<PAGE>
[graphic omitted]
- -----------------------------------------------
NEWPORT JAPAN OPPORTUNITIES 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 Japan Opportunities
Fund. This report covers the 12 months ended August 31, 1999.
The Japanese stock market, as measured by the Nikkei 225 Index, staged a
double-digit comeback in 1999.(1) This was a welcome turnaround on the heels of
one of the most difficult investment periods in recent history for all of
Southeast Asia.
Increased optimism among investors and an improving economy helped create a much
more buoyant environment for stock prices than has been seen in several years.
In this environment, Newport Japan Opportunities Fund performed very well. The
Fund is ranked in the top quartile of its Lipper peer group for both the one-
and three-year periods ended August 31, 1999.(2) We believe Newport's long track
record of investment management in Asia and Japan has made a significant
contribution to this performance record.
The following report provides more specifics about the Fund's performance and
the strategies that helped make it one of the strongest performers in its peer
group. As always, we thank you for the opportunity to serve your investment
needs.
Sincerely,
/s/ Stephen E. Gibson
Stephen E. Gibson
President
October 12, 1999
TABLE OF CONTENTS
1 HIGHLIGHTS
2 PORTFOLIO MANAGER'S REPORT
3 PERFORMANCE
4 PORTFOLIO OF INVESTMENTS
5 FINANCIAL STATEMENTS
8 NOTES TO FINANCIAL STATEMENTS
11 FINANCIAL HIGHLIGHTS
---------------------------
Not FDIC May Lose Value
Insured No Bank Guarantee
---------------------------
(1) The Nikkei 225 Index is an unmanaged index that tracks the performance of
stocks traded on the Tokyo Stock Exchange. Unlike mutual funds, indexes are
not investments and do not incur fees or expenses. It is not possible to
invest in an index.
(2) 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
Japanese Region Funds category was 83.23% for the 12 months ended August 31,
1999. The Fund's Class A shares ranked in the first quartile for one year
(ranked 6 out of 42 funds) and in the first quartile for three years (ranked
4 out of 27 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>
- -------------------------------------------------------------------------------
HIGHLIGHTS
- -------------------------------------------------------------------------------
o TANGIBLE SIGNS OF AN ECONOMIC RECOVERY
Japan's economy grew by 2.0% in the first quarter of 1999. Inventories are
at a 10-year low and industrial production has been positive for two
consecutive months.
o CONSUMER SPENDING RISES
Japanese consumers, who account for 60% of the economy, have started to
loosen their purse strings. Spending on items such as appliances and
computers has risen.
o SMALL COMPANIES LEAD THE WAY
New, smaller companies, which have reorganized around more competitive ways
of doing business, have profited the most in the recent stock market rally.
o STRONG PERFORMANCE FOR THE PAST 12 MONTHS
In an environment of improving economic and financial conditions in Japan,
Newport's diligent research process helped the Fund deliver strong gains
during the reporting period.
NET ASSET VALUE PER SHARE ON 8/31/99
Class A $18.54
- ----------------------------
Class B $18.11
- ----------------------------
Class C $18.10
- ----------------------------
Class Z $18.70
- ----------------------------
TOP 10 HOLDINGS AS OF 8/31/99
Softbank Corp. 4.2%
- ---------------------------------------
Sodick Co., Ltd. 3.1%
- ---------------------------------------
Shohkoh Fund 2.6%
- ---------------------------------------
Drake Beam~Morin-Japan, Inc. 2.6%
- ---------------------------------------
Hikari Tsushin, Inc. 2.6%
- ---------------------------------------
Aiful Corp. 2.2%
- ---------------------------------------
Don Quijote Co., Ltd. 2.2%
- ---------------------------------------
Murata Manufacturing Co., Ltd. 2.1%
- ---------------------------------------
Fujitsu Support & Services, Inc. 2.1%
- ---------------------------------------
Union Tool 2.1%
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.
