-owned and
derive their revenues from toll collection. As the Chinese economy grows, there
will be more vehicles on the roads which will increase toll revenues. Traffic
growth is starting from a relatively low base, which may translate into high
growth rates over the next few years. The Fund has an investment in Zhejiang
Expressway (3.9% of net assets), which owns expressways in the Zhejiang province
- -- one of the fastest growing regions on China's Eastern seaboard.
The past year has also witnessed impressive performance from the Fund's two
largest positions -- China Telecom (8.9% of net assets) and Li & Fung (7.3% of
net assets). China Telecom is the only exchange-listed cellular operator in
China, which is one of the largest cellular markets in the world. The company's
subscriber base has pierced the 10 million mark, but market penetration remains
relatively low, creating the potential for future growth. In urban areas,
cellular phones have become especially popular because of their mobility and
convenience. Li & Fung, a Hong Kong-based trading company, has expanded beyond
its traditional "middleman" role and now is a complete sourcing company for many
of the world's leading retailers. The company provides support throughout the
manufacturing process, including the purchase of raw materials, production
planning and quality control. These value-added services have sharply boosted Li
& Fung's profit margins and earnings.
POLITICAL CONSIDERATIONS
On a global note, we observe that relations between the U.S. and China have
begun to improve following the disruption caused by the accidental bombing of
the Chinese embassy in Belgrade. This diplomatic thaw could make itself felt in
China's efforts to join the World Trade Organization. If the U.S., China and the
WTO come to terms, it would be very good for China's trade and, more
importantly, would greatly improve opportunities for foreign investors in China.
Separately, the war of words between Taiwan and Beijing on the subject of
Taiwanese statehood has intensified recently. Nevertheless, it is the Fund's
policy to capitalize on individual opportunities as they arise. We do like
certain Taiwanese companies -- particularly in technology, where they have
manufacturing expertise. However, we are aware that these companies may
experience a slowdown as a result of the recent earthquake. One recent Fund
purchase is Taiwan Semiconductor Manufacturing (3.8% of net assets), which
provides foundry services for the semiconductor industry.
A POSITIVE ECONOMIC OUTLOOK FOR GREATER CHINA
We have been encouraged by the significant steps taken by the Chinese government
to support the economy and encourage private enterprise and private sector
investment. According to the Shanghai Private Enterprise Association, for
example, the number of privately held companies in Shanghai currently exceeds
111,000. With more freedom to expand than they have had in the past, privately
owned firms are developing into much larger, more efficient organizations
capable of dominating their industries. In addition, the government has lowered
interest rates, invested heavily in infrastructure, and has subsidized mortgage
loans and higher wages. We believe these developments may enable companies in
the China region to continue to grow over the next several years.
/s/ Tim Tuttle /s/ Chris Legallet
Tim Tuttle Chris Legallet
TIM TUTTLE is managing director of Newport Fund Management and lead portfolio
manager of Newport Greater China Fund. CHRIS LEGALLET is Chief Investment
Officer of Newport Fund Management and co-portfolio manager of Newport Greater
China Fund.
<PAGE>
TOP 10 HOLDINGS AS OF 8/31/99
China Telecom Ltd. 8.9%
- --------------------------------------------
Li & Fung Ltd. 7.3%
- --------------------------------------------
Hutchison Whampoa Ltd. 6.2%
- --------------------------------------------
Cheung Kong Holdings Ltd. 6.1%
- --------------------------------------------
Sun Hung Kai Properties Ltd. 5.5%
- --------------------------------------------
Citic Pacific Ltd. 4.9%
- --------------------------------------------
Hong Kong and China Gas Co., Ltd. 4.7%
- --------------------------------------------
Zhejiang Expressway Co., Ltd. 3.9%
- --------------------------------------------
Johnson Electric Holdings Ltd. 3.9%
- --------------------------------------------
China Resources Enterprises Ltd. 3.9%
Holdings are calculated as a percentage of net assets.Because the Fund is
actively managed,there can be no guarantee the Fund will continue to hold these
securities in the future.
SOLD
GUANGDONG INVESTMENTS AND GUANGZHOU INVESTMENT COMPANY LTD., were sold as the
Fund consolidated its positions among financial holding companies.
