N-CSR 1 file001.txt LIBERTY 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 --------------------- Liberty Floating Rate Fund ------------------------------------------------------------------------------ (Exact name of registrant as specified in charter) One Financial Center, Boston, Massachusetts 02111 ------------------------------------------------------------------------------ (Address of principal executive offices) (Zip code) Jean S. Loewenberg, Esq. Columbia Management Group, Inc. One Financial Center Boston, MA 02111 ------------------------------------------------------------------------------ (Name and address of agent for service) Registrant's telephone number, including area code: 1-617-426-3750 ------------------- Date of fiscal year end: August 31, 2003 ------------------ Date of reporting period: February 28, 2003 ----------------- Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. ss. 3507. ITEM 1. REPORTS TO STOCKHOLDERS. LIBERTY FLOATING RATE FUND Semiannual Report February 28, 2003 ELIMINATE CLUTTER IN TWO EASY STEPS: POINT. CLICK. LIBERTY eDELIVERY. For more information about receiving your shareholder reports electronically, call us at 800-345-6611. To sign up for eDelivery, visit us online at www.libertyfunds.com. LIBERTY FLOATING RATE FUND Semiannual Report February 28, 2003 ELIMINATE CLUTTER IN TWO EASY STEPS: POINT. CLICK. LIBERTY eDELIVERY. To sign up for eDelivery, go to www.icsdelivery.com President's Message [photo of Joseph R. Palombo] Dear Shareholder: The environment for the syndicated loan market, which comprises large corporate loans made by a group or syndicate of banks and institutional investors, remained volatile over the past six months. The second half was markedly better than the first half of the period. Bankruptcy filings by high-profile companies, which led to a general widening of loan credit risk premiums, peaked late in 2002. Then, as default rates started to come down and investors began to move back into riskier segments of the fixed income markets, the environment for the syndicated loan market improved. Better performance from the high yield bond sector also helped this market. Declining interest rates, which are generally positive for stocks and bonds, were a negative factor for the fund throughout the six-month period because yields on floating-rate loans adjust downward to reflect lower current rates. Nevertheless, an improving credit environment offset the impact of declining rates and helped the syndicated loan market achieve positive returns for the period. In the following report, portfolio managers Brian Good and Jim Fellows talk in greater detail about the performance of Liberty Floating Rate Fund and the decisions they made in managing the fund. As always, thank you for investing in Liberty Funds. We look forward to helping you build a strong financial future. Sincerely, /s/ Joseph R. Palombo Joseph R. Palombo President -------------------------------------------------------------------------------- MEET THE NEW PRESIDENT Joseph R. Palombo, president and chairman of the Board of Trustees for Liberty Funds, is also chief operating officer of Columbia Management Group. Mr. Palombo has over 19 years of experience in the financial services industry. Prior to joining Columbia Management, he was chief operating officer and chief compliance officer for Putnam Mutual Funds. Prior to that, he was a partner at Coopers & Lybrand. Mr. Palombo received his degree in economics/accounting from the College of the Holy Cross, where he was a member of Phi Beta Kappa. He earned his master's degree in taxation from Bentley College and participated in the Executive Program at the Amos B. Tuck School at Dartmouth College. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Net asset value per share as of 2/28/03 ($) Class A 8.79 Class B 8.79 Class C 8.79 Class Z 8.79 Distributions declared per share 9/1/02-2/28/03 ($) Class A 0.25 Class B 0.23 Class C 0.23 Class Z 0.26 -------------------------------------------------------------------------------- Not FDIC Insured May Lose Value No Bank Guarantee Economic and market conditions change frequently. There is no assurance that the trends described in this report will continue or commence. Performance Information Value of an $10,000 investment 12/17/98--2/28/03 Performance of a $10,000 investment 12/17/98--2/28/03 ($) without sales with sales charge charge -------------------------------------- Class A 11,868 11,456 -------------------------------------- Class B 11,716 11,628 -------------------------------------- Class C 11,658 11,658 -------------------------------------- Class Z 12,008 n/a -------------------------------------- [mountain chart data]: Class A shares Class A shares CSFB Leveraged without sales charge with sales charge Loan Index 12/1998 $10,000.0 $ 9,650.0 $10,000.0 10,011.0 9,661.0 10,026.0 10,084.0 9,731.0 9,983.0 10,158.0 9,802.0 10,044.0 10,249.0 9,890.0 10,117.0 10,325.0 9,964.0 10,247.0 10,387.0 10,023.0 10,339.0 10,458.0 10,092.0 10,407.0 10,521.0 10,153.0 10,370.0 10,554.0 10,185.0 10,345.0 10,615.0 10,244.0 10,330.0 10,662.0 10,289.0 10,397.0 10,707.0 10,332.0 10,468.0 10,779.0 10,402.0 10,570.0 10,856.0 10,476.0 10,604.0 10,940.0 10,557.0 10,521.0 10,975.0 10,590.0 10,559.0 11,051.0 10,665.0 10,647.0 11,132.0 10,742.0 10,712.0 11,223.0 10,831.0 10,789.0 11,310.0 10,914.0 10,844.0 11,387.0 10,988.0 10,879.0 11,457.0 11,056.0 10,885.0 11,499.0 11,096.0 10,908.0 11,527.0 11,124.0 10,985.0 11,571.0 11,166.0 11,051.0 11,672.0 11,263.0 11,146.0 11,701.0 11,291.0 11,159.0 11,655.0 11,247.0 11,112.0 11,541.0 11,137.0 11,245.0 11,654.0 11,246.0 11,258.0 11,663.0 11,255.0 11,286.0 11,795.0 11,382.0 11,376.0 11,905.0 11,488.0 11,159.0 11,784.0 11,371.0 10,985.0 11,587.0 11,181.0 11,158.0 11,693.0 11,284.0 11,274.0 11,799.0 11,386.0 11,336.0 11,956.0 11,537.0 11,293.0 11,852.0 11,437.0 11,424.0 11,996.0 11,576.0 11,546.0 12,134.0 11,709.0 11,538.0 12,178.0 11,752.0 11,363.0 12,013.0 11,593.0 11,191.0 11,694.0 11,285.0 11,158.0 11,584.0 11,178.0 11,177.0 11,468.0 11,067.0 11,183.0 11,396.0 10,997.0 11,033.0 11,546.0 11,142.0 11,223.0 11,722.0 11,311.0 11,399.0 11,833.0 11,419.0 11,553.0 11,855.0 11,443.0 11,613.0 2/2003 11,868.0 11,456.0 11,617.0 MUTUAL FUND PERFORMANCE CHANGES OVER TIME. PLEASE VISIT LIBERTYFUNDS.COM FOR DAILY PERFORMANCE UPDATES. Past performance is no guarantee of future investment results. The principal value and investment returns will fluctuate, resulting in a gain or loss on sale. The graph and table do not reflect the deduction of taxes shareholders would pay on fund distributions or redemption of fund shares. The CSFB Leveraged Loan Index is an unmanaged index that tracks the performance of senior floating rate bank loans. Unlike mutual funds, an index is not an investment, does not incur fees or charges and is not professionally managed. It is not possible to invest directly in an index. Securities in the fund may not match those in the index. Index performance is from December 31, 1998.
