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 811-08953
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Liberty Floating Rate Fund
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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 FLOATING
RATE FUND
Semiannual Report
February 28, 2003
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LIBERTY FLOATING
RATE FUND
Semiannual Report
February 28, 2003
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President's Message
[photo of Joseph R. Palombo]
Dear Shareholder:
The environment for the syndicated loan market, which comprises large corporate
loans made by a group or syndicate of banks and institutional investors,
remained volatile over the past six months. The second half was markedly better
than the first half of the period. Bankruptcy filings by high-profile companies,
which led to a general widening of loan credit risk premiums, peaked late in
2002. Then, as default rates started to come down and investors began to move
back into riskier segments of the fixed income markets, the environment for the
syndicated loan market improved. Better performance from the high yield bond
sector also helped this market.
Declining interest rates, which are generally positive for stocks and bonds,
were a negative factor for the fund throughout the six-month period because
yields on floating-rate loans adjust downward to reflect lower current rates.
Nevertheless, an improving credit environment offset the impact of declining
rates and helped the syndicated loan market achieve positive returns for the
period.
In the following report, portfolio managers Brian Good and Jim Fellows talk in
greater detail about the performance of Liberty Floating Rate Fund and the
decisions they made in managing the fund. As always, thank you for investing in
Liberty Funds. We look forward to helping you build a strong financial future.
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 ($)
Class A 8.79
Class B 8.79
Class C 8.79
Class Z 8.79
Distributions declared per share 9/1/02-2/28/03 ($)
Class A 0.25
Class B 0.23
Class C 0.23
Class Z 0.26
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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 an $10,000 investment
12/17/98--2/28/03
Performance of a $10,000 investment
12/17/98--2/28/03 ($)
without sales with sales
charge charge
- --------------------------------------
Class A 11,868 11,456
- --------------------------------------
Class B 11,716 11,628
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Class C 11,658 11,658
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Class Z 12,008 n/a
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[mountain chart data]:
Class A shares Class A shares CSFB Leveraged
without sales charge with sales charge Loan Index
12/1998 $10,000.0 $ 9,650.0 $10,000.0
10,011.0 9,661.0 10,026.0
10,084.0 9,731.0 9,983.0
10,158.0 9,802.0 10,044.0
10,249.0 9,890.0 10,117.0
10,325.0 9,964.0 10,247.0
10,387.0 10,023.0 10,339.0
10,458.0 10,092.0 10,407.0
10,521.0 10,153.0 10,370.0
10,554.0 10,185.0 10,345.0
10,615.0 10,244.0 10,330.0
10,662.0 10,289.0 10,397.0
10,707.0 10,332.0 10,468.0
10,779.0 10,402.0 10,570.0
10,856.0 10,476.0 10,604.0
10,940.0 10,557.0 10,521.0
10,975.0 10,590.0 10,559.0
11,051.0 10,665.0 10,647.0
11,132.0 10,742.0 10,712.0
11,223.0 10,831.0 10,789.0
11,310.0 10,914.0 10,844.0
11,387.0 10,988.0 10,879.0
11,457.0 11,056.0 10,885.0
11,499.0 11,096.0 10,908.0
11,527.0 11,124.0 10,985.0
11,571.0 11,166.0 11,051.0
11,672.0 11,263.0 11,146.0
11,701.0 11,291.0 11,159.0
11,655.0 11,247.0 11,112.0
11,541.0 11,137.0 11,245.0
11,654.0 11,246.0 11,258.0
11,663.0 11,255.0 11,286.0
11,795.0 11,382.0 11,376.0
11,905.0 11,488.0 11,159.0
11,784.0 11,371.0 10,985.0
11,587.0 11,181.0 11,158.0
11,693.0 11,284.0 11,274.0
11,799.0 11,386.0 11,336.0
11,956.0 11,537.0 11,293.0
11,852.0 11,437.0 11,424.0
11,996.0 11,576.0 11,546.0
12,134.0 11,709.0 11,538.0
12,178.0 11,752.0 11,363.0
12,013.0 11,593.0 11,191.0
11,694.0 11,285.0 11,158.0
11,584.0 11,178.0 11,177.0
11,468.0 11,067.0 11,183.0
11,396.0 10,997.0 11,033.0
11,546.0 11,142.0 11,223.0
11,722.0 11,311.0 11,399.0
11,833.0 11,419.0 11,553.0
11,855.0 11,443.0 11,613.0
2/2003 11,868.0 11,456.0 11,617.0
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 shareholders
would pay on fund distributions or redemption of fund shares. The CSFB Leveraged
Loan Index is an unmanaged index that tracks the performance of senior floating
rate bank loans. Unlike mutual funds, an index is not an investment, does not
incur fees or charges 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 December 31, 1998.
Average annual total return as of 2/28/03 (%)
Share class A B C Z
Inception 11/2/99 11/2/99 11/2/99 12/17/98
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without with without with without with without
sales sales sales sales sales sales sales
charge charge charge charge charge charge charge
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6-month
(cumulative) 2.43 -1.15 2.26 -0.98 2.18 1.19 2.61
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1-year 0.13 -3.40 -0.22 -3.29 -0.37 -1.31 0.48
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Life 4.17 3.29 3.85 3.66 3.72 3.72 4.46
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Average annual total return as of 12/31/02 (%)
Share class A B C Z
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without with without with without with without
sales sales sales sales sales sales sales
charge charge charge charge charge charge charge
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6-month
(cumulative) -2.42 -5.88 -2.60 -5.68 -2.67 -3.61 -2.25
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1-year -0.64 -4.13 -0.99 -4.03 -1.13 -2.07 -0.29
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Life 4.02 3.11 3.70 3.51 3.58 3.58 4.31
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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 3.50% sales charge for class A shares, the
appropriate class B shares early withdrawal charge (EWC) for the holding period
after purchase as follows: first year - 3.25%, second year - 3.00%, third year -
2.00%, fourth year - 1.50%, fifth year - 1.00%, thereafter - 0% and the class C
shares EWC 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 will vary
based on differences in sales charges and fees associated with each class.
Class A, B and C share performance information includes returns of the fund's
class Z shares (the oldest existing fund class) for periods prior to the
inception of the newer class shares. These class Z share returns are not
restated to reflect any expense differential (e.g., Rule 12b-1 fees) between
class Z shares and the newer class shares. Had the expense differential been
reflected, the returns for the periods prior to the inception of classes A, B
and C would have been lower.
1
Portfolio Managers' Report
30-day SEC yield as of 2/28/03 (%)
After
reimbursement
Class A 4.95
Class B 4.78
Class C 4.63
Class Z 5.48
The 30-day SEC yield reflects the portfolio's earning power, net of expenses,
expressed as an annualized percentage of the public offering price at the end of
the period. If the advisor or its affiliates had not waived certain fund
expenses, the 30-day SEC yield would have been 4.78% for class A shares, 4.43%
for class B shares, 4.28% for class C shares and 5.13% for class Z shares.
Top 10 issuers as of 2/28/03 (%)
Washington Group International 3.2%
Century Cable Holdings 2.2
Mission Energy Holdings 1.5
1424666 Ontario Ltd. 1.5
Allied Waste North America 1.4
Nextel Finance 1.4
Aladdin Gaming 1.4
Polymer Group 1.3
Weekly Reader Corp. 1.3
Loews Cineplex Entertainment 1.3
Holdings are calculated as a percentage of net assets. Because the portfolio is
actively managed, there can be no guarantee that the portfolio will continue to
maintain this breakdown in the future.
For the six-month period that ended February 28, 2003, the class A shares of
Liberty Floating Rate Fund delivered a total return of 2.43%, without sales
charge. That was lower than the return of the fund's benchmark, the CSFB
Leveraged Loan Index, which was up 4.07% for the period. The fund was negatively
affected in the fall of 2002 by its holdings in the hotel and lodging sectors,
businesses that have suffered from an ongoing decline in air travel. However,
the environment for floating rate securities became more favorable toward the
end of 2002, and the fund made up some of its lost ground.
LOWER DEFAULT RATES HELP FIXED-INCOME MARKETS
One of the most important developments during the six-month period was a
significant reduction in the incidence of corporate defaults. Default rates
among high-yield bond issuers had been running at unusually high levels--between
12% and 13%--during the summer of 2002. Toward the end of the year default rates
came down to the 7% level. Investors concluded that the lower-rated segments of
the fixed-income markets had become less risky, so they were willing to put more
money into high-yield instruments. In turn, more high-yield bonds were issued in
order to meet growing investor demand. The result of this market shift was not
only that companies were repaying high-yield bank loans, but also that senior
lenders emerged with an improved credit position. These trends were favorable
for the fund's primary markets.
EARLY VOLATILITY HURTS PERFORMANCE
Most of the fund's shortfall in performance can be traced to the first two
months of the six-month period. In addition to weakness in the hotel and lodging
sectors, one specific holding that negatively affected results was engineering
and construction company Washington Group International (3.2% of net assets).1
The fund had received a piece of equity in the company in lieu of a
restructuring, and it declined sharply in September and October of 2002. The
fund's cable and wireless holdings also remained under pressure.
