UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-3009
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Liberty Funds Trust II
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(Exact name of registrant as specified in charter)
One Financial Center, Boston, Massachusetts 02111
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(Address of principal executive offices) (Zip code)
Jean S. Loewenberg, Esq.
Columbia Management Group, Inc.
One Financial Center
Boston, MA 02111
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(Name and address of agent for service)
Registrant's telephone number, including area code: 1-617-426-3750
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Date of fiscal year end: August 31, 2003
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Date of reporting period: February 28, 2003
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
LIBERTY NEWPORT JAPAN
OPPORTUNITIES FUND
Semiannual Report
February 28, 2003
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LIBERTY NEWPORT JAPAN
OPPORTUNITIES FUND
Semiannual Report
February 28, 2003
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PRESIDENT'S MESSAGE
[photo of Joseph R. Palombo]
Dear Shareholder:
The same geopolitical concerns and weak economic conditions that drove the
financial markets across the globe had a negative impact on Japan during the
past six months. In addition, the large-cap sector of the Japanese stock market
came under pressure as the stock of blue-chip companies was sold off during the
period. These factors are discussed in greater detail in the portfolio managers'
report.
While we are disappointed in the performance of the markets over the past six
months, we continue to believe that Japan offers potential for investors who
take a long-term perspective. Exposure to stock markets outside the United
States can help investors achieve diversification and access to foreign-based
market leaders in technology, telecommunications and other growing industries.
In the report that follows, the fund's portfolio managers provide more detailed
discussion about the Japanese stock market and the decisions they made in
managing the fund. During these challenging times, we thank you for your
investment in Liberty Funds.
Sincerely,
/s/ Joseph R. Palombo
Joseph R. Palombo
President
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MEET THE NEW PRESIDENT
Joseph R. Palombo, president and chairman of the Board of Trustees for Liberty
Funds, is also chief operating officer of Columbia Management Group. Mr. Palombo
has over 19 years of experience in the financial services industry. Prior to
joining Columbia Management, he was chief operating officer and chief compliance
officer for Putnam Mutual Funds. Prior to that, he was a partner at Coopers &
Lybrand. Mr. Palombo received his degree in economics/accounting from the
College of the Holy Cross, where he was a member of Phi Beta Kappa. He earned
his master's degree in taxation from Bentley College and participated in the
Executive Program at the Amos B. Tuck School at Dartmouth College.
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NET ASSET VALUE PER SHARE as of 2/28/03 ($)
Class A 5.95
Class B 5.62
Class C 5.62
Class J1 27.21
Class N1 26.85
Class Z 5.98
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1 Class J and N shares are yen denominated and only offered to residents and
citizens of Japan. The value of these shares has been converted from yen to
US dollars.
Not FDIC Insured
May Lose Value
No Bank Guarantee
Economic and market conditions change frequently. There is no assurance that
trends described in this report will continue or commence.
PERFORMANCE INFORMATION
Value of a $10,000 investment
6/3/96 - 2/28/03
PERFORMANCE OF A $10,000 INVESTMENT
6/3/96 - 2/28/03 ($)
without with
sales sales
charge charge
- --------------------------------------
Class A 6,153 5,799
- --------------------------------------
Class B 5,806 5,805
- --------------------------------------
Class C 5,806 5,805
- --------------------------------------
Class J 5,992 5,813
- --------------------------------------
Class N 5,907 5,907
- --------------------------------------
Class Z 6,186 n/a
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[mountain chart data]:
Class A shares Class A shares
without sales charge with sales charge MSCI Japan Index
6/1996 $10,000.0 $ 9,525.0 $10,000.0
10,350.0 9,858.0 9,552.0
10,110.0 9,630.0 9,125.0
9,710.0 9,248.0 9,441.0
9,719.0 9,258.0 8,807.0
9,239.0 8,800.0 8,975.0
9,469.0 9,019.0 8,355.0
9,320.0 8,877.0 7,446.0
8,979.0 8,553.0 7,620.0
9,110.0 8,677.0 7,370.0
9,059.0 8,629.0 7,637.0
9,500.0 9,049.0 8,480.0
10,569.0 10,067.0 9,114.0
11,049.0 10,524.0 8,836.0
11,469.0 10,924.0 8,070.0
10,049.0 9,572.0 7,948.0
10,269.0 9,782.0 7,207.0
9,820.0 9,353.0 6,765.0
9,360.0 8,915.0 6,378.0
9,042.0 8,612.0 6,947.0
9,603.0 9,147.0 6,983.0
9,423.0 8,975.0 6,508.0
9,021.0 8,593.0 6,481.0
9,172.0 8,736.0 6,125.0
8,751.0 8,335.0 6,211.0
8,781.0 8,364.0 6,129.0
9,132.0 8,698.0 5,430.0
8,681.0 8,269.0 5,282.0
8,480.0 8,078.0 6,167.0
9,242.0 8,803.0 6,449.0
9,933.0 9,461.0 6,699.0
10,575.0 10,073.0 6,748.0
10,604.0 10,101.0 6,600.0
10,604.0 10,101.0 7,515.0
12,459.0 11,867.0 7,829.0
13,421.0 12,783.0 7,387.0
13,010.0 12,392.0 8,087.0
15,406.0 14,674.0 8,894.0
17,209.0 16,392.0 8,832.0
18,583.0 17,700.0 9,368.0
19,635.0 18,702.0 9,770.0
20,826.0 19,837.0 10,189.0
24,204.0 23,055.0 10,821.0
26,656.0 25,390.0 10,353.0
24,372.0 23,214.0 10,085.0
24,869.0 23,688.0 10,917.0
23,939.0 22,802.0 10,096.0
21,509.0 20,488.0 9,582.0
19,059.0 18,154.0 10,240.0
19,805.0 18,864.0 9,061.0
16,887.0 16,085.0 9,647.0
18,460.0 17,583.0 9,167.0
17,561.0 16,726.0 8,636.0
15,088.0 14,371.0 8,277.0
14,344.0 13,663.0 7,774.0
12,741.0 12,135.0 7,681.0
12,761.0 12,155.0 7,336.0
11,324.0 10,786.0 7,118.0
10,983.0 10,461.0 7,601.0
11,770.0 11,210.0 7,583.0
12,007.0 11,437.0 7,131.0
11,014.0 10,491.0 6,600.0
9,846.0 9,378.0 6,575.0
9,256.0 8,816.0 6,435.0
8,698.0 8,285.0 5,834.0
9,039.0 8,609.0 5,822.0
9,008.0 8,580.0 5,885.0
8,242.0 7,851.0 5,488.0
7,322.0 6,974.0 5,058.0
7,415.0 7,062.0 5,268.0
7,745.0 7,377.0 5,696.0
8,263.0 7,870.0 5,894.0
8,728.0 8,313.0 6,262.0
8,355.0 7,958.0 5,935.0
7,601.0 7,240.0 5,523.0
7,508.0 7,151.0 5,464.0
7,001.0 6,669.0 5,220.0
6,567.0 6,255.0 4,857.0
6,733.0 6,413.0 5,053.0
6,567.0 6,255.0 4,923.0
6,164.0 5,871.0 4,724.0
2/2003 6,153.0 5,799.0 4,751.0
MUTUAL FUND PERFORMANCE CHANGES OVER TIME. PLEASE VISIT LIBERTYFUNDS.COM FOR
DAILY PERFORMANCE UPDATES.
Past performance is no guarantee of future investment results. The principal
value and investment returns will fluctuate, resulting in a gain or loss on
sale. The graph and table do not reflect the deduction of taxes a shareholder
would pay on fund distributions or the redemption of fund shares. The Morgan
Stanley Capital International (MSCI) Japan Index is an unmanaged index that
tracks the performance of Japanese stocks. Unlike the fund, an index is not an
investment, does not incur fees or expenses and is not professionally managed.
It is not possible to invest directly in an index. Securities in the fund may
not match those in the index. Index performance is from May 31, 1996.
Average annual total return as of 2/28/03 (%)
Share class A B C J N Z
Inception 6/3/96 6/3/96 6/3/96 9/20/00 5/15/00 6/3/96
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without with without with without with without with without with without
sales sales sales sales sales sales sales sales sales sales sales
charge charge charge charge charge charge charge charge charge charge charge
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6-month
(cumulative) -18.04 -22.76 -18.31 -22.40 -18.20 -19.01 -18.09 -20.55 -18.31 -20.77 -18.19
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1-year -17.02 -21.79 -17.72 -21.83 -17.60 -18.42 -17.40 -19.87 -17.76 -20.23 -17.29
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5-year -8.17 -9.25 -8.98 -9.34 -8.98 -8.98 -8.40 -8.96 -8.66 -8.66 -8.15
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Life -6.95 -7.77 -7.75 -7.75 -7.75 -7.75 -7.32 -7.73 -7.51 -7.51 -6.88
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Average annual total return as of 12/31/02 (%)
Share class A B C J N Z
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without with without with without with without with without with without
sales sales sales sales sales sales sales sales sales sales sales
charge charge charge charge charge charge charge charge charge charge charge
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6-month
(cumulative) -21.41 -25.93 -21.77 -25.68 -21.57 -22.35 -21.42 -23.77 -21.68 -24.03 -21.62
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1-year -20.33 -24.91 -21.05 -25.00 -20.95 -21.74 -20.67 -23.05 -21.07 -23.44 -20.55
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5-year -6.20 -7.30 -7.07 -7.43 -7.05 -7.05 -6.47 -7.04 -6.73 -6.73 -6.18
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Life -6.19 -7.03 -7.01 -7.01 -7.01 -7.01 -6.56 -6.99 -6.76 -6.76 -6.12
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Past performance is no guarantee of future investment results. The principal
value and investment returns will fluctuate, 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 contingent deferred sales charge (CDSC) 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%, thereafter - 0% and
the class C CDSC of 1% for the first year only, the 3% maximum sales charge for
class J shares and the 3% CDSC on the one year or less returns of class N.
Class J share performance includes returns of the fund's class N share for the
periods prior to the inception of class J. Class N share performance information
includes returns of the fund's class B shares for periods prior to the inception
of class N. These older class share returns were not restated to reflect any
expense differential (e.g., Rule 12b-1 fees) between the older share class and
the newer class shares. Had the expense differential been reflected, the returns
for the periods prior to the inception of the newer class shares would have been
different.
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.
1
Top 10 holdings as of 2/28/03 (%)
Canon 4.6%
Takeda Chemical Industries 4.5
Rohm Co. 4.2
Kao Corp 3.7
Funai Electric 3.5
Keyence 3.3
Sony Corp. 3.1
Honda Motor 3.0
Yamada Denki 3.0
NTT DoCoMo 3.0
Portfolio holdings are calculated as a percentage of net assets. Since the fund
is actively managed, there is no guarantee the fund will continue to maintain
the same portfolio holdings in the future.
Bought
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DENSO CORP. (1.1% of net assets)
An auto-parts manufacturer, Denso has reduced costs by more than 30%. It has
gained global prominence and is growing its operations rapidly in China. Denso
is gaining market share globally as it continues to win new orders from the big
three US auto makers.
Sold
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SUN DRUG
Sun Drug operates a drug retailing chain in Japan. The company was affected by
stiff competition in the drug store area. The company was slashing prices to
stay competitive, but the steep price reductions cut into its profit margins.
PORTFOLIO MANAGERS' REPORT
For the six-month period that ended February 28, 2003, the class A shares of
Liberty Newport Japan Opportunities Fund returned negative 18.04% without sales
charge. The fund's performance was lower than its benchmark, the MSCI Japan
Index, which returned negative 13.05%. While geopolitical concerns and a weak
economic environment generally took their toll on the Japanese market, the
fund's performance was affected mostly by a significant sell-off in large, blue
chip companies, which were emphasized in the portfolio.
A CHALLENGING EQUITY SUPPLY/DEMAND DYNAMIC
There were three main reasons for the poor performance of Japanese large-cap
stocks during the six-month period. First, prices went down as companies,
primarily in the financial services sector, began selling their holdings in each
other's stock. Historically, many Japanese companies have owned big positions in
each other's shares as well as shares of their customers--a practice known as
"cross-share holdings." Recently, the Japanese government has passed legislation
to reduce the amount of these holdings that banks are allowed to own. Second,
insurance companies also engaged in heavy selling of large-cap liquid stocks, as
they lowered the proportion of stocks in their portfolios to meet their solvency
ratios. Finally, in response to a government decision to allow companies to
return to employees pension assets managed on behalf of the government, many
companies have decided to return the government's portion of these assets. In
order to return it in the form of cash, companies sold existing stock holdings
into the market.
The fund's results were affected to a lesser extent by its underexposure to
cyclical commodity producers, which performed well. As a matter of philosophy,
we do not invest in these types of economically-sensitive companies because it
is difficult to determine when the trough and peak of such cycles will occur.
While large-cap companies suffered the most in this market environment, small
caps performed relatively well.