NEWPORT JAPAN OPPORTUNITIES FUND PERFORMANCE
VS. LIPPER JAPANESE FUNDS CATEGORY AVERAGE: 8/31/98 - 8/31/99
Japan Opportunities Fund 114.09%
Lipper Average 83.23%
Source: Lipper, Inc. The Fund's Class A share return is compared to the Lipper
Japanese Funds category average. Returns do not include sales charges.
Performance for all other shares will vary.
Past performance cannot guarantee future results. Returns and value of an
investment will vary, resulting in a gain or loss on sale. Performance results
assume reinvestment of distributions.
<PAGE>
ANNUAL REPORT: NEWPORT JAPAN OPPORTUNITIES FUND
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER'S REPORT
- --------------------------------------------------------------------------------
THE FUND PERFORMED VERY WELL DURING THE PERIOD
Newport Japan Opportunities Fund returned 114.09% for the 12-month period, based
on Class A shares without a sales charge. That was significantly higher than the
Lipper Japanese Funds category, which returned an average of 83.23%, and the
Nikkei 225 Index, a broad-based measure of the Japanese stock market, which
gained 24.70% for the same period. We believe the Fund's performance can be
attributed to our dynamic management style, which seeks overlooked stocks in
companies that have strong positions in rapidly growing businesses.
GOVERNMENT STIMULUS PACKAGE IS BEGINNING TO WORK
During the year, the Japanese government engineered a $1.1 trillion economic
recovery program that, so far, has exceeded official expectations. The infusion
of funds into the banking system gave banks additional liquidity, enabling them
to lend money to a wider range of businesses. This increased credit contributed
to higher consumer confidence and helped boost capital spending by corporations.
Nevertheless, the recovery is still in the early stages, as actual improvements
in the economy to date have been relatively modest. However, because the decline
in Japan's economy has been so dramatic and long-lasting, the reversal of the
negative trend has played a large part in igniting the financial markets.
STOCK SELECTION FOLLOWED THREE MAIN THEMES
The Fund concentrated on finding companies that capitalized on three major
themes: corporate restructuring, global product dominance and niche marketing.
Sony (1.7% of net assets) is a good example of a global company that has made
significant strides in restructuring. It has revitalized its organization to pay
more attention to shareholder value. And because it dominates the markets for
its products -- which include a wide range of electronic products and devices as
well as recorded music -- the company has been less vulnerable to the effects of
a stronger yen. A strong yen can be a challenge for Japanese exporting companies
that must compete in a global marketplace because it makes Japanese products
more expensive outside of Japan.
The Fund also owns Don Quijote (2.2% of net assets), a popular retailer and an
example of a company that has succeeded in creating a niche for itself -- stores
are kept open until midnight, turning shopping into a form of entertainment.
Moreover, in a significant break with Japanese business tradition, the company
judges and rewards the profitability of each department.
C-TwoNetwork (1.9% of net assets) is another niche company that has been a
strong performer in the portfolio. It is a grocery chain that has successfully
marketed generic products to its customers. Shoppers get the benefit of lower
prices while the company rings up higher profit margins.
SMALL COMPANIES, BIG OPPORTUNITIES
Small companies have been some of the portfolio's best performers. Since many of
these firms are relatively new, they are free of many of the cultural systems
and bureaucracies that have made some of Japan's older, larger companies less
competitive. In addition, the Fund is concentrated in several small companies in
the rapidly growing technology and non-bank financial sectors. Because
technology is a large weighting in the portfolio, the Fund has benefited from
strong performance in that sector. Non-bank financials are the Fund's fourth
largest position. These companies provide credit primarily to small businesses
that don't qualify for bank loans. As Japan's economy has improved, these
lenders have seen an increase in business.
A POSITIVE OUTLOOK
We believe the prospects for the Japanese stock market will remain positive, as
long as the current economic recovery is sustained. The stock market is still
well below where it was at the Fund's inception on June 3, 1996, although the
Fund has still averaged over 20% annually, excluding sales charges, since this
date. And, despite the recent improvement, the economy is still well below where
it was in 1996. In this environment, we are optimistic that through careful
stock selection we can continue to provide value for the Fund's shareholders.
