<PAGE> 1
(Front Cover)
Liberty Floating
Rate Fund
Annual Report
August 31, 2000
<PAGE> 2
PRESIDENT'S MESSAGE
STEVE GIBSON PHOTO
Dear Shareholder:
I am pleased to present the 2000 annual report for Liberty Floating Rate Fund.
You may have noticed that your Fund has a new name. As of July 14, the names of
our funds were changed to include Liberty. Rest assured, the investment
objectives and strategies employed by the Fund's managers are not affected by
this name change. We believe the new name better reflects that your Fund is part
of Liberty Funds, a diverse family of funds representing a wide selection of
investment styles and specialized money management. The goal of all Liberty
funds is to help you reach for financial freedom--however you define it.
The United States economy moved at a fast pace during the fiscal year ended
August 31, 2000. Prompted by concerns that this rapid economic expansion could
lead to higher rates of inflation down the road, the Federal Reserve raised the
federal funds rate four times over the course of the fiscal year. These
increases had a generally positive effect on the floating-rate bank loan market
and the Fund. The reason: the coupons on floating-rate senior bank loans are
reset periodically to reflect current interest rates, so their income generally
rises when interest rates escalate.
Because their coupons periodically adjust with short-term interest rates, the
principal value of floating-rate loans has historically remained relatively
stable when compared to fixed-rate bonds. These factors, as well as the
portfolio managers' emphasis on diversity and credit quality, should bode well
for the Fund in the future.
On the following pages, you will find detailed information about the Fund's
performance in fiscal 2000 and the investment strategies used to achieve it.
As always, we thank you for the confidence you have shown in Liberty and our
funds.
Sincerely,
/s/ Stephen E. Gibson
Stephen E. Gibson
President
October 25, 2000
PERFORMANCE HIGHLIGHTS (AS OF 8/31/00)
<TABLE>
<S> <C> <C>
NET ASSET VALUE PER SHARE
CLASS A $10.00
CLASS B $10.00
CLASS C $10.00
CLASS Z $10.00
DISTRIBUTIONS DECLARED PER SHARE
(11/1/99-8/31/00)
CLASS A $0.71
CLASS B $0.67
CLASS C $0.65
CLASS Z
(FROM
9/1/99) $0.87
</TABLE>
Because economic and market conditions change frequently, there can be no
assurance that the trends described in this report will continue or come to
pass.
Past Performance is no guarantee of future results.
<PAGE> 3
PERFORMANCE INFORMATION
Value of an Initial $10,000 Investment
12/31/98 - 8/31/00
PERFORMANCE OF A $10,000 INVESTMENT IN ALL SHARE
CLASSES 12/31/98-8/31/00
<TABLE>
<CAPTION>
Ending Ending
account value account value
without sales with sales
charge charge
-----------------------------------------
<S> <C> <C>
Class A $11,373 $10,978
-----------------------------------------
Class B $11,327 $11,027
-----------------------------------------
Class C $11,311 $11,311
-----------------------------------------
Class Z $11,410 N/A
</TABLE>
<TABLE>
<CAPTION>
DLJ LEVERAGED LOAN CLASS A SHARES (WITHOUT CLASS A SHARES (WITH SALES
INDEX PLUS SALES CHARGE) CHARGE)
------------------ ----------------------- --------------------------
<S> <C> <C> <C>
12/31/98 10000.00 10000.00 10000.00
10026.00 10053.00 9703.65
9982.00 10135.00 9782.79
10043.00 10219.40 9864.30
10116.00 10292.20 9934.54
10246.00 10353.70 9993.88
10339.00 10427.80 10065.40
10408.00 10486.90 10122.50
10370.00 10520.30 10154.80
10346.00 10583.20 10215.40
10331.00 10627.30 10258.00
10398.00 10675.70 10304.70
10469.00 10767.80 10393.60
10571.00 10818.10 10442.20
10606.00 10910.90 10531.80
10522.00 10935.10 10555.10
10560.00 11013.70 10631.00
10649.00 11095.90 10710.30
10714.00 11183.20 10794.60
10790.00 11265.30 10873.80
8/1/2000 10846.00 11373.10 10977.90
</TABLE>
The DLJ Leveraged Loan Index Plus is an unmanaged index that tracks the
performance of senior floating rate bank loans. Unlike mutual funds, indexes are
not investments and do not incur fees or charges. It is not possible to invest
in an index.
