<PAGE> 1
--------------------------------------------------------------------------------
LIBERTY NEWPORT TIGER CUB FUND CLASS A, B AND C SHARES ANNUAL REPORT
--------------------------------------------------------------------------------
AUGUST 31, 2000
STEIN ROE SMALL CAP TIGER FUND
ADVISED BY NEWPORT FUND MANAGEMENT, INC.
<PAGE> 2
PRESIDENT'S MESSAGE
DEAR SHAREHOLDER:
You may have noticed that your Fund's share classes have new names. As of July
14, the name of each share class of the Fund changed to include Liberty. Rest
assured, the investment objectives and strategies employed by the Fund's
managers are not affected by this name change. We believe the new name better
reflects your Fund's affiliation with the Liberty Funds, a diverse family of
funds representing a wide selection of investment styles and specialized money
management. The goal of all Liberty funds is to help you reach for financial
freedom -- however you define it.
The continued economic development of countries in northern Asia, particularly
the People's Republic of China (China), highlighted the Fund's fiscal year ended
August 31, 2000. Much of the Fund's positive return was generated prior to March
2000, when stocks in the technology, telecommunications and media sectors
performed extremely well. After that time, these securities experienced a
correction, which dampened the Fund's performance.
The Fund performed quite well in comparison to its benchmark, the Morgan Stanley
Capital International (MSCI) Pacific (ex-Japan) Index.(1) This was due in large
part to an overweighting in the markets of northern Asia. It was also due to the
focus of the Fund's management team on small company stocks with solid,
long-term growth potential.
The following report provides more specifics about the Fund's management, and
the economic, political and market factors that affected its performance. As
always, thank you for giving us the opportunity to serve your investment needs.
Sincerely,
/s/ Stephen E. Gibson
--------------------------------------
Stephen E. Gibson
President
October 9, 2000
---------------------------
Not FDIC May Lose Value
Insured No Bank Guarantee
---------------------------
(1) See benchmark index chart on page 1 for performance results.
Because economic and market conditions change frequently, there can be no
assurance that the trends described in this report will continue or come to
pass.
<PAGE> 3
--------------------------------------------------------------------------------
HIGHLIGHTS
--------------------------------------------------------------------------------
- TECHNOLOGY STOCKS EXPERIENCED VOLATILITY.
Much of the Fund's positive performance was generated in the latter part of
1999 and the first few months of 2000. Stocks of technology,
telecommunications and media companies, in both Asia and other parts of the
world, continued their domination of the market. Things changed in March
2000, as our holdings in these segments gave back some of their remarkable
gains.
- HONG KONG AND CHINA STOCKS WERE STRONG.
One of the most exciting developments for investors in Asia is the
evolution of China towards a free market economy. While this is still in
development, the country has come a long way and created significant
investment opportunities.
- SOUTHEAST ASIA WAS LESS COMPELLING.
With the exception of the relatively stable economy of Singapore, the Fund
continued to de-emphasize Southeast Asia. Many nations in that region
continued to have difficulty restructuring their economies; dampening our
view of prospects for their stocks.
FUND PERFORMANCE VS. BENCHMARK
TOTAL RETURN 9/1/99 - 8/31/00
Liberty Newport Tiger Cub Fund
Class A shares Without Sales Charge 9.42%
MSCI Pacific (Ex-Japan) Index 6.81%
The Fund's Class A share return is compared to the MSCI Pacific (ex-Japan)
Index, a broad-based unmanaged index that tracks the performance of stocks in
the Pacific Basin countries other than Japan. Unlike mutual funds, indexes are
not investments and do not incur fees or expenses. It is not possible to invest
in an index. Returns do not include sales charges. Performance for all other
shares will vary.
Past performance cannot guarantee future results. Returns and value of an
investment will vary, resulting in a gain or loss on sale. Performance results
assume reinvestment of distributions.
NET ASSET VALUE PER SHARE AS OF 8/31/00
Class A $8.83
---------------
Class B $8.55
---------------
Class C $8.57
---------------
1
<PAGE> 4
--------------------------------------------------------------------------------
PORTFOLIO MANAGERS' REPORT
--------------------------------------------------------------------------------
TOP FIVE SECTOR BREAKDOWN
AS OF 8/31/00
8/31/00 8/31/99
Durable Goods 15.8% 13.5%
Measuring & Analyzing Instruments 15.4% 13.1%
Computer Related Services 13.4% 5.1%
Real Estate 8.7% 12.4%
Telecommunications 7.1% 2.4%
Sector breakdowns are calculated as a percentage of net assets. Because the Fund
is actively managed, there can be no guarantee that the Fund will continue to
maintain this breakdown in the future.
BOUGHT
--------------------------------------------------------------------------------
SOUTH CHINA MORNING POST LTD. (SCMP) (2.1% of net assets). With a quasi-monopoly
on Hong Kong's newspaper business, SCMP is serious about moving into the dot.com
arena. It is putting new systems into place to gather content and is replacing
its traditional publishing pipeline to include the Internet and multimedia.
DAH SING FINANCIAL (1.6% of net assets), an "old economy" Hong Kong financial
firm is moving into the "new economy," with a revised focus on high-yield
consumer loans, corporate lending and equipment leasing, and a new foray into
Internet banking.
THE FUND OUTPACED THE REGION
The year ended August 31, 2000 was one of tremendous volatility for stocks in
Asia. Class A shares of the Fund had a total return of 9.42% for the 12-month
period ended August 31, 2000 without a sales charge, compared to 6.81% for the
Morgan Stanley Capital International (MSCI) Pacific (ex-Japan) Index. The MSCI
Pacific (ex-Japan) Index is a broad-based, unmanaged index that tracks the
performance of stocks in Pacific Basin countries other than Japan. Most of the
positive performance was generated at the beginning of the period. Later in the
period, markets in Asia followed a worldwide market correction.
