-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DRmxgmUWjTbiz/dnHQR/SuoOQNoETn0VRh2LR9n74Zadx8BTHIvq/N+uf2vPmNfY 2dlvRhFymC3Q8RPjs+q8bQ== 0001193125-03-075394.txt : 20031110 0001193125-03-075394.hdr.sgml : 20031110 20031107174507 ACCESSION NUMBER: 0001193125-03-075394 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20030831 FILED AS OF DATE: 20031110 EFFECTIVENESS DATE: 20031110 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COLUMBIA FLOATING RATE ADVANTAGE FUND CENTRAL INDEX KEY: 0001093062 STATE OF INCORPORATION: MA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-09709 FILM NUMBER: 03986335 BUSINESS ADDRESS: STREET 1: ONE FINANCIAL CENTER CITY: BOSTON STATE: MA ZIP: 02111 BUSINESS PHONE: 6174263750 MAIL ADDRESS: STREET 1: ONE FINANCIAL CENTER CITY: BOSTON STATE: MA ZIP: 02111 FORMER COMPANY: FORMER CONFORMED NAME: LIBERTY FLOATING RATE ADVANTAGE FUND DATE OF NAME CHANGE: 20001211 FORMER COMPANY: FORMER CONFORMED NAME: LIBERTY STEIN ROE ADVISOR FLOATING RATE ADVANTAGE FUND DATE OF NAME CHANGE: 20000124 FORMER COMPANY: FORMER CONFORMED NAME: STEIN ROE ADVISOR FLOATING RATE ADVANTAGE FUND/MA DATE OF NAME CHANGE: 19990811 N-CSR 1 dncsr.txt COLUMBIA FLOATING RATE ADVANTAGE FUND N-CSR COLUMBIA FLOATING RATE ADVANTAGE FUND UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-9709 -------- 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) Russell Kane, 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: 1-617-772-3363 -------------- Date of fiscal year end: 08/31/2003 ---------- Date of reporting period: 08/31/2003 ---------- Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270,30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C, ss. 3507. Item 1. Reports to Stockholders [GRAPHIC] Columbia Floating Rate Advantage Fund Annual Report August 31, 2003 We are now Columbia Funds! INSIDE -- Management's discussion of the changes effective as of October 13, 2003. President's Message [PHOTO] Dear Shareholder: As you know, the fund you invest in has long been associated with a larger investment management organization. In the 1990s, it was affiliated with Liberty Financial, whose asset management companies included Colonial, Stein Roe and Newport. In 2001, these companies became part of the asset management division of FleetBoston Financial Corp, which you know as Columbia Management Group (CMG). Earlier this year, six of the asset management firms that were brought together under the CMG umbrella were consolidated and renamed Columbia Management Advisors, Inc. On October 13, 2003, we took the natural next step forward in this process by changing the name of our funds from Liberty to Columbia. For example, Liberty Floating Rate Advantage Fund was changed to Columbia Floating Rate Advantage Fund. We have also modified certain fund names that existed under both the Liberty and Columbia brands. As a result of these fund name changes, most fund CUSIP numbers have changed. (A CUSIP is a unique identification number assigned to each class of a mutual fund by the Committee on Uniform Security Identification Procedures.) However, ticker symbols have not changed. A list of new fund names and other information related to these changes are available online at www.columbiafunds.com, our new website address. A consolidated identity The consolidation of our management under a single organization and the renaming of our funds are part of a larger effort to create a consistent identity. Having taken these additional steps, we believe it will be easier for our shareholders to do business with us. All funds will be listed under the "Columbia" name in the mutual fund listings section of your newspaper (as long as they meet the newspaper's listing requirements). All service inquires will be handled by Columbia Funds Services, Inc., the new name of our shareholder service organization. What will not change is our commitment to fund shareholders. We remain committed to providing the best possible customer service and to offering a wide variety of mutual funds to help you pursue your long-term financial goals. Should you have questions, please call shareholder services at 800-345-6611. In the report that follows, your portfolio manager talks in depth about investment strategies and other factors that affected your fund's performance during the period. We encourage you to read the report carefully. As always, we thank you for your business and we look forward to continuing to serve your investment needs. Sincerely, /s/ Joseph R. Palumbo Joseph R. Palombo President Net asset value per share as of 08/31/03 ($) Class A 11.22 Class B 11.22 Class C 11.22 Class Z 11.22
Distributions declared per share 09/01/02-08/31/03 Class A 0.81 Class B 0.77 Class C 0.76 Class Z 0.85
[LOGO] Not FDIC Insured May Lose Value No Bank Guarantee Economic and market conditions change frequently.There is no assurance that the trends described in this report will continue or commence. Performance Information -- Columbia Floating Rate Advantage Fund Value of a $10,000 investment 1/13/00 --8/31/03 Performance of a $10,000 investment 1/13/00-08/31/03 ($)
without with sales charge sales charge --------------------------------- Class A 12,569 12,129 --------------------------------- Class B 12,418 12,278 --------------------------------- Class C 12,353 12,353 --------------------------------- Class Z 12,725 n/a
[CHART] Class A shares Class A shares CSFB Leveraged without sales charge with sales charge Loan Index -------------------- ----------------- ---------- 10,000 9,650 10,000 01/31/2000 10,050 9,698 10,097 02/29/2000 10,141 9,787 10,130 03/31/2000 10,151 9,795 10,050 04/30/2000 10,210 9,853 10,086 05/31/2000 10,316 9,955 10,171 06/30/2000 10,420 10,055 10,233 07/31/2000 10,521 10,153 10,307 08/31/2000 10,604 10,233 10,359 09/30/2000 10,696 10,322 10,393 10/31/2000 10,778 10,400 10,398 11/30/2000 10,821 10,442 10,421 12/31/2000 10,895 10,514 10,494 01/31/2001 10,998 10,613 10,557 02/28/2001 11,049 10,663 10,647 03/31/2001 11,020 10,634 10,660 04/30/2001 10,915 10,533 10,615 05/31/2001 11,027 10,641 10,742 06/30/2001 11,041 10,654 10,755 07/31/2001 11,176 10,785 10,782 08/31/2001 11,316 10,920 10,868 09/30/2001 11,128 10,739 10,660 10/31/2001 10,873 10,493 10,494 11/30/2001 11,007 10,622 10,659 12/31/2001 11,176 10,784 10,769 01/31/2002 11,344 10,947 10,829 02/28/2002 11,274 10,879 10,788 03/31/2002 11,493 11,090 10,913 04/30/2002 11,652 11,245 11,029 05/31/2002 11,683 11,274 11,022 06/30/2002 11,455 11,054 10,855 07/31/2002 11,051 10,664 10,690 08/31/2002 10,878 10,497 10,659 09/30/2002 10,723 10,347 10,683 10/31/2002 10,621 10,249 10,540 11/30/2002 10,806 10,427 10,721 12/31/2002 11,067 10,680 10,889 01/31/2003 11,232 10,839 11,036 02/28/2003 11,249 10,855 11,094 03/31/2003 11,398 10,999 11,129 04/30/2003 11,778 11,366 11,287 05/31/2003 12,143 11,718 11,438 06/30/2003 12,421 11,986 11,599 07/31/2003 12,494 12,057 11,679 08/31/2003 12,570 12,130 11,704 Mutual fund performance changes over time. Please visit www.columbiafunds.com for daily performance updates. Past performance is no guarantee of the future investment results. The principal value and investment returns will fluctuate, resulting in a gain or a loss on sale. The graph and table do not reflect the deduction of taxes a shareholder would pay on the fund distributions or redemption of the fund shares. The CSFB Leveraged Loan 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 the index. Index performance is from December 31, 1999. Average annual total return as of 8/31/03 (%) Share Class A B C Z Inception 1/13/00 1/13/00 1/13/00 1/13/00 - ---------------------------------------------------------------- without with without with without with without sales sales sales sales sales sales sales charge charge charge charge charge charge charge - ---------------------------------------------------------------- 1-year 15.55 11.51 15.16 11.91 14.99 13.99 15.95 - ---------------------------------------------------------------- Life 6.50 5.46 6.14 5.81 5.99 5.99 6.86 - ---------------------------------------------------------------- Average annual total return as of 6/30/03 (%) Share Class A B C Z - ---------------------------------------------------------------- without with without with without with without sales sales sales sales sales sales sales charge charge charge charge charge charge charge - ---------------------------------------------------------------- 1-year 8.43 4.64 8.05 4.80 7.90 6.90 8.81 - ---------------------------------------------------------------- Life 6.46 5.37 6.10 5.75 5.95 5.95 6.82 - ----------------------------------------------------------------
Past performance is no guarantee of future investment results. The principal value and investment returns will fluctuate, resulting in a gain or loss on sale. All results shown assume reinvestment of distributions. The "with sales charge" returns include the maximum 3.50% sales charge for class A shares; the appropriate class B shares early withdrawal charge (EWC) for the holding period after purchase as follows: first year - 3.25%, second year - 3.00%, third year - - 2.00%, fourth year - 1.50%, fifth year - 1.00%, thereafter - 0%; and the class C shares EWC of 1.00% for the first year only. Performance results reflect any voluntary waivers or reimbursement of fund expenses by the advisor or its affiliates. Absent these waivers or reimbursement arrangements, performance results would have been lower. Performance for different share classes will vary based on differences in sales charges and fees associated with each class. 1 Portfolio Managers' Report 30-day SEC yield as of 08/31/03 After reimbursement (%) Class A 5.84 Class B 5.73 Class C 5.56 Class Z 6.00 The 30-day SEC yield reflects the portfolio's earning power, net of expenses, expressed as an annualized percentage of the public offering price at the end of the period. If the advisor or its affiliates had not waived certain fund expenses, the 30-day SEC yield would have been 5.60% for Class A shares, 5.49% for Class B shares, 5.30% for Class C shares and 5.92% for Class Z shares.
Top 10 issuers as of 08/31/03 (%) Comcast Cable Communications 4.0 Nextel Finance 3.6 Century Cable Holdings 3.6 Washington Group International 2.7 Calpine 2.2 Mission Energy Holdings 2.1 Cricket Communications 2.0 Olympus Cable Holdings 1.9 Quorum Broadcasting 1.9 Huntsman 1.8 Holdings are calculated as a percentage of net assets. Because the fund is actively managed, there is no guarantee that the fund will continue to maintain these holdings in the future.
