N-CSRS 1 a2135901zn-csrs.txt N-CSRS 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 811-9709 --------------------------------------------- Columbia Floating Rate Advantage Fund ------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) One Financial Center, Boston, Massachusetts 02111 ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Vincent Pietropaolo, 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: 1-617-772-3698 ---------------------------- Date of fiscal year end: August 31, 2004 -------------------------- Date of reporting period: February 29, 2004 ------------------------- 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. Section 3507. ITEM 1. REPORTS TO STOCKHOLDERS. [GRAPHIC] COLUMBIA FLOATING RATE ADVANTAGE FUND SEMIANNUAL REPORT FEBRUARY 29, 2004 [COLUMBIA(R) FUNDS LOGO] A MEMBER OF COLUMBIA MANAGEMENT GROUP Table of Contents Fund Profile 1 Performance Information 2 Economic Update 3 Portfolio Managers' Report 4 Financial Statements 6 Investment Portfolio 7 Statement of Assets and Liabilities 17 Statement of Operations 18 Statement of Changes in Net Assets 19 Statement of Cash Flows 20 Notes to Financial Statements 21 Financial Highlights 27 Important Information About This Report 31 Columbia Funds 32
Economic and market conditions change frequently. There is no assurance that the trends described in this report will continue or commence. Not FDIC May Lose Value Insured No Bank Guarantee TO OUR FELLOW SHAREHOLDERS COLUMBIA FLOATING RATE ADVANTAGE FUND DEAR SHAREHOLDER: We are pleased to let you know that FleetBoston Financial Corporation and Bank of America Corporation have merged, effective April 1, 2004. As as a result of the merger, Columbia Management Group became part of the Bank of America family of companies. Looking ahead, we believe this merger will be a real benefit to our shareholders. Preserving and leveraging our strengths, the combined organization will deliver additional research, management, and product capabilities to you. We also want to take this opportunity to advise a change in your fund's investment advisor. On April 15, Highland Capital Management, L.P. became the investment advisor to Columbia Floating Rate Advantage Fund. Our board transferred management of the fund to Highland because regulations prohibited Columbia Management from purchasing bank loans underwritten by Bank of America. The change of investment advisor will not impact the fund's investment strategy and will give your fund access to the full bank loan marketplace. For more information, please read the sidebar on page 5 of this report and the letter included in this mailing. If you have additional questions about this transfer or about your account, please contact Shareholder Services at 800-345-6611. As you might know, on March 15, 2004, FleetBoston Financial announced an agreement in principle with the staff of the Securities and Exchange Commission ("SEC") and the New York Attorney General to settle charges involving market timing in Columbia Management mutual funds. (Bank of America came to a similar settlement in principle at the same time.) The agreement will require the final approval of the SEC. This action reflects our full cooperation with the investigation and our strong wish to put this regrettable situation behind us. Columbia Management has taken and will continue to take steps to strengthen policies, procedures and oversight to curb frequent trading of Columbia fund shares. We also want you to know that your fund's Board of Trustees has been energetic over the past year in strengthening its capacity to oversee the Columbia funds. Recently, the Board of Trustees: - ELECTED AN INDEPENDENT TRUSTEE TO CHAIR THE TWELVE-PERSON BOARD. IN ADDITION, EACH COMMITTEE OF THE BOARD IS COMPRISED OF TRUSTEES WHO ARE COMPLETELY INDEPENDENT OF THE ADVISOR AND ITS AFFILIATES. - APPOINTED A CHIEF COMPLIANCE OFFICER OF THE COLUMBIA FUNDS, WHO REPORTS DIRECTLY TO EACH FUND'S AUDIT COMMITTEE. TRUSTEES WERE ALSO ASSIGNED TO FOUR SEPARATE INVESTMENT OVERSIGHT COMMITTEES, EACH BETTER ABLE TO MONITOR PERFORMANCE OF INDIVIDUAL FUNDS. - VOTED TO DOUBLE THE REQUIRED INVESTMENT BY EACH TRUSTEE IN THE COLUMBIA FUNDS -- TO FURTHER ALIGN THE INTERESTS OF THE TRUSTEES WITH THOSE OF OUR FUND SHAREHOLDERS. AT THE SAME TIME, NEW POLICIES WERE INSTITUTED REQUIRING ALL INVESTMENT PERSONNEL AND TRUSTEES TO HOLD THEIR COLUMBIA FUND SHARES FOR A MINIMUM OF ONE YEAR (UNLESS EXTRAORDINARY CIRCUMSTANCES WARRANT AN EXCEPTION TO BE GRANTED BY A BOARD DESIGNATED COMMITTEE). Both your fund's trustees and Columbia Management are committed to serving the interests of our shareholders, and we will continue to work hard to help you achieve your financial goals. In the pages that follow, you'll find valuable information about the economic environment and the performance of your Columbia fund. The "Economic Update" provides an overview of the investing environment during the past six months. In the "Portfolio Managers' Report," your fund's management team discusses investment performance and the impact of decisions made during the period. This discussion is followed by financial statements for your fund. We hope that you will take time to read this report and discuss it with your financial advisor if you have any questions. As always, thank you for choosing Columbia funds. It is a privilege to play a role in your financial future. Sincerely, /s/ Thomas C. Theobald /s/ J. Kevin Connaughton Thomas C. Theobald J. Kevin Connaughton Chairman, Board of Trustees President, Columbia Funds J. Kevin Connaughton was named president of Columbia Funds on February 27, 2004. FUND PROFILE COLUMBIA FLOATING RATE ADVANTAGE FUND The information below gives you a snapshot of your fund at the end of the reporting period. Your fund is actively managed and the composition of its portfolio will change over time. QUALITY AS OF 02/29/04 (%) Ba1 4.6 Ba2 8.2 Ba3 20.6 B1 20.3 B2 12.6 B3 8.2 Caa1 4.3 Caa2 2.7 Ca 1.9 Non-rated 9.6 Other 7.0 Total 100%
TOP 10 ISSUERS AS OF 02/29/04 (%) Allied Waste North America 2.9 Century Cable Holdings 2.3 Mission Energy Holdings 2.3 Washington Group International 2.1 Charter Communications 2.0 Cricket Communications 2.0 Huntsman 2.0 Huntsman International 1.9 Nextel Finance 1.8 Michael Foods 1.7
TOP 5 SECTORS AS OF 02/29/04 (%) Cable 9.4 Telecommunications - wireless 7.9 Electric utilities 7.3 Food manufacturer 5.3 Chemicals 4.8
Quality is calculated as a percentage of total investments. Sectors and issuers are calculated as a percentage of net assets. (C) 2004 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. The Morningstar Style Box(TM) reveals a fund's investment strategy. For equity funds the vertical axis shows the market capitalization of the stocks owned and the horizontal axis shows investment style (value, blend or growth). For fixed-income funds the vertical axis shows the average credit quality of the bonds owned, and the horizontal axis shows interest rate sensitivity as measured by a bond's duration (short, intermediate or long). All of these numbers are drawn from the data most recently provided by the fund and entered into Morningstar's database as of month-end. Although the data are gathered from reliable sources, Morningstar cannot guarantee completeness and accuracy. As of 02/29/2004. [SIDENOTE] SUMMARY - FOR THE SIX-MONTH PERIOD THAT ENDED FEBRUARY 29, 2004, THE FUND'S CLASS A SHARES RETURNED 9.72% WITHOUT SALES CHARGE. - THE FUND'S RETURN WAS HIGHER THAN THE RETURN OF ITS BENCHMARK, THE CSFB LEVERAGED LOAN PLUS INDEX, AND THE AVERAGE RETURN OF ITS PEER GROUP, THE LIPPER LOAN PARTICIPATION FUNDS CATEGORY. - THE FUND'S EMPHASIS ON RECOVERING INDUSTRIES, SUCH AS WIRELESS AND CABLE TELEVISION, AIDED ITS STRONG RETURN. RETURNS WERE FURTHER ASSISTED BY THE USE OF LEVERAGE.
CSFB LEVERAGED CLASS A SHARES LOAN PLUS INDEX 9.72% 4.68%
OBJECTIVE To provide a high level of current income, consistent with preservation of capital TOTAL NET ASSETS $470.0 million [CHART] MORNINGSTAR STYLE BOX 1 PERFORMANCE INFORMATION COLUMBIA FLOATING RATE ADVANTAGE FUND [CHART] VALUE OF A $10,000 INVESTMENT 01/13/00 - 02/29/04
CLASS A SHARES CLASS A SHARES CSFB LEVERAGED WITHOUT SALES CHARGE WITH SALES CHARGE LOAN PLUS INDEX 1/13/2000 $ 10,000 $ 9,650 $ 10,000 01/13/2000 - 01/31/2000 $ 10,050 $ 9,698 $ 10,097 02/01/2000 - 02/29/2000 $ 10,141 $ 9,787 $ 10,130 03/01/2000 - 03/31/2000 $ 10,151 $ 9,795 $ 10,050 04/01/2000 - 04/30/2000 $ 10,210 $ 9,853 $ 10,086 05/01/2000 - 05/31/2000 $ 10,316 $ 9,955 $ 10,171 06/01/2000 - 06/30/2000 $ 10,420 $ 10,055 $ 10,233 07/01/2000 - 07/31/2000 $ 10,521 $ 10,153 $ 10,307 08/01/2000 - 08/31/2000 $ 10,604 $ 10,233 $ 10,359 09/01/2000 - 09/30/2000 $ 10,696 $ 10,322 $ 10,393 10/01/2000 - 10/31/2000 $ 10,778 $ 10,400 $ 10,398 11/01/2000 - 11/30/2000 $ 10,821 $ 10,442 $ 10,421 12/01/2000 - 12/31/2000 $ 10,895 $ 10,514 $ 10,494 01/01/2001 - 01/31/2001 $ 10,998 $ 10,613 $ 10,557 02/01/2001 - 02/28/2001 $ 11,049 $ 10,663 $ 10,647 03/01/2001 - 03/31/2001 $ 11,020 $ 10,634 $ 10,660 04/01/2001 - 04/30/2001 $ 10,915 $ 10,533 $ 10,615 05/01/2001 - 05/31/2001 $ 11,027 $ 10,641 $ 10,742 06/01/2001 - 06/30/2001 $ 11,041 $ 10,654 $ 10,755 07/01/2001 - 07/31/2001 $ 11,176 $ 10,785 $ 10,782 08/01/2001 - 08/31/2001 $ 11,316 $ 10,920 $ 10,868 09/01/2001 - 09/30/2001 $ 11,128 $ 10,739 $ 10,660 10/01/2001 - 10/31/2001 $ 10,873 $ 10,493 $ 10,494 11/01/2001 - 11/30/2001 $ 11,007 $ 10,622 $ 10,659 12/01/2001 - 12/31/2001 $ 11,176 $ 10,784 $ 10,769 01/01/2002 - 01/31/2002 $ 11,344 $ 10,947 $ 10,829 02/01/2002 - 02/28/2002 $ 11,274 $ 10,879 $ 10,788 03/01/2002 - 03/31/2002 $ 11,493 $ 11,090 $ 10,913 04/01/2002 - 04/30/2002 $ 11,652 $ 11,245 $ 11,029 05/01/2002 - 05/31/2002 $ 11,683 $ 11,274 $ 11,022 06/01/2002 - 06/30/2002 $ 11,455 $ 11,054 $ 10,855 07/01/2002 - 07/31/2002 $ 11,051 $ 10,664 $ 10,690 08/01/2002 - 08/31/2002 $ 10,878 $ 10,497 $ 10,659 09/01/2002 - 09/30/2002 $ 10,723 $ 10,347 $ 10,683 10/01/2002 - 10/31/2002 $ 10,621 $ 10,249 $ 10,540 11/01/2002 - 11/30/2002 $ 10,806 $ 10,427 $ 10,721 12/01/2002 - 12/31/2002 $ 11,067 $ 10,680 $ 10,889 01/01/2003 - 01/31/2003 $ 11,232 $ 10,839 $ 11,036 02/01/2003 - 02/28/2003 $ 11,249 $ 10,855 $ 11,094 03/01/2003 - 03/31/2003 $ 11,398 $ 10,999 $ 11,130 04/01/2003 - 04/30/2003 $ 11,778 $ 11,366 $ 11,287 05/01/2003 - 05/31/2003 $ 12,143 $ 11,718 $ 11,438 06/01/2003 - 06/30/2003 $ 12,421 $ 11,986 $ 11,600 07/01/2003 - 07/31/2003 $ 12,494 $ 12,057 $ 11,679 08/01/2003 - 08/31/2003 $ 12,572 $ 12,132 $ 11,704 09/01/2003 - 09/30/2003 $ 12,810 $ 12,361 $ 11,821 10/01/2003 - 10/31/2003 $ 13,040 $ 12,584 $ 11,928 11/01/2003 - 11/30/2003 $ 13,283 $ 12,818 $ 12,015 12/01/2003 - 12/31/2003 $ 13,473 $ 13,001 $ 12,089 01/01/2004 - 01/31/2004 $ 13,777 $ 13,295 $ 12,215 02/01/2004 - 02/29/2004 $ 13,791 $ 13,308 $ 12,256
