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 811-08955
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Liberty-Stein Roe Institutional Floating Rate Income 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-STEIN ROE
INSTITUTIONAL FLOATING RATE INCOME FUND
Semiannual Report o February 28, 2003
[logo: STEIN ROE MUTUAL FUNDS]
Contents
From the President 1
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Performance Summary 2
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Portfolio Managers' Report 3
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Portfolio of Investments 5
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Financial Statements 16
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Notes to Financial Statements 23
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Financial Highlights 28
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Transfer Agent 33
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Not FDIC Insured
May Lose Value
No Bank Guarantee
Must be preceded or accompanied by a prospectus.
From the President
[photo of Joseph R. Palombo]
Dear Shareholder:
The environment for the syndicated loan market remained volatile over the
past six months, but 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-Stein Roe Institutional
Floating Rate Income 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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Economic and market conditions change frequently. There is no assurance that the
trends described in this report will continue or commence.
1
Performance Summary
Average annual total return (%), Period ended February 28, 2003
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6-month
(cumulative) 1-year Life*
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Liberty-Stein Roe Institutional
Floating Rate Income Fund 2.58 0.52 4.62
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CSFB Leveraged Loan Index 4.07 2.84 3.67
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Average annual total return (%), Period ended December 31, 2002
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6-month
(cumulative) 1-year Life*
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Liberty-Stein Roe Institutional
Floating Rate Income Fund -2.23 -0.25 4.47
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* The fund's inception date is 12/17/98. Index performance is from 12/31/98.
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. Performance
results reflect any voluntary waivers or reimbursements of fund expenses by the
advisor. Absent these waivers and reimbursement arrangements, performance
results would have been lower.
INVESTMENT COMPARISONS
Growth of a $10,000 Investment: December 17, 1998 through February 28, 2003
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Liberty-Stein Roe
Institutional
Floating Rate CSFB Leveraged
Income Fund: Loan Index:
12/17/98 $10,000
10,011 $10,000
10,078 10,026
10,167 9,983
10,252 10,044
10,329 10,117
10,407 10,247
10,483 10,339
10,554 10,407
8/31/99 10,595 10,370
10,666 10,345
10,720 10,330
10,774 10,397
10,854 10,468
10,936 10,570
2/29/00 11,025 10,605
11,063 10,521
11,133 10,559
11,230 10,647
11,314 10,712
11,416 10,789
8/31/00 11,498 10,844
11,565 10,879
11,623 10,885
11,656 10,909
11,705 10,985
11,799 11,051
2/28/01 11,833 11,146
11,791 11,159
11,680 11,112
11,798 11,245
11,821 11,258
11,949 11,286
8/31/01 12,064 11,377
11,944 11,159
11,748 10,985
11,848 11,158
11,960 11,274
12,123 11,336
2/28/02 12,022 11,293
12,173 11,424
12,318 11,546
12,367 11,538
12,203 11,363
11,895 11,191
8/31/02 11,781 11,158
11,661 11,183
11,605 11,033
11,748 11,223
11,930 11,399
12,061 11,553
2/28/03 12,084 11,617
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 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 and
does not incur fees or charges and is not professionally managed. It is not
possible to invest in an index. Securities in the fund may not match those in
the index. Index performance is from December 31, 1998.
2
Portfolio Managers' Report
Fund
Commentary
COMMENTARY FROM BRIAN GOOD AND JIM FELLOWS, CFA
PORTFOLIO MANAGERS OF LIBERTY-STEIN ROE INSTITUTIONAL
FLOATING RATE INCOME FUND
For the six-month period that ended February 28, 2003, Liberty-Stein Roe
Institutional Floating Rate Income Fund returned 2.58%. 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.
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Investment Objective:
Liberty-Stein Roe Institutional Floating Rate Income Fund seeks high current
income consistent with preservation of capital by investing primarily in
adjustable rate senior secured loans made to corporations, partnerships and
other borrowers that operate in various industries and geographic regions
(including domestic and foreign entities).
Fund Inception:
December 17, 1998
Net Assets (as of 2/28/03):
$89.5 million
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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.
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TOP 5 SECTORS as of 2/28/03
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%
---
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.
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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 the
engineering and construction company Washington Group International (3.2% of net
assets). 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 International Corp. was closed out at a profit. We had been able to
purchase a sizable term loan at a five
3
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 International 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.
