NEWPORT FUNDS Prospectus, January 1, 2000
- - NEWPORT JAPAN OPPORTUNITIES FUND
- - NEWPORT GREATER CHINA FUND
CLASS A, B AND C SHARES
Advised by Newport Fund Management, Inc.
Although these securities have been registered with the Securities and Exchange
Commission, the Commission has not approved or disapproved any shares offered in
this prospectus or determined whether this prospectus is accurate or complete.
Any representation to the contrary is a criminal offense.
Not FDIC May Lose Value
Insured No Bank Guarantee
TABLE OF CONTENTS
<TABLE>
<S> <C>
THE FUNDS ................................................................ 2
Each of these sections discusses the following topics: Investment
Goal, Primary Investment Strategies, Primary Investment Risks,
Performance History and Your Expenses.
Newport Japan Opportunities Fund ......................................... 2
Newport Greater China Fund ............................................... 5
YOUR ACCOUNT ............................................................. 9
How to Buy Shares ........................................................ 9
Sales Charges ............................................................ 10
How to Exchange Shares ................................................... 14
How to Sell Shares ....................................................... 14
Distribution and Service Fees ............................................ 15
Other Information About Your Account ..................................... 16
MANAGING THE FUNDS ....................................................... 18
Investment Advisor ....................................................... 18
Portfolio Managers ....................................................... 18
Year 2000 Compliance ..................................................... 19
FINANCIAL HIGHLIGHTS ..................................................... 20
Newport Japan Opportunities Fund ......................................... 20
Newport Greater China Fund ............................................... 22
</TABLE>
<PAGE>
THE FUNDS NEWPORT JAPAN OPPORTUNITIES FUND
INVESTMENT GOAL
The Fund seeks capital appreciation.
PRIMARY INVESTMENT STRATEGIES
Under normal market conditions, the Fund invests substantially all of its assets
in stocks of companies whose principle activities are in Japan. The Fund's
investment advisor will determine where a company's principle activities are
located by considering its country of organization, the principle trading market
for its stocks and the source of its revenues and location of its assets. The
Fund invests in stocks of well-established companies with histories of
consistent earnings growth in industries with attractive or improving prospects.
At times, the advisor may determine that adverse market conditions make it
desirable to temporarily suspend the Fund's normal investment activities. During
such times, the Fund may, but is not required to, invest in cash or
high-quality, short-term debt securities, without limit. Taking a temporary
defensive position may prevent the Fund from achieving its investment goal.
In seeking to achieve its goal, the Fund may invest in various types of
securities and engage in various investment techniques which are not the
principle focus of the Fund and therefore are not described in this prospectus.
These types of securities and investment practices are identified and discussed
in the Fund's Statement of Additional Information, which you may obtain free of
charge (see back cover). Approval by the Fund's shareholders is not required to
modify or change the Fund's investment goal or investment strategies.
PRIMARY INVESTMENT RISKS
The primary risks of investing in the Fund are described below. There are many
circumstances (including additional risks that are not described here) which
could prevent the Fund from achieving its goal. It is possible to lose money by
investing in the Fund.
Market risk is the risk that the price of a security held by the Fund will fall
due to changing market, economic or political conditions.
Foreign securities are subject to special risks. Foreign stock markets can be
extremely volatile. Fluctuations in currency exchange rates may impact the value
of foreign securities without a change in the intrinsic value of those
securities. The liquidity of foreign securities may be more limited than
domestic securities, which means that the Fund may, at times, be unable to sell
foreign securities at desirable prices. Brokerage commissions, custodial fees
and other fees are generally higher for foreign investments. In addition,
foreign governments may impose withholding taxes which would reduce the amount
of income available to distribute to shareholders. Other risks include the
following: possible delays in the settlement of transactions; less publicly
available information about companies; the impact of political, social or
diplomatic events; and possible seizure, expropriation or nationalization of the
company or its assets.
2
<PAGE>
THE FUNDS NEWPORT JAPAN OPPORTUNITIES FUND
Because the Fund's investments are concentrated in Japan, the value of the
Fund's shares is susceptible to country concentration risks. The political,
economic and market conditions within Japan and movements in the currency
exchange rates between Japan and the U.S. may cause the value of the Fund's
shares to fluctuate more widely than the value of the shares of a fund that
invests in companies located in a number of different countries. The Fund's
concentration in Japan may also result in greater losses to the Fund than if the
Fund were more geographically diversified.
3
<PAGE>
THE FUNDS NEWPORT JAPAN OPPORTUNITIES FUND
UNDERSTANDING PERFORMANCE
CALENDAR YEAR TOTAL RETURN shows the Fund's Class A share performance for each
complete calendar year since it commenced operations. It includes the effects of
Fund expenses, but not the effects of sales charges. If sales charges were
included, these returns would be lower.
AVERAGE ANNUAL TOTAL RETURN is a measure of the Fund's performance over the past
one-year and the life of the Fund periods. It includes the effects of Fund
expenses. The table shows each class's returns with sales charges.
The Fund's return is compared to the Morgan Stanley Capital International Japan
Index (MSCI Index), an unmanaged index that tracks the performance of Japanese
stocks. Unlike the Fund, indices are not investments, do not incur fees or
expenses and are not professionally managed. It is not possible to invest
directly in indices. The Fund's return is also compared to the average return of
the funds included in the Lipper Japanese Funds category average (Lipper
Average). This Lipper Average, which is calculated by Lipper, Inc., is composed
of funds with similar investment objectives to the Fund. Sales charges are not
reflected in the Lipper Average.
PERFORMANCE HISTORY
The bar chart below shows changes in the Fund's performance from year to year by
illustrating the Fund's calendar year total returns for its Class A shares. The
performance table following the bar chart shows how the Fund's average annual
returns for Class A, B and C shares compare with those of a broad measure of
market performance for 1 year and the life of the Fund. The chart and table are
intended to illustrate some of the risks of investing in the Fund by showing the
changes in the Fund's performance. All returns include the reinvestment of
dividends and distributions. Performance results include the effect of expense
reduction arrangements, if any. If these arrangements were not in place, then
the performance results would have been lower. Any expense reduction
arrangements may be discontinued at any time. As with all mutual funds, past
performance does not predict the Fund's future performance.
CALENDAR YEAR TOTAL RETURNS (CLASS A)
[BAR CHART]
<TABLE>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-2.98% 16.96%
</TABLE>
The Fund's year-to-date total return through September 30, 1999 was 85.69%.
For period shown in bar chart:
Best quarter: 4th quarter 1998, +24.70%
Worst quarter: 4th quarter 1997, -11.96%
AVERAGE ANNUAL TOTAL RETURNS -- FOR PERIODS ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
INCEPTION LIFE OF
DATE 1 YEAR THE FUND
<S> <C> <C> <C>
Class A (%) 6/3/96 10.24 (0.13)
------------------------------------------------------------------
Class B (%) 6/3/96 10.92 0.25
------------------------------------------------------------------
Class C (%) 6/3/96 15.05 1.40
------------------------------------------------------------------
MSCI Index (%) N/A 5.05 (14.20)(1)
------------------------------------------------------------------
Lipper Average (%) N/A 8.17 (10.23)(1)
</TABLE>
(1) Performance information is from May 31, 1996.
4
<PAGE>
THE FUNDS NEWPORT JAPAN OPPORTUNITIES FUND
UNDERSTANDING EXPENSES
SALES CHARGES are paid directly by shareholders to Liberty Funds Distributor,
Inc., the Fund's distributor.
REDEMPTION FEE is imposed on redemptions and exchanges of Fund shares purchased
and held for five business days or less. The redemption fee is paid to the Fund
to help offset additional transaction costs created by short-term "market
timers."
ANNUAL FUND OPERATING EXPENSES are deducted from the Fund. They include
management and administration fees, 12b-1 fees, brokerage costs, and
administrative costs including pricing and custody services.
EXAMPLE EXPENSES help you compare the cost of investing in the Fund to the cost
of investing in other mutual funds. The table does not take into account any
expense reduction arrangements discussed in the footnotes to the Annual Fund
Operating Expenses table. It uses the following hypothetical conditions:
- - $10,000 initial investment
- - 5% total return for each year
- - Fund operating expenses remain the same
- - Assumes reinvestment of all dividends and distributions
YOUR EXPENSES
Expenses are one of several factors to consider before you invest in a mutual
fund. The tables below describe the fees and expenses you may pay when you buy,
hold and sell shares of the Fund.
SHAREHOLDER FEES(2) (PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Maximum sales charge (load) on purchases (%)
(as a percentage of the offering price) 5.75 0.00 0.00
- ---------------------------------------------------------------------------------------
Maximum deferred sales charge (load) on
redemptions (%) (as a percentage of the
lesser of purchase price or redemption price) 1.00(3) 5.00 1.00
- ---------------------------------------------------------------------------------------
Redemption fee(4)(5) (%)(as a percentage of amount
redeemed, if applicable) 2.00 2.00 2.00
</TABLE>
ANNUAL FUND OPERATING EXPENSES (DEDUCTED DIRECTLY FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Management and administration fees(6) (%) 1.20 1.20 1.20
- --------------------------------------------------------------------------------
Distribution and service (12b-1) fees (%) 0.25 1.00 1.00
- --------------------------------------------------------------------------------
Other expenses(6) (%) 1.01 1.01 1.01
- --------------------------------------------------------------------------------
Total annual fund operating expenses(6)(%) 2.46 3.21 3.21
================================================================================
</TABLE>
EXAMPLE EXPENSES (YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER)
<TABLE>
<CAPTION>
CLASS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $810 $1,298 $1,812 $3,213
- -----------------------------------------------------------------------------------------
Class B: did not sell your shares $324 $ 990 $1,680 $3,344
sold all your shares at
the end of the period $824 $1,290 $1,880 $3,344
- -----------------------------------------------------------------------------------------
Class C: did not sell your shares $324 $ 990 $1,680 $3,515
sold all your shares at
the end of the period $424 $ 990 $1,680 $3,515
</TABLE>
(2) A $10 annual fee is deducted from accounts of less than $1,000 and paid to
the transfer agent.
(3) This charge applies only to certain Class A shares bought without an initial
sales charge that are sold within 18 months of purchase.
(4) There is a $7.50 charge for wiring sale proceeds to your bank.
(5) A 2.00% contingent redemption fee is imposed on redemptions and exchanges of
Fund shares purchased and held for five business days or less.
(6) The Fund's advisor and administrator have voluntarily agreed to waive
advisory and administration fees and reimburse the Fund for certain expenses
so that the total annual fund operating expenses (exclusive of distribution
and service fees, brokerage commissions, interest, taxes and extraordinary
expenses, if any) will not exceed 1.75%. As a result, the actual management
and administration fees for each share class would be 0.74%, other expenses
for each share class would be 1.01% and total annual fund operating expenses
for Class A, B and C shares would be 2.00%, 2.75% and 2.75%, respectively.
This arrangement may be terminated by the advisor or administrator at any
time.
5
<PAGE>
THE FUNDS NEWPORT GREATER CHINA FUND
INVESTMENT GOAL
The Fund seeks long-term growth of capital.
PRIMARY INVESTMENT STRATEGIES
Under normal market conditions, the Fund invests at least 80% of its total
assets in stocks of companies whose principle activities are in the Greater
China Region. These countries may include Hong Kong, The People's Republic of
China and Taiwan. The Fund's investment advisor will determine where a company's
principle activities are located by considering its country of organization, the
principle trading market for its stocks and the source of its revenues and
location of its assets. The Fund may invest in stocks of any size, whose
earnings, the advisor believes, are in a strong growth trend or are undervalued.
At times, the advisor may determine that adverse market conditions make it
desirable to temporarily suspend the Fund's normal investment activities. During
such times, the Fund may, but is not required to, invest in cash or
high-quality, short-term debt securities, without limit. Taking a temporary
defensive position may prevent the Fund from achieving its investment goal.
In seeking to achieve its goal, the Fund may invest in various types of
securities and engage in various investment techniques which are not the
principle focus of the Fund and therefore are not described in this prospectus.
These types of securities and investment practices are identified and discussed
in the Fund's Statement of Additional Information, which you may obtain free of
charge (see back cover). Approval by the Fund's shareholders is not required to
modify or change the Fund's investment goal or investment strategies.
PRIMARY INVESTMENT RISKS
The primary risks of investing in the Fund are described below. There are many
circumstances (including additional risks that are not described here) which
could prevent the Fund from achieving its goal. It is possible to lose money by
investing in the Fund.
Market risk is the risk that the price of a security held by the Fund will fall
due to changing market, economic or political conditions.