The graph and table do not reflect a deduction of the taxes that a shareholder would pay on fund distributions or the redemption of fund shares. The CSFB Leveraged Loan Plus Index is an unmanaged index that tracks the performance of senior floating rate bank loans. Unlike the fund, indices 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 an index. Index performance is from December 31, 1999. AVERAGE ANNUAL TOTAL RETURN AS OF 02/29/04 (%)
SHARE CLASS A B C Z --------------------------------------------------------------------------------------- INCEPTION 1/13/00 1/13/00 1/13/00 1/13/00 --------------------------------------------------------------------------------------- SALES CHARGE WITHOUT WITH WITHOUT WITH WITHOUT WITH WITHOUT --------------------------------------------------------------------------------------- 6-month (cumulative) 9.72 5.88 9.53 6.28 9.44 8.44 9.91 1-year 22.62 18.33 22.19 18.94 22.01 21.01 23.05 Life 8.10 7.17 7.74 7.55 7.58 7.58 8.47
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/03 (%)
SHARE CLASS A B C Z ---------------------------------------------------------------------------------------- SALES CHARGE WITHOUT WITH WITHOUT WITH WITHOUT WITH WITHOUT ---------------------------------------------------------------------------------------- 6-month (cumulative) 8.46 4.66 8.27 5.02 8.18 7.18 8.65 1-year 21.72 17.46 21.30 18.05 21.12 20.12 22.15 Life 7.80 6.83 7.44 7.14 7.28 7.28 8.16
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 for different share classes will vary based on differences in sales charges and fees associated with each class. 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. [SIDENOTE] PERFORMANCE OF A $10,000 INVESTMENT 01/13/00 - 02/29/04 ($)
SALES CHARGE: WITHOUT WITH -------------------------------- Class A 13,791 13,308 Class B 13,501 13,501 Class C 13,519 13,519 Class Z 13,986 n/a
Performance data quoted represents past performance and current performance may be lower or higher. Past performance is no guarantee of future results. The investment return and principal value will fluctuate so that shares may be worth more or less than the original cost. Please visit www.columbiafunds.com for daily and most recent month-end performance updates. 2 ECONOMIC UPDATE COLUMBIA FLOATING RATE ADVANTAGE FUND The US economy moved strongly early in the six-month reporting period that began September 1, 2003 and ended February 29, 2004. However, the pace of growth slowed as the period wore on, and downbeat news from consumers and the jobs front put a damper on expectations for 2004. A combination of factors accounted for the economy's stronger growth in the first half of this reporting period. A sizeable tax package, which was implemented in 2003, gave disposable income a boost. Income taxes fell across all tax brackets. And, many taxpayers received tax rebate checks late last summer, which helped prop up consumer spending throughout this reporting period. But early in 2004, consumer confidence slipped. Unemployment claims rose and the number of new jobs added to the labor market was substantially lower than economists had expected--given the overall growth of the economy. Even the housing market, which has been hot for years, showed signs of weakness. Home-buying activity slowed, and sales fell late in the period. The business sector contributed to the economy's growth as industrial production rose over the past six months. Business spending--especially on technology-related items--showed strength as corporate profits rose sharply. However, orders for durable goods declined in January, interrupting five consecutive months of gains. Computer and electronic equipment orders rose, but transportation equipment orders fell sharply. BONDS DELIVER RESPECTABLE GAINS A growing economy continued to boost investor enthusiasm for high-yield bonds, which continued to lead the fixed-income markets. The Merrill Lynch US High Yield, Cash Pay Index returned 10.32%. And as interest rates moved lower, other segments of the bond market delivered respectable gains. The yield on the benchmark 10-year US Treasury bond edged downward from 4.46% to 3.97% during the period. The Lehman Brothers Aggregate Bond Index, a broad measure of investment-grade bond performance, returned 4.92%. However, money market fund yields remained below 1%, as the Fed kept short-term interest rates at their historical lows. US STOCKS HEADED HIGHER The US stock market gained ground, but its rate of return slowed in the final month of the period as disappointing economic data gave investors pause. The S&P 500 Index returned 14.59% for this six-month period as all sectors of the market benefited from rising corporate profits. Defensive sectors, such as energy, materials, industrials and consumer staples were the strongest performers, as investors started to hedge their bets on the economy. Technology, which led the stock market rally in its early stage last year, pulled back during the period. INTERNATIONAL STOCK MARKETS REPORTED STRONG RETURNS A rebound in economic growth and a declining dollar helped international stock markets to returns that were generally stronger than in the United States. The MSCI EAFE Index, a broad measure of performance of 21 developed equity markets in Europe, Australasia (which includes Australia and New Zealand) and the Far East, returned 25.22%. European stock markets responded to improving economic data and relatively low interest rates. A strong euro gave returns to American investors an additional boost. Japan's economy continued to report steady but modest growth. Yet its stock market cooled after a run-up in the six months prior to this reporting period. Many emerging stock markets did even better. Although the Chinese economy cooled somewhat in 2003, its stock market soared. The MSCI China Index returned 43.07%. [SIDENOTE] SUMMARY FOR THE SIX-MONTH PERIOD ENDED FEBRUARY 29, 2004 - PERFORMANCE IN THE FIXED-INCOME UNIVERSE WAS LED BY HIGH-YIELD BONDS. AS MEASURED BY THE MERRILL LYNCH US HIGH YIELD, CASH PAY INDEX, THIS SECTOR POSTED A RETURN MORE THAN FIVE PERCENTAGE POINTS HIGHER THAN THE RETURN FOR INVESTMENT-GRADE BONDS, AS MEASURED BY THE LEHMAN BROTHERS AGGREGATE BOND INDEX.
MERRILL LYNCH INDEX LEHMAN INDEX 10.32% 4.92%
- THE US STOCK MARKET ROSE AS THE ECONOMY STRENGTHENED AND CORPORATE PROFITS INCREASED. BOTH THE RUSSELL 3000 INDEX, WHICH TRACKS APPROXIMATELY 98% OF THE US STOCK MARKET, AND THE S&P 500 Index posted double-digit returns this period.
RUSSELL 3000 INDEX S&P 500 INDEX 15.06% 14.59%
The Merrill Lynch US High Yield Cash Pay Index is an unmanaged index that tracks the performance of non-investment-grade corporate bonds. The Lehman Brothers Aggregate Bond Index is a market value-weighted index that tracks fixed-rate, publicly placed, dollar-denominated, and non-convertible investment grade debt issues. The Russell 3000 Index is an unmanaged index that tracks the performance of the 3,000 largest US companies based on total market capitalizations. The S&P 500 Index is an unmanaged index that tracks the performance of 500 widely held, large capitalization US stocks. 3 PORTFOLIO MANAGERS' REPORT COLUMBIA FLOATING RATE ADVANTAGE FUND For the six-month period ended February 29, 2004, class A shares of Columbia Floating Rate Advantage Fund returned 9.72% without sales charge. That was higher than the return of the fund's benchmark, the CSFB Leveraged Loan Plus Index, which was 4.68% for the period. The fund also outperformed the Lipper Loan Participation Funds Category average, which was 6.18%.(1) The fund's emphasis on recovering industries, such as wireless and cable television, aided its strong return, which was boosted by the use of leverage. A recovering economy and lower default rates also played a role in the fund's strong showing for the period. ECONOMIC RECOVERY HELPED BANK LOAN MARKET MOVE HIGHER Although we did not witness tremendous movement in interest rates, a strengthening economy and a rising stock market helped all credit sensitive debt markets, including the bank loan market. Lower quality credits performed especially well, continuing a trend that has been in place since late 2002. In particular, the fund was aided by its overweight position in the wireless and cable television industries, both of which outperformed the market. As new money came into the fund, we added to our positions in Charter Communications, Century Cable Holdings, and Nextel Finance. Other standout performers for the fund included Cricket Communications, Mission Energy Holdings, and steel company Ispat Inland. SIGNS OF A HEALTHY MARKETPLACE The fund did not experience any major defaults. Many lower rated companies have improved their financial condition via their newfound access to the high yield bond market. Floating-rate obligations also benefited from the technical dynamics of the bank loan market. Even though the yield advantage of new issues (versus the London Interbank Rate, or LIBOR) has come down dramatically, net new issuance has been quite low. Meanwhile, the demand for bank loans from mutual funds and other financial institutions has been extremely strong. Lower supply and higher demand resulted in price appreciation for bank loans on the secondary market. Because the overall environment was favorable throughout the period, we took advantage of our ability to use leverage to improve performance, in keeping with the fund's goals and guidelines. A fully leveraged position was not always possible because of the effects of new money coming into the fund and the need for quarterly tender offers. (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. [SIDENOTE] NET ASSET VALUE PER SHARE AS OF 02/29/04 ($) Class A 11.98 Class B 11.98 Class C 11.98 Class Z 11.98
DISTRIBUTIONS DECLARED PER SHARE 09/01/03 - 02/29/04 ($) Class A 0.32 Class B 0.30 Class C 0.29 Class Z 0.34
SEC YIELD AS OF 02/29/04 (%) Class A 4.74 Class B 4.57 Class C 4.40 Class Z 5.25
The 30-day SEC yields reflect the fund'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 SEC yields would have been lower. HOLDINGS DISCUSSED IN THIS REPORT AS OF 02/29/04 (%) Century Cable Holdings 2.3 Mission Energy Holdings 2.3 Charter Communications 2.0 Cricket Communications 2.0 Nextel Finance 1.8 Ispat Inland 1.6