Average Annual Total Returns as of 8/31/00
<TABLE>
<CAPTION>
Share Class A B C Z
Inception 11/1/99 11/1/99 11/1/99 12/17/98
-------------------------------------------------------------------------------------------------------------------
Without With Without With Without With Without
Sales Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge Charge
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 year 7.88% 4.05% 7.44% 4.21% 7.29% 6.30% 8.23%
-------------------------------------------------------------------------------------------------------------------
Life 7.93% 5.71% 7.67% 5.98% 7.58% 7.58% 8.14%
</TABLE>
Average Annual Total Returns as of 6/30/00
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 year 7.32% 3.53% 6.94% 3.72% 6.82% 5.83% 7.61%
-------------------------------------------------------------------------------------------------------------------
Life 7.82% 5.36% 7.58% 5.68% 7.50% 7.50% 8.01%
</TABLE>
Past performance cannot predict future investment results. Returns and value of
an investment will vary, resulting in a gain or loss on sale. All results shown
assume reinvestment of distributions. The "with sales charge" returns include
the maximum 3.50% sales charge for Class A shares; the appropriate Class B
shares early withdrawal charge (EWC) for the holding period after purchase as
follows: first year - 3.25%, second year - 3.00%, third year - 2.00%, fourth
year - 1.50%, fifth year - 1.00%, thereafter - 0%; and the Class C shares EWC of
1% for the first year only. Performance results reflect any voluntary waivers or
reimbursement of Fund expenses by the Advisor or its affiliates. Absent these
waivers or reimbursement arrangements, performance results would have been
lower. Performance for different share classes will vary based on differences in
sales charges and fees associated with each class.
Class A, B and C share (newer class shares) performance information includes
returns of the Fund's Class Z shares (the oldest existing Fund class) for
periods prior to the inception of the newer class shares. These Class Z share
returns are not restated to reflect any expense differential (e.g., Rule 12b-1
fees) between Class Z shares and the newer class shares. Had the expense
differential been reflected, the returns for the periods prior to the inception
of Class A, B and C shares would have been lower.
1
<PAGE> 4
30-DAY SEC YIELDS AS OF 8/31/00
<TABLE>
<CAPTION>
AFTER
REIMBURSEMENT
<S> <C> <C>
CLASS A SHARES 8.97%
CLASS B SHARES 8.97%
CLASS C SHARES 8.81%
CLASS Z SHARES 9.66%
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 8.62% FOR
CLASS A SHARES, 8.61% FOR CLASS B SHARES,
8.46% FOR CLASS C SHARES AND 9.27% FOR
CLASS Z SHARES.
</TABLE>
PORTFOLIO MANAGER'S REPORT
Liberty Floating Rate Fund seeks to provide high current income, while
preserving capital, by investing in variable-rate senior bank loans(1) made to
corporations, partnerships and others. Because these loans are below
investment-grade and may involve greater risks, they have historically paid
higher yields than U.S. Treasury bills or other short-term investments.(2)
ABOVE-AVERAGE PERFORMANCE DURING THE YEAR
Relative to the bank loan market, the Fund provided excellent performance. For
the 12 months ended August 31, 2000, Class A shares delivered a total return of
7.88%, including reinvested dividends and without sales charge. This compares to
total returns of 4.59% for the Fund's benchmark, the DLJ Leveraged Loan Index
Plus. Its current SEC yield as of August 31, 2000 was 8.97%.
RISING INTEREST RATES HELPED BOOST RETURNS
In an attempt to head off higher inflation in the future, the Federal Reserve
boosted key short-term interest rates 1.25% over the 12-month period. The
three-month LIBOR followed suit, gaining 1.36%. Since floating-rate bank loans
reset their rates periodically to reflect changes in the LIBOR, rising interest
rates resulted in higher income to the Fund.
(1)While the Fund expects to maintain a relatively stable net asset value (NAV),
its NAV will fluctuate. The Fund's NAV may fluctuate with changes in the
perceived credit quality of loans in the portfolio. Changes that may affect
credit quality include a sudden or extreme increase in prevailing interest
rates, a default in a loan the portfolio owns or a substantial deterioration in
a borrower's creditworthiness.
(2)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, and some may also provide tax benefits.