Foreign securities are subject to special risks. Foreign stock markets can be
extremely volatile. Fluctuations in currency exchange rates may impact the value
of foreign securities without a change in the intrinsic value of those
securities. The liquidity of foreign securities may be more limited than
domestic securities, which means that the Fund may, at times, be unable to sell
foreign securities at desirable prices. Brokerage commissions, custodial fees
and other fees are generally higher for foreign investments. In addition,
foreign governments may impose withholding taxes which would reduce the amount
of income available to distribute to shareholders. Other risks include the
following: possible delays in the settlement of transactions; less publicly
available
6
<PAGE>
THE FUNDS NEWPORT GREATER CHINA FUND
information about companies; the impact of political, social or diplomatic
events; and possible seizure, expropriation or nationalization of the company or
its assets.
Emerging markets are subject to additional risk. The risks of foreign
investments are typically increased in less developed countries, which are
sometimes referred to as emerging markets. For example, political and economic
structures in these countries may be new and developing rapidly, which may cause
instability. These countries are also more likely to experience high levels of
inflation, deflation or currency devaluations, which could hurt their economies
and securities markets.
Because the Fund's investments are concentrated in the Greater China Region, the
Fund is particularly susceptible to regional risks. Events in any one country
within the region may impact the other countries or the Asian region as a whole.
As a result, events in the region will generally have a greater effect on the
Fund than if the Fund were more geographically diversified, which may result in
greater losses and volatility. Recently, markets in the Greater China Region
have experienced significant volatility. Increased social or political unrest in
part or all of this region could cause further economic and market uncertainty.
Smaller companies are more likely than larger companies to have limited product
lines, operating histories, markets or financial resources. They may depend
heavily on a small management team. Stocks of smaller companies may trade less
frequently, may trade in smaller volumes and may fluctuate more sharply in price
than stocks of larger companies. In addition, they may not be widely followed by
the investment community, which can lower the demand for their stock.
Value stocks are securities of companies that may have experienced adverse
business or industry developments or may be subject to special risks that have
caused the stocks to be out of favor. If the advisor's assessment of a company's
prospects is wrong, the price of its stock may not approach the value the
advisor has placed on it.
As a non-diversified mutual fund, the Fund is allowed to invest a greater
percentage of its total assets in the securities of a single issuer. This may
concentrate issuer risk and, therefore, the Fund may have an increased risk of
loss compared to a similar diversified mutual fund.
7
<PAGE>
THE FUNDS NEWPORT GREATER CHINA FUND
UNDERSTANDING PERFORMANCE
CALENDAR-YEAR TOTAL RETURN shows the Fund's Class A share performance for each
complete calendar year since it commenced operations. It includes the effects of
Fund expenses, but not the effects of sales charges. If sales charges were
included, these returns would be lower.
AVERAGE ANNUAL TOTAL RETURN is a measure of the Fund's performance over the past
one-year and the life of the Fund periods. It includes the effects of Fund
expenses. The table shows each class's returns with sales charges.
The Fund's return is compared to the Hang Seng Stock Index (Hang Seng Index), an
unmanaged index that tracks the performance of approximately 70% of the total
market capitalization of the stock exchange of Hong Kong. The Fund's return is
also compared to the Morgan Stanley Capital International Pacific Region
(Ex-Japan) Index (MSCI Index), an unmanaged index that tracks the performance of
stocks in Pacific Basin countries other than Japan. Unlike the Fund, indices are
not investments, do not incur fees or expenses and are not professionally
managed. It is not possible to invest directly in indices. The Fund's return is
also compared to the average return of the funds included in the Lipper China
Region Funds category average (Lipper Average). This Lipper Average, which is
calculated by Lipper, Inc., is composed of funds with similar investment
objectives to the Fund. Sales charges are not reflected in the Lipper Average.
PERFORMANCE HISTORY
The bar chart below shows changes in the Fund's performance by illustrating the
Fund's calendar year total returns for its Class A shares. The performance table
following the bar chart shows how the Fund's average annual returns for Class A,
B and C shares compare with those of a broad measure of market performance for 1
year and the life of the Fund. The chart and table are intended to illustrate
some of the risks of investing in the Fund by showing the changes in the Fund's
performance. All returns include the reinvestment of dividends and
distributions. Performance results include the effect of expense reduction
arrangements, if any. If these arrangements were not in place, then the
performance results would have been lower. Any expense reduction arrangements
may be discontinued at any time. As with all mutual funds, past performance does
not predict the Fund's future performance.
CALENDAR YEAR TOTAL RETURNS (CLASS A)
[BAR CHART]
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-20.17%
</TABLE>
The Fund's year-to-date total return through September 30, 1999 was 26.54%.
For period shown in bar chart:
Best quarter: 4th quarter 1998, +25.52%
Worst quarter: 2nd quarter 1998, -33.77%
AVERAGE ANNUAL TOTAL RETURNS -- FOR PERIODS ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
INCEPTION LIFE OF
DATE 1 YEAR THE FUND
<S> <C> <C> <C>
Class A (%) 5/16/97 (24.76) (16.58)
--------------------------------------------------------------------
Class B (%) 5/16/97 (24.33) (15.98)
--------------------------------------------------------------------
Class C (%) 5/16/97 (19.92) (12.99)
--------------------------------------------------------------------
Hang Seng Index (%) N/A (2.72) (18.70)(7)
--------------------------------------------------------------------
MSCI Index (%) N/A (6.64) (23.87)(7)
--------------------------------------------------------------------
Lipper Average (%) N/A (17.51) (29.66)(7)
</TABLE>
(7) Performance information is from May 31, 1997.
8
<PAGE>
THE FUNDS NEWPORT GREATER CHINA FUND
UNDERSTANDING EXPENSES
SALES CHARGES are paid directly by shareholders to Liberty Funds Distributor,
Inc., the Fund's distributor.
REDEMPTION FEE is imposed on redemptions and exchanges of Fund shares purchased
and held for five business days or less. The redemption fee is paid to the Fund
to help offset additional transaction costs created by short-term "market
timers."
ANNUAL FUND OPERATING EXPENSES are deducted from the Fund. They include
management and administration fees, 12b-1 fees, brokerage costs, and
administrative costs including pricing and custody services.
EXAMPLE EXPENSES help you compare the cost of investing in the Fund to the cost
of investing in other mutual funds. The table does not take into account any
expense reduction arrangements discussed in the footnotes to the Annual Fund
Operating Expenses table. It uses the following hypothetical conditions:
- - $10,000 initial investment
- - 5% total return for each year
- - Fund operating expenses remain the same
- - Assumes reinvestment of all dividends and distributions
YOUR EXPENSES
Expenses are one of several factors to consider before you invest in a mutual
fund. The tables below describe the fees and expenses you may pay when you buy,
hold and sell shares of the Fund.
SHAREHOLDER FEES(8) (PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Maximum sales charge (load) on purchases (%)
(as a percentage of the offering price) 5.75 0.00 0.00
- ------------------------------------------------------------------------------------
Maximum deferred sales charge (load) on
redemptions (%) (as a percentage of the
lesser of purchase price or redemption price) 1.00(9) 5.00 1.00
- ------------------------------------------------------------------------------------
Redemption fee(10)(11) (%)(as a percentage of amount
redeemed, if applicable) 2.00 2.00 2.00
</TABLE>
ANNUAL FUND OPERATING EXPENSES (DEDUCTED DIRECTLY FROM FUND ASSETS)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Management and administration fees(12) (%) 1.40 1.40 1.40
- ---------------------------------------------------------------------------------
Distribution and service (12b-1) fees (%) 0.25 1.00 1.00
- ---------------------------------------------------------------------------------
Other expenses(12) (%) 0.80 0.80 0.80
- ---------------------------------------------------------------------------------
Total annual fund operating expenses(12) (%) 2.45 3.20 3.20
- ---------------------------------------------------------------------------------
</TABLE>
EXAMPLE EXPENSES (YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER)
<TABLE>
<CAPTION>
CLASS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $809 $1,294 $1,804 $3,197
- ---------------------------------------------------------------------------------------
Class B: did not sell your shares $323 $ 985 $1,672 $3,328
sold all your shares at
the end of the period $823 $1,285 $1,872 $3,328
- ---------------------------------------------------------------------------------------
Class C: did not sell your shares $323 $ 985 $1,672 $3,500
sold all your shares at
the end of the period $423 $ 985 $1,672 $3,500
</TABLE>
(8) A $10 annual fee is deducted from accounts of less than $1,000 and paid to
the transfer agent.
(9) This charge applies only to certain Class A shares bought without an
initial sales charge that are sold within 18 months of purchase.
(10) There is a $7.50 charge for wiring sale proceeds to your bank.
(11) A 2.00% contingent redemption fee is imposed on redemptions and exchanges
of Fund shares purchased and held for five business days or less.
(12) The Fund's advisor and administrator have voluntarily agreed to waive
advisory and administration fees and reimburse the Fund for certain
expenses so that the total annual fund operating expenses (exclusive of
distribution and service fees, brokerage commissions, interest, taxes and
extraordinary expenses, if any) will not exceed 1.90%. As a result, the
actual management and administration fees for each share class would be
1.10% other expenses for each share class would be 0.80% and total annual
fund operating expenses for Class A, B and C shares would be 2.15%, 2.90%
and 2.90%, respectively. This arrangement may be terminated by the advisor
or administrator at any time.
9
<PAGE>
YOUR ACCOUNT
HOW TO BUY SHARES
Your financial advisor can help you establish an appropriate investment
portfolio, buy shares and monitor your investments. When a Fund receives your
purchase request in "good form," your shares will be bought at the next
calculated public offering price. "Good form" means that you placed your order
with your brokerage firm or your payment has been received and your application
is complete, including all necessary signatures.
INVESTMENT MINIMUMS(13)
<TABLE>
<S> <C>
Initial Investment ........ $1,000
Subsequent Investments .... $ 50
Automatic Investment Plan . $ 50
Retirement Plans .......... $ 25
</TABLE>
OUTLINED BELOW ARE THE VARIOUS OPTIONS FOR BUYING SHARES:
METHOD INSTRUCTIONS
Through your Your financial advisor can help you establish your
financial account and buy Fund shares on your behalf.
advisor
- --------------------------------------------------------------------------------
By check For new accounts, send a completed application and
(new account) check made payable to the Fund to the transfer
agent, Liberty Funds Services, Inc., P.O. Box 1722,
Boston, MA 02105-1722.
- --------------------------------------------------------------------------------
By check For existing accounts, fill out and return the
(existing additional investment stub included in your
account) quarterly statement, or send a letter of
instruction including your Fund name and account
number with a check made payable to the Fund to
Liberty Funds Services, Inc., P.O. Box 1722,
Boston, MA 02105-1722.
- --------------------------------------------------------------------------------
By exchange You or your financial advisor may acquire shares by
exchanging shares you own in one fund for shares of the same
class of the Fund at no additional cost. There may be an
additional charge if exchanging from a money market fund. To
exchange by telephone, call 1-800-422-3737.
- --------------------------------------------------------------------------------
By wire You may purchase shares by wiring money from your bank
account to your fund account. To wire funds to your fund
account, call 1-800-422-3737 to obtain a control number and
the wiring instructions.
- --------------------------------------------------------------------------------
By electronic You may purchase shares by electronically transferring
funds transfer money from your bank account to your fund account by calling
1-800-422-3737. Electronic funds transfers may take up to two
business days to settle and be considered in "good form." You
must set up this feature prior to your telephone request. Be
sure to complete the appropriate section of the application.
- --------------------------------------------------------------------------------
Automatic You can make monthly or quarterly investments automatically
investment plan from your bank account to your fund account. You can select
a pre-authorized amount to be sent via electronic funds
transfer. Be sure to complete the appropriate section of the
application for this feature.
- --------------------------------------------------------------------------------
By dividend You may automatically invest dividends distributed
diversification by one fund into the same class of shares of the Fund at no
additional sales charge. To invest your dividends in another
fund, call 1-800-345-6611.
(13) Each Fund reserves the right to change the investment minimums. Each Fund
also reserves the right to refuse a purchase order for any reason,
including if it believes that doing so would be in the best interest of the
Fund and its shareholders.
10
<PAGE>
YOUR ACCOUNT
CHOOSING A SHARE CLASS
The Funds offer three classes of shares in this prospectus -- CLASS A, B and C.
Each share class has its own sales charge and expense structure. Determining
which share class is best for you depends on the dollar amount you are investing
and the number of years for which you are willing to invest. Purchases of
$250,000 or more but less than $1 million can be made only in Class A or Class C
shares. Purchases of $1 million or more are automatically invested in Class A
shares. Effective February 1, 2000, if your financial advisor firm participates
in the Class B discount program, purchases of over $1 million can be made only
in Class A or Class C shares. Otherwise, purchases in excess of $250,000 must be
for Class A or Class C shares only. Based on your personal situation, your
investment advisor can help you decide which class of shares makes the most
sense for you.
The Funds also offer an additional class of shares, Class Z shares, exclusively
to certain institutional and other investors. Class Z shares are made available
through a separate prospectus provided to eligible institutional and other
investors.