GREATER CHINA OFFERED THE BEST OPPORTUNITIES
The Fund continued to emphasize a region we believe represents one of the most
exciting economic stories in the world today -- Greater China. Triggered by
successful economic reforms in China, this area, including Asian economic
stalwarts Hong Kong and Taiwan maintained its investment potential. As a result,
well over half of the Fund's assets remained in this region, with most issues
purchased on the well-regulated Hong Kong Stock Exchange. Hong Kong continued to
provide the best venue for access to stocks of mainland Chinese companies or
those that target the entire region. Hong Kong-based companies have also
performed well as that city-state rebounds from recession. Taiwan benefited from
resurgence in export growth and the Fund took an initial position in the Taiwan
market. Also in Northern Asia the Fund took a position in Korea, which showed
signs of economic recovery.
China continued to reap the benefits of its evolving open market system. The
growing entrepreneurial community, particularly in the higher technology area,
created attractive investment potential in small capitalization stocks, but as
is the case globally, greater volatility accompanies such investments.
SOUTHEAST ASIA CONTINUED TO LAG
In contrast, Southeast Asia offered a less attractive environment. A number of
countries in that region, including the Philippines and Indonesia, struggled
economically. In those nations, economic reforms failed to take hold, and
political upheaval created an unattractive environment for investors. However,
one country in Southeast Asia that managed to hold our attention was Singapore,
where the government's conservative approach toward economic management added
stability to the business climate. The bulk of the Fund's assets devoted to
Southeast Asia were invested in Singapore.
2
<PAGE> 5
--------------------------------------------------------------------------------
PORTFOLIO MANAGERS' REPORT (CONTINUED)
--------------------------------------------------------------------------------
TECHNOLOGY STOCKS SOARED, THEN SOURED
The Fund outperformed in the first half of the year, due in large part to the
positive returns generated by stocks in the technology, media and
telecommunications (TMT) industries. This upswing was in line with a worldwide
trend that saw investors pour money into the stocks of companies representing
those industries. However, in March 2000, technology-oriented stocks from Asia
and other parts of the world experienced a correction. A good example of this
volatility was WYSE Technology (1.4% of net assets), the Taiwanese maker of
"thin client terminals," which are technology tools gaining popularity among
businesses. We bought the stock in January, 2000, and saw its value nearly
double. Although the stock eventually lost significant ground due to this
worldwide correction, the company remains very well positioned in a growth
industry. Ultimately, WYSE was affected by the same trend that drove down prices
of many technology stocks. Technology represents about one-fifth of the
portfolio; we continue to seek long-term growth opportunities in TMT as just one
of a wide range of industries.
OUTLOOK
We believe the Asian markets continue to offer prime opportunity for economic
growth. Nowhere is this more evident than in China, where a changing economy and
a trend toward modernization is creating an environment with high consumer
demand. This should allow Chinese companies, as well as those outside of China
including Hong Kong and Taiwan, to benefit from domestic economic growth. There
is tremendous reason for continued optimism about the prospects for companies in
Greater China. We believe the large populations found in China and other Asian
nations, including India, combined with continued economic improvements, should
create investment opportunities for the Fund.
/s/ Lynda Couch /s/ Christopher Legallet
LYNDA COUCH is portfolio manager of the Fund and is a managing director of
Newport Fund Management. CHRISTOPHER LEGALLET is Chief Investment Officer of
Newport Fund Management, Inc. and co-portfolio manager of the Fund.
International investing offers significant long-term potential, but also
involves certain risks. Because many of the Tiger countries are considered
emerging markets, they are subject to a greater degree of social, political,
currency and economic instability. Small cap stocks involve certain risks, such
as lower liquidity, that are not present in stocks of larger, more established
companies.
TOP 10 HOLDINGS AS OF 8/31/00
Datacraft Asia Ltd 9.5%
---------------------------------------
Johnson Electric Hldgs 7.9%
---------------------------------------
Li & Fung Ltd 7.9%
---------------------------------------
China Mobile Ltd 6.4%
---------------------------------------
Avimo Singapore Ltd 6.1%
---------------------------------------
Venture Mfg (Singapore) Ltd 5.3%
---------------------------------------
Dickson Concepts Intl-New 3.7%
---------------------------------------
Thai Union Frozen Prod-Foreign 2.8%
---------------------------------------
Cheung Kong Hldg 2.7%
---------------------------------------
China Hong Kong Photo Products 2.4%
---------------------------------------
Holdings are calculated as a percentage of net assets. Because the Fund is
actively managed, there can be no guarantee the Fund will continue to hold these
securities in the future.
REDUCED
--------------------------------------------------------------------------------
LI & FUNG LTD and JOHNSON ELECTRIC HOLDINGS LTD. (7.9% and 7.9% of net assets,
respectively). Both Hong Kong stocks have performed so well that they have grown
beyond our "small-cap" profile and holdings must often be trimmed to reduce a
disproportionate percentage of total assets.
