<PAGE>
- ----------------------------------------------------
NEWPORT JAPAN OPPORTUNITIES FUND SEMIANNUAL REPORT
- ----------------------------------------------------
February 28, 1999
[Graphic Omitted]
------------------------------
Not FDIC May Lose Value
Insured No Bank Guarantee
------------------------------
<PAGE>
NEWPORT JAPAN OPPORTUNITIES FUND
SEPTEMBER 1, 1998 - FEBRUARY 28, 1999
INVESTMENT OBJECTIVE: Newport Japan Opportunities Fund seeks capital
appreciation by investing primarily in equity securities of Japanese companies.
THE FUND IS DESIGNED TO OFFER:
|X| A portfolio of quality Japanese stocks
|X| Long-term growth potential
|X| Experienced investment management
PORTFOLIO MANAGER COMMENTARY: "A weak investment environment underscored the
value of active management. Our focus on high-quality growth companies that are
leaders in their industries helped produce strong performance relative to both
the Japanese market index and the Fund's Lipper peer group.(1)" -- David Smith
<TABLE>
NEWPORT JAPAN OPPORTUNITIES FUND PERFORMANCE(2)
<CAPTION>
CLASS A CLASS B CLASS C CLASS Z
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Inception date 6/3/96 6/3/96 6/3/96 6/3/96
- --------------------------------------------------------------------------------------------------
Six-month total returns, assuming 22.17% 21.71% 21.74% 22.39%
reinvestment of all distributions and
no sales charge or contingent deferred
sales charge (CDSC)
- --------------------------------------------------------------------------------------------------
Six-month total returns, assuming 15.15% 16.71% 20.74% 22.39%
public offering price (POP) and CDSC(3)
- --------------------------------------------------------------------------------------------------
Net asset value per share at 2/28/99 $10.58 $10.37 $10.36 $10.66
- --------------------------------------------------------------------------------------------------
</TABLE>
TOP FIVE HOLDINGS (as of 2/28/99)(4) TOP FIVE SECTORS (as of 2/28/99)(4)
- --------------------------------------------------------------------------------
1. Murata Manuf. Co. Ltd. ...... 5.0% 1. Manufacturing ............ 46.5%
2. Shohkoh Fund ................ 5.0% 2. Services ................. 16.8%
3. Ito En Ltd. ................. 4.7% 3. Financials ............... 16.2%
4. Union Tool .................. 4.2% 4. Retail Trade ............. 8.3%
5. Nidec Corp. ................. 3.8% 5. Telecommunications ....... 3.7%
(1) Please see page three for complete Lipper rankings.
(2) 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.
(3) Public offering price (POP) returns include the maximum sales charge of
5.75% for Class A shares. Contingent deferred sales charge (CDSC) returns
reflect the maximum charges of 5% and 1%, respectively, for Class B and C
shares. Past performance cannot predict future results. Returns and value
will fluctuate, resulting in a gain or loss on sale.
(4) Holdings and sector breakdowns are calculated as a percentage of total net
assets. Because the Fund is actively managed, there can be no guarantee the
Fund will continue to hold these securities or invest in these sectors in
the future.
<PAGE>
PRESIDENT'S MESSAGE
TO FUND SHAREHOLDERS
[Photo of Stephen E. Gibson]
I am pleased to present the semiannual report for Newport Japan Opportunities
Fund for the six-month period ended February 28, 1999.
During the past six months, a strengthening Yen and problems in the banking
sector contributed to continued economic stagnation in Japan. While some Asian
stock markets rallied in the fall of 1998, Japanese stocks generally did not
participate in this recovery. However, in a significant departure from the past
few years, Japanese officials have begun implementing monetary reforms and
revitalizing the banking sector in an effort to stimulate the economy. Moreover,
the gains in several Asian stock markets since last fall appeared to signal
improving economies for some of Japan's important trading partners.
We continue to encourage investors in Newport Japan Opportunities Fund to
maintain a long-term outlook. Our active management of the Fund has produced
solid results in comparison to the Fund's peer group, despite the weak market
conditions in Japan in recent years.(1) Newport Fund Management has established
itself as a leader in Asian market investing over the course of numerous
economic and market cycles. Newport's management style is built on 20 years of
experience, knowledge and local relationships in Japan that few fund managers
can match.
The Portfolio Manager's Report on the following pages will provide you with more
specific information on your Fund's performance and the market in which your
Fund invests. Thank you for choosing Newport Japan Opportunities Fund and for
giving us the opportunity to serve your investment needs.
Respectfully,
/s/ Stephen E. Gibson
Stephen E. Gibson
President
April 13, 1999
(1) Source: Lipper, Inc. Lipper rankings are based on the Lipper Japanese Funds
category. The Fund (Class A shares at net asset value) ranked in the first
quartile for six months (7 out of 42 funds) and in the first quartile for
one year (6 out of 34 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 economic and market conditions change frequently, there can be no
assurance that the trends described above or on the following pages will
continue.
<PAGE>
[Photo of David Smith]
PORTFOLIO MANAGER REPORT
DAVID SMITH is portfolio manager of Newport Japan Opportunities Fund and is a
senior vice president of Newport Fund Management, Inc. The following is a
discussion of the Fund's performance for the six-month period ended February 28,
1999.
FUND DELIVERED STRONG RETURNS DESPITE WEAK JAPANESE MARKET ENVIRONMENT
The Nikkei 225 Average, a broad-based measure of the Japanese stock market,
ended the six-month period essentially flat, rising less than 2%. Widespread
negative sentiment focused on Japan's recession, a devalued Japanese real estate
market, problems in the banking system, and weak consumer spending. In this
challenging environment, the Fund generated a six-month total return of 22.17%
for Class A shares, based on net asset value. This performance placed the Fund
in the top quartile within its Lipper peer group.
