N-CSR
COLUMBIA FLOATING RATE FUND
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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Columbia 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)
Russell Kane, 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: 1-617-772-3363
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Date of fiscal year end: 08/31/2003
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Date of reporting period: 08/31/2003
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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. Report to Stockholders
[PHOTO]
Columbia Floating
Rate Fund
Annual Report
August 31, 2003
We are now Columbia Funds!
INSIDE -- Management's discussion of the changes effective as of October 13,
2003.
President's Message
[PHOTO]
Dear Shareholder:
As you know, the fund you invest in has long been associated with a larger
investment management organization. In the 1990s, it was part of Liberty
Financial, whose affiliated asset management companies included Colonial, Stein
Roe and Newport. In 2001, your fund became part of the asset management
division of FleetBoston Financial Corp., which you know as Columbia Management
Group (CMG).
Earlier this year, six of the asset management firms that were brought together
under the CMG umbrella were consolidated and renamed Columbia Management
Advisors, Inc. On October 13, 2003, we took the natural next step forward in
this process by changing the name of our funds from Liberty to Columbia. For
example, Liberty Floating Rate Fund was changed to Columbia Floating Rate Fund.
We have also modified certain fund names that existed under both the Liberty
and Columbia brands.
As a result of these fund name changes, most fund CUSIP numbers have changed.
(A CUSIP is a unique identification number assigned to each class of a mutual
fund by the Committee on Uniform Security Identification Procedures.) However,
ticker symbols have not changed. A list of new fund names and other information
related to these changes are available online at www.columbiafunds.com, our new
website address.
A consolidated identity
The consolidation of our management under a single organization and the
renaming of our funds are part of a larger effort to create a consistent
identity. Having taken these additional steps, we believe it will be easier for
our shareholders to do business with us. All funds will be listed under the
"Columbia" name in the mutual fund listings section of your newspaper (as long
as they meet the newspaper's listing requirements). All service inquires will
be handled by Columbia Funds Services, Inc. the new name of our shareholder
service organization.
What will not change is our commitment to our shareholders. We remain committed
to providing the best possible customer service and to offering a wide variety
of mutual funds to help you pursue your long-term financial goals. Should you
have questions, please call shareholder services at 800-345-6611 or visit our
website at its new address, www.columbiafunds.com.
In the report that follows, your portfolio managers talk in depth about
investment strategies and other factors that affected your fund's performance
during the period. We encourage you to read the report carefully.
As always, we thank you for your business and we look forward to continuing to
serve your investment needs.
Sincerely,
/s/ Joseph R. Palumbo
Joseph R. Palombo
President
Net asset value per share as of 08/31/03 ($)
Class A 9.29
Class B 9.29
Class C 9.29
Class Z 9.29
Distributions declared per share 09/01/02-08/31/03 ($)
Class A 0.48
Class B 0.45
Class C 0.44
Class Z 0.51
[LOGO] Not FDIC Insured May Lose Value
No Bank Guarantee
Economic and market conditions change frequently. There is no assurance that
the trends described in this report will continue or commence.
Performance Information
Value of a $10,000 investment 12/17/98--8/31/03
Performance of a $10,000 investment 12/17/98-08/31/03 ($)
without sales with sales
charge charge
--------------------------------
Class A 12,865 12,418
--------------------------------
Class B 12,677 12,584
--------------------------------
Class C 12,605 12,605
--------------------------------
Class Z 13,039 n/a
[CHART]
Class A Shares Class A Shares
Without With Sales CSFB Leveraged
Sales Charge Charge Loan Index
---------------- ---------------- --------------
$10,000 $ 9,650 $10,000
12/1998 10,011 9,661 10,000
1/1999 10,084 9,731 10,026
2/1999 10,158 9,802 9,983
3/1999 10,249 9,890 10,044
4/1999 10,325 9,964 10,117
5/1999 10,387 10,023 10,247
6/1999 10,458 10,092 10,339
7/1999 10,521 10,153 10,407
8/1999 10,554 10,185 10,370
9/1999 10,615 10,244 10,345
10/1999 10,662 10,289 10,330
11/1999 10,707 10,332 10,397
12/1999 10,779 10,402 10,468
1/2000 10,856 10,476 10,570
2/2000 10,940 10,557 10,604
3/2000 10,975 10,590 10,521
4/2000 11,051 10,665 10,559
5/2000 11,132 10,742 10,647
6/2000 11,223 10,831 10,712
7/2000 11,310 10,914 10,789
8/2000 11,387 10,988 10,844
9/2000 11,457 11,056 10,879
10/2000 11,499 11,096 10,885
11/2000 11,527 11,124 10,908
12/2000 11,571 11,166 10,985
1/2001 11,672 11,263 11,051
2/2001 11,701 11,291 11,146
3/2001 11,655 11,247 11,159
4/2001 11,541 11,137 11,112
5/2001 11,654 11,246 11,245
6/2001 11,663 11,255 11,258
7/2001 11,795 11,382 11,286
8/2001 11,905 11,488 11,376
9/2001 11,784 11,371 11,159
10/2001 11,587 11,181 10,985
11/2001 11,693 11,284 11,158
12/2001 11,799 11,386 11,274
1/2002 11,956 11,537 11,336
2/2002 11,852 11,437 11,293
3/2002 11,996 11,576 11,424
4/2002 12,134 11,709 11,546
5/2002 12,178 11,752 11,538
6/2002 12,013 11,593 11,363
7/2002 11,694 11,285 11,191
8/2002 11,584 11,178 11,158
9/2002 11,468 11,067 11,183
10/2002 11,396 10,997 11,033
11/2002 11,546 11,142 11,223
12/2002 11,722 11,311 11,399
1/2003 11,833 11,419 11,553
2/2003 11,866 11,451 11,613
3/2003 11,991 11,571 11,650
4/2003 12,250 11,821 11,815
5/2003 12,547 12,108 11,973
6/2003 12,734 12,289 12,142
7/2003 12,802 12,354 12,225
8/2003 12,865 12,418 12,256
Mutual fund performance changes over time. Please visit www.columbiafunds.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 that 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 the fund, indexes are not
investments, do not incur fees or expenses and are 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 08/31/03 (%)
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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1-year 11.03 7.15 10.65 7.40 10.48 9.48 11.42
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Life 5.50 4.71 5.18 5.01 5.05 5.05 5.81
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Average annual total return as of 06/30/03 (%)
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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1-year 6.00 2.24 5.63 2.38 5.48 4.48 6.37
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Life 5.48 4.66 5.16 4.98 5.03 5.03 5.78
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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 1.00% 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 (newer class shares) 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 shares would have been lower.
1
Portfolio Managers' Report
30-day SEC yield as of 08/31/03 (%)
After
reimbursement
Class A 4.23
Class B 4.04
Class C 3.88
Class Z 4.68
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 4.12% for
class A shares, 3.93% for class B shares, 3.77% for class C shares and
4.56% for class Z shares.
Top 10 issuers as of 08/31/03 (%)
Washington Group International 3.1
Nextel Finance 2.3
Century Cable Holdings 2.2
Comcast Cable Communications 2.0
Cricket Communications 1.7
Mission Energy Holding 1.5
Sygnet Wireless 1.4
142466 Ontario Ltd. 1.3
Huntsman Corp. 1.2
UPC Financing Partnership 1.2
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 these holdings in the future.
For the 12-month period ended August 31, 2003, Columbia Floating Rate Fund
class A shares returned 11.03% without sales charge. That was greater than the
return of the fund's benchmark, the CSFB Leveraged Loan Index, which was 9.80%
for the same period. The fund also did better than its peer group, the Lipper
Loan Participation Funds Category average, which returned 9.49%./1/ These high
returns reflect an advantageous environment for all types of credit
instruments. We believe the fund was able to outperform because of favorable
sector allocation and security selection.
A strong credit environment
Bank loans and other forms of credit were in high demand, especially during the
past six months. From investment-grade corporate debt to high-yield bonds, we
witnessed a sharp recovery from the weak credit markets of the previous two
years. The corporate accounting scandals that dominated the headlines in 2002
had brought new credit issuance to a standstill. During 2003, however, the
capital markets were once again open for a wide range of issuers. Corporate
balance sheets improved and default rates declined from over 10% at the
beginning of 2003 to 5.4% by mid-year.
Cable and wireless--a boon to performance
The portfolio's overweight position in wireless communications and cable
contributed significantly to its strong performance. Wireless Communications,
which accounted for 8.6% of the portfolio's net assets on August 31, 2003, was
hit disproportionately hard in 2002, with many issues trading at discounts of
30-45% to par. Since then, the industry has staged a strong recovery. Many
wireless companies took advantage of their improved operating performance and
prevailing low interest rates by bringing high-yield bonds to market, thereby
improving their capital structure. In many cases, they even repaid bank debt at
100 cents on the dollar. Holdings such as Centennial Cellular and Western
Wireless (0.3% and 0.4% of net assets, respectively) were especially strong
performers./2/
Cable Television, which constituted 6.2% of the portfolio's net assets at
period end, also rebounded from difficult times. Following the Adelphia
Communications bankruptcy in 2002, mergers and
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/1/ Lipper, Inc., a widely respected data provider in the industry, calculates
an average total return for mutual funds with similar investment objectives
as the fund.
/2/ Holdings are disclosed as of August 31, 2003, and are subject to change.
2
acquisitions activity came to a halt, and subscriber bases became difficult to
value. Over the past six to nine months, however, a series of these types of
transactions and other asset sales took place. Although the subscriber values
implied by these transactions were down from their peak, they were also greater
than what the depressed market was suggesting. Century Cable and Olympus Cable,
both subsidiaries of Adelphia, and Charter Communications (2.2%, 0.7% and 1.1%
of net assets, respectively), bellwethers for an industry on the mend, were
important holdings for the portfolio.
/s/ Brian Good /s/ Jim Fellows
Brian Good and Jim Fellows have been portfolio managers of the Columbia
Floating Rate Fund since its inception in December 1998.
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 portfolio 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 net asset value 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.
Portfolio quality breakdown
as of 08/31/03 (dollar-weighted %)
[CHART]
Baa2 0.2
Baa3 2.3
Ba1 2.2
Ba2 5.0
Ba3 21.5
B1 18.2
B2 8.5
B3 11.5
Caa1 3.3
Caa2 1.7
Ca 1.7
NR 9.0
Other 14.9
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 08/31/03 (%)
[CHART]
Wireless Communications 8.6
Cable television 6.2
Healthcare services 4.5
Food manufactuing 4.3
Diversified manufacturing 4.2
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.
3
Investment Portfolio
August 31, 2003
Variable Rate Senior
Loan Interests (a) - 85.2% Par Value
- ---------------------------------------------------------------
Aerospace/Defense - 2.0%
DRS Technologies,
Term Loan 09/30/08 $ 975,102 $ 983,699
Integrated Defense Technologies,
Term Loan B 03/04/08 2,838,581 2,830,870
Titan Corp.,
Term Loan B 06/30/09 1,980,000 1,986,850
Vought Aircraft Industries, Inc.:
Term Loan B 06/30/07 1,290,460 1,285,377
Term Loan C 06/30/08 2,138,265 2,134,235
Term Loan X 12/31/06 847,637 845,511
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10,066,542
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Auto Parts - 2.8%
142466 Ontario Ltd.,
Term Loan B 08/10/07 6,790,479 6,806,272
Federal-Mogul Corp.,
Term Loan C 02/24/04 485,000 482,561
Key Plastics LLC: (b)
Jr. Sec. Sub Notes 04/30/07 48,970 48,970
Sr. Sec. Sub Notes 04/30/07 101,433 101,433
Meridian Automotive Systems, Inc.,
Term Loan B 03/31/07 3,506,549 3,256,840
TRW Automotive Acquisitions Corp.,
Term Loan C1 02/28/11 3,600,000 3,613,993
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14,310,069
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Broadcasting - 3.3%
Comcorp Broadcasting, Inc.,
Term Loan A2 03/31/04 930,188 925,537
Emmis Communications Corp.,
Term Loan A 02/28/09 2,055,811 2,060,042
Gray Television, Inc.