3
<PAGE> 6
--------------------------------------------------------------------------------
PERFORMANCE INFORMATION
--------------------------------------------------------------------------------
PERFORMANCE OF A $10,000 INVESTMENT IN ALL SHARE CLASSES 6/3/96 - 8/31/00
<TABLE>
<CAPTION>
Without With
Sales Sales
Charge Charge
-------------------------------
<S> <C> <C>
Class A $8,838 $8,329
-------------------------------
Class B $8,550 $8,379
-------------------------------
Class C $8,570 $8,570
-------------------------------
</TABLE>
VALUE OF AN INITIAL $10,000 INVESTMENT
<TABLE>
<CAPTION>
MSCI Pacific Region
(ex-Japan) Index Without sales charge With sales charge
------------------- -------------------- -----------------
<S> <C> <C> <C>
6/03/96 10000 10000 9425
06/30/96 9811 9910 9340.18
07/31/96 9316.53 9340.18 8803.11
08/31/96 9732.97 9320.56 8784.63
09/30/96 9981.17 9430.54 8888.29
10/31/96 10252.6 9080.67 8558.53
11/30/96 10799.1 9521.08 8973.62
12/31/96 10819.6 9641.05 9086.69
01/31/97 10689.8 9810.73 9246.61
02/28/97 10841.6 9680.25 9123.63
03/31/97 10338.5 9269.81 8736.79
04/30/97 10126.6 9190.09 8661.66
05/31/97 10756.5 9710.24 9151.9
06/30/97 10991 9840.36 9274.54
07/31/97 10961.3 10210.4 9623.26
08/31/97 9439.87 9100.49 8577.21
09/30/97 9761.77 9350.76 8813.09
10/31/97 7691.3 7570.37 7135.08
11/30/97 7448.25 7470.44 7040.89
12/31/97 7467.62 6920.62 6522.68
01/31/98 7006.12 5730.27 5400.78
02/28/98 8083.66 7130.18 6720.19
03/31/98 7988.27 7100.23 6691.97
04/30/98 7429.89 6540.02 6163.97
05/31/98 6596.26 5740.18 5410.12
06/30/98 6198.5 4880.3 4599.68
07/31/98 5985.9 4610.42 4345.32
08/31/98 5176.6 3900.41 3676.14
09/30/98 5649.23 4340.38 4090.81
10/31/98 6740.09 5420.27 5108.6
11/30/98 7053.51 5890.21 5551.52
12/31/98 6971.69 5904.93 5565.4
01/31/99 7019.79 5514.61 5197.52
02/28/99 6946.78 5444.58 5131.52
03/31/99 7495.58 5624.79 5301.37
04/30/99 8733.1 6865.62 6470.85
05/31/99 8113.05 7285.8 6866.87
06/30/99 8781.57 8506.9 8017.75
07/31/99 8699.9 8437.14 7952.01
08/31/99 8499.8 8076.88 7612.46
09/30/99 8342.55 7846.69 7395.5
10/31/99 8496.06 8297.09 7820
11/30/99 9201.23 8997.36 8480.01
12/31/99 9940.09 9968.18 9395.01
01/31/00 9234.34 9938.27 9366.82
02/29/00 9204.79 9978.02 9404.29
03/31/00 9283.95 10137.7 9554.76
04/30/00 8900.53 9186.76 8658.52
05/31/00 8072.78 8366.38 7885.31
06/30/00 9014.87 9296.72 8762.16
07/31/00 8970.7 8896.03 8384.51
08/31/00 9078.35 8837.5 8329.34
</TABLE>
The Morgan Stanley Capital International (MSCI) Pacific (ex-Japan) Index is an
unmanaged index that tracks the performance of stocks in the Pacific Basin
countries other than Japan. Unlike mutual funds, indexes are not investments and
do not incur fees or expenses. It is not possible to invest directly in an
index. The MSCI Index performance is from 5/31/96.
AVERAGE ANNUAL TOTAL RETURNS AS OF 8/31/00
<TABLE>
<CAPTION>
Share Class A B C
Inception 6/3/96 6/3/96 6/3/96
--------------------------------------------------------------------------------------------
Without With Sales Without With Sales Without With Sales
Sales Charge Charge Sales Charge Charge Sales Charge Charge
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 year 9.42% 3.13% 8.64% 3.64% 8.62% 7.62%
Life (2.87) (4.22) (3.62) (4.08) (3.57) (3.57)
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS AS OF 6/30/00
<TABLE>
<CAPTION>
Share Class A B C
--------------------------------------------------------------------------------------------
Without With Sales Without With Sales Without With Sales
Sales Charge Charge Sales Charge Charge Sales Charge Charge
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 year 9.29% 3.01% 8.30% 3.30% 8.28% 7.28%
Life (1.77) (3.19) (2.55) (3.04) (2.50) (2.50)
</TABLE>
Past performance cannot predict future investment results. Returns and value of
an investment will vary, resulting in a gain or loss on sale. All results shown
assume reinvestment of distributions. The "with sales charge" returns include
the maximum 5.75% sales charge for Class A shares, the appropriate Class B share
contingent deferred sales charge for the holding period after purchase as
follows: first year -- 5%, second year -- 4%, third year -- 3%, fourth year --
3%, fifth year -- 2%, sixth year -- 1%, and thereafter -- 0% and the Class C
share contingent deferred sales charge of 1% for the first year only.
Performance results reflect any voluntary waivers or reimbursement of Fund
expenses by the Advisor or its affiliates. Absent these waivers or reimbursement
arrangements, performance results would have been lower. Performance for
different share classes vary based on differences in sales charges and fees
associated with each class.
4
<PAGE> 7
--------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
--------------------------------------------------------------------------------
August 31, 2000
(In thousands)
<TABLE>
<CAPTION>
COMMON STOCKS - 95.9% COUNTRY SHARES VALUE
--------------------------------------------------------------------------------
<S> <C> <C> <C>
CONSTRUCTION - 1.5%
SPECIAL TRADE CONTRACTORS
Zhejiang Expressway Co., Ltd., Class H HK 1,000 $ 184
-------
--------------------------------------------------------------------------------
FINANCE, INSURANCE & REAL ESTATE - 18.1%
DEPOSITORY INSTITUTIONS - 3.8%
Dah Sing Financial HK 41 192
Hang Seng Bank Ltd. HK 25 268
-------
460
-------
HOLDING COMPANIES - 3.7%
Dickson Concepts International Ltd. HK 500 446
-------
INSURANCE CARRIERS - 1.9%
Thai Reinsurance Co., Ltd. Th 240 235
-------
REAL ESTATE - 8.7%
Cheung Kong Holdings Ltd. HK 25 325
City Developments Ltd. Si 54 268
HKR International Ltd. HK 349 186
Sun Hung Kai Properties Ltd. HK 29 276
-------
1,055
-------
--------------------------------------------------------------------------------
MANUFACTURING - 28.1%
COMMUNICATIONS EQUIPMENT - 0.8%
AsiaInfo Holdings, Inc.(a) Ch 3 94
-------
ELECTRONIC COMPONENTS - 1.2%