SALES CHARGES
You may be subject to an initial sales charge when you purchase, or a contingent
deferred sales charge (CDSC) when you sell, shares of a Fund. These sales
charges are described below. In certain circumstances, these sales charges are
waived, as described below and in the Statement of Additional Information.
CLASS A SHARES Your purchases of Class A shares generally are at the public
offering price. This price includes a sales charge that is based on the amount
of your initial investment when you open your account. A portion of the sales
charge is the commission paid to the financial advisor firm on the sale of Class
A shares. The sales charge you pay on additional investments is based on the
total amount of your purchase and the current value of your account. The amount
of the sales charge differs depending on the amount you invest as shown in the
table below.
CLASS A SALES CHARGES
<TABLE>
<CAPTION>
% OF
OFFERING
PRICE
AS A % OF RETAINED
THE BY
PUBLIC AS A % FINANCIAL
OFFERING OF YOUR ADVISOR
AMOUNT OF PURCHASE PRICE INVESTMENT FIRM
<S> <C> <C> <C>
Less than $50,000 5.75 6.10 5.00
- ------------------------------------------------------------------------
$ 50,000 to less than $100,000 4.50 4.71 3.75
- ------------------------------------------------------------------------
$100,000 to less than $250,000 3.50 3.63 2.75
- ------------------------------------------------------------------------
$250,000 to less than $500,000 2.50 2.56 2.00
- ------------------------------------------------------------------------
$500,000 to less than $1,000,000 2.00 2.04 1.75
- ------------------------------------------------------------------------
$1,000,000 or more(14) 0.00 0.00 0.00
</TABLE>
For Class A share purchases of $1 million or more, financial advisors receive a
commission from the distributor as follows:
PURCHASES OVER $1 MILLION
<TABLE>
<CAPTION>
AMOUNT PURCHASED COMMISSION %
<S> <C>
First $3 million 1.00
- ------------------------------------------------------------------------
Next $2 million 0.50
- ------------------------------------------------------------------------
Over $5 million 0.25(15)
</TABLE>
(14) Class A shares bought without an initial sales charge in accounts
aggregating $1 million to $5 million at the time of purchase are subject to
a 1% CDSC if the shares are sold within 18 months of the time of purchase.
Subsequent Class A share purchases that bring your account value above $1
million are subject to a 1% CDSC if redeemed within 18 months of their
purchase date. The 18-month period begins on the first day of the month
following each purchase.
(15) Paid over 12 months but only to the extent the shares remain outstanding.
11
<PAGE>
YOUR ACCOUNT
UNDERSTANDING CONTINGENT DEFERRED SALES CHARGES (CDSC)
Certain investments in Class A, B and C shares are subject to a
CDSC, a sales charge applied at the time you sell your shares. You
will pay the CDSC only on shares you sell within a certain amount of
time after purchase. The CDSC generally declines each year until
there is no charge for selling shares. The CDSC is applied to the
net asset value at the time of purchase or sale, whichever is
lower. For purposes of calculating the CDSC, the start of the
holding period is the month-end of the month in which the purchase
is made. Shares you purchase with reinvested dividends or capital
gains are not subject to a CDSC. When you place an order to sell
shares, the Fund will automatically sell first those shares not
subject to a CDSC and then those you have held the longest. This
policy helps reduce and possibly eliminate the potential impact of
the CDSC.
REDUCED SALES CHARGES FOR LARGER INVESTMENTS There are two ways for you to pay a
lower sales charge when purchasing Class A shares. The first is through Rights
of Accumulation. If the combined value of the Fund accounts maintained by you,
your spouse or your minor children reaches a discount level (according to the
chart on the previous page), your next purchase will receive the lower sales
charge. The second is by signing a Statement of Intent within 90 days of your
purchase. By doing so, you would be able to pay the lower sales charge on all
purchases by agreeing to invest a total of at least $50,000 within 13 months. If
your Statement of Intent purchases are not completed within 13 months, you will
be charged the applicable sales charge on the amount you had invested to that
date. In addition, certain investors may purchase shares at a reduced sales
charge or net asset value (NAV), which is the value of a fund share excluding
any sales charges. See the Statement of Additional Information for a description
of these situations.
CLASS B SHARES Your purchases of Class B shares are at the Funds' NAV. Class B
shares have no front-end sales charge, but they do carry a CDSC that is imposed
only on shares sold prior to the completion of the periods shown in the charts
below. The CDSC generally declines each year and eventually disappears over
time. The distributor pays the financial advisor firm an up-front commission on
sales of Class B shares as depicted in the charts below.
PURCHASES OF LESS THAN $250,000:
The Funds
<TABLE>
<CAPTION>
% DEDUCTED WHEN
HOLDING PERIOD AFTER PURCHASE SHARES ARE SOLD
<S> <C>
Through first year 5.00
-----------------------------------------------------------------------
Through second year 4.00
-----------------------------------------------------------------------
Through third year 3.00
-----------------------------------------------------------------------
Through fourth year 3.00
-----------------------------------------------------------------------
Through fifth year 2.00
-----------------------------------------------------------------------
Through sixth year 1.00
-----------------------------------------------------------------------
Longer than six years 0.00
</TABLE>
Commission to financial advisors is 5.00%.
Automatic conversion to Class A shares is eight years after purchase.
12
<PAGE>
YOUR ACCOUNT
EFFECTIVE FOR PURCHASES ON AND AFTER FEBRUARY 1, 2000, there are two ways for
you to pay a lower CDSC and reduce the holding period when making purchases of
Class B shares. The first is through a financial advisor firm which participates
in the Class B share discount program for larger purchases as described in the
charts below. Some financial advisor firms are not able to participate because
their record keeping or transaction processing systems are not designed to
accommodate these reductions. Consult your financial advisor to see whether it
participates in the discount program for larger purchases. The second is through
Rights of Accumulation. If the combined value of the Fund accounts maintained by
you, your spouse or your minor children is at or above a discount level, your
next purchase will receive the lower CDSC and the applicable reduced holding
period.
PURCHASES OF $250,000 TO LESS THAN $500,000:
The Funds
<TABLE>
<CAPTION>
% DEDUCTED WHEN
HOLDING PERIOD AFTER PURCHASE SHARES ARE SOLD
<S> <C>
Through first year 3.00
-----------------------------------------------------------------------
Through second year 2.00
-----------------------------------------------------------------------
Through third year 1.00
-----------------------------------------------------------------------
Longer than four years 0.00
</TABLE>
Commission to financial advisors is 2.50%.
Automatic conversion to Class A shares is four years after purchase.
PURCHASES OF $500,000 TO LESS THAN $1 MILLION:
The Funds
<TABLE>
<CAPTION>
% DEDUCTED WHEN
HOLDING PERIOD AFTER PURCHASE SHARES ARE SOLD
<S> <C>
Through first year 3.00
-----------------------------------------------------------------------
Through second year 2.00
-----------------------------------------------------------------------
Through third year 1.00
-----------------------------------------------------------------------
Longer than four years 0.00
</TABLE>
Commission to financial advisors is 1.75%.
Automatic conversion to Class A shares is three years after purchase.
13
<PAGE>
YOUR ACCOUNT
If you exchange into a fund participating in the Class B share discount program
or transfer your fund account from a financial advisor which does not
participate in the program to one who does, the exchanged or transferred shares
will retain the pre-existing CDSC but any additional purchases of Class B shares
which cause the exchanged or transferred account to exceed the applicable
discount level, will receive the lower CDSC and the reduced holding period for
amounts in excess of the discount level. Your financial advisor will receive the
lower commission for purchases in excess of an applicable discount level.
CLASS C SHARES Similar to Class B shares, your purchases of Class C shares are
at the Funds' NAV. Although Class C shares have no front-end sales charge, they
carry a CDSC of 1.00% that is applied to shares sold within the first year after
they are purchased. After holding shares for one year, you may sell them at any
time without paying a CDSC. The distributor pays the financial advisor firm an
up-front commission of 1.00% on sales of Class C shares.
Class C Sales Charges
<TABLE>
<CAPTION>
YEARS AFTER PURCHASE % DEDUCTED WHEN SHARES ARE SOLD
<S> <C>
Through first year 1.00
- ------------------------------------------------------------------------
Longer than one year 0.00
</TABLE>
CONTINGENT REDEMPTION FEE The Funds can experience substantial price fluctuation
and are intended for long-term investors. Short-term "market timers" who engage
in frequent purchases and redemptions can disrupt the Funds' investment program
and create additional transaction costs that are borne by all shareholders. The
Funds will assess a contingent redemption fee in the amount of 2.00% on
redemptions and exchanges of Fund shares purchased and held for five business
days or less.
The contingent redemption fee will be paid to the Funds to help offset
transaction costs. The Funds will use the "first-in, first-out" method to
determine the five business day holding period. Under this method, the date of
the redemption or exchange will be compared with the earliest purchase date of
shares held in the account. If this holding period is five business days or
less, the contingent redemption fee will be assessed.
The contingent redemption fee does not apply to any shares purchased through the
reinvestment of dividends. The fee may not apply to omnibus accounts and wrap
fee programs.
14
<PAGE>
YOUR ACCOUNT
HOW TO EXCHANGE SHARES
You may exchange your shares for shares of the same share class of another fund
distributed by Liberty Funds Distributor, Inc. at net asset value. If your
shares are subject to a CDSC, you will not be charged a CDSC upon the exchange.
However, when you sell the shares acquired through the exchange, the shares sold
may be subject to a CDSC, depending upon when you originally purchased the
shares you exchanged. For purposes of computing the CDSC, the length of time you
have owned your shares will be computed from the date of your original purchase
and the applicable CDSC will be the CDSC of the original fund. Unless your
account is part of a tax-deferred retirement plan, an exchange is a taxable
event. Therefore, you may realize a gain or a loss for tax purposes. A Fund may
terminate your exchange privilege if the advisor determines that your exchange
activity is likely to adversely impact its ability to manage the Fund. To
exchange by telephone, call 1-800-422-3737.
HOW TO SELL SHARES
Your financial advisor can help you determine if and when you should sell your
shares. You may sell shares of a Fund on any regular business day that the New
York Stock Exchange (NYSE) is open.
When a Fund receives your sales request in "good form," shares will be sold at
the next calculated price. In "good form" means that money used to purchase your
shares is fully collected. When selling shares by letter of instruction, "good
form" also means (i) your letter has complete instructions, the proper
signatures and signature guarantees, (ii) you have included any certificates for
shares to be sold, and (iii) any other required documents are attached. For
additional documents required for sales by corporations, agents, fiduciaries and
surviving joint owners, please call 1-800-345-6611. Retirement plan accounts
have special requirements; please call 1-800-799-7526 for more information.
The Funds will generally send proceeds from the sale to you within seven days
(usually on the next business day after your request is received in "good
form"). However, if you purchased your shares by check, a Fund may delay sending
the proceeds from the sale of your shares for up to 15 days after your purchase
to protect against checks that are returned. No interest will be paid on
uncashed redemption checks.
15
<PAGE>
YOUR ACCOUNT
Outlined below are the various options for selling shares:
Method Instructions
Through your You may call your financial advisor to place your
financial sell order. To receive the current trading day's
advisor price, your financial advisor firm must receive
your request prior to the close of the NYSE,
usually 4:00 p.m. Eastern time.
- ------------------------------------------------------------------------
By exchange You or your financial advisor may sell shares by
exchanging from a Fund into the same share class of
another fund at no additional cost.
To exchange by telephone, call 1-800-422-3737.
- ------------------------------------------------------------------------
By telephone You or your financial advisor may sell shares by
telephone and request that a check be sent to your
address of record by calling 1-800-422-3737, unless
you have notified the Fund of an address change
within the previous 30 days. The dollar limit for
telephone sales is $100,000 in a 30-day period.
You do not need to set up this feature in advance
of your call. Certain restrictions apply to
retirement accounts. For details, call
1-800-345-6611.
- ------------------------------------------------------------------------
By mail You may send a signed letter of instruction or
stock power form along with any certificates to be
sold to the address below. In your letter of
instruction, note the Fund's name, share class,
account number, and the dollar value or number of
shares you wish to sell. All account owners must
sign the letter, and signatures must be guaranteed
by either a bank, a member firm of a national stock
exchange or another eligible guarantor
institution. Additional documentation is required
for sales by corporations, agents, fiduciaries,
surviving joint owners and individual retirement
account owners. For details, call 1-800-345-6611.
Mail your letter of instruction to Liberty Funds
Services, Inc., P.O. Box 1722, Boston, MA
02105-1722.
- ------------------------------------------------------------------------
By wire You may sell shares and request that the proceeds
be wired to your bank. You must set up this
feature prior to your telephone request. Be sure
to complete the appropriate section of the account
application for this feature.
- ------------------------------------------------------------------------
By electronic You may sell shares and request that the proceeds
funds transfer be electronically transferred to your bank.