The Fund's outperformance highlights the value of active management -- the
foundation of our investment philosophy. Unlike the U.S. stock market, the
Japanese stock market is highly inefficient. As a result, stock prices do not
always reflect a company's earnings potential. Through active management, which
includes detailed research and analysis, we attempt to identify attractively
priced, growth-oriented stocks that may have the ability to outperform the
Nikkei. We carefully scrutinize the universe of Japanese stocks, searching for
those that meet our strict criteria: strong management, superior competitive
position, and consistent financial results. This investment philosophy has
resulted in a carefully selected portfolio of well-regarded, profitable
companies, many of which are in industry sectors that do not depend on Japan's
local economy for their success.
NEW POLITICAL ADMINISTRATION COMMITTED TO REFORM
The current administration has taken several steps to help the banking sector,
boost the economy and strengthen Japan's financial markets. In the seven months
since Prime Minister Obuchi has taken office, his government has committed
nearly $1 trillion -- about 20% of Japan's gross domestic product -- towards
recapitalizing the nation's major banks and stimulating the economy. As a result
of the government's reform efforts, 15 of the country's largest banks have
applied to the government for about $60 billion in financial assistance. This
aid should help resolve nonperforming loans that resulted from collapsing real
estate prices. In return, the banks will issue preferred stock and submit
detailed restructuring plans to Japan's Financial Reconstruction Commission. The
reforms are designed to help make Japan's banks more efficient and profitable,
while reducing their burden of nonperforming loans. In addition, the government
has injected over $200 billion into public works programs in the past 12 months,
which has improved the country's infrastructure and created jobs. The government
hopes that these efforts will stimulate economic growth.
OPPORTUNITIES IN TECHNOLOGY AND SOFTWARE COMPANIES
Despite Japan's current financial and economic problems, the country still
represents the world's third-largest economy, behind the United States and the
European Union. Furthermore, Japan accounts for more than 65% of East Asia's
economic output. Many Japanese companies are global leaders in their markets,
despite the stagnant local economy. For example, in the technology sector,
Tokyo's Softbank Corp. (2.79% of total net assets) has one of the world's
largest ownership stakes in Internet companies, including more than 20% of
Yahoo! Inc. Using its Yahoo! investment as a foundation, Softbank's acquisition
strategy has focused on smaller Internet companies -- such as E-Loan Inc., an
Internet mortgage originator -- that can network their business and financial
resources to take advantage of growing levels of electronic communication and
commerce. The asset value of Softbank's Internet portfolio alone is more than
twice the market value of its stock.
CULTURAL CHANGE AND CORPORATE RESTRUCTURING OFFER POTENTIAL GAINS
Japan's weak economy has had one positive effect -- more Japanese companies are
beginning to restructure both their corporate culture and their operations as
they focus on consistent bottom-line performance. Japanese companies are taking
greater notice of their shareholders and are managing their businesses for
greater profitability. To accomplish this, companies are breaking down
bureaucracy and eliminating costly, inefficient practices like lifetime
employment. We believe this trend may encourage greater stock market
participation by both Japanese and international investors. As a result, we have
been positioning the portfolio to take advantage of individual companies that
have demonstrated their commitment to shareholders. One example is Kirin Brewery
Ltd. (2.72% of total net assets). Kirin produces Kirin Lager and Kirin Ichiban
Shibori, Japan's second- and third-best-selling beers. The company has
cross-distribution agreements with Heineken and Anheuser-Busch, which have
helped expand its customer base. In recent years, Kirin has been in a costly
market-share struggle with Asahi Breweries, producer of Japan's top-selling
beer. In response, Kirin has been restructuring its operations, investing in new
products and spending to increase its efficiency and productivity. The company
has also been buying back its stock. This has helped boost the price because a
stock buyback reduces the total number of shares held by the public.
OUTLOOK -- JAPAN IS MAKING PROGRESS
Over the past several years, Japan has made progress towards solving its
economic problems through permanent changes in policy -- the first step towards
recovery. We continue to believe that there are significant investment
opportunities in Japan. This belief seems to be shared by GE Capital Services,
Merrill Lynch & Co., Goodyear Tire & Rubber and Hughes Electronics -- all of
which have made substantial investments in Japanese companies during the past
year. Looking ahead, the Fund is invested in companies that we believe could
benefit from the earliest stages of an economic recovery. We are confident that
our significant investment experience and active management style should
continue to add value for investors seeking long-term growth potential in Japan.