TCL International Holdings Ltd.(a) HK 500 143
-------
FOOD & KINDRED PRODUCTS - 2.8%
Thai Union Frozen Products Public Co.--
Foreign Shares Th 160 342
-------
HOUSEHOLD APPLIANCES - 1.0%
Guangdong Kelon Electric Holdings,
Class H HK 379 125
-------
NONMETALLIC, EXCEPT FUELS - 1.9%
Eastern Water Resources Development &
Management Ltd.--Foreign Shares Th 332 229
-------
MEASURING & ANALYZING INSTRUMENTS - 15.4%
Avimo Singapore Ltd. Si 380 733
China Hong Kong Photo Products
Holdings Ltd. HK 2,868 287
PT Modern Photo Film--
Foreign Shares In 1,293 197
Venture Manufacturing Singapore Ltd. Si 50 639
-------
1,856
-------
--------------------------------------------------------------------------------
PRINTING & PUBLISHING - 2.1%
South China Morning Post Ltd. HK 340 $ 255
-------
RUBBER & PLASTIC - 1.5%
PT Dynaplast--Foreign Shares In 1,398 187
-------
STONE, CLAY, GLASS & CONCRETE - 1.4%
WYSE Technology Taiwan Ltd. Tw 139 166
-------
--------------------------------------------------------------------------------
RETAIL TRADE - 8.7%
APPAREL & ACCESSORY STORES - 5.3%
Esprit Holdings Ltd. HK 278 217
Giordano International Ltd. HK 400 219
Glorious Sun Enterprises HK 900 207
-------
643
-------
MISCELLANEOUS RETAIL - 1.8%
Sa Sa International Holdings Ltd. HK 1,500 219
-------
RESTAURANTS - 1.6%
Cafe de Coral Holdings Ltd. HK 500 189
-------
--------------------------------------------------------------------------------
SERVICES - 13.4%
COMPUTER RELATED SERVICES
Computer & Technologies
Holdings Ltd. HK 270 246
Datacraft Asia Ltd. Si 137 1,151
SINA.com(a) Ch 10 223
-------
1,620
-------
--------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION, ELECTRIC, GAS &
SANITARY SERVICES - 10.3%
AIR TRANSPORTATION - 0.8%
Beijing Capital International Airport
Co., Ltd., Class H(a) HK 400 92
-------
GAS SERVICES - 2.4%
Hong Kong & China Gas Co., Ltd. HK 230 285
-------
TELECOMMUNICATIONS - 7.1%
China Mobile Ltd.(a)(b) HK 100 773
Locus Corp.(a) Ko 2 82
-------
855
-------
--------------------------------------------------------------------------------
WHOLESALE TRADE - 15.8%
DURABLE GOODS
Johnson Electric Holdings Ltd.(a) HK 461 958
Li & Fung Ltd. HK 219 955
-------
1,913
-------
TOTAL COMMON STOCKS
(cost of $10,007) 11,593
-------
</TABLE>
See notes to investment porfolio. 5
<PAGE> 8
--------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (CONTINUED)
--------------------------------------------------------------------------------
August 31, 2000
(In thousands)
<TABLE>
<CAPTION>
RIGHTS & WARRANTS(a) - 1.5% COUNTRY SHARES VALUE
--------------------------------------------------------------------------------
<S> <C> <C> <C>
RETAIL TRADE - 1.5%
RESTAURANTS
Jollibee Foods Corp. Ph 670 $ 178
-------
--------------------------------------------------------------------------------
TRANSPORTATION, COMMUNICATION,
ELECTRIC, GAS & SANITARY SERVICES - 0.0%
TELECOMMUNICATIONS
Locus Corp. Rights Ko (c) 5
-------
TOTAL RIGHTS & WARRANTS
(cost of $332) 183
-------
TOTAL INVESTMENTS - 97.4%
(cost of $10,339)(d) 11,776
-------
SHORT-TERM OBLIGATIONS - 2.9% PAR VALUE
--------------------------------------------------------------------------------
Repurchase Agreement with
SBC Warburg Ltd., dated 08/31/00,
due 09/01/00 at 6.600%, collateralized
by U.S. Treasury notes with various
maturities to 2022, market value $353
(repurchase proceeds $346) $346 346
-------
OTHER ASSETS & LIABILITIES, NET - (0.3)% (34)
--------------------------------------------------------------------------------
NET ASSETS - 100.0% $12,088
-------
</TABLE>
NOTES TO INVESTMENT PORTFOLIO:
--------------------------------------------------------------------------------
(a) Non-income producing.
(b) The value of this security represents fair value as determined in good
faith under the direction of the Trustees.
(c) Rounds to less than one.
(d) Cost for federal income tax purposes is the same.
<TABLE>
<CAPTION>
SUMMARY OF
SECURITIES BY COUNTRY COUNTRY VALUE % OF TOTAL
-----------------------------------------------------------
<S> <C> <C> <C>
Hong Kong HK $ 7,047 59.9
Singapore Si 2,791 23.7
Thailand Th 806 6.8
Indonesia In 384 3.3
China Ch 317 2.7
Philippines Ph 178 1.5
Taiwan Tw 166 1.4
Korea Ko 87 0.7
------- -----
$11,776 100.0
------- -----
</TABLE>
Certain securities are listed by country of underlying exposure but may trade
predominantly on other exchanges.
See notes to financial statements.
6
<PAGE> 9
--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
August 31, 2000
(In thousands except for per share amounts and footnotes)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value (cost $10,339) $11,776
Short-term obligations 346
-------
12,122
Cash including foreign currencies
(cost $32) 31
Receivable for:
Dividends 50
Fund shares sold 17
Expense reimbursement due from
Advisor/Administrator 10
Other 1 109
---- -------
Total Assets 12,231
LIABILITIES
Cash including foreign currencies
(cost $21) 19
Payable for:
Fund shares repurchased 44
Accrued:
Management fee 12
Administration fee 3
Transfer agent fee 8
Bookkeeping fee 4
Deferred Trustees' fees 1
Other 52
----
Total Liabilities 143
-------
NET ASSETS $12,088
=======
Net asset value & redemption
price per share --
Class A ($4,500/509) $ 8.83(a)
=======
Maximum offering price per share --
Class A ($8.83/0.9425) $ 9.37(b)
=======
Net asset value & offering
price per share --
Class B ($6,420/751) $ 8.55(a)
=======
Net asset value & offering
price per share --
Class C ($805/94) $ 8.57(a)
=======
Net asset value, offering & redemption
price per share --
Class S ($363/41) $ 8.88
=======
COMPOSITION OF NET ASSETS
Capital paid in $15,065
Overdistributed net investment income (3)
Accumulated net realized loss (4,412)
Net unrealized appreciation on:
Investments 1,437
Foreign currency transactions 1
=======
$12,088
=======
</TABLE>
(a) Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
(b) On sales of $50,000 or more the offering price is reduced.