Proceeds may take up to two business days
to be received by your bank. You must set up this
feature prior to your request. Be sure to complete
the appropriate section of the account
application for this feature.
DISTRIBUTION AND SERVICE FEES
Each Fund has adopted a plan under Rule 12b-1 that permits it to pay marketing
and other fees to support the sale and distribution of Class A, B and C shares
and the services provided to you by your financial advisor. The annual
distribution fee and service fee may equal up to 0.00% and 0.25%, respectively,
for Class A shares and 0.75% and 0.25%, respectively, for each of Class B and
Class C shares and are paid out of the assets of these classes. Over time, these
fees will increase the cost of your shares and may cost you more than paying
other types of sales charges.(16)
(16)Class B shares automatically convert to Class A shares after a
certain number of years, depending on the program you purchased
your shares under, eliminating the distribution fee upon
conversion.
16
<PAGE>
YOUR ACCOUNT
OTHER INFORMATION ABOUT YOUR ACCOUNT
HOW A FUND'S SHARE PRICE IS DETERMINED The price of each class of a Fund's
shares is based on its net asset value (NAV). The NAV is determined at the close
of regular trading on the NYSE, usually 4:00 p.m. Eastern time, on each business
day that the NYSE is open (typically Monday through Friday).
When you request a transaction, it will be processed at the NAV (plus any
applicable sales charges) next determined after your request is received in
"good form" by the distributor. In most cases, in order to receive that day's
price, the distributor must receive your order before that day's transactions
are processed. If you request a transaction through your financial advisor's
firm, the firm must receive your order by the close of trading on the NYSE to
receive that day's price.
Each Fund determines its NAV for each share class by dividing each class's total
net assets by the number of that class's shares outstanding. In determining the
NAV, each Fund must determine the price of each security in its portfolio at the
close of each trading day. Because the Funds hold securities that are traded on
foreign exchanges, the value of the Funds' securities may change on days when
shareholders will not be able to buy or sell Fund shares. This will affect the
Funds' NAV on the day it is next determined. Securities for which market
quotations are available are valued each day at the current market value.
However, where market quotations are unavailable, or when the advisor believes
that subsequent events have made them unreliable, the Funds may use other data
to determine the fair value of the securities.
You can find the daily prices of some share classes for each Fund in most major
daily newspapers under the caption "Liberty." You can find daily prices for all
share classes by visiting the Funds' web site at www.libertyfunds.com.
ACCOUNT FEES If your account value falls below $1,000 (other than as a result of
depreciation in share value) you may be subject to an annual account fee of $10.
This fee is deducted from the account in June each year. Approximately 60 days
prior to the fee date, the Funds' transfer agent will send you written
notification of the upcoming fee. If you add money to your account and bring the
value above $1,000 prior to the fee date, the fee will not be deducted.
SHARE CERTIFICATES Share certificates are not available for Class B and C
shares. Certificates will be issued for Class A shares only if requested. If you
decide to hold share certificates, you will not be able to sell your shares
until you have endorsed your certificates and returned them to the distributor.
17
<PAGE>
YOUR ACCOUNT
UNDERSTANDING FUND DISTRIBUTIONS
Each Fund earns income from the securities it holds. Each Fund also
may realize capital gains and losses on sales of its securities.
Each Fund distributes substantially all of its net investment income
and capital gains to shareholders. As a shareholder, you are
entitled to a portion of a Fund's income and capital gains based on
the number of shares you own at the time these distributions are
declared.
DIVIDENDS, DISTRIBUTIONS, AND TAXES The Funds have the potential to make the
following distributions:
Types of Distributions
Dividend Represents interest and dividends earned from
securities held by the Funds.
----------------------------------------------------------------------
Capital gains Represents long-term capital gains on sales of
securities held for more than 12 months and short-term capital
gains which are gains on sales of securities held for a
12-month period or less.
DISTRIBUTION OPTIONS The Funds distribute dividends annually and any capital
gains (including short-term capital gains) at least annually. You can choose one
of the options listed in the table below for these distributions when you open
your account.(17) To change your distribution option call 1-800-345-6611.
Distribution Options
Reinvest all distributions in additional shares of your current fund
----------------------------------------------------------------------
Reinvest all distributions in shares of another fund
----------------------------------------------------------------------
Receive dividends in cash (see options below) and reinvest capital
gains(18)
----------------------------------------------------------------------
Receive all distributions in cash (with one of the following options)(18):
- - send the check to your address of record
- - send the check to a third party address
- - transfer the money to your bank via electronic funds transfer
TAX CONSEQUENCES Regardless of whether you receive your distributions in cash or
reinvest them in additional Fund shares, all Fund distributions are subject to
federal income tax. Depending on the state where you live, distributions may
also be subject to state and local income taxes.
In general, any distributions of dividends, interest and short-term capital
gains are taxable as ordinary income. Distributions of long-term capital gains
are generally taxable as such, regardless of how long you have held your Fund
shares. You will be provided with information each year regarding the amount of
ordinary income and capital gains distributed to you for the previous year and
any portion of your distribution which is exempt from state and local taxes.
Your investment in a Fund may have additional personal tax implications. Please
consult your tax advisor on foreign, federal, state, local or other applicable
tax laws.
In addition to the dividends and capital gains distributions made by each Fund,
you may realize a capital gain or loss when selling and exchanging shares of a
Fund. Such transactions may be subject to federal, state and local income tax.
(17) If you do not indicate on your application your preference for handling
distributions, a Fund will automatically reinvest all distributions in
additional shares of the Fund.
(18) Distributions of $10 or less will automatically be reinvested in additional
Fund shares. If you elect to receive distributions by check and the check
is returned as undeliverable, or if you do not cash a distribution check
within six months of the check date, the distribution will be reinvested in
additional shares of the Fund.
18
<PAGE>
MANAGING THE FUNDS
INVESTMENT ADVISOR
Newport Fund Management, Inc. (Newport), located at 580 California Street, Suite
1960, San Francisco, California 94104, is the Funds' investment advisor. In its
duties as investment advisor, Newport runs the Funds' day-to-day business,
including placing all orders for the purchase and sale of each Fund's portfolio
securities. Newport has been an investment advisor since 1987. As of November
30, 1999, Newport managed over $1.3 billion in assets.
For the 1999 fiscal year, aggregate advisory fees paid to Newport by the Newport
Japan Opportunities Fund and Newport Greater China Fund amounted to 0.59% and
0.90% of average daily net assets of each Fund, respectively.
PORTFOLIO MANAGERS
DAVID SMITH, a senior vice president of Newport and its immediate parent,
Newport Pacific Management, Inc. (Newport Pacific), is the manager for the
Newport Japan Opportunities Fund (Japan Fund) and has managed the Japan Fund
since it commenced operations in June, 1996. Mr. Smith has managed various other
funds or accounts on behalf of Newport Pacific since October, 1994.
THOMAS R. TUTTLE, president of Newport and of Newport Pacific, is a co-manager
for the Newport Greater China Fund (China Fund) and has co-managed the China
Fund since it commenced operations in May, 1997. Mr. Tuttle has been affiliated
with Newport since August, 1987 and with Newport Pacific since December, 1983.
CHRISTOPHER LEGALLET, chief investment officer of Newport and of Newport
Pacific, is a co-manager of the China Fund and has co-managed the China Fund
since it commenced operations in May, 1997. Prior to his affiliation with
Newport, Mr. Legallet was a managing director of Jupiter Tyndall (Asia) Ltd. in
Hong Kong, serving as lead manager for investment in Asia from 1992 to 1997.
19
<PAGE>
Year 2000 Compliance
Like other investment companies, financial and business organizations and
individuals around the world, the Funds could be adversely affected if the
computer systems used by the advisor, other service providers and the companies
in which the Funds invest do not properly process and calculate date-related
information and data from and after January 1, 2000. This is commonly known as
the "Year 2000 Problem." The Funds' service providers have taken steps that they
believe are reasonably designed to address the Year 2000 Problem, including
communicating with vendors who furnish services, software and systems to the
Funds, to provide that date-related information and data can be properly
processed after January 1, 2000. Many mutual fund service providers and vendors,
including the Funds' service providers, have made Year 2000 modifications to
their software and systems. In addition, Year 2000 readiness is one of the
factors considered by the advisor in its assessment of companies in which the
Funds invest to the extent that information is readily available. However, no
assurances can be given that the Funds will not be adversely affected by these
matters. The Funds may invest in emerging markets in developing countries, and
some reports indicate that developing countries may be behind other countries
with respect to Year 2000 compliance.
20
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Funds'
financial performance. Information is shown for the Funds' fiscal years since
inception, which run from September 1 to August 31. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that you would have earned (or lost) on an investment in the
Funds (assuming reinvestment of all dividends and distributions). This
information has been derived from the Funds' financial statements which have
been audited by PricewaterhouseCoopers LLP, independent accountants, whose
report, along with the Funds' financial statements, is included in the Funds'
annual report. You can request a free annual report by calling 1-800-426-3750.
NEWPORT JAPAN OPPORTUNITIES FUND
<TABLE>
<CAPTION>
Year ended August 31,
1999 1998 1997
Class A Class B Class C Class A Class B Class C Class A Class B Class C(c)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value-- Beginning of period ($) 8.660 8.520 8.510 10.050 9.950 9.940 9.710 9.690 9.690
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS ($):
Net investment loss (a)(b) (0.128) (0.219) (0.221) (0.103) (0.172) (0.172) (0.094) (0.170) (0.170)
-----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 10.008 9.809 9.811 (1.265) (1.236) (1.236) 0.434 0.430 0.420
-----------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 9.880 9.590 9.590 (1.368) (1.408) (1.408) 0.340 0.260 0.250
-----------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO
SHAREHOLDERS ($):
From net realized gains --- --- --- (0.022) (0.022) (0.022) --- --- ---
-----------------------------------------------------------------------------------------------------------------------------------
Net asset value-- End of period ($) 18.540 18.110 18.100 8.660 8.520 8.510 10.050 9.950 9.940
-----------------------------------------------------------------------------------------------------------------------------------
Total return (%) (d)(e) 114.09 112.56 112.69 (13.62) (14.16) (14.18) 3.50 2.68 2.58
-----------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (%):
Expenses (f) 2.00 2.75 2.75 2.00 2.75 2.75 2.00 2.75 2.75
-----------------------------------------------------------------------------------------------------------------------------------
Net investment loss (f) (1.03) (1.78) (1.78) (1.12) (1.87) (1.87) (0.93) (1.68) (1.68)
-----------------------------------------------------------------------------------------------------------------------------------
Fees and expenses waived or borne by
the Advisor/Administrator (f) 0.46 0.46 0.46 0.72 0.72 0.72 1.79 1.79 1.79
-----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 27 27 27 24 24 24 20 20 20
-----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000) ($) 17,091 21,333 8,167 2,887 6,028 1,862 4,073 6,275 3,001
(a) Net of fees and expenses waived or
borne by the Advisor/Administrator
which amounted to ($): 0.057 0.057 0.057 0.066 0.066 0.066 0.180 0.180 0.180
</TABLE>
(b) Per share data was calculated using average shares outstanding during
the period.
(c) Effective July 1, 1997, Class D shares were redesignated Class C
shares.
(d) Total return at net asset value assuming all distributions reinvested
and no initial sales charge or contingent deferred sales charge.
(e) Had the Advisor/Administrator not waived or reimbursed a portion of
expenses, total return would have been reduced.
(f) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
21
<PAGE>
FINANCIAL HIGHLIGHTS
NEWPORT JAPAN OPPORTUNITIES FUND
<TABLE>
<CAPTION>
Period ended August 31,
1996 (c)
Class A Class B Class C
<S> <C> <C> <C>
Net asset value-- Beginning of period
($) 10.000 10.000 10.000
-----------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS ($):
Net investment loss (a)(b) (0.016) (0.034) (0.034)
-----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) (0.274) (0.276) (0.276)
-----------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations (0.290) (0.310) (0.310)
-----------------------------------------------------------------------------------------------------------------------------------
Net asset value-- End of period ($) 9.710 9.690 9.690
-----------------------------------------------------------------------------------------------------------------------------------
Total return (%) (d)(e)(f) (2.90) (3.10) (3.10)
-----------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (%):
Expenses (g)(h) 2.00 2.75 2.75
-----------------------------------------------------------------------------------------------------------------------------------
Net investment loss (g)(h) (0.66) (1.41) (1.41)
-----------------------------------------------------------------------------------------------------------------------------------
Fees and expenses waived or borne by
the Advisor/Administrator (g)(h) 9.13 9.13 9.13
-----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) --- --- ---
-----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000) ($) 1,066 1,197 472
-----------------------------------------------------------------------------------------------------------------------------------
(a) Net of fees and expenses waived or
borne by the Advisor/Administrator
which amounted to ($): 0.230 0.230 0.230
</TABLE>
(b) Per share data was calculated using average shares outstanding during
the period.
(c) The Fund commenced investment operations on June 3, 1996.