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PORTFOLIO QUALITY BREAKDOWN
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(dollar-weighted %) as of 2/28/03
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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
Non-rated 17.5
Other 11.5
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.
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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.
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-Stein Roe Institutional Floating Rate
Income Fund since its inception.
Portfolio holdings are disclosed as of February 28, 2003, and are subject to
change.
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 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.
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.
4
Stein Roe Floating Rate Limited Liability Company
Investment Portfolio
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February 28, 2003 (Unaudited)
Variable Rate Senior Loan
Interests (a) - 88.5% Par Value
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 Notes, 04/30/07...................................... 42,956 42,956
Sr. Sec. Sub Notes, 04/30/07...................................... 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
--------------
14,012,921
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See notes to investment portfolio.
5
Par Value
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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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
--------------
6,124,263
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CABLE TELEVISION - 4.5%
Century Cable Holdings, LLC:
Discretionary Term, 12/31/09...................................... 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
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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
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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
See notes to investment portfolio.
6
Par Value
CHEMICALS - (CONT)
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
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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
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3,860,822
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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
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9,814,968
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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
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2,607,152
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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
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6,918,806
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See notes to investment portfolio.
7
Par Value
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
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
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18,068,710
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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
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15,164,550
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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
--------------
See notes to investment portfolio.
8
Par Value
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
--------------
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
--------------
See notes to investment portfolio.
9
Par Value
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, 10/17/08 (b).............................. 1 4,849
Term Loan B, 10/17/08............................................. 3,950,000 3,974,503
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 Loan, 07/07/03..................................... 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
--------------
See notes to investment portfolio.
10
Par Value
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
--------------
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
--------------
See notes to investment portfolio.
11
Par Value
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
--------------
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
--------------
See notes to investment portfolio.
12
Par Value
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
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
--------------
See notes to investment portfolio.
13
Par Value
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
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
--------------
See notes to investment portfolio.
14
Preferred Stocks (c)(f) - 0.1% Shares Value
- ------------------------------
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
--------------
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.
15
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
==============
See notes to financial statements.
16
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......................................... 3,000
Trustees' fee.............................................. 1,685
Custody fee................................................ 9,136
Pricing and bookkeeping fees............................... 135,337
Legal fee.................................................. 74,743
Other expenses............................................. 43,560
------------
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.
17
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.
18
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.
19
Liberty-Stein Roe Institutional Floating Rate Income Fund
Statement of Assets
and Liabilities
February 28, 2003 (Unaudited)
ASSETS:
Investments in Portfolio, at cost.............................. $ 98,878,531
------------
Investments in Portfolio, at value............................. $ 89,625,781
Receivable for:
Expense reimbursement due from Advisor...................... 21,768
Deferred Trustees' compensation plan........................... 734
-------------
Total Assets.............................................. 89,648,283
-------------
LIABILITIES:
Payable for:
Distributions............................................... 36,613
Administration fee.......................................... 13,628
Transfer agent fee.......................................... 42,513
Pricing and bookkeeping fees................................ 2,718
Custody fee................................................. 117
Deferred Trustees' fee......................................... 734
Other liabilities.............................................. 15,168
-------------
Total Liabilities........................................... 111,491
-------------
Net Assets..................................................... $ 89,536,792
=============
COMPOSITION OF NET ASSETS:
Paid-in capital................................................ $107,070,300
Overdistributed net investment income.......................... (10,760)
Accumulated net realized loss allocated from Portfolio......... (8,269,998)
Net unrealized depreciation on investments
allocated from Portfolio.................................. (9,252,750)
-------------
Net Assets..................................................... $ 89,536,792
=============
Shares outstanding (unlimited number authorized)............... 10,211,714
-------------
Net asset value per share...................................... $ 8.77
=============
See notes to financial statements.
20
Statement of Operations
For the Six Months Ended February 28, 2003 (Unaudited)
INVESTMENT INCOME:
Interest and fees allocated from Portfolio................... $ 3,288,941
EXPENSES:
Expenses allocated from Portfolio............................ 269,020
Administration fee........................................... 94,857
Pricing and bookkeeping fee.................................. 19,116
Transfer agent fee........................................... 70,991
Trustees' fee................................................ 4,092
Custody fee.................................................. 582
Other expenses............................................... 35,099
------------
Total Expenses............................................ 493,757
Fees and expenses waived or reimbursed by Advisor............ (138,028)
------------
Net Expenses.............................................. 355,729
------------
Net Investment Income........................................ 2,933,212
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS ALLOCATED FROM PORTFOLIO:
Net realized loss on investments allocated from Portfolio.... (2,035,289)
Net increase in reimbursement due from Advisor
allocated from Portfolio (See Note 9)..................... 14,146
Net change in unrealized appreciation/depreciation on
investments allocated from Portfolio...................... 1,417,117
------------
Net Loss.................................................. (604,026)
------------
Net Increase in Net Assets from Operations................... $ 2,329,186
============
See notes to financial statements.