<PAGE>
NEWPORT JAPAN OPPORTUNITIES FUND INVESTMENT PERFORMANCE
VS. THE MSCI JAPAN INDEX
Change in value of $10,000 from 6/30/96 - 2/28/99
CLASS A SHARES BASED ON NAV AND POP
- --------------------------------------------------------------------------------
MSCI
NAV POP JAPAN INDEX
- --------------------------------------------------------------------------------
June 30, 1996 $10,000 $10,000 $10,000
July 31, 1996 9,768 9,206 9,552
August 31, 1996 9,382 8,842 9,125
September 30, 1996 9,391 8,851 9,441
October 31, 1996 8,928 8,414 8,808
November 30, 1996 9,150 8,624 8,976
December 31, 1996 9,005 8,487 8,356
January 31, 1997 8,676 8,177 7,446
February 28, 1997 8,802 8,296 7,620
March 31, 1997 8,754 8,250 7,369
April 30, 1997 9,179 8,651 7,636
May 31, 1997 10,213 9,625 8,480
June 30, 1997 10,676 10,062 9,113
July 31, 1997 11,082 10,445 8,836
August 31, 1997 9,710 9,152 8,069
September 30, 1997 9,923 9,352 7,947
October 31, 1997 9,488 8,942 7,207
November 30, 1997 9,043 8,523 6,765
December 31, 1997 8,736 8,234 6,378
January 31, 1998 9,278 8,745 6,947
February 28, 1998 9,104 8,581 6,983
March 31, 1998 8,717 8,215 6,508
April 30, 1998 8,862 8,352 6,481
May 31, 1998 8,455 7,969 6,125
June 30, 1998 8,484 7,996 6,211
July 31, 1998 8,823 8,316 6,129
August 31, 1998 8,387 7,905 5,431
September 30, 1998 8,194 7,723 5,282
October 31, 1998 8,930 8,416 6,168
November 30, 1998 9,598 9,046 6,450
December 31, 1998 10,218 9,630 6,700
January 31, 1999 10,247 9,658 6,748
February 28, 1999 10,247 9,658 6,600
<TABLE>
VALUE OF A $10,000 INVESTMENT MADE ON 6/30/96
As of 2/28/99
<CAPTION>
- --------------------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS Z
NAV POP NAV W/CDSC NAV W/CDSC NAV
- --------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$10,247 $9,658 $10,054 $9,754 $10,044 $10,044 $10,324
- --------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
AVERAGE ANNUAL TOTAL RETURNS
As of 2/28/99
<CAPTION>
- --------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
CLASS A CLASS B CLASS C CLASS Z
INCEPTION 6/3/96 6/3/96 6/3/96 6/3/96
NAV POP NAV W/CDSC NAV W/CDSC NAV
- --------------------------------------------------------------------------------------------
1 year 12.55% 6.08% 11.87% 6.87% 11.76% 10.76% 12.92%
Life 2.17 (0.02) 1.42 0.35 1.39 1.39 2.45
- --------------------------------------------------------------------------------------------
</TABLE>
Past performance cannot predict future results. Returns and value of an
investment will vary, resulting in a gain or loss on sale. All results shown
assume reinvestment of distributions. Net asset value (NAV) returns do not
include sales charges or contingent deferred sales charges (CDSC). Public
offering price (POP) returns include the maximum sales charge of 5.75% for Class
A shares. CDSC returns reflect the maximum charges of 5% for the one-year return
and 3% for the life of fund return 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. 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 in an index.
<PAGE>
INVESTMENT PORTFOLIO
FEBRUARY 28, 1999 (UNAUDITED, IN THOUSANDS)
COMMON STOCKS - 94.3% SHARES VALUE
- --------------------------------------------------------------------------------
FINANCE, INSURANCE & REAL ESTATE - 16.2%
FINANCIAL SERVICES - 1.9%
Aeon Credit Service Co., Ltd. 5 $ 287
-------
NONDEPOSITORY CREDIT INSTITUTIONS - 11.7%
Acom Co., Ltd. 5 295
Aiful Corp. 5 363
Shohkoh Fund 2 753
Takefuji Corp. 5 362
-------
1,773
-------
REAL ESTATE - 2.6%
Mitsubishi Real Estate Co., Ltd. 40 393
-------
- --------------------------------------------------------------------------------
MANUFACTURING - 46.5%
CHEMICALS & ALLIED PRODUCTS - 4.8%
Fujimi, Inc. 5 220
Takeda Chemical Industries Ltd. 15 514
-------
734
-------
COMMUNICATIONS EQUIPMENT - 7.9%
Matsushita Communication Industrial Co. 10 516
Matsushita-Kotobuki Electronics Industries 14 379
Sony Corp. 4 309
-------
1,204
-------
ELECTRICAL INDUSTRIAL EQUIPMENT - 3.9%
Nidec Corp. 5 584
-------
ELECTRONIC COMPONENTS - 9.4%
Minebea Co., Ltd. 38 377
Murata Manufacturing Co., Ltd. 17 762
Rohm Co., Ltd. 3 292
-------
1,431
-------
FOOD & KINDRED PRODUCTS - 7.7%
Ito En, Ltd. 15 714
Kirin Brewery Co., Ltd. 35 413
Mercian Corp. 11 44
-------
1,171
-------
MACHINERY & COMPUTER EQUIPMENT - 6.6%
Canon, Inc. 17 363
Union Tool 11 639
-------
1,002
-------
MEASURING & ANALYZING INSTRUMENTS - 6.2%
Fuji Photo Film Co., Ltd. 10 $ 366
Keyence Corp. 2 207
Terumo Corp. 18 366
-------
939
-------
- --------------------------------------------------------------------------------
RETAIL TRADE - 8.3%
GENERAL MERCHANDISE STORES - 6.2%
Don Quijote Co., Ltd. 3 393
Ryohin Keikaku Co., Ltd. 4 539
-------
932
-------
HOME FURNISHINGS & EQUIPMENT - 2.1%
Yamada Denki Co. 13 321
-------
- --------------------------------------------------------------------------------
SERVICES - 16.8%
AUTO REPAIR, RENTAL & PARKING - 1.6%
Park24 Co., Ltd. (a) 11 247
-------
COMPUTER RELATED SERVICES - 7.4%
Bellsystem 24, Inc. 1 343
Diamond Computer Service Co. 10 170
Fujitsu Support & Services, Inc. 4 296
Orix Corp. 5 312
-------
1,121
-------
COMPUTER SOFTWARE - 5.2%
Fuji Soft ABC, Inc. 9 514
Nihon Unisys, Ltd. 20 279
-------
793
-------
ENGINEERING, ACCOUNTING, RESEARCH & MANAGEMENT - 1.4%
Meitec Corp. 9 208
-------
OTHER SERVICES - 1.2%
People Co., Ltd. 6 189
-------
- --------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC,
GAS & SANITARY SERVICES - 3.7%
TELECOMMUNICATIONS
NTT Data Communications Systems Co. (b) 173
Nippon Telegraph & Telephone Corp. (b) 394
-------
567
-------
- --------------------------------------------------------------------------------
WHOLESALE TRADE - 2.8%
DURABLE GOODS
Softbank Corp. 6 $ 423
-------
TOTAL COMMON STOCKS (cost of $11,333)(c) 14,319
-------
SHORT-TERM OBLIGATIONS - 4.1% PAR
- --------------------------------------------------------------------------------
Repurchase agreement with ABN AMRO Chicago
Corp., dated 02/26/99, due 03/01/99 at 4.750%,
collateralized by U. S. Treasury bonds and notes
with various maturities to 2021, market value
$617 (repurchase proceeds $626) $626 626
-------
OTHER ASSETS & LIABILITIES, NET - 1.6% 238
- --------------------------------------------------------------------------------
NET ASSETS - 100.0% $15,183
-------
NOTES TO INVESTMENT PORTFOLIO:
- --------------------------------------------------------------------------------
(a) Non-income producing.