(d) Total return at net asset value assuming all distributions reinvested
and no initial sales charge or contingent deferred sales charge.
(e) Had the Advisor/Administrator not waived or reimbursed a portion of
expenses, total return would have been reduced.
(f) Not annualized.
(g) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(h) Annualized.
22
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year ended August 31,
1999 1998
Class A Class B Class C Class A Class B Class C
Net asset value-- Beginning of period ($) 6.340 6.340 6.320 17.900 17.860 17.860
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCOME FROM INVESTMENT OPERATIONS ($):
Net investment income (loss) (a)(b) 0.100(d) 0.019(d) 0.019(d) 0.092(e) 0.012(e) 0.013(e)
- ----------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 7.582 7.521 7.761 (11.591) (11.478) (11.498)
- ----------------------------------------------------------------------------------------------------------
Total from Investment Operations 7.682 7.540 7.780 (11.499) (11.466) (11.485)
- ----------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
($):
From net investment income (0.082) --- --- (0.061) (0.054) (0.055)
- ----------------------------------------------------------------------------------------------------------
Net asset value-- End of period ($) 13.940 13.880 14.100 6.340 6.340 6.320
- ----------------------------------------------------------------------------------------------------------
Total return (%) (h)(i) 121.59 118.93 123.10 (64.42) (64.36) (64.46)
- ----------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (%):
Expenses (k) 2.15 2.90 2.90 2.15 2.90 2.90
- ----------------------------------------------------------------------------------------------------------
Net investment income (loss) (k) 0.92 0.17 0.17 0.74 (0.01) (0.01)
- ----------------------------------------------------------------------------------------------------------
Fees and expenses waived or borne by the
Advisor/Administrator (k) 0.30 0.30 0.30 0.31 0.31 0.31
- ----------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 20 20 20 58 58 58
- ----------------------------------------------------------------------------------------------------------
Net assets at end of period (000) ($) 54,623 3,423 774 31,214 1,692 443
- ----------------------------------------------------------------------------------------------------------
(a) Net of fees and expenses waived or
borne by the Advisor/Administrator
which amounted to ($): 0.032 0.032 0.032 0.039 0.039 0.039
</TABLE>
<TABLE>
<CAPTION>
Period ended August 31,
1997 (c)
Class A Class B Class C
Net asset value-- Beginning of period ($) 13.340 13.330 13.330
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME FROM INVESTMENT OPERATIONS ($):
Net investment income (loss) (a)(b) 0.052(f) (0.004)(f) (0.004)(f)
- -----------------------------------------------------------------------------
Net realized and unrealized gain (loss) 4.508(g) 4.534(g) 4.534(g)
- -----------------------------------------------------------------------------
Total from Investment Operations 4.560 4.530 4.530
- -----------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
($):
From net investment income --- --- ---
- -----------------------------------------------------------------------------
Net asset value-- End of period ($) 17.900 17.860 17.860
- -----------------------------------------------------------------------------
Total return (%) (h)(i) 34.22(j) 33.98(j) 33.98(j)
- -----------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (%):
Expenses (k) 2.15(l) 2.90(l) 2.90(l)
- -----------------------------------------------------------------------------
Net investment income (loss) (k) 0.89(l) 0.14(l) 0.14(l)
- -----------------------------------------------------------------------------
Fees and expenses waived or borne by the
Advisor/Administrator (k) 0.59(l) 0.59(l) 0.59(l)
- -----------------------------------------------------------------------------
Portfolio turnover (%) 4(j) 4(j) 4(j)
- -----------------------------------------------------------------------------
Net assets at end of period (000) ($) 115,699 135 134
- -----------------------------------------------------------------------------
(a) Net of fees and expenses waived or
borne by the Advisor/Administrator
which amounted to ($): 0.034 0.034 0.034
</TABLE>
(b) Per share data was calculated using average shares outstanding during
the period.
(c) The Fund commenced investment operations on May 12, 1997. The activity
shown is from the effective date of registration (May 16, 1997) with
the Securities and Exchange Commission. The per share information
reflects the 1.5 for 1 stock split effective July 25, 1997.
(d) Includes distributions from Citic Pacific Ltd., Glorious Sun
Enterprises, Guangshen Railway Co., Ltd., Hang Seng Bank Ltd., Hong
Kong and China Gas Co., Ltd., Li & Fung Ltd. and Zhejiang Southeast
Electric Power Co., which amounted to $0.021, $0.019, $0.021, $0.020,
$0.017, $0.028 and $0.047 per share, respectively.
(e) Includes distributions from Cheung Kong Holdings Ltd., Citic Pacific
Ltd., Guangshen Railway Co., Ltd. and Henderson Land Development Co.,
Ltd., which amounted to $0.019, $0.036, $0.018 and $0.020 per share
respectively.
(f) Includes distributions from China Light & Power Co. Ltd., Dah Sing
Financial, Glorious Sun Enterprises and Hang Seng Bank Ltd., which
amounted in total to $0.078 per share.
(g) The amount of net realized and unrealized gain shown for a share
outstanding for the period ended August 31, 1997 does not correspond
with the aggregate net loss on investments for the period due to the
timing of sales and repurchases of Fund shares in relation to
fluctuating market values of the investments of the Fund.
(h) Total return at net asset value assuming all distributions reinvested
and no initial sales charge or contingent deferred sales charge.
(i) Had the Advisor/Administrator not waived or reimbursed a portion of
expenses, total return would have been reduced.
(j) Not annualized.
(k) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(l) Annualized.
23
<PAGE>
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<PAGE>
NOTES
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- --------------------------------------------------------------------------------
<PAGE>
FOR MORE INFORMATION
- --------------------------------------------------------------------------------
You can get more information about the Funds' investments in the Funds'
semi-annual and annual reports to shareholders. The annual report contains a
discussion of the market conditions and investment strategies that significantly
affected each Fund's performance over its last fiscal year.
You may wish to read the Statement of Additional Information for more
information on the Funds and the securities in which they invest. The Statement
of Additional Information is incorporated into this prospectus by reference,
which means that it is considered to be part of this prospectus.
You can get free copies of reports and the Statement of Additional Information,
request other information and discuss your questions about the Funds by writing
or calling the Funds' distributor at:
Liberty Funds Distributor, Inc.
One Financial Center
Boston, MA 02111-2621
1-800-426-3750
www.libertyfunds.com
Text-only versions of all Fund documents can be viewed online or downloaded from
the Securities and Exchange Commission at www.sec.gov.
You can review and copy information about the Funds by visiting the following
location, and you can obtain copies, upon payment of a duplicating fee, by
writing the:
Public Reference Room
Securities and Exchange Commission
Washington, DC 20549-6009
Information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
INVESTMENT COMPANY ACT FILE NUMBER:
Liberty Funds Trust II (formerly Colonial Trust II): 811-3009
- - Newport Japan Opportunities Fund
- - Newport Greater China Fund
[LIBERTY FUNDS LOGO]
Liberty Funds Distributor, Inc. (C) 1999
One Financial Center, Boston, MA 02111-2621, 1-800-426-3750
www.libertyfunds.com
734-01/030A-12/99
<PAGE>
STEIN ROE SMALL CAP ASIAN TIGER FUND Prospectus, January 1, 2000
NEWPORT TIGER CUB FUND CLASS A, B AND C SHARES
Advised by Newport Fund Management, Inc.
Although these securities have been registered with the Securities and Exchange
Commission, the Commission has not approved or disapproved any shares offered in
this prospectus or determined whether this prospectus is accurate or complete.
Any representation to the contrary is a criminal offense.
Not FDIC May Lose Value
Insured No Bank Guarantee
TABLE OF CONTENTS
THE FUND 2
- ------------------------------------------------
Investment Goal................................2
Primary Investment Strategies..................2
Primary Investment Risks.......................2
Performance History............................4
Your Expenses..................................5
YOUR ACCOUNT 6
- ------------------------------------------------
How to Buy Shares..............................6
Sales Charges..................................7
How to Exchange Shares........................11
How to Sell Shares............................11
Distribution and Service Fees.................12
Other Information About Your Account..........13
MANAGING THE FUND 15
- ------------------------------------------------
Investment Advisor............................15
Portfolio Managers............................15
Year 2000 Compliance..........................15
FINANCIAL HIGHLIGHTS 16
- ------------------------------------------------
<PAGE>
THE FUND
INVESTMENT GOAL
The Fund seeks capital appreciation.
PRIMARY INVESTMENT STRATEGIES
Under normal market conditions, the Fund invests primarily in stocks of
companies located in the nine Tiger countries of Asia. The Tigers of Asia are
Hong Kong, Singapore, South Korea, Taiwan, Malaysia, Thailand, Indonesia, The
People's Republic of China and the Philippines. In selecting investments for the
Fund, the Fund's investment advisor typically purchases stocks of
well-established smaller capitalization companies with histories of consistent
earnings growth in industries with attractive or improving prospects. At least
65% of the Fund's assets will be invested in small capitalization companies.
Small capitalization companies have market capitalizations of U.S. $2 billion or
less. Up to 35% of the Fund's total assets may be invested in stocks of large
capitalization companies.
At times, the advisor may determine that adverse market conditions make it
desirable to temporarily suspend the Fund's normal investment activities. During
such times, the Fund may, but is not required to, invest in cash or
high-quality, short-term debt securities, without limit. Taking a temporary
defensive position may prevent the Fund from achieving its investment goal.
In seeking to achieve its goal, the Fund may invest in various types of
securities and engage in various investment techniques which are not the
principle focus of the Fund and therefore are not described in this prospectus.
These types of securities and investment practices are identified and discussed
in the Fund's Statement of Additional Information, which you may obtain free of
charge (see back cover). Approval by the Fund's shareholders is not required to
modify or change the Fund's investment goal or investment strategies.
PRIMARY INVESTMENT RISKS
The primary risks of investing in the Fund are described below. There are many
circumstances (including additional risks that are not described here) which
could prevent the Fund from achieving its goal. It is possible to lose money by
investing in the Fund.
Market risk is the risk that the price of a security held by the Fund will fall
due to changing market, economic or political conditions.
2
<PAGE>
THE FUND
Foreign securities are subject to special risks. Foreign stock markets can be
extremely volatile. Fluctuations in currency exchange rates may impact the value
of foreign securities without a change in the intrinsic value of those
securities. The liquidity of foreign securities may be more limited than
domestic securities, which means that the Fund may, at times, be unable to sell
foreign securities at desirable prices. Brokerage commissions, custodial fees
and other fees are generally higher for foreign investments. In addition,
foreign governments may impose withholding taxes which would reduce the amount
of income available to distribute to shareholders. Other risks include the
following: possible delays in the settlement of transactions; less publicly
available information about companies; the impact of political, social or
diplomatic events; and possible seizure, expropriation or nationalization of the
company or its assets.
Emerging markets are subject to additional risk. The risks of foreign
investments are typically increased in less developed countries, which are
sometimes referred to as emerging markets. For example, political and economic
structures in these countries may be new and developing rapidly, which may cause
instability. These countries are also more likely to experience high levels of
inflation, deflation or currency devaluations, which could hurt their economies
and securities markets.
Because the Fund's investments are concentrated in the nine Tiger countries of
Asia, the Fund is particularly susceptible to regional risks. Events in any one
Tiger country may impact the other countries or the Southeast Asian region as a
whole. As a result, events in the region will generally have a greater effect on
the Fund than if the Fund were more geographically diversified, which may result
in greater losses and volatility. Recently, the markets in each of the Asian
countries have experienced significant volatility. Increased social or political
unrest in some or all of these countries could cause further economic and market
uncertainty.
Smaller companies are more likely than larger companies to have limited product
lines, operating histories, markets or financial resources. They may depend
heavily on a small management team. Stocks of smaller companies may trade less
frequently, may trade in smaller volumes and may fluctuate more sharply in price
than stocks of larger companies. In addition, they may not be widely followed by
the investment community, which can lower the demand for their stock.
Value stocks are securities of companies that may have experienced adverse
business or industry developments or may be subject to special risks that have
caused the stocks to be out of favor. If the advisor's assessment of a company's
prospects is wrong, the price of its stock may not approach the value the
advisor has placed on it.
3
<PAGE>
UNDERSTANDING PERFORMANCE
CALENDAR YEAR TOTAL RETURN shows the Fund's Class A share performance for each
complete calendar year since it commenced operations. It includes the effects of
Fund expenses, but not the effects of sales charges. If sales charges were
included, these returns would be lower.
AVERAGE ANNUAL TOTAL RETURN is a measure of the Fund's performance over the past
one-year and the life of the Fund periods. It includes the effects of Fund
expenses. The table shows each class's returns with sales charges.