<PAGE>
ANNUAL REPORT: NEWPORT GREATER CHINA FUND
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
PERFORMANCE OF A $10,000 INVESTMENT IN ALL SHARE CLASSES 5/31/97 - 8/31/99
Without With
Sales Sales
Charge Charge
Class A $7,884 $7,431
- ------------------------------------
Class B $7,788 $7,555
- ------------------------------------
Class C $7,913 $7,913
- ------------------------------------
Class Z $7,942 N/A
- ------------------------------------
Class A $7,884 $7,728
(Load Modified)
- ------------------------------------
PERFORMANCE OF A $10,000 INVESTMENT IN CLASS A SHARES 5/31/97 - 8/31/99
NGCF NGCF MSCI
Without With Pacific
Sales Sales Ex-Japan Hang Seng
Charge Charge Index Index
- ---------------------------------------------------------------------
May, 1997 $10,000 $ 9,425 $10,000 $10,000
June, 1997 10,741 10,123 10,218 10,300
July, 1997 11,256 10,608 10,191 11,098
August, 1997 9,999 9,424 8,777 9,623
September, 1997 10,210 9,623 9,076 10,262
October, 1997 7,563 7,128 7,150 7,260
November, 1997 7,178 6,765 6,924 7,252
December, 1997 7,329 6,907 6,942 7,397
January, 1998 5,797 5,463 6,513 6,384
February, 1998 7,806 7,357 7,515 7,926
March, 1998 7,711 7,267 7,426 8,000
April, 1998 6,969 6,569 6,907 7,240
May, 1998 5,921 5,580 5,762 6,025
July, 1998 4,445 4,189 5,565 5,597
August, 1998 3,558 3,353 4,812 5,167
September, 1998 4,686 4,416 5,252 5,611
October, 1998 5,792 5,458 6,266 7,241
November, 1998 5,999 5,654 6,557 7,447
December, 1998 5,921 5,580 6,481 7,196
January, 1999 5,289 4,984 6,525 6,813
February, 1999 5,193 4,894 6,457 7,065
March, 1999 5,780 5,447 6,967 7,896
April, 1999 5,865 5,527 8,118 9,646
May, 1999 6,572 6,194 7,541 8,832
June, 1999 8,098 7,633 8,163 9,851
July, 1999 7,703 7,260 8,087 9,600
August, 1999 7,884 7,431 7,901 9,857
AVERAGE ANNUAL TOTAL RETURNS AS OF 8/31/99
<TABLE>
<CAPTION>
Share Class A B C Z A
Inception (Load Modified)(1)
Date 5/16/97 5/16/97 5/16/97 5/16/97 7/25/97
- ------------------------------------------------------------------------------------------------------------------------------
Without With Without With Without With Without Without With
Sales Sales Sales Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge Charge Charge Charge
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year 121.59% 108.85% 118.93% 113.93% 123.10% 122.10% 121.80% 121.59% 119.59%
- ------------------------------------------------------------------------------------------------------------------------------
Life of Fund(2) 2.50 (0.11) 1.96 0.67 2.67 2.67 2.84 (15.28) (16.08)
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/99
Share Class A B C Z A
(Load Modified)(1)
- ------------------------------------------------------------------------------------------------------------------------------
Without With Without With Without With Without Without With
Sales Sales Sales Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge Charge Charge Charge
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 year 58.59% 49.47% 57.44% 52.44% 59.69% 58.69% 58.74% 58.59% 56.59%
- ------------------------------------------------------------------------------------------------------------------------------
Life of Fund(2) 4.01 1.15 3.49 2.12 4.24 4.24 4.35 (15.34) (16.21)
</TABLE>
(1) The "With Sales Charge" load--modified Class A total return is shown from
its inception without a front-end sales charge but with a 2% contingent
deferred sales charge (CDSC). The last day that this CDSC applies is August
31,1999. Class B, C and Z shares were not available during the subscription
rights offering period.
(2) The Fund's return from 5/16/97 to 5/31/97 was 34%,which explains why the
Fund's Life return in the table is positive while the return on the chart
is negative.
Past performance cannot predict future investment results. Returns and value
of an investment will vary, resulting in a gain or loss on sale. All results
shown assume reinvestment of distributions. The "With Sales Charge" returns
include the maximum 5.75% charge for Class A shares and the maximum CDSC of
5% for one year and 3% for life for 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 or its affiliates. Absent
these waivers or reimbursement arrangements, performance results would have
been lower.