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
For the Year Ended August 31, 2000
(In thousands)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends $ 369
Interest 39
-------
Total Investment Income (net of
nonreclaimable foreign taxes withheld at
source which amounted to $16) 408
EXPENSES
Management fee $156
Administration fee 34
Service fee -- Class A, Class B,
Class C 33
Distribution fee -- Class B 55
Distribution fee -- Class C 7
Transfer agent fee 46
Bookkeeping fee 27
Trustees' fee 6
Custodian fee 18
Audit fee 21
Legal fee 5
Registration fee 55
Reports to shareholders 30
Other 5
----
498
----
Fees and expenses waived or borne
by the Advisor/Administrator (131) 367
---- -------
Net Investment Income 41
-------
NET REALIZED & UNREALIZED GAIN (LOSS)
ON PORTFOLIO POSITIONS
Net realized gain (loss) on:
Investments 1,025
Foreign currency transactions (7)
----
Net Realized Gain 1,018
Net change in unrealized appreciation /
depreciation during the period on:
Investments 266
Foreign currency transactions (1)
----
Net Change in Unrealized
Appreciation/Depreciation 265
-------
Net Gain 1,283
-------
Increase in Net Assets from Operations $ 1,324
=======
</TABLE>
See notes to financial statements.
7
<PAGE> 10
--------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
(In thousands)
<TABLE>
<CAPTION>
YEARS ENDED AUGUST 31,
INCREASE (DECREASED) IN NET ASSETS 2000(a) 1999
--------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income $ 41 $ 43
Net realized gain (loss) 1,018 (445)
Net change in unrealized
appreciation/depreciation 265 7,635
------- -------
Net Increase from Operations 1,324 7,233
------- -------
Distributions:
From net investment income -- Class A -- (4)
From net investment income -- Class S -- (b)
------- -------
-- 7,229
------- -------
Fund Share Transactions:
Receipts for shares sold -- Class A 3,430 4,205
Value of distributions reinvested -- Class A -- 4
Cost of shares repurchased -- Class A (4,343) (5,991)
------- -------
(913) (1,782)
------- -------
Receipts for shares sold -- Class B 732 2,883
Cost of shares repurchased -- Class B (2,096) (2,304)
------- -------
(1,364) 579
------- -------
Receipts for shares sold -- Class C 103 470
Cost of shares repurchased -- Class C (343) (1,007)
------- -------
(240) (537)
------- -------
Receipts for shares sold -- Class S 420 5
Value of distributions reinvested -- Class S -- (b)
Cost of shares repurchased -- Class S (94) (15)
------- -------
326 (10)
------- -------
Share Transactions (2,191) (1,750)
------- -------
Total Increase (Decrease) (867) 5,479
NET ASSETS
Beginning of period 12,955 7,476
------- -------
End of period (net of overdistributed
net investment income of $3 and $39,
respectively) $12,088 $12,955
------- -------
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED AUGUST 31,
NUMBER OF FUND SHARES 2000(a) 1999
--------------------------------------------------------------------
<S> <C> <C>
Sold -- Class A 402 594
Issued for distributions reinvested -- Class A -- 1
Repurchased -- Class A (494) (906)
------- -------
(92) (311)
------- -------
Sold -- Class B 83 462
Repurchased -- Class B (236) (384)
------- -------
(153) 78
------- -------
Sold -- Class C 12 84
Repurchased -- Class C (39) (154)
------- -------
(27) (70)
------- -------
Sold -- Class S 46 1
Issued for distributions reinvested -- Class S -- (b)
Repurchased -- Class S (10) (2)
------- -------
36 (1)
------- -------
</TABLE>
(a) Effective April 19, 2000, Class Z shares were redesignated Class S shares.
(b) Rounds to less than one. (In thousands)
See notes to financial statements.
8
<PAGE> 11
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
August 31, 2000
NOTE 1. ACCOUNTING POLICIES
ORGANIZATION:
Liberty Newport Tiger Cub Fund - Class A, B and C (the Fund) and Stein Roe Small
Cap Tiger Fund - Class S (formerly, collectively Newport Tiger Cub Fund) are,
collectively, a series of Liberty Funds Trust II, which is a diversified
portfolio of a Massachusetts business trust, registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Fund's investment objective is to seek capital appreciation by investing
primarily in equity securities of small companies (i.e., companies with equity
market capitalizations of U.S. $2 billion or less) located in the nine Tiger
markets of Asia (Hong Kong, Singapore, South Korea, Taiwan, Malaysia, Thailand,
Indonesia, The People's Republic of China and the Philippines). The Fund may
issue an unlimited number of shares. The Fund offers four classes of shares:
Class A, Class B, Class C and Class S. Class A shares are sold with a front-end
sales charge. A 1.00% contingent deferred sales charge is assessed to Class A
shares purchased without an initial sales charge on redemptions made within
eighteen months on an original purchase of $1 million to $25 million. Class B
shares are subject to an annual distribution fee and a contingent deferred sales
charge. Class B shares will convert to Class A shares in three, four or eight
years after purchase, depending on the program under which shares were
purchased. Class C shares are subject to a contingent deferred sales charge on
redemptions made within one year after purchase and an annual distribution fee.
Effective April 19, 2000, Class Z shares were redesignated Class S shares. Class
S shares are offered continuously at net asset value. There are certain
restrictions on the purchase of Class S shares, as defined in the Fund's Class S
prospectus. The financial highlights for Class S are presented in a separate
annual report.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the period. Actual results
could differ from those estimates. The following is a summary of significant
accounting policies that are consistently followed by the Fund in the
preparation of its financial statements.
SECURITY VALUATION AND TRANSACTIONS:
Equity securities generally are valued at the last sale price or, in the case of
unlisted or listed securities for which there were no sales during the day, at
current quoted bid prices. In certain countries, the Fund may hold foreign
designated shares. If the foreign share prices are not readily available as a
result of limited share activity, the securities are valued at the last sale
price of the local shares in the principal market in which such securities are
normally traded. Korean equity securities that have reached the limit for
aggregate foreign ownership and for which premiums to the local exchange prices
may be paid by foreign investors are valued by applying a broker quoted premium
to the local share price. In addition, if the values of foreign securities have
been materially affected by events occurring after the closing of the market,
the foreign securities may be valued at their fair value under procedures
approved by the Trustees.