However, cable and wireless improved later in the period, at which time several
other bright spots emerged. Our investment in the troubled conglomerate Tyco
Corp. was closed out at a profit. We had been able to purchase a sizable term
loan at a five
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1 Holdings are disclosed as of February 28, 2003, and are subject to change.
2
percentage point discount last year, amid the negative publicity surrounding
some of Tyco's accounting practices. The company was later able to refinance its
loan, and our entire position was repaid at par. The gain, though not large in
percentage terms, was important because Tyco Corp. was the fund's biggest
position at that time. The fund also benefited when electric utility AES Corp.
(0.9% of net assets) underwent a major restructuring, resulting in enhanced
collateral to the loan group and a partial cash payment to bondholders.
CAUTIOUS OPTIMISM FOR 2003
By period end, as geopolitical uncertainty mounted, the attention of the nation
and the financial markets focused squarely on the developing events in Iraq.
While the course of war and peace is impossible to predict with any confidence,
the overall environment for floating-rate securities is more to our liking than
it was a year ago. Interest rates appear unlikely to decline meaningfully from
their current levels, while corporate default rates, having moved in the right
direction, appear to be stabilizing rather than going back up. For several
months now, the market for corporate bonds and other syndicated loans has held
up well relative to other financial markets. We see that trend continuing in the
year ahead.
/s/ Brian Good
/s/ Jim Fellows
Brian Good and Jim Fellows, CFA, are senior vice presidents of Stein Roe &
Farnham Incorporated, an affiliate of Columbia Management Group, Inc. They have
been portfolio managers of the Liberty Floating Rate Fund since its inception.
Portfolio quality breakdown
as of 2/28/03 (dollar-weighted %)
[pie chart data]:
Baa2: 0.2%
Baa3: 0.3
Ba1: 0.9
Ba2: 3.4
Ba3: 19.5
B1: 18.3
B2: 11.8
B3: 8.4
Caa1: 6.8
Caa2: 0.4
Ca: 1.0
NR: 17.5
WR: 0.1
Other: 11.4
Quality breakdowns are calculated as a percentage of total investments. Because
the portfolio is actively managed, there can be no guarantee that the portfolio
will continue to maintain these quality breakdowns in the future.
TOP 5 SECTORS as of 2/28/03 (%)
[bar chart data]:
Wireless telecommunications 8.7%
Health care 4.7
Cable television 4.5
Printing/publishing 4.4
Diversified manufacturing 4.1
Sector breakdowns are calculated as a percentage of net assets. Because the
portfolio is actively managed, there can be no guarantee that the portfolio will
continue to maintain this breakdown in the future.
Just like any other investment, floating rate loan investments present financial
risks. Defaults on the loans in the portfolio could reduce the fund's net asset
value and its distributions, as could nonpayment of scheduled interest and
principal. Prepayment of principal by a borrower could mean that the fund
managers have to replace the loan with a lower- yielding security, which could
affect the valuation of the portfolio's holdings.
The fund is a continuously offered, closed-end management investment company and
provides limited liquidity through a quarterly tender offer for between 5% and
25% of outstanding shares. Each quarter, the fund's trustees must approve the
actual tender amount. Please read the prospectus carefully for more details.
The fund may invest a high percentage of assets in a limited number of loans, so
the default of any individual holding can have a greater impact on the fund's
NAV than could a default in a more diversified portfolio.
Unlike floating rate loans, some fixed-income investments may be covered by FDIC
insurance or other guarantees relating to timely payment of principal and
interest. Some may also provide tax benefits.
3
Investment Portfolio
February 28, 2003 (Unaudited)
VARIABLE RATE SENIOR
LOAN INTERESTS (a) - 88.5% PAR VALUE
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AEROSPACE/DEFENSE - 2.6%
DRS Technologies,
Term Loan 09/30/08 $ 980,046 $ 987,447
Integrated Defense Technologies,
Term Loan B 03/04/08 2,992,491 2,979,383
Titan Corp.,
Term Loan B 06/30/09 1,990,000 1,991,962
Vought Aircraft Industries, Inc.:
Term Loan A 06/30/06 572,464 554,637
Term Loan B 06/30/07 1,851,429 1,800,658
Term Loan C 06/30/08 2,196,298 2,140,130
Term Loan X 12/31/06 1,075,000 1,044,094
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11,498,311
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APPAREL - 0.6%
The William Carter Co.,
Term Loan B 09/30/08 2,468,750 2,489,096
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AUTO PARTS - 2.4%
1424666 Ontario Ltd.,
Term Loan B 08/10/07 6,824,990 6,714,226
Federal-Mogul Corp., (b)
Term Loan C 02/24/04 485,000 482,287
Key Plastics, LLC: (c)
Jr. Sec. Sub Notes04/30/07 42,956 42,956
Sr. Sec. Sub Notes04/30/07 101,433 101,433
Meridian Automotive Systems, Inc.,
Term Loan B 03/31/07 3,910,503 3,558,649
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10,899,551
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BROADCASTING - 3.1%
Comcorp Broadcasting, Inc.,
Term Loan A2 03/31/03 930,188 886,004
Emmis Communications Corp.,
Term Loan A 02/28/09 2,055,811 2,061,636
GT Brands LLC,
Term Loan 09/30/07 3,500,000 3,413,949
Quorum Broadcasting Co., Inc.,
Term Loan B 12/31/04 2,029,602 1,872,412
UPC Financing Partnership,
Term Loan C2 03/31/09 7,000,000 4,800,945
White Knight Broadcasting, Inc.,
Term Loan A2 03/31/03 1,026,745 977,975
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14,012,921
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BUILDING PRODUCTS - 1.0%
Tapco International Corp.:
Term Loan B 06/23/07 2,529,157 2,500,405
Term Loan C 06/23/08 1,764,618 1,744,428
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4,244,833
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PAR VALUE
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BUSINESS SERVICES - 1.4%
NATG Holdings, LLC: (c)
Revolver A 01/23/05 $ 1,039,746 $ 1,013,752
Term Loan A 01/23/09 1,011,450 404,734
Term Loan B1 01/23/10 684,740 274,000
Term Loan B2 01/23/10 666,664 533,432
Relizon Co.,
Term Loan B 12/31/07 1,959,494 1,846,986
Transaction Network Services, Inc.,
Term Loan B 04/03/07 2,052,633 2,051,359
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6,124,263
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CABLE TELEVISION - 4.5%
Century Cable Holdings, LLC:
Discretionary Term12/31/09 3,500,000 2,470,760
Term Loan 06/30/09 10,000,000 7,205,371
Charter Communications Operating, LLC,
Term Loan B 03/18/08 2,971,313 2,502,113
CSC Holdings, Inc., (b)
Revolver 06/30/06 1,497,500 1,393,530
Olympus Cable Holdings, LLC:
Term Loan A 06/30/10 2,000,000 1,587,142
Term Loan B 09/30/10 2,000,000 1,622,272
RCN Corp.,
Term Loan B 06/03/07 4,482,000 3,268,384
------------
20,049,572
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CASINOS/GAMBLING - 2.3%
Aladdin Gaming, LLC: (d)
Term Loan A 02/25/05 6,000,000 5,040,000
Term Loan B 08/26/06 1,250,000 1,037,500
Alliance Gaming Corp.,
Term Loan 12/31/06 3,473,750 3,495,572
Ameristar Casinos, Inc.,
Term Loan B 12/20/06 878,778 883,167
------------
10,456,239
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CHEMICALS - 2.2%
Huntsman Corp.:
Term Loan A 03/31/07 4,392,754 3,614,340
Term Loan B 03/31/07 2,107,246 1,733,222
Huntsman International, LLC:
Term Loan B 06/30/07 375,300 369,366
Term Loan C 06/30/08 1,006,030 989,976
Lyondell Chemical Co.,
Term Loan E 05/17/06 91,773 92,046
Messer Griesheim Industries:
Term Loan B 04/27/09 877,032 882,358
Term Loan C 04/27/10 1,622,968 1,632,807
Noveon, Inc., (b)
Term Loan A 03/31/07 344,636 342,660
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9,656,775
------------
See notes to investment portfolio.