2
TAKING ADVANTAGE OF JAPAN'S RESTRUCTURING TREND
We trimmed the fund's concentrated positions and added new companies, which
resulted in a more diversified portfolio. In selecting stocks, we focused on
Japan's robust restructuring trend. We sought companies that have become more
productive and profitable since reconfiguring their businesses. We invested in
Denso Corp. (1.1% of net assets), an auto parts manufacturer that has been
gaining global market share.1 We also added Olympus Optical (1.3% of net
assets), a manufacturer of endoscopes and other optical equipment, including
cameras. Olympus's camera division has a long history of losing money, but its
recent reorganization has resulted in better profits and solid business
prospects for the future.
Because of the decline in consumer spending, we reduced exposure to the retail
area from about 12% to 5% of the portfolio. We also eliminated the consumer
finance position, which suffered from weak loan demand, increasing bankruptcies
and loan defaults. At the end of the reporting period, we owned no banks in the
portfolio.
A DECLINE IN PRICES COULD LEAD TO INVESTMENT OPPORTUNITY
We believe the heavy selling in the large-cap area may continue for a while, as
more companies eliminate their cross-shareholder arrangements. This will likely
put more downward pressure on stock prices. One of the positive outcomes of this
selling activity has been that many well-run blue chip companies now have very
attractive valuations. This is particularly evident in the pharmaceutical
sector, where several highly competitive global companies are selling at
historically low price/earnings ratios. The portfolio has a solid position in
pharmaceuticals, and we are likely to add new companies as opportunities arise.
We expect the wave of restructuring that has taken place among Japanese
companies to continue to present new investment ideas.
/s/ David R. Smith
/s/ Jamie Chui
David R. Smith and Jamie Chui were portfolio managers of Liberty Newport Japan
Opportunities Fund during the reporting period. Jamie Chui began co-managing the
fund in August 2001.
In March, 2003, Richard Yeung replaced David Smith as co-manager of Liberty
Newport Japan Opportunities Fund. Mr. Yeung serves as portfolio manager on
Japanese portfolios and is a member of Columbia Management Group's Asia and
International strategy teams.
TOP 5 SECTORS as of 2/28/03 (%)
[bar chart data]:
Consumer discretionary 23.8%
Information technology 20.9
Industrials 15.5
Consumer staples 12.1
Health care 11.5
Sector breakdowns are calculated as a percentage of net assets. Since the fund
is actively managed, there is no guarantee the fund will continue to maintain
the same sector breakdowns in the future.
- -----------
1 Holdings and sector breakdowns are disclosed as of February 28, 2003, and are
subject to change.
International investing offers significant long-term growth potential, but also
involves certain risks. These risks include currency exchange rate fluctuations,
economic change, instability of emerging countries and political developments. A
portfolio of stocks from a single nation poses additional risks due to limited
diversification.
3
INVESTMENT PORTFOLIO
February 28, 2003 (Unaudited)
COMMON STOCKS - 96.4% SHARES VALUE
- --------------------------------------------------------
CONSUMER DISCRETIONARY - 23.8%
AUTOMOBILES & COMPONENTS - 9.3%
AUTO PARTS & EQUIPMENT - 3.8%
Denso Corp. 11,000 $ 164,607
F.C.C. Co., Ltd. 12,700 320,145
Stanley Electric Co., Ltd. 7,000 86,453
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571,205
----------
AUTOMOBILE MANUFACTURERS - 5.5%
Honda Motor Co., Ltd. 12,400 453,140
Toyota Motor Corp. 15,300 359,155
----------
812,295
----------
CONSUMER DURABLES & APPAREL - 8.0%
CONSUMER ELECTRONICS - 7.2%
Funai Electric Co., Ltd. 4,600 527,260
Pioneer Corp. 3,700 80,125
Sony Corp. 12,200 463,376
----------
1,070,761
----------
HOUSEHOLD APPLIANCES - 0.8%
Rinnai Corp. 5,500 114,220
----------
HOTELS, RESTAURANTS & LEISURE - 1.1%
RESTAURANTS - 1.1%
Plenus Co., Ltd. 2,880 68,945
Saint Marc Co., Ltd. 3,700 92,019
----------
160,964
----------
RETAILING - 5.4%
APPAREL RETAIL - 0.9%
Shimamura Co., Ltd. 2,700 140,236
----------
COMPUTER & ELECTRONICS RETAIL - 3.0%
Yamada Denki Co., Ltd. 22,300 449,905
----------
GENERAL MERCHANDISE STORES - 1.5%
Don Quijote Co., Ltd. 2,800 223,356
----------
- --------------------------------------------------------
CONSUMER STAPLES - 12.1%
FOOD & DRUG RETAILING - 4.7%
DRUG RETAIL - 1.4%
Sugi Pharmacy Co., Ltd. 5,000 206,403
----------
FOOD RETAIL - 3.3%
C Two-Network Co., Ltd. 7,600 167,474
Seven-Eleven Japan Co., Ltd. 6,000 140,338
Yaoko Co., Ltd. 12,700 183,815
----------
491,627
----------
FOOD, BEVERAGE & TOBACCO - 3.7%
PACKAGED FOODS & MEATS - 2.5%
Katokichi Co., Ltd. 23,300 370,151
----------
SHARES VALUE
- --------------------------------------------------------
SOFT DRINKS - 1.2%
Yakult Honsha Co., Ltd. 15,000 $ 184,114
----------
HOUSEHOLD & PERSONAL PRODUCTS - 3.7%
HOUSEHOLD PRODUCTS - 3.7%
Kao Corp. 26,000 548,746
----------
- -------------------------------------------------------
FINANCIALS - 2.4%
REAL ESTATE - 2.4%
REAL ESTATE MANAGEMENT & DEVELOPMENT - 2.4%
Leopalace21 Corp. 16,000 86,757
Mitsubishi Estate Co., Ltd. 39,000 270,194
----------
356,951
----------
- -------------------------------------------------------
HEALTH CARE - 11.5%
HEALTH CARE EQUIPMENT & SERVICES - 3.6%
HEALTH CARE EQUIPMENT - 3.6%
Hogy Medical Co., Ltd. 4,400 186,102
NIPRO Corp. 10,000 157,679
Olympus Optical Co., Ltd. 12,000 193,884
----------
537,665
----------
PHARMACEUTICALS & BIOTECHNOLOGY - 7.9%
PHARMACEUTICALS - 7.9%
Chugai Pharmaceutical Co., Ltd. 19,000 173,100
Fujisawa Pharmaceutical Co., Ltd. 12,000 235,503
Rohto Pharmaceutical Co., Ltd. 16,000 110,984
Takeda Chemical Industries Ltd. 18,000 663,875
----------
1,183,462
----------
- -------------------------------------------------------
INDUSTRIALS - 15.5%
CAPITAL GOODS - 6.1%
ELECTRICAL COMPONENTS & EQUIPMENT - 2.5%
Fanuc Ltd. 8,400 365,943
----------
INDUSTRIAL CONGLOMERATES - 1.5%
Nitto Denko Corp. 7,800 219,058
----------
INDUSTRIAL MACHINERY - 2.1%
SMC Corp. 2,200 168,422
Union Tool Co. 5,800 144,000
----------
312,422
----------
COMMERCIAL SERVICES & SUPPLIES - 5.6%
DIVERSIFIED COMMERCIAL SERVICES - 4.6%
Nichii Gakkan Co. 7,200 348,991
Park24 Co., Ltd. 15,400 269,661
Secom Co., Ltd. 2,500 71,057
----------
689,709
----------
EMPLOYMENT SERVICES - 1.0%
Drake Beam Morin-Japan, Inc. 3,900 154,727
----------
See notes to investment portfolio.
4
INVESTMENT PORTFOLIO (CONTINUED)
February 28, 2003 (Unaudited)
COMMON STOCKS (CONTINUED) SHARES VALUE
- --------------------------------------------------------
INDUSTRIALS (CONTINUED)
TRANSPORTATION - 3.8%
AIR FREIGHT & LOGISTICS - 1.0%
Yamato Transport Co., Ltd. 12,000 $ 152,265
----------
RAILROADS - 2.8%
East Japan Railway Co. 89 410,312
----------
- -------------------------------------------------------
INFORMATION TECHNOLOGY - 20.9%
TECHNOLOGY HARDWARE & EQUIPMENT - 20.9%
ELECTRONIC EQUIPMENT & INSTRUMENTS - 9.0%
Hirose Electric Co., Ltd. 4,300 304,454
HOYA Corp. 5,300 340,287
Keyence Corp. 3,060 497,252
Nidec Corp. 3,600 198,858
----------
1,340,851
----------
NETWORKING EQUIPMENT - 0.5%
Net One Systems Co., Ltd. 17 76,505
----------
OFFICE ELECTRONICS - 7.2%
Canon, Inc. 19,000 686,292
Ricoh Co., Ltd. 25,500 385,256
----------
1,071,548
----------
SEMICONDUCTORS - 4.2%
Rohm Co., Ltd. 5,500 630,419
----------
- -------------------------------------------------------
MATERIALS - 2.4%
CHEMICALS - 2.4%
DIVERSIFIED CHEMICALS - 2.4%
Shin-Etsu Chemical Co., Ltd. 10,700 350,285
----------
- -------------------------------------------------------
TELECOMMUNICATION SERVICES - 5.8%
DIVERSIFIED TELECOMMUNICATION SERVICES - 2.9%
INTEGRATED TELECOMMUNICATION SERVICES - 2.9%
Japan Telecom Holdings Co., Ltd. 85 252,378
KDDI Corp. 56 175,748
----------
428,126
----------
WIRELESS TELECOMMUNICATION SERVICES - 2.9%
NTT DoCoMo, Inc. 233 439,530
----------
- -------------------------------------------------------
UTILITIES - 2.0%
GAS UTILITIES - 2.0%
Tokyo Gas Co. 97,000 293,753
----------
TOTAL COMMON STOCKS
(cost of $15,153,448) 14,357,514
----------
INVESTMENT MANAGEMENT
COMPANIES - 1.4% SHARES VALUE
- -------------------------------------------------------
Nomura Asset Management
(cost of $214,086) 30,000 $ 208,857
----------
SHORT-TERM OBLIGATION - 1.0% PAR
- -------------------------------------------------------
Repurchase agreement with State
Street Bank & Trust Co., dated
02/28/03, due 03/03/03 at 1.260%
collateralized by a U.S. Treasury
Bond maturing 11/15/09, market
value $159,131 (repurchase
proceeds $156,016)
(cost of $156,000) $156,000 156,000
----------
TOTAL INVESTMENTS - 98.8%
(cost of $15,523,534)(a) 14,722,371
----------
OTHER ASSETS & LIABILITIES, NET - 1.2% 175,543
- -------------------------------------------------------
NET ASSETS - 100.0% $14,897,914
===========
NOTES TO INVESTMENT PORTFOLIO:
(a) Cost for federal income tax purposes is the same.
See notes to financial statements.
5
STATEMENT OF ASSETS AND LIABILITIES
February 28, 2003 (Unaudited)
ASSETS:
Investments, at cost $ 15,523,534
------------
Investments, at value $ 14,722,371
Cash 519
Foreign currency (cost of $111,098) 110,478
Receivable for:
Investments sold 166,778
Fund shares sold 900
Interest 5
Dividends 5,590
Expense reimbursement due from
Advisor/Administrator 57,992
Deferred Trustees' compensation plan 2,204
Other assets 1,094
------------
Total Assets 15,067,931
------------
LIABILITIES:
Payable for:
Fund shares repurchased 41,419
Management fee 12,476
Administration fee 3,520
Transfer agent fee 69,895
Pricing and bookkeeping fees 1,109
Audit fee 11,158
Registration fee 10,386
Reports to shareholders 17,850
Deferred Trustees' fee 2,204
------------
Total Liabilities 170,017
------------
NET ASSETS $ 14,897,914
============
COMPOSITION OF NET ASSETS:
Paid-in capital $ 52,982,149
Accumulated net investment loss (797,304)
Accumulated net realized loss (36,483,679)
Net unrealized depreciation on:
Investments (801,163)
Foreign currency translations (2,089)
------------
NET ASSETS $ 14,897,914
============
CLASS A:
Net assets $3,322,435
Shares outstanding 558,521
----------
Net asset value per share $ 5.95(a)
==========
Maximum offering price per share
($5.95/0.9425) $ 6.31(b)
==========
CLASS B:
Net assets $4,430,886
Shares outstanding 788,552
----------
Net asset value and offering price
per share $ 5.62(a)
==========
CLASS C:
Net assets $1,290,616
Shares outstanding 229,644
----------
Net asset value and offering price
per share $ 5.62(a)
==========
CLASS J:
Net assets $ 2,476
Shares outstanding 91
----------
Net asset value and redemption
price per share $ 27.21
----------
Maximum offering price per share
($27.21/0.9700) $ 28.05(c)
==========
CLASS N:
Net assets $5,587,040
Shares outstanding 208,092
----------
Net asset value and offering price
per share $ 26.85(a)
==========
CLASS Z:
Net assets $ 264,461
Shares outstanding 44,248
----------
Net asset value, offering and
redemption price per share $ 5.98
==========
(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.