The Japanese stock market is one of the few markets in the world where active
management has made a difference for investors.
/s/ David Smith
David Smith
David Smith is a senior vice president of Newport Fund Management.
CHANGE IN TOP FIVE SECTOR BREAKDOWNS 8/31/99 VS. 8/31/98
FUNDS AS FUNDS AS
OF 8/31/99 OF 8/31/98
---------- ----------
MANUFACTURING 25.8% 55.2%
SERVICES 14.3% 11.6%
RETAIL TRADE 9.0% 7.8%
FINANCIALS 8.5% 16.0%
COMMUNICATIONS 4.8% 0.9%
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 same sector breakdown in the future.
BOUGHT
- --------------------------------------------------------------------------------
HIKARI TSUSHIN
(2.6% of net assets), one of Japan's top retailers of cellular phones. Forty
percent of Japanese households have cellular phones -- one of the highest usage
rates in the world. The company also invests in internet-related businesses.
SOLD
- --------------------------------------------------------------------------------
Mercion, a company that participated in the red wine boom in Japan. When liquor
stores reported that their inventories had swelled, we sold the stock before it
lost ground.
<PAGE>
ANNUAL REPORT: NEWPORT JAPAN OPPORTUNITIES FUND
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
PERFORMANCE OF A $10,000 INVESTMENT IN
CLASS A SHARES 6/30/96 - 8/31/99
NJOF NJOF MSCI
Without With Japan
Sales Charge Sales Charge Index
- -------------------------------------------
6/96 $10,000 $ 9,425 $10,000
7/96 9,768 9,206 9,552
8/96 9,382 8,842 9,125
9/96 9,391 8,851 9,441
10/96 8,928 8,414 8,808
11/96 9,150 8,623 8,976
12/96 9,005 8,487 8,356
1/97 8,676 8,177 7,446
2/97 8,802 8,295 7,620
3/97 8,754 8,250 7,369
4/97 9,179 8,651 7,636
5/97 10,213 9,625 8,480
6/97 10,676 10,006 9,113
7/97 11,082 10,444 8,836
8/97 9,710 9,151 8,069
9/97 9,923 9,352 7,947
10/97 9,488 8,942 7,207
11/97 9,043 8,523 6,765
12/97 8,726 8,224 6,378
1/98 9,278 8,744 6,947
2/98 9,104 8,580 6,983
3/98 8,717 8,215 6,508
4/98 8,862 8,352 6,481
5/98 8,455 7,968 6,125
6/98 8,484 7,996 6,211
7/98 8,823 8,315 6,130
8/98 8,387 7,904 5,431
9/98 8,194 7,722 5,282
10/98 8,930 8,416 6,168
11/98 9,598 9,046 6,450
12/98 10,218 9,630 6,700
1/99 10,247 9,657 6,748
2/99 10,247 9,657 6,600
3/99 12,039 11,346 7,516
4/99 12,969 12,223 7,830
5/99 12,571 11,848 7,388
6/99 14,886 14,030 8,088
7/99 16,630 15,673 8,895
8/99 17,956 16,924 8,833
PERFORMANCE OF A $10,000 INVESTMENT IN ALL SHARE CLASSES 6/30/96 - 8/31/99
Without With
Sales Sales
Charge Charge
Class A $17,956 $16,924
- --------------------------------
Class B $17,557 $17,257
- --------------------------------
Class C $17,548 $17,548
- --------------------------------
Class Z $18,111 N/A
- --------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 8/31/99
<TABLE>
<CAPTION>
Share Class A B C Z
Inception Date 6/3/96 6/3/96 6/3/96 6/3/96
- ---------------------------------------------------------------------------------------------------------
Without With Without With Without With Without
Sales Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge Charge
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 year 114.09% 101.78% 112.56% 107.56% 112.69% 111.69% 114.70%
- ---------------------------------------------------------------------------------------------------------
Life of Fund 21.03 18.85 20.16 19.55 20.14 20.14 21.35
- ---------------------------------------------------------------------------------------------------------
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/99
Share Class A B C Z
- ---------------------------------------------------------------------------------------------------------
Without With Without With Without With Without
Sales Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge Charge
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 year 75.46% 65.37% 74.25% 69.25% 74.25% 73.25% 76.02%
- ---------------------------------------------------------------------------------------------------------
Life of Fund 15.08 12.89 14.23 13.48 14.23 14.23 15.37
- ---------------------------------------------------------------------------------------------------------
</TABLE>
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 contingent deferred
sales charge of 5% for one year and 3% 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 or its affiliates. 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 Morgan Stanley Capital International Japan Index (MSCI Japan) is an
unmanaged index that tracks the performance of Japanese stocks. Unlike mutual
funds, indexes are not investments and do not incur fees or expenses. It is not
possible to invest directly in an index.