4
Investment Portfolio (continued)
February 28, 2003 (Unaudited)
VARIABLE RATE SENIOR
LOAN INTERESTS (a) (CONTINUED) PAR VALUE
- -------------------------------------------------------
CONSUMER SERVICES - 0.9%
Alderwoods Group, Inc.:
Note 5 Year 01/02/07 $ 494,000 $ 481,650
Note 7 Year 01/02/09 880,114 836,108
Loewen Group, Inc., (d)
Revolver 06/30/04 121,471 121,471
Stewart Enterprises, Inc.,
Term Loan 06/29/06 2,403,958 2,421,593
------------
3,860,822
------------
CONSUMER SPECIALTIES - 2.2%
American Greetings Corp.,
Term Loan B 06/15/06 2,954,028 2,996,279
Church & Dwight Co., Inc.,
Term Loan B 09/30/07 995,000 1,001,758
Johnson Diversey, Inc.,
Term Loan B 11/03/09 2,321,667 2,337,238
Jostens, Inc.,
Term Loan A 05/31/06 390,678 383,683
Mary Kay Corp.,
Term Loan B 10/03/07 3,076,899 3,096,010
------------
9,814,968
------------
CONTAINERS/PACKAGING - 0.6%
Riverwood International Corp.: (b)
Revolver 12/31/06 125,000 121,549
Term Loan B2 03/31/07 2,487,500 2,485,603
------------
2,607,152
------------
DIVERSIFIED COMMERCIAL SERVICES - 1.6%
Enterprise Profit Solutions Corp., (c)(d)
Term Loan A 06/14/10 498,039 --(e)
Outsourcing Solutions, Inc., (c)(d)
Term Loan B 12/10/06 5,797,946 4,116,542
Transcore Holdings, Inc.,
Term Loan B 10/01/06 2,793,000 2,802,264
------------
6,918,806
------------
DIVERSIFIED MANUFACTURING - 4.1%
Enersys, Inc.,
Term Loan B 11/09/08 4,924,904 4,878,292
Flowserve Corp.,
Term Loan C 06/30/09 829,247 829,144
Freedom Forge Corp., (c)(d)
Term Loan 12/17/04 244,736 --(e)
General Cable Corp.,
Term Loan B 05/25/07 1,639,120 1,409,693
Gentek, Inc.,
Term Loan C 10/31/07 339,226 183,471
Jason, Inc.,
Term Loan B 06/30/07 2,305,410 2,198,565
PAR VALUE
- -------------------------------------------------------
Polymer Group, Inc.:
Term Loan B 12/20/05 $ 2,975,410 $ 2,726,752
Term Loan C 12/20/06 3,387,500 3,110,973
Polypore, Inc.,
Term Loan B 12/31/06 1,865,637 1,861,163
Superior Telecom, Inc.,
Term Loan B 11/27/05 2,452,415 870,657
------------
18,068,710
------------
ELECTRIC UTILITIES - 3.4%
AES Corp.,
Term Loan C 04/15/05 3,959,510 3,803,418
Calpine Corp.,
Term Loan B 03/08/04 3,798,260 3,490,366
Michigan Electric Transmission Co.,
Term Loan 05/01/07 995,000 995,309
Mission Energy Holding Co.: (c)
Term Loan A 07/02/06 3,246,754 1,785,833
Term Loan B 07/02/06 9,253,246 5,089,624
------------
15,164,550
------------
ELECTRONIC COMPONENTS - 1.7%
IPC Acquisition Corp.,
Term Loan 12/31/06 1,486,277 1,489,324
Sanmina SCI Corp.,
Term Loan B 12/23/07 1,500,000 1,523,232
Viasystems, Inc.,
Term Loan B 09/30/08 6,412,667 4,441,052
------------
7,453,608
------------
ENGINEERING & CONSTRUCTION - 1.9%
URS Corp.,
Term Loan B 08/22/08 997,500 953,877
Washington Group International,
Revolver B 07/23/04 7,500,000 7,498,944
------------
8,452,821
------------
ENVIRONMENTAL SERVICES - 3.3%
Allied Waste North America, Inc.:
Term Loan A 07/21/05 619,250 619,796
Term Loan B 07/21/06 2,640,663 2,635,877
Term Loan C 07/21/07 3,168,797 3,163,066
Environmental Systems Products
Holdings, Inc.:
Tranche 1 12/31/04 3,642,619 3,478,701
Tranche 2 12/31/04 656,357 556,270
Synagro Technologies, Inc.,
Term Loan 05/07/08 4,298,931 4,310,758
------------
14,764,468
------------
See notes to investment portfolio.
5
Investment Portfolio (continued)
February 28, 2003 (Unaudited)
VARIABLE RATE SENIOR
LOAN INTERESTS (a) (CONTINUED) PAR VALUE
- -------------------------------------------------------
FARMING/AGRICULTURE - 1.4%
Hines Nurseries, Inc.,
Term Loan B 02/28/05 $ 2,283,993 $ 2,281,025
Quality Stores, Inc., (c)(d)
Term Loan B 04/30/06 1,527,683 60,038
United Industries Corp.,
Term Loan B 01/20/06 3,943,675 3,955,973
------------
6,297,036
------------
FINANCE COMPANIES- 0.2%
Finova Group, Inc.,
Note 11/15/09 2,250,000 765,000
------------
FOOD CHAINS - 0.3%
Carrols Corp.,
Term Loan B 12/31/07 1,423,810 1,408,642
------------
FOOD MANUFACTURING - 4.0%
American Seafoods Group, LLC,
Term Loan B 03/31/09 3,457,024 3,473,221
Commonwealth Brands, Inc.,
Term Loan 08/28/07 2,312,500 2,315,850
International Multifoods Corp.,
Term Loan B 02/28/08 1,980,309 1,990,228
Merisant Corp.,
Term Loan B 03/31/07 2,678,258 2,679,966
Michael Foods, Inc.,
Term Loan B 04/10/08 1,024,199 1,030,266
Otis Spunkmeyer, Inc.,
Term Loan B 01/21/09 2,965,909 2,964,055
Pinnacle Foods Holding Corp.,
Term Loan 05/22/08 480,263 481,129
Southern Wine & Spirits of America, Inc.,
Term Loan B 07/02/08 2,985,000 2,992,617
------------
17,927,332
------------
HEALTH CARE - 4.7%
Alliance Imaging, Inc.,
Term Loan A 11/02/06 2,595,420 2,508,756
Concentra Operating Corp.:
Term Loan B 06/30/06 3,013,171 2,966,144
Term Loan C 06/30/07 1,506,585 1,483,072
Davita, Inc.,
Term Loan B 03/31/09 3,961,529 3,975,191
Fresenius Medical Care, Inc.,
Term Loan B 02/21/10 2,340,000 2,345,850
Insight Health Services Corp.,
Delayed Draw
Term Loan (b) 10/17/08 1 4,849
Term Loan B 10/17/08 3,950,000 3,974,503
PAR VALUE
- -------------------------------------------------------
Team Health, Inc.,
Term Loan B 10/31/08 $ 1,000,000 $ 969,655
Vicar Operating, Inc.,
Term Loan C 09/30/08 2,487,500 2,500,982
------------
20,729,002
------------
HOME FURNISHINGS - 0.1%
Simmons Co.,
Term Loan B 10/29/05 261,006 261,916
------------
HOSPITAL MANAGEMENT - 1.6%
Community Health Systems, Inc.,
Term Loan B 07/16/10 1,995,000 1,988,766
Iasis Healthcare Corp.,
Term Loan B 02/07/09 2,500,000 2,525,769
Vanguard Health Systems,
Incremental Term Loan
01/03/10 2,400,000 2,419,040
------------
6,933,575
------------
HOTELS/RESORT - 1.0%
Wyndham International, Inc.,
Term Loan 06/30/06 5,917,511 4,299,846
------------
INDUSTRIAL MACHINERY/COMPONENTS - 0.4%
Terex Corp.,
Term Loan 07/03/09 2,039,825 1,962,311
------------
MEDIA CONGLOMERATES - 0.1%
Bridge Information Systems: (d)
Multidraw Term Loan07/07/03 544,524 73,511
Revolver 07/07/03 350,228 47,281
Term Loan A 07/07/03 1,141,399 154,089
Term Loan B 05/29/05 3,239,260 437,300
------------
712,181
------------
MEDICAL SPECIALTIES - 0.4%
Dade Behring, Inc.,
Term Loan A1 10/01/08 2,000,000 2,001,695
------------
METALS/MINING - 2.6%
Copperweld Corp.,
Term Loan A 05/16/03 2,154,167 1,572,536
OM Group,
Term Loan C 04/01/06 4,494,987 4,311,206
Steel Dynamics, Inc.,
Term Loan B 03/26/08 1,823,571 1,838,887
Stillwater Mining Co.,
Term Loan B 12/31/07 3,845,976 3,712,596
------------
11,435,225
------------
See notes to investment portfolio.