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.The Morgan Stanley Capital International (MSCI)Pacific
Region (Ex-Japan) Index is a broad-based,unmanaged index that tracks the
performance of stocks in Pacific Basin 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, 1999
(In thousands)
COMMON STOCKS - 96.4% COUNTRY SHARES VALUE
- ------------------------------------------------------------------------------
CONSTRUCTION - 4.2%
BUILDING CONSTRUCTION - 0.3%
Shenzen Fangda Co., Ltd., Class B Ch 339 $ 147
-------
SPECIAL TRADE CONTRACTORS - 3.9%
Zhejiang Expressway Co., Ltd. HK 13,018 2,314
-------
- ------------------------------------------------------------------------------
FINANCE, INSURANCE & REAL ESTATE - 38.6%
DEPOSITORY INSTITUTIONS - 10.5%
Dah Sing Financial HK 215 858
HSBC Holdings PLC (a) HK 172 2,130
Hang Seng Bank Ltd. HK 197 2,226
Wing Hang Bank Ltd. HK 276 960
-------
6,174
-------
HOLDING COMPANIES - 11.0%
Citic Pacific Ltd. HK 921 2,864
Hutchison Whampoa Ltd. HK 372 3,629
-------
6,493
-------
INSURANCE CARRIERS -- 1.6%
AXA China Region Ltd. HK 1,330 933
-------
REAL ESTATE - 15.5%
Cheung Kong Holdings Ltd. HK 413 3,590
China Resources Enterprises Ltd. HK 1,388 2,279
Sun Hung Kai Properties Ltd. HK 380 3,255
-------
9,124
-------
- ------------------------------------------------------------------------------
MANUFACTURING - 3.3%
HOUSEHOLD APPLIANCES
Guangdong Kelon Electric Holdings, Class H HK 1,905 1,950
-------
- ------------------------------------------------------------------------------
MINING & ENERGY - 3.0%
COAL MINING
Yanzhou Coal Mining Co., Ltd., Class H Ch 4,004 1,766
-------
- ------------------------------------------------------------------------------
RETAIL TRADE - 6.0%
APPAREL & ACCESSORY STORES - 2.3%
Glorious Sun Enterprises HK 4,236 1,364
-------
FOOD STORES - 3.7%
President Chain Store Corp. Tw 728 2,152
-------
RESTAURANTS - 0.0%
Cafe de Coral Holdings Ltd. HK 52 25
-------
- ------------------------------------------------------------------------------
SERVICES - 6.1%
BUSINESS SERVICES - 2.3%
Legend Holdings Ltd. HK 1,400 1,352
-------
COMPUTER SOFTWARE - 3.8%
Taiwan Semiconductor Manufacturing Co. (b) Tw 529 2,245
-------
- ------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATIONS,
ELECTRIC, GAS & SANITARY SERVICES - 22.4%
ELECTRIC SERVICES - 4.5%
Beijing Datang Power Generation Co., Ltd., Class H HK 3,898 1,041
Zhejiang Southeast Electric Power Co., Class B Ch 4,772 1,594
-------
2,635
-------
GAS SERVICES - 4.7%
Hong Kong and China Gas Co., Ltd. HK 1,987 2,789
-------
LOCAL & SUBURBAN TRANSIT - 1.1%
Shanghai Dazhong Taxi Co. (b) Ch 1,643 667
-------
RAILROAD - 1.5%
Guangshen Railing Co., Ltd., Class H HK 6,889 887
-------
TELECOMMUNICATION - 8.9%
China Telecom Ltd. (a) (b) HK 1,680 5,219
-------
TRANSPORTATION SERVICES - 1.7%
Jiangsu Expressway Co., Ltd., Class H HK 3,608 650
Shenzhen Expressway Co., Ltd., Class H Ch 2,100 368
-------
1,018
-------
- ------------------------------------------------------------------------------
WHOLESALE TRADE - 12.8%
DURABLE GOODS - 11.2%
Johnson Electric Holdings Ltd. HK 508 2,290
Li & Fung Ltd. HK 1,346 4,316
-------
6,606
-------
NONDURABLE GOODS - 1.6%
Ng Fung Hong Ltd. HK 1,380 969
-------
TOTAL COMMON STOCKS (cost of $59,177) (c) 56,829
-------
SHORT-TERM OBLIGATIONS - 3.1% PAR
- ------------------------------------------------------------------------------
Repurchase agreement with ABN AMRO Chicago Corp.,
dated 08/31/99, due 09/01/99 at 5.400%,
collateralized by U.S. Treasury bonds and/or
notes with various maturities to 2027, market
value $1,365 (repurchase proceeds $1,340) $ 1,340 1,340
Federal National Mortgage Association,
5.160% 09/01/1999 (d) 500 500
-------
TOTAL SHORT-TERM OBLIGATIONS 1,840
-------
OTHER ASSETS & LIABILITIES, NET - 0.5% 263
- ------------------------------------------------------------------------------
NET ASSETS - 100% $58,932
=======
NOTES TO INVESTMENT PORTFOLIO:
- -------------------------------------------------------------------------------
(a) The value of this security represents fair value as determined in good
faith under the direction of the Trustees.