For the 12-month period ended August 31, 2003, class A shares of Columbia Floating Rate Advantage Fund returned 15.55% without sales charge. That was greater than the return of the fund's benchmark, the CSFB Leveraged Loan Index, which was 9.80% for the period. The fund also did better than the Lipper Loan Participation Loan Category average, which was 9.49%./1/ These high returns reflect an advantageous environment for all types of credit instruments. We believe the fund was able to outperform because of favorable sector allocation and security selection and also because of the positive effect of using leverage in a rising market. A strong credit environment Bank loans and other forms of credit were in high demand, especially during the past six months. From investment-grade corporate debt to high-yield bonds, we witnessed a sharp recovery from the weak credit markets of the previous two years. The corporate accounting scandals that dominated the headlines in 2002 had brought new credit issuance to a standstill. During 2003, however, the capital markets were once again open for a wide range of issuers. Corporate balance sheets improved and default rates declined from over 10% at the beginning of 2003 to 5.4% by mid-year. As always, the use of leverage tends to exaggerate the trends of the underlying market. When the market was declining a year ago, the decline was magnified by our leverage. Since November of 2002, however, our one-quarter to one-third leveraged position added several percentage points to the fund's return. Cable and wireless--a boon to performance The fund's overweight in wireless communications and cable contributed significantly to its strong performance. Wireless Communications, which accounted for 10.0% of the net assets on August 31, was hit disproportionately hard in 2002, with many issues trading at discounts of 30-45% of par. Since then, the industry has staged a strong recovery. Many wireless companies took advantage of their improved operating performance and prevailing low interest rates by bringing high-yield bonds to market, thereby improving their capital structure. In many cases, they even repaid bank debt at 100 cents on the dollar. Holdings such as Centennial Cellular and Western Wireless (0.4% and 0.5% of net assets, respectively) were especially strong performers./2/ - ------------ /1/ Lipper, Inc., a widely respected data provider in the industry, calculates an average total return for mutual funds with similar investment objectives as the fund. /2/ Holdings are disclosed as of August 31, 2003, and are subject to change. 2 Cable Television, which constituted 13.3% of the fund's net assets at period end, also rebounded from difficult times. Following the Adelphia bankruptcy in 2002, mergers and acquisitions activity came to a halt, and subscriber bases became difficult to value. Over the past six to nine months, however, a series of these types of transactions and other asset sales took place. Although the subscriber values implied by these transactions were down from their peak, they were also greater than what the depressed market was suggesting. Adelphia, the bellwether for an industry on the mend, remains an important holding for the fund because of our position in its wholly-owned subsidiaries, Century Cable and Olympus Cable (3.6% and 1.9% of net assets, respectively). /s/ Brian Good /s/ Jim Fellows Brian Good and Jim Fellows have been portfolio managers of the Columbia Floating Rate Advantage Fund since its inception in January 2000. 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. Portfolio quality breakdown (%) as of 08/31/03 (dollar-weighted) [CHART] Baa3 3.3 Ba1 3.5 Ba2 6.4 Ba3 19.6 B1 19.2 B2 10.3 B3 12.1 Caa1 3.4 Caa2 2.0 Ca 1.6 NR 8.8 Other 9.8 Quality breakdowns are calculated as a percentage of total investments. Because the fund is actively managed, there is no guarantee that the fund will continue to maintain these quality breakdowns in the future. Top 5 sectors as of 08/31/03 (%) [CHART] Cable television 13.3 Wireless communications 10.0 Healthcare services 6.2 Electric utilities 6.0 Movies/Entertainment 5.7 Sector breakdowns are calculated as a percentage of net assets. Because the fund is actively managed, there is no guarantee that the fund will continue to maintain this breakdown in the future. 3 Investment Portfolio August 31, 2003
Variable Rate Senior Loan Interests (a) - 111.3% Par Value ---------------------------------------------------- Aerospace/Defense - 1.4% Integrated Defense Technologies, Term Loan B 03/04/08 $ 946,194 $ 942,612 Vought Aircraft Industries, Inc.: Term Loan B 06/30/07 216,435 212,827 Term Loan C 06/30/08 1,334,577 1,332,358 Term Loan X 12/31/06 847,637 845,511 ------------ 3,333,308 ------------ Auto Parts - 3.4% 142466 Ontario Ltd., Term Loan B 08/10/07 2,365,119 2,370,707 Accuride Corp., Term Loan C 01/21/07 1,000,000 1,002,751 Federal-Mogul Corp.: (b) Supplemental Revolver 02/24/04 1,328,381 1,321,717 Term Loan C 02/24/04 573,404 571,966 TRW Automotive Acquisitions Corp., Term Loan C1 02/28/11 2,000,000 2,007,774 United Components, Inc., Term Loan B 06/30/10 1,000,000 1,008,330 ------------ 8,283,245 ------------ Broadcasting - 5.3% 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 2,102,738 Quorum Broadcasting Co., Inc.: Revolver 12/31/04 1,392,365 1,343,629 Term Loan C 12/31/04 1,481,752 1,429,859 Term Loan B 12/31/04 1,983,293 1,938,627 UPC Financing Partnership, Term Loan C2 03/31/09 5,000,000 4,419,838 White Knight Broadcasting, Inc., Term Loan A2 09/15/03 186,521 185,588 ------------ 13,224,691 ------------ Building Products - 1.2% Outsourcing Solutions, Inc., (d) Term Loan B 06/10/06 2,408,750 1,541,600 Tapco International Corp.: Term Loan B 06/23/07 854,552 856,103 Term Loan C 06/23/08 611,097 612,200 ------------ 3,009,903 ------------ Business Services - 0.8% HQ Global, (c) Term Loan B 11/06/05 1,849,805 735,060
Par Value --------------------------------------------------- NATG Holdings LLC: (d) Revolver A 01/23/05 $ 131,418 $ 131,434 Term Loan A 01/23/09 127,805 102,238 Term Loan B1 01/23/10 86,523 69,214 Term Loan B2 01/23/10 43,771 43,769 Pacer International, Inc., Term Loan 06/10/10 929,412 938,201 ------------ 2,019,916 ------------ Cable Television - 13.3% Bresnan Communications LLC, Term Loan B 12/31/07 3,500,000 3,583,490 Century Cable Holdings LLC, Term Loan 06/30/09 10,500,000 8,808,239 Charter Communications Operating LLC: Term Loan A 09/18/07 1,006,250 923,221 Term Loan B 03/18/08 3,273,123 3,076,133 Comcast Cable Communications, Term Loan 11/18/06 10,000,000 9,958,782 CSC Holdings, Inc., (b) Revolver 06/30/06 1,960,000 1,827,810 Olympus Cable Holdings LLC: Term Loan A 06/30/10 3,000,000 2,580,000 Term Loan B 09/30/10 2,500,000 2,184,375 ------------ 32,942,050 ------------ Casinos/Gambling - 5.0% Aladdin Gaming LLC: (c) Term Loan A 02/25/05 4,000,000 3,200,000 Term Loan B 08/26/06 1,250,000 1,015,625 Alliance Gaming Corp., Term Loan 09/04/09 3,456,250 3,481,706 Ameristar Casinos, Inc., Term Loan B 12/20/06 874,280 877,022 Marina District Finance Co., Inc., Term Loan A 12/31/07 3,750,000 3,747,532 ------------ 12,321,885 ------------ Chemicals - 2.7% Huntsman Corp. LLC: Term Loan A 03/31/07 3,379,041 3,004,887 Term Loan B 03/31/07 1,653,378 1,470,170 Huntsman International LLC: Term Loan B 06/30/07 284,713 285,799 Term Loan C 06/30/08 245,829 246,708 Messer Griesheim Industries, Inc.: Term Loan B 04/27/09 526,219 529,720 Term Loan C 04/27/10 757,385 763,212 Noveon, Inc., (b) Term Loan B 12/31/09 338,213 340,278 ------------ 6,640,774 ------------
See notes to investment portfolio. 4 Investment Portfolio (continued) August 31, 2003
Variable Rate Senior Loan Interests (a) (continued)Par. Value ----------------------------------------------- Coal - 0.6% Headwaters, Inc., Term Loan B 08/30/07 $ 1,481,952 $ 1,506,718 ------------ Consumer Services - 1.1% Alderwoods Group, Inc.: Note 5 Year 01/02/07 254,887 258,710 Note 7 Year 01/02/09 528,100 565,067 Knowledge Learning Corp., Term Loan B 05/15/10 1,970,000 1,952,753 ------------ 2,776,530 ------------ Consumer Specialties - 3.5% Church & Dwight Co., Inc., Term Loan B 09/30/07 544,666 548,569 Johnson Diversey, Inc., Term Loan B 11/03/09 2,310,000 2,323,900 Neptune Technology Group, Inc., Term Loan B 03/31/10 1,947,368 1,977,613 Playtex Products, Inc. Term Loan C 05/31/09 1,492,424 1,493,975 United Industries Corp., Term Loan B 01/20/06 2,297,987 2,304,702 ------------ 8,648,759 ------------ Containers/Packaging - 2.2% Graphic Packaging International, Inc., Term Loan B 08/09/10 4,000,000 4,021,203 Pliant Corp., Term Loan B 05/31/08 1,460,690 1,456,684 ------------ 5,477,887 ------------ Diversified Commercial Services - 0.5% Transcore Holdings, Inc., Term Loan B 10/01/06 1,142,980 1,148,983 ------------ Diversified Manufacturing - 4.5% Amsted Industries, Inc., Term Loan 10/15/10 3,000,000 3,041,106 Enersys, Inc., Term Loan B 11/09/08 1,457,547 1,462,078 Jason, Inc., Term Loan B 06/30/07 1,351,196 1,289,009 Polymer Group, Inc., Term Loan 12/31/06 2,593,219 2,492,732 Polypore, Inc.: Term Loan B 12/31/06 984,772 994,624 Term Loan C 12/31/07 968,750 976,799 Superior Telecom, Inc., (c) Term Loan B 05/27/04 2,384,316 822,589 ------------ 11,078,937 ------------
Par Value ----------------------------------------------- Electric Utilities - 6.0% Calpine Corp., Second Lien 07/16/07 $ 5,700,000 $ 5,400,527 Mission Energy Holdings Co.: Term Loan A 07/02/06 2,467,532 1,375,614 Term Loan B 07/02/06 7,032,468 3,879,481 Northwestern Corp., Term Loan 12/01/06 2,487,500 2,482,281 Westar Energy, Inc., Term Loan 06/05/05 1,680,255 1,688,651 ------------ 14,826,554 ------------ Electronic Components - 1.3% Viasystems, Inc., Term Loan B 09/30/08 3,713,009 3,184,115 ------------ Engineering & Construction - 3.0% URS Corp., Term Loan B 08/22/08 873,047 878,615 Washington Group International, (b) Revolver B 07/23/04 6,500,000 6,555,537 ------------ 7,434,152 ------------ Environmental Services - 1.5% Allied Waste North America, Inc.: Tranche A 01/15/10 1,000,000 1,007,084 Tranche C 01/15/10 1,000,000 1,006,871 Environmental Systems Products Holdings, Tranche 1 12/31/04 1,692,529 1,692,502 ------------ 3,706,457 ------------ Farming/Agriculture - 0.4% Scotts Company, Term Loan B 12/31/07 925,879 932,816 ------------ Finance Companies - 0.2% Finova Group, Inc., Note 05/15/09 1,490,000 588,550 ------------ Food Chains - 0.8% Buffets, Inc., Term Loan 06/30/09 609,463 607,909 Domino's, Inc., Term Loan 06/25/10 1,377,049 1,389,619 ------------ 1,997,528 ------------
See notes to investment portfolio. 5 Investment Portfolio (continued) August 31, 2003
Variable Rate Senior Loan Interests (a) (continued) Par Value ---------------------------------------------------- Food Manufacturing - 4.6% Burns Philp, Inc., Term Loan 02/26/09 $ 2,164,575 $ 2,215,209 Commonwealth Brands, Inc., Term Loan 08/28/07 1,388,750 1,396,342 Constellation Brands, Inc., Term Loan B 11/30/08 1,277,283 1,290,541 Interstate Bakeries, Tranche A 07/19/06 1,000,000 997,482 Interstate Brands Corp., Term Loan B 07/19/07 955,190 957,906 Term Loan C 07/19/07 2,955,038 2,955,819 Merisant Co., Term Loan B 01/11/10 950,000 958,881 Michael Foods, Inc., Term Loan B 04/10/08 668,732 672,129 ------------ 11,444,309 ------------ Healthcare Services - 6.0% Ameripath, Inc., Term Loan 03/27/10 3,491,250 3,527,758 Concentra Operating Corp., Term Loan 06/30/09 2,333,000 2,343,868 Fresenius Medical Care, Inc., Term Loan C 02/21/10 1,300,000 1,305,680 Medex, Inc., Term Loan 05/30/09 2,000,000 2,013,317 Pacificare Health Systems, Inc., Term Loan 06/03/08 1,000,000 1,007,069 PerkinElmer, Inc., Term Loan B 12/26/08 1,805,000 1,835,095 Team Health, Inc., Term Loan B 10/31/08 2,855,694 2,831,125 ------------ 14,863,912 ------------ Hospital Management - 0.9% Community Health Systems, Inc., Term Loan B 07/16/10 492,519 494,366 Vanguard Health Systems, Incremental Term Loan 01/03/10 1,592,000 1,605,386 ------------ 2,099,752 ------------ Hotels/Resorts - 0.8% Wyndham International, Inc., Term Loan 06/30/06 2,416,940 2,008,773 ------------ Industrial Machinery/Components - 0.4% Terex Corp., Incremental Term Loan 12/31/09 992,462 985,420 ------------
Par. Value ----------------------------------------------- Metals/Mining - 1.5% Dresser, Inc., Term Loan B 04/10/09 $ 1,800,297 $ 1,813,098 Stillwater Mining Co., Term Loan B 12/31/07 1,912,988 1,932,346 ------------ 3,745,444 ------------ Movies/Entertainment - 5.4% AMF Bowling Worldwide, Inc., Term Loan 02/28/08 1,633,617 1,638,453 Carmike Cinemas, Inc., Term Loan 01/31/07 2,336,093 2,356,514 GT Brands LLC, Term Loan 09/30/07 2,322,443 2,256,153 Loews Cineplex Entertainment, Term Loan 02/29/08 3,735,378 3,724,316 Regal Cinemas, Inc., Term Loan D 06/30/09 1,250,000 1,260,138 Vivendi Universal Entertainment LLP, Term Loan B 06/30/08 2,000,000 2,011,798 ------------ 13,247,372 ------------ Oil Refining/Marketing - 2.4% CITGO Petroleum Corp., Term Loan 02/27/06 1,500,000 1,560,424 WEG Acquisitions LP, Term Loan 06/17/08 1,000,000 1,009,653 Williams Energy Partners, Term Loan B 08/06/08 1,500,000 1,503,750 Williams Production RMT Co., Term Loan 05/30/07 1,875,000 1,891,152 ------------ 5,964,979 ------------ Paper - 1.1% Appleton Papers, Inc., Term Loan C 11/08/06 1,094,777 1,099,579 Port Townsend Paper Corp., Term Loan B 03/16/07 1,857,250 1,727,527 ------------ 2,827,106 ------------ Pharmaceuticals - 1.1% Medpointe, Inc., Term Loan B 09/30/08 2,775,117 2,629,784 ------------ Printing/Publishing - 2.5% CBD Media, Inc., Term Loan B 12/31/09 2,000,000 2,019,533