Your fund is actively managed and the composition of its portfolio will change over time. Information provided is calculated as a percentage of net assets. 4 A STABLE RATE ENVIRONMENT We anticipate that short-term interest rates will remain stable over the next six months. Ordinarily, continued economic strength would translate into higher short-term interest rates, precisely the scenario for which floating rate securities provide protection. However, we do not expect the Federal Reserve to raise short-term interest rates in the absence of strong job creation. Yet, we are optimistic that we have the potential to achieve competitive returns even in a stable rate environment. [PHOTO OF BRIAN GOOD] Brian Good has co-managed Columbia Floating Rate Advantage Fund since its inception in January 2000 and has been with the advisor and its predecessors since April 1998. /s/ Brian Good [PHOTO OF JIM FELLOWS] Jim Fellows has co-managed Columbia Floating Rate Advantage Fund since its inception in January 2000 and has been with the advisor and its predecessors since April 1998. /s/ Jim Fellows 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 (NAV) 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 use of leverage for investment purposes creates opportunities for greater total returns, but at the same time involves certain risks, such as greater volatility of the NAV of the fund's shares and the nonpayment of dividends. 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. [SIDENOTE] IMPORTANT INFORMATION Effective 11:59 p.m. on April 15, 2004, Highland Capital Management, L.P. ("Highland") replaced Columbia Management Advisors, Inc. as investment adviser to Columbia Floating Rate Advantage Fund. Highland did so pursuant to an interim investment advisory agreement (the "Interim Agreement"), which has been approved by the Board of Trustees of the fund, pending shareholder approval of a longer-term agreement with Highland. Also effective 11:59 p.m. on April 15, 2004, pursuant to the Interim Agreement, Mark Okada and Joe Dougherty assumed primary responsibility for the day-to-day management of Columbia Floating Rate Advantage Fund. Mr. Okada and Mr. Dougherty are supported by a team of industry-focused investment professionals in analyzing and executing investment ideas. Mr. Okada has been affiliated with Highland since it was founded in 1993 and Mr. Dougherty has been affiliated with Highland since 1998. In connection with the change of investment advisor for Columbia Floating Rate Advantage Fund from Columbia to Highland, PFPC Distributors, Inc. replaced Columbia Funds Distributor, Inc. as distributor and principal underwriter to the funds, effective April 16, 2004. 5 FINANCIAL STATEMENTS FEBRUARY 29, 2004 COLUMBIA FLOATING RATE ADVANTAGE FUND A GUIDE TO UNDERSTANDING YOUR FUND'S FINANCIAL STATEMENTS INVESTMENT PORTFOLIO The investment portfolio details all of the fund's holdings and their market value as of the last day of the reporting period. Portfolio holdings are organized by type of asset, industry, country or geographic region (if applicable) to demonstrate areas of concentration and diversification. STATEMENT OF ASSETS AND LIABILITIES This statement details the fund's assets, liabilities, net assets and share price for each share class. Net assets are calculated by subtracting all the fund's liabilities (including any unpaid expenses) from the total of the fund's investment and non-investment assets. The share price for each class is calculated by dividing net assets for that class by the number of shares outstanding in that class as of the last day of the reporting period. STATEMENT OF OPERATIONS This statement details income earned by the fund and the expenses charged to the fund. The Statement of Operations also shows any net gain or loss the fund realized on the sales of its holdings during the period, as well as any unrealized gains or losses recognized over the period. The total of these results represents the fund's net increase or decrease in net assets from operations. STATEMENT OF CHANGES IN NET ASSETS This statement demonstrates how the fund's net assets were affected by its operating results, distributions to shareholders and shareholder transactions (e.g., subscriptions, redemptions and dividend reinvestments). The Statement of Changes in Net Assets also reconciles changes in the number of shares outstanding. STATEMENT OF CASH FLOWS The statement of cash flows reports net cash provided or used by operating, investing and financing activities and the net effect of those flows on cash and cash equivalents during the period. FINANCIAL HIGHLIGHTS The financial highlights demonstrate how the fund's net asset value per share was affected by the fund's operating results. The financial highlights table also discloses certain key fund ratios (e.g., fund expenses and net investment income as a percentage of average net assets). NOTES TO FINANCIAL STATEMENTS These notes disclose the organizational background of the fund, its significant accounting policies (including those surrounding security valuation, income recognition and distributions to shareholders), federal tax information, fees and compensation paid to affiliates and significant risk and contingencies. 6 INVESTMENT PORTFOLIO FEBRUARY 29, 2004 (UNAUDITED) COLUMBIA FLOATING RATE ADVANTAGE FUND VARIABLE RATE SENIOR LOAN INTERESTS (a) - 97.4%
PAR ($) VALUE ($) ------------------------------------------ ------------------------------------------------------------------------- AEROSPACE/DEFENSE - 0.9% Decrane Aircraft Holdings, Inc. Floating Rate Loan 06/30/08 2,000,000 2,025,000 Vought Aircraft Industries, Inc. Term Loan B 06/30/07 216,435 217,147 Term Loan C 06/30/08 1,334,577 1,339,016 Term Loan X 12/31/06 847,637 855,048 AEROSPACE/DEFENSE TOTAL 4,436,211 AUTO PARTS - 3.7% 142466 Ontario Ltd. Term Loan B 08/10/07 2,352,928 2,372,105 Accuride Corp. Term Loan C 01/21/07 989,583 1,002,777 Federal-Mogul Corp. (b) Supplemental Revolver 02/06/05 1,438,927 1,431,722 Term Loan B 02/24/05 5,000,000 4,535,381 Term Loan C 02/06/05 573,404 576,984 Shiloh Industries, Inc. Term Loan B 01/14/09 3,500,000 3,549,839 TRW Automotive Acquisitions Corp. Term Loan D1 02/28/11 2,782,609 2,834,721 United Components, Inc. Tranche C 06/30/10 990,000 1,003,658 AUTO PARTS TOTAL 17,307,187 BROADCASTING - 2.1% Comcorp Broadcasting, Inc. Term Loan A2 03/31/04 1,813,479 1,804,412 Gray Television, Inc. Incremental Term Loan 12/31/10 2,085,000 2,108,764 PanAmSat Corp. Tranche B1 09/30/10 1,076,923 1,094,416 Spanish Broadcasting Systems, Inc. Term Loan 10/30/09 4,375,000 4,432,392 White Knight Broadcasting, Inc. Term Loan A2 03/31/04 186,521 185,588 BROADCASTING TOTAL 9,625,572 BUILDING PRODUCTS - 0.5% St. Mary's Cement, Inc. Term Loan B 12/04/09 1,000,000 1,011,268 Tapco International Corp. Term Loan B 06/23/07 850,101 854,389 Term Loan C 06/23/08 607,914 610,980 BUILDING PRODUCTS TOTAL 2,476,637 BUSINESS SERVICES - 1.2% NATG Holdings LLC (c) Credit Linked Certificate of Deposit 01/23/05 131,418 131,352 Term Loan A 01/23/09 127,805 102,254 Term Loan B1 01/23/10 86,523 69,224 Term Loan B2 01/23/10 22,158 22,160 Pacer International, Inc. Term Loan 06/10/10 827,451 836,554
See notes to investment portfolio. 7
PAR ($) VALUE ($) ------------------------------------------ ------------------------------------------------------------------------- BUSINESS SERVICES - (CONTINUED) Per-Se Technologies, Inc. Term Loan B 09/11/08 2,193,750 2,240,806 Relizon Co. Term Loan B 02/20/11 2,000,000 2,012,500 BUSINESS SERVICES TOTAL 5,414,850 CABLE - 9.4% Bresnan Communications LLC Term Loan B 12/31/07 3,500,000 3,581,871 Century Cable Holdings LLC Discretionary Term Loan 12/31/09 1,000,000 949,688 Term Loan 06/30/09 10,500,000 10,069,059 Charter Communications Operating LLC Term Loan A 09/18/07 8,506,250 8,239,904 Term Loan B 03/18/08 1,261,600 1,230,236 CSC Holdings, Inc. (b) Revolver 06/30/06 1,956,250 1,917,145 Insight Midwest Holdings LLC Term Loan 12/31/09 3,000,000 3,024,440 Term Loan B 12/31/09 2,500,000 2,517,055 Olympus Cable Holdings LLC Term Loan A 06/30/10 6,000,000 5,681,250 UPC Financing Partnership Term Loan C2 03/31/09 7,000,000 6,976,174 CABLE TOTAL 44,186,822 CASINOS/GAMBLING - 2.8% Aladdin Gaming LLC (d) Term Loan A 02/25/05 4,000,000 3,620,000 Term Loan B 08/26/06 1,250,000 1,131,250 Alliance Gaming Corp. Term Loan B 09/04/09 3,650,000 3,692,269 Ameristar Casinos, Inc. Term Loan B 12/20/06 869,782 875,136 Marina District Finance Co., Inc. Term Loan A 12/31/07 3,636,545 3,675,473 CASINOS/GAMBLING TOTAL 12,994,128 CHEMICALS - 4.8% Huntsman Co. LLC Term Loan A 03/31/07 5,372,299 5,234,930 Term Loan B 03/31/07 4,067,415 3,960,049 Huntsman International LLC Term Loan B 06/30/07 4,534,834 4,579,546 Term Loan C 06/30/08 4,495,708 4,543,553 Kraton Polymers LLC Term Loan 12/23/10 2,333,333 2,375,748 Messer Griesheim Industries, Inc. Term Loan B 04/27/09 526,219 530,956 Term Loan C 04/27/10 757,385 764,202 Nalco Co. Term Loan B 11/04/10 400,000 404,500 Noveon, Inc. (b) Term Loan B 12/31/09 338,213 342,026 CHEMICALS TOTAL 22,735,510
See notes to investment portfolio. 8
PAR ($) VALUE ($) ------------------------------------------ ------------------------------------------------------------------------- COAL - 0.2% Headwaters, Inc. Term Loan B 08/30/07 899,575 919,120 COAL TOTAL 919,120 CONSUMER SERVICES - 1.2% Alderwoods Group, Inc. Note 7 Year 01/02/09 528,100 591,472 Knowledge Learning Corp. Term Loan B 05/15/10 5,000,000 5,025,011 CONSUMER SERVICES TOTAL 5,616,483 CONSUMER SPECIALTIES - 1.9% Jarden Corp. Term Loan B 04/24/08 1,246,875 1,259,142 Johnson Diversey, Inc. Term Loan B 11/03/09 2,148,080 2,174,511 Rayovac Corp. Term Loan B 09/30/09 1,621,451 1,633,964 Reddy Ice Group, Inc. Term Loan 08/15/09 748,125 756,384 Sola International, Inc. Term Loan 12/11/09 1,250,000 1,268,750 United Industries Corp. Term Loan B 01/20/06 2,026,671 2,041,857 CONSUMER SPECIALTIES TOTAL 9,134,608 CONTAINER/PACKAGING - 1.2% Graphic Packaging International, Inc. Term Loan B 08/09/10 3,980,000 4,044,016 Port Townsend Paper Corp. Term Loan B 03/16/07 1,847,750 1,792,453 CONTAINERS/PACKAGING TOTAL 5,836,469 DIVERSIFIED COMMERCIAL SERVICES - 1.1% Transcore Holdings, Inc. Term Loan B 01/05/08 1,136,981 1,152,171 Term Loan C 01/05/08 3,990,000 4,039,875 DIVERSIFIED COMMERCIAL SERVICES TOTAL 5,192,046 DIVERSIFIED MANUFACTURING - 3.7% Amsted Industries, Inc. Term Loan 10/15/10 2,985,000 3,016,198 Enersys, Inc. Term Loan B 11/09/08 2,447,535 2,471,988 Jason, Inc. Term Loan B 06/30/07 1,266,300 1,253,684 Polymer Group, Inc. (b) Term Loan 12/31/06 5,535,448 5,615,020 Polypore, Inc. Term Loan B 12/31/06 979,695 986,905 Term Loan C 12/31/07 963,845 973,104 Roper Industries, Inc. Term Loan 12/29/08 3,000,000 3,039,375 DIVERSIFIED MANUFACTURING TOTAL 17,356,274
See notes to investment portfolio. 9