The Fund's return is compared to the Morgan Stanley Capital International
Pacific Region (Ex-Japan) Index (MSCI Index), an unmanaged index that tracks the
performance of stocks in Pacific Basin countries other than Japan. Unlike the
Fund, indices are not investments, do not incur fees or expenses and are not
professionally managed. It is not possible to invest directly in indices. The
Fund's return is also compared to the average return of the funds included in
the Lipper Pacific Ex-Japan Funds category average (Lipper Average). This Lipper
Average, which is calculated by Lipper, Inc., is composed of funds with similar
investment objectives to the Fund. Sales charges are not reflected in the Lipper
Average.
PERFORMANCE HISTORY
The bar chart below shows changes in the Fund's performance from year to year by
illustrating the Fund's calendar year total returns for its Class A shares. The
performance table following the bar chart shows how the Fund's average annual
returns for Class A, B and C shares compare with those of a broad measure of
market performance for 1 year and the life of the Fund. The chart and table are
intended to illustrate some of the risks of investing in the Fund by showing the
changes in the Fund's performance. All returns include the reinvestment of
dividends and distributions. Performance results include the effect of expense
reduction arrangements, if any. If these arrangements were not in place, then
the performance results would have been lower. Any expense reduction
arrangements may be discontinued at any time. As with all mutual funds, past
performance does not predict the Fund's future performance.
CALENDAR YEAR TOTAL RETURNS (CLASS A)
[BAR GRAPH]
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
<S> <C> <C>
-28.22% -14.67%
</TABLE>
The Fund's year-to-date total return through September 30, 1999 was 32.88%.
For period shown in bar chart:
Best quarter: 4th quarter 1998, +36.06%
Worst quarter: 2nd quarter 1998, -31.27%
AVERAGE ANNUAL TOTAL RETURNS -- FOR PERIODS ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
INCEPTION LIFE OF THE
DATE 1 YEAR FUND
<S> <C> <C> <C>
Class A (%) 6/3/96 (19.57) (20.31)
- -----------------------------------------------------------------------------------------------------
Class B (%) 6/3/96 (19.72) (20.09)
- -----------------------------------------------------------------------------------------------------
Class C (%) 6/3/96 (16.05) (19.03)
- -----------------------------------------------------------------------------------------------------
MSCI Index (%) N/A (6.64) (13.06)(1)
- -----------------------------------------------------------------------------------------------------
Lipper Average (%) N/A (8.56) (19.46)(1)
</TABLE>
(1) Performance information is from May 31, 1996.
4
<PAGE>
THE FUND
UNDERSTANDING EXPENSES
SALES CHARGES are paid directly by shareholders to Liberty Funds Distributor,
Inc., the Fund's distributor.
REDEMPTION FEE is imposed on redemptions and exchanges of Fund shares purchased
and held for five business days or less. The redemption fee is paid to the Fund
to help offset additional transaction costs created by short-term "market
timers."
ANNUAL FUND OPERATING EXPENSES are deducted from the Fund. They include
management and administration fees, 12b-1 fees, brokerage costs, and
administrative costs including pricing and custody services.
EXAMPLE EXPENSES help you compare the cost of investing in the Fund to the cost
of investing in other mutual funds. The table does not take into account any
expense reduction arrangements discussed in the footnotes to the Annual Fund
Operating Expenses table. It uses the following hypothetical conditions:
- - $10,000 initial investment
- - 5% total return for each year
- - Fund operating expenses remain
the same
- - Assumes reinvestment of all dividends and distributions
YOUR EXPENSES
Expenses are one of several factors to consider before you invest in a mutual
fund. The tables below describe the fees and expenses you may pay when you buy,
hold and sell shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES(2) (PAID DIRECTLY FROM YOUR INVESTMENT)
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Maximum sales charge (load) on purchases (%)
(as a percentage of the offering price) 5.75 0.00 0.00
- -----------------------------------------------------------------------------------------------------
Maximum deferred sales charge (load) on redemptions (%)
(as a percentage of the lesser of purchase price or
redemption price) 1.00(3) 5.00 1.00
- -----------------------------------------------------------------------------------------------------
Redemption fee(4)(5) (%) (as a percentage of
amount redeemed, if applicable) 2.00 2.00 2.00
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (DEDUCTED DIRECTLY FROM FUND ASSETS)
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Management and administration fees (6) (%) 1.40 1.40 1.40
- -----------------------------------------------------------------------------------------------------
Distribution and service (12b-1) fees (%) 0.25 1.00 1.00
- -----------------------------------------------------------------------------------------------------
Other expenses (6) (%) 1.95 1.95 1.95
- -----------------------------------------------------------------------------------------------------
Total annual fund operating expenses (6) (%) 3.60 4.35 4.35
- -----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE EXPENSES (YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER)
CLASS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
Class A $917 $1,614 $2,332 $4,215
----------------------------------------------------------------------------------------------------
Class B: did not sell your shares $436 $1,318 $2,211 $4,341
sold all your shares at
the end of the period $936 $1,618 $2,411 $4,341
----------------------------------------------------------------------------------------------------
Class C: did not sell your shares $436 $1,318 $2,211 $4,494
sold all your shares at
the end of the period $536 $1,318 $2,211 $4,494
</TABLE>
(2) A $10 annual fee is deducted from accounts of less than $1,000 and paid
to the transfer agent.
(3) This charge applies only to certain Class A shares bought without an
initial sales charge that are sold within 18 months of purchase.
(4) There is a $7.50 charge for wiring sale proceeds to your bank.
(5) A 2.00% contingent redemption fee is imposed on redemptions and
exchanges of Fund shares purchased and held for five business days or
less.
(6) The Fund's advisor and administrator have voluntarily agreed to waive
advisory and administration fees and reimburse the Fund for certain
expenses so that the total annual fund operating expenses (exclusive of
distribution and service fees, brokerage commissions, interest, taxes
and extraordinary expenses, if any) will not exceed 2.00%. As a result,
the actual management and administration fees for each share class
would be 0.05%, other expenses for each share class would be 1.95% and
total annual fund operating expenses for Class A, B and C shares would
be 2.25%, 3.00% and 3.00%, respectively. This arrangement may be
terminated by the advisor or administrator at any time.
5
<PAGE>
YOUR ACCOUNT
Investment Minimums(7)
Initial Investment...................$1,000
Subsequent Investments..................$50
Automatic Investment Plan...............$50
Retirement Plans .......................$25
HOW TO BUY SHARES
Your financial advisor can help you establish an appropriate investment
portfolio, buy shares and monitor your investments. When the Fund receives your
purchase request in "good form," your shares will be bought at the next
calculated public offering price. "Good form" means that you placed your order
with your brokerage firm or your payment has been received and your application
is complete, including all necessary signatures. Effective the close of business
on November 19, 1999, the Fund's shares are no longer available to new accounts.
Shareholders of the Fund on that date may continue to buy shares in accounts
existing on that date. Investors who did not own shares of the Fund on November
19, 1999 generally will not be allowed to buy shares of the Fund except that new
accounts may be established by participants in most group employer retirement
plans (and their successor plans) in which the Fund had been established as an
investment option by November 19, 1999. Investors may be required to demonstrate
eligibility to buy shares of the Fund before an investment is accepted.
OUTLINED BELOW ARE THE VARIOUS OPTIONS FOR BUYING SHARES:
<TABLE>
<CAPTION>
METHOD INSTRUCTIONS
<S> <C>
Through your Your financial advisor can help you establish your account and buy
financial advisor Fund shares on your behalf.
---------------------------------------------------------------------------------------------------
By check For new accounts, send a completed application and check made payable to
(new account) the Fund to the transfer agent, Liberty Funds Services, Inc., P.O. Box
1722, Boston, MA 02105-1722.
---------------------------------------------------------------------------------------------------
By check For existing accounts, fill out and return the additional investment
(existing account) stub included in your quarterly statement, or send a letter of instruction
including your Fund name and account number with a check made payable to
the Fund to Liberty Funds Services, Inc., P.O. Box 1722, Boston, MA
02105-1722.
---------------------------------------------------------------------------------------------------
By exchange You or your financial advisor may acquire shares by exchanging shares
you own in one fund for shares of the same class of the Fund at no
additional cost. There may be an additional charge if exchanging from
a money market fund. To exchange by telephone, call 1-800-422-3737.
---------------------------------------------------------------------------------------------------
By wire You may purchase shares by wiring money from your bank account to your
fund account. To wire funds to your fund account, call 1-800-422-3737
to obtain a control number and the wiring instructions.
---------------------------------------------------------------------------------------------------
By electronic funds You may purchase shares by electronically transferring money from your
transfer bank account to your fund account by calling 1-800-422-3737. Electronic
funds transfers may take up to two business days to settle and be
considered in "good form." You must set up this feature prior to your
telephone request. Be sure to complete the appropriate section of the
application.
---------------------------------------------------------------------------------------------------
Automatic You can make monthly or quarterly investments automatically from your bank
investment plan account to your fund account. You can select a pre-authorized amount to
be sent via electronic funds transfer. Be sure to complete the
appropriate section of the application for this feature.
---------------------------------------------------------------------------------------------------
By dividend You may automatically invest dividends distributed by one fund into the
diversification same class of shares of the Fund at no additional sales charge. To invest
your dividends in another fund, call 1-800-345-6611.
</TABLE>
(7) The Fund reserves the right to change the investment minimums. The Fund
also reserves the right to refuse a purchase order for any reason,
including if it believes that doing so would be in the best interest of
the Fund and its shareholders.
6
<PAGE>
YOUR ACCOUNT
CHOOSING A SHARE CLASS
The Fund offers three classes of shares in this prospectus -- CLASS A, B and C.
Each share class has its own sales charge and expense structure. Determining
which share class is best for you depends on the dollar amount you are investing
and the number of years for which you are willing to invest. Purchases of
$250,000 or more but less than $1 million can be made only in Class A or Class C
shares. Purchases of $1 million or more are automatically invested in Class A
shares. Effective February 1, 2000, if your financial advisor firm participates
in the Class B discount program, purchases of over $1 million can be made only
in Class A or Class C shares. Otherwise, purchases in excess of $250,000 must be
for Class A or Class C shares only. Based on your personal situation, your
investment advisor can help you decide which class of shares makes the most
sense for you.
The Fund also offers an additional class of shares, Class Z shares, exclusively
to certain institutional and other investors. Class Z shares are made available
through a separate prospectus provided to eligible institutional and other
investors.
SALES CHARGES
You may be subject to an initial sales charge when you purchase, or a contingent
deferred sales charge (CDSC) when you sell, shares of the Fund. These sales
charges are described below. In certain circumstances, these sales charges are
waived, as described below and in the Statement of Additional Information.
CLASS A SHARES Your purchases of Class A shares generally are at the public
offering price. This price includes a sales charge that is based on the amount
of your initial investment when you open your account. A portion of the sales
charge is the commission paid to the financial advisor firm on the sale of Class
A shares. The sales charge you pay on additional investments is based on the
total amount of your purchase and the current value of your account. The amount
of the sales charge differs depending on the amount you invest as shown in the
table below.
CLASS A SALES CHARGES
<TABLE>
<CAPTION>
% OF
OFFERING
AS A % OF PRICE
THE PUBLIC AS A % RETAINED BY
OFFERING OF YOUR FINANCIAL
AMOUNT OF PURCHASE PRICE INVESTMENT ADVISOR FIRM
<S> <C> <C> <C>
Less than $50,000 5.75 6.10 5.00
- ------------------------------------------- -------------- ------------- --------------
$50,000 to less than $100,000 4.50 4.71 3.75
- ------------------------------------------- -------------- ------------- --------------
$100,000 to less than $250,000 3.50 3.63 2.75
- ------------------------------------------- -------------- ------------- --------------
$250,000 to less than $500,000 2.50 2.56 2.00
- ------------------------------------------- -------------- ------------- --------------
$500,000 to less than $1,000,000 2.00 2.04 1.75
- ------------------------------------------- -------------- ------------- --------------
$1,000,000 or more(8) 0.00 0.00 0.00
</TABLE>
For Class A share purchases of $1 million or more, financial advisors receive a
commission from the distributor as follows:
PURCHASES OVER $1 MILLION
<TABLE>
<CAPTION>
AMOUNT PURCHASED COMMISSION %
<S> <C>
First $3 million 1.00
- -------------------------------------------- ------------------------------------------
Next $2 million 0.50
- -------------------------------------------- ------------------------------------------
Over $5 million 0.25(9)
</TABLE>
(8) Class A shares bought without an initial sales charge in accounts
aggregating $1 million to $5 million at the time of purchase are subject
to a 1% CDSC if the shares are sold within 18 months of the time of
purchase. Subsequent Class A share purchases that bring your account value
above $1 million are subject to a 1% CDSC if redeemed within 18 months of
their purchase date. The 18-month period begins on the first day of the
month following each purchase.
(9) Paid over 12 months but only to the extent the shares remain outstanding.