Forward currency contracts are valued based on the weighted value of the
exchange traded contracts with similar durations.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
The value of all assets and liabilities quoted in foreign currencies is
translated into U.S. dollars at that day's exchange rates. In certain countries,
the Fund may hold portfolio positions for which market quotations are not
readily available. Such securities are valued at fair value under procedures
approved by the Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains and losses are based upon the specific
identification method for both financial statement and federal income tax
purposes.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS:
All income, expenses (other than Class A, Class B and Class C service fees and
Class B and Class C distribution fees), and realized and unrealized gains
(losses) are allocated to each class proportionately on a daily basis for
purposes of determining the net asset value of each class.
The per share data was calculated using average shares outstanding during the
period. In addition, Class A, Class B and Class C net investment income per
share data reflects the service fee per share applicable to Class A, Class B and
Class C shares and the distribution fee applicable to Class B and Class C shares
only.
Class A, Class B and Class C ratios are calculated by adjusting the expense and
net investment income ratios for the Fund for the entire period by the service
fee applicable to Class A, Class B and Class C shares and the distribution fee
applicable to Class B and Class C shares only.
FEDERAL INCOME TAXES:
Consistent with the Fund's policy to qualify as a regulated investment company
and to distribute all of its taxable income,no federal income tax has been
accrued.
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions to shareholders are recorded on the ex-date.
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforwards) under income tax regulations.
9
<PAGE> 12
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSACTIONS:
Net realized and unrealized gains (losses) on foreign currency transactions
includes the gains (losses) arising from the fluctuations in exchange rates
between trade and settlement dates on securities transactions, gains (losses)
arising from the disposition of foreign currency and currency gains (losses)
between the accrual and payment dates on dividends and interest income and
foreign withholding taxes.
The Fund does not distinguish that portion of gains (losses) on investments
which is due to changes in foreign exchange rates from that which is due to
changes in market prices of the investments. Such fluctuations are included with
the net realized and unrealized gains (losses) from investments.
FORWARD CURRENCY CONTRACTS:
The Fund may enter into forward currency contracts to purchase or sell foreign
currencies at predetermined exchange rates in connection with the settlement of
purchases and sales of securities. The Fund may also enter into forward currency
contracts to hedge certain other foreign currency denominated assets. The
contracts are used to minimize the exposure to foreign exchange rate
fluctuations during the period between trade and settlement date of the
contracts. All contracts are marked-to-market daily, resulting in unrealized
gains (losses) which become realized at the time the forward currency contracts
are closed or mature. Realized and unrealized gains (losses) arising from such
transactions are included in net realized and unrealized gains (losses) on
foreign currency transactions. Forward currency contracts do not eliminate
fluctuations in the prices of the Fund's portfolio securities. While the maximum
potential loss from such contracts is the aggregate face value in U.S. dollars
at the time the contract is opened, the actual exposure is typically limited to
the change in value of the contract (in U.S. dollars) over the period it remains
open. Risks may also arise if counterparties fail to perform their obligations
under the contracts.
OTHER:
Corporate actions are recorded on the ex-date (except for certain foreign
securities which are recorded as soon after ex-date as the Fund becomes aware of
such), net of nonrebatable tax withholdings. Where a high level of uncertainty
as to collection exists, income on securities is recorded net of all tax
withholdings with any rebates recorded when received.
The Fund's custodian takes possession through the federal book-entry system of
securities collateralizing repurchase agreements. Collateral is marked-to-market
daily to ensure that the market value of the underlying assets remains
sufficient to protect the Fund. The Fund may experience costs and delays in
liquidating the collateral if the issuer defaults or enters bankruptcy.
NOTE 2. FEES AND COMPENSATION PAID TO AFFILIATES
MANAGEMENT FEE:
Newport Fund Management (the Advisor), is the investment Advisor of the Fund and
receives a monthly fee equal to 1.15% annually of the Fund's average net assets.
ADMINISTRATION FEE:
Colonial Management Associates, Inc. (the Administrator), an affiliate of the
Advisor, provides accounting and other services for a monthly fee equal to 0.25%
annually of the Fund's average net assets.
BOOKKEEPING FEE:
The Administrator provides bookkeeping and pricing services for a monthly fee
equal to $27,000 annually plus 0.035% annually of the Fund's average net assets
over $50 million.
TRANSFER AGENT FEE:
Liberty Funds Services, Inc. (the Transfer Agent), an affiliate of the
Administrator, provides shareholder services for a monthly fee equal to 0.236%
annually of the Fund's average net assets and receives reimbursement for certain
out-of-pocket expenses through December 31, 1999.
Effective January 1, 2000, the Transfer Agent fee was changed to a fee comprised
of 0.07% annually of average net assets plus charges based on the number of
shareholder accounts and transactions. The Transfer Agent receives reimbursement
for certain out-of-pocket expenses.
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES:
Liberty Funds Distributor, Inc. (the Distributor), a subsidiary of the
Administrator, is the Fund's principal underwriter. For the year ended August
31, 2000, the Fund has been advised that the Distributor retained net
underwriting discounts of $1,231 on sales of the Fund's Class A shares and
received contingent deferred sales charges (CDSC) of none, $74,442 and $729 on
Class A, Class B and Class C share redemptions, respectively.
The Fund has adopted a 12b-1 plan which requires it to pay the Distributor a
service fee equal to 0.25% annually on Class A, Class B and Class C net assets
as of the 20th of each month. The plan also requires the payment of a
distribution fee to the Distributor equal to 0.75% of the average net assets
attributable to Class B and Class C shares.
The CDSC and the fees received from the 12b-1 plan are used principally as
repayment to the Distributor for amounts paid by the Distributor to dealers who
sold such shares.
EXPENSE LIMITS:
The Advisor/Administrator has agreed, until further notice, to waive fees and
bear certain Fund expenses to the extent that total expenses (exclusive of
service fees, distribution fees, brokerage commissions, interest, taxes and
extraordinary expenses, if any) exceed 2.00% annually of the Fund's average net
assets.