See notes to investment portfolio. 6 Investment Portfolio (continued) August 31, 2003
Variable Rate Senior Loan Interests (a) (continued)Par. Value ----------------------------------------------- Printing/Publishing (continued) Readers Digest Association, Inc., Term Loan B 05/20/08 $ 1,879,043 $ 1,866,575 TV Guide, Inc.: (b) Term Loan A 02/28/05 1,015,288 969,598 Term Loan B 02/28/05 315,333 301,141 Weekly Reader Corp., Term Loan B 11/17/06 962,732 935,512 ------------ 6,092,359 ------------ Rail/Shipping - 2.0% American Commercial Lines: (c) Term Loan B 06/30/06 775,443 649,239 Term Loan C 06/30/07 1,022,879 856,405 Dakota Minnesota Eastern Rail Corp., Term Loan 07/25/07 1,000,000 1,011,044 Helm Holding Corp., Term Loan B 10/18/06 2,421,864 2,321,743 ------------ 4,838,431 ------------ Real Estate Investment Trusts - 1.5% AIMCO Properties LP, Term Loan 05/30/08 2,000,000 2,008,157 Central Parking Corp., Term Loan B 03/31/10 1,795,500 1,801,658 ------------ 3,809,815 ------------ Retail Stores - 0.7% CH Operating LLC, Term Loan 06/21/07 1,758,621 1,760,799 ------------ Semiconductors - 0.4% Semiconductors Components Industries LLC: Term Loan C 08/04/07 742,991 736,248 Term Loan D 08/04/07 242,991 240,207 ------------ 976,455 ------------ Steel/Iron Ore - 3.0% International Steel Group, Tranche A 05/06/05 1,370,291 1,363,823 Ispat Inland LP.: Term Loan B 07/16/05 2,196,287 1,535,316 Term Loan C 07/16/06 2,196,287 1,535,316 UCAR Finance, Inc., Term Loan B 12/31/07 2,981,552 2,989,329 ------------ 7,423,784 ------------ Telecommunication Services - 2.1% Alaska Communications Systems Holdings, Inc., Term Loan 02/14/09 1,750,000 1,754,832
Par Value -------------------------------------------------------- Time Warner Telecom Holdings, Term Loan B 03/31/08 $ 1,194,000 $ 1,188,932 Valor Telecommunications Enterprises LLC, Term Loan B 06/30/08 2,354,913 2,347,388 ------------ 5,291,152 ------------ Telecommunications Infrastructure/ Equipment - 0.5% Spectrasite Communications, Inc., Term Loan B 12/31/07 1,222,815 1,230,275 ------------ Textiles - 1.4% Springs Industries, Inc., Term Loan A 03/05/07 863,293 861,123 St. John's Knits International, Inc., Term Loan B 07/31/07 2,646,381 2,651,273 ------------ 3,512,396 ------------ Transportation - 4.3% Laidlaw Investments Ltd., Term Loan B 06/19/09 3,366,000 3,453,192 Motor Coach Industries International, Inc., Term Loan 06/16/05 2,762,509 2,265,179 TTIndustries, Inc., Term Loan B 03/31/07 3,310,428 3,092,162 United Airlines, Term Loan B 07/01/04 1,892,000 1,878,506 ------------ 10,689,039 ------------ Wireless Communications - 10.0% Centennial Cellular Operating Co. LLC, Term Loan A 11/30/06 1,091,462 1,048,729 Centennial Puerto Rico Operations Corp.: Term Loan B 05/31/07 587,010 567,772 Term Loan C 11/30/07 346,455 335,223 Cricket Communications, Inc., (c) Vendor Term Loan 06/30/07 11,500,000 4,858,750 Nextel Finance Co., Inc.: Term Loan A 12/31/07 4,138,158 4,003,566 Term Loan B 06/30/08 2,490,625 2,490,454 Term Loan C 12/31/08 2,490,625 2,490,451 Nextel Partners, Term Loan B 01/29/08 3,482,500 3,443,546 Rural Cellular Corp., Term Loan D 10/03/09 1,036,479 1,009,955 Sygnet Wireless, Inc., Term Loan C 12/23/07 2,018,162 1,993,130 Ubiquitel Operating Co.: Term Loan A 09/30/07 938,776 748,064 Term Loan B 11/17/08 469,388 372,645
See notes to investment portfolio. 7 Investment Portfolio (continued) August 31, 2003
Variable Rate Senior Loan Interests (a) (continued) Par. Value --------------------------------------------------------- Wireless Communications (continued) Western Wireless Corp., Term Loan B 09/30/08 $ 1,321,637 $ 1,278,780 ------------ 24,641,065 ------------ Total Variable Rate Senior Loan Interests (cost of $283,427,027) 275,166,179 ------------ Common Stocks (e) - 2.2% Shares --------------------------------------------------------- Business Services - 0.0% NATG Holdings LLC (d) 40,800 72,216 ------------ Engineering & Construction - 1.7% Washington Group International 164,146 4,136,479 ------------ Healthcare Services - 0.2% Sun Healthcare Group, Inc. 92,617 421,304 ------------ Movies/Entertainment - 0.3% AMF Bowling Worldwide, Inc., 29,759 803,493 ------------ Total Common Stocks (cost of $6,319,264) 5,433,492 ------------ Short-Term Obligation - 8.0% Par. --------------------------------------------------------- Repurchase agreement with State Street Bank & Trust Co., dated 08/29/03, due 09/02/03 at 0.940%, collateralized by a U.S. Treasury Bond maturing 02/12/04, market value of $20,158,700 (repurchase proceeds $19,765,064) (cost of $19,763,000) $19,763,000 19,763,000 ------------ Total Investments - 121.5% (cost of $309,509,291)(f) 300,362,671 ------------ Other Assets & Liabilities, Net - (21.5)% (53,068,430) --------------------------------------------------------- Net Assets - 100.0% $247,294,241 ------------
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, see note 8. (c) These securities are in default of certain debt covenants. Income is not being accrued. (d) Represents fair value as determined in good faith under the direction of the Board of Trustees. (e) Non-income producing. (f) Cost for federal income tax purposes is $309,572,715.
Acronym Name - ------- ---- IRL Increasing Rate Loan
See notes to financial statements. 8 Statement of Assets and Liabilities August 31, 2003 Assets: Investments, at cost $309,509,291 ------------ Investments, at value $300,362,671 Cash 493 Receivable for: Investments sold 1,094,378 Fund shares sold 5,119,502 Interest and fees 1,729,697 Deferred Trustees' compensation plan 3,120 Other assets 4,131 ------------ Total Assets 308,313,992 ------------ Liabilities: Deferred facility fees 323,636 Payable for: Investments purchased 60,571 Distributions 471,160 Management fee 119,840 Administration fee 53,272 Transfer agent fee 42,813 Pricing and bookkeeping fees 36,046 Audit fee 57,810 Distribution and services fees 127,269 Custody fee 5,010 Interest expense 73,438 Expense reimbursement due to Advisor 37,094 Deferred Trustees' fee 3,120 Other liabilities 108,672 Notes payable 59,500,000 ------------ Total Liabilities 61,019,751 ------------ Net Assets $247,294,241 ------------ Composition of Net Assets: Paid-in capital $269,639,534 Overdistributed net investment income (59,212) Accumulated net realized loss (13,139,461) Net unrealized depreciation on investments (9,146,620) ------------ Net Assets $247,294,241 ------------ Class A: Net assets $ 85,165,503 Shares outstanding 7,589,089 ------------ Net asset value and redemption price per share $ 11.22(a) ------------ Maximum offering price per share ($11.22/0.9650) $ 11.63(b) ------------ Class B: Net assets $ 76,378,802 Shares outstanding 6,806,325 ------------ Net asset value and offering price per share $ 11.22(a) ------------ Class C: Net assets $ 80,571,522 Shares outstanding 7,179,896 ------------ Net asset value and offering price per share $ 11.22(a) ------------ Class Z: Net assets $ 5,178,414 Shares outstanding 461,433 ------------ Net asset value, offering and redemption price per share $ 11.22 ------------
(a) Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. (b) On sales of $100,000 or more the offering price is reduced. Statement of Operations For the Year Ended August 31, 2003 Investment Income: Interest $17,887,070 Facility and other fees 993,382 ----------- Total Investment Income 18,880,452 ----------- Expenses: Management fee 1,177,927 Administration fee 523,522 Distribution fee: Class A 65,340 Class B 299,227 Class C 362,057 Service fee: Class A 163,350 Class B 166,237 Class C 150,857 Transfer agent fee 465,244 Pricing and bookkeeping fees 203,873 Trustees' fee 11,724 Custody fee 20,048 Other expenses 286,974 ----------- Total Operating Expenses 3,896,380 Fees and expenses waived or reimbursed by Advisor (696,577) Custody earnings credit (2,086) ----------- Net Operating Expenses 3,197,717 Interest expense 988,653 Commitment fee 426,037 ----------- Net Expenses 4,612,407 ----------- Net Investment Income 14,268,045 ----------- Net Realized and Unrealized Gain (Loss) on Investments: Net realized loss on investments (4,458,140) Net change in unrealized appreciation/ depreciation on investments 16,553,299 ----------- Net Gain 12,095,159 ----------- Net Increase in Net Assets from Operations $26,363,204 -----------
See notes to financial statements. 9
Year Year Ended Ended Increase (Decrease) August 31, August 31, in Net Assets: 2003 2002 --------------------------------------------------------- Operations: Net investment income $ 14,268,045 $ 17,565,808 Net realized loss on investments (4,458,140) (4,422,545) Net change in unrealized appreciation/depreciation on investments 16,553,299 (24,393,222) ------------ ------------ Net Increase (Decrease) from Operations 26,363,204 (11,249,959) ------------ ------------ Distributions Declared to Shareholders: From net investment income: Class A (4,987,877) (7,229,439) Class B (4,852,868) (5,772,702) Class C (4,288,202) (4,574,186) Class Z (60,225) (212,723) ------------ ------------ Total Distributions Declared to Shareholders (14,189,172) (17,789,050) ------------ ------------ Share Transactions: Class A: Subscriptions 26,844,332 18,572,509 Distributions reinvested 3,108,790 4,678,393 Redemptions (18,545,181) (50,701,801) ------------ ------------ Net Increase (Decrease) 11,407,941 (27,450,899) ------------ ------------ Class B: Subscriptions 15,460,982 22,463,001 Distributions reinvested 2,841,144 3,580,288 Redemptions (14,388,694) (28,971,192) ------------ ------------ Net Increase (Decrease) 3,913,432 (2,927,903) ------------ ------------ Class C: Subscriptions 31,262,179 28,691,771 Distributions reinvested 2,853,491 3,074,908 Redemptions (19,111,456) (26,047,239) ------------ ------------ Net Increase 15,004,214 5,719,440 ------------ ------------ Class Z: Subscriptions 4,975,535 159,842 Distributions reinvested 2,309 212,723 Redemptions (23,102) (2,766,176) ------------ ------------ Net Increase (Decrease) 4,954,742 (2,393,611) ------------ ------------ Net Increase (Decrease) from Share Transactions 35,280,329 (27,052,973) ------------ ------------ Total Increase (Decrease) in Net Assets 47,454,361 (56,091,982)
Statement of Changes in Net Assets
Year Year Ended Ended Increase (Decrease) August 31, August 31, in Net Assets: 2003 2002 --------------------------------------------------------- Net Assets: Beginning of period $199,839,880 $255,931,862 ------------ ------------ End of period (including overdistributed net investment income of $(59,212) and $(107,726), respectively) $247,294,241 $199,839,880 ------------ ------------ Changes in Shares: Class A: Subscriptions 2,421,540 1,648,681 Issued for distributions reinvested 294,027 413,072 Redemptions (1,778,375) (4,646,687) ------------ ------------ Net Increase (Decrease) 937,192 (2,584,934) ------------ ------------ Class B: Subscriptions 1,412,670 1,986,627 Issued for distributions reinvested 268,398 316,278 Redemptions (1,376,098) (2,670,279) ------------ ------------ Net Increase (Decrease) 304,970 (367,374) ------------ ------------ Class C: Subscriptions 2,837,998 2,534,958 Issued for distributions reinvested 269,627 271,691 Redemptions (1,823,827) (2,370,615) ------------ ------------ Net Increase 1,283,798 436,034 ------------ ------------ Class Z: Subscriptions 449,963 13,333 Issued for distributions reinvested 210 19,606 Redemptions (2,073) (262,457) ------------ ------------ Net Increase (Decrease) 448,100 (229,518) ------------ ------------
See notes to financial statements. 10 For the Year Ended August 31, 2003 Increase (Decrease) in Cash ---------------------------------------------------------- Cash flows from operating activities: Net investment Income $ 14,268,045 Adjustments to reconcile net investment income to net cash provided by operating activities: Purchase of investment securities (251,907,917) Proceeds from disposition of investment securities 244,641,157 Purchase of short-term portfolio investments, net (6,764,356) Increase in interest and fees receivable (52,302) Decrease in receivable for expense reimbursement 29,031 Increase in receivable for investments sold (882,647) Decrease in other assets 53,045 Increase in deferred facility fees 14,312 Increase in payable for accrued expenses 207,228 Net amortization of premium (discount) (2,031,926) Decrease in payable for investments purchased (35,258) Increase in payable for expense reimbursement 37,094 Increase in other liabilities 38,158 ------------- Net cash used by operating activities (2,386,336) Cash flows from financing activities: Decrease in notes payable (14,500,000) Decrease in interest payable (36,007) Proceeds from shares sold 74,004,629 Payment of shares redeemed (52,068,973) Distributions paid in cash (6,141,615) ------------- Net cash provided by financing activities 1,258,034 ------------- Net decrease in cash (1,128,302) Cash: Beginning of year 1,128,795 ------------- End of year $ 493 -------------