(c) On sales of $10,000 or more the offering price is reduced.
See notes to financial statements.
6
STATEMENT OF OPERATIONS
For the Six Months Ended
February 28, 2003 (Unaudited)
INVESTMENT INCOME:
Dividends $ 37,037
Interest 6,381
----------
Total Investment Income (net of
foreign taxes withheld of $6,536) 43,418
----------
EXPENSES:
Management fee 88,644
Administration fee 23,327
Distribution fee:
Class B 18,701
Class C 6,349
Class J 3
Class N 23,373
Service fee:
Class A 6,132
Class B 6,233
Class C 2,107
Class J 3
Class N 7,791
Agency fee:
Class J 1
Class N 3,116
Pricing and bookkeeping fees 6,976
Transfer agent fee 60,066
Trustees' fee 3,082
Custody fee 6,683
Registration fee 31,432
Reports to shareholders 49,223
Other expenses 14,578
----------
Total Operating Expenses 357,820
Fees and expenses waived or reimbursed by
Advisor/Administrator (121,018)
----------
Net Operating Expenses 236,802
Interest expense 2,216
----------
Net Expenses 239,018
----------
Net Investment Loss (195,600)
----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY:
Net realized loss on:
Investments (6,508,620)
Foreign currency transactions (32,434)
----------
Net realized loss (6,541,054)
----------
Net change in unrealized
appreciation/depreciation on:
Investments 3,378,743
Foreign currency translations 1,372
----------
Net change in unrealized
appreciation/depreciation 3,380,115
----------
Net Loss (3,160,939)
----------
Net Decrease in Net Assets
from Operations $ (3,356,539)
----------
See notes to financial statements.
7
STATEMENT OF CHANGES IN NET ASSETS
(UNAUDITED)
SIX MONTHS YEAR
ENDED ENDED
INCREASE (DECREASE) FEBRUARY 28, AUGUST 31,
IN NET ASSETS: 2003 2002
- --------------------------------------------------------
OPERATIONS:
Net investment loss $ (195,600) $ (569,460)
Net realized loss on
investments and foreign
currency transactions (6,541,054) (16,201,166)
Net change in unrealized
appreciation/depreciation on
investments and foreign
currency translations 3,380,115 11,685,137
------------ -----------
Net Decrease from Operations (3,356,539) (5,085,489)
------------ -----------
SHARE TRANSACTIONS:
Class A:
Subscriptions 47,572,402 53,717,678
Redemptions (48,017,734) (56,627,716)
------------ -----------
Net Decrease (445,332) (2,910,038)
------------ -----------
Class B:
Subscriptions 960,241 2,711,804
Redemptions (1,444,319) (4,252,391)
------------ -----------
Net Decrease (484,078) (1,540,587)
------------ -----------
Class C:
Subscriptions 11,691,595 16,869,944
Redemptions (11,957,516) (18,103,293)
------------ -----------
Net Decrease (265,921) (1,233,349)
------------ -----------
Class N:
Subscriptions -- 76,471
Redemptions (422,016) (3,367,244)
------------ -----------
Net Decrease (422,016) (3,290,773)
------------ -----------
Class Z:
Subscriptions 9,399,371 11,593,223
Redemptions (10,979,188) (12,081,578)
------------ -----------
Net Decrease (1,579,817) (488,355)
------------ -----------
Net Decrease from
Share Transactions (3,197,164) (9,463,102)
------------ -----------
Total Decrease in Net Assets (6,553,703) (14,548,591)
NET ASSETS:
Beginning of period 21,451,617 36,000,208
------------ -----------
End of period (including
accumulated net investment
loss of $(797,304) and
$(601,704), respectively) $ 14,897,914 $ 21,451,617
============ ============
(UNAUDITED)
SIX MONTHS YEAR
ENDED ENDED
FEBRUARY 28, AUGUST 31,
2003 2002
- --------------------------------------------------------
CHANGES IN SHARES:
Class A:
Subscriptions 7,553,495 6,768,357
Redemptions (7,599,313) (7,059,212)
------------ -----------
Net Decrease (45,818) (290,855)
------------ -----------
Class B:
Subscriptions 159,015 360,078
Redemptions (238,595) (555,891)
------------ -----------
Net Decrease (79,580) (195,813)
------------ -----------
Class C:
Subscriptions 1,936,297 2,251,428
Redemptions (1,965,804) (2,388,615)
------------ -----------
Net Decrease (29,507) (137,187)
------------ -----------
Class N:
Subscriptions -- 1,940
Redemptions (14,955) (91,260)
------------ -----------
Net Decrease (14,955) (89,320)
------------ -----------
Class Z:
Subscriptions 1,471,547 1,462,193
Redemptions (1,698,576) (1,495,715)
------------ -----------
Net Decrease (227,029) (33,522)
------------ -----------
See notes to financial statements.
8
NOTES TO FINANCIAL STATEMENTS
February 28, 2003 (Unaudited)
NOTE 1. ACCOUNTING POLICIES
ORGANIZATION:
Liberty Newport Japan Opportunities Fund (the "Fund"), a series of Liberty Funds
Trust II (the "Trust"), 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 goal is to seek
capital appreciation. The Fund may issue an unlimited number of shares. The Fund
offers six classes of shares: Class A, Class B, Class C, Class J, Class N and
Class Z. 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 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. Class J shares
are sold with a front-end sales charge. Class N shares are subject to a
contingent deferred sales charge. Class J and Class N shares are available for
purchase only by residents and citizens of Japan. Class N shares automatically
convert to Class J shares after five years, eliminating a portion of the
distribution fee upon conversion. Class Z shares are offered continuously at net
asset value. There are certain restrictions on the purchase of Class Z shares,
as described in the Fund's prospectus.
The accompanying financial statements are prepared under accounting principles
generally accepted in the United States. 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 revenue and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies 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
the current quoted bid price. 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.
Forward currency contracts are valued based on the weighted value of
exchange-traded contracts with similar durations.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
The values of all assets and liabilities quoted in foreign currencies are
translated into U.S. dollars at that day's exchange rates.
Generally, trading in foreign securities is substantially completed each day at
various times prior to the close of the New York Stock Exchange ("NYSE"). The
values of such securities used in computing the net asset value of the Fund's
shares are determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the customary
trading session of the NYSE, which would not be reflected in the computation of
the Fund's net asset value. If events materially affecting the value of such
securities and such exchange rates occur during such period, then these
securities will be valued at their fair value as determined in good faith by or
under the supervision of the Board of Trustees.
Investments for which market quotations are not readily available, or quotations
which management believes are not appropriate, are valued at fair value under
procedures approved by the Board of Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains (losses) are based upon the specific identification
method for both financial statement and federal income tax purposes.
9
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
February 28, 2003 (Unaudited)
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS:
All income, expenses (other than Class A, Class B, Class C, Class J and Class N
class specific expenses), 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.
Class A, Class B, Class C, Class J and Class N per share data and ratios are
calculated by adjusting the expense and net investment income per share data and
ratios for the Fund for the entire period by the service fee applicable to Class
A, Class B, Class C, Class J and Class N shares, the distribution fee applicable
to Class B, Class C, Class J and Class N shares and the agency fee applicable to
Class J and Class N 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.
FOREIGN CURRENCY TRANSACTIONS:
Net realized and unrealized gains (losses) on foreign currency transactions
includes 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) on 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 was opened, exposure is typically limited to the change
in value of the contract (in U.S. dollars) over the period it remains open.
Risks may also arise if counterparties fail to perform their obligations under
the contracts.
OTHER:
Interest income is recorded on the accrual basis. Corporate actions and dividend
income 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
non-reclaimable 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. FEDERAL TAX INFORMATION
Income and capital gain distributions 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.
10
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
February 28, 2003 (Unaudited)
The following capital loss carryforwards, determined as of August 31, 2002, are
available to reduce taxable income arising from future net realized gains on
investments, if any, to the extent permitted by the Internal Revenue Code:
Year of Expiration Capital Loss Carryforward
--------------- -----------------------
2006 $ 68,392
2007 1,707,149
2008 130,554
2009 845,766
2010 12,194,062
------------
$14,945,923
------------
NOTE 3. FEES AND COMPENSATION PAID
TO AFFILIATES
MANAGEMENT FEE:
Newport Fund Management, Inc. (the "Advisor"), a subsidiary of Newport Pacific
Management, Inc. ("NPMI"), is the investment advisor of the Fund and receives a
monthly fee equal to 0.95% annually of the Fund's average daily 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 daily net assets.
PRICING AND BOOKKEEPING FEES:
The Administrator is responsible for providing pricing and bookkeeping services
to the Fund under a Pricing and Bookkeeping Agreement. Under a separate
agreement (the "Outsourcing Agreement"), the Administrator has delegated those
functions to State Street Bank and Trust Company ("State Street"). The
Administrator pays fees to State Street under the Outsourcing Agreement.
Under its pricing and bookkeeping agreement with the Fund, the Administrator
receives from the Fund an annual flat fee of $10,000, paid monthly, and in any
month that the Fund's average daily net assets are more than $50 million, a
monthly fee equal to the average daily net assets of the Fund for that month
multiplied by a fee rate that is calculated by taking into account the fees
payable to State Street under the Outsourcing Agreement. The Fund also pays
out-of-pocket costs for pricing services.
TRANSFER AGENT FEE:
Liberty Funds Services, Inc. (the "Transfer Agent"), an affiliate of the
Administrator, provides shareholder services for a monthly fee equal to 0.06%
annually of the Fund's average daily net assets plus charges based on the number
of shareholder accounts and transactions. The Transfer Agent also receives
reimbursement for certain out-of-pocket expenses.
UNDERWRITING DISCOUNTS, SERVICE, AGENCY AND DISTRIBUTION FEES:
Liberty Funds Distributor, Inc. (the "Distributor"), an affiliate of the
Administrator, is the Fund's principal underwriter. For the six months ended
February 28, 2003, the Fund has been advised that the Distributor retained net
underwriting discounts of $1,495 on sales of the Fund's Class A shares and
received contingent deferred sales charges ("CDSC") of $8,337 and $4,045 on
Class B and Class C share redemptions, respectively.
The Fund has adopted a 12b-1 plan (the "Plan"), which requires the payment of a
monthly service fee to the Distributor equal to 0.25% annually of the average
daily net assets attributable to Class A, Class B, Class C, Class J and Class N
shares as of the 20th of each month. The Plan also requires the payment of a
monthly distribution fee to the Distributor equal to 0.75% annually of the
average daily net assets attributable to Class B, Class C and Class N shares and
0.25% annually of the average daily net assets attributable to Class J shares.
The CDSC and the fees received from the Plan are used principally as repayment
to the Distributor for amounts paid by the Distributor to dealers who sold such
shares.
Class J and Class N shares pay an annual agency fee of 0.10% of the Class J and
Class N average daily net assets, to an agent in Japan to compensate the agent
for, among other things, making certain filings and reports in Japan.
EXPENSE LIMITS:
The Advisor/Administrator have voluntarily agreed, until further notice, to
waive fees and bear certain Fund expenses so that total expenses (exclusive of
service, agency and distribution fees, brokerage commissions, interest, taxes
and extraordinary expenses, if any) will not exceed 1.75% annually of the Fund's
average daily net assets.
11
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
February 28, 2003 (Unaudited)
OTHER:
The Fund pays no compensation to its officers, all of whom are employees of the
Advisor, Administrator or any of their affiliates.
The Fund's Independent 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.
The Fund has an agreement with its custodian bank under which custody fees may
be reduced by balance credits. If applicable, the Fund could invest a portion of
the assets utilized in connection with the expense offset arrangement in an
income-producing asset if it had not entered into such an agreement. For the six
months ended February 28, 2003, there were no such credits.
NOTE 4. PORTFOLIO INFORMATION
INVESTMENT ACTIVITY:
For the six months ended February 28, 2003, purchases and sales of investments,
other than short-term obligations, were $ 7,347,866 and $10,513,990,
respectively.
Unrealized appreciation (depreciation) at February 28, 2003, based on cost of
investments for federal income tax purposes, was:
Gross unrealized appreciation $ 1,377,719
Gross unrealized depreciation (2,178,882)
-----------
Net unrealized depreciation $ (801,163)
===========
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. In addition, concentration of
investments in a single region or country may result in greater volatility.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
NOTE 5. LINE OF CREDIT
The Fund has a fundamental policy which allows it to borrow from banks, other
affiliated funds and other entities to the extent permitted by applicable law,
provided that the Fund's borrowings shall not exceed 33 1/3% of the value of its
total net assets (exclusive of borrowings). The Fund is part of a $200,000,000
credit facility that has been set up as a means for borrowing. 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%. Other investment companies managed
by the Advisor also participate in the line of credit on the same terms. In
addition, a commitment fee of 0.10% per annum on the unused commitment shall be
paid quarterly by each fund based on the relative asset size of each fund to the
Trust as a whole. The commitment fee is included in "Other expenses" on the
Statement of Operations. Because several investment companies participate, there
is no assurance that an individual fund will have access to the entire
$200,000,000 at any particular time. For the six months ended February 28, 2003,
the average daily loan balance outstanding on days where borrowing existed was
$1,535,714 at a weighted average interest rate of 1.80%.