Average annual total return as of 2/28/03 (%) Share class A B C Z Inception 11/2/99 11/2/99 11/2/99 12/17/98 ------------------------------------------------------------------------------------------------------------------- without with without with without with without sales sales sales sales sales sales sales charge charge charge charge charge charge charge ------------------------------------------------------------------------------------------------------------------- 6-month (cumulative) 2.43 -1.15 2.26 -0.98 2.18 1.19 2.61 ------------------------------------------------------------------------------------------------------------------- 1-year 0.13 -3.40 -0.22 -3.29 -0.37 -1.31 0.48 ------------------------------------------------------------------------------------------------------------------- Life 4.17 3.29 3.85 3.66 3.72 3.72 4.46 ------------------------------------------------------------------------------------------------------------------- Average annual total return as of 12/31/02 (%) Share class A B C Z ------------------------------------------------------------------------------------------------------------------- without with without with without with without sales sales sales sales sales sales sales charge charge charge charge charge charge charge ------------------------------------------------------------------------------------------------------------------- 6-month (cumulative) -2.42 -5.88 -2.60 -5.68 -2.67 -3.61 -2.25 ------------------------------------------------------------------------------------------------------------------- 1-year -0.64 -4.13 -0.99 -4.03 -1.13 -2.07 -0.29 ------------------------------------------------------------------------------------------------------------------- Life 4.02 3.11 3.70 3.51 3.58 3.58 4.31 -------------------------------------------------------------------------------------------------------------------
Past performance is no guarantee of future investment results. The principal value and investment returns will fluctuate, resulting in a gain or loss on sale. All results shown assume reinvestment of distributions. The "with sales charge" returns include the maximum 3.50% sales charge for class A shares, the appropriate class B shares early withdrawal charge (EWC) for the holding period after purchase as follows: first year - 3.25%, second year - 3.00%, third year - 2.00%, fourth year - 1.50%, fifth year - 1.00%, thereafter - 0% and the class C shares EWC of 1% for the first year only. Performance results reflect any voluntary waivers or reimbursement of Fund expenses by the advisor or its affiliates. Absent these waivers or reimbursement arrangements, performance results would have been lower. Performance for different share classes will vary based on differences in sales charges and fees associated with each class. Class A, B and C share performance information includes returns of the fund's class Z shares (the oldest existing fund class) for periods prior to the inception of the newer class shares. These class Z share returns are not restated to reflect any expense differential (e.g., Rule 12b-1 fees) between class Z shares and the newer class shares. Had the expense differential been reflected, the returns for the periods prior to the inception of classes A, B and C would have been lower. 1 Portfolio Managers' Report 30-day SEC yield as of 2/28/03 (%) After reimbursement Class A 4.95 Class B 4.78 Class C 4.63 Class Z 5.48 The 30-day SEC yield reflects the portfolio's earning power, net of expenses, expressed as an annualized percentage of the public offering price at the end of the period. If the advisor or its affiliates had not waived certain fund expenses, the 30-day SEC yield would have been 4.78% for class A shares, 4.43% for class B shares, 4.28% for class C shares and 5.13% for class Z shares. Top 10 issuers as of 2/28/03 (%) Washington Group International 3.2% Century Cable Holdings 2.2 Mission Energy Holdings 1.5 1424666 Ontario Ltd. 1.5 Allied Waste North America 1.4 Nextel Finance 1.4 Aladdin Gaming 1.4 Polymer Group 1.3 Weekly Reader Corp. 1.3 Loews Cineplex Entertainment 1.3 Holdings are calculated as a percentage of net assets. Because the portfolio is actively managed, there can be no guarantee that the portfolio will continue to maintain this breakdown in the future. For the six-month period that ended February 28, 2003, the class A shares of Liberty Floating Rate Fund delivered a total return of 2.43%, without sales charge. That was lower than the return of the fund's benchmark, the CSFB Leveraged Loan Index, which was up 4.07% for the period. The fund was negatively affected in the fall of 2002 by its holdings in the hotel and lodging sectors, businesses that have suffered from an ongoing decline in air travel. However, the environment for floating rate securities became more favorable toward the end of 2002, and the fund made up some of its lost ground. LOWER DEFAULT RATES HELP FIXED-INCOME MARKETS One of the most important developments during the six-month period was a significant reduction in the incidence of corporate defaults. Default rates among high-yield bond issuers had been running at unusually high levels--between 12% and 13%--during the summer of 2002. Toward the end of the year default rates came down to the 7% level. Investors concluded that the lower-rated segments of the fixed-income markets had become less risky, so they were willing to put more money into high-yield instruments. In turn, more high-yield bonds were issued in order to meet growing investor demand. The result of this market shift was not only that companies were repaying high-yield bank loans, but also that senior lenders emerged with an improved credit position. These trends were favorable for the fund's primary markets. EARLY VOLATILITY HURTS PERFORMANCE Most of the fund's shortfall in performance can be traced to the first two months of the six-month period. In addition to weakness in the hotel and lodging sectors, one specific holding that negatively affected results was engineering and construction company Washington Group International (3.2% of net assets).1 The fund had received a piece of equity in the company in lieu of a restructuring, and it declined sharply in September and October of 2002. The fund's cable and wireless holdings also remained under pressure. However, cable and wireless improved later in the period, at which time several other bright spots emerged. Our investment in the troubled conglomerate Tyco Corp. was closed out at a profit. We had been able to purchase a sizable term loan at a five ------------ 1 Holdings are disclosed as of February 28, 2003, and are subject to change. 2 percentage point discount last year, amid the negative publicity surrounding some of Tyco's accounting practices. The company was later able to refinance its loan, and our entire position was repaid at par. The gain, though not large in percentage terms, was important because Tyco Corp. was the fund's biggest position at that time. The fund also benefited when electric utility AES Corp. (0.9% of net assets) underwent a major restructuring, resulting in enhanced collateral to the loan group and a partial cash payment to bondholders. CAUTIOUS OPTIMISM FOR 2003 By period end, as geopolitical uncertainty mounted, the attention of the nation and the financial markets focused squarely on the developing events in Iraq. While the course of war and peace is impossible to predict with any confidence, the overall environment for floating-rate securities is more to our liking than it was a year ago. Interest rates appear unlikely to decline meaningfully from their current levels, while corporate default rates, having moved in the right direction, appear to be stabilizing rather than going back up. For several months now, the market for corporate bonds and other syndicated loans has held up well relative to other financial markets. We see that trend continuing in the year ahead. /s/ Brian Good /s/ Jim Fellows Brian Good and Jim Fellows, CFA, are senior vice presidents of Stein Roe & Farnham Incorporated, an affiliate of Columbia Management Group, Inc. They have been portfolio managers of the Liberty Floating Rate Fund since its inception. Portfolio quality breakdown as of 2/28/03 (dollar-weighted %) [pie chart data]: Baa2: 0.2% Baa3: 0.3 Ba1: 0.9 Ba2: 3.4 Ba3: 19.5 B1: 18.3 B2: 11.8 B3: 8.4 Caa1: 6.8 Caa2: 0.4 Ca: 1.0 NR: 17.5 WR: 0.1 Other: 11.4 Quality breakdowns are calculated as a percentage of total investments. Because the portfolio is actively managed, there can be no guarantee that the portfolio will continue to maintain these quality breakdowns in the future. TOP 5 SECTORS as of 2/28/03 (%) [bar chart data]: Wireless telecommunications 8.7% Health care 4.7 Cable television 4.5 Printing/publishing 4.4 Diversified manufacturing 4.1 Sector breakdowns are calculated as a percentage of net assets. Because the portfolio is actively managed, there can be no guarantee that the portfolio will continue to maintain this breakdown in the future. Just like any other investment, floating rate loan investments present financial risks. Defaults on the loans in the portfolio could reduce the fund's net asset value and its distributions, as could nonpayment of scheduled interest and principal. Prepayment of principal by a borrower could mean that the fund managers have to replace the loan with a lower- yielding security, which could affect the valuation of the portfolio's holdings. The fund is a continuously offered, closed-end management investment company and provides limited liquidity through a quarterly tender offer for between 5% and 25% of outstanding shares. Each quarter, the fund's trustees must approve the actual tender amount. Please read the prospectus carefully for more details. The fund may invest a high percentage of assets in a limited number of loans, so the default of any individual holding can have a greater impact on the fund's NAV than could a default in a more diversified portfolio. Unlike floating rate loans, some fixed-income investments may be covered by FDIC insurance or other guarantees relating to timely payment of principal and interest. Some may also provide tax benefits. 