Statement of Cash Flows See notes to financial statements. 11 Notes to Financial Statements August 31, 2003 Note 1. Accounting Policies Organization: Columbia Floating Rate Advantage Fund (the "Fund") (formerly Liberty Floating Rate Advantage 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. The Fund's investment goal is to provide a high level of current income, consistent with preservation of capital. The Fund authorized an unlimited number of shares. The Fund offers four classes of shares: Class A, Class B, Class C and Class Z. Class A shares are sold with a front-end sales charge. A 1.00% early withdrawal charge is assessed to Class A shares purchased without an initial sales charge on redemptions made within eighteen months on an original purchase of $1 million to $25 million. Class B shares are subject to an annual distribution fee and an early withdrawal charge. Class B shares will convert to Class A shares eight years after purchase. Class C shares are subject to an early withdrawal charge on redemptions made within one year after purchase and an annual distribution fee. Class Z shares are offered continuously at net asset value. There are certain restrictions on the purchase of Class Z shares, as described in the Fund's prospectus. On April 1, 2003, Stein Roe & Farnham Incorporated ("Stein Roe"), the investment advisor to the Fund, merged into Columbia Management Advisors, Inc. ("Columbia"), formerly known as Columbia Management Co., an indirect, wholly-owned subsidiary of FleetBoston Financial Corporation. At the time of the merger, Columbia assumed the obligations of Stein Roe with respect to the Fund. The merger did not change the way the Fund is managed, the investment personnel assigned to manage the Fund or the fees paid by the Fund to Columbia. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. Investment Valuation and Transactions: The value of the Portfolio is determined in accordance with guidelines established, and periodically reviewed, by the Board of Trustees. Variable rate senior loans are generally valued using market prices or quotations provided by banks, dealers or pricing services with respect to secondary market transactions. The prices provided by these principal market makers may differ from the value that would be realized if the loans were sold and the differences could be material to the financial statements. In the absence of actual market values, senior loans will be valued by Columbia, at fair value, which is intended to approximate market value, pursuant to procedures approved by the Board of Trustees. In determining fair value, Columbia will consider on an ongoing basis, among other factors, (i) the creditworthiness of the Borrower; (ii) the current interest rate, the interest rate redetermination period and maturity of such senior loan interests; and (iii) recent prices in the market for instruments of similar quality, rate and interest rate redetermination period and maturity. Because of uncertainty inherent in the valuation process, the estimated value of a senior loan interest may differ significantly from the value that would have been used had there been market activity for that senior loan interest. Equity securities generally are valued at the last sale price or, in the case of unlisted or listed securities for which there were no sales during the last day, at the current quoted bid price. Equity securities for which market quotations are not readily available are valued at fair value as determined in good faith under consistency applied procedures established by and under the general supervison of the Board of Trustees. Short-term obligations with a maturity of 60 days or less are valued at amortized cost. Security transactions are accounted for on the date the securities are purchased, sold or mature. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes. Statement of Cash Flows: Information on financial transactions which have been settled through the receipt or disbursement of cash is presented in the Statement of Cash Flows. The cash amount shown in the Statement of Cash Flows is the amount included in the Fund's Statement of Assets and Liabilities and represents cash on hand at its custodian bank account and does not include any short-term investments at August 31, 2003. 12 Notes to Financial Statements (continued) August 31, 2003 Determination of Class Net Asset Values: All income, expenses (other than class specific fees), and realized and unrealized gains (losses) are allocated to each class proportionately on a daily basis, based on net assets, for purposes of determining the net asset value of each class. Federal Income Taxes: Consistent with the Fund's policy to qualify as a regulated investment company and to distribute all of its taxable income, no federal income tax has been accrued. Interest Income, Discount and Premium: Interest income is recorded on the accrual basis and includes accretion of discount, amortization of premiums and paydown gains and losses. Facility fees received are treated as market discounts. Unamortized facility fees are reflected as deferred fees on the Statement of Assets and Liabilities. Distributions to Shareholders: The Fund declares and records distributions daily and pays monthly. Note 2. Federal Tax Information Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from accounting principles generally accepted in the United States of America. These differences are primarily due to differing treatments for deferral of losses from wash sales, discount accretion/premium amortization on debt securities, capital loss carryforwards, distribution payable, post-October losses and non-deductible expenses. Reclassifications are made to the Fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. For the year ended August 31, 2003, permanent items identified and reclassified among the components of net assets are as follows:
Overdistributed Accumulated Net Investment Net Realized Income Loss --------------- ------------ $(30,359) $30,359
Net investment income, net realized gains (losses) and net assets were not affected by this reclassification. The tax character of distributions paid during the year was as follows: Ordinary Income -------- $14,189,172 As of August 31, 2003, the components of distributable earnings on a tax basis were as follows:
Undistributed Ordinary Unrealized Income Depreciation* ------------- ------------- $468,307 $(9,210,044)
* The difference between book-basis and tax-basis unrealized depreciation is attributable primarily amortization/accretion on debt securities and to the tax deferral of losses on wash sales. The following capital loss carryforwards 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 Capital Loss Expiration Carryforward ---------- ------------ 2009 $ 22,035 2010 819,190 2011 4,813,376 ---------- $5,654,601 ----------
Under current tax rules, certain capital losses realized after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. As of August 31, 2003 for federal income tax purposes, post-October losses of $7,474,622 attributable to security transactions were deferred to September 1, 2003. Expired capital loss carryforwards, if any, are recorded as reduction of paid-in capital. Note 3. Fees and Compensation Paid to Affiliates Management Fee: Columbia is the investment advisor of the Fund and receives a monthly fee equal to 0.45% annually of the Fund's average daily managed assets. At a special meeting held on October 8, 2003, the Board of Trustees approved a new management fee structure to go into effect on November 1, 2003. Under the new structure, Columbia will receive a monthly fee based on the Fund's average daily net assets as follows:
Annual Average Daily Net Assets Fee Rate ------------------------ -------- First $1 billion 0.45% Next $1 billion 0.40% Over $2 billion 0.35%
13 Notes to Financial Statements (continued) August 31, 2003 Administration Fee: Columbia also provides accounting and other services for a monthly fee equal to 0.20% annually of the Fund's average daily managed 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 Bank and Trust Company ("State Street"). Columbia pays fees 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 are more than $50 million, a monthly fee equal to the average daily net assets of the Fund for that month multiplied by a fee rate that is calculated by taking into account the fees payable to State Street under the Outsourcing Agreement. For the year ended August 31, 2003, the net asset based fee rate was 0.032%. The Fund also pays out-of-pocket costs for pricing services. Transfer Agent Fee: Liberty Funds Services, Inc. (the "Transfer Agent"), an affiliate of Columbia, provides shareholder services for a monthly fee comprised of 0.06% annually of the Fund's average daily net assets plus charges based on the number of shareholder accounts and transactions. The Transfer Agent also receives reimbursement for certain out-of-pocket expenses. Effective October 13, 2003 Liberty Funds Services, Inc. changed its name to Columbia Funds Services, Inc. At a special meeting held on October 8, 2003, the Board of Trustees approved the change of transfer agent fees structure of the Fund. Effective November 1, 2003, the Fund will be charged an annual $34.00 charge per open account for the transfer agent fees. Underwriting Discounts, Service and Distribution Fees: Liberty Funds Distributor, Inc. (the "Distributor"), an affiliate of Columbia, is the Fund's principal underwriter. Effective October 13, 2003 Liberty Funds Distributor, Inc. changed its name to Columbia Funds Distributor, Inc. For the year ended August 31, 2003, the Fund has been advised that the Distributor retained net underwriting discounts of $14,478 on sales of the Fund's Class A shares and received early withdrawal charges (EWC) of $958, $242,910 and $27,685 on Class A, Class B and Class C share redemptions, respectively. The Fund has adopted a 12b-1 plan (the "Plan"), which requires it to pay the Distributor a monthly service fee equal to 0.25% annually on Class A, Class B and Class C net assets. The Plan also requires the payment of a monthly distribution fee to the Distributor equal to 0.10%, 0.45% and 0.60% annually of the average daily net assets attributable to Class A, Class B and Class C shares only. The EWC and the fees received from the Plan are used principally as repayment to the Distributor for amounts paid by the Distributor to dealers who sold such shares. Expense Limits: Columbia has voluntarily agreed, until further notice, to waive fees and bear certain Fund expenses to the extent that certain expenses (exclusive of management fees, administration fees, service fees, distribution fees, brokerage commissions, interest, commitment fees, leverage fees, taxes and extraordinary expenses, if any) exceed 0.15% of average daily net assets. Other: The Fund pays no compensation to its officers, all of whom are employees of Columbia or its affiliates. The Fund's Independent 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. The Fund has an agreement with its custodian bank under which $2,086 of custody fees were reduced by balance credits for the year ended August 31, 2003. 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. Note 4. Portfolio Information Investment Activity: During the year ended August 31, 2003, purchases and sales of investments, other than short-term obligations, were $251,907,917 and $244,641,157, respectively. 14 Notes to Financial Statements (continued) August 31, 2003 Unrealized appreciation (depreciation) at August 31, 2003, based on cost of investments for federal income tax purposes, was: Gross unrealized appreciation $ 4,513,096 Gross unrealized depreciation (13,723,140) ------------ Net unrealized depreciation $ (9,210,044) ------------
Other: The Fund may focus its investments in certain industries, subjecting it to greater risk than a fund that is more diversified. Note 5. Tender of Shares The Board of Trustees has adopted a policy of making tender offers on a quarterly basis. The Board has designated the 15(th) day of February, May, August, and November each year, or the next business day if the 15(th) is not a business day as the Repurchase Request Deadline. Tender offers are made for a portion of the Fund's then outstanding shares at the net asset value of the shares as of the Repurchase Pricing Date. The tender offer amount, which is determined by the Board of Trustees, will be at least 5% and no more than 25% of the total number of shares outstanding on the Repurchase Request Deadline. The Fund may repurchase an additional amount of shares up to 2% of the shares outstanding on the Repurchase Request Deadline. During the year ended August 31, 2003, there were four tender offers in November, February, May and August. For each tender, the Fund offered to repurchase 15%, 17%, 15% and 12%, of its shares, 12.57%, 5.71%, 4.32% and 3.93%, respectively, of shares outstanding were tendered. Note 6. 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, but 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. At August 31, 2003, the following sets forth the selling participants with respect to interests in senior loans purchased by the Portfolio on a participation basis. Principal Selling Participant Amount Value ------------------- ---------- ---------- Citibank: CSC Holdings, Inc., Revolver $1,960,000 $1,827,810 Note 7. Loan Agreement At August 31, 2003, the Fund had one term loan outstanding with Citicorp North America, Inc., totaling $59,500,000 which bore interest at 1.12 % per annum, due September 18, 2003. The Fund may borrow up to $150,000,000. The average daily loan balance was $68,904,110 at a weighted average interest rate of 1.37%. The Fund is required to maintain certain asset coverage with respect to the loans. Note 8. Unfunded Loan Commitments As of August 31, 2003, the Fund had unfunded loan commitments of $5,913,453, which could be extended at the option of the Borrower.