NOTE 6. SUBSEQUENT EVENT
On April 1, 2003, the Advisor merged into NPMI, an indirect subsidiary of
Columbia Management Group, Inc. ("CMG"). Immediately following this merger, NPMI
and the Administrator merged into Columbia Management Advisers, Inc.
("Columbia"), a direct subsidiary of CMG, which subsequently became the
investment advisor of the Fund. The merger will not change the way the Fund is
managed, the investment personnel assigned to manage the Fund or the fees paid
by the Fund to Columbia.
12
FINANCIAL HIGHLIGHTS
Selected data for a share outstanding throughout each period is as follows:
(UNAUDITED)
SIX MONTHS
ENDED YEAR ENDED AUGUST 31,
FEBRUARY 28, ---------------------------------------------------------------
CLASS A SHARES 2003 2002 (a) 2001 (a) 2000 (a) 1999 (a) 1998 (a)
========================================================================================================================
NET ASSET VALUE,
BEGINNING OF PERIOD $ 7.26 $ 8.95 $ 17.85 $ 18.54 $ 8.66 $ 10.05
------ ------ ------- ------- ------- -------
INCOME FROM
INVESTMENT OPERATIONS:
Net investment loss (b) (0.05) (0.12) (0.20) (0.28) (0.13) (0.10)
Net realized and unrealized gain (loss) on
investments and foreign currency (1.26) (1.57) (8.70) 0.28 10.01 (1.29)
------ ------ ------- ------- ------ -------
Total from Investment Operations (1.31) (1.69) (8.90) -- 9.88 (1.39)
------ ------ ------- ------- ------ -------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS:
From net investment income -- -- -- (0.69) -- --
Return of capital -- -- -- --(c) -- --
------ ------ ------- ------- ------ -------
Total Distributions Declared
to Shareholders -- -- -- (0.69) -- --
------ ------ ------- ------- ------ -------
NET ASSET VALUE,
END OF PERIOD $ 5.95 $ 7.26 $ 8.95 $ 17.85 $ 18.54 $ 8.66
====== ====== ======= ======= ======= =======
Total return (d)(e) (18.04)%(f) (18.88)% (49.86)% (0.68)% 114.09% (13.26)%
====== ====== ======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Operating expenses (g) 2.00%(h) 2.00% 2.00% 1.93% 2.00% 2.00%
Interest expense 0.02%(h) --% --% --% --% --%
Net expenses (g) 2.02%(h) 2.00% 2.00% 1.93% 2.00% 2.00%
Net investment loss (g) (1.56)%(h) (1.46)% (1.58)% (1.28)% (1.03)% (1.12)%
Waiver/reimbursement 1.30%(h) 0.41% 0.15% --% 0.46% 0.72%
Portfolio turnover rate 41%(f) 33% 11% 15% 27% 24%
Net assets, end of period (000's) $ 3,322 $ 4,385 $ 8,011 $ 21,452 $ 17,091 $ 2,887
(a)For the years ended August 31, 2002, 2001 and 2000, the Fund was audited by
Ernst & Young LLP. Each of the previous years was audited by other auditors.
(b)Per share data was calculated using average shares outstanding during the
period.
(c)Rounds to less than $0.01 per share.
(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, if applicable, had an impact of less than 0.01%.
(h)Annualized.
13
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share outstanding throughout each period is as follows:
(UNAUDITED)
SIX MONTHS
ENDED YEAR ENDED AUGUST 31,
FEBRUARY 28, ---------------------------------------------------------------
CLASS B SHARES 2003 2002 (a) 2001 (a) 2000 (a) 1999 (a) 1998 (a)
========================================================================================================================
NET ASSET VALUE,
BEGINNING OF PERIOD $ 6.88 $ 8.56 $ 17.29 $ 18.11 $ 8.52 $ 9.95
------ ------ ------- ------- ------ -------
INCOME FROM
INVESTMENT OPERATIONS:
Net investment loss (b) (0.07) (0.17) (0.29) (0.43) (0.22) (0.17)
Net realized and unrealized gain (loss) on
investments and foreign currency (1.19) (1.51) (8.44) 0.26 9.81 (1.26)
------ ------ ------- ------- ------ -------
Total from Investment Operations (1.26) (1.68) (8.73) (0.17) 9.59 (1.43)
------ ------ ------- ------- ------ -------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS:
From net investment income -- -- -- (0.65) -- --
Return of capital -- -- -- --(c) -- --
------ ------ ------- ------- ------ -------
Total Distributions Declared
to Shareholders -- -- -- (0.65) -- --
------ ------ ------- ------- ------ -------
NET ASSET VALUE,
END OF PERIOD $ 5.62 $ 6.88 $ 8.56 $ 17.29 $ 18.11 $ 8.52
====== ====== ======= ======= ======= =======
Total return (d)(e) (18.31)%(f) (19.63)% (50.49)% (1.62)% 112.56% (14.16)%
====== ====== ======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Operating expenses (g) 2.75%(h) 2.75% 2.75% 2.68% 2.75% 2.75%
Interest expense 0.02%(h) --% --% --% --% --%
Net expenses (g) 2.77%(h) 2.75% 2.75% 2.68% 2.75% 2.75%
Net investment loss (g) (2.31)%(h) (2.21)% (2.33)% (2.03)% (1.78)% (1.87)%
Waiver/reimbursement 1.30%(h) 0.41% 0.15% --% 0.46% 0.72%
Portfolio turnover rate 41%(f) 33% 11% 15% 27% 24%
Net assets, end of period (000's) $ 4,431 $ 5,969 $ 9,109 $ 28,021 $ 21,333 $ 6,028
(a)For the years ended August 31, 2002, 2001 and 2000, the Fund was audited by
Ernst & Young LLP. Each of the previous years was audited by other auditors.
(b)Per share data was calculated using average shares outstanding during the
period.
(c)Rounds to less than $0.01 per share.
(d)Total return at net asset value assuming all distributions reinvested and no
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, if applicable, had an impact of less than 0.01%.
(h)Annualized.
14
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share outstanding throughout each period is as follows:
(UNAUDITED)
SIX MONTHS
ENDED YEAR ENDED AUGUST 31,
FEBRUARY 28, ---------------------------------------------------------------
CLASS C SHARES 2003 2002 (a) 2001 (a) 2000 (a) 1999 (a) 1998 (a)
========================================================================================================================
NET ASSET VALUE,
BEGINNING OF PERIOD $ 6.87 $ 8.57 $ 17.28 $ 18.10 $ 8.51 $ 9.94
------ ------ ------- ------- ------ -------
INCOME FROM
INVESTMENT OPERATIONS:
Net investment loss (b) (0.07) (0.17) (0.29) (0.43) (0.22) (0.17)
Net realized and unrealized gain (loss) on
investments and foreign currency (1.18) (1.53) (8.42) 0.26 9.81 (1.26)
------ ------ ------- ------- ------ -------
Total from Investment Operations (1.25) (1.70) (8.71) (0.17) 9.59 (1.43)
------ ------ ------- ------- ------ -------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS:
From net investment income -- -- -- (0.65) -- --
Return of capital -- -- -- --(c) -- --
------ ------ ------- ------- ------ -------
Total Distributions Declared
to Shareholders -- -- -- (0.65) -- --
------ ------ ------- ------- ------ -------
NET ASSET VALUE,
END OF PERIOD $ 5.62 $ 6.87 $ 8.57 $ 17.28 $ 18.10 $ 8.51
====== ====== ======= ======= ======= =======
Total return (d)(e) (18.20)%(f) (19.84)% (50.41)% (1.62)% 112.69% (14.18)%
====== ====== ======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Operating expenses (g) 2.75%(h) 2.75% 2.75% 2.68% 2.75% 2.75%
Interest expense 0.02%(h) --% --% --% --% --%
Net expenses (g) 2.77%(h) 2.75% 2.75% 2.68% 2.75% 2.75%
Net investment loss (g) (2.31)%(h) (2.21)% (2.33)% (2.03)% (1.78)% (1.87)%
Waiver/reimbursement 1.30%(h) 0.41% 0.15% --% 0.46% 0.72%
Portfolio turnover rate 41%(f) 33% 11% 15% 27% 24%
Net assets, end of period (000's) $ 1,291 $ 1,780 $ 3,395 $ 11,161 $ 8,167 $ 1,862
(a)For the years ended August 31, 2002, 2001 and 2000, the Fund was audited by
Ernst & Young LLP. Each of the previous years was audited by other auditors.
(b)Per share data was calculated using average shares outstanding during the
period.
(c)Rounds to less than $0.01 per share.
(d)Total return at net asset value assuming all distributions reinvested and no
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, if applicable, had an impact of less than 0.01%.
(h)Annualized.
15
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share outstanding throughout each period is as follows:
(UNAUDITED)
SIX MONTHS PERIOD
ENDED YEAR ENDED ENDED
FEBRUARY 28, AUGUST 31, AUGUST 31,
CLASS J SHARES 2003 2002 2001 (a)
=========================================================================================================
NET ASSET VALUE, BEGINNING OF PERIOD $ 33.22 $ 41.00 $ 80.68
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss (b) (0.26) (0.66) (1.08)
Net realized and unrealized loss on
investments and foreign currency (5.75) (7.12) (38.60)
------- ------- -------
Total from Investment Operations (6.01) (7.78) (39.68)
------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 27.21 $ 33.22 $ 41.00
======= ======= =======
Total return (c)(d) (18.09)%(e) (18.98)% (49.18)%(e)
======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Operating expenses (f) 2.35%(g) 2.35% 2.35%(g)
Interest expense 0.02%(g) --% --%
Net expenses (f) 2.37%(g) 2.35% 2.35%(g)
Net investment loss (f) (1.91)%(g) (1.81)% (1.93)%(g)
Waiver/reimbursement 1.30%(g) 0.41% 0.15%(g)
Portfolio turnover rate 41%(e) 33% 11%
Net assets, end of period (000's) $ 2 $ 3 $ 4
(a)Class J shares were initially offered on September 20, 2000. Per share data
reflects activity from that date.
(b)Per share data was calculated using average shares outstanding during the
period.
(c)Total return at net asset value assuming no initial sales charge.
(d)Had the Advisor/Administrator not waived or reimbursed a portion of expenses,
total return would have been reduced.
(e)Not annualized.
(f)The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(g)Annualized.
16
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share outstanding throughout each period is as follows:
(UNAUDITED)
SIX MONTHS YEAR ENDED
ENDED AUGUST 31, PERIOD ENDED
FEBRUARY 28, ---------------------------------- AUGUST 31,
CLASS N SHARES 2003 2002 2001 2000 (a)
==========================================================================================================================
NET ASSET VALUE, BEGINNING OF PERIOD $ 32.87 $ 40.78 $ 82.43 $ 91.37
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss (b) (0.34) (0.84) (1.40) (0.16)
Net realized and unrealized loss on
investments and foreign currency (5.68) (7.07) (40.25) (8.78)
------- ------- ------- -------
Total from Investment Operations (6.02) (7.91) (41.65) (8.94)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 26.85 $ 32.87 $ 40.78 $ 82.43
======= ======= ======= =======
Total return (c)(d) (18.31)%(e) (19.40)% (50.53)% (9.78)%(e)
======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Operating expenses (f) 2.85%(g) 2.85% 2.85% 2.78%(g)
Interest expense 0.02%(g) --% --% --%
Net expenses (f) 2.87%(g) 2.85% 2.85% 2.78%(g)
Net investment loss (f) (2.41)%(g) (2.31)% (2.43)% (2.55)%(g)
Waiver/reimbursement 1.30%(g) 0.41% 0.15% --%
Portfolio turnover rate 41%(e) 33% 11% 15%
Net assets, end of period (000's) $ 5,587 $ 7,332 $ 12,738 $ 32,035
(a)Class N shares were initially offered on May 15, 2000. Per share data
reflects activity from that date.
(b)Per share data was calculated using average shares outstanding during the
period.
(c)Total return at net asset value assuming no contingent deferred sales charge.
(d)Had the Advisor/Administrator not waived or reimbursed a portion of expenses,
total return would have been reduced.
(e)Not annualized.
(f)The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(g)Annualized.