3 Investment Portfolio February 28, 2003 (Unaudited) VARIABLE RATE SENIOR LOAN INTERESTS (a) - 88.5% PAR VALUE ------------------------------------------------------- AEROSPACE/DEFENSE - 2.6% DRS Technologies, Term Loan 09/30/08 $ 980,046 $ 987,447 Integrated Defense Technologies, Term Loan B 03/04/08 2,992,491 2,979,383 Titan Corp., Term Loan B 06/30/09 1,990,000 1,991,962 Vought Aircraft Industries, Inc.: Term Loan A 06/30/06 572,464 554,637 Term Loan B 06/30/07 1,851,429 1,800,658 Term Loan C 06/30/08 2,196,298 2,140,130 Term Loan X 12/31/06 1,075,000 1,044,094 ------------ 11,498,311 ------------ APPAREL - 0.6% The William Carter Co., Term Loan B 09/30/08 2,468,750 2,489,096 ------------ AUTO PARTS - 2.4% 1424666 Ontario Ltd., Term Loan B 08/10/07 6,824,990 6,714,226 Federal-Mogul Corp., (b) Term Loan C 02/24/04 485,000 482,287 Key Plastics, LLC: (c) Jr. Sec. Sub Notes04/30/07 42,956 42,956 Sr. Sec. Sub Notes04/30/07 101,433 101,433 Meridian Automotive Systems, Inc., Term Loan B 03/31/07 3,910,503 3,558,649 ------------ 10,899,551 ------------ BROADCASTING - 3.1% Comcorp Broadcasting, Inc., Term Loan A2 03/31/03 930,188 886,004 Emmis Communications Corp., Term Loan A 02/28/09 2,055,811 2,061,636 GT Brands LLC, Term Loan 09/30/07 3,500,000 3,413,949 Quorum Broadcasting Co., Inc., Term Loan B 12/31/04 2,029,602 1,872,412 UPC Financing Partnership, Term Loan C2 03/31/09 7,000,000 4,800,945 White Knight Broadcasting, Inc., Term Loan A2 03/31/03 1,026,745 977,975 ------------ 14,012,921 ------------ BUILDING PRODUCTS - 1.0% Tapco International Corp.: Term Loan B 06/23/07 2,529,157 2,500,405 Term Loan C 06/23/08 1,764,618 1,744,428 ------------ 4,244,833 ------------ PAR VALUE ------------------------------------------------------- BUSINESS SERVICES - 1.4% NATG Holdings, LLC: (c) Revolver A 01/23/05 $ 1,039,746 $ 1,013,752 Term Loan A 01/23/09 1,011,450 404,734 Term Loan B1 01/23/10 684,740 274,000 Term Loan B2 01/23/10 666,664 533,432 Relizon Co., Term Loan B 12/31/07 1,959,494 1,846,986 Transaction Network Services, Inc., Term Loan B 04/03/07 2,052,633 2,051,359 ------------ 6,124,263 ------------ CABLE TELEVISION - 4.5% Century Cable Holdings, LLC: Discretionary Term12/31/09 3,500,000 2,470,760 Term Loan 06/30/09 10,000,000 7,205,371 Charter Communications Operating, LLC, Term Loan B 03/18/08 2,971,313 2,502,113 CSC Holdings, Inc., (b) Revolver 06/30/06 1,497,500 1,393,530 Olympus Cable Holdings, LLC: Term Loan A 06/30/10 2,000,000 1,587,142 Term Loan B 09/30/10 2,000,000 1,622,272 RCN Corp., Term Loan B 06/03/07 4,482,000 3,268,384 ------------ 20,049,572 ------------ CASINOS/GAMBLING - 2.3% Aladdin Gaming, LLC: (d) Term Loan A 02/25/05 6,000,000 5,040,000 Term Loan B 08/26/06 1,250,000 1,037,500 Alliance Gaming Corp., Term Loan 12/31/06 3,473,750 3,495,572 Ameristar Casinos, Inc., Term Loan B 12/20/06 878,778 883,167 ------------ 10,456,239 ------------ CHEMICALS - 2.2% Huntsman Corp.: Term Loan A 03/31/07 4,392,754 3,614,340 Term Loan B 03/31/07 2,107,246 1,733,222 Huntsman International, LLC: Term Loan B 06/30/07 375,300 369,366 Term Loan C 06/30/08 1,006,030 989,976 Lyondell Chemical Co., Term Loan E 05/17/06 91,773 92,046 Messer Griesheim Industries: Term Loan B 04/27/09 877,032 882,358 Term Loan C 04/27/10 1,622,968 1,632,807 Noveon, Inc., (b) Term Loan A 03/31/07 344,636 342,660 ------------ 9,656,775 ------------ See notes to investment portfolio. 4 Investment Portfolio (continued) February 28, 2003 (Unaudited) VARIABLE RATE SENIOR LOAN INTERESTS (a) (CONTINUED) PAR VALUE ------------------------------------------------------- CONSUMER SERVICES - 0.9% Alderwoods Group, Inc.: Note 5 Year 01/02/07 $ 494,000 $ 481,650 Note 7 Year 01/02/09 880,114 836,108 Loewen Group, Inc., (d) Revolver 06/30/04 121,471 121,471 Stewart Enterprises, Inc., Term Loan 06/29/06 2,403,958 2,421,593 ------------ 3,860,822 ------------ CONSUMER SPECIALTIES - 2.2% American Greetings Corp., Term Loan B 06/15/06 2,954,028 2,996,279 Church & Dwight Co., Inc., Term Loan B 09/30/07 995,000 1,001,758 Johnson Diversey, Inc., Term Loan B 11/03/09 2,321,667 2,337,238 Jostens, Inc., Term Loan A 05/31/06 390,678 383,683 Mary Kay Corp., Term Loan B 10/03/07 3,076,899 3,096,010 ------------ 9,814,968 ------------ CONTAINERS/PACKAGING - 0.6% Riverwood International Corp.: (b) Revolver 12/31/06 125,000 121,549 Term Loan B2 03/31/07 2,487,500 2,485,603 ------------ 2,607,152 ------------ DIVERSIFIED COMMERCIAL SERVICES - 1.6% Enterprise Profit Solutions Corp., (c)(d) Term Loan A 06/14/10 498,039 --(e) Outsourcing Solutions, Inc., (c)(d) Term Loan B 12/10/06 5,797,946 4,116,542 Transcore Holdings, Inc., Term Loan B 10/01/06 2,793,000 2,802,264 ------------ 6,918,806 ------------ DIVERSIFIED MANUFACTURING - 4.1% Enersys, Inc., Term Loan B 11/09/08 4,924,904 4,878,292 Flowserve Corp., Term Loan C 06/30/09 829,247 829,144 Freedom Forge Corp., (c)(d) Term Loan 12/17/04 244,736 --(e) General Cable Corp., Term Loan B 05/25/07 1,639,120 1,409,693 Gentek, Inc., Term Loan C 10/31/07 339,226 183,471 Jason, Inc., Term Loan B 06/30/07 2,305,410 2,198,565 PAR VALUE ------------------------------------------------------- Polymer Group, Inc.: Term Loan B 12/20/05 $ 2,975,410 $ 2,726,752 Term Loan C 12/20/06 3,387,500 3,110,973 Polypore, Inc., Term Loan B 12/31/06 1,865,637 1,861,163 Superior Telecom, Inc., Term Loan B 11/27/05 2,452,415 870,657 ------------ 18,068,710 ------------ ELECTRIC UTILITIES - 3.4% AES Corp., Term Loan C 04/15/05 3,959,510 3,803,418 Calpine Corp., Term Loan B 03/08/04 3,798,260 3,490,366 Michigan Electric Transmission Co., Term Loan 05/01/07 995,000 995,309 Mission Energy Holding Co.: (c) Term Loan A 07/02/06 3,246,754 1,785,833 Term Loan B 07/02/06 9,253,246 5,089,624 ------------ 15,164,550 ------------ ELECTRONIC COMPONENTS - 1.7% IPC Acquisition Corp., Term Loan 12/31/06 1,486,277 1,489,324 Sanmina SCI Corp., Term Loan B 12/23/07 1,500,000 1,523,232 Viasystems, Inc., Term Loan B 09/30/08 6,412,667 4,441,052 ------------ 7,453,608 ------------ ENGINEERING & CONSTRUCTION - 1.9% URS Corp., Term Loan B 08/22/08 997,500 953,877 Washington Group International, Revolver B 07/23/04 7,500,000 7,498,944 ------------ 8,452,821 ------------ ENVIRONMENTAL SERVICES - 3.3% Allied Waste North America, Inc.: Term Loan A 07/21/05 619,250 619,796 Term Loan B 07/21/06 2,640,663 2,635,877 Term Loan C 07/21/07 3,168,797 3,163,066 Environmental Systems Products Holdings, Inc.: Tranche 1 12/31/04 3,642,619 3,478,701 Tranche 2 12/31/04 656,357 556,270 Synagro Technologies, Inc., Term Loan 05/07/08 4,298,931 4,310,758 ------------ 14,764,468 ------------ See notes to investment portfolio. 5 Investment Portfolio (continued) February 28, 2003 (Unaudited) VARIABLE RATE SENIOR LOAN INTERESTS (a) (CONTINUED) PAR VALUE ------------------------------------------------------- FARMING/AGRICULTURE - 1.4% Hines Nurseries, Inc., Term Loan B 02/28/05 $ 2,283,993 $ 2,281,025 Quality Stores, Inc., (c)(d) Term Loan B 04/30/06 1,527,683 60,038 United Industries Corp., Term Loan B 01/20/06 3,943,675 3,955,973 ------------ 6,297,036 ------------ FINANCE COMPANIES- 0.2% Finova Group, Inc., Note 11/15/09 2,250,000 765,000 ------------ FOOD CHAINS - 0.3% Carrols Corp., Term Loan B 12/31/07 1,423,810 1,408,642 ------------ FOOD MANUFACTURING - 4.0% American Seafoods Group, LLC, Term Loan B 03/31/09 3,457,024 3,473,221 Commonwealth Brands, Inc., Term Loan 08/28/07 2,312,500 2,315,850 International Multifoods Corp., Term Loan B 02/28/08 1,980,309 1,990,228 Merisant Corp., Term Loan B 03/31/07 2,678,258 2,679,966 Michael Foods, Inc., Term Loan B 04/10/08 1,024,199 1,030,266 Otis Spunkmeyer, Inc., Term Loan B 01/21/09 2,965,909 2,964,055 Pinnacle Foods Holding Corp., Term Loan 05/22/08 480,263 481,129 Southern Wine & Spirits of America, Inc., Term Loan B 07/02/08 2,985,000 2,992,617 ------------ 17,927,332 ------------ HEALTH CARE - 4.7% Alliance Imaging, Inc., Term Loan A 11/02/06 2,595,420 2,508,756 Concentra Operating Corp.: Term Loan B 06/30/06 3,013,171 2,966,144 Term Loan C 06/30/07 1,506,585 1,483,072 Davita, Inc., Term Loan B 03/31/09 3,961,529 3,975,191 Fresenius Medical Care, Inc., Term Loan B 02/21/10 2,340,000 2,345,850 Insight Health Services Corp., Delayed Draw Term Loan (b) 10/17/08 1 4,849 Term Loan B 10/17/08 3,950,000 3,974,503 PAR VALUE ------------------------------------------------------- Team Health, Inc., Term Loan B 10/31/08 $ 1,000,000 $ 969,655 Vicar Operating, Inc., Term Loan C 09/30/08 2,487,500 2,500,982 ------------ 20,729,002 ------------ HOME FURNISHINGS - 0.1% Simmons Co., Term Loan B 10/29/05 261,006 261,916 ------------ HOSPITAL MANAGEMENT - 1.6% Community Health Systems, Inc., Term Loan B 07/16/10 1,995,000 1,988,766 Iasis Healthcare Corp., Term Loan B 02/07/09 2,500,000 2,525,769 Vanguard Health Systems, Incremental Term Loan 01/03/10 2,400,000 2,419,040 ------------ 6,933,575 ------------ HOTELS/RESORT - 1.0% Wyndham International, Inc., Term Loan 06/30/06 5,917,511 4,299,846 ------------ INDUSTRIAL MACHINERY/COMPONENTS - 0.4% Terex Corp., Term Loan 07/03/09 2,039,825 1,962,311 ------------ MEDIA CONGLOMERATES - 0.1% Bridge Information Systems: (d) Multidraw Term Loan07/07/03 544,524 73,511 Revolver 07/07/03 350,228 47,281 Term Loan A 07/07/03 1,141,399 154,089 Term Loan B 05/29/05 3,239,260 437,300 ------------ 712,181 ------------ MEDICAL SPECIALTIES - 0.4% Dade Behring, Inc., Term Loan A1 10/01/08 2,000,000 2,001,695 ------------ METALS/MINING - 2.6% Copperweld Corp., Term Loan A 05/16/03 2,154,167 1,572,536 OM Group, Term Loan C 04/01/06 4,494,987 4,311,206 Steel Dynamics, Inc., Term Loan B 03/26/08 1,823,571 1,838,887 Stillwater Mining Co., Term Loan B 12/31/07 3,845,976 3,712,596 ------------ 11,435,225 ------------ See notes to investment portfolio. 