(b) Non-income producing.
(c) Cost for federal income tax purposes is the same.
(d) Rate represents yield at date of purchase.
SUMMARY OF
SECURITIES BY COUNTRY COUNTRY VALUE % OF TOTAL
- -----------------------------------------------------------------------------
Hong Kong HK $47,890 84.3
China Ch 4,542 8.0
Taiwan Tw 4,397 7.7
------- -----
$56,829 100.0
------- -----
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 AND LIABILITIES
- --------------------------------------------------------------------------------
August 31, 1999
(In thousands except for per share amounts and footnotes)
ASSETS
Investments at value (cost $59,177) $ 56,829
Short-term obligations 1,840
--------
58,669
Cash including foreign currencies
(cost $25) $ 25
Receivable for:
Investments sold 314
Dividends 169
Expense reimbursement due from Advisor/Administrator 133
Fund shares sold 68
Deferred organization expenses 6
Other 5 720
---- --------
Total Assets 59,389
LIABILITIES
Payable due to custodian bank 45
Cash including foreign securities
(cost $72) 72
Payable for:
Fund shares repurchased 171
Investments purchased 49
Accrued:
Management fee 55
Administration fee 12
Transfer agent fee 11
Bookkeeping fee 3
Deferred Trustees fees 1
Other 38
----
Total liabilities 457
--------
Net Assets $ 58,932
--------
CLASS A
Net asset value & redemption price per
share ($54,623/3,918) $ 13.94(a)
--------
Maximum offering price per share ($13.94/0.9425) $ 14.79(b)
--------
CLASS B
Net asset value & offering price per share ($3,423/246) $ 13.88(a)
--------
CLASS C
Net asset value & offering price per share ($774/55) $ 14.10(a)
--------
CLASS Z
Net asset value, offering & redemption price
per share ($112/8) $ 14.01
--------
COMPOSITION OF NET ASSETS
Capital paid in $104,453
(177)
Overdistributed net investment income
Accumulated net realized loss (42,996)
Net unrealized depreciation (2,348)
--------
$ 58,932
========
(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 Yaesr Ended August 31, 1999
(In thousands)
INVESTMENT INCOME
Dividends:
Citic Pacific Ltd. $ 99
Glorious Sun Enterprises 88
Guangshen Railway Co., Ltd.,
Class H 97
Hang Seng Bank Ltd. 92
Hong Kong and China Gas Co., Ltd. 82
Li & Fung Ltd. 130
Zhejiang Southeast Electric Power Co.,
Class B 222
Other 697
Interest 49
-------
Total Investment Income (net of nonreclaimable
foreign taxes withheld at source which
amounted to $33) 1,556
EXPENSES
Management fee $ 581
Administration fee 127
Service fee - Class A, Class B, Class C 127
Distribution fee - Class B 21
Distribution fee - Class C 5
Transfer agent fee 177
Bookkeeping fee 28
Trustees fee 9
Custodian fee 49
Audit fee 47
Legal fee 6
Registration fee 43
Reports to shareholders 10
Amortization of deferred organization expenses 2
Other 32
------
1,264
Fees and expenses waived by the
Advisor/Administrator (149) 1,115
------ -------
Net Investment Income 441
-------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
PORTFOLIO POSITIONS
Net realized loss on:
Investments (21,517)
Foreign currency transactions (568)
------
Net Realized Loss (22,085)
Net change in unrealized appreciation/depreciation
during the period on:
Investments 57,905
Foreign currency transactions (49)
------
Net Change in Unrealized Appreciation/Depreciation 57,856
-------
Net Gain 35,771
-------
Increase in Net Assets from Operations $36,212
-------
See notes to financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
(In thousands)
YEAR ENDED AUGUST 31
----------------------
INCREASE (DECREASE) IN NET ASSETS 1999 1998
- -----------------------------------------------------------------------------
OPERATIONS
Net investment income $ 441 $ 519
Net realized loss (22,085) (21,497)
Net change in unrealized appreciation/depreciation 57,856 (46,968)
--------- ---------
Net Increase (Decrease) from Operations 36,212 (67,946)
--------- ---------
DISTRIBUTIONS