6
Investment Portfolio (continued)
February 28, 2003 (Unaudited)
VARIABLE RATE SENIOR
LOAN INTERESTS (a) (CONTINUED) PAR VALUE
- -------------------------------------------------------
MOVIES/ENTERTAINMENT - 3.7%
AMF Bowling Worldwide, Inc.,
Term Loan 02/28/08 $ 4,629,756 $ 4,620,696
Carmike Cinemas, Inc.,
Term Loan 01/15/07 3,481,739 3,471,123
Loews Cineplex Entertainment Corp.,
Term Loan 02/29/08 5,813,615 5,714,476
Metro-Goldwyn-Mayer Studios, Inc.,
Term Loan B 06/30/08 2,500,000 2,487,998
------------
16,294,293
------------
OIL REFINING/MARKETING - 0.6%
Tesoro Petroleum Corp.,
Term Loan B 12/31/07 2,945,285 2,811,061
------------
PAPER - 0.9%
Appleton Papers, Inc.,
Term Loan C 11/08/06 1,965,474 1,974,150
Bear Island Paper Co.,
Term Loan 12/31/05 271,038 264,332
Port Townsend Paper Corp.,
Term Loan B 03/16/07 1,965,000 1,749,649
------------
3,988,131
------------
PHARMACEUTICAL - 0.6%
Medpointe, Inc.,
Term Loan B 09/30/08 3,147,075 2,874,668
------------
PRINTING/PUBLISHING - 4.4%
American Media Operations, Inc.,
Term Loan C1 04/01/07 2,500,000 2,507,916
Canwest Media, Inc.:
Term Loan B2 05/15/08 1,801,929 1,802,899
Term Loan C2 05/15/09 1,125,760 1,126,366
DIMAC Holdings: (d)
Term Loan A 12/31/05 246,193 923
Term Loan B 01/01/05 65,687 1,971
DIMAC Marketing Partners, Inc.: (d)
Revolver 07/01/03 27,443 --(e)
Term Loan B 01/01/05 160,714 4,861
Muzak, LLC,
Term Loan B 12/31/06 1,437,455 1,361,544
Qwest Dex, Inc.,
Term Loan A 08/30/04 3,833,333 3,969,697
Readers Digest Association, Inc.,
Term Loan B 05/20/08 1,480,031 1,456,780
Sun Media Corp.,
Term Loan B 02/07/09 1,500,000 1,502,368
Weekly Reader Corp.,
Term Loan B 11/17/06 5,826,933 5,722,282
------------
19,457,607
------------
PAR VALUE
- -------------------------------------------------------
RAIL/SHIPPING - 2.4%
American Commercial Lines:
Term Loan B 06/30/06 $ 956,424 $ 770,076
Term Loan C 06/30/07 1,342,969 1,081,307
Dakota Minnesota Eastern Rail Corp.,
Term Loan 07/25/07 1,980,000 1,990,042
Helm Financial Corp.,
Term Loan B 10/18/06 5,276,677 4,891,270
RailAmerica Transportation Corp.:
AUD Term Loan 05/23/09 280,000 279,700
CDN Term Loan 05/23/09 233,333 233,083
USD Term Loan B 05/23/09 1,236,667 1,235,221
------------
10,480,699
------------
REAL ESTATE INVESTMENT TRUST - 1.1%
Corrections Corp. of America,
Term Loan B 03/31/08 2,967,525 2,972,036
Macerich Partnership, L.P.,
Term Loan 07/26/05 2,048,000 2,050,560
------------
5,022,596
------------
RETAIL STORES - 0.4%
CH Operating, LLC,
Term Loan 06/30/07 1,965,517 1,950,884
------------
SEMICONDUCTORS - 0.3%
Semiconductor Components Industries, LLC:
Term Loan B 08/04/06 320,722 290,601
Term Loan C 08/04/07 345,393 312,955
Term Loan D 08/04/07 865,948 786,272
------------
1,389,828
------------
STEEL/IRON ORE - 2.1%
Ispat Inland, LP.:
Term Loan B 07/16/05 3,906,126 2,535,957
Term Loan C 07/16/06 3,906,126 2,535,957
UCAR Finance, Inc.,
Term Loan B 12/31/07 4,443,135 4,255,618
------------
9,327,532
------------
TELECOMMUNICATIONS INFRASTRUCTURE EQUIPMENT - 0.5%
Spectrasite Communications, Inc.,
Term Loan B 12/31/07 2,701,739 2,402,244
------------
TELECOMMUNICATIONS SERVICES - 1.9%
GT Group Telecom Services Corp., (c)(d)
Vendor Term Loan 06/30/08 3,162,326 63,246
ICG Communications, Inc.,
Term Loan 03/31/06 334,758 230,983
KMC Telecom, Inc.:
Term Loan 07/01/07 1,984,751 744,935
13.5% Sr. Disc. Notes 05/15/09 44,000 440
12.5% Sr. Disc. Notes 02/15/08 168,000 1,680
See notes to investment portfolio.
7
Investment Portfolio (continued)
February 28, 2003 (Unaudited)
VARIABLE RATE SENIOR
LOAN INTERESTS (a) (CONTINUED) PAR VALUE
- -------------------------------------------------------
TELECOMMUNICATIONS SERVICES (CONTINUED)
Time Warner Telecom,
Term Loan B 03/31/08 $ 2,800,000 $ 2,394,705
TSI Telecommunication Services, Inc.,
Term Loan B 12/31/06 948,864 906,758
Valor Telecommunications Enterprises, LLC,
Term Loan B 06/30/08 4,871,586 4,297,334
------------
8,640,081
------------
TEXTILES - 0.5%
Springs Industries, Inc.,
Term Loan B 09/05/08 2,493,498 2,501,499
------------
TRANSPORTATION - 3.8%
Evergreen International Aviation, Inc.:
Term Loan B1 05/07/03 886,623 758,064
Term Loan B2 05/07/03 3,633,117 3,111,559
Motor Coach Industries, Inc.,
Term Loan 06/16/05 5,098,771 3,943,133
Transportation Technology,
Term Loan B 03/31/07 6,442,578 5,470,045
United Airlines,
Term Loan B 07/01/04 4,000,000 3,840,565
------------
17,123,366
------------
WIRELESS TELECOMMUNICATIONS - 8.7%
American Cellular Corp.:
Term Loan B 03/31/08 567,430 426,656
Term Loan C 03/31/09 647,873 487,141
Centennial Cellular Operating Co., LLC,
Term Loan A 11/30/06 2,587,500 2,122,001
Centennial Puerto Rico Operations Corp.:
Term Loan B 05/31/07 3,658,113 2,867,202
Term Loan C 11/30/07 2,753,428 2,158,712
Cricket Communications, Inc., (d)
Vendor Term Loan 06/30/08 19,000,000 4,180,000
Nextel Finance Co.:
Term Loan B 06/30/08 1,998,125 1,908,070
Term Loan C 12/31/08 3,085,625 2,947,541
Term Loan D 03/31/09 1,500,000 1,400,654
Nextel Partners, Inc.,
Term Loan B 01/29/08 6,000,000 5,574,668
Rural Cellular Corp.:
Term Loan B 10/03/08 2,663,316 2,304,561
Term Loan C 04/03/09 2,663,316 2,304,561
Sygnet Wireless, Inc.:
Term Loan B 03/23/07 1,590,821 1,415,887
Term Loan C 12/23/07 4,019,222 3,576,487
PAR VALUE
- -------------------------------------------------------
Ubiquitel Operating Co.:
Term Loan A 09/30/07 $ 938,776 $ 662,257
Term Loan B 11/17/08 4,224,490 2,723,575
Western Wireless Corp.,
Term Loan A 03/31/08 2,000,000 1,594,933
------------
38,654,906
------------
TOTAL VARIABLE RATE SENIOR LOAN INTERESTS
(cost of $437,890,780) 394,190,622
------------
COMMON STOCKS (f) - 2.1% SHARES
- -------------------------------------------------------
BUSINESS SERVICES - 0.4%
NATG Holdings LLC (c) 322,876 1,614,380
------------
CONSUMER SERVICES - 0.1%
Alderwoods Group, Inc. 97,955 363,413
------------
ENGINEERING & CONSTRUCTION - 1.5%
Washington Group
International, Inc. 442,972 6,573,704
------------
HEALTHCARE SERVICES - 0.0%
Sun Healthcare Group 182,213 50,109
------------
MOVIES/ENTERTAINMENT - 0.1%
AMF Bowling Worldwide, Inc. 19,918 378,442
------------
TOTAL COMMON STOCKS
(cost of $11,038,242) 8,980,048
------------
PREFERRED STOCKS (c)(f) - 0.1%
- -------------------------------------------------------
ENVIRONMENTAL SERVICES - 0.1%
Environmental System 620 619,928
(cost of $697,302) ------------
SHORT-TERM OBLIGATIONS - 8.7% PAR
- -------------------------------------------------------
COMMERCIAL PAPER - 8.5%
International Lease Finance,
1.330% 03/03/03 $18,000,000 17,998,670
UBS Financial,
1.310% 03/03/03 20,000,000 19,998,544
------------
37,997,214
------------
See notes to investment portfolio.
8
Investment Portfolio (continued)
February 28, 2003 (Unaudited)
SHORT-TERM
OBLIGATIONS (CONTINUED) PAR VALUE
- -------------------------------------------------------
TIME DEPOSIT - 0.2%
State Street Bank & Trust Co.,
0.250% 03/03/03 $ 1,100,000 $ 1,100,000
------------
TOTAL SHORT TERM OBLIGATIONS
(cost of $39,097,214) 39,097,214
------------
TOTAL INVESTMENTS - 99.4%
(cost of $488,723,538)(g) 442,887,812
------------
OTHER ASSETS & LIABILITIES, NET - 0.6% 2,528,195
- -------------------------------------------------------
NET ASSETS - 100.0% $445,416,007
============
NOTES TO INVESTMENT PORTFOLIO:
(a)Senior Loans in which the Portfolio invests generally pay interest at rates
which are periodically predetermined by reference to a base lending rate plus
a premium. These base lending rates are generally (i) the prime rate offered
by one or more major United States banks, (ii) the lending rate offered by
one or more European banks such as the London Inter-Bank Offered Rate
(`LIBOR') and (iii) the certificate of deposit rate. Senior loans are
generally considered to be restricted in that the Portfolio ordinarily is
contractually obligated to receive approval from the Agent Bank and/or
borrower prior to the disposition of a Senior Loan.
(b)Unfunded commitments, see Note 8.
(c)Represents fair value as determined in good faith under procedures approved
by the Trustees.