7
<PAGE>
YOUR ACCOUNT
UNDERSTANDING CONTINGENT DEFERRED SALES CHARGES (CDSC)
Certain investments in Class A, B and C shares are subject to a CDSC, a sales
charge applied at the time you sell your shares. You will pay the CDSC only on
shares you sell within a certain amount of time after purchase. The CDSC
generally declines each year until there is no charge for selling shares. The
CDSC is applied to the net asset value at the time of purchase or sale,
whichever is lower. For purposes of calculating the CDSC, the start of the
holding period is the month-end of the month in which the purchase is made.
Shares you purchase with reinvested dividends or capital gains are not subject
to a CDSC. When you place an order to sell shares, the Fund will automatically
sell first those shares not subject to a CDSC and then those you have held the
longest. This policy helps reduce and possibly eliminate the potential impact of
the CDSC.
REDUCED SALES CHARGES FOR LARGER INVESTMENTS There are two ways for you to pay a
lower sales charge when purchasing Class A shares. The first is through Rights
of Accumulation. If the combined value of the Fund accounts maintained by you,
your spouse or your minor children reaches a discount level (according to the
chart on the previous page), your next purchase will receive the lower sales
charge. The second is by signing a Statement of Intent within 90 days of your
purchase. By doing so, you would be able to pay the lower sales charge on all
purchases by agreeing to invest a total of at least $50,000 within 13 months. If
your Statement of Intent purchases are not completed within 13 months, you will
be charged the applicable sales charge on the amount you had invested to that
date. In addition, certain investors may purchase shares at a reduced sales
charge or net asset value (NAV), which is the value of a fund share excluding
any sales charges. See the Statement of Additional Information for a description
of these situations.
CLASS B SHARES Your purchases of Class B shares are at the Fund's NAV. Class B
shares have no front-end sales charge, but they do carry a CDSC that is imposed
only on shares sold prior to the completion of the periods shown in the charts
below. The CDSC generally declines each year and eventually disappears over
time. The distributor pays the financial advisor firm an up-front commission on
sales of Class B shares as depicted in the charts below.
PURCHASES OF LESS THAN $250,000:
CLASS B SALES CHARGES
<TABLE>
<CAPTION>
% DEDUCTED WHEN
HOLDING PERIOD AFTER PURCHASE SHARES ARE SOLD
<S> <C>
Through first year 5.00
- ------------------------------------------- -----------------------------------------
Through second year 4.00
- ------------------------------------------- -----------------------------------------
Through third year 3.00
- ------------------------------------------- -----------------------------------------
Through fourth year 3.00
- ------------------------------------------- -----------------------------------------
Through fifth year 2.00
- ------------------------------------------- -----------------------------------------
Through sixth year 1.00
- ------------------------------------------- -----------------------------------------
Longer than six years 0.00
</TABLE>
Commission to financial advisors is 5.00%.
Automatic conversion to Class A shares is eight years after purchase.
8
<PAGE>
YOUR ACCOUNT
EFFECTIVE FOR PURCHASES ON AND AFTER FEBRUARY 1, 2000, there are two ways for
you to pay a lower CDSC and reduce the holding period when making purchases of
Class B shares. The first is through a financial advisor firm which participates
in the Class B share discount program for larger purchases as described in the
charts below. Some financial advisor firms are not able to participate because
their record keeping or transaction processing systems are not designed to
accommodate these reductions. Consult your financial advisor to see whether it
participates in the discount program for larger purchases. The second is through
Rights of Accumulation. If the combined value of the Fund accounts maintained by
you, your spouse or your minor children is at or above a discount level, your
next purchase will receive the lower CDSC and the applicable reduced holding
period.
PURCHASES OF $250,000 TO LESS THAN $500,000:
CLASS B SALES CHARGES
<TABLE>
<CAPTION>
% DEDUCTED WHEN
HOLDING PERIOD AFTER PURCHASE SHARES ARE SOLD
<S> <C>
Through first year 3.00
- -------------------------------------------- -----------------------------------------
Through second year 2.00
- -------------------------------------------- -----------------------------------------
Through third year 1.00
- -------------------------------------------- -----------------------------------------
Longer than four years 0.00
</TABLE>
Commission to financial advisors is 2.50%.
Automatic conversion to Class A shares is four years after purchase.
PURCHASES OF $500,000 TO LESS THAN $1 MILLION:
CLASS B SALES CHARGES
<TABLE>
<CAPTION>
% DEDUCTED WHEN
HOLDING PERIOD AFTER PURCHASE SHARES ARE SOLD
<S> <C>
Through first year 3.00
- -------------------------------------------- -----------------------------------------
Through second year 2.00
- -------------------------------------------- -----------------------------------------
Through third year 1.00
- -------------------------------------------- -----------------------------------------
Longer than four years 0.00
</TABLE>
Commission to financial advisors is 1.75%.
Automatic conversion to Class A shares is three years after purchase.
9
<PAGE>
YOUR ACCOUNT
If you exchange into a fund participating in the Class B share discount program
or transfer your fund account from a financial advisor which does not
participate in the program to one who does, the exchanged or transferred shares
will retain the pre-existing CDSC but any additional purchases of Class B shares
which cause the exchanged or transferred account to exceed the applicable
discount level, will receive the lower CDSC and the reduced holding period for
amounts in excess of the discount level. Your financial advisor will receive the
lower commission for purchases in excess of an applicable discount level.
CLASS C SHARES Similar to Class B shares, your purchases of Class C shares are
at the Fund's NAV. Although Class C shares have no front-end sales charge, they
carry a CDSC of 1.00% that is applied to shares sold within the first year after
they are purchased. After holding shares for one year, you may sell them at any
time without paying a CDSC. The distributor pays the financial advisor firm an
up-front commission of 1.00% on sales of Class C shares.
CLASS C SALES CHARGES
<TABLE>
<CAPTION>
YEARS AFTER PURCHASE % DEDUCTED WHEN SHARES ARE SOLD
<S> <C>
Through first year 1.00
- -------------------------------------------- ------------------------------------------
Longer than one year 0.00
</TABLE>
CONTINGENT REDEMPTION FEE The Fund can experience substantial price fluctuation
and is intended for long-term investors. Short-term "market timers" who engage
in frequent purchases and redemptions can disrupt the Fund's investment program
and create additional transaction costs that are borne by all shareholders. The
Fund will assess a contingent redemption fee in the amount of 2.00% on
redemptions and exchanges of Fund shares purchased and held for five business
days or less.
The contingent redemption fee will be paid to the Fund to help offset
transaction costs. The Fund will use the "first-in, first-out" method to
determine the five business day holding period. Under this method, the date of
the redemption or exchange will be compared with the earliest purchase date of
shares held in the account. If this holding period is five business days or
less, the contingent redemption fee will be assessed.
The contingent redemption fee does not apply to any shares purchased through the
reinvestment of dividends. The fee may not apply to omnibus accounts and wrap
fee programs.
10
<PAGE>
YOUR ACCOUNT
HOW TO EXCHANGE SHARES
You may exchange your shares for shares of the same share class of another fund
distributed by Liberty Funds Distributor, Inc. at net asset value. If your
shares are subject to a CDSC, you will not be charged a CDSC upon the exchange.
However, when you sell the shares acquired through the exchange, the shares sold
may be subject to a CDSC, depending upon when you originally purchased the
shares you exchanged. For purposes of computing the CDSC, the length of time you
have owned your shares will be computed from the date of your original purchase
and the applicable CDSC will be the CDSC of the original fund. Unless your
account is part of a tax-deferred retirement plan, an exchange is a taxable
event. Therefore, you may realize a gain or a loss for tax purposes. The Fund
may terminate your exchange privilege if the advisor determines that your
exchange activity is likely to adversely impact its ability to manage the Fund.
To exchange by telephone, call 1-800-422-3737.
HOW TO SELL SHARES
Your financial advisor can help you determine if and when you should sell your
shares. You may sell shares of the Fund on any regular business day that the New
York Stock Exchange (NYSE) is open.
When the Fund receives your sales request in "good form," shares will be sold at
the next calculated price. In "good form" means that money used to purchase your
shares is fully collected. When selling shares by letter of instruction, "good
form" also means (i) your letter has complete instructions, the proper
signatures and signature guarantees, (ii) you have included any certificates for
shares to be sold, and (iii) any other required documents are attached. For
additional documents required for sales by corporations, agents, fiduciaries and
surviving joint owners, please call 1-800-345-6611. Retirement plan accounts
have special requirements; please call 1-800-799-7526 for more information.
The Fund will generally send proceeds from the sale to you within seven days
(usually on the next business day after your request is received in "good
form"). However, if you purchased your shares by check, the Fund may delay
sending the proceeds from the sale of your shares for up to 15 days after your
purchase to protect against checks that are returned. No interest will be paid
on uncashed redemption checks.
11
<PAGE>
YOUR ACCOUNT
OUTLINED BELOW ARE THE VARIOUS OPTIONS FOR SELLING SHARES:
<TABLE>
<CAPTION>
METHOD INSTRUCTIONS
<S> <C>
Through your You may call your financial advisor to place your sell order.
financial advisor To receive the current trading day's price, your financial
advisor firm must receive your request prior to the close
of the NYSE, usually 4:00 p.m. Eastern time.
- -------------------- -----------------------------------------------------------------
By exchange You or your financial advisor may sell shares by exchanging
from the Fund into the same share class of another fund at
no additional cost. To exchange by telephone, call
1-800-422-3737.
- -------------------- -----------------------------------------------------------------
By telephone You or your financial advisor may sell shares by telephone and
request that a check be sent to your address of record by
calling 1-800-422-3737, unless you have notified the Fund of an
address change within the previous 30 days. The dollar limit
for telephone sales is $100,000 in a 30-day period. You do not
need to set up this feature in advance of your call. Certain
restrictions apply to retirement accounts. For details, call
1-800-345-6611.
- -------------------- -----------------------------------------------------------------
By mail You may send a signed letter of instruction or stock power form
along with any certificates to be sold to the address below.
In your letter of instruction, note the Fund's name, share
class, account number, and the dollar value or number of shares
you wish to sell. All account owners must sign the letter, and
signatures must be guaranteed by either a bank, a member firm
of a national stock exchange or another eligible guarantor
institution. Additional documentation is required for sales by
corporations, agents, fiduciaries, surviving joint owners and
individual retirement account owners. For details, call
1-800-345-6611.
Mail your letter of instruction to Liberty Funds Services,
Inc., P.O. Box 1722, Boston, MA 02105-1722.
- -------------------- -----------------------------------------------------------------
By wire You may sell shares and request that the proceeds be
wired to your bank. You must set up this feature prior to
your telephone request. Be sure to complete the
appropriate section of the account application for this
feature.
- -------------------- -----------------------------------------------------------------
By electronic You may sell shares and request that the proceeds be
funds transfer electronically transferred to your bank. Proceeds may take up
to two business days to be received by your bank. You must set
up this feature prior to your request. Be sure to complete the
appropriate section of the account application for this
feature.
</TABLE>
DISTRIBUTION AND SERVICE FEES
The Fund has adopted a plan under Rule 12b-1 that permits it to pay marketing
and other fees to support the sale and distribution of Class A, B and C shares
and the services provided to you by your financial advisor. The annual
distribution fee and service fee may equal up to 0.00% and 0.25%, respectively,
for Class A shares and 0.75% and 0.25%, respectively, for each of Class B and
Class C shares and are paid out of the assets of these classes. Over time, these
fees will increase the cost of your shares and may cost you more than paying
other types of sales charges.(10)
(10) Class B shares automatically convert to Class A shares after a certain
number of years, depending on the program you purchased your shares under,
eliminating the distribution fee upon conversion.
12
<PAGE>
YOUR ACCOUNT
OTHER INFORMATION ABOUT YOUR ACCOUNT
HOW THE FUND'S SHARE PRICE IS DETERMINED The price of each class of the Fund's
shares is based on its net asset value (NAV). The NAV is determined at the close
of regular trading on the NYSE, usually 4:00 p.m. Eastern time, on each business
day that the NYSE is open (typically Monday through Friday).
When you request a transaction, it will be processed at the NAV (plus any
applicable sales charges) next determined after your request is received in
"good form" by the distributor. In most cases, in order to receive that day's
price, the distributor must receive your order before that day's transactions
are processed. If you request a transaction through your financial advisor's
firm, the firm must receive your order by the close of trading on the NYSE to
receive that day's price.
The Fund determines its NAV for each share class by dividing each class's total
net assets by the number of that class's shares outstanding. In determining the
NAV, the Fund must determine the price of each security in its portfolio at the
close of each trading day. Because the Fund holds securities that are traded on
foreign exchanges, the value of the Fund's securities may change on days when
shareholders will not be able to buy or sell Fund shares. This will affect the
Fund's NAV on the day it is next determined. Securities for which market
quotations are available are valued each day at the current market value.
However, where market quotations are unavailable, or when the advisor believes
that subsequent events have made them unreliable, the Fund may use other data to
determine the fair value of the securities.