Unfunded Borrower Commitments -------- ----------- CSC Holdings, Inc. $1,040,000 Federal-Mogul Corp. 247,075 Noveon, Inc. 625,000 TV Guide, Inc. 1,001,378 Washington Group International, Inc. 3,000,000 ---------- $5,913,453 ----------
15 Financial Highlights Selected data for a share outstanding throughout each period is as follows:
Year Ended August 31, Period Ended ----------------------------------- August 31, Class A Shares 2003 2002 2001 2000 (a) - ----------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $ 10.48 $ 11.74 $ 12.09 $ 12.00 -------- -------- -------- -------- Income from Investment Operations: Net investment income 0.81 (b) 0.83(b)(c) 1.10(b) 0.64 Net realized and unrealized gain (loss) on investments 0.74 (1.26)(c) (0.32) 0.07 -------- -------- -------- -------- Total from Investment Operations 1.55 (0.43) 0.78 0.71 -------- -------- -------- -------- Less Distributions Declared to Shareholders: From net investment income (0.81) (0.83) (1.13) (0.62) From net realized gains -- -- --(d) -- -------- -------- -------- -------- Total Distributions Declared to Shareholders (0.81) (0.83) (1.13) (0.62) -------- -------- -------- -------- Net Asset Value, End of Period $ 11.22 $ 10.48 $ 11.74 $ 12.09 -------- -------- -------- -------- Total return (e)(f) 15.55% (3.88)% 6.71% 6.04%(g) -------- -------- -------- -------- Ratios to Average Net Assets/ Supplemental Data: Operating expenses (h) 1.38% 1.38% 1.37% 1.01%(i) Interest and commitment fees expenses 0.73% 0.99% 2.04% 1.91%(i) Net expenses (h) 2.11% 2.37% 3.41% 2.92%(i) Net investment income (h) 7.67% 7.25%(c) 9.24% 9.49%(i) Waiver/reimbursement 0.36% 0.32% 0.32% 1.41%(i) Portfolio turnover rate 90% 98% 65% 8% (g) Net assets, end of period (000's) $ 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 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. 16 Financial Highlights (continued) Selected data for a share outstanding throughout each period is as follows:
Year Ended August 31, Period Ended ----------------------------------- August 31, Class B Shares 2003 2002 2001 2000 (a) - ----------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $ 10.48 $ 11.74 $ 12.07 $ 12.00 -------- -------- -------- -------- Income from Investment Operations: Net investment income 0.78 (b) 0.78(b)(c) 1.05(b) 0.62 Net realized and unrealized gain (loss) on investments 0.73 (1.25)(c) (0.30) 0.05 -------- -------- -------- -------- Total from Investment Operations 1.51 (0.47) 0.75 0.67 -------- -------- -------- -------- Less Distributions Declared to Shareholders: From net investment income (0.77) (0.79) (1.08) (0.60) From net realized gains -- -- --(d) -- -------- -------- -------- -------- Total Distributions Declared to Shareholders (0.77) (0.79) (1.08) (0.60) -------- -------- -------- -------- Net Asset Value, End of Period $ 11.22 $ 10.48 $ 11.74 $ 12.07 -------- -------- -------- -------- Total return (e)(f) 15.16% (4.22)% 6.52% 5.69%(g) -------- -------- -------- -------- Ratios to Average Net Assets/ Supplemental Data: Operating expenses (h) 1.73% 1.73% 1.72% 1.36%(i) Interest and commitment fees expenses 0.73% 0.99% 2.04% 1.91%(i) Net expenses (h) 2.46% 2.72% 3.76% 3.27%(i) Net investment income (h) 7.34% 6.90%(c) 8.89% 9.14%(i) Waiver/reimbursement 0.36% 0.32% 0.32% 1.41%(i) Portfolio turnover rate 90% 98% 65% 8% (g) Net assets, end of period (000's) $ 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 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. 17 Financial Highlights (continued) Selected data for a share outstanding throughout each period is as follows:
Year Ended August 31, Period Ended ----------------------------------- August 31, Class C Shares 2003 2002 2001 2000 (a) - ----------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $ 10.48 $ 11.74 $ 12.07 $ 12.00 -------- -------- -------- -------- Income from Investment Operations: Net investment income 0.76(b) 0.76(b)(c) 1.03(b) 0.61 Net realized and unrealized gain (loss) on investments 0.74 (1.25)(c) (0.30) 0.05 -------- -------- -------- -------- Total from Investment Operations 1.50 (0.49) 0.73 0.66 -------- -------- -------- -------- Less Distributions Declared to Shareholders: From net investment income (0.76) (0.77) (1.06) (0.59) From net realized gains -- -- --(d) -- -------- -------- -------- -------- Total Distributions Declared to Shareholders (0.76) (0.77) (1.06) (0.59) -------- -------- -------- -------- Net Asset Value, End of Period $ 11.22 $ 10.48 $ 11.74 $ 12.07 -------- -------- -------- -------- Total return (e)(f) 14.99% (4.36)% 6.35% 5.62%(g) -------- -------- -------- -------- Ratios to Average Net Assets/ Supplemental Data: Operating expenses (h) 1.88% 1.88% 1.87% 1.51%(i) Interest and commitment fees expenses 0.73% 0.99% 2.04% 1.91%(i) Net expenses (h) 2.61% 2.87% 3.91% 3.42%(i) Net investment income (h) 7.14% 6.75%(c) 8.74% 8.99%(i) Waiver/reimbursement 0.36% 0.32% 0.32% 1.41%(i) Portfolio turnover rate 90% 98% 65% 8% (g) Net assets, end of period (000's) $ 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 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. 18 Financial Highlights (continued) Selected data for a share outstanding throughout each period is as follows:
Year Ended August 31, Period Ended ----------------------------------- August 31, Class Z Shares 2003 2002 2001 2000 (a) - -------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $ 10.48 $ 11.74 $ 12.08 $ 12.00 -------- -------- -------- -------- Income from Investment Operations: Net investment income 0.78 (b) 0.86(b)(c) 1.14(b) 0.67 Net realized and unrealized gain (loss) on investments 0.81 (1.25)(c) (0.31) 0.05 -------- -------- -------- -------- Total from Investment Operations 1.59 (0.39) 0.83 0.72 -------- -------- -------- -------- Less Distributions Declared to Shareholders: From net investment income (0.85) (0.87) (1.17) (0.64) From net realized gains -- -- --(d) -- -------- -------- -------- -------- Total Distributions Declared to Shareholders (0.85) (0.87) (1.17) (0.64) -------- -------- -------- -------- Net Asset Value, End of Period $ 11.22 $ 10.48 $ 11.74 $ 12.08 -------- -------- -------- -------- Total return (e)(f) 15.95% (3.53)% 7.17% 6.11%(g) -------- -------- -------- -------- Ratios to Average Net Assets/ Supplemental Data: Operating expenses (h) 1.03% 1.03% 1.02% 0.66%(i) Interest and commitment fees expenses 0.73% 0.99% 2.04% 1.91%(i) Net expenses (h) 1.76% 2.02% 3.06% 2.57%(i) Net investment income (h) 7.21% 7.60%(c) 9.59% 9.84%(i) Waiver/reimbursement 0.36% 0.32% 0.32% 1.41%(i) Portfolio turnover rate 90% 98% 65% 8%(g) Net assets, end of period (000's) $ 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 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. 19 Financial Highlights (continued) Loan Agreement Asset Coverage Requirements
Total Amount Asset Coverage Per $1,000 Date Outstanding of Indebtedness -------- ---------------- ----------------------------- 08/31/2003 $59,500,000 $5,156 08/31/2002 74,000,000 3,701 08/31/2001 88,000,000 3,908 08/31/2000 19,000,000 6,739
20 Report of Independent Auditors To the Trustees and the Shareholders of Columbia Floating Rate Advantage Fund In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations, changes in net assets, and cash flows and the financial highlights present fairly, in all material respects, the financial position of Columbia Floating Rate Advantage Fund (the "Fund") (formerly Liberty Floating Rate Advantage Fund), at August 31, 2003, and the results of its operations, the changes in its net assets, its cash flows and its financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at August 31, 2003, by correspondence with the custodian and lending or agent banks, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Boston, Massachusetts October 21, 2003 21 Trustees Effective October 8, 2003, Patrick J. Simpson and Richard L. Woolworth were appointed to the Board of Trustees of the Fund. Messrs. Simpson and Woolworth had been directors of 15 Columbia Funds and 12 funds in the CMG Fund Trust. Also effective October 8, 2003, the incumbent trustees of the Fund were elected as directors of the 15 Columbia Funds and as trustees of the 12 funds in the CMG Fund Trust. The new combined Board of Trustees of the Fund now oversees 124 funds in the Columbia Funds Complex (including the former Liberty Funds, former Stein Roe Funds, Columbia Funds and CMG Funds). Several of those trustees also serve on the Boards of other funds in the Columbia Funds Complex. The Trustees serve terms of indefinite duration. The names, addresses and ages of the Trustees and officers of the Funds in the Columbia Funds Complex, the year each was first elected or appointed to office, their principal business occupations during at least the last five years, the number of portfolios overseen by each Trustee and other directorships they hold are shown below. Each officer listed below serves as an officer of each Fund in the Columbia Funds Complex. The Statement of Additional Information (SAI) contains additional information about the Trustees and is available without charge upon request by calling the fund's distributor at 800-345-6611.