Incremental
Term Loan 12/31/10 2,085,000 2,102,738
Quorum Broadcasting Co., Inc.,
Revolver 12/31/04 1,392,365 1,343,629
Term Loan B 12/31/04 1,983,293 1,938,627
Term Loan C 12/31/04 1,481,752 1,429,860
UPC Financing Partnership,
Term Loan C2 03/31/09 7,000,000 6,180,605
White Knight Broadcasting, Inc.,
Term Loan A2 09/15/03 1,026,745 1,021,612
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17,002,650
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Building Products - 0.5%
Tapco International Corp.:
Term Loan B 06/23/07 1,525,964 1,527,686
Term Loan C 06/23/08 1,047,455 1,048,298
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2,575,984
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Par Value
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Business Services - 2.0%
NATG Holdings LLC: (b)
Revolver A 01/23/05 $ 1,039,746 $ 1,039,875
Term Loan A 01/23/09 1,011,450 809,116
Term Loan B1 01/23/10 684,740 547,762
Term Loan B2 01/23/10 338,491 338,476
Outsourcing Solutions, Inc., (b)(d)
Term Loan B 06/10/06 5,797,946 3,710,685
Relizon Co.,
Term Loan B 12/31/07 1,949,367 1,919,264
Transaction Network Services, Inc.,
Term Loan B 04/03/07 2,003,798 1,993,364
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10,358,542
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Cable Television - 6.2%
Century Cable Holdings LLC.
Discretionary Term 12/31/09 3,500,000 2,879,123
Term Loan 06/30/09 10,000,000 8,384,648
Charter Communications Operating LLC:
Incremental
Term Loan 09/18/08 1,987,500 1,851,717
Term Loan B 03/18/08 3,956,344 3,718,235
Comcast Cable Communications,
Term Loan 11/18/06 10,000,000 9,958,783
CSC Holdings, Inc., (c)
Revolver 06/30/06 1,306,667 1,218,540
Olympus Cable Holdings LLC:
Term Loan A 06/30/10 2,000,000 1,720,000
Term Loan B 09/30/10 2,000,000 1,747,500
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31,478,546
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Casinos/Gambling - 2.7%
Aladdin Gaming LLC: (d)
Term Loan A 02/25/05 6,000,000 4,800,000
Term Loan B 08/26/06 1,250,000 1,015,625
Alliance Gaming Corp.,
Term Loan 09/04/09 3,456,250 3,481,598
Ameristar Casinos, Inc.,
Term Loan B 12/20/06 874,280 877,022
Marina District Finance Co., Inc.,
Term Loan A 12/13/07 3,750,000 3,747,532
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13,921,777
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Chemicals - 2.0%
Huntsman Corp.:
Term Loan A 03/31/07 4,730,658 4,206,842
Term Loan B 03/31/07 2,314,729 2,058,238
Huntsman International, LLC:
Term Loan B 06/30/07 369,058 370,466
Term Loan C 06/30/08 989,297 992,836
See notes to investment portfolio.
4
Investment Portfolio (continued)
August 31, 2003
Variable Rate Senior
Loan Interests (a) (continued) Par Value
- -----------------------------------------------------------
Chemicals (continued)
Messer Griesheim Industries:
Term Loan B 04/27/09 $ 877,032 $ 883,587
Term Loan C 04/27/10 1,262,308 1,271,664
Noveon, Inc., (c)
Term Loan B 12/31/09 338,213 341,518
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10,125,151
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Consumer Services - 1.0%
Alderwoods Group, Inc.:
Note 5 Year 01/02/07 428,133 434,520
Note 7 Year 01/02/09 880,100 941,707
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 27,444 --
Term Loan B 01/01/05 160,714 4,821
Knowledge Learning Corp.,
Term Loan B 05/15/10 3,940,000 3,926,841
-------------
5,310,783
-------------
Consumer Specialties - 2.9%
Church & Dwight Co., Inc.,
Term Loan B 09/30/07 544,666 548,569
Fisher Scientific International, Inc.
Term Loan 03/31/10 2,992,500 3,011,845
Johnson Diversey, Inc.,
Term Loan B 11/03/09 2,310,000 2,323,900
Neptune Technology Group, Inc.,
Term Loan B 03/31/10 1,947,368 1,977,613
Playtex Products, Inc.
Term Loan C 05/31/09 2,984,848 2,987,951
Reddy Ice Group, Inc.
Term Loan 08/17/09 750,000 758,434
United Industries Corp.,
Term Loan B 01/20/06 3,062,666 3,070,794
-------------
14,679,106
-------------
Containers/Packaging - 0.9%
Graphic Packaging International, Inc.
Term Loan B 08/09/10 3,000,000 3,015,902
Kerr Group, Inc.,
Term Loan 08/13/10 1,500,000 1,514,044
-------------
4,529,946
-------------
Diversified Commercial Services - 0.5%
Transcore Holdings, Inc.,
Term Loan B 10/01/06 2,666,955 2,680,961
-------------
Par Value
- ---------------------------------------------------
Diversified Manufacturing - 4.2%
Amsted Industries, Inc.,
Term Loan 10/15/10 3,750,000 $ 3,801,383
Enersys, Inc.,
Term Loan B 11/09/08 4,899,840 4,911,463
Flowserve Corp.,
Term Loan C 06/30/09 743,532 748,071
General Cable Corp.,
Term Loan B 05/28/07 1,608,856 1,484,147
Gentek, Inc.,
Term Loan C 10/31/07 339,226 211,283
Jason, Inc.,
Term Loan B 06/30/07 2,226,931 2,120,630
Polymer Group, Inc.,
Term Loan 12/31/06 5,530,360 5,316,058
Polypore, Inc.,
Term Loan B 12/31/06 1,856,070 1,868,239
Superior Telecom, Inc., (d)
Term Loan B 05/27/04 2,384,316 822,589
-----------
21,283,863
-----------
Electric Utilities - 3.2%
Calpine Corp.,
Second Lien 07/16/07 5,700,000 5,400,527
Michigan Electric Transmission Co.,
Term Loan 05/01/07 990,000 993,265
Mission Energy Holding Co.:
Term Loan A 07/02/06 3,506,494 1,954,821
Term Loan B 07/02/06 9,993,506 5,512,946
Northwestern Corp.,
Term Loan 12/01/06 2,487,500 2,482,281
-----------
16,343,840
-----------
Electronic Components - 1.3%
IPC Acquisition Corp.,
Term Loan 12/31/06 1,123,842 1,116,620
Viasystems, Inc.,
Term Loan B 09/30/08 6,404,195 5,491,960
-----------
6,608,580
-----------
Engineering & Construction - 1.8%
URS Corp.,
Term Loan B 08/22/08 1,589,462 1,600,273
Washington Group International, (c)
Revolver B 07/23/04 7,500,000 7,577,874
-----------
9,178,147
-----------
See notes to investment portfolio.
5
Investment Portfolio (continued)
August 31, 2003
Variable Rate Senior
Loan Interests (a) (continued) Par Value
- ---------------------------------------------------------
Environmental Services - 1.9%
Allied Waste North America, Inc.:
Term Loan A 01/15/10 $ 571,429 $ 575,554
Term Loan B 01/15/10 3,428,571 3,454,088
Term Loan C 01/15/10 600,000 604,123
Environmental Systems Products Holdings, Inc.:
Tranche 1 12/31/04 3,017,072 3,017,024
Tranche 2 12/31/04 674,213 664,091
Synagro Technologies, Inc.,
Term Loan 05/07/07 1,626,059 1,634,516
-------------
9,949,396
-------------
Farming/Agriculture - 0.0%
Quality Stores, Inc., (b)(d)
Term Loan B 04/30/06 1,501,616 33,937
-------------
Finance Companies - 0.2%
Finova Group, Inc.,
Note 05/15/09 2,250,000 888,750
-------------
Food Chains - 0.5%
Carrols Corp.,
Term Loan B 12/31/07 1,414,683 1,412,108
Domino's, Inc.,
Term Loan 06/25/10 1,377,049 1,389,619
-------------
2,801,727
-------------
Food Manufacturing - 4.3%
American Seafoods Group LLC,
Term Loan B 03/31/09 3,115,455 3,122,411
Burns Philp, Inc.,
Term Loan 02/26/09 1,995,000 2,009,777
Commonwealth Brands, Inc.,
Term Loan 08/28/07 1,388,750 1,396,342
Constellation Brands, Inc
Term Loan B 11/30/08 1,973,983 1,994,473
Interstate Bakeries,
Tranche A 07/19/06 3,000,000 2,992,445
Interstate Brands Corp.,
Term Loan C 07/19/07 2,000,000 2,000,581
Merisant Corp.,
Term Loan B 01/11/10 1,330,000 1,342,433
Michael Foods, Inc.,
Term Loan B 04/10/08 835,915 840,161
Otis Spunkmeyer, Inc.,
Term Loan B 02/20/09 2,895,247 2,899,451
Pinnacle Foods Holding Corp.,
Term Loan 05/22/08 460,526 460,719
Southern Wine & Spirits of America, Inc.,
Term Loan B 07/02/08 2,970,000 2,984,744
-------------
22,043,537
-------------
Par Value
- --------------------------------------------------------------
Healthcare Services - 4.3%
Alliance Imaging, Inc.,
Term Loan A 11/02/06 $ 2,595,420 $ 2,465,621
Ameripath, Inc.,
Term Loan 03/27/10 3,491,250 3,527,758
Concentra Operating Corp.,
Term Loan 06/30/09 3,267,000 3,282,218
Davita, Inc.,
Term Loan B 03/31/09 2,000,000 2,007,607
Fresenius Medical Care, Inc.,
Term Loan B 02/21/10 1,300,000 1,305,680
Insight Health Services Corp.:
Delayed Draw
Term Loan 10/17/08 1,000,000 999,860
Term Loan B 10/17/08 3,395,273 3,413,343
Kinetic Concepts, Inc.,
Term Loan B 08/11/10 1,250,000 1,259,371
Pacificare Health Systems, Inc.,
Term Loan 06/03/08 1,250,000 1,258,836
VCA Antech, Inc.
Term Loan D 06/30/09 2,177,600 2,188,488
-------------
21,708,782
-------------
Home Furnishings - 0.0%
Simmons Co.,
Term Loan B 10/29/05 214,917 215,696
-------------
Hospital Management - 1.7%
Community Health Systems, Inc.:
Incremental
Term Loan 01/16/11 2,000,000 2,007,500
Term Loan B 07/16/10 1,985,000 1,992,444
Iasis Healthcare Corp.,
Term Loan B 02/09/09 2,312,500 2,337,722
Vanguard Health Systems,
Incremental
Term Loan 01/03/10 2,388,000 2,408,079
-------------
8,745,745
-------------
Hotels/Resorts - 0.6%
Wyndham International, Inc.,
Term Loan 06/30/06 3,583,122 2,993,705
-------------
Industrial Machinery/Components - 1.0%
Terex Corp.,
Term Loan 07/03/09 5,022,017 4,988,538
-------------
Insurance Brokers/Service - 0.4%
Infinity Property & Casualty,
Term Loan 06/30/10 2,000,000 2,014,983
-------------
See notes to investment portfolio.
6
Investment Portfolio (continued)
August 31, 2003
Variable Rate Senior
Loan Interests (a) (continued) Par Value
- ----------------------------------------------------------
Media Conglomerates - 0.0%
Bridge Information Systems: (d)
Multi-Draw
Term Loan 09/07/03 $ 533,287 $ 58,662
-------------
Medical Specialties - 0.4%
Dade Behring, Inc.,
Term Loan A1 10/03/08 1,755,588 1,785,776
-------------
Metal Fabrications - 0.2%
Copperweld Corp. Welded Tube Holdings,
Term Loan 12/16/03 2,154,167 1,023,225
-------------
Metals/Mining - 1.1%
Dresser, Inc.