You can find the daily prices of some share classes for the Fund in most major
daily newspapers under the caption "Liberty." You can find daily prices for all
share classes by visiting the Fund's web site at www.libertyfunds.com.
ACCOUNT FEES If your account value falls below $1,000 (other than as a result of
depreciation in share value) you may be subject to an annual account fee of $10.
This fee is deducted from the account in June each year. Approximately 60 days
prior to the fee date, the Fund's transfer agent will send you written
notification of the upcoming fee. If you add money to your account and bring the
value above $1,000 prior to the fee date, the fee will not be deducted.
SHARE CERTIFICATES Share certificates are not available for Class B and C
shares. Certificates will be issued for Class A shares only if requested. If you
decide to hold share certificates, you will not be able to sell your shares
until you have endorsed your certificates and returned them to the distributor.
13
<PAGE>
YOUR ACCOUNT
UNDERSTANDING FUND DISTRIBUTIONS
The Fund earns income from the securities it holds. The Fund also may realize
capital gains and losses on sales of its securities. The Fund distributes
substantially all of its net investment income and capital gains to
shareholders. As a shareholder, you are entitled to a portion of the Fund's
income and capital gains based on the number of shares you own at the time these
distributions are declared.
DIVIDENDS, DISTRIBUTIONS, AND TAXES The Fund has the potential to make the
following distributions:
TYPES OF DISTRIBUTIONS
<TABLE>
<S> <C>
Dividend Represents interest and dividends earned from securities
held by the Fund.
-------------------- -----------------------------------------------------------------
Capital gains Represents long-term capital gains on sales of securities held
for more than 12 months and short-term capital gains, which are
gains on sales of securities held for a 12-month period or less.
</TABLE>
DISTRIBUTION OPTIONS The Fund distributes dividends annually and any capital
gains (including short-term capital gains) at least annually. You can choose one
of the options listed in the table below for these distributions when you open
your account.(11) To change your distribution option call 1-800-345-6611.
DISTRIBUTION OPTIONS
Reinvest all distributions in additional shares of your current fund
- --------------------------------------------------------------------------------
Reinvest all distributions in shares of another fund
- --------------------------------------------------------------------------------
Receive dividends in cash (see options below) and reinvest capital gains(12)
- --------------------------------------------------------------------------------
Receive all distributions in cash (with one of the following options) (12):
- - send the check to your address of record
- - send the check to a third party address
- - transfer the money to your bank via electronic funds transfer
TAX CONSEQUENCES Regardless of whether you receive your distributions in cash or
reinvest them in additional Fund shares, all Fund distributions are subject to
federal income tax. Depending on the state where you live, distributions may
also be subject to state and local income taxes.
In general, any distributions of dividends, interest and short-term capital
gains are taxable as ordinary income. Distributions of long-term capital gains
are generally taxable as such, regardless of how long you have held your Fund
shares. You will be provided with information each year regarding the amount of
ordinary income and capital gains distributed to you for the previous year and
any portion of your distribution which is exempt from state and local taxes.
Your investment in the Fund may have additional personal tax implications.
Please consult your tax advisor on foreign, federal, state, local or other
applicable tax laws.
In addition to the dividends and capital gains distributions made by the Fund,
you may realize a capital gain or loss when selling and exchanging shares of the
Fund. Such transactions may be subject to federal, state and local income tax.
(11) If you do not indicate on your application your preference for handling
distributions, the Fund will automatically reinvest all distributions in
additional shares of the Fund.
(12) Distributions of $10 or less will automatically be reinvested in
additional Fund shares. If you elect to receive distributions by check and
the check is returned as undeliverable, or if you do not cash a
distribution check within six months of the check date, the distribution
will be reinvested in additional shares of the Fund.
14
<PAGE>
MANAGING THE FUND
INVESTMENT ADVISOR
Newport Fund Management Inc. (Newport), located at 580 California Street, Suite
1960, San Francisco, California 94104, is the Fund's investment advisor. In its
duties as investment advisor, Newport runs the Fund's day-to-day business,
including placing all orders for the purchase and sale of the Fund's portfolio
securities. Newport has been an investment advisor since 1987. As of November
30, 1999, Newport managed over $1.3 billion in assets.
For the 1999 fiscal year, aggregate advisory fees paid to Newport by the Fund
amounted to 0.04% of average daily net assets of the Fund.
PORTFOLIO MANAGERS
CHRISTOPHER LEGALLET, chief investment officer of Newport and its immediate
parent, Newport Pacific Management, Inc. (Newport Pacific), is a co-manager of
the Fund and has co-managed the Fund since December, 1999. Mr. Legallet has
managed various other funds for Newport since 1997. Prior to his affiliation
with Newport, Mr. Legallet was a managing director of Jupiter Tyndall (Asia)
Ltd. in Hong Kong, serving as lead manager for investment in Asia from 1992 to
1997.
LYNDA COUCH, a vice president of Newport and Newport Pacific, is a co-manager
for the Fund. Ms. Couch has managed other Newport funds since April, 1995. Ms.
Couch has been an officer of Newport since 1994.
YEAR 2000 COMPLIANCE
Like other investment companies, financial and business organizations and
individuals around the world, the Fund could be adversely affected if the
computer systems used by the advisor, other service providers and the companies
in which the Fund invests do not properly process and calculate date-related
information and data from and after January 1, 2000. This is commonly known as
the "Year 2000 Problem." The Fund's service providers have taken steps that they
believe are reasonably designed to address the Year 2000 Problem, including
communicating with vendors who furnish services, software and systems to the
Fund, to provide that date-related information and data can be properly
processed after January 1, 2000. Many mutual fund service providers and vendors,
including the Fund's service providers, have made Year 2000 modifications to
their software and systems. In addition, Year 2000 readiness is one of the
factors considered by the advisor in its assessment of companies in which the
Fund invests to the extent that information is readily available. However, no
assurances can be given that the Fund will not be adversely affected by these
matters. The Fund may invest in emerging markets in
15
<PAGE>
developing countries, and some reports indicate that developing countries may be
behind other countries with respect to Year 2000 compliance.
16
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance. Information is shown for the Fund's fiscal years since
inception, which run from September 1 to August 31. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that you would have earned (or lost) on an investment in the
Fund (assuming reinvestment of all dividends and distributions). This
information has been derived from the Fund's financial statements which have
been audited by PricewaterhouseCoopers LLP, independent accountants, whose
report, along with the Fund's financial statements, is included in the Fund's
annual report. You can request a free annual report by calling 1-800-426-3750.
THE FUND
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
1999 1998 1997
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C(c)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value --
Beginning of period ($) 3.900 3.830 3.830 9.100 9.020 9.020 9.320 9.300 9.300
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS ($):
Net investment income (loss) (a)(b) 0.051(d) 0.005(d) 0.006(d) 0.115(e) 0.067(e) 0.067(e) 0.059(f) (0.012)(f) (0.012)(f)
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 4.124 4.035 4.054 (5.315) (5.257) (5.257) (0.279) (0.268) (0.268)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 4.175 4.040 4.060 (5.200) (5.190) (5.190) (0.220) (0.280) (0.280)
- ---------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO
SHAREHOLDERS ($):
From net investment income (0.005) --- --- --- --- --- --- --- ---
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value --
End of period ($) 8.070 7.870 7.890 3.900 3.830 3.830 9.100 9.020 9.020
- ---------------------------------------------------------------------------------------------------------------------------------
Total return (%) (g)(h) 107.10 105.48 106.01 (57.14) (57.54) (57.54) (2.36) (3.01) (3.01)
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (%):
Expenses(i) 2.25 3.00 3.00 2.25 3.00 3.00 2.25 3.00 3.00
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (i) 0.84 0.09 0.09 1.75 1.00 1.00 0.62 (0.13) (0.13)
- ---------------------------------------------------------------------------------------------------------------------------------
Fees and expenses waived or borne by
the Advisor/Administrator (i) 1.35 1.35 1.35 1.02 1.02 1.02 1.09 1.09 1.09
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 36 36 36 56 56 56 96 96 96
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets at end of
period (000) ($) 4,847 7,115 954 3,556 3,165 732 8,653 7,664 1,300
- ---------------------------------------------------------------------------------------------------------------------------------
(a) Net of fees and expenses waived or
borne by the Advisor/Administrator
which amounted to ($): 0.083 0.083 0.083 0.067 0.067 0.067 0.105 0.105 0.105
</TABLE>
(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) Includes distributions from China Hong Kong Photo Products Holdings Ltd.,
Four Seas Mercantile Holdings Ltd., HKR International Ltd., Li & Fung
Ltd., Thai Union Frozen Products Public Co. and Venture Manufacturing
Singapore Ltd., which amounted to $0.022, $0.015, $0.012, $0.015, $0.022
and $0.017 per share, respectively.
(e) Includes distributions from China Hong Kong Photo Products, Dickson
Concepts International Ltd., Four Seas Mercantile, Hang Seng Bank Ltd.,
Hon Kwok Land Investment, Li & Fung Ltd., Sa Sa International Ltd., Sun
Hung Kai Properties Ltd. and Varitronix International Ltd., which amounted
in total to $0.126 per share.
(f) Includes distributions from Srithai Superware Public Co., Ltd. and
Varitronix International Ltd., which amounted in total to $0.039 per
share.
(g) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(h) Had the Advisor/Administrator not waived or reimbursed a portion of
expenses, total return would have been reduced.
(i) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
17
<PAGE>
FINANCIAL HIGHLIGHTS
THE FUND
<TABLE>
<CAPTION>
PERIOD ENDED AUGUST 31,
1996 (c)
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
Net asset value--
Beginning of period ($) 10.000 10.000 10.000
- ---------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS ($):
Net investment income (loss) (a)(b) 0.016 (0.002) (0.002)
---------------------------------------------------------------------------------------------------------
Net realized and unrealized loss (0.696) (0.698) (0.698)
---------------------------------------------------------------------------------------------------------
Total from Investment Operations (0.680) (0.700) (0.700)
---------------------------------------------------------------------------------------------------------
Net asset value--
End of period ($) 9.320 9.300 9.300
---------------------------------------------------------------------------------------------------------
Total return (%) (d)(e)(f) (6.80) (7.00) (7.00)
---------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (%):
Expenses (g)(h) 2.25 3.00 3.00
---------------------------------------------------------------------------------------------------------
Net investment income (loss) (g)(h) 0.62 (0.13) (0.13)
---------------------------------------------------------------------------------------------------------
Fees and expenses waived or borne by the
Advisor/Administrator (g)(h) 5.16 5.16 5.16
---------------------------------------------------------------------------------------------------------
Portfolio turnover (%) (f) 3 3 3
---------------------------------------------------------------------------------------------------------
Net assets at end of
period (000) ($) 3,542 2,654 738
---------------------------------------------------------------------------------------------------------
(a) Net of fees and expenses waived or
borne by the Advisor/Administrator
which amounted to ($): 0.123 0.123 0.123
</TABLE>
(b) Per share data was calculated using average shares outstanding during the
period.
(c) The Fund commenced investment operations on June 3, 1996.
(d) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(e) Had the Advisor/Administrator not waived or reimbursed a portion of
expenses, total return would have been reduced.
(f) Not annualized.
(g) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
(h) Annualized.
18
<PAGE>
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19
<PAGE>
NOTES
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20
<PAGE>
FOR MORE INFORMATION
You can get more information about the Fund's investments in the Fund's
semi-annual and annual reports to shareholders. The annual report contains a
discussion of the market conditions and investment strategies that significantly
affected the Fund's performance over its last fiscal year.
You may wish to read the Statement of Additional Information for more
information on the Fund and the securities in which it invests. The Statement of
Additional Information is incorporated into this prospectus by reference, which
means that it is considered to be part of this prospectus.
You can get free copies of reports and the Statement of Additional Information,
request other information and discuss your questions about the Fund by writing
or calling the Fund's distributor at:
Liberty Funds Distributor, Inc.
One Financial Center
Boston, MA 02111-2621
1-800-426-3750
www.libertyfunds.com
Text-only versions of all Fund documents can be viewed online or downloaded from
the Securities and Exchange Commission at www.sec.gov.
You can review and copy information about the Fund by visiting the following
location, and you can obtain copies, upon payment of a duplicating fee, by
writing the:
Public Reference Room
Securities and Exchange Commission
Washington, DC 20549-6009
Information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
INVESTMENT COMPANY ACT FILE NUMBER:
Liberty Funds Trust II (formerly Colonial Trust II): 811-3009
*Stein Roe Small Cap Asian Tiger Fund (formerly Newport Tiger Cub Fund)
[LOGO OF LIBERTY FUNDS]
ALL-STAR - COLONIAL - CRABBE HUSON - NEWPORT - STEIN ROE ADVISOR
Liberty Funds Distributor, Inc.(C) 1999
One Financial Center, Boston, MA 02111-2621, 1-800-426-3750
www.libertyfunds.com
735-01/033A-12/99