From net investment income -- Class A (362) (356)
From net investment income -- Class B -- (9)
From net investment income -- Class C -- (2)
From net investment income -- Class Z (1) (a)
--------- ---------
35,849 (68,313)
--------- ---------
FUND SHARE TRANSACTIONS
Receipts for shares sold -- Class A 10,986 11,106
Value of distributions reinvested -- Class A 245 231
Cost of shares repurchased -- Class A (21,210) (29,994)
--------- ---------
(9,979) (18,657)
--------- ---------
Receipts for shares sold -- Class B 1,301 4,627
Value of distributions reinvested -- Class B -- 5
Cost of shares repurchased -- Class B (1,457) (1,277)
--------- ---------
(156) 3,355
--------- ---------
Receipts for shares sold -- Class C 281 2,192
Value of distributions reinvested -- Class C -- 1
Cost of shares repurchased -- Class C (464) (1,285)
--------- ---------
(183) 908
--------- ---------
Receipts for shares sold -- Class Z 2 1
Value of distributions reinvested -- Class Z 1 1
--------- ---------
3 2
--------- ---------
Net Decrease from Fund Share Transactions (10,315) (14,392)
--------- ---------
Total Increase (Decrease) 25,534 (82,705)
NET ASSETS
Beginning of period 33,398 116,103
--------- ---------
End of period (net of overdistributed and including
undistributed net investment income of $177
and $313, respectively) $ 58,932 $ 33,398
========= =========
NUMBER OF FUND SHARES
Sold -- Class A 975 953
Issued for distributions reinvested -- Class A 23 18
Repurchased -- Class A (2,001) (2,514)
--------- ---------
(1,003) (1,543)
--------- ---------
Sold -- Class B 123 382
Issued for distributions reinvested -- Class B -- (a)
Repurchased -- Class B (144) (123)
--------- ---------
(21) 259
--------- ---------
Sold -- Class C 26 194
Issued for distributions reinvested -- Class C -- (a)
Repurchased -- Class C (41) (132)
--------- ---------
(15) 62
--------- ---------
Sold -- Class Z (a) (a)
Issued for distributions reinvested -- Class Z (a) (a)
--------- ---------
(a) (a)
--------- ---------
(a) Rounds to less than one.
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
August 31, 1999
NOTE 1. ACCOUNTING POLICIES
ORGANIZATION
Newport Greater China Fund (the Fund), a series of Liberty Funds Trust II,
formerly 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 capital appreciation 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. A
1.00% contingent deferred sales charge is assessed 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, as described in the Fund's 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 under procedures
approved by the Trustees.
Forward currency contracts are valued based on the weighted value of the
contracts with similar maturities.
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), 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
includes the gains (losses) arising from the fluctuations in exchange rates
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, the actual 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 a monthly fee
equal to $27,000 annually plus a percentage of the Fund's average net assets
as follows:
AVERAGE NET ASSETS ANNUAL FEE RATE
------------------ ---------------
First $50 million No charge
Next $950 million 0.035%
TRANSFER AGENT FEE
Liberty Funds Services Inc. (the Transfer Agent), an affiliate of the
Administrator, provides shareholder services for a monthly fee equal to 0.236%
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. (the Distributor), a subsidiary of the
Administrator, is the Fund's principal underwriter. For the year ended August
31, 1999, the Fund has been advised that the Distributor retained net
underwriting discounts of $7,977 on sales of the Fund's Class A shares and
received contingent deferred sales charges (CDSC) of $176,977, $13,018 and
$4,403 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 Fund's assets.