Term Loan B 04/10/09 2,000,000 2,012,427
Stillwater Mining Co.,
Term Loan B 12/31/07 3,825,976 3,864,693
-------------
5,877,120
-------------
Movies/Entertainment - 4.0%
AMF Bowling Worldwide, Inc.,
Term Loan 02/28/08 4,084,042 4,094,027
Carmike Cinemas, Inc.,
Term Loan 01/31/07 3,090,625 3,117,642
GT Brands LLC,
Term Loan 09/30/07 3,251,420 3,158,614
Loews Cineplex Entertainment Corp.,
Term Loan 02/29/08 5,627,981 5,611,314
Metro-Goldwyn-Mayer Studios, Inc.,
Term Loan B 06/30/08 2,500,000 2,508,506
Vivendi Universal Entertainment LLP,
Term Loan B 06/30/08 2,000,000 2,011,798
-------------
20,501,901
-------------
Oil Refining/Marketing - 0.6%
Magellan Mainstream Holdings LP,
Term Loan 06/17/08 1,875,000 1,893,099
Tesoro Petroleum Corp.,
Sr. Sec. Inst.
Term Loan 04/15/08 1,197,000 1,209,132
-------------
3,102,231
-------------
Paper - 0.8%
Appleton Papers, Inc.,
Term Loan C 11/08/06 1,824,628 1,832,633
Par Value
- ----------------------------------------------------------
Bear Island Paper Co.,
Term Loan 12/31/05 $ 271,038 $ 271,716
Port Townsend Paper Corp.,
Term Loan B 03/16/07 1,955,000 1,818,450
-------------
3,922,799
-------------
Pharmaceuticals - 1.3%
Medco Health,
Term Loan 06/30/10 3,430,000 3,451,422
Medpointe, Inc.,
Term Loan B 09/30/08 3,147,075 2,982,324
-------------
6,433,746
-------------
Printing/Publishing - 2.0%
Readers Digest Association, Inc.,
Term Loan B 05/20/08 1,388,129 1,378,919
Sun Media Corp.,
Term Loan B 02/07/09 1,440,326 1,444,976
TV Guide, Inc.:
Revolver A (c) 02/28/05 1,522,932 1,454,397
Tranche B 02/28/05 473,000 451,711
Weekly Reader Corp.,
Term Loan B 11/17/06 5,783,725 5,614,782
-------------
10,344,785
-------------
Rail/Shipping - 2.5%
American Commercial Lines: (d)
Term Loan B 06/30/06 956,424 800,766
Term Loan C 06/30/07 1,342,969 1,124,400
Dakota Minnesota Eastern Rail Corp.,
Term Loan 07/25/07 2,900,000 2,934,323
Helm Financial Corp.,
Term Loan B 10/18/06 5,247,372 5,030,443
Kansas City Southern Railway Co.,
Term Loan B 06/12/08 1,183,025 1,187,114
RailAmerica Transportation Corp.:
Term Loan 05/22/09 508,200 509,800
Term Loan B 05/22/09 1,224,300 1,228,151
-------------
12,814,997
-------------
Real Estate Investment Trusts - 0.8%
AIMCO Properties LP,
Term Loan 05/30/08 1,850,000 1,857,545
Macerich Partnership LP,
Term Loan 07/26/05 1,968,000 1,975,418
-------------
3,832,963
-------------
See notes to investment portfolio.
7
Investment Portfolio (continued)
August 31, 2003
Variable Rate Senior
Loan Interests (a) (continued) Par Value
- -------------------------------------------------------------
Rental/Leasing Companies - 0.5%
Rent-A-Center, Inc.,
Term Loan 05/28/09 $ 2,400,000 $ 2,418,976
-------------
Retail Stores - 0.3%
CH Operating LLC,
Term Loan 06/21/07 1,758,621 1,760,799
-------------
Semiconductors - 0.6%
Semiconductor Components Industries LLC:
Term Loan B 08/04/06 1,196,965 1,186,102
Term Loan C 08/04/07 1,289,018 1,277,319
Term Loan D 08/04/07 631,777 622,640
-------------
3,086,061
-------------
Steel/Iron Ore - 2.3%
Ispat Inland LP.:
Term Loan B 07/16/05 3,885,675 2,714,739
Term Loan C 07/16/06 3,885,675 2,714,739
Steel Dynamics, Inc.,
Term Loan B 03/26/08 1,809,894 1,823,174
UCAR Finance, Inc.,
Term Loan B 12/31/07 4,443,135 4,454,714
-------------
11,707,366
-------------
Telecommunications Infrastructure Equipment - 0.4%
Spectrasite Communications, Inc.,
Term Loan B 12/31/07 1,834,223 1,837,755
-------------
Telecommunications Services - 1.9%
Alaska Communications Systems Holdings, Inc.,
Term Loan 02/14/09 1,750,000 1,754,832
ICG Communications, Inc.,
Term Loan 03/31/06 329,799 277,090
Time Warner Telecom,
Term Loan B 03/31/08 2,786,000 2,774,174
Valor Telecommunications Enterprises LLC,
Term Loan B 06/30/08 4,709,827 4,696,616
-------------
9,502,712
-------------
Textiles - 0.8%
Springs Industries, Inc.,
Term Loan B 09/05/08 2,345,490 2,351,323
St. John Knits International, Inc.,
Incremental
Term Loan B 07/31/07 1,496,659 1,499,426
-------------
3,850,749
-------------
Par Value
- -------------------------------------------------------
Transportation - 3.9%
Laidlaw Investments Ltd.,
Term Loan B 06/19/09 $ 4,554,000 $ 4,671,966
Motor Coach Industries, Inc.,
Term Loan 06/16/05 5,803,248 4,758,498
Pacer International, Inc.,
Term Loan 06/10/10 929,412 938,201
TTIndustries, Inc.,
Term Loan B 03/31/07 6,409,454 5,981,157
United Airlines,
Term Loan B 07/01/04 3,784,000 3,757,013
-------------
20,106,835
-------------
Wireless Communications - 8.6%
Centennial Cellular Operating Co., LLC,
Term Loan A 11/30/06 1,637,192 1,573,093
Centennial Puerto Rico Operations Corp.:
Term Loan B 05/31/07 695,627 673,273
Term Loan C 11/30/07 651,169 630,058
Cricket Communications, Inc., (d)
Vendor Term Loan 06/30/07 20,500,000 8,661,250
Nextel Finance Co.:
Term Loan A 12/31/07 1,947,368 1,884,031
Term Loan B 06/30/08 3,738,109 3,735,337
Term Loan C 12/31/08 4,820,158 4,817,305
Term Loan D 03/31/09 1,492,500 1,484,675
Nextel Partners, Inc.,
Term Loan B 01/29/08 5,970,000 5,903,222
Rural Cellular Corp.:
Term Loan B 10/03/08 781,710 759,020
Term Loan C 04/03/09 781,710 760,039
Sygnet Wireless, Inc.:
Revolver (c) 09/30/06 81,567 76,877
Term Loan A 09/23/06 1,642,843 1,610,166
Term Loan B 03/23/07 1,484,857 1,469,165
Term Loan C 12/23/07 3,995,106 3,946,198
Ubiquitel Operating Co.:
Term Loan A 09/30/07 938,776 748,064
Term Loan B 11/17/08 4,224,490 3,353,804
Western Wireless Corp.,
Term Loan A 03/31/08 1,300,000 1,241,499
Term Loan B 09/30/08 830,409 803,481
-------------
44,130,557
-------------
Total Variable Rate Senior Loan Interests
(cost of $451,230,723) 434,939,298
-------------
See notes to investment portfolio.
8
Investment Portfolio (continued)
August 31, 2003
Common Stocks (e) - 2.0% Shares Value
- --------------------------------------------------------
Business Services - 0.1%
NATG Holdings LLC (b) 322,876 $ 571,491
-------------
Engineering & Construction - 1.6%
Washington Group
International, Inc. 320,332 8,072,366
-------------
Environmental Services - 0.0%
Environmental Systems (b) 3,445 --
-------------
Healthcare Services - 0.2%
Sun Healthcare Group 186,353 829,270
-------------
Movies/Entertainment - 0.1%
AMF Bowling Worldwide, Inc. 19,918 537,786
-------------
Total Common Stocks
(cost of $13,018,429) 10,010,913
-------------
Preferred Stocks (b)(e) - 0.1%
- --------------------------------------------------------
Auto Parts - 0.0%
Key Plastics LLC, Series A 13 --
-------------
Consumer Services - 0.0%
DIMAC Holdings, Series C 483 --
-------------
Environmental Services - 0.1%
Environmental Systems, Series A 637,928 637,92
-------------
Total Preferred Stocks
(cost of $697,301) 637,928
-------------
Warrants (b)(e) - 0.0% Units
- --------------------------------------------------------
Auto Parts - 0.0%
Key Plastics LLC,
expires 04/26/11 7 --
-------------
Consumer Services - 0.0%
DIMAC Holdings,
expires 04/04/25 483 --
-------------
Total Warrants
(cost of $0) --
-------------
Short-Term Obligation - 12.1% Par Value
- -------------------------------------------------------------
Repurchase agreement with State
Street Bank & Trust Co., dated
08/29/03, due 09/02/03 at 0.940%,
collateralized by U.S. Treasury
Bonds with various maturities to
02/12/04 market value of
$63,020,410 (repurchase
proceeds $61,785,452)
(cost of $61,779,000) $ 61,779,000 $ 61,779,000
-------------
Total Investments - 99.4%
(cost of $526,725,453)(f) 507,367,139
-------------
Other Assets & Liabilities, Net - 0.6% 3,294,292
- -------------------------------------------------------------
Net Assets - 100.0% $ 510,661,431
-------------
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) Represents fair value as determined in good faith under procedures approved
by the Trustees.
(c) Unfunded commitments, See Note 8.
(d) These issuers are in default of certain debt covenants. Income is not being
accrued.
(e) Non-income producing.
(f) Cost for federal income tax purposes is $526,975,870.
See notes to financial statements.
9
Columbia Floating Rate Limited Liability Company
Statement of Assets and Liabilities
August 31, 2003
Assets:
Investments, at cost (including
repurchase agreement) $526,725,453
------------
Investments, at value $445,588,139
Repurchase agreement 61,779,000
Receivable for:
Investments sold 1,277,823
Interest and fees 2,731,704
Deferred Trustees' compensation plan 324
Other assets 5,518
------------
Total Assets 511,382,508
------------
Liabilities:
Deferred facility fees 210,544
Payable to custodian bank 856
Payable for:
Investments purchased 18,333
Management fee 180,937
Transfer agent fee 500
Pricing and bookkeeping fees 43,783
Audit fee 63,670
Legal fee 35,882
Deferred Trustees' fee 324
Other liabilities 166,248
------------
Total Liabilities 721,077
------------
Net Assets $510,661,431
------------
Statement of Operations
For the Year Ended August 31, 2003
Investment Income:
Interest $ 29,371,999
Facility and other fees 671,142
------------
Total Investment Income 30,043,141
Expenses:
Management fee 2,072,250
Transfer agent fee 6,000
Pricing and bookkeeping fees 268,155
Trustees' fee 5,557
Custody fee 24,020
Legal fee 159,904
Other expenses 93,138
------------
Total Operating Expenses 2,629,024
Custody earnings credit (2,274)
------------
Net Operating Expenses 2,626,750
Interest expense 5,047
------------
Net Expenses 2,631,797
------------
Net Investment Income 27,411,344
------------
Net Realized and Unrealized
Gain (Loss) on Portfolio Positions:
Net realized loss on investments (11,578,981)
Net realized loss on the disposal of
investments in violation of restrictions
and subsequently reimbursed by affiliate --
Net change in unrealized appreciation/
depreciation on investments 33,906,354
------------
Net Gain 22,327,373
------------
Net Increase in Net Assets from Operations $ 49,738,717
------------
See notes to financial statements.