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------
August 31, 1999
(In thousands)
SHARES VALUE
COMMON STOCKS - 67.4%
- -----------------------------------------------------------------------------
FINANCE, INSURANCE & REAL ESTATE - 9.3%
FINANCIAL SERVICES - 1.0%
Aeon Credit Service Co., Ltd. 5 $ 478
-------
NONDEPOSITORY CREDIT INSTITUTIONS - 7.5%
Acom Co., Ltd. 5 507
Aiful Corp. 6 1,110
Shohkoh Fund 2 1,303
Takefuji Corp. 5 804
-------
3,724
-------
REAL ESTATE - 0.8%
Mitsubishi Estate Co., Ltd. 40 413
-------
- -----------------------------------------------------------------------------
MANUFACTURING - 25.8%
CHEMICALS & ALLIED PRODUCTS - 2.8%
Fujimi, Inc. 12 630
Takeda Chemical Industries Ltd. 15 753
-------
1,383
-------
COMMUNICATIONS EQUIPMENT - 3.4%
Matsushita Communication Industrial Co. 10 850
Sony Corp. 7 841
-------
1,691
-------
ELECTRICAL INDUSTRIAL EQUIPMENT - 5.1%
Nidec Corp. 5 985
Sodick Co., Ltd. (a) 160 1,540
-------
2,525
-------
ELECTRONIC COMPONENTS - 3.3%
Murata Manufacturing Co., Ltd. 13 1,044
Rohm Co., Ltd. 3 597
-------
1,641
-------
FOOD & KINDRED PRODUCTS - 4.1%
Ito En Ltd. 13 1,004
Kirin Brewery Co., Ltd. 50 607
Nissin Food Products Co., Ltd. 15 397
-------
2,008
-------
MACHINERY & COMPUTER EQUIPMENT - 3.5%
Canon, Inc. 25 730
Union Tool 11 1,024
-------
1,754
-------
MEASURING & ANALYZING INSTRUMENTS - 3.6%
Fuji Photo Film Co., Ltd. 10 365
Keyence Corp. 4 853
Terumo Corp. 18 575
-------
1,793
-------
- -----------------------------------------------------------------------------
RETAIL TRADE - 9.0%
FOOD STORES - 1.9%
C Two-Network Co., Ltd. (a) 4 949
-------
GENERAL MERCHANDISE STORES - 5.4%
Don Quijote Co., Ltd. 5 1,081
Ryohin Keikaku Co., Ltd. 4 803
Ryohin Keikaku Co., Ltd. - New Shares (a) 4 789
-------
2,673
-------
HOME FURNISHINGS & EQUIPMENT - 1.7%
Yamada Denki Co. 13 830
-------
- -----------------------------------------------------------------------------
SERVICES - 14.3%
AMUSEMENT & RECREATION - 0.6%
People Co., Ltd. 6 $ 300
-------
AUTO REPAIR, RENTAL & PARKING - 1.1%
Park24 Co., Ltd. 11 536
-------
COMPUTER RELATED SERVICES - 4.7%
Bellsystem 24, Inc. 1 602
Diamond Computer Services Co. 10 213
Fujitsu Support & Services, Inc. 4 1,033
Orix Corp. 5 481
-------
2,329
-------
COMPUTER SOFTWARE - 2.9%
Fuji Soft ABC, Inc. 12 818
Nihon Unisys Ltd. 20 606
-------
1,424
-------
ENGINEERING, ACCOUNTING, RESEARCH & MANAGEMENT - 0.6%
Meitec Corp. 9 320
-------
HEALTH SERVICES - 1.8%
Fancl Corp. 3 890
-------
PERSONAL SERVICES - 2.6%