(d)These issuers are in default of certain debt covenants. Income is not being
accrued.
(e)Amount rounds to less than $1.
(f)Non-income producing.
(g)Cost for federal income tax purposes is $488,789,198.
See notes to financial statements.
9
Stein Roe Floating Rate Limited Liability Company
Statement of Assets and Liabilities
February 28, 2003 (Unaudited)
ASSETS:
Investments, at cost $488,723,538
------------
Investments, at value $442,887,812
Cash 492,262
Receivable for:
Investments sold 36,695
Interest and fees 2,577,379
Reimbursement due from Advisor 68,751
Deferred Trustees' compensation plan 324
Other assets 118,797
------------
Total Assets 446,182,020
------------
LIABILITIES:
Deferred facility fees 353,217
Payable for:
Management fee 148,643
Transfer agent fee 975
Pricing and bookkeeping fees 61,790
Custody fee 2,941
Deferred Trustees' fee 324
Other liabilities 198,123
------------
Total Liabilities 766,013
------------
NET ASSETS $445,416,007
============
Statement of Operations
For the Six Months Ended
February 28, 2003 (Unaudited)
INVESTMENT INCOME:
Interest $ 15,444,556
Facility and other fees 589,968
------------
Total Investment Income 16,034,524
EXPENSES:
Management fee 1,044,447
Transfer agent fee 2,976
Trustees' fee 1,685
Custody fee 9,136
Pricing and bookkeeping fees 135,337
Legal fee 74,743
Other expenses 43,584
------------
Total Expenses 1,311,908
Custody earnings credit (195)
------------
Net Expenses 1,311,713
------------
Net Investment Income 14,722,811
------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON PORTFOLIO POSITIONS:
Net realized loss on investments (10,161,908)
Net increase in reimbursement
due from Advisor (See Note 9) 68,751
Net change in unrealized
appreciation/depreciation on investments 7,428,942
------------
Net Loss (2,664,215)
------------
Net Increase in Net Assets from Operations $ 12,058,596
============
See notes to financial statements.
10
Stein Roe Floating Rate Limited Liability Company
Statement of Changes in Net Assets
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, AUGUST 31,
INCREASE (DECREASE) IN NET ASSETS: 2003 2002
=======================================================================================================================
OPERATIONS:
Net investment income $ 14,722,811 $ 38,015,994
Net realized loss on investments (10,161,908) (12,166,254)
Net increase in reimbursement due from Advisor (See Note 9) 68,751 --
Net change in unrealized appreciation/depreciation on investments 7,428,942 (37,403,502)
------------ ------------
Net Increase (Decrease) from Operations 12,058,596 (11,553,762)
------------ ------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST:
Contributions 11,106,334 80,963,660
Withdrawals (114,236,585) (200,374,089)
------------ ------------
Net Decrease from Transactions in
Investors' Beneficial Interest (103,130,251) (119,410,429)
------------ ------------
Total Decrease in Net Assets (91,071,655) (130,964,191)
NET ASSETS:
Beginning of period 536,487,662 667,451,853
------------ ------------
End of period $445,416,007 $536,487,662
============ ============
See notes to financial statements.
11
Stein Roe Floating Rate Limited Liability Company
Statement of Cash Flows
For the Six Months Ended
February 28, 2003 (Unaudited)
INCREASE (DECREASE) IN CASH
=======================================================
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Investment Income $14,722,811
Adjustments to reconcile net investment
income to net cash provided by
operating activities:
Purchase of investment securities (116,910,263)
Proceeds from disposition of
investment securities 172,558,204
Sale of short-term portfolio
investments, net 33,394,435
Increase in receivable for
reimbursement due from Advisor (68,751)
Decrease in interest and fees receivable 346,318
Decrease in receivable for investments sold 101,395
Increase in other assets (107,547)
Decrease in deferred facility fees (171,562)
Increase in payable for accrued expenses 11,696
Increase in other liabilities 162,666
Net amortization/accretion of income (2,577,478)
Decrease in payable for
investments purchased (159,716)
-------------
Net cash provided by operating activities 101,302,208
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from capital contributions 11,106,334
Payment of capital withdrawals (114,236,585)
-------------
Net cash flows used for
financing activities (103,130,251)
-------------
Net decrease in cash (1,828,043)
CASH:
Cash at beginning of period 2,320,305
-------------
Cash at end of period $ 492,262
=============
See notes to financial statements.
12
Liberty Floating Rate Fund
Statement of Assets and Liabilities
February 28, 2003 (Unaudited)
ASSETS:
Investments in Portfolio, at cost $392,373,202
-------------
Investments in Portfolio, at value $355,790,226
Receivable for:
Fund shares sold 726,662
Expense reimbursement due from Advisor 98,882
Deferred Trustees' compensation plan 1,659
Other assets 113,945
-------------
Total Assets 356,731,374
-------------
LIABILITIES:
Payable for:
Distributions 553,466
Administration fee 52,704
Transfer agent fee 213,910
Pricing and bookkeeping fees 7,717
Trustees' fee 187
Custody fee 130
Registration fee 26,833
Deferred Trustees' fee 1,659
Other liabilities 14,664
-------------
Total Liabilities 871,270
-------------
NET ASSETS $355,860,104
=============
COMPOSITION OF NET ASSETS:
Paid-in capital $417,332,390
Overdistributed net investment income (41,168)
Accumulated net realized loss
allocated from Portfolio (24,848,142)
Net unrealized depreciation on
investments allocated from Portfolio (36,582,976)
-------------
NET ASSETS $355,860,104
=============
CLASS A:
Net assets $ 80,272,153
Shares outstanding 9,136,761
-------------
Net asset value and redemption
price per share $ 8.79(a)
=============
Maximum offering price per share
($8.79/0.9650) $ 9.11(b)
=============
CLASS B:
Net assets $155,746,344
Shares outstanding 17,727,470
-------------
Net asset value and offering
price per share $ 8.79(a)
=============
CLASS C:
Net assets $110,966,558
Shares outstanding 12,630,227
-------------
Net asset value and offering
price per share $ 8.79(a)
=============
CLASS Z:
Net assets $ 8,875,049
Shares outstanding 1,010,165
-------------
Net asset value, offering and redemption
price per share $ 8.79
=============
(a)Redemption price per share is equal to net asset value less any applicable
early withdrawal charge.
(b)On sales of $100,000 or more the offering price is
reduced.
Statement of Operations
For the Six Months Ended
February 28, 2003 (Unaudited)
INVESTMENT INCOME:
Interest and fees allocated from Portfolio $12,745,583
EXPENSES:
Expenses allocated from Portfolio 1,042,693
Administration fee 367,529
Distribution fee:
Class A 42,525
Class B 355,388
Class C 345,748
Service fee:
Class A 106,314
Class B 197,437
Class C 144,062
Pricing and bookkeeping fees 68,583
Transfer agent fee 496,582
Trustees' fee 9,478
Custody fee 595
Other expenses 97,875
-------------
Total Expenses 3,274,809
Fees and expenses waived
or reimbursed by Advisor (613,242)
-------------
Net Expenses 2,661,567
-------------
Net Investment Income 10,084,016
-------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS ALLOCATED
FROM PORTFOLIO:
Net realized loss on investments
allocated from Portfolio (8,126,619)
Net increase in reimbursement
due from Advisor allocated
from Portfolio (See Note 9) 54,605
Net change in unrealized
appreciation/depreciation
on investments allocated from Portfolio 6,011,825
-------------
Net Loss (2,060,189)
-------------
Net Increase in Net Assets
from Operations $ 8,023,827
=============
See notes to financial statements.