10
Columbia Floating Rate Limited Liability Company
Statement of Changes in Net Assets
Year Ended Year Ended
August 31, August 31,
Increase (Decrease) in Net Assets: 2003 2002
- ----------------------------------------------------------------------------------------------------------------------------
Operations:
Net investment income $ 27,411,344 $ 38,015,994
Net realized loss on investments (11,578,981) (12,166,254)
Net realized loss on the disposal of investments in violation of restrictions and subsequently
reimbursed by affiliate -- --
Net change in unrealized appreciation/depreciation on investments 33,906,354 (37,403,502)
------------- -------------
Net Increase (Decrease) from Operations 49,738,717 (11,553,762)
------------- -------------
Transactions in Investors' Beneficial Interest:
Contributions 93,827,932 80,963,660
Withdrawals (169,392,880) (200,374,089)
------------- -------------
Net Decrease from Transactions in Investors' Beneficial Interest (75,564,948) (119,410,429)
------------- -------------
Total Decrease in Net Assets (25,826,231) (130,964,191)
Net Assets:
Beginning of period 536,487,662 667,451,853
------------- -------------
End of period $ 510,661,431 $ 536,487,662
------------- -------------
See notes to financial statements.
11
Columbia Floating Rate Limited Liability Company
Statement of Cash Flows
For the Year Ended August 31, 2003
Increase (Decrease) in Cash
- -------------------------------------------------------------------------------
Cash flows from operating activities:
Net Investment Income $ 27,411,344
Adjustments to reconcile net investment income to net cash
provided by operating activities:
Purchase of investment securities (309,671,229)
Proceeds from disposition of investment securities 348,176,487
Disposition of short-term portfolio investments, net 10,712,649
Decrease in interest and fees receivable 191,993
Increase in receivable for investments sold (1,139,733)
Decrease in other assets 5,732
Decrease in deferred facility fees (314,235)
Increase in payable for accrued expenses 122,119
Net amortization of premium (discount) (2,240,748)
Decrease in payable for investments purchased (141,383)
Increase in other liabilities 130,791
-------------
Net cash provided by operating activities 73,243,787
-------------
Cash flows from financing activities:
Proceeds from capital contributions 93,827,932
Payment of capital withdrawals (169,392,880)
-------------
Net cash used for financing activities (75,564,948)
-------------
Net decrease in cash (2,321,161)
Cash:
Beginning of year 2,320,305
-------------
End of year $ (856)
-------------
See notes to financial statements.
12
Columbia Floating Rate Fund
Statement of Assets and Liabilities
August 31, 2003
Assets:
Investment in Portfolio, at cost $436,423,455
------------
Investment in Portfolio, at value $420,841,977
Receivable for:
Fund shares sold 5,076,650
Expense reimbursement due from Advisor 11,864
Deferred Trustees' compensation plan 4,987
Other assets 121,709
------------
Total Assets 426,057,187
------------
Liabilities:
Payable for:
Distributions 570,414
Administration fee 66,309
Transfer agent fee 65,392
Pricing and bookkeeping fees 11,475
Distribution and service fees 203,841
Deferred Trustees' fee 4,987
Other liabilities 51,860
------------
Total Liabilities 974,278
------------
Net Assets $425,082,909
------------
Composition of Net Assets:
Paid-in capital $467,133,816
Overdistributed net investment income (118,985)
Accumulated net realized loss allocated from
Portfolio (26,350,444)
Net unrealized depreciation on investments
allocated from Portfolio (15,581,478)
------------
Net Assets $425,082,909
------------
Class A:
Net assets $ 97,924,217
Shares outstanding 10,538,912
------------
Net asset value and redemption price per share $ 9.29 (a)
------------
Maximum offering price per share
($9.29/0.9650) $ 9.63 (b)
------------
Class B:
Net assets $163,448,012
Shares outstanding 17,589,077
------------
Net asset value and offering price per share $ 9.29 (a)
------------
Class C:
Net assets $132,655,812
Shares outstanding 14,275,878
------------
Net asset value and offering price per share $ 9.29 (a)
------------
Class Z:
Net assets $ 31,054,868
Shares outstanding 3,341,425
------------
Net asset value, offering and redemption
price per share $ 9.29
------------
(a) Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
(b) On sales of $100,000 or more the offering price is reduced.
Statement of Operations
For the Year Ended August 31, 2003
Investment Income:
Interest and fees allocated from Portfolio $23,963,533
-----------
Expenses:
Net operating expenses allocated from
Portfolio 2,096,672
Administration fee 733,776
Distribution fee:
Class A 84,108
Class B 705,300
Class C 690,589
Service fee:
Class A 210,271
Class B 391,833
Class C 287,746
Transfer agent fee 831,460
Pricing and bookkeeping fees 115,570
Trustees' fee 11,854
Custody fee 1,460
Other expenses 156,186
-----------
Total Operating Expenses 6,316,825
Fees and expenses waived or reimbursed by
Advisor (1,024,842)
-----------
Net Operating Expenses 5,291,983
Interest expense allocated from portfolio 4,036
-----------
Net Expenses 5,296,019
-----------
Net Investment Income 18,667,514
-----------
Net Realized and Unrealized Gain
(Loss) on Investments Allocated
from Portfolio:
Net realized loss on investments allocated
from Portfolio (9,169,133)
Net realized loss on the disposal of
investments in violation of restrictions and
subsequently reimbursed by affiliate
allocated from Portfolio --
Net change in unrealized appreciation/
depreciation on investments allocated
from Portfolio 27,013,323
-----------
Net Gain 17,844,190
-----------
Net Increase in Net Assets from Operations $36,511,704
-----------
See notes to financial statements.
13
Columbia Floating Rate Fund
Statement of Changes in Net Assets
Year Ended Year Ended
Increase (Decrease) August 31, August 31,
in Net Assets: 2003 2002
- ---------------------------------------------------------
Operations:
Net investment income $ 18,667,514 $ 26,458,047
Net realized loss on
investments allocated
from Portfolio (9,169,133) (8,907,633)
Net realized loss on the
disposal of investments in
violation of restrictions
and subsequently
reimbursed by affiliate
allocated from Portfolio -- --
Net change in unrealized
appreciation/depreciation
on investments allocated
from Portfolio 27,013,323 (30,883,851)
------------ ------------
Net Increase (Decrease)
from Operations 36,511,704 (13,333,437)
------------ ------------
Distributions Declared to Shareholders:
From net investment income:
Class A (4,539,163) (7,104,057)
Class B (7,926,365) (10,221,673)
Class C (5,630,260) (8,408,033)
Class Z (611,180) (809,139)
From net realized gains:
Class A -- (456)
Class B -- (655)
Class C -- (539)
Class Z -- (52)
------------ ------------
Total Distributions Declared
to Shareholders (18,706,968) (26,544,604)
------------ ------------
Share Transactions:
Class A:
Subscriptions 27,208,495 28,944,806
Distributions reinvested 3,087,731 4,435,355
Redemptions (44,962,115) (52,671,603)
------------ ------------
Net Decrease (14,665,889) (19,291,442)
------------ ------------
Class B:
Subscriptions 18,058,823 20,986,672
Distributions reinvested 4,767,950 5,846,660
Redemptions (41,744,003) (32,352,200)
------------ ------------
Net Decrease (18,917,230) (5,518,868)
------------ ------------
Class C:
Subscriptions 36,719,791 29,374,992
Distributions reinvested 3,919,840 5,754,828
Redemptions (50,692,251) (69,520,549)
------------ ------------
Net Decrease (10,052,620) (34,390,729)
------------ ------------
Year Ended Year Ended
August 31, August 31,
2003 2002
- ---------------------------------------------------------
Class Z:
Subscriptions $ 22,935,486 $ 5,244,801
Distributions reinvested 108,322 74,304
Redemptions (5,754,567) (2,625,789)
------------ ------------
Net Increase 17,289,241 2,693,316
------------ ------------
Net Decrease from Share
Transactions (26,346,498) (56,507,723)
------------ ------------
Total Decrease in Net
Assets (8,541,762) (96,385,764)
Net Assets:
Beginning of period 433,624,671 530,010,435
------------ ------------
End of period
(overdistributed net
investment income of
$(118,985) and
$(68,416), respectively) $425,082,909 $433,624,671
------------ ------------
Changes in Shares:
Class A:
Subscriptions 2,964,783 3,083,643
Issued for distributions
reinvested 347,141 473,895
Redemptions (5,067,027) (5,608,115)
------------ ------------
Net Decrease (1,755,103) (2,050,577)
------------ ------------
Class B:
Subscriptions 1,983,663 2,248,559
Issued for distributions
reinvested 536,176 624,817
Redemptions (4,711,437) (3,446,281)
------------ ------------
Net Decrease (2,191,598) (572,905)
------------ ------------
Class C:
Subscriptions 4,038,037 3,143,271
Issued for distributions
reinvested 440,802 614,545
Redemptions (5,725,422) (7,394,823)
------------ ------------
Net Decrease (1,246,583) (3,637,007)
------------ ------------
Class Z:
Subscriptions 2,482,423 560,381
Issued for distributions
reinvested 11,924 7,930
Redemptions (651,580) (281,403)
------------ ------------
Net Increase 1,842,767 286,908
------------ ------------
See notes to financial statements.
14
Notes to Financial Statements
August 31, 2003
Note 1. Accounting Policies
Organization:
Columbia Floating Rate Fund (the "Fund") (formerly Liberty Floating Rate 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
Columbia Floating Rate Limited Liability Company (the "Portfolio"), (formerly
Stein Roe Floating Rate Limited Liability Company), 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 Code.
At August 31, 2003, Columbia Floating Rate Fund and Columbia Institutional
Floating Rate Income Fund owned 82.4% and 17.6%, respectively, of the Portfolio.
On April 1, 2003, Stein Roe & Farnham Incorporated ("Stein Roe"), the
investment advisor and pricing and bookkeeping agent to the Portfolio and the
Fund, merged into Columbia Management Advisors, Inc. ("Columbia"), formerly
known as Columbia Management Co., an indirect, wholly-owned subsidiary of
FleetBoston Financial Corporation. At the time of the merger, Columbia assumed
the obligations of Stein Roe with respect to the Portfolio and the Fund. The
merger did not change the way the Portfolio and the Fund are managed, the
investment personnel assigned to manage the Portfolio and the Fund or the fees
paid by the Portfolio and the Fund to Columbia.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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 the 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 Columbia at fair value, which is intended to
approximate market value, pursuant to procedures approved by the Board of
Trustees. In determining fair value, Columbia 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. Equity securities for which market
quotations are not readily available are valued at fair value as determined in
good faith under consistently applied procedures established by and under the
general supervision of the Board of Trustees.
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.
15
Notes to Financial Statements (continued)
August 31, 2003
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:
All income, expenses (other than class specific fees), and realized and
unrealized gains (losses) are allocated to each class proportionately on a
daily basis, based on net assets, for purposes of determining the net asset
value of each class.
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, Discount and Premium:
Interest income is recorded on the accrual basis and includes accretion of
discounts, amortization of premiums and paydown gains and losses. Facility fees
received are treated as market discounts. Unamortized facility fees are
reflected as deferred fees on the Statement of Assets and Liabilities.
Distributions to Shareholders:
The Fund declares and records distributions from net investment income daily
and pays monthly. Capital gain distributions, if any, are declared and paid
annually.
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 August 31, 2003.
Note 2. Federal Tax Information
The Fund's income and capital gain distributions are determined in accordance
with income tax regulations, which may differ from accounting principles
generally accepted in the United States of America. These differences are
primarily due to differing treatments for deferral of losses from wash sales,
discount accretion/premium amortization on debt securities, current year
distribution payable, capital loss carryforwards, post-October losses and
non-deductible expenses. 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.
For the year ended August 31, 2003, permanent items identified and reclassified
among the components of the Fund's net assets are as follows:
Overdistributed Accumulated
Net Investment Net Realized Paid-In
Income Loss Capital
--------------- ------------ --------
$(11,115) $(405,183) $416,298
Net investment income, net realized gains (losses) and net assets were not
affected by this reclassification.
The tax character of distributions paid by the Fund during the years ended
August 31, 2003 and August 31, 2002 was as follows:
August 31,
-----------------------
2003 2002
----------- -----------
Ordinary Income $18,706,968 $26,542,902
Long-Term Capital Gains -- 1,702
As of August 31, 2003, the components of the Fund's distributable earnings on a
tax basis were as follows:
Undistributed
Ordinary Unrealized
Income Depreciation*
------------- -------------
$541,169 $(15,783,304)
* The difference between book-basis and tax-basis unrealized depreciation is
attributable primarily to accretion/amortization on debt securities and the
tax deferral of losses on wash sales.