OTHER:
The Fund pays no compensation to its officers, all of whom are employees of the
Advisor or Administrator.
The Fund's Trustees may participate in a deferred compensation plan which may be
terminated at any time. Obligations of the plan will be paid solely out of the
Fund's assets.
10
<PAGE> 13
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
NOTE 3. PORTFOLIO INFORMATION
INVESTMENT ACTIVITY:
During the year ended August 31, 2000, purchases and sales of investments, other
than short-term obligations, were $2,938,894 and $4,145,029, respectively.
Unrealized appreciation (depreciation) at August 31, 2000, based on cost of
investments for both financial statement and federal income tax purposes was
approximately:
<TABLE>
<S> <C>
Gross unrealized appreciation $ 4,401,000
Gross unrealized depreciation (2,964,000)
-----------
Net unrealized appreciation $ 1,437,000
===========
</TABLE>
CAPITAL LOSS CARRYFORWARDS:
At August 31, 2000, capital loss carryforwards available (to the extent provided
in regulations) to offset future realized gains were approximately as follows:
<TABLE>
<CAPTION>
Year of Expiration Capital Loss Carryforward
------------------ -------------------------
<S> <C>
2006 $ 203,000
2007 4,208,000
----------
$4,411,000
==========
</TABLE>
Expired capital loss carryforwards, if any, are recorded as a reduction of
capital paid in.
To the extent loss carryforwards are used to offset any future realized gains,
it is unlikely that such gains would be distributed since they may be taxable to
shareholders as ordinary income.
OTHER:
There are certain additional risks involved when investing in foreign securities
that are not inherent with investments in domestic securities. These risks may
involve foreign currency exchange rate fluctuations, adverse political and
economic developments and the possible prevention of currency exchange or other
foreign governmental laws or restrictions.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
NOTE 4. LINE OF CREDIT
The Fund may borrow up to 33 1/3% of its net assets under a line of credit for
temporary or emergency purposes. Any borrowings bear interest at one of the
following options determined at the inception of the loan: (1) federal funds
rate plus 1 /2 of 1%, (2) the lending bank's base rate or (3) IBOR offshore loan
rate plus 1 /2 of 1%. There were no borrowings under the line of credit during
the year ended August 31, 2000.
11
<PAGE> 14
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
-------------------------------
2000
-------------------------------
CLASS A CLASS B CLASS C
---------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.070 $ 7.870 $ 7.890
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a)(b) 0.068 0.002 0.002
Net realized and unrealized gain 0.692 0.678 0.678
------- ------- -------
Total from Investment Operations 0.760 0.680 0.680
------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 8.830 $ 8.550 $ 8.570
======= ======= =======
Total return (c)(d) 9.42% 8.64% 8.62%
======= ======= =======
RATIOS TO AVERAGE NET ASSETS
Expenses (e) 2.25% 3.00% 3.00%
Net investment income (e) 0.76% 0.01% 0.01%
Fees and expenses waived or borne
by the Advisor/Administrator (e) 0.97% 0.97% 0.97%
Portfolio turnover 23% 23% 23%
Net assets at end of period (000) $ 4,500 $ 6,420 $ 805
</TABLE>
(a) Net of fees and expenses
waived or borne by the
Advisor/Administrator which
amounted to: $ 0.087 $ 0.087 $ 0.087
(b) Per share data was calculated using average shares outstanding during the
period.
(c) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(d) Had the Advisor/Administrator not waived or reimbursed a portion of
expenses, total return would have been reduced.
(e) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
-------------------------------
1999
-------------------------------
CLASS A CLASS B CLASS C
---------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 3.900 $ 3.830 $ 3.830
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (a)(b) 0.051 0.005 0.006
Net realized and unrealized gain 4.124 4.035 4.054
------- ------- -------
Total from Investment Operations 4.175 4.040 4.060
------- ------- -------
LESS DISTRIBUTION DECLARED TO
SHAREHOLDERS:
From net investment income (0.005) -- --
------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 8.070 $ 7.870 $ 7.890
======= ======= =======
Total return (c)(d) 107.10% 105.48% 106.01%
======= ======= =======
RATIOS TO AVERAGE NET ASSETS
Expenses (e) 2.25% 3.00% 3.00%
Net investment income (e) 0.84% 0.09% 0.09%
Fees and expenses waived or borne
by the Advisor/Administrator (e) 1.35% 1.35% 1.35%
Portfolio turnover 36% 36% 36%
Net assets at end of period (000) $ 4,847 $ 7,115 $ 954
</TABLE>
(a) Net of fees and expenses
waived or borne by the
Advisor/Administrator which
amounted to: $ 0.083 $ 0.083 $ 0.083
(b) Per share data was calculated using average shares outstanding during the
period.
(c) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(d) Had the Advisor/Administrator not waived or reimbursed a portion of
expenses, total return would have been reduced.
(e) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
12
<PAGE> 15
-------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
-------------------------------------------------------------------------------
Selected data for a share of each class outstanding throughout each period are
as follows:
<TABLE>
<CAPTION>
YEARS ENDED AUGUST 31,
----------------------------------------------------------------------
1998 1997
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C(d)
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.100 $ 9.020 $ 9.020 $ 9.320 $ 9.300 $ 9.300
------- -------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)(a)(b) 0.115 0.067 0.067 0.059 (0.012) (0.012)
Net realized and unrealized loss (5.315) (5.257) (5.257) (0.279) (0.268) (0.268)
------- -------- ------- ------- ------- -------
Total from Investment Operations (5.200) (5.190) (5.190) (0.220) (0.280) (0.280)
------- -------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 3.900 $ 3.830 $ 3.830 $ 9.100 $ 9.020 $ 9.020
======= ======== ======= ======= ======= =======
Total return (d)(e) (57.14)% (57.54)% (57.54)% (2.36)% (3.01)% (3.01)%
======= ======== ======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS
Expenses (f) 2.25% 3.00% 3.00% 2.25% 3.00% 3.00%
Net investment income (loss) (f) 1.75% 1.00% 1.00% 0.62% (0.13)% (0.13)
Fees and expenses waived or borne
by the Advisor/Administrator (f) 1.02% 1.02% 1.02% 1.09% 1.09% 1.09%
Portfolio turnover 56% 56% 56% 96% 96% 96%
Net assets at end of period (000) $ 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: $ 0.067 $ 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) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or contingent deferred sales charge.