Number of Year First Portfolios in Position Elected or Columbia Funds Other with Appointed Principal Occupation(s) Complex Overseen Directorships Name, Address and Age Funds to Office/1/ During Past Five Years by Trustee Held - --------------------------------------------------------------------------------------------------------------------------------- Disinterested Trustees Douglas A. Hacker (Age 48) Trustee 1996 Executive Vice President 124 None P.O. Box 66100 - Strategy of United Chicago, IL 60666 Airlines (airline) since December, 2002 (formerly President of UAL Loyalty Services (airline) from September, 2001 to December, 2002; Executive Vice President and Chief Financial Officer of United Airlines from March, 1993 to September, 2001; Senior Vice President and Chief Financial Officer of UAL, Inc. prior thereto). Janet Langford Kelly (Age 45) Trustee 1996 Chief Administrative 124 None 3100 West Beaver Road Officer and Senior Vice Troy, MI 48084-3163 President, Kmart Holding Corporation since September, 2003 (formerly Executive Vice President-Corporate Development and Administration, General Counsel and Secretary, Kellogg Company (food manufacturer), from September, 1999 to August, 2003; Senior Vice President, Secretary and General Counsel, Sara Lee Corporation (branded, packaged, consumer-products manufacturer) from January, 1995 to September, 1999). Richard W. Lowry (Age 67) Trustee 1995 Private Investor since 126/3/ None 10701 Charleston Drive August, 1987 (formerly Vero Beach, FL 32963 Chairman and Chief Executive Officer, U.S. Plywood Corporation (building products manufacturer)). Charles R. Nelson (Age 61) Trustee 1981 Professor of Economics, 124 None Department of Economics University of University of Washington Washington, since Seattle, WA 98195 January, 1976; Ford and Louisa Van Voorhis Professor of Political Economy, University of Washington, since September, 1993; Director, Institute for Economic Research, University of Washington, since September, 2001; Adjunct Professor of Statistics, University of Washington, since September, 1980; Associate Editor, Journal of Money Credit and Banking, since September, 1993; consultant on econometric and statistical matters. John J. Neuhauser (Age 60) Trustee 1985 Academic Vice President 127/3,4/ Saucony, Inc. (athletic footwear); 84 College Road and Dean of Faculties SkillSoft Corp. Chestnut Hill, MA 02467-3838 since August, 1999, (E-Learning) Boston College (formerly Dean, Boston College School of Management from September, 1977 to September, 1999. Patrick J. Simpson (Age 58) Trustee 2000 Partner, Perkins Coie 124 None 1211 S.W. 5th Avenue L.L.P. (formerly Suite 1500 Partner, Stoel Rives Portland, OR 97204 Boley Jones & Grey). Thomas E. Stitzel (Age 67) Trustee 1998 Business Consultant 124 None 2208 Tawny Woods Place since 1999 (formerly Boise, ID 83706 Professor of Finance from 1975 to 1999 and Dean from 1977 to 1991, College of Business, Boise State University); Chartered Financial Analyst.
22 Trustees (continued)
Number of Year First Portfolios in Position Elected or Columbia Funds Other with Appointed Principal Occupation(s) Complex Overseen Directorships Name, Address and Age Funds to Office/1/ During Past Five Years by Trustee Held - ------------------------------------------------------------------------------------------------------------------------------- Disinterested Trustees Thomas C. Theobald (Age 66) Trustee 1996 Managing Director, 124 Anixter International (network 27 West Monroe Street, William Blair Capital support equipment distributor), Suite 3500 Partners (private equity Jones Lang LaSalle (real estate Chicago, IL 60606 investing) since management services) and September, 1994 MONY Group (life insurance). (formerly Chief Executive Officer and Chairman of the Board of Directors, Continental Bank Corporation prior thereto). Anne-Lee Verville (Age 58) Trustee 1998 Author and speaker on 125/4/ Chairman of the Board of 359 Stickney Hill Road educational systems Directors, Enesco Group, Inc. Hopkinton, NH 03229 needs (formerly General (designer, importer and Manager, Global distributor of giftware and Education Industry from collectibles). 1994 to 1997, and President, Applications Solutions Division from 1991 to 1994, IBM Corporation (global education and global applications)). Richard L. Woolworth (Age 62) Trustee 1991 Chairman and Chief 124 NW Natural, a natural gas 100 S.W. Market Street Executive Officer, The service provider #1500 Regence Group Portland, OR 97207 (healthcare maintenance organization) (formerly Chairman and Chief Executive Officer, BlueCross BlueShield of Oregon; Certified Public Accountant, Arthur Young & Company). Interested Trustees William E. Mayer/2/ (Age 63) Trustee 1994 Managing Partner, Park 126/3/ Lee Enterprises (print media), 399 Park Avenue Avenue Equity Partners WR Hambrecht + Co. (financial Suite 3204 (private equity) since service provider) and First New York, NY 10022 February, 1999 (formerly Health (healthcare). Founding Partner, Development Capital LLC from November 1996 to February, 1999; Dean and Professor, College of Business and Management, University of Maryland from October, 1992 to November, 1996). Joseph R. Palombo/2/ (Age 50) Trustee, 2000 Executive Vice President 125/5/ None One Financial Center Chairman and Chief Operating Boston, MA 02111 of the Officer of Columbia Board Management Group, Inc. and (Columbia Management) President since December, 2001 and Director, Executive Vice President and Chief Operating Officer of the Advisor since April, 2003 (formerly Chief Operations Officer of Mutual Funds, Liberty Financial Companies, Inc. from August, 2000 to November, 2001; Executive Vice President of Stein Roe & Farnham Incorporated (Stein Roe) from April, 1999 to April, 2003; Director of Colonial Management Associates, Inc. (Colonial) from April, 1999 to April, 2003; Director of Stein Roe from September, 2000 to April, 2003) President of Columbia Funds and Galaxy Funds since February, 2003 (formerly Vice President from September 2002 to February 2003); Manager of Stein Roe Floating Rate Limited Liability Company since October, 2000; (formerly Vice President of the Columbia Funds from April, 1999 to August, 2000; Chief Operating Officer and Chief Compliance Officer, Putnam Mutual Funds from December, 1993 to March, 1999).
/1/ In December 2000, the boards of each of the former Liberty Funds and former Stein Roe Funds were combined into one board of trustees responsible for the oversight of both fund groups (collectively, the "Liberty Board"). In October 2003, the trustees on the Liberty Board were elected to the boards of the Columbia Funds (the "Columbia Board") and of the CMG Funds (the "CMG Funds Board"); simultaneous with that election, Patrick J. Simpson and Richard L. Woolworth, who had been directors on the Columbia Board and trustees on the CMG Funds Board, were appointed to serve as trustees of the Liberty Board. The date shown is the earliest date on which a trustee/director was elected or appointed to the board of a Fund in the Columbia Funds Complex). /2/ Mr. Mayer is an "interested person" (as defined in the Investment Company Act of 1940 (1940 Act)) by reason of his affiliation with WR Hambrecht + Co. Mr. Palombo is an interested person as an employee of the Advisor. /3/ Messrs. Lowry, Neuhauser and Mayer each also serve as a director/trustee of the All-Star Funds, currently consisting of 2 funds, which are advised by an affiliate of the Advisor. /4/ Mr. Neuhauser and Ms. Verville also serve as disinterested directors of Columbia Management Multi-Strategy Hedge Fund, LLC, which is advised by the Advisor. /5/ Mr. Palombo also serves as an interested director of Columbia Management Multi-Strategy Hedge Fund, LLC, which is advised by the Advisor. 23 Officers and Transfer Agent
Year First Elected or Position with Appointed Principal Occupation(s) Name, Address and Age Columbia Funds to Office During Past Five Years - ------------------------------------------------------------------------------------------------------------ Officers Vicki L. Benjamin (Age 42) Chief Accounting 2001 Controller of the Columbia Funds and of the One Financial Center Officer and Liberty All-Star Funds since May, 2002; Chief Boston, MA 02111 Controller Accounting Officer of the Columbia Funds and Liberty All-Star Funds since June, 2001; Controller and Chief Accounting Officer of the Galaxy Funds since September, 2002 (formerly Vice President, Corporate Audit, State Street Bank and Trust Company from May, 1998 to April, 2001; Audit Manager from July, 1994 to June, 1997; Senior Audit Manager from July, 1997 to May, 1998, Coopers & Lybrand, LLP). J. Kevin Connaughton (Age 39) Treasurer 2000 Treasurer of the Columbia Funds and of the One Financial Center Liberty All-Star Funds since December, 2000; Vice Boston, MA 02111 President of the Advisor since April, 2003 (formerly Controller of the Liberty Funds and of the Liberty All-Star Funds from February, 1998 to October, 2000); Treasurer of the Galaxy Funds since September, 2002; Treasurer, Columbia Management Multi-Strategy Hedge Fund, LLC since December, 2002 (formerly Vice President of Colonial from February, 1998 to October, 2000 and Senior Tax Manager, Coopers & Lybrand, LLP from April, 1996 to January, 1998).