Drake Beam Morin - Japan, Inc. 7 1,278
-------
- -----------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 4.8%
COMMUNICATIONS - 2.5%
Hikari Tsushin, Inc. 2 1,266
-------
TELECOMMUNICATIONS - 2.3%
NTT Data Communications Systems Co. (b) 290
Nippon Telegraph & Telephone Corp. (b) 842
-------
1,132
-------
- -----------------------------------------------------------------------------
WHOLESALE TRADE - 4.2%
DURABLE GOODS
Softbank Corp. 6 2,059
-------
TOTAL COMMON STOCKS (cost of $15,100) (c) 33,396
-------
SHORT-TERM OBLIGATIONS - 30.3%
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 $8,140
(repurchase proceeds $7,993) $7,992 7,992
Federal National Mortgage Association,
5.160% 09/01/99 (d) 7,013 7,012
-------
TOTAL SHORT-TERM OBLIGATIONS 15,004
-------
OTHER ASSETS & LIABILITIES, NET - 2.3% 1,162
- -----------------------------------------------------------------------------
NET ASSETS - 100% $49,562
=======
NOTES TO INVESTMENT PORTFOLIO:
- -----------------------------------------------------------------------------
(a) Non-income producing.
(b) Rounds to less than one.
(c) Cost for federal income tax purposes is $17,873.
(d) Rate represents yield at date of purchase.
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 $15,100) $33,396
Short-term obligations 15,004
-------
48,400
Cash including foreign currencies
(cost $143) $ 156
Receivable for:
Fund shares sold 1,116
Expense reimbursement due from
Advisor/Administrator 21
Dividends 10
Interest 1
Other 3 1,307
------ -------
Total assets 49,707
LIABILITIES
Payable for:
Fund shares repurchased 54
Accrued:
Management fee 35
Administration fee 9
Transfer agent fee 9
Bookkeeping fee 2
Deferred Trustees fees 1
Other 35
------
Total liabilities 145
-------
Net Assets $49,562
=======
Class A
Net asset value & redemption price
per share -- ($17,091/922) $ 18.54(a)
-------
Maximum offering price per share -- ($18.54/0.9425) $ 19.67(b)
-------
Class B
Net asset value & offering price
per share -- ($21,333/1,178) $ 18.11(a)
-------
Class C
Net asset value & offering price
per share -- ($8,167/451) $ 18.10(a)
-------
Class Z
Net asset value, offering & redemption
price per share -- ($2,971/159) $ 18.70
-------
COMPOSITION OF NET ASSETS
Capital paid in $33,656
Accumulated net investment loss (413)
Accumulated net realized loss (1,988)
Net unrealized appreciation on:
Investments 18,296
Foreign currency transactions 11
-------
$49,562
=======
(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.