The following capital loss carryforwards determined as of August 31, 2003, are
available to reduce the Fund's taxable income arising from future net realized
gains on investments, if any, to the extent permitted by the Internal Revenue
Code:
Year of Capital Loss
Expiration Carryforward
---------- ------------
2010 $ 7,156,391
2011 4,178,432
-----------
$11,334,823
-----------
16
Notes to Financial Statements (continued)
August 31, 2003
Under current tax rules, certain capital losses realized after October 31 may
be deferred and treated as occurring on the first day of the following fiscal
year. As of August 31, 2003 for federal income tax purposes, post-October
losses of $14,890,555 attributable to security transactions were deferred to
September 1, 2003.
Expired capital loss carryforward, if any, are recorded as a reduction of paid
in capital.
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.
At a special meeting held on October 8, 2003, the Board of Trustees approved a
new management fee structure to go into effect on November 1, 2003. Under the
new structure, Columbia will receive a monthly fee based on the Portfolio's
average daily net assets as follows:
Annual
Average Daily Net Assets Fee Rate
------------------------ --------
First $1 billion 0.45%
Next $1 billion 0.40%
Over $2 billion 0.35%
Administration Fee:
Columbia is the investment advisor of the Fund and 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:
Columbia is responsible for providing pricing and bookkeeping services to the
Portfolio and the Fund under a Pricing and Bookkeeping Agreement. Under a
separate agreement (the "Outsourcing Agreement"), Columbia has delegated those
functions to State Street Bank and Trust Company ("State Street"). Columbia
pays fees to State Street under the Outsourcing Agreement.
Under its pricing and bookkeeping agreement with the Portfolio and the Fund,
Columbia receives from the Portfolio and the Fund annual flat fees 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 year ended August 31, 2003, the net asset based
fee rate was 0.030%. The Portfolio also pays out-of-pocket costs for pricing
services.
Transfer Agent Fee:
Liberty Funds Services, Inc. (the "Transfer Agent"), an affiliate of Columbia,
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. Effective October 13, 2003,
Liberty Funds Services, Inc., changed its name to Columbia Funds Services, Inc.
The Portfolio pays the Transfer Agent a monthly fee equal to $6,000 annually.
At a special meeting held on October 8, 2003, the Board of Trustees approved
the change of transfer agent fees structure of the Fund. Effective November 1,
2003, the Fund will be charged an annual $34.00 charge per open account for the
transfer agent fees.
Underwriting Discounts, Service and Distribution Fees:
Liberty Funds Distributor, Inc. (the "Distributor"), an affiliate of Columbia,
is the Fund's principal underwriter. Effective October 13, 2003, Liberty Funds
Distributor, Inc. changed its name to Columbia Funds Distributor, Inc. For the
year ended August 31, 2003, the Fund has been advised that the Distributor
retained $10,812 net underwriting discounts on sales of the Fund's Class A
shares and received early withdrawal charges (EWC) of $2,015, $623,746 and
$24,472 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. 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.
17
Notes to Financial Statements (continued)
August 31, 2003
Expense Limits:
Columbia 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 Columbia.
The Portfolio has an agreement with its custodian bank under which $2,274 of
custody fees were reduced by balance credits for the year ended August 31,
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 year ended August 31, 2003, purchases and sales of investments,
other than short-term obligations, by the Portfolio were $309,671,229 and
$348,176,487, respectively.
Unrealized appreciation (depreciation) at August 31, 2003, based on cost for
federal tax purposes, was:
Gross unrealized appreciation $ 7,867,581
Gross unrealized depreciation (27,476,312)
------------
Net unrealized depreciation $(19,608,731)
------------
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 year ended August
31, 2003, there were four tender offers in September, December, March and June.
The Fund offered to repurchase 15%, 15%, 15% and 12% of its shares and 13.81%,
9.32%, 7.49% and 5.26% 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 August 31, 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 $1,306,667 $1,218,540
Goldman Sachs Credit
Partners LP:
Bridge Information Systems,
Multi-Draw Term Loan 533,287 58,662
Simmons Co.,
Term Loan B 214,917 215,696
The ability of borrowers to meet their obligations may be affected by economic
developments in a specific industry.
18
Notes to Financial Statements (continued)
August 31, 2003
Note 7. Line of Credit
The Portfolio and other affiliated funds participate in a $350,000,000 credit
facility, which is used for temporary or emergency purposes to facilitate
portfolio liquidity. Interest is charged to the Portfolio based on its
borrowings. In addition, the Portfolio has agreed to pay commitment fees on its
pro-rata portion of the line of credit. The commitment fee is included in
"Other expenses" on the Statement of Operations. Prior to April 26, 2003, the
Portfolio participated in a separate credit agreement with similar terms to its
existing agreement. The Portfolio may borrow up to $150,000,000. The average
daily loan balance was $19,800,000 at a weighted average interest rate of
1.835%. The Portfolio is required to maintain certain asset coverage with
respect to the loans.
Note 8. Unfunded Loan Commitments
As of August 31, 2003, the Portfolio had unfunded loan commitments of
$6,937,959, which could be extended at the option of the Borrower, pursuant to
the following loan agreements:
Unfunded
Borrower Commitments
- -------- -----------
CSC Holdings, Inc. $ 693,333
Noveon, Inc. 625,000
Sygnet Wireless, Inc. 617,558
TV Guide, Inc. 1,502,068
Washington Group International, Inc. 3,500,000
----------
$6,937,959
----------
Note 9. Other
During the year ended August 31, 2003, the Portfolio held a security in
violation of investment restrictions. This position was sold off at a loss of
$101,250 and the Portfolio was reimbursed by the Advisor.
19
Columbia Floating Rate Limited Liability Company -- Financial Highlights
Selected data for a share outstanding throughout each period is as follows:
Year Ended August 31, Period Ended
------------------------------------- August 31,
2003 2002 2001 2000 1999 (a)
- -----------------------------------------------------------------------------------------------------
Ratios to Average Net Assets/ Supplemental Data:
Total return 11.68%(g) (2.20)% 5.15% 8.73% 5.85%(f)
Operating expenses 0.57%(b) 0.55%(b) 0.53%(b) 0.55% 0.96%(c)
Interest expense --(d) 0.03% -- -- --
Net investment income 5.96%(b) 6.42%(b)(e) 8.94%(b) 9.26% 7.59%(c)
Portfolio turnover rate 75% 70% 63% 21% 17%(f)
(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) Rounds to less than 0.01%.
(e) Effective September 1, 2001, the Portfolio adopted the provisions of the
AICPA Audit and Accounting Guide for Investment Companies and began
amortizing and accreting premium and discount on 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.
(f) Not annualized.
(g) Total return consists of a voluntary reimbursement by the Advisor for a
realized investment loss on an investment not meeting the Portfolio's
investment restrictions. This reimbursement had an impact of less than
0.01% on the Portfolio's return.
20
Columbia Floating Rate Fund -- Financial Highlights
Selected data for a share outstanding throughout each period is as follows:
Year Ended August 31, Period Ended
--------------------------------- 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) 0.48 0.54 (c) 0.81 0.71
Net realized and unrealized gain (loss) allocated from
Portfolio 0.46 (0.79)(c) (0.37) (0.05)
-------- -------- -------- --------
Total from Investment Operations 0.94 (0.25) 0.44 0.66
-------- -------- -------- --------
Less Distributions Declared to
Shareholders:
From net investment income (0.48) (0.54) (0.82) (0.71)
From net realized gains -- --(d) --(d) --(d)
-------- -------- -------- --------
Total Distributions Declared to Shareholders (0.48) (0.54) (0.82) (0.71)
-------- -------- -------- --------
Net Asset Value, End of Period $ 9.29 $ 8.83 $ 9.62 $ 10.00
-------- -------- -------- --------
Total return (e)(f) 11.03%(g) (2.67)% 4.56% 6.79%(h)
-------- -------- -------- --------
Ratios to Average Net Assets:
Net operating expenses 1.15% 1.15% 1.15% 1.15%(j)
Interest expense allocated from Portfolio --(i) 0.03% -- --
Net expenses 1.15% 1.18% 1.15% 1.15%(j)
Net investment income 5.39% 5.83%(c) 8.28% 8.53%(j)
Waiver/reimbursement 0.28% 0.28% 0.18% 0.13%(j)
Net assets, end of period (000's) $ 97,924 $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 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 or early withdrawal charge.
(g) Total return consists of a voluntary reimbursement by the Advisor for a
realized investment loss on an investment not meeting the Portfolio's
investment restrictions. This reimbursement had an impact of less than
0.01% on the Fund's Class A Shares return.
(h) Not annualized.
(i) Rounds to less than 0.01%.
(j) Annualized.
21
Columbia Floating Rate Fund -- Financial Highlights (continued)
Selected data for a share outstanding throughout each period is as follows:
Year Ended August 31, Period Ended
--------------------------------- 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) 0.45 0.51 (c) 0.77 0.67
Net realized and unrealized gain (loss) allocated from
Portfolio 0.46 (0.79)(c) (0.37) (0.05)
-------- -------- -------- -------
Total from Investment Operations 0.91 (0.28) 0.40 0.62
-------- -------- -------- -------
Less Distributions Declared to
Shareholders:
From net investment income (0.45) (0.51) (0.78) (0.67)
From net realized gains -- --(d) --(d) --(d)
-------- -------- -------- -------
Total Distributions Declared to Shareholders (0.45) (0.51) (0.78) (0.67)
-------- -------- -------- -------
Net Asset Value, End of Period $ 9.29 $ 8.83 $ 9.62 $ 10.00
-------- -------- -------- -------
Total return (e)(f) 10.65%(g) (3.02)% 4.19% 6.35%(h)
-------- -------- -------- -------
Ratios to Average Net Assets:
Net operating expenses 1.50% 1.50% 1.50% 1.50%(j)
Interest expense allocated from Portfolio --(i) 0.03% -- --
Net expenses 1.50% 1.53% 1.50% 1.50%(j)
Net investment income 5.05% 5.48%(c) 7.93% 8.18%(j)
Waiver/reimbursement 0.28% 0.28% 0.18% 0.13%(j)
Net assets, end of period (000's) $163,448 $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 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) Total return consists of a voluntary reimbursement by the Advisor for a
realized investment loss on an investment not meeting the Portfolio's
investment restrictions. This reimbursement had an impact of less than
0.01% on the Fund's Class B Shares return.
(h) Not annualized.
(i) Rounds to less than 0.01%.
(j) Annualized.
22
Columbia Floating Rate Fund -- Financial Highlights (continued)
Selected data for a share outstanding throughout each period is as follows:
Year Ended August 31, Period Ended
--------------------------------- 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) 0.44 0.50 (c) 0.76 0.66
Net realized and unrealized gain (loss) allocated from
Portfolio 0.46 (0.79)(c) (0.37) (0.05)
-------- -------- -------- -------
Total from Investment Operations 0.90 (0.29) 0.39 0.61
-------- -------- -------- -------
Less Distributions Declared to
Shareholders:
From net investment income (0.44) (0.50) (0.77) (0.66)
From net realized gains -- --(d) --(d) --(d)
-------- -------- -------- -------
Total Distributions Declared to Shareholders (0.44) (0.50) (0.77) (0.66)
-------- -------- -------- -------
Net Asset Value, End of Period $ 9.29 $ 8.83 $ 9.62 $ 10.00
-------- -------- -------- -------
Total return (e)(f) 10.48%(g) (3.16)% 4.04% 6.20%(h)
-------- -------- -------- -------
Ratios to Average Net Assets:
Net operating expenses 1.65% 1.65% 1.65% 1.65%(j)
Interest expense allocated from Portfolio --(i) 0.03% -- --
Net expenses 1.65% 1.68% 1.65% 1.65%(j)
Net investment income 4.88% 5.33%(c) 7.78% 8.03%(j)
Waiver/reimbursement 0.28% 0.28% 0.18% 0.13%(j)
Net assets, end of period (000's) $132,656 $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 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) Total return consists of a voluntary reimbursement by the Advisor for a
realized investment loss on an investment not meeting the Portfolio's
investment restrictions. This reimbursement had an impact of less than
0.01% on the Fund's Class C Shares return.