6 Investment Portfolio (continued) February 28, 2003 (Unaudited) VARIABLE RATE SENIOR LOAN INTERESTS (a) (CONTINUED) PAR VALUE ------------------------------------------------------- MOVIES/ENTERTAINMENT - 3.7% AMF Bowling Worldwide, Inc., Term Loan 02/28/08 $ 4,629,756 $ 4,620,696 Carmike Cinemas, Inc., Term Loan 01/15/07 3,481,739 3,471,123 Loews Cineplex Entertainment Corp., Term Loan 02/29/08 5,813,615 5,714,476 Metro-Goldwyn-Mayer Studios, Inc., Term Loan B 06/30/08 2,500,000 2,487,998 ------------ 16,294,293 ------------ OIL REFINING/MARKETING - 0.6% Tesoro Petroleum Corp., Term Loan B 12/31/07 2,945,285 2,811,061 ------------ PAPER - 0.9% Appleton Papers, Inc., Term Loan C 11/08/06 1,965,474 1,974,150 Bear Island Paper Co., Term Loan 12/31/05 271,038 264,332 Port Townsend Paper Corp., Term Loan B 03/16/07 1,965,000 1,749,649 ------------ 3,988,131 ------------ PHARMACEUTICAL - 0.6% Medpointe, Inc., Term Loan B 09/30/08 3,147,075 2,874,668 ------------ PRINTING/PUBLISHING - 4.4% American Media Operations, Inc., Term Loan C1 04/01/07 2,500,000 2,507,916 Canwest Media, Inc.: Term Loan B2 05/15/08 1,801,929 1,802,899 Term Loan C2 05/15/09 1,125,760 1,126,366 DIMAC Holdings: (d) Term Loan A 12/31/05 246,193 923 Term Loan B 01/01/05 65,687 1,971 DIMAC Marketing Partners, Inc.: (d) Revolver 07/01/03 27,443 --(e) Term Loan B 01/01/05 160,714 4,861 Muzak, LLC, Term Loan B 12/31/06 1,437,455 1,361,544 Qwest Dex, Inc., Term Loan A 08/30/04 3,833,333 3,969,697 Readers Digest Association, Inc., Term Loan B 05/20/08 1,480,031 1,456,780 Sun Media Corp., Term Loan B 02/07/09 1,500,000 1,502,368 Weekly Reader Corp., Term Loan B 11/17/06 5,826,933 5,722,282 ------------ 19,457,607 ------------ PAR VALUE ------------------------------------------------------- RAIL/SHIPPING - 2.4% American Commercial Lines: Term Loan B 06/30/06 $ 956,424 $ 770,076 Term Loan C 06/30/07 1,342,969 1,081,307 Dakota Minnesota Eastern Rail Corp., Term Loan 07/25/07 1,980,000 1,990,042 Helm Financial Corp., Term Loan B 10/18/06 5,276,677 4,891,270 RailAmerica Transportation Corp.: AUD Term Loan 05/23/09 280,000 279,700 CDN Term Loan 05/23/09 233,333 233,083 USD Term Loan B 05/23/09 1,236,667 1,235,221 ------------ 10,480,699 ------------ REAL ESTATE INVESTMENT TRUST - 1.1% Corrections Corp. of America, Term Loan B 03/31/08 2,967,525 2,972,036 Macerich Partnership, L.P., Term Loan 07/26/05 2,048,000 2,050,560 ------------ 5,022,596 ------------ RETAIL STORES - 0.4% CH Operating, LLC, Term Loan 06/30/07 1,965,517 1,950,884 ------------ SEMICONDUCTORS - 0.3% Semiconductor Components Industries, LLC: Term Loan B 08/04/06 320,722 290,601 Term Loan C 08/04/07 345,393 312,955 Term Loan D 08/04/07 865,948 786,272 ------------ 1,389,828 ------------ STEEL/IRON ORE - 2.1% Ispat Inland, LP.: Term Loan B 07/16/05 3,906,126 2,535,957 Term Loan C 07/16/06 3,906,126 2,535,957 UCAR Finance, Inc., Term Loan B 12/31/07 4,443,135 4,255,618 ------------ 9,327,532 ------------ TELECOMMUNICATIONS INFRASTRUCTURE EQUIPMENT - 0.5% Spectrasite Communications, Inc., Term Loan B 12/31/07 2,701,739 2,402,244 ------------ TELECOMMUNICATIONS SERVICES - 1.9% GT Group Telecom Services Corp., (c)(d) Vendor Term Loan 06/30/08 3,162,326 63,246 ICG Communications, Inc., Term Loan 03/31/06 334,758 230,983 KMC Telecom, Inc.: Term Loan 07/01/07 1,984,751 744,935 13.5% Sr. Disc. Notes 05/15/09 44,000 440 12.5% Sr. Disc. Notes 02/15/08 168,000 1,680 See notes to investment portfolio. 7 Investment Portfolio (continued) February 28, 2003 (Unaudited) VARIABLE RATE SENIOR LOAN INTERESTS (a) (CONTINUED) PAR VALUE ------------------------------------------------------- TELECOMMUNICATIONS SERVICES (CONTINUED) Time Warner Telecom, Term Loan B 03/31/08 $ 2,800,000 $ 2,394,705 TSI Telecommunication Services, Inc., Term Loan B 12/31/06 948,864 906,758 Valor Telecommunications Enterprises, LLC, Term Loan B 06/30/08 4,871,586 4,297,334 ------------ 8,640,081 ------------ TEXTILES - 0.5% Springs Industries, Inc., Term Loan B 09/05/08 2,493,498 2,501,499 ------------ TRANSPORTATION - 3.8% Evergreen International Aviation, Inc.: Term Loan B1 05/07/03 886,623 758,064 Term Loan B2 05/07/03 3,633,117 3,111,559 Motor Coach Industries, Inc., Term Loan 06/16/05 5,098,771 3,943,133 Transportation Technology, Term Loan B 03/31/07 6,442,578 5,470,045 United Airlines, Term Loan B 07/01/04 4,000,000 3,840,565 ------------ 17,123,366 ------------ WIRELESS TELECOMMUNICATIONS - 8.7% American Cellular Corp.: Term Loan B 03/31/08 567,430 426,656 Term Loan C 03/31/09 647,873 487,141 Centennial Cellular Operating Co., LLC, Term Loan A 11/30/06 2,587,500 2,122,001 Centennial Puerto Rico Operations Corp.: Term Loan B 05/31/07 3,658,113 2,867,202 Term Loan C 11/30/07 2,753,428 2,158,712 Cricket Communications, Inc., (d) Vendor Term Loan 06/30/08 19,000,000 4,180,000 Nextel Finance Co.: Term Loan B 06/30/08 1,998,125 1,908,070 Term Loan C 12/31/08 3,085,625 2,947,541 Term Loan D 03/31/09 1,500,000 1,400,654 Nextel Partners, Inc., Term Loan B 01/29/08 6,000,000 5,574,668 Rural Cellular Corp.: Term Loan B 10/03/08 2,663,316 2,304,561 Term Loan C 04/03/09 2,663,316 2,304,561 Sygnet Wireless, Inc.: Term Loan B 03/23/07 1,590,821 1,415,887 Term Loan C 12/23/07 4,019,222 3,576,487 PAR VALUE ------------------------------------------------------- Ubiquitel Operating Co.: Term Loan A 09/30/07 $ 938,776 $ 662,257 Term Loan B 11/17/08 4,224,490 2,723,575 Western Wireless Corp., Term Loan A 03/31/08 2,000,000 1,594,933 ------------ 38,654,906 ------------ TOTAL VARIABLE RATE SENIOR LOAN INTERESTS (cost of $437,890,780) 394,190,622 ------------ COMMON STOCKS (f) - 2.1% SHARES ------------------------------------------------------- BUSINESS SERVICES - 0.4% NATG Holdings LLC (c) 322,876 1,614,380 ------------ CONSUMER SERVICES - 0.1% Alderwoods Group, Inc. 97,955 363,413 ------------ ENGINEERING & CONSTRUCTION - 1.5% Washington Group International, Inc. 442,972 6,573,704 ------------ HEALTHCARE SERVICES - 0.0% Sun Healthcare Group 182,213 50,109 ------------ MOVIES/ENTERTAINMENT - 0.1% AMF Bowling Worldwide, Inc. 19,918 378,442 ------------ TOTAL COMMON STOCKS (cost of $11,038,242) 8,980,048 ------------ PREFERRED STOCKS (c)(f) - 0.1% ------------------------------------------------------- ENVIRONMENTAL SERVICES - 0.1% Environmental System 620 619,928 (cost of $697,302) ------------ SHORT-TERM OBLIGATIONS - 8.7% PAR ------------------------------------------------------- COMMERCIAL PAPER - 8.5% International Lease Finance, 1.330% 03/03/03 $18,000,000 17,998,670 UBS Financial, 1.310% 03/03/03 20,000,000 19,998,544 ------------ 37,997,214 ------------ See notes to investment portfolio. 8 Investment Portfolio (continued) February 28, 2003 (Unaudited) SHORT-TERM OBLIGATIONS (CONTINUED) PAR VALUE ------------------------------------------------------- TIME DEPOSIT - 0.2% State Street Bank & Trust Co., 0.250% 03/03/03 $ 1,100,000 $ 1,100,000 ------------ TOTAL SHORT TERM OBLIGATIONS (cost of $39,097,214) 39,097,214 ------------ TOTAL INVESTMENTS - 99.4% (cost of $488,723,538)(g) 442,887,812 ------------ OTHER ASSETS & LIABILITIES, NET - 0.6% 2,528,195 ------------------------------------------------------- NET ASSETS - 100.0% $445,416,007 ============ NOTES TO INVESTMENT PORTFOLIO: (a)Senior Loans in which the Portfolio invests generally pay interest at rates which are periodically predetermined by reference to a base lending rate plus a premium. These base lending rates are generally (i) the prime rate offered by one or more major United States banks, (ii) the lending rate offered by one or more European banks such as the London Inter-Bank Offered Rate (`LIBOR') and (iii) the certificate of deposit rate. Senior loans are generally considered to be restricted in that the Portfolio ordinarily is contractually obligated to receive approval from the Agent Bank and/or borrower prior to the disposition of a Senior Loan. (b)Unfunded commitments, see Note 8. (c)Represents fair value as determined in good faith under procedures approved by the Trustees. (d)These issuers are in default of certain debt covenants. Income is not being accrued. (e)Amount rounds to less than $1. (f)Non-income producing. (g)Cost for federal income tax purposes is $488,789,198. See notes to financial statements. 9 Stein Roe Floating Rate Limited Liability Company Statement of Assets and Liabilities February 28, 2003 (Unaudited) ASSETS: Investments, at cost $488,723,538 ------------ Investments, at value $442,887,812 Cash 492,262 Receivable for: Investments sold 36,695 Interest and fees 2,577,379 Reimbursement due from Advisor 68,751 Deferred Trustees' compensation plan 324 Other assets 118,797 ------------ Total Assets 446,182,020 ------------ LIABILITIES: Deferred facility fees 353,217 Payable for: Management fee 148,643 Transfer agent fee 975 Pricing and bookkeeping fees 61,790 Custody fee 2,941 Deferred Trustees' fee 324 Other liabilities 198,123 ------------ Total Liabilities 766,013 ------------ NET ASSETS $445,416,007 ============ Statement of Operations For the Six Months Ended February 28, 2003 (Unaudited) INVESTMENT INCOME: Interest $ 15,444,556 Facility and other fees 589,968 ------------ Total Investment Income 16,034,524 EXPENSES: Management fee 1,044,447 Transfer agent fee 2,976 Trustees' fee 1,685 Custody fee 9,136 Pricing and bookkeeping fees 135,337 Legal fee 74,743 Other expenses 43,584 ------------ Total Expenses 1,311,908 Custody earnings credit (195) ------------ Net Expenses 1,311,713 ------------ Net Investment Income 14,722,811 ------------ NET REALIZED AND UNREALIZED GAIN (LOSS) ON PORTFOLIO POSITIONS: Net realized loss on investments (10,161,908) Net increase in reimbursement due from Advisor (See Note 9) 68,751 Net change in unrealized appreciation/depreciation on investments 7,428,942 ------------ Net Loss (2,664,215) ------------ Net Increase in Net Assets from Operations $ 12,058,596 ============ See notes to financial statements. 10 Stein Roe Floating Rate Limited Liability Company Statement of Changes in Net Assets