21
Statement of Changes
in Net Assets
(UNAUDITED)
SIX MONTHS YEAR ENDED
FEBRUARY 28, AUGUST 31,
INCREASE (DECREASE) IN NET ASSETS: 2003 2002
------------- -------------
OPERATIONS:
Net investment income.................................................. $ 2,933,212 $ 7,091,790
Net realized loss on investments allocated from Portfolio.............. (2,035,289) (3,258,621)
Net increase in reimbursement due from Advisor
allocated from Portfolio (See Note 9)............................... 14,146 --
Net change in unrealized appreciation/depreciation
on investments allocated from Portfolio............................. 1,417,117 (6,519,650)
------------- -------------
Net Increase (Decrease) from Operations................................ 2,329,186 (2,686,481)
------------- -------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS:
From net investment income............................................. (2,931,916) (7,252,059)
------------- -------------
SHARE TRANSACTIONS:
Subscriptions....................................................... -- 5,206,897
Distributions reinvested............................................ 3,220,246 7,000,576
Redemptions......................................................... (13,992,293) (37,321,400)
------------- -------------
Net Decrease from Share Transactions................................... (10,772,047) (25,113,927)
------------- -------------
Total Decrease in Net Assets........................................... (11,374,777) (35,052,467)
NET ASSETS:
Beginning of period.................................................... 100,911,569 135,964,036
------------- -------------
End of period (including overdistributed net investment income
of $(10,760) and $(12,056), respectively)........................... $ 89,536,792 $100,911,569
============= =============
CHANGES IN SHARES:
Subscriptions....................................................... -- 556,223
Issued for distributions reinvested................................. 369,552 749,377
Redemptions......................................................... (1,606,008) (3,998,992)
------------- -------------
Net Decrease...................................................... (1,236,456) (2,693,392)
============= =============
See notes to financial statements.
22
Notes to Financial Statements
Notes to Financial Statements
- -----------------------------
February 28, 2003 (Unaudited)
Note 1. Accounting Policies
Organization:
- -------------
Liberty-Stein Roe Institutional Floating Rate Income 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 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-Stein Roe Institutional Floating
Rate Income Fund and Liberty Floating Rate Fund owned 20.1% and 79.9%,
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 for the reporting
period. Actual results could differ from those estimates. The following is a
summary of significant accounting policies consistently followed by the
Portfolio and the Fund in the preparation of their financial statements.
Security Valuations:
- --------------------
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 differences could be material
to the financial statements. In the absence of actual market values, senior
loans will be valued by Stein Roe and Farnham Incorporated (the "Advisor"), an
indirect, wholly-owned subsidiary of Columbia Management Group, Inc., on behalf
of the Portfolio 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. Short-term
securities with remaining maturities of 60 days or less are valued at amortized
cost.
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.
23
Investment Transactions and Investment Income:
- ----------------------------------------------
Investment transactions are accounted for on trade date. 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. Realized gains and losses from investment transactions
are reported on an identified cost basis. Unamortized facility fees are
reflected as deferred fees on the Statement of Assets and Liabilities.
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.
Distributions to Shareholders:
- ------------------------------
Dividends from net investment income are declared by the Fund and recorded
each business day and are paid monthly. Capital gains distributions, if any, are
declared and paid annually. Dividends and distributions are recorded on the
ex-dividend date.
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.
Capital loss
Year of expiration carryforward
- --------------------------------------------------------------------
2009 $ 16,991
2010 2,799,382
----------
Total $2,816,373
==========
Note 3. Trustees' Fees and Transactions with Affiliates
- -------------------------------------------------------
Management & Administrative fees:
- ---------------------------------
The Portfolio pays a monthly management fee and the Fund pays a monthly
administrative fee to the Advisor, an indirect, wholly-owned subsidiary of
Columbia Management Group, Inc., for its services as investment advisor and
manager.