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the Year Ended August 31, 1999
(In thousands)
INVESTMENT INCOME
Dividends $ 59
Interest 145
-------
Total Investment Income (net of nonreclaimable
foreign taxes withheld
at source which amounted to $10) 204
EXPENSES
Management fee $ 200
Administration fee 52
Service fee - Class A, Class B, Class C 48
Distribution fee - Class B 75
Distribution fee - Class C 22
Transfer agent fee 61
Bookkeeping fee 27
Trustees fee 8
Custodian fee 13
Audit fee 46
Legal fee 7
Registration fee 41
Reports to shareholders 1
Other 9
------
610
Fees and expenses waived by the
Advisor/Administrator (97) 513
------ -------
Net Investment Loss (309)
-------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
PORTFOLIO POSITIONS
Net realized gain (loss) on:
Investments (142)
Foreign currency transactions 1
------
Net Realized Loss (141)
Net change in unrealized appreciation/
depreciation during the period on:
Investments 18,492
Foreign currency transactions 5
------
Net Change in Unrealized
Appreciation/Depreciation 18,497
-------
Net Gain 18,356
-------
Increase in Net Assets from Operations $18,047
-------
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 loss $ (309) $ (225)
Net realized loss (141) (1,910)
Net change in unrealized appreciation/depreciation 18,497 (167)
--------- ---------
Net Increase (Decrease) from Operations 18,047 (2,302)
--------- ---------
DISTRIBUTIONS
From net realized gains -- Class A -- (10)
From net realized gains -- Class B -- (15)
From net realized gains -- Class C -- (7)
From net realized gains -- Class Z -- (3)
--------- ---------
18,047 (2,337)
--------- ---------
FUND SHARE TRANSACTIONS
Receipts for shares sold -- Class A 10,643 4,953
Value of distributions reinvested -- Class A -- 9
Cost of shares repurchased -- Class A (1,831) (5,430)
--------- ---------
8,812 (468)
--------- ---------
Receipts for shares sold -- Class B 10,907 5,636
Value of distributions reinvested -- Class B -- 13
Cost of shares repurchased -- Class B (4,074) (4,899)
--------- ---------
6,833 750
--------- ---------
Receipts for shares sold -- Class C 4,835 2,608
Value of distributions reinvested -- Class C -- 6
Cost of shares repurchased -- Class C (1,140) (3,346)
--------- ---------
3,695 (732)
--------- ---------
Receipts for shares sold -- Class Z 39 215
Value of distributions reinvested -- Class Z -- 3
Cost of shares repurchased -- Class Z (85) (47)
--------- ---------
(46) 171
--------- ---------
Net Increase (Decrease) from Fund
Share Transactions 19,294 (279)
--------- ---------
Total Increase (Decrease) 37,341 (2,616)
NET ASSETS
Beginning of period 12,221 14,837
--------- ---------
End of period (including accumulated net
investment loss of $413 and $175,
respectively) $ 49,562 $ 12,221
========= =========
NUMBER OF FUND SHARES
Sold -- Class A 737 522
Issued for distributions reinvested -- Class A -- 1
Repurchased -- Class A (148) (596)
--------- ---------
589 (73)
--------- ---------
Sold -- Class B 806 607
Issued for distributions reinvested -- Class B -- 1
Repurchased -- Class B (336) (531)
--------- ---------
470 77
--------- ---------
Sold -- Class C 336 284
Issued for distributions reinvested -- Class C -- 1
Repurchased -- Class C (104) (368)
--------- ---------
232 (83)
--------- ---------
Sold -- Class Z 3 23
Issued for distributions reinvested -- Class Z -- (a)
Repurchased -- Class Z (10) (5)
--------- ---------
(7) 18
--------- ---------
(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 Japan Opportunities 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
Japanese companies. 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 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 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 are
translated into U.S. dollars at that day's exchange rates.
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 reflects the service fee per share applicable to Class A, Class B
and Class C shares and the distribution fee applicable to Class B and Class C
shares only.
Class A, Class B and Class C ratios are calculated by adjusting the expense
and net investment income ratios for the Fund for the entire period by the
service fee applicable to Class A, Class B and Class C shares and the
distribution fee applicable to Class B and Class C shares only.
FEDERAL INCOME TAXES
Consistent with the Fund's policy to qualify as a regulated investment company
and to distribute all of its taxable income, no federal income tax has been
accrued.