PAR ($) VALUE ($) ------------------------------------------ ------------------------------------------------------------------------- ELECTRIC UTILITIES - 7.3% Calpine Corp. Second Lien 07/16/07 6,666,500 6,362,341 CenterPoint Energy, Inc. Term Loan 10/07/06 4,986,487 5,113,286 Infrasource, Inc. Term Loan 09/30/10 4,987,500 4,985,583 Mission Energy Holdings Co. Term Loan 12/11/06 1,750,000 1,777,718 Term Loan A 07/02/06 2,467,532 2,393,590 Term Loan B 07/02/06 7,032,468 6,821,733 Northwestern Corp. Term Loan 12/01/06 2,475,000 2,489,806 NRG Energy, Inc. Credit Linked Certificate of Deposit 06/23/10 416,667 431,175 Term Loan 06/23/10 744,167 774,201 TNP Enterprises, Inc. Term Loan 12/31/06 2,985,000 3,028,164 ELECTRIC UTILITIES TOTAL 34,177,597 ELECTRONIC COMPONENTS - 0.9% Viasystems, Inc. Term Loan B 09/30/08 4,289,989 4,334,553 ELECTRONIC COMPONENTS TOTAL 4,334,553 ENGINEERING & CONSTRUCTION - 3.0% Great Lakes Dredge & Dock Corp. Term Loan B 12/22/10 3,500,000 3,536,482 URS Corp. Term Loan B 08/22/08 760,637 765,132 Washington Group International Credit Linked Certificate of Deposit 10/03/07 9,600,000 9,786,000 ENGINEERING & CONSTRUCTION TOTAL 14,087,614 ENVIRONMENTAL SERVICES - 3.9% Allied Waste North America, Inc. Term Loan B 01/15/10 1,163,415 1,183,315 Tranche A 01/15/10 3,574,343 3,632,744 Tranche C 01/15/10 8,558,000 8,709,814 Environmental Systems Products Holdings Second Lien 12/12/10 4,500,000 4,556,677 ENVIRONMENTAL SERVICES TOTAL 18,082,550 FARMING/AGRICULTURE - 0.6% AGCO Corp. Term Loan 01/31/06 3,000,000 3,037,501 FARMING/AGRICULTURE TOTAL 3,037,501 FINANCE COMPANIES - 0.2% Finova Group, Inc. Term Loan 05/15/09 1,490,000 804,600 FINANCE COMPANIES TOTAL 804,600 FOOD CHAINS - 1.5% AFC Enterprises, Inc. Term Loan A 09/23/08 927,119 908,617
See notes to investment portfolio. 10
PAR ($) VALUE ($) ------------------------------------------ ------------------------------------------------------------------------- FOOD CHAINS - (CONTINUED) Buffets, Inc. Synthetic Letter of Credit 06/28/09 466,700 469,622 Term Loan 06/28/09 3,400,000 3,413,577 Domino's, Inc. Term Loan 06/25/10 2,176,647 2,212,071 FOOD CHAINS TOTAL 7,003,887 FOOD MANUFACTURER - 5.3% Atkins Nutritionals, Inc. First Lien 10/29/09 2,000,000 2,007,565 Second Lien 10/29/09 1,000,000 1,015,091 Burns Philp, Inc. Term Loan 02/26/09 2,153,725 2,204,511 Commonwealth Brands, Inc. Term Loan 08/28/07 1,224,240 1,239,653 Constellation Brands, Inc. Term Loan B 11/30/08 916,667 929,926 Dr. Pepper Bottling Company of Texas Term Loan B 12/19/10 986,301 1,001,712 DS Waters Enterprises LP Term Loan 11/07/09 1,000,000 1,015,841 Interstate Brands Corp. Term Loan B 07/19/07 950,316 954,124 Term Loan C 07/19/07 2,940,113 2,941,502 Tranche A 07/19/06 906,250 906,253 Merisant Co. Term Loan B 01/11/10 798,000 806,510 Michael Foods, Inc. Floater Term Loan 11/21/11 3,000,000 3,077,929 Term Loan 11/21/10 4,987,500 5,075,475 Pinnacle Foods Holding Corp. (b) Delayed Draw Term Loan 11/25/10 1,585,321 1,589,605 FOOD MANUFACTURER TOTAL 24,765,697 HEALTHCARE SERVICES - 4.4% Ameripath, Inc. Term Loan 03/27/10 2,500,000 2,507,804 Colgate Medical Ltd. Term Loan B 12/30/08 1,750,000 1,764,283 Concentra Operating Corp. Term Loan 06/30/09 2,321,335 2,347,821 dj Orthopedics LLC Term Loan 05/15/09 750,000 758,925 Fresenius Medical Care, Inc. Term Loan C 02/21/10 1,293,500 1,310,932 Medco Health Solutions, Inc. Term Loan 06/30/10 3,391,500 3,445,125 Medex, Inc. Term Loan 05/30/09 1,990,000 2,011,700 Pacificare Health Systems, Inc. Term Loan 06/03/08 995,000 1,006,796 PerkinElmer, Inc. Term Loan B 12/26/08 1,487,778 1,506,232
See notes to investment portfolio. 11
PAR ($) VALUE ($) ------------------------------------------ ------------------------------------------------------------------------- HEALTHCARE SERVICES - (CONTINUED) Quintiles Transnational Corp. Term Loan B 09/25/09 1,246,875 1,273,428 Team Health, Inc. Term Loan B 10/31/08 2,855,694 2,856,187 HEALTHCARE SERVICES TOTAL 20,789,233 HOSPITAL MANAGEMENT - 0.4% Community Health Systems, Inc. Tranche B Term Loan 07/16/10 490,038 498,858 Vanguard Health Systems Incremental Term Loan 01/03/10 1,584,000 1,603,387 HOSPITAL MANAGEMENT TOTAL 2,102,245 HOTELS/RESORTS - 0.9% Wyndham International, Inc. Term Loan I 06/30/06 4,212,138 4,111,384 HOTELS/RESORTS TOTAL 4,111,384 INDUSTRIAL MACHINERY/COMPONENTS - 1.3% Dresser, Inc. Term Loan B 04/10/09 1,732,209 1,752,058 Terex Corp. Incremental Term Loan 12/31/09 989,962 992,045 Term Loan 07/03/09 3,115,300 3,122,440 INDUSTRIAL MACHINERY/COMPONENTS TOTAL 5,866,543 INSURANCE BROKERS/SERVICES - 0.6% Conseco, Inc. Term Loan A1 09/10/09 2,307,692 2,322,792 Term Loan B1 09/10/10 692,308 696,895 INSURANCE BROKERS/SERVICES TOTAL 3,019,687 METALS/MINING - 0.4% Stillwater Mining Co. Term Loan B 12/31/07 1,902,988 1,927,072 METALS/MINING TOTAL 1,927,072 MOVIES/ENTERTAINMENT - 2.3% GT Brands LLC Term Loan 09/30/07 2,144,886 2,089,571 Loews Cineplex Entertainment Term Loan 02/29/08 2,790,555 2,799,324 Regal Cinemas, Inc. Term Loan D 06/30/09 2,191,935 2,222,438 Six Flags Theme Parks, Inc. Term Loan B 06/30/09 1,750,000 1,772,976 Vivendi Universal Entertainment LLP Term Loan B 06/30/08 2,000,000 2,015,925 MOVIES/ENTERTAINMENT TOTAL 10,900,234 OFFICE SUPPLIES - 0.8% Xerox Corp. Term Loan 09/30/08 3,500,000 3,540,631 OFFICE SUPPLIES TOTAL 3,540,631
See notes to investment portfolio. 12
PAR ($) VALUE ($) ------------------------------------------ ------------------------------------------------------------------------- OIL REFINING/MARKETING - 2.8% ALON USA Term Loan 12/12/08 1,500,000 1,540,266 CITGO Petroleum Corp. Term Loan 02/27/06 1,500,000 1,569,017 Magellan Midstream Holdings LP Tranche A 06/17/08 719,229 729,118 Magellan Midstream Partners LP Tranche C 08/06/08 1,500,000 1,516,917 Tesoro Petroleum Corp. Fixed Asset Term Loan 04/15/08 1,989,975 2,055,207 Western Refining Co. LP Term Loan B 08/28/08 3,920,000 4,001,761 Williams Production RMT Co. Term Loan C 05/30/07 1,865,625 1,881,951 OIL REFINING/MARKETING TOTAL 13,294,237 PAPER - 1.6% Appleton Papers, Inc. Tranche D Term Loan 11/08/06 3,934,241 3,966,215 RLC Industries Co. Term Loan B 02/26/10 3,500,000 3,539,356 PAPER TOTAL 7,505,571 PHARMACEUTICALS - 0.9% aaiPharma, Inc. Term Loan 12/01/09 1,442,156 1,460,170 Medpointe, Inc. Term Loan B 09/30/08 2,768,038 2,785,390 PHARMACEUTICALS TOTAL 4,245,560 PRINTING/PUBLISHING - 4.0% Dex Media East LLC Term Loan A 11/08/08 6,325,770 6,398,555 Dex Media West LLC Term Loan A 09/09/09 6,783,642 6,869,334 Readers Digest Association, Inc. Term Loan A 05/21/07 863,941 867,568 Term Loan B 05/20/08 2,767,396 2,790,061 TV Guide, Inc. (b) Term Loan A 02/28/05 1,015,288 984,824 Weekly Reader Corp. Term Loan B 11/17/06 957,731 959,228 PRINTING/PUBLISHING TOTAL 18,869,570 RAIL/SHIPPING - 1.1% American Commercial Lines LLC Term Loan A 06/30/05 673,286 604,300 Term Loan B 06/30/06 845,881 757,134 Term Loan C 06/30/07 1,496,141 1,339,171 Helm Holding Corp. Term Loan B 10/18/06 2,409,758 2,394,705 RAIL/SHIPPING TOTAL 5,095,310
See notes to investment portfolio. 13
PAR ($) VALUE ($) ------------------------------------------ ------------------------------------------------------------------------- REAL ESTATE INVESTMENT TRUSTS - 0.8% AIMCO Properties LP Term Loan 05/30/08 2,000,000 2,021,257 Central Parking Corp. Term Loan B 03/31/10 1,717,586 1,737,114 REAL ESTATE INVESTMENT TRUSTS TOTAL 3,758,371 RETAIL STORES - 0.5% Alimentation Couche-Tard, Inc. Term Loan 12/17/10 1,000,000 1,008,138 CH Operating LLC Term Loan 06/21/07 1,344,828 1,344,890 RETAIL STORES TOTAL 2,353,028 SEMICONDUCTORS - 0.9% AMI Semiconductor, Inc. Term Loan 09/26/08 997,500 1,008,724 Semiconductors Components Industries LLC Term Loan E 08/04/07 3,064,619 3,078,216 SEMICONDUCTORS TOTAL 4,086,940 STEEL/IRON ORE - 2.4% International Steel Group, Inc. Term Loan B 05/01/07 667,145 670,060 Ispat Inland LP Term Loan B 07/16/05 3,928,798 3,761,977 Term Loan C 07/16/06 3,928,798 3,761,977 The Techs Industries, Inc. Term Loan 01/14/10 3,000,000 3,014,589 STEEL/IRON ORE TOTAL 11,208,603 TELECOMMUNICATIONS-INFRASTRUCTURE/ EQUIPMENT - 0.2% Spectrasite Communications, Inc. Term Loan B 12/31/07 1,119,885 1,134,618 TELECOMMUNICATIONS- INFRASTRUCTURE/EQUIPMENT TOTAL 1,134,618 TELECOMMUNICATIONS-WIRELESS - 7.9% Cricket Communications, Inc. (d) Vendor Term Loan 06/30/07 11,500,000 9,430,000 Dobson Celluar Systems, Inc. (b) Revolver 03/31/10 5,865,300 5,921,930 Nextel Finance Co., Inc. Term Loan A 12/31/07 3,914,474 3,892,106 Term Loan E 12/15/10 4,580,000 4,636,660 Nextel Partners Term Loan B 11/30/10 6,000,000 6,093,047 Rural Cellular Corp. Incremental Term Loan 10/03/09 636,479 640,844 Term Loan B 10/03/08 1,180,494 1,189,396 Term Loan C 04/03/09 1,180,494 1,189,396 Western Wireless Corp. Term Loan B 09/30/08 4,321,637 4,346,161 TELECOMMUNICATIONS-WIRELESS TOTAL 37,339,540
See notes to investment portfolio. 14
PAR ($) VALUE ($) ------------------------------------------ ------------------------------------------------------------------------- TELECOMMUNICATIONS SERVICES - 1.4% Alaska Communications Systems Holdings, Inc. Term Loan 02/14/09 1,750,000 1,763,169 Valor Telecommunications Enterprises LLC Term Loan A 06/30/07 2,372,702 2,380,147 Term Loan B 06/30/08 2,342,806 2,360,410 TELECOMMUNICATIONS SERVICES TOTAL 6,503,726 TEXTILES - 1.0% Levi Strauss & Co. Term Loan A 09/29/09 1,246,875 1,296,834 Springs Industries, Inc. Term Loan A 03/05/07 766,616 769,235 St. John's Knits International, Inc. Term Loan B 07/31/07 2,634,567 2,644,517 TEXTILES TOTAL 4,710,586 TRANSPORTATION - 3.4% Comcar Industries, Inc. Term Loan B 01/15/10 3,000,000 3,013,520 Laidlaw Investments Ltd. Term Loan B 06/19/09 3,298,000 3,403,820 Motor Coach Industries International, Inc. Term Loan 06/16/05 2,714,486 2,329,933 TTI, Inc. Term Loan B 03/31/07 5,693,711 5,715,207 United Airlines, Inc. Term Loan B 07/01/04 1,486,779 1,497,266 TRANSPORTATION TOTAL 15,959,746 TOTAL VARIABLE RATE SENIOR LOAN INTERESTS (COST OF $445,443,073) 457,848,351 SENIOR NOTES - 0.1% DIVERSIFIED MANUFACTURING - 0.1% Superior Telecom, Inc. Sr. Secured Note 11/10/08 417,064 418,032 DIVERSIFIED MANUFACTURING TOTAL 418,032 TOTAL SENIOR NOTES (COST OF $417,064) 418,032 COMMON STOCKS (e) - 0.6% SHARES ------------------------------------------ ------------------------------------------------------------------------- BUSINESS SERVICES - 0.0% HQ Global Workplaces, Inc. (c) 729 - NATG Holdings LLC (c) 40,800 72,216 BUSINESS SERVICES TOTAL 72,216 DIVERSIFIED MANUFACTURING - 0.2% Superior Telecom, Inc. 47,459 735,615 DIVERSIFIED MANUFACTURING TOTAL 735,615
See notes to investment portfolio. 15
SHARES VALUE ($) ------------------------------------------ ------------------------------------------------------------------------- HEALTHCARE SERVICES - 0.2% Sun Healthcare Group, Inc. 92,617 1,106,773 HEALTHCARE SERVICES TOTAL 1,106,773 MOVIES/ENTERTAINMENT - 0.2% AMF Bowling Worldwide, Inc. 29,759 743,975 MOVIES/ENTERTAINMENT TOTAL 743,975 TOTAL COMMON STOCKS (COST OF $2,708,317) 2,658,579 PREFERRED STOCKS (c) - 0.1% BUSINESS SERVICES - 0.1% HQ Global Workplaces, Inc. (c) 1,214 688,338 BUSINESS SERVICES TOTAL 688,338 DIVERSIFIED MANUFACTURING - 0.0% Superior Telecom, Inc. (c) 14,382 14,382 DIVERSIFIED MANUFACTURING TOTAL 14,382 TOTAL PREFERRED STOCKS (COST OF $0) 702,720 PAR ($) ---------------------------------------------------------------------------------------------------------------------- SHORT-TERM OBLIGATION - 5.5% Repurchase agreement with State Street Bank & Trust Co., dated 02/27/04 due 03/01/04 at 0.930%, collateralized by a U.S. Treasury Note maturing 08/15/04, market value of $26,235,754 (repurchase proceeds $25,719,993) (cost of $25,718,000) 25,718,000 25,718,000 TOTAL INVESTMENTS - 103.7% (COST OF $474,286,454)(f) 487,345,682 OTHER ASSETS & LIABILITIES, NET - (3.7)% (17,395,256) NET ASSETS 100.0% $ 469,950,426