(e) Had the Advisor/Administrator not waived or reimbursed a portion of
expenses, total return would have been reduced.
(f) The benefits derived from custody credits and directed brokerage
arrangements had no impact.
<TABLE>
<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.
13
<PAGE> 16
--------------------------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS
--------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF LIBERTY FUNDS TRUST II
LIBERTY NEWPORT TIGER CUB FUND
STEIN ROE SMALL CAP TIGER FUND
We have audited the accompanying statement of assets and liabilities of Liberty
Newport Tiger Cub Fund - Class A, B, & C and Stein Roe Small Cap Tiger Fund -
Class S (formerly, collectively, Newport Tiger Cub Fund), collectively a series
of Liberty Funds Trust II (the "Trust"), including the Investment Portfolio, as
of August 31, 2000, and the related statement of operations, the statement of
changes in net assets and the financial highlights for the period then ended.
These financial statements and financial highlights are the responsibility of
the Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit. The statement
of changes in net assets for the year ended August 31, 1999, and the financial
highlights for each of the four years in the period then ended were audited by
other auditors whose report dated October 12, 1999 expressed an unqualified
opinion on that financial statement and those financial highlights.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of August 31, 2000, by correspondence with
the custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Liberty Newport Tiger Cub Fund - Class A, B, & C and Stein Roe Small Cap Tiger
Fund - Class S, collectively a series of Liberty Funds Trust II, at August 31,
2000, the results of its operations, the changes in its net assets, and the
financial highlights for the year then ended, in conformity with accounting
principles generally accepted in the United States.
/s/ Ernst & Young, LLP
Boston, Massachusetts
October 10, 2000
14
<PAGE> 17
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<PAGE> 18
This page left intentionally blank.
<PAGE> 19
TRUSTEES & TRANSFER AGENT
--------------------------------------------------------------------------------
TOM BLEASDALE
Retired (formerly Chairman of the Board and Chief Executive Officer, Shore Bank
& Trust Company)
LORA S. COLLINS
Attorney (formerly Attorney, Kramer, Levin, Naftalis & Frankel)
JAMES E. GRINNELL
Private Investor (formerly Senior Vice President-Operations,The Rockport
Company)
RICHARD W. LOWRY
Private Investor (formerly Chairman and Chief Executive Officer, U.S. Plywood
Corporation)
SALVATORE MACERA
Private Investor (formerly Executive Vice President of Itek Corp. and President
of Itek Optical & Electronic Industries, Inc.)
WILLIAM E. MAYER
Partner, Park Avenue Equity Partners (formerly Dean, College of Business and
Management, University of Maryland; Dean, Simon Graduate School of Business,
University of Rochester; Chairman and Chief Executive Officer, CS First Boston
Merchant Bank; and President and Chief Executive Officer,The First Boston
Corporation)
JAMES L. MOODY, JR.
Retired (formerly Chairman of the Board, Chief Executive Officer and Director,
Hannaford Bros. Co.)
JOHN J. NEUHAUSER
Academic Vice President and Dean of Faculties, Boston College (formerly Dean,
Boston College School of Management)
JOSEPH R. PALOMBO
Chief Operations Officer, Mutual Funds, Liberty Financial Companies, Inc.,
Executive Vice President and Director of Colonial Management Associates, Inc.
and Executive Vice President and Chief Administrative Officer of Liberty Funds
Group LLC (formerly Vice President of Liberty Funds Group - Boston and Chief
Operating Officer, Putnam Mutual Funds)
THOMAS E. STITZEL
Business Consultant and Chartered Financial Analyst (formerly Professor of
Finance, College of Business, Boise State University)
ANNE-LEE VERVILLE
Consultant (formerly General Manager, Global Education Industry, and President,
Applications Solutions Division, IBM Corporation) Transfer
--------------------------------------------------------------------------------
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for the Fund is:
Liberty Funds Services, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
The Fund mails one shareholder report to each shareholder address. If you would
like more than one report, please call 1-800-426-3750 and additional reports
will be sent to you.
This report has been prepared for shareholders of the Fund.This report may also
be used as sales literature when preceded or accompanied by the current
prospectus which provides details of sales charges, investment objectives and
operating policies of the Fund and with the most recent copy of the Liberty
Funds Performance Update.
<PAGE> 20
--------------------------------------------------------------------------------
CHOOSE LIBERTY
--------------------------------------------------------------------------------
BECAUSE NO SINGLE INVESTMENT MANAGER CAN BE ALL THINGS TO ALL INVESTORS.(SM)
--------------
L I B E R T Y
--------------
FUNDS
--------------
ALL-STAR INSTITUTIONAL MONEY MANAGEMENT APPROACH FOR INDIVIDUAL INVESTORS.
COLONIAL FIXED INCOME AND VALUE STYLE EQUITY INVESTING.
CRABBE
HUSON A CONTRARIAN APPROACH TO FIXED INCOME AND EQUITY INVESTING.
NEWPORT A LEADER IN INTERNATIONAL INVESTING. (SM)
STEIN ROE
ADVISOR INNOVATIVE SOLUTIONS FOR GROWTH AND INCOME INVESTING.
KEYPORT A LEADING PROVIDER OF INNOVATIVE ANNUITY PRODUCTS.
Liberty's mutual funds are offered by prospectus through Liberty Funds
Distributor, Inc.
BEFORE YOU INVEST, CONSULT YOUR FINANCIAL ADVISOR.
Your financial advisor can help you develop a long-term plan for reaching your
financial goals.
--------------------------------------------------------------------------------
LIBERTY NEWPORT TIGER CUB FUND CLASS A, B AND C SHARES ANNUAL REPORT
--------------------------------------------------------------------------------
[LIBERTY FUNDS LOGO]
ALL-STAR - COLONIAL - CRABBE HUSON - NEWPORT - STEIN ROE ADVISOR
Liberty Funds Distributor, Inc. (C)2000
One Financial Center, Boston, MA 02111-2621, 1-800-426-3750
www.libertyfunds.com
735-02/759C-0800 (10/00) 00/1715