(b) Rounds to less than one.
(c) Cost for federal income tax purposes is $11,391.
See notes to financial statements.
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
FEBRUARY 28, 1999 (UNAUDITED)
(in thousands except for per share amounts and footnotes)
ASSETS
Investments at value (cost $11,333) $14,319
Short-term obligations 626
-------
14,945
Cash including foreign currencies (cost $1,511) $1,528
Receivable for:
Investments sold 84
Fund shares sold 48
Dividends 11
Expense reimbursement due from
Advisor/Administrator 3
Other 2 1,676
------ -------
Total Assets 16,621
LIABILITIES
Payable for:
Investments purchased 1,275
Fund shares repurchased 136
Accrued:
Management fee 12
Administration fee 3
Transfer agent fee 3
Bookkeeping fee 2
Deferred Trustees fees 1
Other 6
------
Total Liabilities 1,438
-------
NET ASSETS $15,183
-------
Net asset value & redemption price per share -
Class A ($4,401/416) $ 10.58 (a)
-------
Maximum offering price per share - Class A
($10.58/0.9425) $ 11.23 (b)
-------
Net asset value & offering price per share -
Class B ($7,319/706) $ 10.37 (a)
-------
Net asset value & offering price per share -
Class C ($1,784/172) $ 10.36 (a)
-------
Net asset value, offering & redemption price
per share - Class Z ($1,679/158) $ 10.66
-------
(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 SIX MONTHS ENDED FEBRUARY 28, 1999
(UNAUDITED)
(in thousands)
INVESTMENT INCOME
Dividends $ 24
Interest 22
------
Total Investment Income (net of nonreclaimable
foreign taxes withheld at source which
amounted to $4) 46
EXPENSES
Management fee $ 67
Administration fee 18
Service fee - Class A, Class B, Class C 16
Distribution fee - Class B 25
Distribution fee - Class C 7
Transfer agent fee 21
Bookkeeping fee 14
Trustees fee 4
Audit fee 12
Legal fee 2
Custodian fee 3
Registration fee 23
Reports to shareholders 4
Other 3
------
219
Fees and expenses waived by the
Advisor/Administrator (48) 171
------ ------
Net Investment Loss (125)
------
NET REALIZED & UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS
Net realized loss on:
Investments (271)
Foreign currency transactions (49)
------
Net Realized Loss (320)
Change in net unrealized appreciation (depreciation)
during the period on:
Investments 3,182
Foreign currency transactions (3)
------
Net Unrealized Appreciation 3,179
------
Net Gain 2,859
------
Increase in Net Assets from Operations $2,734
------
See notes to financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
(Unaudited)
Six months Year
ended ended
(in thousands) February 28 August 31
----------- ---------
INCREASE (DECREASE) IN NET ASSETS 1999 1998
Operations:
Net investment loss $ (125) $ (225)
Net realized loss (320) (1,910)
Net unrealized appreciation (depreciation) 3,179 (167)
------- -------
Net Increase (Decrease) from Operations 2,734 (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)
------- -------
-- (2,337)
------- -------
Fund Share Transactions:
Receipts for shares sold - Class A 1,491 4,953
Value of distributions reinvested - Class A -- 9
Cost of shares repurchased - Class A (718) (5,430)
------- -------
773 (468)
------- -------
Receipts for shares sold - Class B 1,251 5,636
Value of distributions reinvested - Class B -- 13
Cost of shares repurchased - Class B (1,268) (4,899)
------- -------
(17) 750
------- -------
Receipts for shares sold - Class C 256 2,608
Value of distributions reinvested - Class C -- 6
Cost of shares repurchased - Class C (720) (3,346)
------- -------
(464) (732)
------- -------
Receipts for shares sold - Class Z 9 215
Value of distributions reinvested - Class Z -- 3
Cost of shares repurchased - Class Z (73) (47)
------- -------
(64) 171
------- -------
Net Increase (Decrease) from Fund Share
Transactions 228 (279)
------- -------
Total Increase (Decrease) 2,962 (2,616)
NET ASSETS
Beginning of period 12,221 14,837
------- -------
End of period (including accumulated
net investment loss of $300 and $175,
respectively) $15,183 $12,221
------- -------
See notes to financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS - CONT.
(Unaudited)
Six months Year
ended ended
February 28 August 31
----------- ---------
1999 1998
NUMBER OF FUND SHARES
Sold - Class A 156 522
Issued for distributions reinvested - Class A -- 1
Repurchased - Class A (73) (596)
------- -------
83 (73)
------- -------
Sold - Class B 130 607
Issued for distributions reinvested - Class B -- 1
Repurchased - Class B (132) (531)
------- -------
(2) 77
------- -------
Sold - Class C 27 284
Issued for distributions reinvested - Class C -- 1
Repurchased - Class C (74) (368)
------- -------
(47) (83)
------- -------
Sold - Class Z 1 23
Issued for distributions reinvested - Class Z -- (a)
Repurchased - Class Z (9) (5)
------- -------
(8) 18
------- -------
(a) Rounds to less than one.
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1999 (UNAUDITED)
NOTE 1. INTERIM FINANCIAL STATEMENTS
................................................................................