Important Information About This Report The Transfer Agent for Columbia Floating Rate Advantage Fund is: Columbia Funds Services, Inc. P.O. Box 8081 Boston, MA 02266-8081 Please note our new name as of October 13, 2003. The fund mails one shareholder report to each shareholder address. If you would like more than one report, please call shareholder services at 800-345-6611 and additional reports will be sent to you. This report has been prepared for shareholders of Columbia Floating Rate 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. Annual Report: Columbia Floating Rate Advantage Fund Columbia Floating Rate Advantage Fund Annual Report, August 31, 2003 [LOGO] [LOGO](R) ColumbiaFunds A Member of Columbia Management Group (C) 2003 Columbia Funds Distributor, Inc. One Financial Center, Boston, MA 02111-2621 800.345.6611 www.columbiafunds.com 762-02/212P-0803 (10/03) 03/2926 PRSRT STD U.S. Postage PAID Holliston, MA Permit NO. 20 Item 2. Code of Ethics. (a) The registrant has, as of the end of the period covered by this report, adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the Registrant or a third party. (b) During the period covered by this report, there were not any amendments to a provision of the code of ethics adopted in 2(a) above. (c) During the period covered by this report, there were not any waivers or implicit waivers to a provision of the code of ethics adopted in 2(a) above. Item 3. Audit Committee Financial Expert. The registrant's Board of Trustees has determined that Douglas A. Hacker and Anne-Lee Verville, each of whom are members of the registrant's Board of Trustees and Audit Committee, each qualify as an audit committee financial expert. Mr. Hacker and Ms. Verville are each independent trustees, as defined in paragraph (a)(2) of this item's instructions. Item 4. Principal Accountant Fees and Services. Not applicable at this time. Item 5. Audit Committee of Listed Registrants. Not applicable at this time. Item 6. Reserved. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Columbia Management Advisors, Inc. ("CMA") VOTING CLIENT AND FUND PROXIES POLICY: All proxies for client securities for which Columbia Management Advisors, Inc. ("CMA") has been granted authority to vote shall be voted in a manner considered to be in the best interests of CMA's clients, including the CMA Managed Funds(1) and their shareholders without regard to any benefit to CMA or its affiliates. CMA shall examine each proposal and vote against the proposal, if, in its judgment, approval or adoption of the proposal would be expected to impact adversely the current or potential market value of the issuer's securities. In addition, CMA shall examine each proposal and vote the securities held on behalf of a client against the proposal, if, in its judgment, the proposal would be expected to effect adversely the best interest of the client. References to the best interest of a client refer to the interest of the client in terms of the potential economic return on the client's investment. In the event a client believes that its other interests require a different vote, CMA shall vote as the client instructs. CMA addresses potential material conflicts of interest by having a predetermined voting policy. For those proposals that require special consideration or in instances where special circumstances may require varying from the predetermined policy, the Proxy Committee will determine the vote in the best interest of CMA's clients, without consideration of any benefit to CMA, its affiliates or its other clients. OVERVIEW: CMA's policy is based upon its fiduciary obligation to act in its clients' best interests. In addition, the SEC recently adopted rules under the Investment Company Act of 1940 and the Investment Advisers Act of 1940. These rules impose obligations with respect to proxy voting on investment advisers and investment companies. PROCEDURE: I. Account Policies Except as otherwise directed by the client, CMA shall vote as follows: Separately Managed Accounts CMA shall vote proxies on securities held in its separately managed accounts. CMA Trust Company Trust Pools CMA Trust Company shall vote proxies on securities held in the trust pools. CMG Funds/CMA Fund Trust CMA shall vote proxies on securities held in the Funds, including multi-managed and subadvised Funds. CMA Private Portfolio CMA shall vote proxies on securities held in its separately managed accounts. Private Management Accounts The authority to vote proxies on securities held in such accounts shall be reserved to the client. MasterPlan Accounts Where CMA serves as trustee (or custodian) with participant-directed accounts (including 404(c) plans), the proxies on securities held in such accounts shall be forwarded to the participants for voting where permitted by the controlling instrument. This includes ESOP or company stock. II. Proxy Committee CMA shall establish a Proxy Committee, which shall be composed of the heads of equity investments, equity research and compliance, and senior operational and investment representatives of CMA's regional offices, fund administration and legal department and the Sarbanes Oxley specialist. In the event that such persons are unable to participate in a meeting of the Proxy Committee, their designees shall act on their behalf. A vacancy in the Proxy Committee shall be filled by the prior member's successor in position at CMA or a person of equivalent experience. Each portfolio manager of a fund or account which holds securities of an issuer having a shareholder meeting shall be an ad hoc member of the Proxy Committee in connection with the vote of proxies for the meeting. The Proxy Committee's functions shall include, in part, (a) direction of the vote on proposals where there has been a recommendation to the Committee not to vote according to the predetermined policy provided in the Voting Guidelines in III (A) and (B) below or which proposals require special consideration under III (C) below, (b) annual review of this Proxy Voting Policy and Procedure to ensure consistency with internal policies and regulatory agency policies, (c) annual review of existing Voting Guidelines and development of additional Voting Guidelines to assist in the review of proxy proposals, and (d) development and modification of Voting Procedures as it deems appropriate or necessary. In determining the vote of any proposal for which it has responsibility, the Proxy Committee shall consider whether the proposal would be expected to impact adversely the current or potential market value of the issuer's securities. In addition, the Proxy Committee shall examine the proposal and vote the securities held on behalf of a client against the proposal, if, in its judgment, the proposal would be expected to effect adversely the best interest of the client. References to the best interest of a client refer to the interest of the client in terms of the potential economic return on the client's investment. In the event a client believes that its other interests require a different vote, CMA shall vote as the client instructs. In determining the vote on any proposal, the Proxy Committee shall not consider any benefit to CMA, any of its affiliates, any of its or its affiliates' clients, or of its customers or service providers, other than benefits to the owner of the securities to be voted. The Proxy Committee shall create a charter, which shall be consistent with this policy and procedure. The charter shall set forth the Committee's purpose, membership and operation. The charter shall include procedures prohibiting a member from voting on a matter for which he or she has a conflict of interest by reason of a direct relationship with the issuer or other party affected by a given proposal, e.g., is a portfolio manager for an account of the issuer. III. Voting Guidelines In general, proposals which are designed to either dissuade or preclude the acquisition and/or merger of one corporate entity by/with another, or have the effect of diluting the value of the existing shares outstanding, or reduce the shareholders' power over any company actions are rejected. Individual merger and corporate restructuring proposals are reviewed on a case-by-case basis. A. Proposals usually voted for CMA will vote in favor of the following proposals, unless otherwise directed by the Proxy Committee: 1. Auditors. Proposals for the annual appointment or approval of independent corporate auditors. An auditor will usually be thought of as independent unless the auditor receives more than 50% of its revenues from non-audit activities from the company and its affiliates. 2. Directors. Proposals for the election of Directors or an increase or decrease in the number of Directors provided a majority of directors would be independent. However, CMA will vote against proposals that give management the ability to alter the size of the board without shareholder approval. 3. Chairman of the Board / Chief Executive Officer. Proposals for the creation or elimination of positions or titles for senior management personnel. CMA prefers the role of Chairman and CEO to be held by different persons. In evaluating proposals we will consider the size of the company and the nature of its shareholder base. 4. Compensation. Proposals for specific compensation for employees/directors if provisions are consistent with standard business practices, such as bonus plans, incentive plans, stock option plans, pension and retirement benefits, stock purchase plans, or thrift plans. CMA requires management to provide substantial justification for the repricing of options. 5. Debt Limits. Proposals for an increase in debt limit, unless proposed specifically as an anti-takeover action. 6. Indemnification. Proposals to approve indemnification of the Board of Directors through self-insurance plans or purchase of insurance. It is not the intent to eliminate Director Responsibility for negligence and or breaches of fiduciary duty. 7. Meeting. Proposals to approve the minutes of a prior meeting; proposals to change the date or location of the annual meeting. 8. Name of Company. Proposals to approve a change in the company name. 9. Principal Office. Proposals to change the location of the company's principal place of business provided the purpose is not to reduce the scope of adequate regulatory or financial supervision. 10. Report and Accounts. Proposals to approve the annual reports and accounts provided the certifications required by Sarbanes Oxley Act 2002 have been provided. 11. Par Value. Proposals to change the par value of the stock. 12. Shares. Proposals for the elimination of authorized but un-issued shares or retirement of those shares purchased for a sinking fund or treasury stock; proposals to increase the authorized shares for stock dividends, stock splits or general issuance, unless proposed as an anti-takeover action. 13. Share Repurchase Programs. Proposals to institute/ renew open market share repurchase plans in which all shareholders may participate on equal terms. 14. Independent Committees. Proposals that request that the board audit, compensation and/ or nominating committees include independent directors. The Audit Committee must satisfy the independence and experience requirements established by the Securities and Exchange Commission ("SEC") and the New York Stock Exchange. At least one member of the Audit Committee must qualify as a "financial expert" within the definition set forth in rules of the SEC. 15. Equal Opportunity Employment. Proposals that endorse the recruitment, development, and promotion of personnel on a non-discriminatory merit basis, regardless of race, creed, color or gender. B. Proposals Usually Voted Against CMA will vote against the following proposals, unless otherwise determined by the Proxy Committee. 1. Super Majority Voting. Proposals to require a majority vote larger than 51% of outstanding shares to approve any proxy proposal. Such proposals are largely intended to support management positions prior to the occurrence of a particular event. 2. Cumulative Voting. Proposals, which allow more than one vote per share in the election of directors. Directors should represent all shareholders equally as opposed to group influences. 3. Preferred Stock, Warrants, Rights, Poison Pills. Proposals intended largely to avoid acquisition prior to the occurrence of an actual event or to discourage acquisition by creating a cost constraint. 4. Reclassification of Common Stock. Proposals to change voting rights by type of Common stock or for long term holders versus new holders. 5. Written Consent. Proposals to eliminate the right of shareholders to act by written consent without a meeting. C. Ability to Vote Proxies Other than as Provided in A or B Above. A Portfolio Manager, SubAdviser or other party involved with a client's or Fund's account may conclude that the interest of the client or Fund requires that a proxy be voted on a proposal in a manner that differs from the predetermined proxy voting policy. In this situation, he or she shall request that the Proxy Committee consider voting the proxy on the proposal other than according to the predetermined policy provided in III (A) or (B) above. If any person (or entity) requests the Proxy Committee (or any of its members) to vote a proxy other than according to the predetermined policy, that person shall furnish to the Proxy Committee a written explanation of the reasons for the request and a description of the person's (or entity's) relationship with the party proposing the matter to shareholders. The Proxy Committee may vary from the predetermined policy if it determines that voting on the proposal according to the predetermined policy would be expected to impact adversely the current or potential market value of the issuer's securities or to effect adversely the best interest of the client. References to the best interest of a client refer to the interest of the client in terms of the potential economic return on the client's investment. In the event a client believes that its other interests require a different vote, CMA shall vote as the client instructs. In determining the vote on any proposal, the Proxy Committee shall not consider any benefit other than benefits to the owner of the securities to be voted. D. Proposals Requiring Special Consideration The following proposals require individual, special consideration. The Proxy Committee will determine how proxies related to each of these proposals will be voted. The Proxy Committee shall determines to vote against any such proposal which would be expected to impact adversely the current or potential market value of the issuer's securities or to effect adversely the best interest of the client. References to the best interest of a client refer to the interest of the client in terms of the potential economic return on the client's investment. In the event a client believes that its other interests require a different vote, CMA shall vote as the client instructs In determining the vote on any proposal, the Proxy Committee shall not consider any benefit other than benefits to the owner of the securities to be voted. 1. New Proposals. For each new type of proposal that is expected to be proposed to shareholders of multiple companies, the Proxy Committee will develop a Guideline, which will be incorporated into this Proxy Voting Policy and Procedures. 2. Accounts Adhering to Taft Hartley Principles. All proposals for these accounts shall be voted according to the Taft Hartley Guidelines developed by Institutional Shareholder Services, Inc. ("ISS"). 3. Accounts Adhering to Socially Responsible Principles. All proposals for these accounts shall be voted according to the Socially Responsible Guidelines developed by ISS or as specified by the client. 4. Proxies of International Issuers which Block Securities Sales between the Time a Shareholder submits a Proxy and the Vote. Proposals for these securities shall be voted only on the specific instruction of the Proxy Committee and to the extent practicable in accordance with these Proxy Voting Guidelines. 5. Proxies of Investment Company Shares. Proposals on issues other than those specified above under III (A) and (B), e.g., election of directors, selection of accountants. 6. Mergers/Acquisitions. Proposals where a hostile merger/acquisition is apparent or where CMA represents ownership in more than one of the companies involved in a potential merger/acquisition. Proposals for potential mergers/acquisitions, which do not appear to be hostile, shall be voted based on previously stated Guidelines. 7. Shareholder Proposals. Shareholder proposals that are not covered by III (A) and (B) above will be reviewed individually. 8. Executive/Director Compensation. Except as provided in III (A)(4), proposals relating to compensation of any executive or director will be voted as recommended by ISS or as otherwise directed by the Proxy Committee. 9. Annual Evaluation of New Issues. During the first quarter of each year, the Proxy Committee will consider any new controversial issues that are likely to be on the ballots during the upcoming proxy season. The Proxy Committee will also be notified in the unusual instance when an analyst or portfolio manager feels strongly that the best interests of shareholders would be served by deviating from our standard policy on a specific proposal. 