NOTE 3. PORTFOLIO INFORMATION
INVESTMENT ACTIVITY
During the year ended August 31, 1999, purchases and sales of investments,
other than short-term obligations, were $9,760,594 and $21,557,048,
respectively.
Unrealized appreciation (depreciation) at August 31, 1999, based on cost of
investments for both financial statement and federal income tax purposes was:
Gross unrealized appreciation $11,619,172
Gross unrealized depreciation (13,967,342)
-----------
Net unrealized depreciation $(2,348,170)
===========
CAPITAL LOSS CARRYFORWARDS
At August 31, 1999, 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
2007 33,041,000
-----------
$33,870,000
-----------
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. LINE OF CREDIT
The Fund may borrow up to 33 1/3% 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 funds
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 year ended August 31, 1999.
- -------------------------------------------------------------------------------
CHANGE IN INDEPENDENT AUDITOR (UNAUDITED)
Based on the recommendation of the Audit Committee of the Fund on June 18,
1999, the Board of Trustees determined not to retain PricewaterhouseCoopers
LLP (PwC) as the Fund's independent auditor and voted to appoint Ernst & Young
LLP for the fiscal year ended August 31, 2000. During the two most recent
fiscal years, PWC's audit reports contained no adverse opinion or disclaimer
of opinion; nor were its reports qualified or modified as to uncertainty,
audit scope, or accounting principle. Further, in connection with its audits
for the two most recent fiscal years and through October 12, 1999, there were
no disagreements between the Fund and PwC on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure, which if not resolved to the satisfaction of PwC would have caused
it to make reference to the disagreements in its report on the financial
statements for such years.
- ------------------------------------------------------------------------------
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding
throughout each period are as follows:
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31, 1999
--------------------------------------------------------
CLASS A CLASS B CLASS C CLASS Z
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 6.340 $ 6.340 $ 6.320 $ 6.380
----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (a)(b)(c) 0.100 0.019 0.019 0.128
Net realized and unrealized gain 7.582 7.521 7.761 7.608
----------- ----------- ----------- -----------
Total from Investment Operations 7.682 7.540 7.780 7.736
----------- ----------- ----------- -----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income (0.082) -- -- (0.106)
----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 13.940 $ 13.880 $ 14.100 $ 14.010
----------- ----------- ----------- -----------
Total return (d)(e) 121.59% 118.93% 123.10% 121.80%
----------- ----------- ----------- -----------
RATIOS TO AVERAGE NET ASSETS
Expenses (f) 2.15% 2.90% 2.90% 1.90%
Net investment income (f) 0.92% 0.17% 0.17% 1.17%
Fees and expenses waived or borne by the
Advisor/Administrator (f) 0.30% 0.30% 0.30% 0.30%
Portfolio turnover 20% 20% 20% 20%
Net assets at end of period (000) $ 54,623 $ 3,423 $ 774 $ 112
(a) Net of fees and expenses waived or borne
by the Advisor/Administrator which
amounted to: $ 0.032 $ 0.032 $ 0.032 $ 0.032
(b) Per share data was calculated using average shares outstanding during the period.
(c) Includes distributions from securities listed on the Statement of Operations which amounted to $0.021, $0.019, $0.021,
$0.020, $0.017, $0.028 and $0.047 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>
<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 (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
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 (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) 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.
(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
TO THE TRUSTEES OF LIBERTY FUNDS 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 Liberty Funds Trust II, formerly Colonial Trust II),
at August 31, 1999, 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,
1999 by correspondence with the custodian, provide a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
October 12, 1999
<PAGE>
ANNUAL REPORT: NEWPORT GREATER CHINA FUND
- --------------------------------------------------------------------------------
TRUSTEES & TRANSFER AGENT
- --------------------------------------------------------------------------------
ROBERT J. BIRNBAUM WILLIAM E. MAYER
Consultant (formerly Special Partner, Development Capital, LLC
Counsel, Dechert, Price & Rhoads; (formerly Dean, College of Business
President and Chief Operating and Management, University of
Officer, New York Stock Exchange, Maryland; Dean, Simon Graduate
Inc.; President, American Stock School of Business, University of
Exchange Inc.) Rochester; Chairman and Chief
Executive Officer, CS First Boston
TOM BLEASDALE Merchant Bank; and President and
Retired (formerly Chairman of the Chief Executive Officer, The First
Board and Chief Executive Officer, Boston Corporation)
Shore Bank & Trust Company)
JAMES L. MOODY, JR.