NOTES TO INVESTMENT PORTFOLIO: (a) Senior Loans in which the Fund invests generally pay interest at rates which are periodically redetermined 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 Fund ordinarily is contractually obligated to receive approval from the Agent Bank and/or borrower prior to the disposition of a Senior Loan. (b) Unfunded commitment exists for this loan, see note 8. (c) Represents fair value as determined in good faith under the direction of the Board of Trustees. (d) These securities are in default of certain debt covenants. Income is not being accrued. (e) Non-income producing. (f) Cost for federal income tax purposes is $474,374,002. See notes to financial statements. 16 STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 29, 2004 (UNAUDITED) COLUMBIA FLOATING RATE ADVANTAGE FUND
($) ------------------------------------------ ----------------------------------------------------------------------------------- ASSETS Investments, at cost 474,286,454 Investments, at value 487,345,682 Cash 280 Receivable for: Fund shares sold 8,964,993 Interest and fees 2,725,249 Expense reimbursement due from Investment Advisor 50,395 Deferred Trustees' compensation plan 4,040 Other assets 166,754 --------------- Total Assets 499,257,393 LIABILITIES Deferred facility fees 500,166 Payable for: Distributions 616,993 Investment advisory fee 194,166 Administration fee 87,917 Transfer agent fee 18,836 Pricing and bookkeeping fees 32,252 Trustees' fees 300 Custody fee 49 Distribution and service fees 219,932 Interest expense 132,316 Deferred Trustees' fees 4,040 Notes payable 27,500,000 --------------- Total Liabilities 29,306,967 NET ASSETS 469,950,426 COMPOSITION OF NET ASSETS Paid-in capital 470,597,785 Overdistributed net investment income (113,450) Accumulated net realized loss (13,593,137) Net unrealized appreciation on investments 13,059,228 --------------- NET ASSETS 469,950,426 CLASS A Net assets 151,330,777 Shares outstanding 12,629,282 Net asset value and redemption price per share 11.98(a) Maximum offering price per share ($11.98/0.9650) 12.41(b) CLASS B Net assets 105,222,119 Shares outstanding 8,780,249 Net asset value and offering price per share 11.98(a) CLASS C Net assets 189,375,595 Shares outstanding 15,804,115 Net asset value and offering price per share 11.98(a) CLASS Z Net assets 24,021,935 Shares outstanding 2,004,702 Net asset value, offering and redemption price per share 11.98
(a) Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. (b) On sales of $100,000 or more the offering price is reduced. See notes to financial statements. 17 STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED FEBRUARY 29, 2004 (UNAUDITED) COLUMBIA FLOATING RATE ADVANTAGE FUND
($) ------------------------------------------ ----------------------------------------------------------------------------------- INVESTMENT INCOME Interest 12,178,049 Facility and other fees 777,072 --------------- Total Investment Income 12,955,121 EXPENSES Investment advisory fee 1,040,739 Administration fee 464,162 Distribution fee: Class A 56,775 Class B 206,476 Class C 389,551 Service fee: Class A 141,939 Class B 114,709 Class C 162,313 Transfer agent fee 259,640 Pricing and bookkeeping fees 109,060 Trustees' fees 7,297 Custody fee 10,226 Other expenses 132,354 --------------- Total Operating Expenses 3,095,241 Fees and expenses waived or reimbursed by Investment Advisor (259,429) Custody earnings credit (222) --------------- Net Operating Expenses 2,835,590 Interest expense 685,655 Commitment fee 289,263 --------------- Net Expenses 3,810,508 --------------- Net Investment Income 9,144,613 NET REALIZED AND UNREALIZED GAIN (LOSS) ON Net realized loss on investments (453,676) INVESTMENTS Net change in unrealized appreciation/depreciation on investments 22,205,848 --------------- Net Gain 21,752,172 --------------- Net Increase in Net Assets from Operations 30,896,785
See notes to financial statements. 18 STATEMENT OF CHANGES IN NET ASSETS COLUMBIA FLOATING RATE ADVANTAGE FUND
(UNAUDITED) SIX MONTHS ENDED YEAR ENDED FEBRUARY 29, AUGUST 31, INCREASE (DECREASE) IN NET ASSETS: 2004 2003 ------------------------------------------ -------------------------------------------------------------------------------------- OPERATIONS Net investment income 9,144,613 14,268,045 Net realized loss on investments (453,676) (4,458,140) Net change in unrealized appreciation/depreciation on investments 22,205,848 16,553,299 ---------------------------------- Net Increase from Operations 30,896,785 26,363,204 DISTRIBUTIONS DECLARED TO SHAREHOLDERS From net investment income: Class A (3,163,143) (4,987,877) Class B (2,388,748) (4,852,868) Class C (3,251,405) (4,288,202) Class Z (395,555) (60,225) ---------------------------------- Total Distributions Declared to Shareholders (9,198,851) (14,189,172) SHARE TRANSACTIONS Class A: Subscriptions 70,701,875 26,844,332 Distributions reinvested 1,855,550 3,108,790 Redemptions (13,521,426) (18,545,181) ---------------------------------- Net Increase 59,035,999 11,407,941 Class B: Subscriptions 27,770,423 15,460,982 Distributions reinvested 1,318,578 2,841,144 Redemptions (6,142,712) (14,388,694) ---------------------------------- Net Increase 22,946,289 3,913,432 Class C: Subscriptions 106,838,483 31,262,179 Distributions reinvested 2,048,640 2,853,491 Redemptions (7,962,954) (19,111,456) ---------------------------------- Net Increase 100,924,169 15,004,214 Class Z: Subscriptions 19,742,551 4,975,535 Distributions reinvested 114,178 2,309 Redemptions (1,804,935) (23,102) ---------------------------------- Net Increase 18,051,794 4,954,742 Net Increase from Share Transactions 200,958,251 35,280,329 ---------------------------------- Total Increase in Net Assets 222,656,185 47,454,361 NET ASSETS Beginning of period 247,294,241 199,839,880 End of period (including overdistributed net investment income of $(113,450) and $(59,212), respectively) 469,950,426 247,294,241 CHANGES IN SHARES Class A: Subscriptions 6,036,219 2,421,540 Issued for distributions reinvested 157,863 294,027 Redemptions (1,153,889) (1,778,375) ---------------------------------- Net Increase 5,040,193 937,192 Class B: Subscriptions 2,382,221 1,412,670 Issued for distributions reinvested 112,268 268,398 Redemptions (520,565) (1,376,098) ---------------------------------- Net Increase 1,973,924 304,970 Class C: Subscriptions 9,122,973 2,837,998 Issued for distributions reinvested 173,957 269,627 Redemptions (672,711) (1,823,827) ---------------------------------- Net Increase 8,624,219 1,283,798 Class Z: Subscriptions 1,685,723 449,963 Issued for distributions reinvested 9,638 210 Redemptions (152,092) (2,073) ---------------------------------- Net Increase 1,543,269 448,100
See notes to financial statements. 19 STATEMENT OF CASH FLOWS COLUMBIA FLOATING RATE ADVANTAGE FUND
(UNAUDITED) SIX MONTHS ENDED INCREASE (DECREASE) IN CASH FEBRUARY 29, 2004 ($) ------------------------------------------ -------------------------------------------------------------------------------------- CASH FLOWS USED FOR OPERATING AND INVESTING ACTIVITIES: Net investment Income 9,144,613 ADJUSTMENTS TO RECONCILE NET INVESTMENT Purchase of investment securities (373,163,929) INCOME TO NET CASH PROVIDED BY Proceeds from disposition of investment securities 215,153,878 OPERATING ACTIVITIES: Purchase of short-term portfolio investments, net (5,955,000) Increase in interest and fees receivable (995,552) Increase in receivable for expense reimbursement (50,395) Decrease in receivable for investments sold 1,094,378 Increase in other assets (163,543) Increase in deferred facility fees 176,530 Increase in payable for accrued expenses 112,312 Net amortization of premium (discount) (1,265,788) Decrease in payable for investments purchased (60,571) Decrease in payable for expense reimbursement (37,094) Decrease in other liabilities (108,672) --------------- Net cash used for operating activities (156,118,833) CASH FLOWS USED FROM FINANCING ACTIVITIES: Decrease in notes payable (32,000,000) Increase in interest payable 58,878 Proceeds from shares sold 221,207,841 Payment of shares redeemed (29,432,027) Distributions paid in cash (3,716,072) --------------- Net cash flows provided by financing activities 156,118,620 --------------- Net decrease in cash (213) CASH: Cash at beginning of the period 493 --------------- Cash at end of period 280
See notes to financial statements. 20 NOTES TO FINANCIAL STATEMENTS FEBRUARY 29, 2004 (UNAUDITED) COLUMBIA FLOATING RATE ADVANTAGE FUND NOTE 1. ORGANIZATION Columbia Floating Rate Advantage Fund (the "Fund") is a Massachusetts business trust registered under the Investment Company Act of 1940, as amended, as a non-diversified, closed-end management investment company. INVESTMENT GOAL The Fund seeks to provide a high level of current income consistent with preservation of capital. FUND SHARES The Fund may issue an unlimited number of shares and offers four classes of shares: Class A, Class B, Class C and Class Z. Each share class has its own sales charge and expense structure. Class A shares are subject to a maximum front-end sales charge of 3.50% based on the amount of initial investment. Class A shares purchased without an initial sales charge are subject to a 1.00% early withdrawal charge on shares sold within eighteen months on an original purchase of $1 million to $25 million. Class B shares are subject to a maximum early withdrawal charge of 3.25% based upon the holding period after purchase. Class B shares will convert to Class A shares eight years after purchase. Class C shares are subject to a 1.00% early withdrawal charge on shares sold within one year after purchase. Class Z shares are offered continuously at net asset value. There are certain restrictions on the purchase of Class Z shares, as described in the Fund's prospectus. Effective October 13, 2003, the Fund changed its name from Liberty Floating Rate Advantage Fund to Columbia Floating Rate Advantage Fund. NOTE 2. SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. SECURITY VALUATION 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, the senior loans will be valued at fair value, which is intended to approximate market value, pursuant to procedures approved by the Board of Trustees. In determining fair value, the following factors, among others, will be considered on an on-going basis: (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 similar quality, rate and interest rate redeterminiation period and maturity. Because of uncertainty inherent in the valuation