In the opinion of management of Newport Japan Opportunities Fund (the Fund), a
series of Colonial Trust II, the accompanying financial statements contain all
normal and recurring adjustments necessary for the fair presentation of the
financial position of the Fund at February 28, 1999, and the results of its
operations, the changes in its net assets and the financial highlights for the
six months then ended.
NOTE 2. ACCOUNTING POLICIES
................................................................................
ORGANIZATION: The Fund is a diversified portfolio of a Massachusetts business
trust, registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company. The Fund's investment objective is to
seek capital appreciation by investing primarily in equity securities of
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 and a 1.00% contingent deferred
sales charge on redemptions made within eighteen months on an original purchase
of $1 million to $5 million. Class B shares are subject to an annual
distribution fee and a contingent deferred sales charge. Class B shares will
convert to Class A shares when they have been outstanding approximately eight
years. Class C shares are subject to a contingent deferred sales charge on
redemptions made within one year after purchase and an annual distribution fee.
Class Z shares are offered continuously at net asset value. There are certain
restrictions on the purchase of Class Z shares, please refer to the prospectus.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the 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 current value.
Forward currency contracts are valued based on the weighted value of the
exchange traded contracts with similar durations.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
The value of all assets and liabilities quoted in foreign currencies are
translated into U.S. dollars at that day's exchange rates.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains and losses are based upon the specific
identification method for both financial statement and federal income tax
purposes.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS: All income,
expenses (other than the Class A, Class B and Class C service fees and Class B
and Class C distribution fees) and realized and unrealized gains (losses) are
allocated to each class proportionately on a daily basis for purposes of
determining the net asset value of each class.
The per share data was calculated using average shares outstanding during the
period. In addition, Class A, Class B and Class C net investment income per
share data reflects the service fee per share applicable to Class A, Class B and
Class C shares and the distribution fee applicable to Class B and Class C shares
only.
Class A, Class B and Class C ratios are calculated by adjusting the expense and
net investment income ratios for the Fund for the entire period by the service
fee applicable to Class A, Class B and Class C shares and the distribution fee
applicable to Class B and Class C shares only.
FEDERAL INCOME TAXES: Consistent with the Fund's policy to qualify as a
regulated investment company and to distribute all of its taxable income, no
federal income tax has been accrued.
DEFERRED ORGANIZATION EXPENSES: The Fund incurred $1,000 of expenses in
connection with its organization. These expenses were deferred and 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 fluctuations in exchange rates on
gains (losses) between trade and settlement dates on securities transactions,
gains (losses) arising from the disposition of foreign currency and currency
gains (losses) between the accrual and payment dates on dividends and interest
income and foreign withholding taxes.
The Fund does not distinguish that portion of gains (losses) on investments
which is due to changes in foreign exchange rates from that which is due to
changes in market prices of the investments. Such fluctuations are included with
the net realized and unrealized gains (losses) from investments.
FORWARD CURRENCY CONTRACTS: The Fund may enter into forward currency contracts
to purchase or sell foreign currencies at predetermined exchange rates in
connection with the settlement of purchases and sales of securities. The
contracts are used to minimize the exposure to foreign exchange rate
fluctuations during the period between trade and settlement date of the
contracts. The Fund may also enter into forward currency contracts to hedge
certain other foreign currency denominated assets. All contracts are
marked-to-market daily, resulting in unrealized gains (losses) which become
realized at the time the forward currency contracts are closed or mature.
Realized and unrealized gains (losses) arising from such transactions are
included in net realized and unrealized gains (losses) on foreign currency
transactions. Forward currency contracts do not eliminate fluctuations in the
prices of the Fund's portfolio securities. While the maximum potential loss from
such contracts is the aggregate face value in U.S. dollars at the time the
contract is opened, exposure is typically limited to the change in value of the
contract (in U.S. dollars) over the period it remains open. Risks may also arise
if counterparties fail to perform their obligations under the contracts.
OTHER: Corporate actions are recorded on the ex-date (except for certain foreign
securities which are recorded as soon after ex-date as the Fund becomes aware of
such), net of nonrebatable tax withholdings. Where a high level of uncertainty
as to collection exists, income on securities is recorded net of all tax
withholdings with any rebates recorded when received.
The Fund's custodian takes possession through the federal book-entry system of
securities collateralizing repurchase agreements. Collateral is marked-to-market
daily to ensure that the market value of the underlying assets remains
sufficient to protect the Fund. The Fund may experience costs and delays in
liquidating the collateral if the issuer defaults or enters bankruptcy.
NOTE 3. 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
$27,000 per year plus 0.035% of the Fund's average net assets over $50 million.
TRANSFER AGENT: Liberty Funds Services, Inc. (the Transfer Agent), an affiliate
of the Administrator, provides shareholder services for a monthly fee equal
to 0.25% annually of the Fund's average net assets and receives reimbursement
for certain out of pocket expenses.
Effective October 1, 1997 and continuing through September 30, 1998, the
Transfer Agent fee was reduced by 0.0012% in cumulative monthly increments,
resulting in a decrease in the fee from 0.25% to 0.236% annually.
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES: Liberty Funds
Distributor, Inc. (the Distributor), a subsidiary of the Administrator is the
Fund's principal underwriter. For the six months ended February 28, 1999, the
Fund has been advised that the Distributor retained net underwriting discounts
of $2,153 on sales of the Fund's Class A shares and received contingent deferred
sales charges (CDSC) of $12, $20,691 and $2,456 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 4. PORTFOLIO INFORMATION
................................................................................
INVESTMENT ACTIVITY: During the six months ended February 28, 1999, purchases
and sales of investments, other than short-term obligations, were $3,595,775 and
$3,512,659, respectively.
Unrealized appreciation (depreciation) at February 28, 1999, based on cost of
investments for federal income tax purposes was:
Gross unrealized appreciation $3,162,495
Gross unrealized depreciation (234,538)
----------
Net unrealized appreciation $2,927,957
----------
Capital loss carryforwards: At August 31, 1998, capital loss carryforwards
available (to the extent provided in regulations) to offset future realized
gains were approximately as follows:
Year of Capital loss
expiration carryforward
---------- ------------
2006 $68,000
Expired capital loss carryforwards, if any, are recorded as a reduction of
capital paid in.