10. Pre-Emptive Rights. Proposals to create or eliminate pre-emptive rights. In evaluating proposals the Proxy Committee will consider the size of the company and the nature of its shareholder base. If any person (or entity) requests that the Proxy Committee (or any of its members) vote a proxy in a specific manner, that person shall furnish to the Proxy Committee a written explanation of the reasons for the request and a description of the person's (or entity's) relationship with the party proposing the matter to shareholders. IV. VOTING PROCEDURES The Proxy Committee has developed the following procedures to assist in the voting of proxies according to the Voting Guidelines set forth in Section III above. The Proxy Committee may revise these procedures from time to time, as it deems appropriate or necessary to effect the purposes of this Policy and Procedures. CMA shall use Institutional Shareholder Services ("ISS"), a third party vendor, to implement its proxy voting process. ISS shall provide proxy analysis and record keeping services. On a daily basis CMA shall send to ISS a holdings file detailing each equity holding held in an account advised by CMA. Information on equity holdings for the international portfolio shall be sent weekly. ISS shall receive proxy material information from Proxy Edge or the custodian bank for the account. This shall include issues to be voted upon, together with a breakdown of holdings for CMA accounts. ISS shall then reconcile information it receives from CMA with that it has received from Proxy Edge and custodian banks. Any discrepancies shall be noted and resolved by ISS. Whenever a vote is solicited, ISS shall send CMA a request to vote over a secure website. CMA personnel shall check this website daily. The request shall be accompanied by a recommended vote. The recommended vote shall be based upon CMA's Voting Guidelines previously delivered by CMA to ISS as set forth in Section III. CMA shall promptly provide ISS with any amendments or modifications to the Guidelines. CMA shall return a final instruction to vote to ISS, which ISS shall record with Proxy Edge or the custodian bank as our agent. ISS shall have procedures in place to ensure that a vote is cast on every security holding maintained by CMA on which a vote is solicited unless otherwise directed by the Proxy Committee. On a yearly basis, or as required by our clients CMA shall receive a report from ISS detailing CMA's voting for the previous period. Each time that ISS shall send CMA a request to vote the request shall be accompanied by the recommended vote determined in accordance with CMA's Voting Guidelines. ISS shall vote as indicated in the request unless the client has reserved discretion, the Proxy Committee determines that the best interest of a client requires another vote or the proposal is a matter on which the Proxy Committee has discretion under Section III.D. In such situations ISS shall vote based on the direction of the client or the Proxy Committee, as the case may be. The interests of CMA's Taft Hartley or "Socially Responsible " clients may impact a proposal that normally should be voted in a certain way. ISS shall inform CMA of all proposals having impact on its Taft Hartley and or "Socially Responsible " clients. The Proxy Voting Committee shall be consulted before a vote is placed in cases where Taft Hartley or Socially Responsible issues are presented. (1) CMA Managed Funds or a Fund is a registered investment company or series of a registered investment company managed or advised by Columbia Management Advisors, Inc. Item 8. Reserved. Item 9. Controls and Procedures. (a) The registrant's principal executive officer and principal financial officer, based on their evaluation of the registrant's disclosure controls and procedures as of a date within 90 days of the filing of this report, have concluded that such controls and procedures are adequately designed to ensure that information required to be disclosed by the registrant in Form N-CSR is accumulated and communicated to the registrant's management, including the principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. (b) There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's last fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 10. Exhibits. (a)(1) Code of ethics required to be disclosed under Item 2 of Form N-CSR attached hereto as Exhibit 99.CODE ETH (a)(2) Certifications pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) attached hereto as Exhibit 99.CERT. (b) Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)) attached hereto as Exhibit 99.906CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) Columbia Floating Rate Advantage Fund -------------------------------------- By (Signature and Title) /s/ Joseph R. Palombo ------------------------- Joseph R. Palombo, President Date November 7, 2003 ---------------------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title) /s/ Joseph R. Palombo -------------------------- Joseph R. Palombo, President Date November 7, 2003 ---------------------------------------------- By (Signature and Title) /s/ J. Kevin Connaughton -------------------------- J. Kevin Connaughton, Treasurer Date November 7, 2003 ---------------------------------------------- EX-99.CODE ETH 3 dex99codeeth.txt CODE OF ETHICS EX-99.CODE ETH COLUMBIA MANAGEMENT GROUP FAMILY OF FUNDS CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS I. Covered Officers/Purpose of the Code This Code of Ethics (the "Code") for the investment companies within the Columbia Management Group fund complex (collectively the "Funds" and each, a "Fund") applies to the Funds' Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer, and Director of Trustee Administration (the "Covered Officers") for the purpose of promoting: . honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; . full, fair, accurate, timely and understandable disclosure in reports and documents that a Fund files with, or submits to, the Securities and Exchange Commission ("SEC"), and in other public communications made by a Fund; . compliance with applicable laws and governmental rules and regulations; . the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and . accountability for adherence to the Code. Each Covered Officer shall adhere to a high standard of business ethics and shall be sensitive to situations that may give rise to actual or apparent conflicts of interest. II. Administration of the Code The Boards of Trustees and Boards of Directors of the Funds (collectively, the "Board") shall designate an individual to be primarily responsible for the administration of the Code (the "Code Officer"). The Code shall be administered by the Columbia Management Group Compliance Department. In the absence of the Code Officer, his or her designee shall serve as the Code Officer, but only on a temporary basis. Each Fund has designated a chief legal officer (the "Chief Legal Officer") for purposes of the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder. The Chief Legal Officer of a Fund shall assist the Fund's Code Officer in administration of this Code. The Chief Legal Officer shall be responsible for applying this Code to specific situations in which questions are presented under it (in consultation with Fund counsel, where appropriate) and has the authority to interpret this Code in any particular situation. However, any waivers sought by a Covered Officer must be approved by each Audit Committee of the Funds (collectively, the "Audit Committee"). III. Managing Conflicts of Interest Overview. A "conflict of interest" occurs when a Covered Officer's private interest interferes with the interests of, or his/her service to, a Fund. For example, a conflict of interest would arise if a Covered Officer, or a family member, receives improper personal benefits as a result of the Covered Officer's position with a Fund. Certain conflicts of interest arise out of the relationships between Covered Officers and a Fund and already are subject to conflict of interest provisions in the Investment Company Act of 1940 (the "Company Act") and the Investment Advisers Act of 1940 (the "Advisers Act"). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with a Fund because of their status as "affiliated persons" of the Fund. A Fund's and its investment adviser's compliance programs and procedures are designed to prevent, or identify and correct, violations of those provisions. This Code does not, and is not intended to, repeat or replace those programs and procedures, and such conflicts fall outside of the parameters of this Code. Although typically not presenting an opportunity for improper personal benefit, conflicts may arise from, or as a result of, the contractual relationship between a Fund and its investment adviser, administrator, principal underwriter, pricing and bookkeeping agent and/or transfer agent (each, a "Service Provider") of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for a Fund or for a Service Provider, or for both), be involved in establishing policies and implementing decisions that will have different effects on the Service Provider and a Fund. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Fund and the Service Provider and is consistent with the performance by the Covered Officers of their duties as officers of a Fund. In addition, it is recognized by the Board that the Covered Officers may also be officers or employees of one or more other investment companies covered by this or other codes. Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions of the Company Act and the Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of a Fund. Each Covered Officer must: . not use personal influence or personal relationships improperly to influence investment decisions or financial reporting by a Fund whereby the Covered Officer or an immediate family member would benefit personally to the detriment of a Fund; and . not cause a Fund to take action, or fail to take action, for the individual personal benefit of the Covered Officer or an immediate family member rather than the benefit of the Fund./1/ There are some conflict of interest situations that must be approved by the Code Officer, after consultation with the Chief Legal Officer. Those situations include, but are not limited to,: . service as director on the board of any public or private company; . the receipt of any gifts in excess of $100 in the aggregate from a third party that does or seeks to do business with the Funds during any 12-month period; . the receipt of any entertainment from any company with which a Fund has current or prospective business dealings, unless such entertainment is business-related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety; . any material ownership interest in, or any consulting or employment relationship with, any Fund service providers, other than its investment adviser, principal underwriter, administrator or any affiliated person thereof; . a direct or indirect material financial interest in commissions, transaction charges or spreads paid by a Fund for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer's employment, such as compensation or equity ownership. IV. Disclosure and Compliance Each Covered Officer shall: . be familiar with the disclosure requirements generally applicable to the Funds; - ---------- /11/ For purposes of this Code, personal trading activity of the Covered Officers shall be monitored in accordance with the Columbia Management Group Code of Ethics. Each Covered Officer shall be considered an "Access Person" under such Code. The term "immediate family" shall have the same meaning as provided in such Code. . not knowingly misrepresent, or cause others to misrepresent, facts about any Fund to others, whether within or outside the Fund, including to the Fund's trustees and auditors, and to governmental regulators and self-regulatory organizations; . to the extent appropriate within his/her area of responsibility, consult with other officers and employees of the Funds and the adviser with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Funds file with, or submit to, the SEC and in other public communications made by the Funds; and . promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. V. Reporting and Accountability Each Covered Officer must: . upon adoption of the Code (or after becoming a Covered Officer), affirm in writing to the Board that he/she has received, read and understands the Code; . annually affirm to the Board compliance with the requirements of the Code; . not retaliate against any other Covered Officer or any employee of the Funds or their affiliated persons for reports of potential violations that are made in good faith; . notify the Chief Legal Officer and the Code Officer promptly if he/she knows of any violation of this Code; and . respond to the trustee and officer questionnaires circulated periodically in connection with the preparation of disclosure documents for the Funds. The Code Officer shall maintain records of all activities related to this Code. The Funds will follow the procedures set forth below in investigating and enforcing this Code: . The Chief Legal Officer and/or the Code Officer will take all appropriate action to investigate any potential violation reported to him/her; . If, after such investigation, the Chief Legal Officer and the Code Officer believes that no violation has occurred, the Code Officer will notify the person(s) reporting the potential violation, and no further action is required; . Any matter that the Chief Legal Officer and/or the Code Officer believes is a violation will be reported to the Audit Committee; . If the Audit Committee concurs that a violation has occurred, it will inform and make a recommendation to the Board, which will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to the Chief Executive Officer of Columbia Management Group; or a recommendation to sanction or dismiss the Covered Officer; . The Audit Committee will be responsible for granting waivers in its sole discretion; . Any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules. The Chief Legal Officer shall: . report to the Audit Committee quarterly any approvals provided in accordance with Section III of this Code; and . report to the Audit Committee quarterly any violations of, or material issues arising under, this Code. VI. Other Policies and Procedures This Code shall be the sole code of ethics adopted by the Funds for the purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other polices or procedures of the Funds or the Funds' Service Providers govern or purport to govern the behavior or activities (including, but not limited to, personal trading activities) of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The Funds' and their investment advisers' and principal underwriter's codes of ethics under Rule 17j-1 under the Company Act and any policies and procedures of the Service Providers are separate requirements applicable to the Covered Officers and are not part of this Code. VII. Amendments All material amendments to this Code must be approved or ratified by the Board, including a majority of independent directors. VIII. Confidentiality All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the Board, the Covered Officers, the Chief Legal Officer, the Code Officer, outside audit firms and legal counsel to the Funds, and senior management of Columbia Management Group. IX. Internal Use The Code is intended solely for the internal use by the Funds and does not constitute an admission, by or on behalf of any Fund, as to any fact, circumstance, or legal conclusion. EX-99.CERT 4 dex99cert.txt CERTIFICATION PURSUANT TO SECTION 302 EX-99.CERT I, Joseph R. Palombo, certify that: 1. I have reviewed this report on Form N-CSR of Columbia Floating Rate Advantage Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent 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; and 5. The registrant's other certifying officers and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 7, 2003 /s/ Joseph R. Palombo ---------------------------------- Joseph R. Palombo, President I, J. Kevin Connaughton, certify that: 1. I have reviewed this report on Form N-CSR of Columbia Floating Rate Advantage Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent 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; and 5. The registrant's other certifying officers and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 7, 2003 /s/ J. Kevin Connaughton ---------------------------------- J. Kevin Connaughton, Treasurer EX-99.906CT 5 dex99906ct.txt CERTIFICATION PURSUANT TO SECTION 906 EX-99.906CERT CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Certified Shareholder Report of Columbia Floating Rate Advantage Fund (the "Trust") on Form N-CSR for the period ending August 31, 2003, as filed with the Securities and Exchange Commission on the date hereof ("the Report"), the undersigned hereby certifies that, to his knowledge: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Trust. Date: November 7, 2003 /s/ Joseph R. Palombo ----------------------------------- Joseph R. Palombo, President Date: November 7, 2003 /s/ J. Kevin Connaughton ----------------------------------- J. Kevin Connaughton, Treasurer A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission (the "Commission") or its staff upon request. This certification is being furnished to the Commission solely pursuant to 18 U.S.C. ss. 1350 and is not being filed as part of the Form N-CSR with the Commission. -----END PRIVACY-ENHANCED MESSAGE-----