(UNAUDITED) SIX MONTHS ENDED YEAR ENDED FEBRUARY 28, AUGUST 31, INCREASE (DECREASE) IN NET ASSETS: 2003 2002 ======================================================================================================================= OPERATIONS: Net investment income $ 14,722,811 $ 38,015,994 Net realized loss on investments (10,161,908) (12,166,254) Net increase in reimbursement due from Advisor (See Note 9) 68,751 -- Net change in unrealized appreciation/depreciation on investments 7,428,942 (37,403,502) ------------ ------------ Net Increase (Decrease) from Operations 12,058,596 (11,553,762) ------------ ------------ TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST: Contributions 11,106,334 80,963,660 Withdrawals (114,236,585) (200,374,089) ------------ ------------ Net Decrease from Transactions in Investors' Beneficial Interest (103,130,251) (119,410,429) ------------ ------------ Total Decrease in Net Assets (91,071,655) (130,964,191) NET ASSETS: Beginning of period 536,487,662 667,451,853 ------------ ------------ End of period $445,416,007 $536,487,662 ============ ============
See notes to financial statements. 11 Stein Roe Floating Rate Limited Liability Company Statement of Cash Flows For the Six Months Ended February 28, 2003 (Unaudited) INCREASE (DECREASE) IN CASH ======================================================= CASH FLOWS FROM OPERATING ACTIVITIES: Net Investment Income $14,722,811 Adjustments to reconcile net investment income to net cash provided by operating activities: Purchase of investment securities (116,910,263) Proceeds from disposition of investment securities 172,558,204 Sale of short-term portfolio investments, net 33,394,435 Increase in receivable for reimbursement due from Advisor (68,751) Decrease in interest and fees receivable 346,318 Decrease in receivable for investments sold 101,395 Increase in other assets (107,547) Decrease in deferred facility fees (171,562) Increase in payable for accrued expenses 11,696 Increase in other liabilities 162,666 Net amortization/accretion of income (2,577,478) Decrease in payable for investments purchased (159,716) ------------- Net cash provided by operating activities 101,302,208 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from capital contributions 11,106,334 Payment of capital withdrawals (114,236,585) ------------- Net cash flows used for financing activities (103,130,251) ------------- Net decrease in cash (1,828,043) CASH: Cash at beginning of period 2,320,305 ------------- Cash at end of period $ 492,262 ============= See notes to financial statements. 12 Liberty Floating Rate Fund Statement of Assets and Liabilities February 28, 2003 (Unaudited) ASSETS: Investments in Portfolio, at cost $392,373,202 ------------- Investments in Portfolio, at value $355,790,226 Receivable for: Fund shares sold 726,662 Expense reimbursement due from Advisor 98,882 Deferred Trustees' compensation plan 1,659 Other assets 113,945 ------------- Total Assets 356,731,374 ------------- LIABILITIES: Payable for: Distributions 553,466 Administration fee 52,704 Transfer agent fee 213,910 Pricing and bookkeeping fees 7,717 Trustees' fee 187 Custody fee 130 Registration fee 26,833 Deferred Trustees' fee 1,659 Other liabilities 14,664 ------------- Total Liabilities 871,270 ------------- NET ASSETS $355,860,104 ============= COMPOSITION OF NET ASSETS: Paid-in capital $417,332,390 Overdistributed net investment income (41,168) Accumulated net realized loss allocated from Portfolio (24,848,142) Net unrealized depreciation on investments allocated from Portfolio (36,582,976) ------------- NET ASSETS $355,860,104 ============= CLASS A: Net assets $ 80,272,153 Shares outstanding 9,136,761 ------------- Net asset value and redemption price per share $ 8.79(a) ============= Maximum offering price per share ($8.79/0.9650) $ 9.11(b) ============= CLASS B: Net assets $155,746,344 Shares outstanding 17,727,470 ------------- Net asset value and offering price per share $ 8.79(a) ============= CLASS C: Net assets $110,966,558 Shares outstanding 12,630,227 ------------- Net asset value and offering price per share $ 8.79(a) ============= CLASS Z: Net assets $ 8,875,049 Shares outstanding 1,010,165 ------------- Net asset value, offering and redemption price per share $ 8.79 ============= (a)Redemption price per share is equal to net asset value less any applicable early withdrawal charge. (b)On sales of $100,000 or more the offering price is reduced. Statement of Operations For the Six Months Ended February 28, 2003 (Unaudited) INVESTMENT INCOME: Interest and fees allocated from Portfolio $12,745,583 EXPENSES: Expenses allocated from Portfolio 1,042,693 Administration fee 367,529 Distribution fee: Class A 42,525 Class B 355,388 Class C 345,748 Service fee: Class A 106,314 Class B 197,437 Class C 144,062 Pricing and bookkeeping fees 68,583 Transfer agent fee 496,582 Trustees' fee 9,478 Custody fee 595 Other expenses 97,875 ------------- Total Expenses 3,274,809 Fees and expenses waived or reimbursed by Advisor (613,242) ------------- Net Expenses 2,661,567 ------------- Net Investment Income 10,084,016 ------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ALLOCATED FROM PORTFOLIO: Net realized loss on investments allocated from Portfolio (8,126,619) Net increase in reimbursement due from Advisor allocated from Portfolio (See Note 9) 54,605 Net change in unrealized appreciation/depreciation on investments allocated from Portfolio 6,011,825 ------------- Net Loss (2,060,189) ------------- Net Increase in Net Assets from Operations $ 8,023,827 ============= See notes to financial statements. 13 Liberty Floating Rate Fund Statement of Changes in Net Assets (UNAUDITED) SIX MONTHS ENDED YEAR ENDED INCREASE (DECREASE) FEBRUARY 28, AUGUST 31, IN NET ASSETS: 2003 2002 ------------------------------------------------------ OPERATIONS: Net investment income $ 10,084,016 $ 26,458,047 Net realized loss on investments allocated from Portfolio (8,126,619) (8,907,633) Net increase in reimbursement due from Advisor allocated from Portfolio (See Note 9) 54,605 -- Net change in unrealized appreciation/depreciation on investments allocated from Portfolio 6,011,825 (30,883,851) ----------- ----------- Net Increase (Decrease) from Operations 8,023,827 (13,333,437) ----------- ----------- DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income: Class A (2,455,444) (7,104,057) Class B (4,279,912) (10,221,673) Class C (3,038,678) (8,408,033) Class Z (282,734) (809,139) From net realized capital gains: Class A -- (456) Class B -- (655) Class C -- (539) Class Z -- (52) ----------- ----------- Total Distributions Declared to Shareholders (10,056,768) (26,544,604) ----------- ----------- SHARE TRANSACTIONS: Class A: Subscriptions 1,875,968 28,944,806 Distributions reinvested 1,815,771 4,435,355 Redemptions (31,529,846) (52,671,603) ----------- ----------- Net Decrease (27,838,107) (19,291,442) ----------- ----------- Class B: Subscriptions 4,839,152 20,986,672 Distributions reinvested 2,792,317 5,846,660 Redemptions (25,724,766) (32,352,200) ----------- ----------- Net Decrease (18,093,297) (5,518,868) ----------- ----------- Class C: Subscriptions 6,002,841 29,374,992 Distributions reinvested 2,306,648 5,754,828 Redemptions (33,794,162) (69,520,549) ----------- ----------- Net Decrease (25,484,673) (34,390,729) ----------- ----------- Class Z: Subscriptions 771,307 5,244,801 Distributions reinvested 31,114 74,304 Redemptions (5,117,970) (2,625,789) ----------- ----------- Net Increase (Decrease) (4,315,549) 2,693,316 ----------- ----------- (UNAUDITED) SIX MONTHS ENDED YEAR ENDED FEBRUARY 28, AUGUST 31, 2003 2002 ------------------------------------------------------- Net Decrease from Share Transactions $(75,731,626)$(56,507,723) ----------- ----------- Total Decrease in Net Assets (77,764,567) (96,385,764) NET ASSETS: Beginning of period 433,624,671 530,010,435 ----------- ----------- End of period (including overdistributed net investment income of $(41,168) and $(68,416), respectively) $355,860,104 $433,624,671 ----------- ----------- CHANGES IN SHARES: Class A: Subscriptions 214,820 3,083,643 Issued for distributions reinvested 207,881 473,895 Redemptions (3,579,955) (5,608,115) ----------- ----------- Net Decrease (3,157,254) (2,050,577) ----------- ----------- Class B: Subscriptions 553,276 2,248,559 Issued for distributions reinvested 319,770 624,817 Redemptions (2,926,251) (3,446,281) ----------- ----------- Net Decrease (2,053,205) (572,905) ----------- ----------- Class C: Subscriptions 686,746 3,143,271 Issued for distributions reinvested 264,157 614,545 Redemptions (3,843,137) (7,394,823) ----------- ----------- Net Decrease (2,892,234) (3,637,007) ----------- ----------- Class Z: Subscriptions 88,165 560,381 Issued for distributions reinvested 3,560 7,930 Redemptions (580,218) (281,403) ----------- ----------- Net Increase (Decrease) (488,493) 286,908 ----------- ----------- See notes to financial statements. 14 Notes to Financial Statements February 28, 2003 (Unaudited) NOTE 1. ACCOUNTING POLICIES ORGANIZATION: Liberty Floating Rate Fund (the "Fund") is a non-diversified, closed-end management investment company organized as a Massachusetts business trust. The Fund invests all of its investable assets in Stein Roe Floating Rate Limited Liability Company (the "Portfolio"), which seeks to provide a high-level of current income, consistent with preservation of capital. The Fund authorized an unlimited number of shares. The Fund offers four classes of shares: Class A, Class B, Class C and Class Z shares. Class A shares are sold with a front end sales charge and an annual distribution fee. A 1.00% early withdrawal charge is assessed to Class A shares purchased without an initial sales charge on redemptions made within eighteen months on an original purchase of $1 million to $25 million. Class B shares are subject to an annual distribution fee and an early withdrawal charge. Class B shares will convert to Class A shares eight years after purchase. Class C shares are subject to an early withdrawal charge on redemptions made within one year after purchase and an annual distribution fee. Class Z shares are offered continuously at net asset value. There are certain restrictions on the purchase of Class Z shares, as described in the Fund's prospectus. The Portfolio is a non-diversified, closed-end management investment company organized as a Delaware limited liability company. The Portfolio allocates income, expenses, realized and unrealized gains and losses to each investor on a daily basis, based on methods in compliance with the Internal Revenue Service. At February 28, 2003, Liberty Floating Rate Fund and Liberty-Stein Roe Institutional Floating Rate Income Fund owned 79.9% and 20.1%, respectively, of the Portfolio. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Portfolio and Fund in the preparation of their financial statements. SECURITY VALUATION AND TRANSACTIONS: The value of the Portfolio is determined in accordance with guidelines established, and periodically reviewed, by the Board of Trustees. Senior loans are generally valued using market prices or quotations provided by banks, dealers or pricing services with respect to secondary market transactions. The prices provided by these principal market makers may differ from the value that would be realized if the loans were sold and the difference could be material to the financial statements. In the absence of actual market values, senior loans will be valued by Stein Roe & Farnham Incorporated (the "Advisor"), an indirect, wholly-owned subsidiary of Columbia Management Group, Inc., at fair value, which is intended to approximate market value, pursuant to procedures approved by the Board of Trustees. In determining fair value, the Advisor will consider on an ongoing basis, among other factors, (i) the creditworthiness of the Borrower; (ii) the current interest rate, the interest rate redetermination period and maturity of such senior loan interests; and (iii) recent prices in the market for instruments of similar quality, rate and interest rate redetermination period and maturity. Because of uncertainty inherent in the valuation process, the estimated value of a senior loan interest may differ significantly from the value that would have been used had there been market activity for that senior loan interest. Equity securities generally are valued at the last sale price or, in the case of unlisted or listed securities for which there were no sales during the last day, at the current quoted bid price. Short-term obligations with a maturity of 60 days or less are valued at amortized cost. Security transactions are accounted for on the date the securities are purchased, sold or mature. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes. DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS: All income, expenses (other than the Class A, Class B and Class C service and distribution fees), and realized and unrealized gains (losses) are allocated to each class proportionately on a daily basis for purposes of determining the net asset value of each class. 15 Notes to Financial Statements (continued) February 28, 2003 (Unaudited) Class A, Class B and Class C per share data and ratios are calculated by adjusting the expense and net investment income per share data and ratios for the Fund for the entire period by the service and distribution fees per share applicable to Class A, Class B and Class C shares. FEDERAL INCOME TAXES: No provision is made for federal income taxes since (a) the Fund elects to be taxed as a "regulated investment company" and make distributions to its shareholders to be relieved of all federal income taxes under provisions of current federal tax law; and (b) the Portfolio is treated as a partnership for federal income tax purposes and all of its income is allocated to its owners based on methods in compliance with the Internal Revenue Service. INTEREST INCOME, DEBT DISCOUNT AND PREMIUM: Interest income is recorded on the accrual basis. Facility fees received are treated as market discounts. Market premiums and discounts are amortized over the estimated life of each applicable loan. Unamortized facility fees are reflected as deferred fees on the Statement of Assets and Liabilities. DISTRIBUTIONS TO SHAREHOLDERS: The Fund declares and records distributions daily and pays monthly. STATEMENT OF CASH FLOWS: Information on financial transactions which have been settled through the receipt or disbursement of cash is presented in the Statement of Cash Flows. The cash amount shown in the Statement of Cash Flows is the amount included in the Portfolio's Statement of Assets and Liabilities and represents cash on hand at its custodian bank account and does not include any short-term investments at February 28, 2003. NOTE 2. FEDERAL TAX INFORMATION Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Reclassifications are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. The following capital loss carryforwards, determined as of August 31, 2002, are available to the Fund to reduce taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Internal Revenue Code. YEAR OF CAPITAL LOSS EXPIRATION CARRYFORWARDS ---------- ------------- 2010 $7,156,391 NOTE 3. FEES AND COMPENSATION PAID TO AFFILIATES MANAGEMENT FEE: The Advisor receives a monthly fee equal to 0.45% annually of the Portfolio's average daily net assets. ADMINISTRATION FEE: The Advisor provides accounting and other services for a monthly fee equal to 0.20% annually of the Fund's average daily net assets. PRICING AND BOOKKEEPING FEES: The Administrator is responsible for providing pricing and bookkeeping services to the Portfolio and Fund under a Pricing and Bookkeeping Agreement. Under a separate agreement (the "Outsourcing Agreement"), the Advisor has delegated those functions to State Street Bank and Trust Company ("State Street"). The Advisor pays fees to State Street under the Outsourcing Agreement. Under its pricing and bookkeeping agreement with the Portfolio and Fund, the Advisor receives from the Portfolio and Fund an annual flat fee of $10,000 and $5,000 respectively, paid monthly, and in any month that the Fund's average daily net assets are more than $50 million, a monthly fee equal to the average daily net assets of the Fund for that month multiplied by a fee rate that is calculated by taking into account the fees payable to State Street under the Outsourcing Agreement. For the six months ended February 28, 2003, the net asset based fee was 0.035%. The Portfolio also pays out-of-pocket costs for pricing services. 16 Notes to Financial Statements (continued) February 28, 2003 (Unaudited) TRANSFER AGENT FEE: Liberty Funds Services, Inc. (the "Transfer Agent"), an affiliate of the Advisor, provides shareholder services for a monthly fee comprised of 0.06% annually of the Fund's average daily net assets plus charges based on the number of shareholder accounts and transactions. The Transfer Agent also receives reimbursement for certain out-of-pocket expenses. The Portfolio pays the Transfer Agent a monthly fee equal to $6,000 annually. UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES: Liberty Funds Distributor, Inc. (the "Distributor"), an affiliate of the Advisor, is the Fund's principal underwriter. For the six months ended February 28, 2003, the Fund has been advised that the Distributor retained $2,287 net underwriting discounts on sales of the Fund's Class A shares and received early withdrawal charges (EWC) of $2,015, $385,932 and $18,695 on Class A, Class B and Class C share redemptions, respectively. The Fund has adopted a 12b-1 plan (the "Plan") which requires it to pay the Distributor a monthly service fee equal to 0.25% annually on Class A, Class B and Class C net assets as of the 20th of each month. The Plan also requires the payment of a monthly distribution fee to the Distributor equal to 0.10%, 0.45% and 0.60% annually of the average daily net assets attributable to Class A, Class B and Class C shares only. The EWC and the fees received from the Plan are used principally as repayment to the Distributor for amounts paid by the Distributor to dealers who sold such shares. EXPENSE LIMITS: The Advisor has voluntarily agreed, until further notice, to waive fees and bear certain Fund expenses to the extent that total expenses (inclusive of allocated Portfolio expenses but exclusive of service fees, distribution fees, brokerage commissions, interest, commitment fees, taxes and extraordinary expenses, if any) exceed 0.80% of the Fund's average daily net assets. OTHER: The Portfolio and Fund pay no compensation to their officers, all of whom are employees of the Advisor. The Portfolio has an agreement with its custodian bank under which $195 of custody fees were reduced by balance credits for the six months ended February 28, 2003. The Portfolio could have invested a portion of the assets utilized in connection with the expense offset arrangement in an income-producing asset if it had not entered into such an agreement. NOTE 4. PORTFOLIO INFORMATION INVESTMENT ACTIVITY: During the six months ended February 28, 2003, purchases and sales of investments, other than short-term obligations, by the Portfolio were $116,910,263 and $172,558,204, respectively. Unrealized appreciation (depreciation) at February 28, 2003, based on cost for federal tax purposes, was: Gross unrealized appreciation $ 9,655,827 Gross unrealized depreciation (55,557,213) ------------ Net unrealized depreciation $(45,901,386) ------------ OTHER: The Portfolio may focus its investments in certain industries, subjecting it to greater risk than a fund that is more diversified. NOTE 5. TENDER OF SHARES The Board of Trustees has adopted a policy of making tender offers on a quarterly basis. The Board has designated the 15th day of March, June, September and December, each year, or the next business day if the 15th is not a business day as the Repurchase Request Deadline. Tender offers are made for a portion of the Fund's then outstanding shares at the net asset value of the shares as of the Repurchase Pricing Date. The tender offer amount, which is determined by the Board of Trustees, will be at least 5% and no more than 25% of the total number of shares outstanding on the Repurchase Request Deadline. The Fund may repurchase an additional amount of shares up to 2% of the shares outstanding on the Repurchase Request Deadline. During the six months ended February 28, 2003, there were two tender offers in September and December. The Fund offered to repurchase 15% and 15%, respectively, of its shares and 13.81% and 9.32%, respectively, of shares outstanding were tendered. 