13
Liberty Floating Rate Fund
Statement of Changes in Net Assets
(UNAUDITED)
SIX MONTHS
ENDED YEAR ENDED
INCREASE (DECREASE) FEBRUARY 28, AUGUST 31,
IN NET ASSETS: 2003 2002
- ------------------------------------------------------
OPERATIONS:
Net investment income $ 10,084,016 $ 26,458,047
Net realized loss on
investments allocated
from Portfolio (8,126,619) (8,907,633)
Net increase in reimbursement
due from Advisor allocated
from Portfolio (See Note 9) 54,605 --
Net change in unrealized
appreciation/depreciation
on investments allocated
from Portfolio 6,011,825 (30,883,851)
----------- -----------
Net Increase (Decrease) from
Operations 8,023,827 (13,333,437)
----------- -----------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income:
Class A (2,455,444) (7,104,057)
Class B (4,279,912) (10,221,673)
Class C (3,038,678) (8,408,033)
Class Z (282,734) (809,139)
From net realized capital gains:
Class A -- (456)
Class B -- (655)
Class C -- (539)
Class Z -- (52)
----------- -----------
Total Distributions Declared
to Shareholders (10,056,768) (26,544,604)
----------- -----------
SHARE TRANSACTIONS:
Class A:
Subscriptions 1,875,968 28,944,806
Distributions reinvested 1,815,771 4,435,355
Redemptions (31,529,846) (52,671,603)
----------- -----------
Net Decrease (27,838,107) (19,291,442)
----------- -----------
Class B:
Subscriptions 4,839,152 20,986,672
Distributions reinvested 2,792,317 5,846,660
Redemptions (25,724,766) (32,352,200)
----------- -----------
Net Decrease (18,093,297) (5,518,868)
----------- -----------
Class C:
Subscriptions 6,002,841 29,374,992
Distributions reinvested 2,306,648 5,754,828
Redemptions (33,794,162) (69,520,549)
----------- -----------
Net Decrease (25,484,673) (34,390,729)
----------- -----------
Class Z:
Subscriptions 771,307 5,244,801
Distributions reinvested 31,114 74,304
Redemptions (5,117,970) (2,625,789)
----------- -----------
Net Increase (Decrease) (4,315,549) 2,693,316
----------- -----------
(UNAUDITED)
SIX MONTHS
ENDED YEAR ENDED
FEBRUARY 28, AUGUST 31,
2003 2002
- -------------------------------------------------------
Net Decrease from
Share Transactions $(75,731,626)$(56,507,723)
----------- -----------
Total Decrease in Net Assets (77,764,567) (96,385,764)
NET ASSETS:
Beginning of period 433,624,671 530,010,435
----------- -----------
End of period (including
overdistributed net
investment income
of $(41,168) and
$(68,416), respectively) $355,860,104 $433,624,671
----------- -----------
CHANGES IN SHARES:
Class A:
Subscriptions 214,820 3,083,643
Issued for distributions
reinvested 207,881 473,895
Redemptions (3,579,955) (5,608,115)
----------- -----------
Net Decrease (3,157,254) (2,050,577)
----------- -----------
Class B:
Subscriptions 553,276 2,248,559
Issued for distributions
reinvested 319,770 624,817
Redemptions (2,926,251) (3,446,281)
----------- -----------
Net Decrease (2,053,205) (572,905)
----------- -----------
Class C:
Subscriptions 686,746 3,143,271
Issued for distributions
reinvested 264,157 614,545
Redemptions (3,843,137) (7,394,823)
----------- -----------
Net Decrease (2,892,234) (3,637,007)
----------- -----------
Class Z:
Subscriptions 88,165 560,381
Issued for distributions
reinvested 3,560 7,930
Redemptions (580,218) (281,403)
----------- -----------
Net Increase (Decrease) (488,493) 286,908
----------- -----------
See notes to financial statements.
14
Notes to Financial Statements
February 28, 2003 (Unaudited)
NOTE 1. ACCOUNTING POLICIES
ORGANIZATION:
Liberty Floating Rate Fund (the "Fund") is a non-diversified, closed-end
management investment company organized as a Massachusetts business trust. The
Fund invests all of its investable assets in Stein Roe Floating Rate Limited
Liability Company (the "Portfolio"), which seeks to provide a high-level of
current income, consistent with preservation of capital. The Fund authorized an
unlimited number of shares. The Fund offers four classes of shares: Class A,
Class B, Class C and Class Z shares. Class A shares are sold with a front end
sales charge and an annual distribution fee. A 1.00% early withdrawal charge is
assessed to Class A shares purchased without an initial sales charge on
redemptions made within eighteen months on an original purchase of $1 million to
$25 million. Class B shares are subject to an annual distribution fee and an
early withdrawal charge. Class B shares will convert to Class A shares eight
years after purchase. Class C shares are subject to an early withdrawal charge
on redemptions made within one year after purchase and an annual distribution
fee. Class Z shares are offered continuously at net asset value. There are
certain restrictions on the purchase of Class Z shares, as described in the
Fund's prospectus.
The Portfolio is a non-diversified, closed-end management investment company
organized as a Delaware limited liability company. The Portfolio allocates
income, expenses, realized and unrealized gains and losses to each investor on a
daily basis, based on methods in compliance with the Internal Revenue Service.
At February 28, 2003, Liberty Floating Rate Fund and Liberty-Stein Roe
Institutional Floating Rate Income Fund owned 79.9% and 20.1%, respectively, of
the Portfolio.
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 period. Actual results
could differ from those estimates. The following is a summary of significant
accounting policies consistently followed by the Portfolio and Fund in the
preparation of their financial statements.
SECURITY VALUATION AND TRANSACTIONS:
The value of the Portfolio is determined in accordance with guidelines
established, and periodically reviewed, by the Board of Trustees. Senior loans
are generally valued using market prices or quotations provided by banks,
dealers or pricing services with respect to secondary market transactions. The
prices provided by these principal market makers may differ from the value that
would be realized if the loans were sold and the difference could be material to
the financial statements. In the absence of actual market values, senior loans
will be valued by Stein Roe & Farnham Incorporated (the "Advisor"), an indirect,
wholly-owned subsidiary of Columbia Management Group, Inc., at fair value, which
is intended to approximate market value, pursuant to procedures approved by the
Board of Trustees. In determining fair value, the Advisor will consider on an
ongoing basis, among other factors, (i) the creditworthiness of the Borrower;
(ii) the current interest rate, the interest rate redetermination period and
maturity of such senior loan interests; and (iii) recent prices in the market
for instruments of similar quality, rate and interest rate redetermination
period and maturity. Because of uncertainty inherent in the valuation process,
the estimated value of a senior loan interest may differ significantly from the
value that would have been used had there been market activity for that senior
loan interest.
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 last day,
at the current quoted bid price.
Short-term obligations with a maturity of 60 days or less are valued at
amortized cost.
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 the Class A, Class B and Class C service and
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.
15
Notes to Financial Statements (continued)
February 28, 2003 (Unaudited)
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 and distribution fees per share
applicable to Class A, Class B and Class C shares.
FEDERAL INCOME TAXES:
No provision is made for federal income taxes since (a) the Fund elects to be
taxed as a "regulated investment company" and make distributions to its
shareholders to be relieved of all federal income taxes under provisions of
current federal tax law; and (b) the Portfolio is treated as a partnership for
federal income tax purposes and all of its income is allocated to its owners
based on methods in compliance with the Internal Revenue Service.
INTEREST INCOME, DEBT DISCOUNT
AND PREMIUM:
Interest income is recorded on the accrual basis. Facility fees received are
treated as market discounts. Market premiums and discounts are amortized over
the estimated life of each applicable loan. Unamortized facility fees are
reflected as deferred fees on the Statement of Assets and Liabilities.
DISTRIBUTIONS TO SHAREHOLDERS:
The Fund declares and records distributions daily and pays monthly.
STATEMENT OF CASH FLOWS:
Information on financial transactions which have been settled through the
receipt or disbursement of cash is presented in the Statement of Cash Flows. The
cash amount shown in the Statement of Cash Flows is the amount included in the
Portfolio's Statement of Assets and Liabilities and represents cash on hand at
its custodian bank account and does not include any short-term investments at
February 28, 2003.
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 the Fund 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 CARRYFORWARDS
---------- -------------
2010 $7,156,391
NOTE 3. FEES AND COMPENSATION PAID
TO AFFILIATES
MANAGEMENT FEE:
The Advisor receives a monthly fee equal to 0.45% annually of the Portfolio's
average daily net assets.
ADMINISTRATION FEE:
The Advisor provides accounting and other services for a monthly fee equal to
0.20% 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 Portfolio and Fund under a Pricing and Bookkeeping Agreement. Under a
separate agreement (the "Outsourcing Agreement"), the Advisor has delegated
those functions to State Street Bank and Trust Company ("State Street"). The
Advisor pays fees to State Street under the Outsourcing Agreement.
Under its pricing and bookkeeping agreement with the Portfolio and Fund, the
Advisor receives from the Portfolio and Fund an annual flat fee of $10,000 and
$5,000 respectively, 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. For the six months ended February 28, 2003, the net asset
based fee was 0.035%. The Portfolio also pays out-of-pocket costs for pricing
services.
16
Notes to Financial Statements (continued)
February 28, 2003 (Unaudited)
TRANSFER AGENT FEE:
Liberty Funds Services, Inc. (the "Transfer Agent"), an affiliate of the
Advisor, provides shareholder services for a monthly fee comprised of 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.
The Portfolio pays the Transfer Agent a monthly fee equal to $6,000 annually.
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES:
Liberty Funds Distributor, Inc. (the "Distributor"), an affiliate of the
Advisor, is the Fund's principal underwriter. For the six months ended February
28, 2003, the Fund has been advised that the Distributor retained $2,287 net
underwriting discounts on sales of the Fund's Class A shares and received early
withdrawal charges (EWC) of $2,015, $385,932 and $18,695 on Class A, Class B and
Class C share redemptions, respectively.
The Fund has adopted a 12b-1 plan (the "Plan") which requires it to pay the
Distributor a monthly service fee equal to 0.25% annually on Class A, Class B
and Class C net assets as of the 20th of each month. The Plan also requires the
payment of a monthly distribution fee to the Distributor equal to 0.10%, 0.45%
and 0.60% annually of the average daily net assets attributable to Class A,
Class B and Class C shares only.
The EWC 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 has voluntarily agreed, until further notice, to waive fees and bear
certain Fund expenses to the extent that total expenses (inclusive of allocated
Portfolio expenses but exclusive of service fees, distribution fees, brokerage
commissions, interest, commitment fees, taxes and extraordinary expenses, if
any) exceed 0.80% of the Fund's average daily net assets.