(h) Not annualized.
(i) Rounds to less than 0.01%.
(j) Annualized.
23
Columbia Floating Rate Fund -- Financial Highlights (continued)
Selected data for a share outstanding throughout each period is as follows:
Year Ended August 31, Period Ended
--------------------------------------------- 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) 0.50 0.57 (c) 0.84 0.87 0.47
Net realized and unrealized gain (loss)
allocated from Portfolio 0.47 (0.78)(c) (0.37) (0.07) 0.07
-------- -------- -------- -------- --------
Total from Investment Operations 0.97 (0.21) 0.47 0.80 0.54
-------- -------- -------- -------- --------
Less Distributions Declared
to Shareholders:
From net investment income (0.51) (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 (0.51) (0.58) (0.85) (0.87) (0.47)
-------- -------- -------- -------- --------
Net Asset Value,
End of Period $ 9.29 $ 8.83 $ 9.62 $ 10.00 $ 10.07
-------- -------- -------- -------- --------
Total return (e)(f) 11.42%(g) (2.33)% 4.89% 8.23% 5.43%(h)
-------- -------- -------- -------- --------
Ratios to Average Net Assets:
Net operating expenses 0.80% 0.80% 0.80% 0.80% 1.30%(j)
Interest expense allocated from Portfolio --(i) 0.03% -- -- --
Net expenses 0.80% 0.83% 0.80% 0.80% 1.30%(j)
Net investment income 5.53% 6.18%(c) 8.63% 8.94% 7.10%(j)
Waiver/reimbursement 0.28% 0.28% 0.18% 0.39% 55.49%(j)
Net assets, end of period (000's) $ 31,055 $ 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 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) Total return consists of a voluntary reimbursement by the Advisor for a
realized investment loss on an investment not meeting the Portfolio's
investment restrictions. This reimbursement had an impact of less than
0.01% on the Fund's Class Z Shares return.
(h) Not annualized.
(i) Rounds to less than 0.01%.
(j) Annualized.
24
Report of Independent Auditors
To the Trustees and the Shareholders of Columbia Floating Rate Fund and the
Trustees of Columbia Floating Rate Limited Liability Company
In our opinion, the accompanying statements of assets and liabilities,
including the investment portfolio, and the related statements of operations
and of changes in net assets and cash flows and the financial highlights
present fairly, in all material respects, the financial position of Columbia
Floating Rate Fund (the "Fund") (formerly Liberty Floating Rate Fund) and
Columbia Floating Rate Limited Liability Company (the "Portfolio") (formerly
Stein Roe Floating Rate Limited Liability Company), at August 31, 2003, and the
results of each of their operations, the changes in each of their net assets,
the Portfolio's cash flows and each of their financial highlights for the
periods indicated, in conformity with accounting principles generally accepted
in the United States of America. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Portfolio's and Fund's management; our responsibility is
to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with auditing
standards generally accepted in the United States of America, which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of portfolio positions at August 31, 2003, by correspondence with the custodian
and lending or agent banks, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
October 21, 2003
25
Trustees
Effective October 8, 2003, Patrick J. Simpson and Richard L. Woolworth were
appointed to the Board of Trustees of the Fund. Messrs. Simpson and Woolworth
had been directors of 15 Columbia Funds and 12 funds in the CMG Fund Trust.
Also effective October 8, 2003, the incumbent trustees of the Fund were elected
as directors of the 15 Columbia Funds and as trustees of the 12 funds in the
CMG Fund Trust. The new combined Board of Trustees of the Fund now oversees 124
funds in the Columbia Funds Complex (including the former Liberty Funds, former
Stein Roe Funds, Columbia Funds and CMG Funds). Several of those trustees also
serve on the Boards of other funds in the Columbia Funds Complex.
The Trustees serve terms of indefinite duration. The names, addresses and ages
of the Trustees and officers of the Funds in the Columbia Funds Complex, the
year each was first elected or appointed to office, their principal business
occupations during at least the last five years, the number of portfolios
overseen by each Trustee and other directorships they hold are shown below.
Each officer listed below serves as an officer of each Fund in the Columbia
Funds Complex. The Statement of Additional Information (SAI) contains
additional information about the Trustees and is available without charge upon
request by calling the fund's distributor at 800-345-6611.
Number of
Year First Portfolios in
Position Elected or Columbia Funds
with Appointed Principal Occupation(s) Complex Overseen
Name, Address and Age Funds to Office/1/ During Past Five Years by Trustee
- --------------------------------------------------------------------------------------------------------------
Disinterested Trustees
Douglas A. Hacker (Age 48) Trustee 1996 Executive Vice President - Strategy of 124
P.O. Box 66100 United Airlines (airline) since
Chicago, IL 60666 December, 2002 (formerly President of
UAL Loyalty Services (airline) from
September, 2001 to December, 2002;
Executive Vice President and Chief
Financial Officer of United Airlines
from March, 1993 to September, 2001;
Senior Vice President and Chief
Financial Officer of UAL, Inc. prior
thereto).
Janet Langford Kelly (Age 45) Trustee 1996 Chief Administrative Officer and Senior 124
3100 West Beaver Road Vice President, Kmart Holding
Troy, MI 48084-3163 Corporation since September, 2003
(formerly Executive Vice
President-Corporate Development and
Administration, General Counsel and
Secretary, Kellogg Company (food
manufacturer), from September, 1999 to
August, 2003; Senior Vice President,
Secretary and General Counsel, Sara Lee
Corporation (branded, packaged,
consumer-products manufacturer) from
January, 1995 to September, 1999).
Richard W. Lowry (Age 67) Trustee 1995 Private Investor since August, 1987 126/3/
10701 Charleston Drive (formerly Chairman and Chief Executive
Vero Beach, FL 32963 Officer, U.S. Plywood Corporation
(building products manufacturer)).
Charles R. Nelson (Age 61) Trustee 1981 Professor of Economics, University of 124
Department of Economics Washington, since January, 1976; Ford
University of Washington and Louisa Van Voorhis Professor of
Seattle, WA 98195 Political Economy, University of
Washington, since September, 1993;
Director, Institute for Economic
Research, University of Washington,
since September, 2001; Adjunct
Professor of Statistics, University of
Washington, since September, 1980;
Associate Editor, Journal of Money
Credit and Banking, since September,
1993; consultant on econometric and
statistical matters.
John J. Neuhauser (Age 60) Trustee 1985 Academic Vice President and Dean of 127/3,4/
84 College Road Faculties since August, 1999, Boston
Chestnut Hill, MA 02467-3838 College (formerly Dean, Boston College
School of Management from September,
1977 to September, 1999.
Patrick J. Simpson (Age 58) Trustee 2000 Partner, Perkins Coie L.L.P. (formerly 124
1211 S.W. 5th Avenue Partner, Stoel Rives Boley Jones &
Suite 1500 Grey).
Portland, OR 97204
Thomas E. Stitzel (Age 67) Trustee 1998 Business Consultant since 1999 124
2208 Tawny Woods Place (formerly Professor of Finance from
Boise, ID 83706 1975 to 1999 and Dean from 1977 to
1991, College of Business, Boise State
University); Chartered Financial
Analyst.
Other
Principal Occupation(s) Directorships
During Past Five Years Held
- ---------------------------------------------------------------------------
Executive Vice President - Strategy of None
United Airlines (airline) since
December, 2002 (formerly President of
UAL Loyalty Services (airline) from
September, 2001 to December, 2002;
Executive Vice President and Chief
Financial Officer of United Airlines
from March, 1993 to September, 2001;
Senior Vice President and Chief
Financial Officer of UAL, Inc. prior
thereto).
Chief Administrative Officer and Senior None
Vice President, Kmart Holding
Corporation since September, 2003
(formerly Executive Vice
President-Corporate Development and
Administration, General Counsel and
Secretary, Kellogg Company (food
manufacturer), from September, 1999 to
August, 2003; Senior Vice President,
Secretary and General Counsel, Sara Lee
Corporation (branded, packaged,
consumer-products manufacturer) from
January, 1995 to September, 1999).
Private Investor since August, 1987 None
(formerly Chairman and Chief Executive
Officer, U.S. Plywood Corporation
(building products manufacturer)).
Professor of Economics, University of None
Washington, since January, 1976; Ford
and Louisa Van Voorhis Professor of
Political Economy, University of
Washington, since September, 1993;
Director, Institute for Economic
Research, University of Washington,
since September, 2001; Adjunct
Professor of Statistics, University of
Washington, since September, 1980;
Associate Editor, Journal of Money
Credit and Banking, since September,
1993; consultant on econometric and
statistical matters.
Academic Vice President and Dean of Saucony, Inc. (athletic footwear);
Faculties since August, 1999, Boston SkillSoft Corp.
College (formerly Dean, Boston College (E-Learning)
School of Management from September,
1977 to September, 1999.
Partner, Perkins Coie L.L.P. (formerly None
Partner, Stoel Rives Boley Jones &
Grey).
Business Consultant since 1999 None
(formerly Professor of Finance from
1975 to 1999 and Dean from 1977 to
1991, College of Business, Boise State
University); Chartered Financial
Analyst.
26
Trustees (continued)
Number of
Year First Portfolios in
Position Elected or Columbia Funds
with Appointed Principal Occupation(s) Complex Overseen
Name, Address and Age Funds to Office/1/ During Past Five Years by Trustee
- ---------------------------------------------------------------------------------------------------------------
Disinterested Trustees
Thomas C. Theobald (Age 66) Trustee 1996 Managing Director, William Blair 124
27 West Monroe Street, Capital Partners (private equity
Suite 3500 investing) since September, 1994
Chicago, IL 60606 (formerly Chief Executive Officer and
Chairman of the Board of Directors,
Continental Bank Corporation prior
thereto).
Anne-Lee Verville (Age 58) Trustee 1998 Author and speaker on educational 125/4/
359 Stickney Hill Road systems needs (formerly General
Hopkinton, NH 03229 Manager, Global Education Industry from
1994 to 1997, and President,
Applications Solutions Division from
1991 to 1994, IBM Corporation (global
education and global applications)).
Richard L. Woolworth (Age 62) Trustee 1991 Chairman and Chief Executive Officer, 124
100 S.W. Market Street The Regence Group (healthcare
#1500 maintenance organization) (formerly
Portland, OR 97207 Chairman and Chief Executive Officer,
BlueCross BlueShield of Oregon;
Certified Public Accountant, Arthur
Young & Company).
Interested Trustees
William E. Mayer/2/ (Age 63) Trustee 1994 Managing Partner, Park Avenue Equity 126/3/
399 Park Avenue Partners (private equity) since
Suite 3204 February, 1999 (formerly Founding
New York, NY 10022 Partner, Development Capital LLC from
November 1996 to February, 1999; Dean
and Professor, College of Business and
Management, University of Maryland from
October, 1992 to November, 1996).
Joseph R. Palombo/2/ (Age 50) Trustee, 2000 Executive Vice President and Chief 125/5/
One Financial Center Chairman Operating Officer of Columbia
Boston, MA 02111 of the Management Group, Inc. (Columbia
Board Management) since December, 2001 and
and Director, Executive Vice President and
President Chief Operating Officer of the Advisor
since April, 2003 (formerly Chief
Operations Officer of Mutual Funds,
Liberty Financial Companies, Inc. from
August, 2000 to November, 2001;
Executive Vice President of Stein Roe &
Farnham Incorporated (Stein Roe) from
April, 1999 to April, 2003; Director of
Colonial Management Associates, Inc.
(Colonial) from April, 1999 to April,
2003; Director of Stein Roe from
September, 2000 to April, 2003)
President of Columbia Funds and Galaxy
Funds since February, 2003 (formerly
Vice President from September 2002 to
February 2003); Manager of Stein Roe
Floating Rate Limited Liability Company
since October, 2000; (formerly Vice
President of the Columbia Funds from
April, 1999 to August, 2000; Chief
Operating Officer and Chief Compliance
Officer, Putnam Mutual Funds from
December, 1993 to March, 1999).