17
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share outstanding throughout each period is as follows:
(UNAUDITED)
SIX MONTHS
ENDED YEAR ENDED AUGUST 31,
FEBRUARY 28, ----------------------------------------------------------------
CLASS Z SHARES 2003 2002 (a) 2001 (a) 2000 (a) 1999 (a) 1998 (a)
========================================================================================================================
NET ASSET VALUE,
BEGINNING OF PERIOD $ 7.31 $ 9.00 $ 18.00 $ 18.70 $ 8.71 $ 10.07
------- ------- ------- ------- ------- -------
INCOME FROM
INVESTMENT OPERATIONS:
Net investment loss (b) (0.04) (0.10) (0.17) (0.22) (0.10) (0.08)
Net realized and unrealized gain (loss) on
investments and foreign currency (1.29) (1.59) (8.83) 0.23 10.09 (1.28)
------- ------- ------- ------- ------- -------
Total from Investment Operations (1.33) (1.69) (9.00) 0.01 9.99 (1.36)
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net investment income -- -- -- (0.71) -- --
Return of capital -- -- -- --(c) -- --
------- ------- ------- ------- ------- -------
Total Distributions Declared
to Shareholders -- -- -- (0.71) -- --
------- ------- ------- ------- ------- -------
NET ASSET VALUE,
END OF PERIOD $ 5.98 $ 7.31 $ 9.00 $ 18.00 $ 18.70 $ 8.71
======= ======= ======= ======= ======= =======
Total return (d)(e) (18.19)%(f) (18.78)% (50.00)% (0.66)% 114.70% (13.30)%
======= ======= ======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Operating expenses (g) 1.75%(h) 1.75% 1.75% 1.68% 1.75% 1.75%
Interest expense 0.02%(h) --% --% --% --% --%
Net expenses (g) 1.77%(h) 1.75% 1.75% 1.68% 1.75% 1.75%
Net investment loss (g) (1.31)%(h) (1.21)% (1.33)% (1.03)% (0.78)% (0.87)%
Waiver/reimbursement 1.30%(h) 0.41% 0.15% --% 0.46% 0.72%
Portfolio turnover rate 41%(f) 33% 11% 15% 27% 24%
Net assets, end of period (000's) $ 264 $ 1,984 $ 2,744 $ 5,272 $ 2,971 $ 1,444
(a)For the years ended August 31, 2002, 2001 and 2000, the Fund was audited by
Ernst & Young LLP. Each of the previous years was audited by other auditors.
(b)Per share data was calculated using average shares outstanding during the
period.
(c)Rounds to less than $0.01 per share.
(d)Total return at net asset value assuming all distributions reinvested.
(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, if applicable, had an impact of less than 0.01%.
(h)Annualized.
18
[THIS PAGE INTENTIONALLY LEFT BLANK]
[THIS PAGE INTENTIONALLY LEFT BLANK]
TRANSFER AGENT
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Liberty Newport Japan Opportunities Fund is:
Liberty Funds Services, Inc.
P.O. Box 8081
Boston, MA 02266-8081
The fund mails one shareholder report to each shareholder address. If you would
like more than one report, please call shareholder services at 800-345-6611 and
additional reports will be sent to you.
This report has been prepared for shareholders of Liberty Newport Japan
Opportunities Fund. This report may also be used as sales literature when
preceded or accompanied by the current prospectus which provides details of
sales charges, investment objectives and operating policies of the fund and with
the most recent copy of the Liberty Funds Performance Update.
Semiannual Report:
Liberty Newport Japan Opportunities Fund
Liberty Newport Japan Opportunities Fund SEMIANNUAL REPORT, FEBRUARY 28, 2003
[eagle head logo]
LibertyFunds
A Member of Columbia Management Group
(C)2003 Liberty Funds Distributor, Inc.
A Member of Columbia Management Group
One Financial Center, Boston, MA 02111-2621
PRSRT STD
U.S. POSTAGE
PAID
HOLLISTON, MA
PERMIT NO. 20
734-03/084N-0303 (04/03) 03/0806
LIBERTY NEWPORT
GREATER CHINA FUND
Semiannual Report
February 28, 2003
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LIBERTY NEWPORT
GREATER CHINA FUND
Semiannual Report
February 28, 2003
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PRESIDENT'S MESSAGE
[photo of Joseph R. Palombo]
Dear Shareholder:
Most of the world's stock markets delivered negative returns over the past six
months. However, China's stock market held up better than most and its losses
were modest. China has been one of the few growing economies over the past year.
Domestic growth has been strong. China also has been able to increase its share
of global exports, the result of an increasingly competitive manufacturing base.
The nation's acceptance into the World Trade Organization has fueled increased
foreign investment, a positive for the country's economic development.
While we are always disappointed to report negative performance, we continue to
believe that China offers significant potential for investors who take a
long-term perspective. Exposure to stock markets outside the US can help
investors expand diversification and provide access to economies that are
experiencing significantly higher economic growth.
In the report that follows, the fund's portfolio manager provides a more
detailed discussion about the Chinese market and the decisions he made in
managing the fund. During these challenging times, we thank you for your
investment in Liberty Funds.
Sincerely,
/s/ Joseph R. Palombo
Joseph R. Palombo
President
- --------------------------------------------------------------------------------
MEET THE NEW PRESIDENT
Joseph R. Palombo, president and chairman of the Board of Trustees for Liberty
Funds, is also chief operating officer of Columbia Management Group. Mr. Palombo
has over 19 years of experience in the financial services industry. Prior to
joining Columbia Management, he was chief operating officer and chief compliance
officer for Putnam Mutual Funds. Prior to that, he was a partner at Coopers &
Lybrand. Mr. Palombo received his degree in economics/accounting from the
College of the Holy Cross, where he was a member of Phi Beta Kappa. He earned
his master's degree in taxation from Bentley College and participated in the
Executive Program at the Amos B. Tuck School at Dartmouth College.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE as of 2/28/03 ($)
Class A 13.44
Class B 13.22
Class C 13.40
Class Z 13.54
DISTRIBUTIONS DECLARED PER SHARE 9/1/02- 2/28/03 ($)
Class A 0.08
Class B 0.00
Class C 0.00
Class Z 0.12
- --------------------------------------------------------------------------------
Not FDIC Insured
May Lose Value
No Bank Guarantee
Economic and market conditions change frequently There is no assurance that the
trends described in this report will continue or commence.
PERFORMANCE INFORMATION
VALUE OF A $10,000 INVESTMENT
5/16/97 - 2/28/03 ($)
PERFORMANCE OF A $10,000 INVESTMENT
5/16/97 - 2/28/03 ($)
without with
sales sales
charge charge
- ---------------------------------------
Class A 10,360 9,764
- ---------------------------------------
Class B 9,984 9,884
- ---------------------------------------
Class C 10,121 10,121
- ---------------------------------------
Class Z 10,515 n/a
- ---------------------------------------
[mountain chart data]:
Class A shares Class A shares
without sales charge with sales charge MSCI China Index
5/1997 $10,000.0 $ 9,425.0 $10,000.0
10,000.0 9,425.0 9,887.0
13,418.0 12,646.0 10,108.0
14,415.0 13,586.0 11,492.0
15,104.0 14,236.0 12,170.0
13,417.0 12,645.0 10,146.0
13,701.0 12,913.0 8,499.0
10,149.0 9,565.0 6,960.0
9,631.0 9,077.0 6,754.0
9,887.0 9,319.0 5,036.0
7,778.0 7,331.0 6,823.0
10,474.0 9,872.0 6,647.0
10,346.0 9,751.0 5,962.0
9,352.0 8,814.0 5,180.0
7,944.0 7,487.0 4,372.0
6,852.0 6,458.0 3,581.0
5,963.0 5,621.0 2,611.0
4,774.0 4,499.0 3,740.0
6,287.0 5,926.0 3,804.0
7,770.0 7,323.0 4,112.0
8,049.0 7,586.0 4,243.0
7,892.0 7,438.0 3,893.0
7,097.0 6,689.0 3,169.0
6,968.0 6,568.0 3,035.0
7,756.0 7,310.0 3,447.0
9,000.0 8,482.0 4,313.0
8,818.0 8,311.0 4,323.0
10,867.0 10,242.0 6,348.0
10,336.0 9,741.0 5,555.0
10,579.0 9,970.0 5,511.0
9,986.0 9,412.0 5,290.0
10,366.0 9,770.0 4,863.0
12,096.0 11,400.0 4,770.0
13,241.0 12,480.0 4,412.0
13,302.0 12,537.0 4,219.0
14,425.0 13,595.0 3,445.0
15,760.0 14,854.0 3,524.0
14,061.0 13,253.0 3,856.0
13,552.0 12,773.0 3,925.0
15,009.0 14,146.0 4,450.0
15,503.0 14,612.0 4,365.0
15,162.0 14,290.0 4,188.0
14,114.0 13,303.0 3,679.0
13,287.0 12,523.0 3,507.0
12,574.0 11,851.0 3,040.0
13,121.0 12,366.0 3,065.0
14,107.0 13,296.0 3,509.0
13,652.0 12,867.0 3,189.0
12,445.0 11,729.0 2,672.0
13,408.0 12,637.0 2,943.0
13,363.0 12,594.0 3,024.0
13,074.0 12,322.0 3,123.0
12,436.0 11,721.0 2,700.0
11,313.0 10,662.0 2,116.0
10,175.0 9,590.0 2,044.0
10,592.0 9,983.0 2,096.0
11,472.0 10,813.0 2,301.0
11,737.0 11,062.0 2,308.0
11,714.0 11,040.0 2,092.0
11,629.0 10,961.0 2,109.0
12,342.0 11,633.0 2,226.0
12,879.0 12,139.0 2,325.0
12,864.0 12,124.0 2,361.0
12,236.0 11,532.0 2,281.0
11,501.0 10,839.0 2,182.0
10,949.0 10,319.0 2,139.0
10,220.0 9,633.0 1,969.0
10,251.0 9,662.0 1,980.0
10,849.0 10,225.0 2,062.0
10,272.0 9,681.0 1,984.0
10,487.0 9,884.0 2,079.0
2/2003 10,360.0 9,764.0 2,027.0
MUTUAL FUND PERFORMANCE CHANGES OVER TIME. PLEASE VISIT LIBERTYFUNDS.COM FOR
DAILY PERFORMANCE UPDATES.
Past performance is no guarantee of future investment results. The principal
value and investment returns will fluctuate, resulting in a gain or loss on
sale. The graph and table do not reflect the deduction of taxes shareholder
would pay on fund distributions or the redemption of fund shares. The Morgan
Stanley Capital International (MSCI) China Index is designed to broadly and
fairly represent the full diversity of business activities in China. This index
aims to capture 85% of the free float adjusted market capitalization in each
industry group. Country indices are based on MSCI market indices, assuming
dividends are reinvested. Index performance is from May 31, 1997. Unlike the
fund, an index is not an investment, does not incur fees or expenses and is not
professionally managed. It is not possible to invest directly in an index.
Securities in the fund may not match those in the index.
Shares of the Liberty Newport Greater China Fund were offered during a
subscription period that began June 20, 1997 and ended July 25, 1997. The
subscription proceeds were invested into the fund on July 25, 1997. The fund's
performance returns are calculated from its inception date of May 16, 1997.
Average annual total return as of 2/28/03 (%)
Share class A B C Z
Inception 5/16/97 5/16/97 5/16/97 5/16/97
- -------------------------------------------------------------------------------------------------------------------
without with without with without with without
sales sales sales sales sales sales sales
charge charge charge charge charge charge charge
- -------------------------------------------------------------------------------------------------------------------
6-month (cumulative) -5.41 -10.85 -5.71 -10.42 -5.77 -6.71 -5.27
- -------------------------------------------------------------------------------------------------------------------
1-year -10.95 -16.07 -11.57 -15.99 -11.67 -12.55 -10.84
- -------------------------------------------------------------------------------------------------------------------
5-year -0.22 -1.40 -0.93 -1.33 -0.68 -0.68 -0.01
- -------------------------------------------------------------------------------------------------------------------
Life 0.61 -0.41 -0.03 -0.20 0.21 0.21 0.87
- -------------------------------------------------------------------------------------------------------------------
Average annual total return as of 12/31/02 (%)
Share class A B C Z
- -------------------------------------------------------------------------------------------------------------------
without with without with without with without
sales sales sales sales sales sales sales
charge charge charge charge charge charge charge
- -------------------------------------------------------------------------------------------------------------------
6-month (cumulative) -16.05 -20.88 -16.44 -20.62 -16.46 -17.29 -16.08
- -------------------------------------------------------------------------------------------------------------------
1-year -12.49 -17.52 -13.18 -17.52 -13.19 -14.05 -12.44
- -------------------------------------------------------------------------------------------------------------------
5-year 0.77 -0.42 0.11 -0.29 0.38 0.38 1.02
- -------------------------------------------------------------------------------------------------------------------
Life 0.48 -0.57 -0.18 -0.35 0.08 0.08 0.72
- -------------------------------------------------------------------------------------------------------------------
Past performance is no guarantee of future investment results. The principal
value and investment returns will fluctuate, 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 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%, thereafter - 0% and the class
C 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.
1
TOP 10 HOLDINGS AS OF 02/28/03 (%)
Huaneng Power International 9.6%
Zhejiang Expressway 6.0
Hutchison Whampoa 5.6
Hang Seng Bank 5.4
Sun Hung Kai Properties 5.3
China Mobile 5.2
Hong Kong & China Gas 5.1
Taiwan Semiconductor Manufacturing 4.9
Beijing Datang Power Generation 4.7
CNOOC 3.4
Portfolio holdings are calculated as a percentage of net assets. Since the fund
is actively managed, there is no guarantee the fund will continue to hold these
securities in the future.