DEFERRED ORGANIZATION EXPENSES
The Fund incurred $1,000 of expenses in connection with its organization.
These expenses were deferred and have been 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 0.95% 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 0.035% of the Fund's average net assets over
$50 million.
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 $24,674 on sales of the Fund's Class A shares and
received contingent deferred sales charges (CDSC) of $12, $57,976 and $3,478
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 fees, distribution fees, brokerage commissions, interest, taxes and
extraordinary expenses, if any) exceed 1.75% 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 $8,517,612 and $4,796,666,
respectively.
Unrealized appreciation (depreciation) at August 31, 1999, based on cost of
investments for federal income tax purposes was approximately:
Gross unrealized appreciation $15,556,000
Gross unrealized depreciation (33,000)
-----------
Net unrealized appreciation $15,523,000
===========
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 $ 68,000
2007 1,778,000
----------
$1,846,000
----------
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 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.
NOTE 5. OTHER RELATED PARTY TRANSACTIONS
At August 31, 1999, the Fund had two shareholders, FTC & Company and Liberty
Financial Companies, Inc., who owned greater than 5% of the Fund's shares
outstanding.
- -------------------------------------------------------------------------------
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 1998
--------------------------------------------------- -------------------------------------------------------
CLASS A CLASS B CLASS C CLASS Z CLASS A CLASS B CLASS C CLASS Z
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET
VALUE,
BEGINNING OF
PERIOD $ 8.660 $ 8.520 $ 8.510 $ 8.710 $ 10.050 $ 9.950 $ 9.940 $ 10.070
--------- --------- --------- --------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment
loss (a)(b) (0.128) (0.219) (0.221) (0.096) (0.103) (0.172) (0.172) (0.080)
Net realized
and unrealized
gain (loss) 10.008 9.809 9.811 10.086 (1.265) (1.236) (1.236) (1.258)
--------- --------- --------- --------- -------- -------- -------- --------
Total from
Investment
Operations 9.880 9.590 9.590 9.990 (1.368) (1.408) (1.408) (1.338)
--------- --------- --------- --------- -------- -------- -------- --------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net
realized gains -- -- -- -- (0.022) (0.022) (0.022) (0.022)
--------- --------- --------- --------- -------- -------- -------- --------
NET ASSET
VALUE, END OF
PERIOD $ 18.540 $ 18.110 $ 18.100 $ 18.700 $ 8.660 $ 8.520 $ 8.510 $ 8.710
--------- --------- --------- --------- -------- -------- -------- --------
Total return
(c)(d) 114.09% 112.56% 112.69% 114.70% (13.62)% (14.16)% (14.18)% (13.30)%
--------- --------- --------- --------- -------- -------- -------- --------
RATIOS TO AVERAGE NET ASSETS
Expenses (e) 2.00% 2.75% 2.75% 1.75% 2.00% 2.75% 2.75% 1.75%
Net investment
loss (e) (1.03)% (1.78)% (1.78)% (0.78)% (1.12)% (1.87)% (1.87)% (0.87)%
Fees and
expenses
waived or
borne by the
Advisor/
Administrator (e) 0.46% 0.46% 0.46% 0.46% 0.72% 0.72% 0.72% 0.72%
Portfolio
turnover 27% 27% 27% 27% 24% 24% 24% 24%
Net assets at
end of period
(000) $ 17,091 $ 21,333 $ 8,167 $ 2,971 $ 2,887 $ 6,028 $ 1,862 $ 1,444
(a) Net of
fees and
expenses
waived or
borne by the
Advisor/
Administrator
which
amounted
to: $ 0.057 $ 0.057 $ 0.057 $ 0.057 $ 0.066 $ 0.066 $ 0.066 $ 0.066
(b) Per share data was calculated using average shares outstanding during the period.
(c) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred
sales charge.
(d) Had the Advisor/Administrator not waived or reimbursed a portion of expenses, total return would have been reduced.