To the extent loss carryforwards are used to offset any future realized gains,
it is unlikely that such gains would be distributed since they may be taxable to
shareholders as ordinary income.
Other: There are certain additional risks involved when investing in foreign
securities that are not inherent with investments in domestic securities. These
risks may involve foreign currency exchange rate fluctuations, adverse political
and economic developments and the possible prevention of currency exchange or
other foreign governmental laws or restrictions.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
NOTE 5. LINE OF CREDIT
................................................................................
The Fund may borrow up to 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 six months ended February 28, 1999.
NOTE 6. OTHER RELATED PARTY TRANSACTIONS
................................................................................
At February 28, 1999, the Fund had one shareholder, Liberty Financial Companies,
who owned greater than 5% of the Fund's shares outstanding.
NOTE 7. COMPOSITION OF NET ASSETS
................................................................................
Capital paid in $14,590
Accumulated net investment loss (300)
Accumulated net realized loss (2,096)
Net unrealized appreciation on:
Investments 2,986
Foreign currency transactions 3
-------
$15,183
-------
NOTE 8. RESULTS OF SPECIAL MEETING OF SHAREHOLDERS
................................................................................
On October 30, 1998, a Special Meeting of Shareholders of the Fund was held to
approve the following items, all described in the Proxy Statement for the
meeting. On August 21, 1998, the record date for the Meeting, the Fund had
outstanding 1,439,915 shares of beneficial interest.
The votes cast at the Meeting were as follows:
AUTHORITY
FOR WITHHELD
--- --------
To Elect a Board of Trustees:
Robert J. Birnbaum 701,817 22,349
Tom Bleasdale 701,912 22,255
John Carberry 701,875 22,292
Lora S. Collins 701,817 22,349
James E. Grinnell 701,808 22,359
Richard W. Lowry 701,808 22,359
Salavatore Macera 701,770 22,396
William E. Mayer 701,912 22,348
James L. Moody, Jr 701,912 22,255
John J. Neuhauser 701,912 22,255
Thomas E. Stitzel 701,819 22,292
Robert L. Sullivan 701,912 22,349
Anne-Lee Verville 701,875 22,292
To amend fundamental investment policies regarding borrowing and lending.
FOR AGAINST ABSTAIN
--- ------- -------
511,027 29,050 23,940
To reclassify the fundamental investment policy regarding the purchase of
illiquid securities.
FOR AGAINST ABSTAIN
--- ------- -------
515,358 24,358 24,300
To approve policies for a master fund/feeder fund structure.
FOR AGAINST ABSTAIN
--- ------- -------
513,403 26,222 24,392
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
Selected data for a share of each class outstanding throughout each period are as follows:
<CAPTION>
(Unaudited)
Six months ended February 28
-----------------------------------------------------------
1999
Class A Class B Class C Class Z
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net asset value -
Beginning of period $ 8.660 $ 8.520 $ 8.510 $ 8.710
-------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss (a)(b) (0.064) (0.100) (0.099) (0.052)
Net realized and unrealized gain 1.984 1.950 1.949 2.002
-------- -------- -------- --------
Total from Investment Operations 1.920 1.850 1.850 1.950
-------- -------- -------- --------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net realized gains -- -- -- --
-------- -------- -------- --------
Net asset value - End of period $ 10.580 $ 10.370 $ 10.360 $ 10.660
-------- -------- -------- --------
Total return (c)(d) 22.17% (e) 21.71% (e) 21.74% (e) 22.39% (e)
-------- -------- -------- --------
RATIOS TO AVERAGE NET ASSETS
Expenses (f) 2.00% (g) 2.75% (g) 2.75% (g) 1.75% (g)
Net investment loss (f) (1.34)% (g) (2.09)% (g) (2.09)% (g) (1.09)% (g)
Fees and expenses
waived or borne by the
Advisor/Administrator (f) 0.69% (g) 0.69% (g) 0.69% (g) 0.69% (g)
Portfolio turnover 27% (e) 27% (e) 27% (e) 27% (e)
Net assets at end of period (000) $ 4,401 $ 7,319 $ 1,784 $ 1,679
(a) Net of fees and expenses waived or borne by the Advisor/Administrator
which amounted to: $ 0.033 $ 0.033 $ 0.033 $ 0.033
(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) Not annualized.
(f) The benefits derived from custody credits and directed brokerage arrangements had no impact.
(g) Annualized.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS - CONT.
Selected data for a share of each class outstanding throughout each period are as follows:
<CAPTION>
Year ended August 31
------------------------------------------------------
1998
Class A Class B Class C Class Z
-------- -------- -------- --------
<S> <C> <C> <C> <C>
$ 10.050 $ 9.950 $ 9.940 $ 10.070
-------- -------- -------- --------
(0.103) (0.172) (0.172) (0.080)
(1.265) (1.2360) (1.236) (1.258)
-------- -------- -------- --------
(1.368) (1.408) (1.408) (1.338)
-------- -------- -------- --------
(0.022) (0.022) (0.022) (0.022)
-------- -------- -------- --------
$ 8.660 $ 8.520 $ 8.510 $ 8.710
-------- -------- -------- --------
(13.62)% (14.16)% (14.18)% (13.30)%
-------- -------- -------- --------
2.00% 2.75% 2.75% 1.75%
(1.12)% (1.87)% (1.87)% (0.87)%
0.72% 0.72% 0.72% 0.72%
24% 24% 24% 24%
$ 2,887 $ 6,028 $ 1,862 $ 1,444
$ 0.066 $ 0.066 $ 0.066 $ 0.066
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS - CONT.