Bought
- --------------------------------------------------------------------------------
XIANO GAS HOLDINGS (0.8% of net assets). This liquid natural gas distributor
reflects the growth of privatization in China. The company has benefited from
China's desire to reduce pollution by moving to cleaner burning fuels.
Sold
- --------------------------------------------------------------------------------
GIORDANO INTERNATIONAL (0.4% of net assets). A Gap-like clothing retailer,
Giordano operates in a sector that is overly competitive in China. We reduced
its position in the portfolio because we were disappointed with the company's
overall performance.
PORTFOLIO MANAGER'S REPORT
For the six-month period that ended February 28, 2003, Liberty Newport Greater
China Fund class A shares returned negative 5.41%, without sales charge. The
fund's performance was slightly lower than its benchmark, the MSCI China Index,
which returned negative 5.23%. While the MSCI China Index is a reasonable proxy
for stock market performance in China, it is not a perfect match with the fund's
investment universe, which includes companies in Hong Kong and Taiwan in its
definition of "greater" China.
As of the end of the reporting period, about 58% of the portfolio's assets were
invested in China, 32% in Hong Kong, 9% in Taiwan and 2% in cash.1 The fund's
investments in Hong Kong and Taiwan - markets that have been highly sensitive to
the weak global economy -- detracted the most from performance. Taiwanese
investments, which were primarily in the technology sector, were particularly
hard hit in the face of a slowdown in demand for computers and consumer
electronics. While the Chinese market did better than Hong Kong and Taiwan, it,
too, was affected by economic sluggishness around the world.
CHINA--A BRIGHT SPOT IN THE GLOBAL ECONOMY
Strong domestic consumption, a healthy export business and a competitive
manufacturing environment helped boost China's growth to a 7% to 8% annual rate,
making it an attractive country in which to invest. As private enterprise has
flourished, the Chinese government has committed significant resources to
infrastructure development and expansion. We took advantage of this development
theme by emphasizing companies that should benefit from the construction of
roads, dams, utilities, seaports and airports.
We maintained our position in toll road companies, which has been in place for
more than a year, and recently added a new company, Anhui Expressway (1.1% of
net assets). In addition to new road construction, toll road companies, which
tend to be monopolies in their provinces, have benefited from increased use of
private automobiles. Domestic and international travel has also been on the rise
in China. To participate in this trend, we invested in Beijing Capital
International Airport and Hainan Meilan Airport
- --------------
1 Country breakdowns and portfolio holdings are disclosed as of February 28,
2003 and are subject to change.
2
(1.1% and 1.1% of net assets, respectively). Hainan Meilan Airport is located on
the South China Sea island of Hainan, which is being developed as a tourist
destination. To take advantage of China's import/export business, we added Cosco
Pacific (2.7% of net assets), a multi-industry company with exposure to China's
seaports.
A REDUCTION IN CORE HOLDINGS
We eliminated or reduced some long-term core holdings. We sold HSBC, a global
bank with large operations in the United States and Europe, because we wanted to
focus more on growth in China. We reduced positions in Johnson Electric Holdings
(2.6% of net assets), which makes motors for a variety of products, and Li &
Fung (3.2% of net assets), a clothing company. Although we remain positive on
the long-term revenue prospects for both companies, they are tied to US consumer
sales, which have recently softened.
OUR OUTLOOK FOR GREATER CHINA IS POSITIVE
We are encouraged by China's success in a difficult global environment. We
believe that the country's rising position in global trade and an emerging
middle class bode well for the future. China's abundant land and labor, combined
with Hong Kong's financial sophistication and Taiwan's technological skills,
make the region unique among international investment markets.
/s/ Chris Legallet
Chris Legallet is the portfolio manager of Liberty Newport Greater China Fund.
He is also chief investment officer -- international equities of Newport Fund
Management, Inc., an affiliate of Columbia Management Group, Inc. Chris has
managed or co-managed the fund since it commenced operations in May 1997.
International investing offers significant long-term growth potential, but also
involves certain risks. These risks include currency exchange rate fluctuations,
economic change, instability of emerging countries and political developments. A
portfolio of stocks from a single region poses additional risks due to limited
diversification.
TOP 5 SECTORS AS OF 2/28/03 (%)
[bar chart data]:
Industrials 27.9%
Utilities 19.8
Financials 17.2
Information technology 9.3
Consumer discretionary 8.9
Sector breakdowns are calculated as a percentage of net assets. Since the fund
is actively managed, there is no guarantee the fund will continue to maintain
the same sector breakdowns in the future.
3
INVESTMENT PORTFOLIO
February 28, 2003 (Unaudited)
COMMON STOCKS - 99.1% SHARES VALUE
- --------------------------------------------------------
CONSUMER DISCRETIONARY - 8.9%
CONSUMER DURABLES & APPAREL - 3.2%
APPAREL, ACCESSORIES & LUXURY GOODS - 3.2%
Li & Fung Ltd. 1,132,000 $ 1,139,403
-----------
HOTELS, RESTAURANTS & LEISURE - 1.0%
RESTAURANTS - 1.0%
Cafe de Coral Holdings Ltd. 554,000 346,294
-----------
MEDIA - 2.0%
BROADCASTING & CABLE - 2.0%
Television Broadcasts Ltd. 230,000 698,936
-----------
RETAILING - 2.7%
APPAREL RETAIL - 0.4%
Giordano International Ltd. 496,000 151,045
-----------
DISTRIBUTORS - 2.3%
China Resources Enterprise Ltd. 904,000 811,386
-----------
- -------------------------------------------------------
CONSUMER STAPLES - 4.6%
FOOD & DRUG RETAILING - 4.6%
FOOD RETAIL - 4.6%
Convenience Retail Asia Ltd. (a)2,480,000 623,259
President Chain Store Corp. 678,963 1,025,772
-----------
1,649,031
-----------
- -------------------------------------------------------
ENERGY - 3.4%
OIL & GAS - 3.4%
INTEGRATED OIL & GAS - 3.4%
CNOOC Ltd. 854,000 1,199,038
-----------
- -------------------------------------------------------
FINANCIALS - 17.2%
BANKS - 5.4%
Hang Seng Bank Ltd. 174,900 1,911,812
-----------
DIVERSIFIED FINANCIALS - 2.2%
MULTI-SECTOR HOLDINGS - 2.2%
Swire Pacific Ltd. 185,000 787,537
-----------
REAL ESTATE - 9.6%
REAL ESTATE MANAGEMENT & DEVELOPMENT - 9.6%
Cheung Kong Holdings Ltd. 114,000 716,246
Henderson Land Development
Co., Ltd. 296,000 838,774
Sun Hung Kai Properties Ltd. 332,000 1,868,804
-----------
3,423,824
-----------
- -------------------------------------------------------
INDUSTRIALS - 27.9%
CAPITAL GOODS - 11.6%
ELECTRICAL COMPONENTS & EQUIPMENT - 2.6%
Johnson Electric Holdings Ltd. 837,500 934,254
-----------
INDUSTRIAL CONGLOMERATES - 9.0%
China Merchants Holdings
International Co., Ltd. 1,152,000 893,653
Hutchison Whampoa Ltd. 333,200 1,999,456
Xinao Gas Holdings Ltd. (a) 1,040,000 300,039
-----------
3,193,148
-----------
SHARES VALUE
- --------------------------------------------------------
TRADING COMPANIES & DISTRIBUTORS - 0.0%
China Hong Kong Photo Products
Holdings Ltd. 67,000 $ 4,467
-----------
TRANSPORTATION - 16.3%
AIR FREIGHT & LOGISTICS - 5.2%
Cosco Pacific Ltd. 1,066,000 963,624
Sinotrans Ltd., Class H (a) 3,000,000 865,496
-----------
1,829,120
-----------
AIRPORT SERVICES - 2.1%
Beijing Capital International Airport
Co., Inc., Class H 1,590,000 377,164
Hainan Meilan Airport Co., Ltd.,
Class H (a) 762,000 385,934
-----------
763,098
-----------
HIGHWAYS & RAILTRACKS - 9.0%
Anhui Expressway Co., Ltd.,
Class H 1,442,000 374,413
Jiangsu Expressway Co., Ltd.
Class H 2,198,000 718,669
Zhejiang Expressway Co., Ltd.,
Class H 4,820,000 2,116,746
-----------
3,209,828
-----------
- -------------------------------------------------------
INFORMATION TECHNOLOGY - 9.3%
TECHNOLOGY HARDWARE & EQUIPMENT - 9.3%
COMPUTER HARDWARE - 3.1%
Legend Group Ltd. 3,170,000 1,087,287
-----------
COMPUTER STORAGE & PERIPHERALS - 1.0%
Asustek Computer, Inc. 212,000 359,942
-----------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.3%
Hon Hai Precision Industry
Co., Ltd. 34,890 112,451
-----------
SEMICONDUCTORS - 4.9%
Taiwan Semiconductor
Manufacturing Co., Ltd. (a) 1,427,126 1,724,872
-----------
- -------------------------------------------------------
MATERIALS - 1.4%
METALS & MINING - 1.4%
DIVERSIFIED METALS & MINING - 1.4%
Yanzhou Coal Mining Co., Ltd.,
Class H 1,126,000 483,665
-----------
- -------------------------------------------------------
TELECOMMUNICATION SERVICES - 6.6%
WIRELESS TELECOMMUNICATION SERVICES - 6.6%
China Mobile Ltd. (a)(b) 842,000 1,842,295
China Unicom Ltd. (a) 806,000 488,312
-----------
2,330,607
-----------
See notes to investment portfolio.
4
INVESTMENT PORTFOLIO (CONTINUED)
February 28, 2003 (Unaudited)
COMMON STOCKS (CONTINUED) SHARES VALUE
- -------------------------------------------------------
UTILITIES - 19.8%
ELECTRIC UTILITIES - 14.3%
Beijing Datang Power Generation
Co., Ltd., Class H 4,946,000 $ 1,664,733
Huaneng Power International,
Inc., Class H 3,820,000 3,404,154
-----------
5,068,887
-----------
GAS UTILITIES - 5.5%
Hong Kong & China Gas
Co., Ltd. 1,458,304 1,795,066
Wah Sang Gas Holdings Ltd. 1,380,000 164,559
-----------
1,959,625
-----------
TOTAL COMMON STOCKS
(cost of $36,878,361) 35,179,557
-----------
SHORT-TERM OBLIGATION - 1.6% PAR
- -------------------------------------------------------
Repurchase agreement with State
Street Bank & Trust Co., dated
02/28/03, due 03/03/03 at 1.260%
collateralized by a U.S. Treasury
Bond maturing 11/15/09,
market value $595,269,
(repurchase proceeds $581,061)
(cost of $581,000) $581,000 581,000
-----------
TOTAL INVESTMENTS - 100.7%
(cost of $37,459,361) (c) 35,760,557
-----------
OTHER ASSETS & LIABILITIES, NET - (0.7)% (257,442)
- -------------------------------------------------------
NET ASSETS - 100.0% $35,503,115
===========
NOTES TO INVESTMENT PORTFOLIO:
(a)Non-income producing.
(b)Represents fair value as determined in good faith under the direction of the
Board of Trustees.
(c)Cost for federal income tax purposes is the same.
SUMMARY OF SECURITIES % OF TOTAL
BY COUNTRY VALUE INVESTMENTS
- -------------------------------------------------------
Hong Kong $20,478,260 57.3%
China 11,478,260 32.1
Taiwan 3,223,037 9.0
United States 581,000 1.6
----------- -----
$35,760,557 100.0%
=========== =====
Certain securities are listed by country of underlying exposure but may trade
predominantly on other exchanges.
See notes to financial statements.