OTHER:
The Portfolio and Fund pay no compensation to their officers, all of whom are
employees of the Advisor. The Portfolio has an agreement with its custodian bank
under which $195 of custody fees were reduced by balance credits for the six
months ended February 28, 2003. The Portfolio could have invested 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.
NOTE 4. PORTFOLIO INFORMATION
INVESTMENT ACTIVITY:
During the six months ended February 28, 2003, purchases and sales of
investments, other than short-term obligations, by the Portfolio were
$116,910,263 and $172,558,204, respectively. Unrealized appreciation
(depreciation) at February 28, 2003, based on cost for federal tax purposes,
was:
Gross unrealized appreciation $ 9,655,827
Gross unrealized depreciation (55,557,213)
------------
Net unrealized depreciation $(45,901,386)
------------
OTHER:
The Portfolio may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
NOTE 5. TENDER OF SHARES
The Board of Trustees has adopted a policy of making tender offers on a
quarterly basis. The Board has designated the 15th day of March, June, September
and December, each year, or the next business day if the 15th is not a business
day as the Repurchase Request Deadline. Tender offers are made for a portion of
the Fund's then outstanding shares at the net asset value of the shares as of
the Repurchase Pricing Date. The tender offer amount, which is determined by the
Board of Trustees, will be at least 5% and no more than 25% of the total number
of shares outstanding on the Repurchase Request Deadline. The Fund may
repurchase an additional amount of shares up to 2% of the shares outstanding on
the Repurchase Request Deadline. During the six months ended February 28, 2003,
there were two tender offers in September and December. The Fund offered to
repurchase 15% and 15%, respectively, of its shares and 13.81% and 9.32%,
respectively, of shares outstanding were tendered.
17
Notes to Financial Statements (continued)
February 28, 2003 (Unaudited)
NOTE 6. SENIOR LOAN PARTICIPATION COMMITMENTS
The Portfolio invests primarily in participations and assignments, or acts as a
party to the primary lending syndicate of a Variable Rate Senior Loan interest
to United States corporations, partnerships, and other entities. If the lead
lender in a typical lending syndicate becomes insolvent, enters FDIC
receivership or, if not FDIC insured, enters into bankruptcy, the Portfolio may
incur certain costs and delays in receiving payment or may suffer a loss of
principal and/or interest. When the Portfolio purchases a participation of a
Senior Loan interest, the Portfolio typically enters into a contractual
agreement with the lender or other third party selling the participation, but
not with the borrower directly. As such, the Portfolio assumes the credit risk
of the Borrower, Selling Participant or other persons interpositioned between
the Portfolio and the Borrower.
At February 28, 2003, the following sets forth the selling participants with
respect to interests in Senior Loans purchased by the Portfolio on a
participation basis.
Selling Principal
Participant Amount Value
- ----------- ------- -----
Citibank:
CSC Holdings, Inc.,
Revolver $1,497,500 $1,393,530
Simmons Co.,
Term Loan B 261,006 261,916
Goldman Sachs Credit
Partners LP:
Bridge Information
Systems,
Multi-Draw Term Loan 544,524 73,511
The ability of borrowers to meet their obligations may be affected by economic
developments in a specific industry.
NOTE 7. LINE OF CREDIT
The Portfolio 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 Portfolio's borrowings shall not exceed 33 1/3% of the
value of its total net assets (exclusive of borrowings). The Portfolio 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 Portfolio's
unused commitment shall be paid quarterly by each fund based on the relative
asset size of the Portfolio to the other investment companies participating in
this agreement. 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 or portfolio will have access to the
entire $200,000,000 at any particular time. For the six months ended February
28, 2003, there were no borrowings under the agreement.
NOTE 8. UNFUNDED LOAN COMMITMENTS
As of February 28, 2003, the Portfolio had unfunded loan commitments of
$4,766,356, which could be extended at the option of the Borrower, pursuant to
the following loan agreements:
Unfunded
Borrower Commitments
- -------- -----------
CSC Holdings, Inc. $ 753,750
Federal-Mogul Corp. 262,606
Insight Health Services Corp. 2,000,000
Noveon, Inc. 625,000
Riverwood International Corp. 1,125,000
----------
$4,766,356
----------
NOTE 9. OTHER
During the six months ended February 28, 2003, the Portfolio held Team Health,
Inc., a violation of investment restrictions. A portion of this position was
sold off at a loss of $68,751 and the Fund was reimbursed by the Advisor. The
remaining position as of February 28, 2003, was subsequently sold in March 2003.
NOTE 10. SUBSEQUENT EVENT
On April 1, 2003, the Advisor merged into Columbia Management Advisers, Inc.
("Columbia"), a direct subsidiary of Columbia Management Group, Inc., 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.
18
Stein Roe Floating Rate Limited Liability Company--Financial Highlights
Selected data for a share outstanding throughout each period is as follows:
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED AUGUST 31, PERIOD ENDED
FEBRUARY 28, ---------------------------------------------------- AUGUST 31,
2003 2002 2001 2000 1999 (a)
=============================================================================================================================
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Operating expenses 0.57%(b)(c) 0.55%(b) 0.53%(b) 0.55% 0.96%(c)
Interest expense -- 0.03% -- -- --
Net investment income 6.35%(b)(c) 6.42%(b)(d) 8.94%(b) 9.26% 7.59%(c)
Portfolio turnover rate 28%(e) 70% 63% 21% 17%(e)
(a)From commencement of operations on December 17, 1998.
(b)The benefits derived from custody credits and directed brokerage
arrangements, if applicable, had an impact of less than 0.01%.
(c)Annualized.
(d)Effective September 1, 2001, the Portfolio has adopted the provisions of the
AICPA Audit and Accounting Guide for Investment Companies and began
amortizing and accreting premium and discount on all debt securities. The
effect of this change for the year ended August 31, 2002, was to increase the
ratio of net investment income to average net assets from 6.41% to 6.42%.
Ratios for the periods prior to August 31, 2002 have not been restated to
reflect this change in presentation.
(e)Not annualized.
19
Liberty Floating Rate Fund -- Financial Highlights
Selected data for a share outstanding throughout each period is as follows:
(UNAUDITED) YEAR ENDED
SIX MONTHS ENDED AUGUST 31, PERIOD ENDED
FEBRUARY 28, ---------------------------------- AUGUST 31,
CLASS A SHARES 2003 2002 2001 2000 (a)
===========================================================================================================================
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.83 $ 9.62 $ 10.00 $ 10.05
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (b) 0.26 0.54(c) 0.81 0.71
Net realized and unrealized loss allocated from Portfolio (0.05) (0.79)(c) (0.37) (0.05)
------- ------- ------- -------
Total from Investment Operations 0.21 (0.25) 0.44 0.66
------- ------- ------- -------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS:
From net investment income (0.25) (0.54) (0.82) (0.71)
From net realized gains -- --(d) --(d) --(d)
------- ------- ------- -------
Total Distributions Declared to Shareholders (0.25) (0.54) (0.82) (0.71)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 8.79 $ 8.83 $ 9.62 $ 10.00
======= ======= ======= =======
Total return (e)(f) 2.43%(g)(h) (2.67)% 4.56% 6.79%(h)
======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Operating expenses 1.15%(i) 1.15% 1.15% 1.15%(i)
Interest expense allocated from Portfolio -- 0.03% -- --
Net expenses 1.15%(i) 1.18% 1.15% 1.15%(i)
Net investment income 5.81%(i) 5.83%(c) 8.28% 8.53%(i)
Waiver/reimbursement 0.33%(i) 0.28% 0.18% 0.13%(i)
Net assets, end of period (000's) $ 80,272 $108,583 $138,058 $147,209
(a)Class A shares were initially offered on November 2, 1999. Per share data
reflects activity from that date.
(b)Per share data was calculated using average shares outstanding during the
period.
(c)Effective September 1, 2001, the Fund has adopted the provisions of the
AICPA Audit and Accounting Guide for Investment Companies and began
amortizing and accreting premium and discount on all debt securities. The
effect of this change for the year ended August 31, 2002, to the net
investment income and net realized and unrealized loss per share was less
than $0.01, and increased the ratio of net investment income to average net
assets from 5.82% to 5.83%. Per share data and ratios for periods prior to
August 31, 2002 have not been restated to reflect this change in
presentation.
(d)Rounds to less than $0.01.
(e)Had the Advisor not waived or reimbursed a portion of expenses, total return
would have been reduced.
(f)Total return at net asset value assuming all distributions reinvested and no
initial sales charge.
(g)At February 28, 2003, 0.11% of the Fund's total return consists of a
voluntary reimbursement by the Advisor for a realized investment loss on an
investment not meeting the Fund's investment restrictions. Excluding this
item, total return would have been 2.32%.
(h)Not annualized.
(i)Annualized.