24
The management fee for the Portfolio is computed at an annual rate of 0.45%
of average daily net assets. The administrative fee for the Fund is computed at
an annual rate of 0.20% of average daily net assets.
Pricing and Bookkeeping Fees:
- -----------------------------
The Advisor 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 or $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 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.
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.
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 brokerage commissions, interest,
taxes and extraordinary expenses, if any) exceed 0.75% of 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:
- --------------------
The Portfolio's aggregate cost of purchases and proceeds from sales other
than short-term obligations for the six months ended February 28, 2003 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)
=============
25
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 Fund may repurchase an additional amount of
shares up to 2% of the shares outstanding on the Repurchase Request Deadline.
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. 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 0.31% and 13.48%,
respectively, of shares outstanding were tendered.
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.
PRINCIPAL
SELLING 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.
26
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:
BORROWER UNFUNDED 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.
27
Financial Highlights
Stein Roe Floating Rate Limited Liability Company
Selected data for a share outstanding throughout each period is as follows:
(UNAUDITED)
SIX MONTHS YEAR ENDED PERIOD
ENDED AUGUST 31, 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.
28
Liberty-Stein Roe Institutional Floating Rate Income Fund
Selected data for a share outstanding throughout each period is as follows:
(UNAUDITED)
SIX MONTHS YEAR ENDED PERIOD
ENDED AUGUST 31, ENDED
FEBRUARY 28, ----------------------------------------- AUGUST 31,
2003 2002 2001 2000 1999 (a)
------- ------- ------- -------- --------
NET ASSET VALUE,
BEGINNING OF PERIOD........................... $ 8.81 $ 9.61 $10.00 $10.07 $10.00
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............................ 0.29(b) 0.60(b)(c) 0.87(b) 0.88 0.51
Net realized and unrealized gain (loss)
allocated from Portfolio...................... (0.06) (0.82)(c) (0.40) (0.07) 0.07
------- ------- ------- ------- -------
Total from Investment Operations.............. 0.23 (0.22) 0.47 0.81 0.58
------- ------- ------- ------- -------
LESS DISTRIBUTIONS
DECLARED TO SHAREHOLDERS:
From net investment income....................... (0.27) (0.58) (0.85) (0.88) (0.51)
In excess of net investment income............... -- -- -- -- --(d)
From net realized gains.......................... -- -- (0.01) --(d) --
------- ------- ------- ------- -------
Total Distributions Declared
to Shareholders............................ (0.27) (0.58) (0.86) (0.88) (0.51)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD................... $ 8.77 $ 8.81 $ 9.61 $10.00 $10.07
======= ======= ======= ======= =======
Total return (e)................................. 2.58%(f)(g) (2.39)% 4.93% 8.52% 5.94%(f)
======= ======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Operating expenses............................... 0.75%(h) 0.75% 0.75% 0.75% 0.87%(h)
Interest expense allocated from Portfolio........ -- 0.03% -- -- --
Net expenses..................................... 0.75%(h) 0.78% 0.75% 0.75% 0.87%(h)
Net investment income............................ 6.19%(h) 6.28%(c) 8.90% 8.97% 7.68%(h)
Waiver/reimbursement............................. 0.29%(h) 0.21% 0.10% 0.14% 0.85%(h)
Net assets, end of period (000's)................ $89,537 $100,912 $135,964 $184,661 $127,195
(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 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 net
investment income per share by $0.01 and increase net realized and
unrealized loss per share by $0.01. The impact to the ratio of net
investment income to average net assets increased from 6.27% to 6.28%. 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)Not annualized.
(g)At February 28, 2003, 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. This reimbursement had an
impact of less than 0.01% on the Fund's return.
(h)Annualized.
29
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30
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31
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32
Transfer Agent
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Liberty-Stein Roe Institutional Floating Rate Income
Fund is:
Liberty Funds Services, Inc.
PO 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 800-338-2550 and
additional reports will be sent to you.
Semiannual Report:
Liberty-Stein Roe Institutional Floating Rate Income Fund
33
[logo: STEIN ROE MUTUAL FUNDS]
One Financial Center
Boston, MA 02111-2621
800-338-2550
S87-03/082N-0303 (04/03)
03/0815
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-Stein Roe Institutional Floating Rate Income Fund
-----------------------------------------------------------
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.