5
STATEMENT OF ASSETS AND LIABILITIES
February 28, 2003 (Unaudited)
ASSETS:
Investments, at cost $ 37,459,361
------------
Investments, at value $ 35,760,557
Cash 103
Foreign currency (cost of $13,897) 13,739
Receivable for:
Fund shares sold 4,603
Interest 61
Expense reimbursement due from
Advisor/Administrator 8,792
Deferred Trustees' compensation plan 2,552
------------
Total Assets 35,790,407
------------
LIABILITIES:
Payable for:
Investments purchased 177,227
Fund shares repurchased 28,265
Management fee 33,756
Administration fee 7,338
Transfer agent fee 22,165
Pricing and bookkeeping fees 2,302
Audit fee 10,930
Deferred Trustees' fee 2,552
Other liabilities 2,757
------------
Total Liabilities 287,292
------------
NET ASSETS $ 35,503,115
============
COMPOSITION OF NET ASSETS:
Paid-in capital $ 76,583,162
Accumulated net investment loss (243,510)
Accumulated net realized loss (39,137,570)
Net unrealized depreciation on:
Investments (1,698,804)
Foreign currency translations (163)
------------
NET ASSETS $ 35,503,115
============
CLASS A:
Net assets $ 29,870,000
Shares outstanding 2,221,759
------------
Net asset value per share $ 13.44(a)
============
Maximum offering price per share
($13.44/0.9425) $ 14.26(b)
============
CLASS B:
Net assets $ 3,644,632
Shares outstanding 275,766
------------
Net asset value and offering
price per share $ 13.22(a)
============
CLASS C:
Net assets $ 1,819,084
Shares outstanding 135,717
------------
Net asset value and offering
price per share $ 13.40(a)
============
CLASS Z:
Net assets $ 169,399
Shares outstanding 12,511
------------
Net asset value, offering and
redemption price per share $ 13.54
============
(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 Six Months Ended
February 28, 2003 (Unaudited)
INVESTMENT INCOME:
Dividends $ 253,607
Interest 8,144
-----------
Total Investment Income (net of
foreign taxes withheld of $14) 261,751
-----------
EXPENSES:
Management fee 219,210
Administration fee 47,654
Distribution fee:
Class B 13,678
Class C 6,652
Service fee:
Class A 40,552
Class B 4,563
Class C 2,218
Pricing and bookkeeping fees 5,909
Transfer agent fee 80,813
Trustees' fee 2,324
Custody fee 20,274
Registration fee 30,084
Other expenses 19,286
-----------
Total Operating Expenses 493,217
Fees and expenses waived or reimbursed by
Advisor/Administrator (62,670)
-----------
Net Operating Expenses 430,547
Interest expense 377
-----------
Net Expenses 430,924
-----------
Net Investment Loss (169,173)
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY:
Net realized gain (loss) on:
Investments 1,072,619
Foreign currency transactions (27,985)
-----------
Net realized gain 1,044,634
-----------
Net change in unrealized
appreciation/depreciation on:
Investments (2,614,873)
Foreign currency translations 1,582
-----------
Net change in unrealized
appreciation/depreciation (2,613,291)
-----------
Net Loss (1,568,657)
-----------
Net Decrease in Net Assets
from Operations $(1,737,830)
-----------
See notes to financial statements.
6
STATEMENT OF CHANGES IN NET ASSETS
(UNAUDITED)
SIX MONTHS YEAR
ENDED ENDED
INCREASE (DECREASE) FEBRUARY 28, AUGUST 31,
IN NET ASSETS: 2003 2002
- -------------------------------------------------------
OPERATIONS:
Net investment income (loss) $ (169,173) $ 237,736
Net realized gain (loss) on
investments and foreign
currency transactions 1,044,634 (1,654,609)
Net change in unrealized
appreciation/depreciation
on investments and foreign
currency translations (2,613,291) 506,034
----------- -----------
Net Decrease from Operations (1,737,830) (910,839)
----------- -----------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income:
Class A (211,935) (373,665)
Class B -- (11,000)
Class C -- (3,498)
Class Z (4,186) (2,195)
----------- -----------
Total Distributions Declared
to Shareholders (216,121) (390,358)
----------- -----------
SHARE TRANSACTIONS:
Class A:
Subscriptions 36,149,424 39,177,370
Distributions reinvested 167,826 272,269
Redemptions (37,939,023) (42,820,843)
----------- -----------
Net Decrease (1,621,773) (3,371,204)
----------- -----------
Class B:
Subscriptions 1,018,529 1,634,125
Distributions reinvested -- 9,061
Redemptions (1,012,705) (1,785,215)
----------- -----------
Net Increase (Decrease) 5,824 (142,029)
----------- -----------
Class C:
Subscriptions 2,523,727 8,269,957
Distributions reinvested -- 2,795
Redemptions (2,422,552) (7,745,504)
----------- -----------
Net Increase 101,175 527,248
----------- -----------
Class Z:
Subscriptions 4,060,730 2,966,512
Distributions reinvested 2,201 2,195
Redemptions (4,092,385) (2,979,944)
----------- -----------
Net Decrease (29,454) (11,237)
----------- -----------
Net Decrease from
Share Transactions (1,544,228) (2,997,222)
----------- -----------
Total Decrease in Net Assets (3,498,179) (4,298,419)
(UNAUDITED)
SIX MONTHS YEAR
ENDED ENDED
INCREASE (DECREASE) FEBRUARY 28, AUGUST 31,
IN NET ASSETS: 2003 2002
- --------------------------------------------------------
NET ASSETS:
Beginning of period $ 39,001,294 $ 43,299,713
------------ ------------
End of period (including
accumulated net investment
loss and undistributed
net investment income of
$(243,510) and
$141,784, respectively) $ 35,503,115 $ 39,001,294
============ ============
CHANGES IN SHARES:
Class A:
Subscriptions 2,631,702 2,614,029
Issued for distributions
reinvested 11,869 17,466
Redemptions (2,744,674) (2,833,877)
------------ ------------
Net Decrease (101,103) (202,382)
------------ ------------
Class B:
Subscriptions 77,209 108,551
Issued for distributions
reinvested -- 589
Redemptions (76,031) (118,333)
------------ ------------
Net Increase (Decrease) 1,178 (9,193)
------------ ------------
Class C:
Subscriptions 186,171 535,143
Issued for distributions
reinvested -- 179
Redemptions (177,875) (498,990)
------------ ------------
Net Increase 8,296 36,332
------------ ------------
Class Z:
Subscriptions 295,198 189,434
Issued for distributions
reinvested 154 140
Redemptions (292,431) (189,630)
------------ ------------
Net Increase (Decrease) 2,921 (56)
------------ ------------
See notes to financial statements.
7
NOTES TO FINANCIAL STATEMENTS
February 28, 2003 (Unaudited)
NOTE 1. ACCOUNTING POLICIES
ORGANIZATION:
Liberty Newport Greater China Fund (the "Fund"), a series of Liberty Funds Trust
II (the"Trust"), is a non-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 goal is to seek
long-term growth of capital. The Fund may issue an unlimited number of shares.
The Fund offers four classes of shares: Class A, Class B, Class C and Class Z.
Class A shares are sold with a front-end sales charge. A 1.00% contingent
deferred sales charge is assessed 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 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. Class Z shares are offered
continuously at net asset value. There are certain restrictions on the purchase
of Class Z shares, as described in the Fund's prospectus.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies 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
the current quoted bid price. 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.
Forward currency contracts are valued based on the weighted value of
exchange-traded contracts with similar durations.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
The values of all assets and liabilities quoted in foreign currencies are
translated into U.S. dollars at that day's exchange rates.
Generally, trading in foreign securities is substantially completed each day at
various times prior to the close of the New York Stock Exchange ("NYSE"). The
values of such securities used in computing the net asset value of the Fund's
shares are determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the customary
trading session of the NYSE, which would not be reflected in the computation of
the Fund's net asset value. If events materially affecting the value of such
securities and such exchange rates occur during such period, then these
securities will be valued at their fair value as determined in good faith by or
under the supervision of the Board of Trustees.
Investments for which market quotations are not readily available, or quotations
which management believes are not appropriate, are valued at fair value under
procedures approved by the Board of Trustees.
Security transactions are accounted for on the date the securities are
purchased, sold or mature.
Cost is determined and gains (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.
Class A, Class B and Class C per share data and ratios are calculated by
adjusting the expense and net investment income per share data and 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.
8
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
February 28, 2003 (Unaudited)
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.
FOREIGN CURRENCY TRANSACTIONS:
Net realized and unrealized gains (losses) on foreign currency transactions
includes 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) on 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 was opened, exposure is typically limited to the change
in value of the contract (in U.S. dollars) over the period it remains open.
Risks may also arise if counterparties fail to perform their obligations under
the contracts.
OTHER:
Interest income is recorded on the accrual basis. Corporate actions and dividend
income 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
non-reclaimable 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 into bankruptcy.
NOTE 2. FEDERAL TAX INFORMATION
Income and capital gain distributions 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.
The following capital loss carryforwards, determined as of August 31, 2002, are
available to reduce taxable income arising from future net realized gains on
investments, if any, to the extent permitted by the Internal Revenue Code:
YEAR OF CAPITAL LOSS
EXPIRATION CARRYFORWARD
---------- -------------
2006 $ 494,399
2007 33,041,123
2008 703,958
2010 5,047,669
-----------
$39,287,149
===========
NOTE 3. FEES AND COMPENSATION
PAID TO AFFILIATES
MANAGEMENT FEE:
Newport Fund Management, Inc. (the "Advisor"), a subsidiary of Newport Pacific
Management, Inc. ("NPMI"), is the investment advisor of the Fund and receives a
monthly fee equal to 1.15% annually of the Fund's average daily net assets.
9
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
February 28, 2003 (Unaudited)
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 daily net assets.
PRICING AND BOOKKEEPING FEES:
The Administrator is responsible for providing pricing and bookkeeping services
to the Fund under a Pricing and Bookkeeping Agreement. Under a separate
agreement (the "Outsourcing Agreement"), the Administrator has delegated those
functions to State Street Bank and Trust Company ("State Street"). The
Administrator pays fees to State Street under the Outsourcing Agreement.
Under its pricing and bookkeeping agreement with the Fund, the Administrator
receives from the Fund an annual flat fee of $10,000, paid monthly, and in any
month that the Fund's average daily net assets are more than $50 million, a
monthly fee equal to the average daily net assets of the Fund for that month
multiplied by a fee rate that is calculated by taking into account the fees
payable to State Street under the Outsourcing Agreement. The Fund also pays
out-of-pocket costs for pricing services.
TRANSFER AGENT FEE:
Liberty Funds Services, Inc. (the "Transfer Agent"), an affiliate of the
Administrator, provides shareholder services for a monthly fee equal to 0.06%
annually of the Fund's average daily net assets plus charges based on the number
of shareholder accounts and transactions. The Transfer Agent also receives
reimbursement for certain out-of-pocket expenses.
UNDERWRITING DISCOUNTS, SERVICE
AND DISTRIBUTION FEES:
Liberty Funds Distributor, Inc. (the "Distributor"), an affiliate of the
Administrator, is the Fund's principal underwriter. For the six months ended
February 28, 2003, the Fund has been advised that the Distributor retained net
underwriting discounts of $577 on sales of the Fund's Class A shares and
received contingent deferred sales charges ("CDSC") of $2, $7,344 and $1,586 on
Class A, Class B and Class C share redemptions, respectively.
The Fund has adopted a 12b-1 plan (the "Plan"), which requires the payment of a
monthly service fee to the Distributor equal to 0.25% annually of the average
daily net assets attributable to Class A, Class B and Class C shares as of the
20th of each month. The Plan also requires the payment of a monthly distribution
fee to the Distributor equal to 0.75% annually of the average daily net assets
attributable to Class B and Class C shares only.
The CDSC and the fees received from the Plan are used principally as repayment
to the Distributor for amounts paid by the Distributor to dealers who sold such
shares.
EXPENSE LIMITS:
The Advisor/Administrator have voluntarily agreed, until further notice, to
waive fees and bear certain Fund expenses so that total expenses (exclusive of
service and distribution fees, brokerage commissions, interest, taxes and
extraordinary expenses, if any) will not exceed 1.90% annually of the Fund's
average daily net assets.
OTHER:
The Fund pays no compensation to its officers, all of whom are employees of the
Advisor, Administrator or any of their affiliates.
The Fund's Independent 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.
The Fund has an agreement with its custodian bank under which custody fees may
be reduced by balance credits. If applicable, the Fund could invest a portion of
the assets utilized in connection with the expense offset arrangement in an
income-producing asset if it had not entered into such an agreement. For the six
months ended February 28, 2003, there were no such credits.
NOTE 4. PORTFOLIO INFORMATION
INVESTMENT ACTIVITY:
For the six months ended February 28, 2003, purchases and sales of investments,
other than short-term obligations, were $6,692,789 and $7,941,946, respectively.
Unrealized appreciation (depreciation) at February 28, 2003, based on cost of
investments for federal income tax purposes, was:
Gross unrealized appreciation $ 6,584,236
Gross unrealized depreciation (8,283,040)
-----------
Net unrealized depreciation $(1,698,804)
===========
10
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
February 28, 2003 (Unaudited)
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. In addition, concentration of
investments in a single region or country may result in greater volatility.
The Fund may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
NOTE 5. LINE OF CREDIT
The Fund has a fundamental policy which allows it to borrow from banks, other
affiliated funds and other entities to the extent permitted by applicable law,
provided that the Fund's borrowings shall not exceed 33 1/3% of the value of its
total net assets (exclusive of borrowings). The Fund is part of a $200,000,000
credit facility that has been set up as a means of borrowing. 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%. Other investment companies managed
by the Advisor also participate in the line of credit on the same terms. In
addition, a commitment fee of 0.10% per annum on the unused commitment shall be
paid quarterly by each fund based on the relative asset size of each fund to the
Trust as a whole. The commitment fee is included in "Other expenses" on the
Statement of Operations. Because several investment companies participate, there
is no assurance that an individual fund will have access to the entire
$200,000,000 at any particular time. For the six months ended February 28, 2003,
the average daily loan balance outstanding on days where borrowings existed was
$1,000,000 at a weighted average interest rate of 2.23%.