17 Notes to Financial Statements (continued) February 28, 2003 (Unaudited) NOTE 6. SENIOR LOAN PARTICIPATION COMMITMENTS The Portfolio invests primarily in participations and assignments, or acts as a party to the primary lending syndicate of a Variable Rate Senior Loan interest to United States corporations, partnerships, and other entities. If the lead lender in a typical lending syndicate becomes insolvent, enters FDIC receivership or, if not FDIC insured, enters into bankruptcy, the Portfolio may incur certain costs and delays in receiving payment or may suffer a loss of principal and/or interest. When the Portfolio purchases a participation of a Senior Loan interest, the Portfolio typically enters into a contractual agreement with the lender or other third party selling the participation, but not with the borrower directly. As such, the Portfolio assumes the credit risk of the Borrower, Selling Participant or other persons interpositioned between the Portfolio and the Borrower. At February 28, 2003, the following sets forth the selling participants with respect to interests in Senior Loans purchased by the Portfolio on a participation basis. Selling Principal Participant Amount Value ----------- ------- ----- Citibank: CSC Holdings, Inc., Revolver $1,497,500 $1,393,530 Simmons Co., Term Loan B 261,006 261,916 Goldman Sachs Credit Partners LP: Bridge Information Systems, Multi-Draw Term Loan 544,524 73,511 The ability of borrowers to meet their obligations may be affected by economic developments in a specific industry. NOTE 7. LINE OF CREDIT The Portfolio has a fundamental policy which allows it to borrow from banks, other affiliated funds and other entities to the extent permitted by applicable law, provided that the Portfolio's borrowings shall not exceed 33 1/3% of the value of its total net assets (exclusive of borrowings). The Portfolio is part of a $200,000,000 credit facility that has been set up as a means of borrowing. Any borrowings bear interest at one of the following options determined at the inception of the loan: (1) federal funds rate plus 1/2 of 1%, (2) the lending bank's base rate or (3) IBOR offshore loan rate plus 1/2 of 1%. Other investment companies managed by the Advisor also participate in the line of credit on the same terms. In addition, a commitment fee of 0.10% per annum on the Portfolio's unused commitment shall be paid quarterly by each fund based on the relative asset size of the Portfolio to the other investment companies participating in this agreement. The commitment fee is included in "Other expenses" on the Statement of Operations. Because several investment companies participate, there is no assurance that an individual fund or portfolio will have access to the entire $200,000,000 at any particular time. For the six months ended February 28, 2003, there were no borrowings under the agreement. NOTE 8. UNFUNDED LOAN COMMITMENTS As of February 28, 2003, the Portfolio had unfunded loan commitments of $4,766,356, which could be extended at the option of the Borrower, pursuant to the following loan agreements: Unfunded Borrower Commitments -------- ----------- CSC Holdings, Inc. $ 753,750 Federal-Mogul Corp. 262,606 Insight Health Services Corp. 2,000,000 Noveon, Inc. 625,000 Riverwood International Corp. 1,125,000 ---------- $4,766,356 ---------- NOTE 9. OTHER During the six months ended February 28, 2003, the Portfolio held Team Health, Inc., a violation of investment restrictions. A portion of this position was sold off at a loss of $68,751 and the Fund was reimbursed by the Advisor. The remaining position as of February 28, 2003, was subsequently sold in March 2003. NOTE 10. SUBSEQUENT EVENT On April 1, 2003, the Advisor merged into Columbia Management Advisers, Inc. ("Columbia"), a direct subsidiary of Columbia Management Group, Inc., which subsequently became the investment advisor of the Fund. The merger will not change the way the Fund is managed, the investment personnel assigned to manage the Fund or the fees paid by the Fund to Columbia. 18 Stein Roe Floating Rate Limited Liability Company--Financial Highlights Selected data for a share outstanding throughout each period is as follows:
(UNAUDITED) SIX MONTHS ENDED YEAR ENDED AUGUST 31, PERIOD ENDED FEBRUARY 28, ---------------------------------------------------- AUGUST 31, 2003 2002 2001 2000 1999 (a) ============================================================================================================================= RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Operating expenses 0.57%(b)(c) 0.55%(b) 0.53%(b) 0.55% 0.96%(c) Interest expense -- 0.03% -- -- -- Net investment income 6.35%(b)(c) 6.42%(b)(d) 8.94%(b) 9.26% 7.59%(c) Portfolio turnover rate 28%(e) 70% 63% 21% 17%(e)
(a)From commencement of operations on December 17, 1998. (b)The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. (c)Annualized. (d)Effective September 1, 2001, the Portfolio has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing and accreting premium and discount on all debt securities. The effect of this change for the year ended August 31, 2002, was to increase the ratio of net investment income to average net assets from 6.41% to 6.42%. Ratios for the periods prior to August 31, 2002 have not been restated to reflect this change in presentation. (e)Not annualized. 19 Liberty Floating Rate Fund -- Financial Highlights Selected data for a share outstanding throughout each period is as follows:
(UNAUDITED) YEAR ENDED SIX MONTHS ENDED AUGUST 31, PERIOD ENDED FEBRUARY 28, ---------------------------------- AUGUST 31, CLASS A SHARES 2003 2002 2001 2000 (a) =========================================================================================================================== NET ASSET VALUE, BEGINNING OF PERIOD $ 8.83 $ 9.62 $ 10.00 $ 10.05 ------- ------- ------- ------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (b) 0.26 0.54(c) 0.81 0.71 Net realized and unrealized loss allocated from Portfolio (0.05) (0.79)(c) (0.37) (0.05) ------- ------- ------- ------- Total from Investment Operations 0.21 (0.25) 0.44 0.66 ------- ------- ------- ------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.25) (0.54) (0.82) (0.71) From net realized gains -- --(d) --(d) --(d) ------- ------- ------- ------- Total Distributions Declared to Shareholders (0.25) (0.54) (0.82) (0.71) ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $ 8.79 $ 8.83 $ 9.62 $ 10.00 ======= ======= ======= ======= Total return (e)(f) 2.43%(g)(h) (2.67)% 4.56% 6.79%(h) ======= ======= ======= ======= RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Operating expenses 1.15%(i) 1.15% 1.15% 1.15%(i) Interest expense allocated from Portfolio -- 0.03% -- -- Net expenses 1.15%(i) 1.18% 1.15% 1.15%(i) Net investment income 5.81%(i) 5.83%(c) 8.28% 8.53%(i) Waiver/reimbursement 0.33%(i) 0.28% 0.18% 0.13%(i) Net assets, end of period (000's) $ 80,272 $108,583 $138,058 $147,209
(a)Class A shares were initially offered on November 2, 1999. Per share data reflects activity from that date. (b)Per share data was calculated using average shares outstanding during the period. (c)Effective September 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing and accreting premium and discount on all debt securities. The effect of this change for the year ended August 31, 2002, to the net investment income and net realized and unrealized loss per share was less than $0.01, and increased the ratio of net investment income to average net assets from 5.82% to 5.83%. Per share data and ratios for periods prior to August 31, 2002 have not been restated to reflect this change in presentation. (d)Rounds to less than $0.01. (e)Had the Advisor not waived or reimbursed a portion of expenses, total return would have been reduced. (f)Total return at net asset value assuming all distributions reinvested and no initial sales charge. (g)At February 28, 2003, 0.11% of the Fund's total return consists of a voluntary reimbursement by the Advisor for a realized investment loss on an investment not meeting the Fund's investment restrictions. Excluding this item, total return would have been 2.32%. (h)Not annualized. (i)Annualized. 20 Liberty Floating Rate Fund-- Financial Highlights (continued) Selected data for a share outstanding throughout each period is as follows:
(UNAUDITED) YEAR ENDED SIX MONTHS ENDED AUGUST 31, PERIOD ENDED FEBRUARY 28, ---------------------------------- AUGUST 31, CLASS B SHARES 2003 2002 2001 2000 (a) =========================================================================================================================== NET ASSET VALUE, BEGINNING OF PERIOD $ 8.83 $ 9.62 $ 10.00 $ 10.05 ------- ------- ------- ------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (b) 0.24 0.51(c) 0.77 0.67 Net realized and unrealized loss allocated from Portfolio (0.05) (0.79)(c) (0.37) (0.05) ------- ------- ------- ------- Total from Investment Operations 0.19 (0.28) 0.40 0.62 ------- ------- ------- ------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.23) (0.51) (0.78) (0.67) From net realized gains -- --(d) --(d) --(d) ------- ------- ------- ------- Total Distributions Declared to Shareholders (0.23) (0.51) (0.78) (0.67) ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $ 8.79 $ 8.83 $ 9.62 $ 10.00 ======= ======= ======= ======= Total return (e)(f) 2.26%(g)(h) (3.02)% 4.19% 6.35%(h) ======= ======= ======= ======= RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Operating expenses 1.50%(i) 1.50% 1.50% 1.50%(i) Interest expense allocated from Portfolio -- 0.03% -- -- Net expenses 1.50%(i) 1.53% 1.50% 1.50%(i) Net investment income 5.46%(i) 5.48%(c) 7.93% 8.18%(i) Waiver/reimbursement 0.33%(i) 0.28% 0.18% 0.13%(i) Net assets, end of period (000's) $155,746 $174,707 $195,891 $ 83,695