process, the estimated value of a senior loan may differ significantly from the value that would have been used had there been market activity for that senior loan interest. Equity securities are valued at the last sale price at the close of the principal exchange on which they trade. Unlisted securities or listed securities for which there were no sales during the day are valued at the closing bid price on such exchanges or over-the-counter markets. Short-term debt obligations maturing within 60 days are valued at amortized cost, which approximates market value. SECURITY TRANSACTIONS Security transactions are accounted for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes. 21 REPURCHASE AGREEMENTS The Fund may engage in repurchase agreement transactions with institutions that the Fund's investment advisor has determined are creditworthy. The Fund, through its custodian, receives delivery of underlying securities collateralizing a repurchase agreement. Collateral is at least equal, at all times, to the value of the repurchase obligation including interest. A repurchase agreement transaction involves certain risks in the event of default or insolvency of the counterparty. These risks include possible delays or restrictions upon the Fund's ability to dispose of the underlying securities and a possible decline in the value of the underlying securities during the period while the Fund seeks to assert its rights. INCOME RECOGNITION 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. DETERMINATION OF CLASS NET ASSET VALUES All income, expenses (other than class-specific expenses, as shown on the Statement of Operations), and realized and unrealized gains (losses), are allocated to each class of the Fund on a daily basis, for purposes of determining the net asset value of each class. Income and expenses are allocated to each class based on the settled shares method, while realized and unrealized gains (losses) are allocated based on the relative net assets of each class. FEDERAL INCOME TAX STATUS The Fund intends to qualify each year as a "regulated investment company" under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its taxable income, if any, for its tax year, and as such will not be subject to federal income taxes. In addition, the Fund 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. Therefore, no federal income tax provision is recorded. DISTRIBUTIONS TO SHAREHOLDERS Dividends from net investment income are declared daily and paid monthly. Net realized capital gains, if any, are distributed at least annually. STATEMENT OF CASH FLOWS The Fund is required to disclose a Statement of Cash Flows due to its average debt outstanding during the period. 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 within the Fund's Statement of Assets and Liabilities and includes cash on hand at its custodian bank and does not include any short-term investments. NOTE 3. FEDERAL TAX INFORMATION The tax character of distributions paid during the year ended August 31, 2003 was as follows: Ordinary Income $ 14,189,172
Unrealized appreciation and depreciation at February 29, 2004, based on cost of investments for federal income tax purposes was: Unrealized appreciation $ 14,979,545 Unrealized depreciation (2,007,865) ------------- Net unrealized appreciation $ 12,971,680
The following capital loss carryforwards, determined as of August 31, 2003, are available to reduce taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Internal Revenue Code:
YEAR OF EXPIRATION CAPITAL LOSS CARRYFORWARD ------------------------------------------------------ 2009 $ 22,035 2010 819,190 2011 4,813,376 ------------ $ 5,654,601
Under current tax rules, certain currency and capital losses realized after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. As determined on August 31, 2003, post-October capital losses of $7,474,622 attributed to security transactions were deferred to September 1, 2003. 22 NOTE 4. FEES AND COMPENSATION PAID TO AFFILIATES INVESTMENT ADVISORY FEE Effective April 15, 2004, Highland Capital Management, L.P. ("Highland") is the investment advisor to the Fund. Prior to April 15, 2004, Columbia Management Advisors, Inc. ("Columbia") was the investment advisor to the Fund. Columbia was an indirect, wholly owned subsidiary of FleetBoston Financial Corporation ("FleetBoston"), however, effective April 1, 2004, FleetBoston was acquired by Bank of America Corporation ("BOA"), see Note 11. For the period ended February 29, 2004, Columbia received a monthly investment advisory fee based on the Portfolio's average daily managed net assets at the following annual rates:
AVERAGE DAILY NET ASSETS FEE RATE ------------------------------------------------ First $1 billion 0.45% Next $1 billion 0.40% Over $2 billion 0.35%
Prior to November 1, 2003, Columbia was entitled to receive a monthly investment advisory fee at the annual rate of 0.45% of the Fund's average daily managed net assets. For the six months ended February 29, 2004, the Fund's annualized effective investment advisory fee rate was 0.45%. ADMINISTRATION FEES Columbia provides accounting and other services to the Fund for a monthly administration fee at the annual rate of 0.20% of the Fund's average daily managed net assets. PRICING AND BOOKKEEPING FEES Columbia is responsible for providing pricing and bookkeeping services to the Fund under a pricing and bookkeeping agreement. Under a separate agreement (the "Outsourcing Agreement"), Columbia has delegated those functions to State Street Corporation ("State Street"). Columbia pays the total fees collected to State Street under the Outsourcing Agreement. Under its pricing and bookkeeping agreement with the Fund, Columbia receives from the Fund an annual flat fee of $10,000 paid monthly, and in any month that the Fund's average daily net assets exceed $50 million, an additional monthly fee. The additional fee rate is calculated by taking into account the fees payable to State Street under the Outsourcing Agreement. This rate is applied to the average daily net assets of the Fund for that month. The Fund also pays additional fees for pricing services. For the six months ended February 29, 2004, the Fund's annualized effective pricing and bookkeeping fee rate was 0.062%. TRANSFER AGENT FEE Columbia Funds Services, Inc. (the "Transfer Agent"), formerly Liberty Funds Services, Inc., an indirect, wholly owned subsidiary of BOA, provides shareholder services to the Fund. For such services, the Transfer Agent receives a fee, paid monthly, at the annual rate of $34.00 per open account. The Transfer Agent also receives reimbursement for certain out-of-pocket expenses. Prior to November 1, 2003, the Transfer Agent was entitled to receive a monthly transfer agent fee, in addition to reimbursement for certain out-of-pocket expenses, at the annual rate of 0.06% of the Fund's average daily net assets plus flat-rate charges based on the number of shareholder accounts and transactions. For the six months ended February 29, 2004, the Fund's annualized effective transfer agent fee rate, exclusive of out-of-pocket fees, was 0.11%. UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES Columbia Funds Distributor, Inc. (the "Distributor"), an indirect, wholly owned subsidiary of BOA, is the principal underwriter of the Fund. Prior to October 13, 2003, Columbia Funds Distributor, Inc. was known as Liberty Funds Distributor, Inc. For the six months ended February 29, 2004, the Distributor has retained net underwriting discounts of $51,693 on sales of the Fund's Class A shares and received early withdrawal charges ("EWC") of $65, $86,565 and $19,824 on Class A, Class B and Class C share redemptions, respectively. The Fund has adopted a 12b-1 plan (the "Plan") which requires the payment of a monthly service fee to the Distributor at the annual rate of 0.25% of the average daily net assets attributable to Class A, Class B and Class C shares of the Fund. The Plan also requires the payment of a monthly distribution fee to the Distributor at the annual rates of 0.10%, 0.45% and 0.60% of the average daily net assets attributable to Class A, Class B and Class C shares, respectively. 23 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 Columbia has voluntarily agreed to reimburse certain expenses to the extent that total expenses (exclusive of investment advisory fees, administration fees, distribution and service fees, brokerage commissions, interest, facility fees, taxes and extraordinary expenses, if any) exceed 0.15% annually of the Fund's average daily net assets. This arrangement may be revised or discontinued by Columbia at any time. CUSTODY CREDITS The Fund has an agreement with its custodian bank under which custody fees may be reduced by balance credits. The Fund 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. FEES PAID TO OFFICERS AND TRUSTEES The Fund pays no compensation to its officers, all of whom are employees of Columbia or its affiliates. The Fund's Trustees may participate in a deferred compensation plan which may be terminated at any time. Obligations of the plan will be paid solely out of the Fund's assets. NOTE 5. PORTFOLIO INFORMATION For the six months ended February 29, 2004, the cost of purchases and proceeds from sales of securities, excluding short-term obligations, were $373,163,929 and $215,153,878, respectively. NOTE 6. 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 February, May, August and November of 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 outstanding shares at the net asset value of the shares as of the Repurchase Pricing Date. The tender 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 if the shareholders' offer for repurchase exceeds the Repurchase Offer Amount. For the six months ended February 29, 2004, there were two tender offers in November and February. For each tender, the Fund offered to repurchase 10% and 25%, respectively, of its shares, and 3.08% and 4.59%, respectively, of shares outstanding were tendered. NOTE 7. SENIOR LOAN PARTICIPATION COMMITMENTS The Fund 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 Fund may incur certain costs and delays in receiving payment or may suffer a loss of principal and/or interest. When the Fund purchases a participation of a senior loan interest, the Fund typically enters into a contractual agreement with the lender or other third party selling the participation, not with the borrower directly. As such, the Fund assumes the credit risk of the Borrower, Selling Participant or other persons interpositioned between the Fund and the Borrower. The ability of Borrowers to meet their obligations may be affected by economic developments in a specific industry. At February 29, 2004, the following sets forth the selling participants with respect to interests in senior loans purchased by the Fund on a participation basis.