(e) The benefits derived from custody credits and directed brokerage arrangements had no impact.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31, 1997 PERIOD ENDED AUGUST 31, 1996 (d)
------------------------------------------------------ -------------------------------------------------
Class A Class B Class C(c) Class Z Class A Class B Class C Class Z
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF
PERIOD $ 9.710 $ 9.690 $ 9.690 $ 9.720 $ 10.000 $ 10.000 $ 10.000 $ 10.000
-------- -------- -------- -------- --------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment
loss (a)(b) (0.094) (0.170) (0.170) (0.069) (0.016) (0.034) (0.034) (0.010)
Net realized and
unrealized gain
(loss) 0.434 0.430 0.420 0.419 (0.274) (0.276) (0.276) (0.270)
-------- -------- -------- -------- --------- -------- -------- --------
Total from
Investment
Operations 0.340 0.260 0.250 0.350 (0.290) (0.310) (0.310) (0.280)
-------- -------- -------- -------- --------- -------- -------- --------
NET ASSET VALUE,
END OF PERIOD $ 10.050 $ 9.950 $ 9.940 $ 10.070 $ 9.710 $ 9.690 $ 9.690 $ 9.720
-------- -------- -------- -------- --------- -------- -------- --------
Total return(e)(f) 3.50% 2.68% 2.58% 3.60% (2.90)%(g) (3.10)%(g) (3.10)%(g) (2.80)%(g)
-------- -------- -------- -------- --------- -------- -------- --------
RATIOS TO AVERAGE NET ASSETS
Expenses (h) 2.00% 2.75% 2.75% 1.75% 2.00%(i) 2.75%(i) 2.75%(i) 1.75%(i)
Net investment
loss (h) (0.93)% (1.68)% (1.68)% (0.68)% (0.66)%(i) (1.41)%(i) (1.41)%(i) (0.41)%(i)
Fees and
expenses
waived or
borne by the
Advisor/
Administrator
(h) 1.79% 1.79% 1.79% 1.79% 9.13%(i) 9.13%(i) 9.13%(i) 9.13%(i)
Portfolio
turnover 20% 20% 20% 20% -- -- -- --
Net assets at
end of period
(000) $ 4,073 $ 6,275 $ 3,001 $ 1,488 $ 1,066 $ 1,197 $ 472 $ 1,214
(a) Net of fees
and expenses
waived or
borne by the
Advisor/
Administrator
which
amounted to: $ 0.180 $ 0.180 $ 0.180 $ 0.180 $ 0.230 $ 0.230 $ 0.230 $ 0.230
(b) Per share data was calculated using average shares outstanding during the period.
(c) Effective July 1, 1997, Class D shares were redesignated Class C shares.
(d) The Fund commenced investment operations on June 3, 1996.
(e) Total return at net asset value assuming all distributions reinvested and no initial sales charge or contingent deferred
sales charge.
(f) Had the Advisor/Administrator not waived or reimbursed a portion of expenses, total return would have been reduced.
(g) Not annualized.
(h) The benefits derived from custody credits and directed brokerage arrangements had no impact.
(i) Annualized.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
TO THE TRUSTEES OF LIBERTY FUNDS TRUST II
AND THE SHAREHOLDERS OF NEWPORT JAPAN OPPORTUNITIES 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 Japan Opportunities
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 JAPAN OPPORTUNITIES 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 Japan Opportunities 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 Japan Opportunities
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 JAPAN OPPORTUNITIES FUND ANNUAL REPORT
- --------------------------------------------------------------------------------
-------------
BULK RATE
U.S. POSTAGE
PAID
[Graphic HOLLISTON, MA
Omitted] L I B E R T Y PERMIT NO. 20
----------------- -------------
F U N D S
ALL-STAR o COLONIAL o CRABBE HUSON o NEWPORT o STEIN ROE ADVISOR
JO-02/766H-0899 (10/99) 99/1243