NOTE 6. SUBSEQUENT EVENT
On April 1, 2003, the Advisor merged into NPMI, an indirect subsidiary of
Columbia Management Group, Inc. ("CMG"). Immediately following this merger, NPMI
and the Administrator merged into Columbia Management Advisers, Inc.
("Columbia"), a direct subsidiary of CMG, which subsequently became the
investment advisor of the Fund. The merger will not change the way the Fund is
managed, the investment personnel assigned to manage the Fund or the fees paid
by the Fund to Columbia.
11
FINANCIAL HIGHLIGHTS
Selected data for a share outstanding throughout each period is as follows:
(UNAUDITED)
SIX MONTHS
ENDED YEAR ENDED AUGUST 31,
FEBRUARY 28, ----------------------------------------------------------------
CLASS A SHARES 2003 2002(a) 2001(a) 2000(a) 1999(a) 1998(a)
========================================================================================================================
NET ASSET VALUE,
BEGINNING OF PERIOD $ 14.29 $ 14.91 $ 19.98 $ 13.94 $ 6.34 $ 17.90
------- ------- ------- ------- ------- -------
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income (loss) (b) (0.05) 0.10 0.12 0.05 0.10 0.09
Net realized and unrealized gain (loss) on
investments and foreign currency (0.72) (0.57) (5.19) 5.99 7.58 (11.59)
------- ------- ------- ------- ------- -------
Total from Investment Operations (0.77) (0.47) (5.07) 6.04 7.68 (11.50)
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS:
From net investment income (0.08) (0.15) -- -- (0.08) (0.06)
------- ------- ------- ------- ------- -------
NET ASSET VALUE,
END OF PERIOD $ 13.44 $ 14.29 $ 14.91 $ 19.98 $ 13.94 $ 6.34
======= ======= ======= ======= ======= =======
Total return (c)(d) (5.41)%(e) (3.22)% (25.38)% 43.33% 121.59% (64.42)%
======= ======= ======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Operating expenses (f) 2.15%(g) 2.15% 2.15% 2.15% 2.15% 2.15%
Interest expense --%(g)(h) --% --% --% --% --%
Net expenses (f) 2.15%(g) 2.15% 2.15% 2.15% 2.15% 2.15%
Net investment income (loss) (f) (0.78)%(g) 0.65% 0.68% 0.26% 0.92% 0.74%
Waiver/reimbursement 0.33%(g) 0.29% 0.21% 0.10% 0.30% 0.31%
Portfolio turnover rate 18%(e) 16% 14% 28% 20% 58%
Net assets, end of period (000's) $ 29,870 $ 33,201 $ 37,652 $ 64,722 $ 54,623 $ 31,214
(a)For the years ended August 31, 2002, 2001 and 2000, the Fund was audited by
Ernst & Young LLP. Each of the previous years was audited by other auditors.
(b)Per share data was calculated using average shares outstanding during the
period.
(c)Total return at net asset value assuming all distributions reinvested and no
initial sales charge or contingent deferred sales charge.
(d)Had the Advisor/Administrator not waived or reimbursed a portion of expenses,
total return would have been reduced.
(e)Not annualized.
(f)The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(g)Annualized.
(h)Rounds to less than 0.01%.
12
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share outstanding throughout each period is as follows:
(UNAUDITED)
SIX MONTHS
ENDED YEAR ENDED AUGUST 31,
FEBRUARY 28, ----------------------------------------------------------------
CLASS B SHARES 2003 2002(a) 2001(a) 2000(a) 1999(a) 1998(a)
========================================================================================================================
NET ASSET VALUE,
BEGINNING OF PERIOD $ 14.02 $ 14.63 $ 19.75 $ 13.88 $ 6.34 $ 17.86
------- ------- ------- ------- ------- -------
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income (loss) (b) (0.10) (0.02) (0.01) (0.09) 0.02 0.01
Net realized and unrealized gain (loss) on
investments and foreign currency (0.70) (0.55) (5.11) 5.96 7.52 (11.48)
------- ------- ------- ------- ------- -------
Total from Investment Operations (0.80) (0.57) (5.12) 5.87 7.54 (11.47)
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS:
From net investment income -- (0.04) -- -- -- (0.05)
------- ------- ------- ------- ------- -------
NET ASSET VALUE,
END OF PERIOD $ 13.22 $ 14.02 $ 14.63 $ 19.75 $ 13.88 $ 6.34
======= ======= ======= ======= ======= =======
Total return (c)(d) (5.71)%(e) (3.93)% (25.92)% 42.29% 118.93% (64.36)%
======= ======= ======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Operating expenses (f) 2.90%(g) 2.90% 2.90% 2.90% 2.90% 2.90%
Interest expense --%(g)(h) --% --% --% --% --%
Net expenses (f) 2.90%(g) 2.90% 2.90% 2.90% 2.90% 2.90%
Net investment income (loss) (f) (1.53)%(g) (0.10)% (0.07)% (0.49)% 0.17% (0.01)%
Waiver/reimbursement 0.33%(g) 0.29% 0.21% 0.10% 0.30% 0.31%
Portfolio turnover rate 18%(e) 16% 14% 28% 20% 58%
Net assets, end of period (000's) $ 3,645 $ 3,850 $ 4,151 $ 6,335 $ 3,423 $ 1,692
(a)For the years ended August 31, 2002, 2001 and 2000, the Fund was audited by
Ernst & Young LLP. Each of the previous years was audited by other auditors.
(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
contingent deferred sales charge.
(d)Had the Advisor/Administrator not waived or reimbursed a portion of expenses,
total return would have been reduced.
(e)Not annualized.
(f)The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(g)Annualized.
(h)Rounds to less than 0.01%.
13
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share outstanding throughout each period is as follows:
(UNAUDITED)
SIX MONTHS
ENDED YEAR ENDED AUGUST 31,
FEBRUARY 28, ----------------------------------------------------------------
CLASS C SHARES 2003 2002(a) 2001(a) 2000(a) 1999(a) 1998(a)
========================================================================================================================
NET ASSET VALUE,
BEGINNING OF PERIOD $ 14.22 $ 14.84 $ 20.03 $ 14.10 $ 6.32 $ 17.86
------- ------- ------- ------- ------- -------
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income (loss) (b) (0.10) (0.02) (0.01) (0.09) 0.02 0.01
Net realized and unrealized gain (loss) on
investments and foreign currency (0.72) (0.56) (5.18) 6.02 7.76 (11.50)
------- ------- ------- ------- ------- -------
Total from Investment Operations (0.82) (0.58) (5.19) 5.93 7.78 (11.49)
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS:
From net investment income -- (0.04) -- -- -- (0.05)
------- ------- ------- ------- ------- -------
NET ASSET VALUE,
END OF PERIOD $ 13.40 $ 14.22 $ 14.84 $ 20.03 $ 14.10 $ 6.32
======= ======= ======= ======= ======= =======
Total return (c)(d) (5.77)%(e) (3.94)% (25.91)% 42.06% 123.10% (64.46)%
======= ======= ======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Operating expenses (f) 2.90%(g) 2.90% 2.90% 2.90% 2.90% 2.90%
Interest expense --%(g)(h) --% --% --% --% --%
Net expenses (f) 2.90%(g) 2.90% 2.90% 2.90% 2.90% 2.90%
Net investment income (loss) (f) (1.53)%(g) (0.10)% (0.07)% (0.49)% 0.17% (0.01)%
Waiver/reimbursement 0.33%(g) 0.29% 0.21% 0.10% 0.30% 0.31%
Portfolio turnover rate 18%(e) 16% 14% 28% 20% 58%
Net assets, end of period (000's) $ 1,819 $ 1,812 $ 1,352 $ 1,296 $ 774 $ 443
(a)For the years ended August 31, 2002, 2001 and 2000, the Fund was audited by
Ernst & Young LLP. Each of the previous years was audited by other auditors.
(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
contingent deferred sales charge.
(d)Had the Advisor/Administrator not waived or reimbursed a portion of expenses,
total return would have been reduced.
(e)Not annualized.
(f)The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(g)Annualized.
(h)Rounds to less than 0.01%.
14
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for a share outstanding throughout each period is as follows:
(UNAUDITED)
SIX MONTHS
ENDED YEAR ENDED AUGUST 31,
FEBRUARY 28, ----------------------------------------------------------------
CLASS Z SHARES 2003 2002(a) 2001(a) 2000(a) 1999(a) 1998(a)
========================================================================================================================
NET ASSET VALUE,
BEGINNING OF PERIOD $ 14.41 $ 15.05 $ 20.11 $ 14.01 $ 6.38 $ 17.91
------- ------- ------- ------- ------- -------
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income (loss)(b) (0.03) 0.14 0.16 0.09 0.13 0.12
Net realized and unrealized gain (loss) on
investments and foreign currency (0.72) (0.59) (5.22) 6.01 7.61 (11.58)
------- ------- ------- ------- ------- -------
Total from Investment Operations (0.75) (0.45) (5.06) 6.10 7.74 (11.46)
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS:
From net investment income (0.12) (0.19) -- -- (0.11) (0.07)
------- ------- ------- ------- ------- -------
NET ASSET VALUE,
END OF PERIOD $ 13.54 $ 14.41 $ 15.05 $ 20.11 $ 14.01 $ 6.38
======= ======= ======= ======= ======= =======
Total return (c)(d) (5.27)%(e) (3.10)% (25.16)% 43.54% 121.80% (64.19)%
======= ======= ======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Operating expenses (f) 1.90%(g) 1.90% 1.90% 1.90% 1.90% 1.90%
Interest expense --%(g)(h) --% --% --% --% --%
Net expenses (f) 1.90%(g) 1.90% 1.90% 1.90% 1.90% 1.90%
Net investment income (loss)(f) (0.53)%(g) 0.90% 0.93% 0.51% 1.17% 0.99%
Waiver/reimbursement 0.33%(g) 0.29% 0.21% 0.10% 0.30% 0.31%
Portfolio turnover rate 18%(e) 16% 14% 28% 20% 58%
Net assets, end of period (000's) $ 169 $ 138 $ 145 $ 164 $ 112 $ 49
(a)For the years ended August 31, 2002, 2001 and 2000, the Fund was audited by
Ernst & Young LLP. Each of the previous years was audited by other auditors.
(b)Per share data was calculated using average shares outstanding during the
period.
(c)Total return at net asset value assuming all distributions reinvested.
(d)Had the Advisor/Administrator not waived or reimbursed a portion of expenses,
total return would have been reduced.
(e)Not annualized.
(f)The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(g)Annualized.
(h)Rounds to less than 0.01%.
15
[THIS PAGE INTENTIONALLY LEFT BLANK]
TRANSFER AGENT
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Liberty Newport Greater China Fund is:
Liberty Funds Services, Inc.
P.O. Box 8081
Boston, MA 02266-8081
The fund mails one shareholder report to each shareholder address. If you would
like more than one report, please call shareholder services at 800-345-6611 and
additional reports will be sent to you.
This report has been prepared for shareholders of Liberty Newport Greater China
Fund. This report may also be used as sales literature when preceded or
accompanied by the current prospectus which provides details of sales charges,
investment objectives and operating policies of the fund and with the most
recent copy of the Liberty Funds Performance Update.
Semiannual Report:
Liberty Newport Greater China Fund
17
Liberty Newport Greater China Fund SEMIANNUAL REPORT, FEBRUARY 28, 2003
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LibertyFunds
A Member of Columbia Management Group
(C)2003 Liberty Funds Distributor, Inc.
A Member of Columbia Management Group
One Financial Center, Boston, MA 02111-2621
PRSRT STD
U.S. POSTAGE
PAID
HOLLISTON, MA
PERMIT NO. 20
736-03/079N-0303 (04/03) 03/0807
ITEM 2. CODE OF ETHICS.
Not applicable at this time.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable at this time.
ITEMS 4-6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES
Not applicable at this time.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) Not applicable at this time.
(b) There were no significant changes in the registrant's internal controls or
in other factors that could affect these controls subsequent to the date of our
evaluation.
ITEM 10. EXHIBITS.
File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(a) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant intends to
satisfy the Item 2 requirements through filing of an exhibit: Not applicable.
(b) A separate certification for each principal executive officer and principal
financial officer of the registrant as required by Rule 30a-2 under the Act (17
CFR 270.30a-2) in the exact form set forth below: Attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Liberty Funds Trust II
-----------------------------------------------------------
By (Signature and Title)* /s/ Joseph R. Palombo
----------------------------------------------
Joseph R. Palombo, President
Date April 25, 2003
-------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ Joseph R. Palombo
----------------------------------------------
Joseph R. Palombo, President
Date April 25, 2003
-------------------------------------------------------------------
By (Signature and Title)* /s/ J. Kevin Connaughton
----------------------------------------------
J. Kevin Connaughton, Treasurer
Date April 25, 2003
-------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.