PRINCIPAL SELLING PARTICIPANT AMOUNT VALUE ------------------------------------------------------------ Citibank: CSC Holdings, Inc., Revolver $ 1,956,250 $ 1,917,145
24 NOTE 8. UNFUNDED LOAN COMMITMENTS As of February 29, 2004, the Fund had unfunded loan commitments of $11,016,506, which could be extended at the option of the Borrower, pursuant to the following loan agreements:
UNFUNDED BORROWER COMMITMENT --------------------------------------------------------- CSC Holdings, Inc. $ 1,043,750 Dobson Cellular Systems, Inc. 1,250,000 Federal Mogul Corp. 136,530 Noveon, Inc. 625,000 Pinnacle Foods Holding Corp. 5,614,679 Polymer Group, Inc. 1,345,169 TV Guide, Inc. 1,001,378 ------------ $ 11,016,506
NOTE 9. LOAN AGREEMENT At February 29, 2004, the Fund had one term loan outstanding with Citicorp North America, Inc., totaling $27,500,000, due September 16, 2004. The Fund may borrow up to $150,000,000. The average daily loan balance was $115,489,011 at a weighted average interest rate of 1.12%. The Fund is required to maintain certain asset coverage with respect to the loan. NOTE 10. DISCLOSURE OF SIGNIFICANT RISKS AND CONTINGENCIES INDUSTRY FOCUS The Fund may focus its investments in certain industries, subjecting it to greater risk than a fund that is more diversified. LEGAL PROCEEDINGS Columbia, the Distributor, and certain of their affiliates (collectively, "The Columbia Group") have received information requests and subpoenas from various regulatory and law enforcement authorities in connection with their investigations of late trading and market timing in mutual funds. The Columbia Group has not uncovered any instances where Columbia or the Distributor were knowingly involved in late trading of mutual fund shares. On February 24, 2004, the Securities and Exchange Commission ("SEC") filed a civil complaint in the United States District Court for the District of Massachusetts against Columbia and the Distributor, alleging that they had violated certain provisions of the federal securities laws in connection with trading activity in mutual fund shares. Also on February 24, 2004, the New York Attorney General ("NYAG") filed a civil complaint in New York Supreme Court, County of New York against Columbia and the Distributor alleging that Columbia and the Distributor had violated certain New York anti-fraud statutes. If either Columbia or the Distributor is unsuccessful in its defense of these proceedings, it could be barred from serving as an investment adviser or distributor for any investment company registered under the Investment Company Act of 1940, as amended (a "registered investment company"). Such results could prevent Columbia, the Distributor or any company that is an affiliated person of Columbia and the Distributor from serving as an investment adviser or distributor for any registered investment company, including your fund. Your fund has been informed by Columbia and the Distributor that, if these results occur, they will seek exemptive relief from the SEC to permit them to continue to serve as your fund's investment adviser and distributor. There is no assurance that such exemptive relief will be granted. On March 15, 2004, Columbia and the Distributor entered into agreements in principle with the SEC Division of Enforcement and NYAG in settlement of the charges. Under the agreements, Columbia and the Distributor agreed, inter alia, to the following conditions: payment of $70 million in disgorgement; payment of $70 million in civil penalties; an order requiring Columbia and the Distributor to cease and desist from violations of the antifraud provisions and other provisions of the federal securities laws; governance changes designed to maintain the independence of the mutual fund boards of trustees and ensure compliance with securities laws and their fiduciary duties; and retention of an independent consultant to review Columbia's and the Distributor's compliance policies and procedures. The agreement requires the final approval of the SEC. In a separate agreement with the NYAG, the Columbia Group has agreed to reduce mutual fund fees by $80 million over a five-year period. As a result of these matters or any adverse publicity or other developments resulting from them, there may be increased redemptions or reduced sales of fund shares, which could increase transaction costs or operating expenses, or have other adverse consequences for the funds. 25 NOTE 11. SUBSEQUENT EVENT On April 1, 2004, FleetBoston, including the Fund's investment advisor and distributor, was acquired by BOA. Effective 11:59 p.m. on April 15, 2004, Highland replaced Columbia as investment advisor to the Fund. Highland did so pursuant to an interim investment advisory agreement, which has been approved by the Board of Trustees of the Fund, pending shareholder approval of a longer-term agreement with Highland. The change in investment advisor will not impact the Fund's investment strategy. In connection with the change of investment advisor for the Fund, PFPC Distributors, Inc. replaced Columbia Funds Distributor, Inc. as distributor and principal underwriter of the Fund, effective April 16, 2004. 26 FINANCIAL HIGHLIGHTS COLUMBIA FLOATING RATE ADVANTAGE FUND SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
(UNAUDITED) PERIOD SIX MONTHS ENDED ENDED FEBRUARY 29, YEAR ENDED AUGUST 31, AUGUST 31, CLASS A SHARES 2004 2003 2002 2001 2000(a) -------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 11.22 $ 10.48 $ 11.74 $ 12.09 $ 12.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.32(b) 0.81(b) 0.83(b)(c) 1.10(b) 0.64 Net realized and unrealized gain (loss) on investments 0.76 0.74 (1.26)(c) (0.32) 0.07 ---------------- --------- --------- --------- ---------- Total from Investment Operations 1.08 1.55 (0.43) 0.78 0.71 LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.32) (0.81) (0.83) (1.13) (0.62) From net realized gains -- -- -- --(d) -- ---------------- --------- --------- --------- ---------- Total Distributions Declared to Shareholders (0.32) (0.81) (0.83) (1.13) (0.62) NET ASSET VALUE, END OF PERIOD $ 11.98 $ 11.22 $ 10.48 $ 11.74 $ 12.09 Total return (e)(f) 9.72%(g) 15.55% (3.88)% 6.71% 6.04%(g) RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Operating expenses (h) 1.35%(i) 1.38% 1.38% 1.37% 1.01%(i) Interest and commitment fees expenses 0.56%(i) 0.73% 0.99% 2.04% 1.91%(i) Net expenses (h) 1.91%(i) 2.11% 2.37% 3.41% 2.92%(i) Net investment income (h) 5.49%(i) 7.67% 7.25%(c) 9.24% 9.49%(i) Waiver/reimbursement 0.15%(i) 0.36% 0.32% 0.32% 1.41%(i) Portfolio turnover rate 52%(g) 90% 98% 65% 8%(g) Net assets, end of period (000's) $ 151,331 $ 85,166 $ 69,733 $ 108,399 $ 54,402
(a) The Fund commenced investment operations on January 13, 2000. (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. The impact to the ratio of net investment income to average net assets was less than 0.01%. 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) Total return at net asset value assuming all distributions reinvested and no initial sales charge or early withdrawal charge. (f) Had the Investment Advisor not waived or reimbursed a portion of expenses, total return would have been reduced. (g) Not annualized. (h) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. (i) Annualized. 27
(UNAUDITED) PERIOD SIX MONTHS ENDED ENDED FEBRUARY 29, YEAR ENDED AUGUST 31, AUGUST 31, CLASS B SHARES 2004 2003 2002 2001 2000(a) -------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 11.22 $ 10.48 $ 11.74 $ 12.07 $ 12.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.30(b) 0.78(b) 0.78(b)(c) 1.05(b) 0.62 Net realized and unrealized gain (loss) on investments 0.76 0.73 (1.25)(c) (0.30) 0.05 ---------------- --------- --------- --------- ---------- Total from Investment Operations 1.06 1.51 (0.47) 0.75 0.67 LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.30) (0.77) (0.79) (1.08) (0.60) From net realized gains -- -- -- --(d) -- ---------------- --------- --------- --------- ---------- Total Distributions Declared to Shareholders (0.30) (0.77) (0.79) (1.08) (0.60) NET ASSET VALUE, END OF PERIOD $ 11.98 $ 11.22 $ 10.48 $ 11.74 $ 12.07 Total return (e)(f) 9.53%(g) 15.16% (4.22)% 6.52% 5.69%(g) RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Operating expenses (h) 1.70%(i) 1.73% 1.73% 1.72% 1.36%(i) Interest and commitment fees expenses 0.56%(i) 0.73% 0.99% 2.04% 1.91%(i) Net expenses (h) 2.26%(i) 2.46% 2.72% 3.76% 3.27%(i) Net investment income (h) 5.19%(i) 7.34% 6.90%(c) 8.89% 9.14%(i) Waiver/reimbursement 0.15%(i) 0.36% 0.32% 0.32% 1.41%(i) Portfolio turnover rate 52%(g) 90% 98% 65% 8%(g) Net assets, end of period (000's) $ 105,222 $ 76,379 $ 68,157 $ 80,609 $ 19,964
(a) The Fund commenced investment operations on January 13, 2000. (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. The impact to the ratio of net investment income to average net assets was less than 0.01%. 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) Total return at net asset value assuming all distributions reinvested and no early withdrawal charge. (f) Had the Investment Advisor not waived or reimbursed a portion of expenses, total return would have been reduced. (g) Not annualized. (h) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. (i) Annualized. 28
(UNAUDITED) PERIOD SIX MONTHS ENDED ENDED FEBRUARY 29, YEAR ENDED AUGUST 31, AUGUST 31, CLASS C SHARES 2004 2003 2002 2001 2000(a) -------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 11.22 $ 10.48 $ 11.74 $ 12.07 $ 12.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.29(b) 0.76(b) 0.76(b)(c) 1.03(b) 0.61 Net realized and unrealized gain (loss) on investments 0.76 0.74 (1.25)(c) (0.30) 0.05 ---------------- --------- --------- --------- ---------- Total from Investment Operations 1.05 1.50 (0.49) 0.73 0.66 LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.29) (0.76) (0.77) (1.06) (0.59) From net realized gains -- -- -- --(d) -- ---------------- --------- --------- --------- ---------- Total Distributions Declared to Shareholders (0.29) (0.76) (0.77) (1.06) (0.59) NET ASSET VALUE, END OF PERIOD $ 11.98 $ 11.22 $ 10.48 $ 11.74 $ 12.07 Total return (e)(f) 9.44%(g) 14.99% (4.36)% 6.35% 5.62%(g) RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Operating expenses (h) 1.85%(i) 1.88% 1.88% 1.87% 1.51%(i) Interest and commitment fees expenses 0.56%(i) 0.73% 0.99% 2.04% 1.91%(i) Net expenses (h) 2.41%(i) 2.61% 2.87% 3.91% 3.42%(i) Net investment income (h) 4.94%(i) 7.14% 6.75%(c) 8.74% 8.99%(i) Waiver/reimbursement 0.15%(i) 0.36% 0.32% 0.32% 1.41%(i) Portfolio turnover rate 52%(g) 90% 98% 65% 8%(g) Net assets, end of period (000's) $ 189,376 $ 80,572 $ 61,811 $ 64,074 $ 13,013