JOHN V. CARBERRY Retired (formerly Chairman of the
Senior Vice President of Liberty Board, Chief Executive Officer and
Financial Companies, Inc. (formerly Director Hannaford Bros. Co.)
Managing Director, Salomon
Brothers) JOHN J. NEUHAUSER
Dean, Boston College School of
LORA S. COLLINS Management
Attorney (formerly Attorney,
Kramer, Levin, Naftalis & Frankel) THOMAS E. STITZEL
Professor of Finance, College of
JAMES E. GRINNELL Business, Boise State University;
Private Investor (formerly Senior Business Consultant and Author
Vice President-Operations, The
Rockport Company) ROBERT L. SULLIVAN
Retired Partner, KPMG LLP (formerly
RICHARD W. LOWRY Management Consultant, Saatchi and
Private Investor (formerly Chairman Saatchi Consulting Ltd. and
and Chief Executive Officer, U.S. Principal and International
Plywood Corporation) Practice Director, Management
Consulting, Peat Marwick Main & Co.)
SALVATORE MACERA
Private Investor (formerly ANNE-LEE VERVILLE
Executive Vice President of Itek Consultant (formerly General
Corp. and President of Itek Optical Manager, Global Education Industry,
& Electronic Industries, Inc.) and President, Applications
Solutions Division, IBM
Corporation)
- --------------------------------------------------------------------------------
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
The 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.
<PAGE>
- --------------------------------------------------------------------------------
CHOOSE LIBERTY
- --------------------------------------------------------------------------------
BECAUSE NO SINGLE INVESTMENT MANAGER CAN BE ALL THINGS TO ALL INVESTORS.(SM)
- --------------------------------------------------------------------------------
L I B E R T Y
- --------------------------------------------------------------------------------
[Graphic Omitted] Colonial has long been a recognized leader in fixed-income
investing. In addition, Colonial has distinguished itself
with both a traditional value and a more contemporary
approach to equity investing.
- --------------------------------------------------------------------------------
[Graphic Omitted] Crabbe Huson's contrarian investment style seeks long-term
performance by investing in stocks from high-quality,
out-of-favor companies. This risk-averse strategy
capitalizes on the potential of these companies to regain
market popularity.
- --------------------------------------------------------------------------------
[Graphic Omitted] LAMCO brings institutional money management to individual
investors through a disciplined multi-manager investment
process that seeks to deliver consistent long-term returns.
- --------------------------------------------------------------------------------
[Graphic Omitted] Leaders in Asian investing with a global reach.
- --------------------------------------------------------------------------------
[Graphic Omitted] Stein Roe's growth management style emphasizes companies
with the ability to create, maintain and grow earnings in
different market environments.
- --------------------------------------------------------------------------------
BOSTON o CHICAGO o NEW YORK o PORTLAND o SAN FRANCISCO
- --------------------------------------------------------------------------------
That's why each of these affiliated managers has excelled in a particular
investment style. These managers not only specialize in a distinct investment
style, they hold a passion for their style along with a demonstrated track
record.
Each of these managers is a member of the Liberty Financial Companies (NYSE: L),
a diversified asset accumulation and management organization with over $62.7
billion in assets under management for more than 1.7 million investors. Many of
the affiliated managers' products are offered by prospectus through Liberty
Funds Distributor, Inc.
Ask your financial advisor to help you develop an investment strategy that
blends the complementary disciplines of different managers into a well-balanced
program tailored to your goals.
- --------------------------------------------------------------------------------
NEWPORT GREATER CHINA FUND ANNUAL REPORT
- --------------------------------------------------------------------------------
[Graphic
Omitted] L I B E R T Y
-----------------
F U N D S
ALL-STAR o COLONIAL o CRABBE HUSON o NEWPORT o STEIN ROE ADVISOR
GC-02/766H-0899 (10/99) 99/1244