Other
Principal Occupation(s) Directorships
During Past Five Years Held
- ------------------------------------------------------------------------
Managing Director, William Blair Anixter International (network
Capital Partners (private equity support equipment distributor),
investing) since September, 1994 Jones Lang LaSalle (real estate
(formerly Chief Executive Officer and management services) and
Chairman of the Board of Directors, MONY Group (life insurance).
Continental Bank Corporation prior
thereto).
Author and speaker on educational Chairman of the Board of
systems needs (formerly General Directors, Enesco Group, Inc.
Manager, Global Education Industry from (designer, importer and
1994 to 1997, and President, distributor of giftware and
Applications Solutions Division from collectibles).
1991 to 1994, IBM Corporation (global
education and global applications)).
Chairman and Chief Executive Officer, NW Natural, a natural gas
The Regence Group (healthcare service provider
maintenance organization) (formerly
Chairman and Chief Executive Officer,
BlueCross BlueShield of Oregon;
Certified Public Accountant, Arthur
Young & Company).
Managing Partner, Park Avenue Equity Lee Enterprises (print media),
Partners (private equity) since WR Hambrecht + Co. (financial
February, 1999 (formerly Founding service provider) and First
Partner, Development Capital LLC from Health (healthcare).
November 1996 to February, 1999; Dean
and Professor, College of Business and
Management, University of Maryland from
October, 1992 to November, 1996).
Executive Vice President and Chief None
Operating Officer of Columbia
Management Group, Inc. (Columbia
Management) since December, 2001 and
Director, Executive Vice President and
Chief Operating Officer of the Advisor
since April, 2003 (formerly Chief
Operations Officer of Mutual Funds,
Liberty Financial Companies, Inc. from
August, 2000 to November, 2001;
Executive Vice President of Stein Roe &
Farnham Incorporated (Stein Roe) from
April, 1999 to April, 2003; Director of
Colonial Management Associates, Inc.
(Colonial) from April, 1999 to April,
2003; Director of Stein Roe from
September, 2000 to April, 2003)
President of Columbia Funds and Galaxy
Funds since February, 2003 (formerly
Vice President from September 2002 to
February 2003); Manager of Stein Roe
Floating Rate Limited Liability Company
since October, 2000; (formerly Vice
President of the Columbia Funds from
April, 1999 to August, 2000; Chief
Operating Officer and Chief Compliance
Officer, Putnam Mutual Funds from
December, 1993 to March, 1999).
/1/ In December 2000, the boards of each of the former Liberty Funds and former
Stein Roe Funds were combined into one board of trustees responsible for
the oversight of both fund groups (collectively, the "Liberty Board"). In
October 2003, the trustees on the Liberty Board were elected to the boards
of the Columbia Funds (the "Columbia Board") and of the CMG Funds (the "CMG
Funds Board"); simultaneous with that election, Patrick J. Simpson and
Richard L. Woolworth, who had been directors on the Columbia Board and
trustees on the CMG Funds Board, were appointed to serve as trustees of the
Liberty Board. The date shown is the earliest date on which a
trustee/director was elected or appointed to the board of a Fund in the
Columbia Funds Complex).
/2/ Mr. Mayer is an "interested person" (as defined in the Investment Company
Act of 1940 (1940 Act)) by reason of his affiliation with WR Hambrecht +
Co. Mr. Palombo is an interested person as an employee of the Advisor.
/3/ Messrs. Lowry, Neuhauser and Mayer each also serve as a director/trustee of
the All-Star Funds, currently consisting of 2 funds, which are advised by
an affiliate of the Advisor.
/4/ Mr. Neuhauser and Ms. Verville also serve as disinterested directors of
Columbia Management Multi-Strategy Hedge Fund, LLC, which is advised by the
Advisor.
/5/ Mr. Palombo also serves as an interested director of Columbia Management
Multi-Strategy Hedge Fund, LLC, which is advised by the Advisor.
27
Officers and Transfer Agent
Year first
elected or
Position with appointed Principal occupation(s)
Name, address and age Columbia Funds to office during past five years
- ------------------------------------------------------------------------------------------------------------
Officers
Vicki L. Benjamin (Age 42) Chief Accounting 2001 Controller of the Columbia Funds and of the
One Financial Center Officer and Liberty All-Star Funds since May, 2002; Chief
Boston, MA 02111 Controller Accounting Officer of the Columbia Funds and
Liberty All-Star Funds since June, 2001;
Controller and Chief Accounting Officer of the
Galaxy Funds since September, 2002 (formerly Vice
President, Corporate Audit, State Street Bank and
Trust Company from May, 1998 to April, 2001;
Audit Manager from July, 1994 to June, 1997;
Senior Audit Manager from July, 1997 to May,
1998, Coopers & Lybrand, LLP).
J. Kevin Connaughton (Age 39) Treasurer 2000 Treasurer of the Columbia Funds and of the
One Financial Center Liberty All-Star Funds since December, 2000; Vice
Boston, MA 02111 President of the Advisor since April, 2003
(formerly Controller of the Liberty Funds and of
the Liberty All-Star Funds from February, 1998 to
October, 2000); Treasurer of the Galaxy Funds
since September, 2002; Treasurer, Columbia
Management Multi-Strategy Hedge Fund, LLC since
December, 2002 (formerly Vice President of
Colonial from February, 1998 to October, 2000 and
Senior Tax Manager, Coopers & Lybrand, LLP from
April, 1996 to January, 1998).
Important Information About This Report
The Transfer Agent for Columbia Floating Rate Fund is:
Columbia Funds Services, Inc.
P.O. Box 8081
Boston, MA 02266-8081
Please note our new name as of October 13, 2003
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 Columbia 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 Columbia Funds Performance Update.
Annual Report:
Columbia Floating Rate Fund
Columbia Floating Rate Fund Annual Report, August 31, 2003
[LOGO](R) ColumbiaFunds
A Member of Columbia Management Group
(c)2003 Columbia Funds Distributor, Inc.
One Financial Center, Boston, MA 02111-2621
800.426.3750 WWW.columbiafunds.com
761-02/211P-0803 (10/03) 03/2927
PRSRT STD
U.S. Postage
PAID
Holliston, MA Permit NO. 20
Item 2. Code of Ethics.
(a) The registrant has, as of the end of the period covered by this
report, adopted a code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by the
Registrant or a third party.
(b) During the period covered by this report, there were not any
amendments to a provision of the code of ethics adopted in 2(a) above.
(c) During the period covered by this report, there were not any waivers
or implicit waivers to a provision of the code of ethics adopted in
2(a) above.
Item 3. Audit Committee Financial Expert.
The registrant's Board of Trustees has determined that Douglas A. Hacker and
Anne-Lee Verville, each of whom are members of the registrant's Board of
Trustees and Audit Committee, each qualify as an audit committee financial
expert. Mr. Hacker and Ms. Verville are each independent trustees, as defined in
paragraph (a)(2) of this item's instructions.
Item 4. Principal Accountant Fees and Services.
Not applicable at this time.
Item 5. Audit Committee of Listed Registrants.
Not applicable at this time.
Item 6. Reserved.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Columbia Management Advisors, Inc. ("CMA")
VOTING CLIENT AND FUND PROXIES
POLICY:
All proxies for client securities for which Columbia Management Advisors, Inc.
("CMA") has been granted authority to vote shall be voted in a manner considered
to be in the best interests of CMA's clients, including the CMA Managed Funds(1)
and their shareholders without regard to any benefit to CMA or its affiliates.
CMA shall examine each proposal and vote against the proposal, if, in its
judgment, approval or adoption of the proposal would be expected to impact
adversely the current or potential market value of the issuer's securities. In
addition, CMA shall examine each proposal and vote the securities held on behalf
of a client against the proposal, if, in its judgment, the proposal would be
expected to effect adversely the best interest of the client. References to the
best
interest of a client refer to the interest of the client in terms of the
potential economic return on the client's investment. In the event a client
believes that its other interests require a different vote, CMA shall vote as
the client instructs.
CMA addresses potential material conflicts of interest by having a predetermined
voting policy. For those proposals that require special consideration or in
instances where special circumstances may require varying from the predetermined
policy, the Proxy Committee will determine the vote in the best interest of
CMA's clients, without consideration of any benefit to CMA, its affiliates or
its other clients.
OVERVIEW:
CMA's policy is based upon its fiduciary obligation to act in its clients' best
interests. In addition, the SEC recently adopted rules under the Investment
Company Act of 1940 and the Investment Advisers Act of 1940. These rules impose
obligations with respect to proxy voting on investment advisers and investment
companies.
PROCEDURE:
I. Account Policies
Except as otherwise directed by the client, CMA shall vote as follows:
Separately Managed Accounts
CMA shall vote proxies on securities held in its separately managed accounts.
CMA Trust Company Trust Pools
CMA Trust Company shall vote proxies on securities held in the trust pools.
CMG Funds/CMA Fund Trust
CMA shall vote proxies on securities held in the Funds, including multi-managed
and subadvised Funds.
CMA Private Portfolio
CMA shall vote proxies on securities held in its separately managed accounts.
Private Management Accounts
The authority to vote proxies on securities held in such accounts shall be
reserved to the client.
MasterPlan Accounts
Where CMA serves as trustee (or custodian) with participant-directed accounts
(including 404(c) plans), the proxies on securities held in such accounts shall
be forwarded to the participants for voting where permitted by the controlling
instrument. This includes ESOP or company stock.
II. Proxy Committee
CMA shall establish a Proxy Committee, which shall be composed of the heads of
equity investments, equity research and compliance, and senior operational and
investment representatives of CMA's regional offices, fund administration and
legal department and the Sarbanes Oxley specialist. In the event that such
persons are unable to participate in a meeting of the Proxy Committee, their
designees shall act on their behalf. A vacancy in the Proxy Committee shall be
filled by the prior member's successor in position at CMA or a person of
equivalent experience. Each portfolio manager of a fund or account which holds
securities of an issuer having a shareholder meeting shall be an ad hoc member
of the Proxy Committee in connection with the vote of proxies for the meeting.
The Proxy Committee's functions shall include, in part,
(a) direction of the vote on proposals where there has been a recommendation to
the Committee not to vote according to the predetermined policy provided in the
Voting Guidelines in III (A) and (B) below or which proposals require special
consideration under III (C) below,
(b) annual review of this Proxy Voting Policy and Procedure to ensure
consistency with internal policies and regulatory agency policies,
(c) annual review of existing Voting Guidelines and development of additional
Voting Guidelines to assist in the review of proxy proposals, and
(d) development and modification of Voting Procedures as it deems appropriate or
necessary.
In determining the vote of any proposal for which it has responsibility, the
Proxy Committee shall consider whether the proposal would be expected to impact
adversely the current or potential market value of the issuer's securities. In
addition, the Proxy Committee shall examine the proposal and vote the securities
held on behalf of a client against the proposal, if, in its judgment, the
proposal would be expected to effect adversely the best interest of the client.
References to the best interest of a client refer to the interest of the client
in terms of the potential economic return on the client's investment. In the
event a client believes that its other interests require a different vote, CMA
shall vote as the client instructs.
In determining the vote on any proposal, the Proxy Committee shall not consider
any benefit to CMA, any of its affiliates, any of its or its affiliates'
clients, or of its customers or service providers, other than benefits to the
owner of the securities to be voted.
The Proxy Committee shall create a charter, which shall be consistent with this
policy and procedure. The charter shall set forth the Committee's purpose,
membership and operation. The charter shall include procedures prohibiting a
member from voting on a matter for which he or she has a conflict of interest by
reason of a direct relationship with the issuer or other party affected by a
given proposal, e.g., is a portfolio manager for an account of the issuer.
III. Voting Guidelines
In general, proposals which are designed to either dissuade or preclude the
acquisition and/or merger of one corporate entity by/with another, or have the
effect of diluting the value of the existing shares outstanding, or reduce the
shareholders' power over any company actions are rejected. Individual merger and
corporate restructuring proposals are reviewed on a case-by-case basis.