(a) The Fund commenced investment operations on January 13, 2000. (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. The impact to the ratio of net investment income to average net assets was less than 0.01%. 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) Total return at net asset value assuming all distributions reinvested and no early withdrawal charge. (f) Had the Investment Advisor not waived or reimbursed a portion of expenses, total return would have been reduced. (g) Not annualized. (h) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. (i) Annualized. 29
(UNAUDITED) PERIOD SIX MONTHS ENDED ENDED FEBRUARY 29, YEAR ENDED AUGUST 31, AUGUST 31, CLASS Z SHARES 2004 2003 2002 2001 2000(a) -------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $ 11.22 $ 10.48 $ 11.74 $ 12.08 $ 12.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.34(b) 0.78(b) 0.86(b)(c) 1.14(b) 0.67 Net realized and unrealized gain (loss) on investments 0.76 0.81 (1.25)(c) (0.31) 0.05 ---------------- --------- --------- --------- ---------- Total from Investment Operations 1.10 1.59 (0.39) 0.83 0.72 LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS: From net investment income (0.34) (0.85) (0.87) (1.17) (0.64) From net realized gains -- -- -- --(d) -- ---------------- --------- --------- --------- ---------- Total Distributions Declared to Shareholders (0.34) (0.85) (0.87) (1.17) (0.64) NET ASSET VALUE, END OF PERIOD $ 11.98 $ 11.22 $ 10.48 $ 11.74 $ 12.08 Total return (e)(f) 9.91%(g) 15.95% (3.53)% 7.17% 6.11%(g) RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA: Operating expenses (h) 1.00%(i) 1.03% 1.03% 1.02% 0.66%(i) Interest and commitment fees expenses 0.56%(i) 0.73% 0.99% 2.04% 1.91%(i) Net expenses (h) 1.56%(i) 1.76% 2.02% 3.06% 2.57%(i) Net investment income (h) 5.83%(i) 7.21% 7.60%(c) 9.59% 9.84%(i) Waiver/reimbursement 0.15%(i) 0.36% 0.32% 0.32% 1.41%(i) Portfolio turnover rate 52%(g) 90% 98% 65% 8%(g) Net assets, end of period (000's) $ 24,022 $ 5,178 $ 140 $ 2,850 $ 2,656
(a) The Fund commenced investment operations on January 13, 2000. (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. The impact to the ratio of net investment income to average net assets was less than 0.01%. 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) Total return at net asset value assuming all distributions reinvested. (f) Had the Investment Advisor not waived or reimbursed a portion of expenses, total return would have been reduced. (g) Not annualized. (h) The benefits derived from custody credits and directed brokerage arrangements, if applicable, had an impact of less than 0.01%. (i) Annualized. 30 IMPORTANT INFORMATION ABOUT THIS REPORT COLUMBIA FLOATING RATE ADVANTAGE FUND TRANSFER AGENT Columbia Funds Services, Inc. P.O. Box 8081 Boston MA 02266-8081 800.345.6611 DISTRIBUTOR Columbia Funds Distributor, Inc. One Financial Center Boston MA 02111 INVESTMENT ADVISOR Columbia Management Advisors, Inc. 100 Federal Street Boston MA 02111 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 Advantage 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. A description of the policies and procedures that the fund uses to determine how to vote proxies relating to its portfolio securities is available (i) without charge, upon request, by calling 800-345-6611 and (ii) on the Securities and Exchange Commission's website at http://www.sec.gov. 31 COLUMBIA FUNDS COLUMBIA FLOATING RATE ADVANTAGE FUND LARGE GROWTH Columbia Common Stock Columbia Growth Columbia Growth Stock Columbia Large Cap Growth Columbia Tax-Managed Growth Columbia Tax-Managed Growth II Columbia Young Investor LARGE VALUE Columbia Disciplined Value Columbia Growth & Income Columbia Large Cap Core Columbia Tax-Managed Value MIDCAP GROWTH Columbia Acorn Select Columbia Mid Cap Growth Columbia Tax-Managed Aggressive Growth MIDCAP VALUE Columbia Dividend Income Columbia Mid Cap Columbia Strategic Investor SMALL GROWTH Columbia Acorn Columbia Acorn USA Columbia Small Company Equity SMALL VALUE Columbia Small Cap Columbia Small-Cap Value BALANCED Columbia Asset Allocation Columbia Balanced Columbia Liberty Fund SPECIALTY Columbia Real Estate Equity Columbia Technology Columbia Utilities TAXABLE FIXED-INCOME Columbia Contrarian Income Columbia Corporate Bond Columbia Federal Securities Columbia Fixed Income Securities Columbia High Yield Columbia High Yield Opportunities Columbia Income Columbia Intermediate Bond Columbia Intermediate Government Income Columbia Quality Plus Bond Columbia Short Term Bond Columbia Strategic Income FLOATING RATE Columbia Floating Rate Columbia Floating Rate Advantage TAX EXEMPT Columbia High Yield Municipal Columbia Intermediate Tax-Exempt Bond Columbia Managed Municipals Columbia National Municipal Bond Columbia Tax-Exempt Columbia Tax-Exempt Insured 32 SINGLE STATE TAX EXEMPT Columbia California Tax-Exempt Columbia Connecticut Intermediate Municipal Bond Columbia Connecticut Tax-Exempt Columbia Florida Intermediate Municipal Bond Columbia Massachusetts Intermediate Municipal Bond Columbia Massachusetts Tax-Exempt Columbia New Jersey Intermediate Municipal Bond Columbia New York Intermediate Municipal Bond Columbia New York Tax-Exempt Columbia Oregon Municipal Bond Columbia Pennsylvania Intermediate Municipal Bond Columbia Rhode Island Intermediate Municipal Bond MONEY MARKET Columbia Money Market Columbia Municipal Money Market INTERNATIONAL/GLOBAL Columbia Acorn International Columbia Acorn International Select Columbia Europe Columbia Global Equity Columbia International Stock Columbia Newport Asia Pacific Columbia Newport Greater China Columbia Newport Tiger INDEX FUNDS Columbia Large Company Index Columbia Small Company Index Columbia U.S. Treasury Index Please consider the investment objectives, risks, charges and expenses of a mutual fund carefully before investing. Contact us at 800-345-6611 for a prospectus which contains this and other important information about the fund. Read it carefully before you invest. For complete product information on any Columbia fund, visit our website at www.columbiafunds.com. Columbia Management Group and Columbia Management refer collectively to the various investment advisory subsidiaries of Columbia Management Group, including Columbia Management Advisors, Inc., the registered investment advisor, and Columbia Funds Distributor, Inc. 33 This page intentionally left blank. [GRAPHIC] eDelivery Help your fund reduce printing and postage costs! Elect to get your shareholder reports by eletronic delivery. With Columbia's eDelivery program, you receive an e-mail message when your shareholder report becomes available online. If your fund account is registered with Columbia Funds, you can sign up quickly and easily on our website at www.columbiafunds.com. Please note -- if you own your fund shares through a financial institution, contact the institution to see if it offers electronic delivery. If you own your fund shares through a retirement plan, electronic delivery may not be available to you. COLUMBIA FLOATING RATE ADVANTAGE FUND PRSRT STD SEMIANNUAL REPORT, FEBRUARY 29, 2004 U.S. POSTAGE PAID HOLLISTON, MA PERMIT NO. 20 [COLUMBIA FUNDS(R) LOGO] A MEMBER OF COLUMBIA MANAGMENT GROUP (C)2004 COLUMBIA FUNDS DISTRIBUTOR, INC. ONE FINANCIAL CENTER, BOSTON, MA 02111-2621 800.345.6611 www.columbiafunds.com 762-03/319R-0204 (04/04) 04/0804 ITEM 2. CODE OF ETHICS. Not applicable at this time. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable at this time. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable at this time. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS Not applicable at this time. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable at this time. ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable at this time. ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The registrant has not filed Schedule 14A subsequent to the effective date of that Schedule's Item 7(d)(2)(ii)(G). However, it is the registrant's policy to consider candidates for the Board of Trustees/Directors who are recommend by shareholders. A Fund shareholder who wishes to nominate a candidate to the Board may send information regarding prospective candidates to the Fund's Governance Committee, care of the Fund's Secretary. The information should include evidence of the shareholder's Fund ownership, a full listing of the proposed candidate's education, experience, current employment, date of birth, names and addresses of at least three professional references, information as to whether the candidate is not an "interested person" under the 1940 Act and "independent" under NYSE Listing Standards in relation to the Fund, and such other information as may be helpful to the independent trustees/directors in evaluating the candidate. All satisfactorily completed information packages regarding a candidate will be forwarded to an independent trustee/director for consideration. ITEM 10. CONTROLS AND PROCEDURES. (a) The registrant's principal executive officer and principal financial officer, based on his evaluation of the registrant's disclosure controls and procedures as of a date within 90 days of the filing of this report, has 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 11. EXHIBITS. (a)(1) Code of ethics required to be disclosed under Item 2 of Form N-CSR: Not applicable at this time. (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. (a)(3) Not applicable at this time. (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 Advantage Fund ---------------------------------------------------------------- By (Signature and Title) /s/ J. Kevin Connaughton ---------------------------------------------------- J. Kevin Connaughton, President and Treasurer Date May 6, 2004 ------------------------------------------------------------------------ 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/ J. Kevin Connaughton ---------------------------------------------------- J. Kevin Connaughton, President and Treasurer Date May 6, 2004 ------------------------------------------------------------------------