(a)Class B shares were initially offered on November 2, 1999. Per share data reflects activity from that date. (b)Per share data was calculated using average shares outstanding during the period. (c)Effective September 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing and accreting premium and discount on all debt securities. The effect of this change for the year ended August 31, 2002, to the net investment income and net realized and unrealized loss per share was less than $0.01, and increased the ratio of net investment income to average net assets from 5.47% to 5.48%. Per share data and ratios for periods prior to August 31, 2002 have not been restated to reflect this change in presentation. (d)Rounds to less than $0.01. (e)Had the Advisor not waived or reimbursed a portion of expenses, total return would have been reduced. (f)Total return at net asset value assuming all distributions reinvested and no early withdrawal charge. (g)At February 28, 2003, 0.12% of the Fund's total return consists of a voluntary reimbursement by the Advisor for a realized investment loss on an investment not meeting the Fund's investment restrictions. Excluding this item, total return would have been 2.14%. (h)Not annualized. (i)Annualized. 21 Liberty Floating Rate Fund-- Financial Highlights (continued) Selected data for a share outstanding throughout each period is as follows:
(UNAUDITED) YEAR ENDED SIX MONTHS ENDED AUGUST 31, PERIOD ENDED FEBRUARY 28, ---------------------------------- AUGUST 31, CLASS C SHARES 2003 2002 2001 2000 (a) =========================================================================================================================== NET ASSET VALUE, BEGINNING OF PERIOD $ 8.83 $ 9.62 $ 10.00 $ 10.05 ------- ------- ------- ------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (b) 0.23 0.50(c) 0.76 0.66 Net realized and unrealized loss allocated from Portfolio (0.04) (0.79)(c) (0.37) (0.05) ------- ------- ------- ------- Total from Investment Operations 0.19 (0.29) 0.39 0.61 ------- ------- ------- ------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.23) (0.50) (0.77) (0.66) From net realized gains -- --(d) --(d) --(d) ------- ------- ------- ------- Total Distributions Declared to Shareholders (0.23) (0.50) (0.77) (0.66) ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $ 8.79 $ 8.83 $ 9.62 $ 10.00 ------- ------- ------- ------- Total return (e)(f) 2.18%(g)(h) (3.16)% 4.04% 6.20%(h) ------- ------- ------- ------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Operating expenses 1.65%(i) 1.65% 1.65% 1.65%(i) Interest expense allocated from Portfolio -- 0.03% -- -- Net expenses 1.65%(i) 1.68% 1.65% 1.65%(i) Net investment income 5.31%(i) 5.33%(c) 7.78% 8.03%(i) Waiver/reimbursement 0.33%(i) 0.28% 0.18% 0.13%(i) Net assets, end of period (000's) $110,967 $137,098 $184,399 $ 91,664
(a)Class C shares were initially offered on November 2, 1999. Per share data reflects activity from that date. (b)Per share data was calculated using average shares outstanding during the period. (c)Effective September 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing and accreting premium and discount on all debt securities. The effect of this change for the year ended August 31, 2002, to the net investment income and net realized and unrealized loss per share was less than $0.01, and increased the ratio of net investment income to average net assets from 5.32% to 5.33%. Per share data and ratios for periods prior to August 31, 2002 have not been restated to reflect this change in presentation. (d)Rounds to less than $0.01. (e)Had the Advisor not waived or reimbursed a portion of expenses, total return would have been reduced. (f)Total return at net asset value assuming all distributions reinvested and no early withdrawal charge. (g)At February 28, 2003, 0.11% of the Fund's total return consists of a voluntary reimbursement by the Advisor for a realized investment loss on an investment not meeting the Fund's investment restrictions. Excluding this item, total return would have been 2.07%. (h)Not annualized. (i)Annualized. 22 Liberty Floating Rate Fund-- Financial Highlights (continued) Selected data for a share outstanding throughout each period is as follows:
(UNAUDITED) SIX MONTHS ENDED YEAR ENDED AUGUST 31, PERIOD ENDED FEBRUARY 28, ---------------------------------------------------- AUGUST 31, CLASS Z SHARES 2003 2002 2001 2000 1999 (a) ============================================================================================================================= NET ASSET VALUE, BEGINNING OF PERIOD $ 8.83 $ 9.62 $ 10.00 $ 10.07 $ 10.00 ------- ------- ------- ------- ------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (b) 0.27 0.57(c) 0.84 0.87 0.47 Net realized and unrealized loss allocated from Portfolio (0.05) (0.78)(c) (0.37) (0.07) 0.07 ------- ------- ------- ------- ------- Total from Investment Operations 0.22 (0.21) 0.47 0.80 0.54 ------- ------- ------- ------- ------- LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.26) (0.58) (0.85) (0.87) (0.47) In excess of net investment income -- -- -- -- --(d) From net realized gains -- --(d) --(d) --(d) -- ------- ------- ------- ------- ------- Total Distributions Declared to Shareholders (0.26) (0.58) (0.85) (0.87) (0.47) ------- ------- ------- ------- ------- NET ASSET VALUE, END OF PERIOD $ 8.79 $ 8.83 $ 9.62 $ 10.00 $ 10.07 ======= ======= ======= ======= ======= Total return (e)(f) 2.61%(g)(h) (2.33)% 4.89% 8.23% 5.43%(h) ======= ======= ======= ======= ======= RATIOS TO AVERAGE NET ASSETS: Operating expenses 0.80%(i) 0.80% 0.80% 0.80% 1.30%(i) Interest expense allocated from Portfolio -- 0.03% -- -- -- Net expenses 0.80%(i) 0.83% 0.80% 0.80% 1.30%(i) Net investment income 6.16%(i) 6.18%(c) 8.63% 8.94% 7.10%(i) Waiver/reimbursement 0.33%(i) 0.28% 0.18% 0.39% 55.49%(i) Net assets, end of period (000's) $ 8,875 $ 13,236 $ 11,662 $ 6,845 $ 893
(a)From commencement of operations on December 17, 1998. (b)Per share data was calculated using average shares outstanding during the period. (c)Effective September 1, 2001, the Fund has adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing and accreting premium and discount on all debt securities. The effect of this change for the year ended August 31, 2002, to the net investment income and net realized and unrealized loss per share was less than $0.01, and increased the ratio of net investment income to average net assets from 6.17% to 6.18%. Per share data and ratios for periods prior to August 31, 2002 have not been restated to reflect this change in presentation. (d)Rounds to less than $0.01. (e)Had the Advisor not waived or reimbursed a portion of expenses, total return would have been reduced. (f)Total return at net asset value assuming all distributions reinvested. (g)At February 28, 2003, 0.12% of the Fund's total return consists of a voluntary reimbursement by the Advisor for a realized investment loss on an investment not meeting the Fund's investment restrictions. Excluding this item, total return would have been 2.49%. (h)Not annualized. (i)Annualized. 23 [THIS PAGE INTENTIONALLY LEFT BLANK] Transfer Agent Important Information About This Report The Transfer Agent for Liberty Floating Rate Fund is: Liberty Funds Services, Inc. PO Box 8081 Boston, MA 02266-8081 800-345-6611 The fund mails one shareholder report to each shareholder address. If you would like more than one report, please call shareholder services at 800-345-6611 and additional reports will be sent to you. This report has been prepared for shareholders of Liberty Floating Rate Fund. This report may also be used as sales literature when preceded or accompanied by the current prospectus which provides details of sales charges, investment objectives and operating policies of the fund and with the most recent copy of the Liberty Funds Performance Update. Semiannual Report: Liberty Floating Rate Fund Liberty Floating Rate Fund SEMIANNUAL REPORT, FEBRUARY 28, 2003 [eagle head logo] LibertyFunds A Member of Columbia Management Group (C)2003 Liberty Funds Distributor, Inc. A Member of Columbia Management Group One Financial Center, Boston, MA 02111-2621 PRSRT STD U.S. POSTAGE PAID HOLLISTON, MA PERMIT NO. 20 761-03/081N-0303 (04/03) 03/0813 ITEM 2. CODE OF ETHICS. Not applicable at this time. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable at this time. ITEMS 4-6. [RESERVED] ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES Not applicable at this time. ITEM 8. [RESERVED] ITEM 9. CONTROLS AND PROCEDURES. (a) Not applicable at this time. (b) There were no significant changes in the registrant's internal controls or in other factors that could affect these controls subsequent to the date of our evaluation. ITEM 10. EXHIBITS. File the exhibits listed below as part of this Form. Letter or number the exhibits in the sequence indicated. (a) Any code of ethics, or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy the Item 2 requirements through filing of an exhibit: Not applicable. (b) A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2 under the Act (17 CFR 270.30a-2) in the exact form set forth below: Attached hereto. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) Liberty Floating Rate Fund ----------------------------------------------------------- By (Signature and Title)* /s/ Joseph R. Palombo ---------------------------------------------- Joseph R. Palombo, President Date April 25, 2003 ------------------------------------------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title)* /s/ Joseph R. Palombo ---------------------------------------------- Joseph R. Palombo, President Date April 25, 2003 ------------------------------------------------------------------- By (Signature and Title)* /s/ J. Kevin Connaughton ---------------------------------------------- J. Kevin Connaughton, Treasurer Date April 25, 2003 ------------------------------------------------------------------- * Print the name and title of each signing officer under his or her signature.