20
Liberty Floating Rate Fund-- Financial Highlights (continued)
Selected data for a share outstanding throughout each period is as follows:
(UNAUDITED) YEAR ENDED
SIX MONTHS ENDED AUGUST 31, PERIOD ENDED
FEBRUARY 28, ---------------------------------- AUGUST 31,
CLASS B SHARES 2003 2002 2001 2000 (a)
===========================================================================================================================
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.83 $ 9.62 $ 10.00 $ 10.05
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (b) 0.24 0.51(c) 0.77 0.67
Net realized and unrealized loss allocated from Portfolio (0.05) (0.79)(c) (0.37) (0.05)
------- ------- ------- -------
Total from Investment Operations 0.19 (0.28) 0.40 0.62
------- ------- ------- -------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS:
From net investment income (0.23) (0.51) (0.78) (0.67)
From net realized gains -- --(d) --(d) --(d)
------- ------- ------- -------
Total Distributions Declared to Shareholders (0.23) (0.51) (0.78) (0.67)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 8.79 $ 8.83 $ 9.62 $ 10.00
======= ======= ======= =======
Total return (e)(f) 2.26%(g)(h) (3.02)% 4.19% 6.35%(h)
======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Operating expenses 1.50%(i) 1.50% 1.50% 1.50%(i)
Interest expense allocated from Portfolio -- 0.03% -- --
Net expenses 1.50%(i) 1.53% 1.50% 1.50%(i)
Net investment income 5.46%(i) 5.48%(c) 7.93% 8.18%(i)
Waiver/reimbursement 0.33%(i) 0.28% 0.18% 0.13%(i)
Net assets, end of period (000's) $155,746 $174,707 $195,891 $ 83,695
(a)Class B shares were initially offered on November 2, 1999. Per share data
reflects activity from that date.
(b)Per share data was calculated using average shares outstanding during the
period.
(c)Effective September 1, 2001, the Fund has adopted the provisions of the
AICPA Audit and Accounting Guide for Investment Companies and began
amortizing and accreting premium and discount on all debt securities. The
effect of this change for the year ended August 31, 2002, to the net
investment income and net realized and unrealized loss per share was less
than $0.01, and increased the ratio of net investment income to average net
assets from 5.47% to 5.48%. Per share data and ratios for periods prior to
August 31, 2002 have not been restated to reflect this change in
presentation.
(d)Rounds to less than $0.01.
(e)Had the Advisor not waived or reimbursed a portion of expenses, total return
would have been reduced.
(f)Total return at net asset value assuming all distributions reinvested and no
early withdrawal charge.
(g)At February 28, 2003, 0.12% of the Fund's total return consists of a
voluntary reimbursement by the Advisor for a realized investment loss on an
investment not meeting the Fund's investment restrictions. Excluding this
item, total return would have been 2.14%.
(h)Not annualized.
(i)Annualized.
21
Liberty Floating Rate Fund-- Financial Highlights (continued)
Selected data for a share outstanding throughout each period is as follows:
(UNAUDITED) YEAR ENDED
SIX MONTHS ENDED AUGUST 31, PERIOD ENDED
FEBRUARY 28, ---------------------------------- AUGUST 31,
CLASS C SHARES 2003 2002 2001 2000 (a)
===========================================================================================================================
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.83 $ 9.62 $ 10.00 $ 10.05
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (b) 0.23 0.50(c) 0.76 0.66
Net realized and unrealized loss allocated from Portfolio (0.04) (0.79)(c) (0.37) (0.05)
------- ------- ------- -------
Total from Investment Operations 0.19 (0.29) 0.39 0.61
------- ------- ------- -------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS:
From net investment income (0.23) (0.50) (0.77) (0.66)
From net realized gains -- --(d) --(d) --(d)
------- ------- ------- -------
Total Distributions Declared to Shareholders (0.23) (0.50) (0.77) (0.66)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 8.79 $ 8.83 $ 9.62 $ 10.00
------- ------- ------- -------
Total return (e)(f) 2.18%(g)(h) (3.16)% 4.04% 6.20%(h)
------- ------- ------- -------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Operating expenses 1.65%(i) 1.65% 1.65% 1.65%(i)
Interest expense allocated from Portfolio -- 0.03% -- --
Net expenses 1.65%(i) 1.68% 1.65% 1.65%(i)
Net investment income 5.31%(i) 5.33%(c) 7.78% 8.03%(i)
Waiver/reimbursement 0.33%(i) 0.28% 0.18% 0.13%(i)
Net assets, end of period (000's) $110,967 $137,098 $184,399 $ 91,664
(a)Class C shares were initially offered on November 2, 1999. Per share data
reflects activity from that date.
(b)Per share data was calculated using average shares outstanding during the
period.
(c)Effective September 1, 2001, the Fund has adopted the provisions of the
AICPA Audit and Accounting Guide for Investment Companies and began
amortizing and accreting premium and discount on all debt securities. The
effect of this change for the year ended August 31, 2002, to the net
investment income and net realized and unrealized loss per share was less
than $0.01, and increased the ratio of net investment income to average net
assets from 5.32% to 5.33%. Per share data and ratios for periods prior to
August 31, 2002 have not been restated to reflect this change in
presentation.
(d)Rounds to less than $0.01.
(e)Had the Advisor not waived or reimbursed a portion of expenses, total return
would have been reduced.
(f)Total return at net asset value assuming all distributions reinvested and no
early withdrawal charge.
(g)At February 28, 2003, 0.11% of the Fund's total return consists of a
voluntary reimbursement by the Advisor for a realized investment loss on an
investment not meeting the Fund's investment restrictions. Excluding this
item, total return would have been 2.07%.
(h)Not annualized.
(i)Annualized.
22
Liberty Floating Rate Fund-- Financial Highlights (continued)
Selected data for a share outstanding throughout each period is as follows:
(UNAUDITED)
SIX MONTHS ENDED YEAR ENDED AUGUST 31, PERIOD ENDED
FEBRUARY 28, ---------------------------------------------------- AUGUST 31,
CLASS Z SHARES 2003 2002 2001 2000 1999 (a)
=============================================================================================================================
NET ASSET VALUE,
BEGINNING OF PERIOD $ 8.83 $ 9.62 $ 10.00 $ 10.07 $ 10.00
------- ------- ------- ------- -------
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income (b) 0.27 0.57(c) 0.84 0.87 0.47
Net realized and unrealized loss allocated
from Portfolio (0.05) (0.78)(c) (0.37) (0.07) 0.07
------- ------- ------- ------- -------
Total from Investment Operations 0.22 (0.21) 0.47 0.80 0.54
------- ------- ------- ------- -------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS:
From net investment income (0.26) (0.58) (0.85) (0.87) (0.47)
In excess of net investment income -- -- -- -- --(d)
From net realized gains -- --(d) --(d) --(d) --
------- ------- ------- ------- -------
Total Distributions Declared
to Shareholders (0.26) (0.58) (0.85) (0.87) (0.47)
------- ------- ------- ------- -------
NET ASSET VALUE,
END OF PERIOD $ 8.79 $ 8.83 $ 9.62 $ 10.00 $ 10.07
======= ======= ======= ======= =======
Total return (e)(f) 2.61%(g)(h) (2.33)% 4.89% 8.23% 5.43%(h)
======= ======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS:
Operating expenses 0.80%(i) 0.80% 0.80% 0.80% 1.30%(i)
Interest expense allocated from Portfolio -- 0.03% -- -- --
Net expenses 0.80%(i) 0.83% 0.80% 0.80% 1.30%(i)
Net investment income 6.16%(i) 6.18%(c) 8.63% 8.94% 7.10%(i)
Waiver/reimbursement 0.33%(i) 0.28% 0.18% 0.39% 55.49%(i)
Net assets, end of period (000's) $ 8,875 $ 13,236 $ 11,662 $ 6,845 $ 893
(a)From commencement of operations on December 17, 1998.
(b)Per share data was calculated using average shares outstanding during the
period.
(c)Effective September 1, 2001, the Fund has adopted the provisions of the
AICPA Audit and Accounting Guide for Investment Companies and began
amortizing and accreting premium and discount on all debt securities. The
effect of this change for the year ended August 31, 2002, to the net
investment income and net realized and unrealized loss per share was less
than $0.01, and increased the ratio of net investment income to average net
assets from 6.17% to 6.18%. Per share data and ratios for periods prior to
August 31, 2002 have not been restated to reflect this change in
presentation.
(d)Rounds to less than $0.01.
(e)Had the Advisor not waived or reimbursed a portion of expenses, total return
would have been reduced. (f)Total return at net asset value assuming all
distributions reinvested.
(g)At February 28, 2003, 0.12% of the Fund's total return consists of a
voluntary reimbursement by the Advisor for a realized investment loss on an
investment not meeting the Fund's investment restrictions. Excluding this
item, total return would have been 2.49%.
(h)Not annualized.
(i)Annualized.
23
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Transfer Agent
Important Information About This Report
The Transfer Agent for Liberty Floating Rate Fund is:
Liberty Funds Services, Inc.
PO Box 8081
Boston, MA 02266-8081
800-345-6611
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 Floating Rate 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 Floating Rate Fund
Liberty Floating Rate 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
761-03/081N-0303 (04/03) 03/0813
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 Floating Rate Fund
-----------------------------------------------------------
By (Signature and Title)* /s/ Joseph R. Palombo
----------------------------------------------
Joseph R. Palombo, President
Date April 25, 2003
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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
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By (Signature and Title)* /s/ J. Kevin Connaughton
----------------------------------------------
J. Kevin Connaughton, Treasurer
Date April 25, 2003
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* Print the name and title of each signing officer under his or her signature.