A. Proposals usually voted for
CMA will vote in favor of the following proposals, unless otherwise directed by
the Proxy Committee:
1. Auditors. Proposals for the annual appointment or approval of independent
corporate auditors. An auditor will usually be thought of as independent unless
the auditor receives more than 50% of its revenues from non-audit activities
from the company and its affiliates.
2. Directors. Proposals for the election of Directors or an increase or decrease
in the number of Directors provided a majority of directors would be
independent. However, CMA will vote against proposals that give management the
ability to alter the size of the board without shareholder approval.
3. Chairman of the Board / Chief Executive Officer. Proposals for the creation
or elimination of positions or titles for senior management personnel. CMA
prefers the role of Chairman and CEO to be held by different persons. In
evaluating proposals we will consider the size of the company and the nature of
its shareholder base.
4. Compensation. Proposals for specific compensation for employees/directors if
provisions are consistent with standard business practices, such as bonus plans,
incentive plans, stock option plans, pension and retirement benefits, stock
purchase plans, or thrift plans. CMA requires management to provide substantial
justification for the repricing of options.
5. Debt Limits. Proposals for an increase in debt limit, unless proposed
specifically as an anti-takeover action.
6. Indemnification. Proposals to approve indemnification of the Board of
Directors through self-insurance plans or purchase of insurance. It is not the
intent to eliminate Director Responsibility for negligence and or breaches of
fiduciary duty.
7. Meeting. Proposals to approve the minutes of a prior meeting; proposals to
change the date or location of the annual meeting.
8. Name of Company. Proposals to approve a change in the company name.
9. Principal Office. Proposals to change the location of the company's principal
place of business provided the purpose is not to reduce the scope of adequate
regulatory or financial supervision.
10. Report and Accounts. Proposals to approve the annual reports and accounts
provided the certifications required by Sarbanes Oxley Act 2002 have been
provided.
11. Par Value. Proposals to change the par value of the stock.
12. Shares. Proposals for the elimination of authorized but un-issued shares or
retirement of those shares purchased for a sinking fund or treasury stock;
proposals to increase the authorized shares for stock dividends, stock splits or
general issuance, unless proposed as an anti-takeover action.
13. Share Repurchase Programs. Proposals to institute/ renew open market share
repurchase plans in which all shareholders may participate on equal terms.
14. Independent Committees. Proposals that request that the board audit,
compensation and/ or nominating committees include independent directors. The
Audit Committee must satisfy the independence and experience requirements
established by the Securities and Exchange Commission ("SEC") and the New York
Stock Exchange. At least one member of the Audit Committee must qualify as a
"financial expert" within the definition set forth in rules of the SEC.
15. Equal Opportunity Employment. Proposals that endorse the recruitment,
development, and promotion of personnel on a non-discriminatory merit basis,
regardless of race, creed, color or gender.
B. Proposals Usually Voted Against
CMA will vote against the following proposals, unless otherwise determined by
the Proxy Committee.
1. Super Majority Voting. Proposals to require a majority vote larger than 51%
of outstanding shares to approve any proxy proposal. Such proposals are largely
intended to support management positions prior to the occurrence of a particular
event.
2. Cumulative Voting. Proposals, which allow more than one vote per share in the
election of directors. Directors should represent all shareholders equally as
opposed to group influences.
3. Preferred Stock, Warrants, Rights, Poison Pills. Proposals intended largely
to avoid acquisition prior to the occurrence of an actual event or to discourage
acquisition by creating a cost constraint.
4. Reclassification of Common Stock. Proposals to change voting rights by type
of Common stock or for long term holders versus new holders.
5. Written Consent. Proposals to eliminate the right of shareholders to act by
written consent without a meeting.
C. Ability to Vote Proxies Other than as Provided in A or B Above.
A Portfolio Manager, SubAdviser or other party involved with a client's or
Fund's account may conclude that the interest of the client or Fund requires
that a proxy be voted on a proposal in a manner that differs from the
predetermined proxy voting policy. In this situation, he or she shall request
that the Proxy Committee consider voting the proxy on the proposal other than
according to the predetermined policy provided in III (A) or (B) above. If any
person (or entity) requests the Proxy Committee (or any of its members) to vote
a proxy other than according to the predetermined policy, that person shall
furnish to the Proxy Committee a written explanation of the reasons for the
request and a description of the person's (or entity's) relationship with the
party proposing the matter to shareholders.
The Proxy Committee may vary from the predetermined policy if it determines that
voting on the proposal according to the predetermined policy would be expected
to impact adversely the current or potential market value of the issuer's
securities or to effect adversely the best interest of the client. References to
the best interest of a client refer to the interest of the client in terms of
the potential economic return on the client's investment. In the event a client
believes that its other interests require a different vote, CMA shall vote as
the client instructs. In determining the vote on any proposal, the Proxy
Committee shall not consider any benefit other than benefits to the owner of the
securities to be voted.
D. Proposals Requiring Special Consideration
The following proposals require individual, special consideration. The Proxy
Committee will determine how proxies related to each of these proposals will be
voted. The Proxy Committee shall determines to vote against any such proposal
which would be expected
to impact adversely the current or potential market value of the issuer's
securities or to effect adversely the best interest of the client. References to
the best interest of a client refer to the interest of the client in terms of
the potential economic return on the client's investment. In the event a client
believes that its other interests require a different vote, CMA shall vote as
the client instructs In determining the vote on any proposal, the Proxy
Committee shall not consider any benefit other than benefits to the owner of the
securities to be voted.
1. New Proposals. For each new type of proposal that is expected to be proposed
to shareholders of multiple companies, the Proxy Committee will develop a
Guideline, which will be incorporated into this Proxy Voting Policy and
Procedures.
2. Accounts Adhering to Taft Hartley Principles. All proposals for these
accounts shall be voted according to the Taft Hartley Guidelines developed by
Institutional Shareholder Services, Inc. ("ISS").
3. Accounts Adhering to Socially Responsible Principles. All proposals for these
accounts shall be voted according to the Socially Responsible Guidelines
developed by ISS or as specified by the client.
4. Proxies of International Issuers which Block Securities Sales between the
Time a Shareholder submits a Proxy and the Vote. Proposals for these securities
shall be voted only on the specific instruction of the Proxy Committee and to
the extent practicable in accordance with these Proxy Voting Guidelines.
5. Proxies of Investment Company Shares. Proposals on issues other than those
specified above under III (A) and (B), e.g., election of directors, selection of
accountants.
6. Mergers/Acquisitions. Proposals where a hostile merger/acquisition is
apparent or where CMA represents ownership in more than one of the companies
involved in a potential merger/acquisition. Proposals for potential
mergers/acquisitions, which do not appear to be hostile, shall be voted based on
previously stated Guidelines.
7. Shareholder Proposals. Shareholder proposals that are not covered by III (A)
and (B) above will be reviewed individually.
8. Executive/Director Compensation. Except as provided in III (A)(4), proposals
relating to compensation of any executive or director will be voted as
recommended by ISS or as otherwise directed by the Proxy Committee.
9. Annual Evaluation of New Issues. During the first quarter of each year, the
Proxy Committee will consider any new controversial issues that are likely to be
on the ballots during the upcoming proxy season. The Proxy Committee will also
be notified in the unusual instance when an analyst or portfolio manager feels
strongly that the best interests of shareholders would be served by deviating
from our standard policy on a specific proposal.
10. Pre-Emptive Rights. Proposals to create or eliminate pre-emptive rights. In
evaluating proposals the Proxy Committee will consider the size of the company
and the nature of its shareholder base.
If any person (or entity) requests that the Proxy Committee (or any of its
members) vote a proxy in a specific manner, that person shall furnish to the
Proxy Committee a written explanation of the reasons for the request and a
description of the person's (or entity's) relationship with the party proposing
the matter to shareholders.
IV. VOTING PROCEDURES
The Proxy Committee has developed the following procedures to assist in the
voting of proxies according to the Voting Guidelines set forth in Section III
above. The Proxy Committee may revise these procedures from time to time, as it
deems appropriate or necessary to effect the purposes of this Policy and
Procedures.
CMA shall use Institutional Shareholder Services ("ISS"), a third party vendor,
to implement its proxy voting process. ISS shall provide proxy analysis and
record keeping services.
On a daily basis CMA shall send to ISS a holdings file detailing each equity
holding held in an account advised by CMA. Information on equity holdings for
the international portfolio shall be sent weekly.
ISS shall receive proxy material information from Proxy Edge or the custodian
bank for the account. This shall include issues to be voted upon, together with
a breakdown of holdings for CMA accounts. ISS shall then reconcile information
it receives from CMA with that it has received from Proxy Edge and custodian
banks. Any discrepancies shall be noted and resolved by ISS.
Whenever a vote is solicited, ISS shall send CMA a request to vote over a secure
website. CMA personnel shall check this website daily. The request shall be
accompanied by a recommended vote. The recommended vote shall be based upon
CMA's Voting Guidelines previously delivered by CMA to ISS as set forth in
Section III. CMA shall promptly provide ISS with any amendments or modifications
to the Guidelines. CMA shall return a final instruction to vote to ISS, which
ISS shall record with Proxy Edge or the custodian bank as our agent.
ISS shall have procedures in place to ensure that a vote is cast on every
security holding maintained by CMA on which a vote is solicited unless otherwise
directed by the Proxy Committee. On a yearly basis, or as required by our
clients CMA shall receive a report from ISS detailing CMA's voting for the
previous period.
Each time that ISS shall send CMA a request to vote the request shall be
accompanied by the recommended vote determined in accordance with CMA's Voting
Guidelines. ISS
shall vote as indicated in the request unless the client has reserved
discretion, the Proxy Committee determines that the best interest of a client
requires another vote or the proposal is a matter on which the Proxy Committee
has discretion under Section III.D. In such situations ISS shall vote based on
the direction of the client or the Proxy Committee, as the case may be. The
interests of CMA's Taft Hartley or "Socially Responsible " clients may impact a
proposal that normally should be voted in a certain way. ISS shall inform CMA of
all proposals having impact on its Taft Hartley and or "Socially Responsible "
clients. The Proxy Voting Committee shall be consulted before a vote is placed
in cases where Taft Hartley or Socially Responsible issues are presented.
(1) CMA Managed Funds or a Fund is a registered investment company or series of
a registered investment company managed or advised by Columbia Management
Advisors, Inc.
Item 8. Reserved.
Item 9. Controls and Procedures.
(a) The registrant's principal executive officer and principal financial
officer, based on their evaluation of the registrant's disclosure
controls and procedures as of a date within 90 days of the filing of
this report, have concluded that such controls and procedures are
adequately designed to ensure that information required to be
disclosed by the registrant in Form N-CSR is accumulated and
communicated to the registrant's management, including the principal
executive officer and principal financial officer, or persons
performing similar functions, as appropriate to allow timely decisions
regarding required disclosure.
(b) There were no changes in the registrant's internal control over
financial reporting that occurred during the registrant's last fiscal
half-year (the registrant's second fiscal half-year in the case of an
annual report) that has materially affected, or is reasonably likely
to materially affect, the registrant's internal control over financial
reporting.
Item 10. Exhibits.
(a)(1) Code of ethics required to be disclosed under Item 2 of Form N-CSR
attached hereto as Exhibit 99.CODE ETH
(a)(2) Certifications pursuant to Rule 30a-2(a) under the Investment Company Act
of 1940 (17 CFR 270.30a-2(a)) attached hereto as Exhibit 99.CERT.
(b) Certification pursuant to Rule 30a-2(b) under the Investment Company Act of
1940 (17 CFR 270.30a-2(b)) attached hereto as Exhibit 99.906CERT.
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) Columbia Floating Rate Fund
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By (Signature and Title) /s/ Joseph R. Palombo
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Joseph R. Palombo, President
Date November 7, 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
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Joseph R. Palombo, President
Date November 7, 2003
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By (Signature and Title) /s/ J. Kevin Connaughton
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J. Kevin Connaughton, Treasurer
Date November 7, 2003
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