Selected data for a share of each class outstanding throughout each period are as follows:
<CAPTION>
Year ended August 31
---------------------------------------------------------
1997
Class A Class B Class C (c) Class Z
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net asset value -
Beginning of period $ 9.710 $ 9.690 $ 9.690 $ 9.720
-------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss (a)(b) (0.094) (0.170) (0.170) (0.069)
Net realized and
unrealized gain (loss) 0.434 0.430 0.420 0.419
-------- -------- -------- --------
Total from Investment
Operations 0.340 0.260 0.250 0.350
-------- -------- -------- --------
Net asset value -
End of period $ 10.050 $ 9.950 $ 9.940 $ 10.070
-------- -------- -------- --------
Total return (e)(f) 3.50% 2.68% 2.58% 3.60%
-------- -------- -------- --------
RATIOS TO AVERAGE NET ASSETS
Expenses (h) 2.00% 2.75% 2.75% 1.75%
Net investment loss (h) (0.93)% (1.68)% (1.68)% (0.68)%
Fees and expenses
waived or borne by the
Advisor/Administrator (h) 1.79% 1.79% 1.79% 1.79%
Portfolio turnover 20% 20% 20% 20%
Net assets at end
of period (000) $ 4,073 $ 6,275 $ 3,001 $ 1,488
(a) Net of fees and expenses waived or borne by the Advisor/Administrator
which amounted to: $ 0.180 $ 0.180 $ 0.180 $ 0.180
(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>
<TABLE>
FINANCIAL HIGHLIGHTS - CONT.
Selected data for a share of each class outstanding throughout each period are as follows:
<CAPTION>
Year ended August 31
---------------------------------------------------------
1997
Class A Class B Class C (c) Class Z
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net asset value -
Beginning of period $ 9.710 $ 9.690 $ 9.690 $ 9.720
-------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss (a)(b) (0.094) (0.170) (0.170) (0.069)
Net realized and unrealized
gain (loss) 0.434 0.430 0.420 0.419
-------- -------- -------- --------
Total from Investment Operations 0.340 0.260 0.250 0.350
-------- -------- -------- --------
Net asset value - End of period $ 10.050 $ 9.950 $ 9.940 $ 10.070
-------- -------- -------- --------
Total return (e)(f) 3.50% 2.68% 2.58% 3.60%
-------- -------- -------- --------
RATIOS TO AVERAGE NET ASSETS
Expenses (h) 2.00% 2.75% 2.75% 1.75%
Net investment loss (h) (0.93)% (1.68)% (1.68)% (0.68)%
Fees and expenses waived or borne
by the Advisor/Administrator (h) 1.79% 1.79% 1.79% 1.79%
Portfolio turnover 20% 20% 20% 20%
Net assets at end
of period (000) $ 4,073 $ 6,275 $ 3,001 $ 1,488
(a) Net of fees and expenses waived or borne by the Advisor/Administrator
which amounted to: $ 0.180 $ 0.180 $ 0.180 $ 0.180
(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>
<TABLE>
FINANCIAL HIGHLIGHTS - CONT.
Selected data for a share of each class outstanding throughout each period are as follows:
Period ended August 31
------------------------------------------------------
1996 (d)
Class A Class B Class C Class Z
-------- -------- -------- --------
<S> <C> <C> <C> <C>
$ 10.000 $ 10.000 $ 10.000 $ 10.000
-------- -------- -------- --------
(0.016) (0.034) (0.034) (0.010)
(0.274) (0.276) (0.276) (0.270)
-------- -------- -------- --------
(0.290) (0.310) (0.310) (0.280)
-------- -------- -------- --------
$ 9.710 $ 9.690 $ 9.690 $ 9.720
-------- -------- -------- --------
(2.90)% (g) (3.10)% (g) (3.10)% (g) (2.80)% (g)
-------- -------- -------- --------
2.00% (i) 2.75% (i) 2.75% (i) 1.75% (i)
(0.66)% (i) (1.41)% (i) (1.41)% (i) (0.41)% (i)
9.13% (i) 9.13% (i) 9.13% (i) 9.13% (i)
-- -- -- --
$ 1,066 $ 1,197 $ 472 $ 1,214
$ 0.230 $ 0.230 $ 0.230 $ 0.230
</TABLE>
<PAGE>
HOW TO REACH US
BY PHONE OR BY MAIL
BY TELEPHONE
CUSTOMER CONNECTION - 1-800-345-6611
For 24-hour account information, call from your touch-tone phone. (Rotary
callers will be automatically connected to a representative during business
hours.) A recorded message will guide you through the menu:
For fund prices, dividends and capital gains information ........... press [1]
For account information ............................................ press [2]
To speak to a service representative ............................... press [3]
For yield and total return information ............................. press [4]
For duplicate statements or new supply of checks ................... press [5]
To order duplicate tax forms and year-end statements ............... press [6]
(February through May)
To review your options at any time during your call ................ press [*]
To speak with a shareholder services representative about your account, call
Monday to Friday, 8:00 a.m. to 8:00 p.m. ET, and Saturdays from February through
mid-April, 10:00 a.m. to 2:00 p.m. ET.
TELEPHONE TRANSACTION DEPARTMENT - 1-800-422-3737
To purchase, exchange or sell shares by telephone, call Monday to Friday, 9:00
a.m. to 7:00 p.m. ET. Transactions received after the close of the New York
Stock Exchange will receive the next business day's closing price.
LITERATURE - 1-800-426-3750
To request literature on any fund distributed by Liberty Funds Distributor,
Inc., call Monday to Friday, 8:30 a.m. to 6:30 p.m. ET.
BY MAIL
LIBERTY FUNDS SERVICES, INC.
P.O. BOX 1722
BOSTON, MA 02105-1722
<PAGE>
SHAREHOLDER COMMUNICATIONS
TO KEEP YOU INFORMED
To make recordkeeping easy and keep you up-to-date on the performance of your
investments, you can expect to receive the following information about your
account:
TRANSACTION CONFIRMATIONS: Each time you make a purchase, sale or exchange, you
receive a confirmation statement within just a few days.
QUARTERLY STATEMENTS: Every three months, if any transactions are made that
affect your share balance, this statement reports on your account activity
during the quarter (including any reinvestment of dividends). This statement
also provides year-to-date information.
LIBERTY FUNDS DISTRIBUTOR INVESTOR OPPORTUNITIES: Mailed with your quarterly
account statements, this newsletter highlights timely investment strategies,
portfolio manager commentary and shareholder service updates.
TAX FORMS AND YEAR-END TAX GUIDE: Easy-to-use forms and timely information are
designed to make tax reporting simpler. (Usually mailed in January.)
AVERAGE COST BASIS STATEMENTS: If you sold or exchanged shares during the year,
this statement may help you calculate your gain/loss for tax purposes. (Usually
mailed in February.)
<PAGE>
SHAREHOLDER SERVICES
TO MAKE INVESTING EASIER
Your Fund has one of the most extensive selections of shareholder services
available. Your financial advisor can help you arrange for any of these
services, or you can call Liberty Funds Services, Inc. directly at
1-800-345-6611.
AFFORDABLE ADDITIONAL INVESTMENTS: Add to your account with as little as $50 on
most funds; $25 for an IRA account.
FREE EXCHANGES(1): Exchange all or part of your account into the same share
class of another fund distributed by Liberty Funds Distributor, Inc. by phone or
mail.
EASY ACCESS TO YOUR MONEY(1): Make withdrawals from your account by phone, by
mail or, for certain funds, by check.
ONE-YEAR REINSTATEMENT PRIVILEGE: If you need access to your money, but then
choose to return it within one year, you can reinvest in any fund distributed by
Liberty Funds Distributor of the same share class without any penalty or sales
charge.
FUNDAMATIC: Make periodic investments as low as $50 from your checking account
to your Fund account.
SYSTEMATIC WITHDRAWAL PLAN (SWP): Receive monthly, quarterly or semiannual
payments via check or bank transmission. There is a $5,000 account value
required, but no minimum for the payment amount. The maximum annual withdrawal
is 12% of account balance at time SWP is established. SWPs by check are
processed on the 10th calendar day of each month unless the 10th falls on a
non-business day or the first business day of the week. If this occurs, the
processing date will be the previous business day. Dividends and capital gains
must be reinvested.
AUTOMATED DOLLAR COST AVERAGING: Transfer money on a monthly basis from any fund
with a balance of $5,000 into the same share class of up to four other funds
distributed by Liberty Funds Distributor. Minimum for each transfer is $100.
RETIREMENT PLANS: Choose from a broad range of retirement plans, including IRAs.
(1) Redemptions and exchanges are made at the next determined net asset value
after the request is received by the Transfer Agent. Proceeds may be more or
less than your original cost. The exchange privilege may be terminated at
any time. Exchanges are not available on all funds. Investors who purchase
Class B or C shares, or $1 million or more of Class A shares, may be subject
to a contingent deferred sales charge.
<PAGE>
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
Newport Japan Opportunities 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 the most recent
copy of the Liberty Funds Distributor, Inc. Performance Update.
* Effective October 1, 1998, Colonial Investors Service Center, Inc. -- the
Transfer Agent for Colonial, Crabbe Huson, Newport and Stein Roe Advisor funds
-- changed its name to Liberty Funds Services, Inc.
<PAGE>
TRUSTEES
ROBERT J. BIRNBAUM
Consultant (formerly Special Counsel, Dechert, Price & Rhoads; President and
Chief Operating Officer, New York Stock Exchange, Inc.; President, American
Stock Exchange Inc.)
TOM BLEASDALE
Retired (formerly Chairman of the Board and Chief Executive Officer, Shore Bank
& Trust Company)
JOHN V. CARBERRY
Senior Vice President of Liberty Financial Companies, Inc. (formerly Managing
Director, Salomon Brothers)
LORA S. COLLINS
Attorney (formerly Attorney, Kramer, Levin, Naftalis & Frankel)
JAMES E. GRINNELL
Private Investor (formerly Senior Vice President-Operations, The Rockport
Company)
RICHARD W. LOWRY
Private Investor (formerly Chairman and Chief Executive Officer, U.S. Plywood
Corporation)
SALVATORE MACERA
Private Investor (formerly Executive Vice President of Itek Corp. and President
of Itek Optical & Electronic Industries, Inc.)
WILLIAM E. MAYER
Partner, Development Capital, LLC (formerly Dean, College of Business and
Management, University of Maryland; Dean, Simon Graduate School of Business,
University of Rochester; Chairman and Chief Executive Officer, CS First Boston
Merchant Bank; and President and Chief Executive Officer, The First Boston
Corporation)
JAMES L. MOODY, JR.
Retired (formerly Chairman of the Board, Chief Executive Officer and Director,
Hannaford Bros. Co.)
JOHN J. NEUHAUSER
Dean, Boston College School of Management
THOMAS E. STITZEL
Professor of Finance, College of Business, Boise State University; Business
Consultant and Author
ROBERT L. SULLIVAN
Retired Partner, KPMG LLP (formerly Management Consultant, Saatchi and Saatchi
Consulting Ltd. and Principal and International Practice Director, Management
Consulting, Peat Marwick Main & Co.)
ANNE-LEE VERVILLE
Consultant (formerly General Manager, Global Education Industry, and President,
Applications Solutions Division, IBM Corporation)
[logo] L I B E R T Y
COLONIAL o CRABBE HUSON o NEWPORT o STEIN ROE ADVISOR
Liberty Funds Distributor, Inc. (C)1999
One Financial Center, Boston, MA 02111-2621, 1-800-426-3750
Visit us at www.libertyfunds.com
JF-03/799G-0399 (4/99) 99/416