2
<PAGE> 5
FUND FOCUSED ON DIVERSIFICATION AND CREDIT QUALITY
Economic expansion fueled growth in new loan issuance throughout much of the
period. Although the pace of new issuance slowed slightly toward the end of the
fiscal year, the wide variety of loans available allowed us to build a highly
diversified portfolio. As of the fiscal year-end, the portfolio held loans from
127 issuers in 48 industries encompassing both the "new" and "old" economies.
Anticipating that short-term interest rates would continue to rise throughout
the period, we took a conservative stance, stressing loans from the more
creditworthy issuers and issues with shorter maturities. Due to this emphasis on
quality, the portfolio also experienced a lower default rate than did the
general bank loan market.
A GROWING CORPORATE LOAN MARKET
Demand by businesses for financing has caused the corporate loan market to grow
considerably in the past 18 months. In addition to providing more loans to
choose from, the expansion of the market attracted a more diverse investor base.
With more liquidity has come greater efficiency. Thus, it is easier now to
determine what the market will pay for a given loan under current market
conditions. This, rather than any change in investment strategy, is the chief
reason the Fund's net asset value (NAV) fluctuated by approximately 1.0% over
the past year.
STABLE INTEREST RATES LIKELY IN COMING MONTHS
We believe the bank loan market will continue
to mature, growing more efficient and more transparent in its pricing. At the
same time, the economic slowdown and stable inflation rate point toward little
change in interest rates before year-end 2000.
TOP FIVE SECTOR BREAKDOWNS (8/31/00)
WIRELESS COMMUNICATIONS: 9.4% LOGO
DIVERSIFIED MANUFACTURING: 6.1%
AUTOMOTIVE 5.6%
CHEMICALS: 3.3%
ENVIRONMENTAL SERVICES: 3.2%
SECTOR BREAKDOWNS ARE CALCULATED AS A PERCENTAGE OF NET ASSETS. BECAUSE THE
PORTFOLIO IS ACTIVELY MANAGED, THERE CAN BE NO GUARANTEE THAT THE PORTFOLIO WILL
CONTINUE TO MAINTAIN THIS BREAKDOWN IN THE FUTURE.
/S/ BRIAN GOOD
BRIAN GOOD
/S/ JIM FELLOWS
JIM FELLOWS
BRIAN GOOD and JIM FELLOWS, senior vice presidents of the Advisor, have been
portfolio managers of the Liberty Floating Rate Fund since 1998.
An investment in the Fund offers significant current income potential. However,
the following could have the effect of reducing the net asset value (NAV) and
distributions of the Fund: defaults on the loans held in the portfolio;
nonpayment of scheduled interest or principal payments; prepayment of principal
by borrowers resulting in a loan's replacement with a lower-yielding security,
and the valuation of the portfolio's holdings.
The Fund is a continuously offered, closed-end mutual fund and provides limited
liquidity through a quarterly tender offer 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.
3
<PAGE> 6
STEIN ROE FLOATING RATE LIMITED LIABILITY COMPANY
INVESTMENT PORTFOLIO
August 31, 2000
(In thousands)
<TABLE>
<CAPTION>
VARIABLE RATE SENIOR LOAN
INTERESTS(A)(B) - 93.1% PAR VALUE
--------------------------------------------------------
<S> <C> <C>
AEROSPACE/DEFENSE - 0.9%
DeCrane Aircraft Holdings, Inc:
Term B 9/30/05 $2,958 $ 2,967
Term C 4/30/06 1,496 1,506
--------
4,473
--------
AUTOMOTIVE - 5.6%
Blackstone Capital Co.,
Term 11/28/00 1,514 1,511
Blackstone Wasserstein Holdings,
Term 11/28/00 1,486 1,484
Dura Operating Corp.
Term B 3/31/06 5,000 5,002
J.L. French Automotive,
Term B 10/21/06 1,569 1,574
Key Plastics, Inc.,
Term B 3/15/06 1,474 1,128
Meridian Automotive Systems, Inc.,
Term B 3/31/07 6,000 6,009
Ontario Ltd.,
Term B 8/10/07 3,000 2,992
Stoneridge, Inc.,
Term B 12/31/05 1,970 1,984
Tenneco Automotive Inc.,
Term B 9/30/07 2,500 2,472
Term C 3/31/09 2,500 2,472
Venture Holdings Co., LLC
Term B 4/1/05 1,980 1,952
--------
28,580
--------
BROADCASTING - 1.8%
Comcorp Broadcasting, Inc.,
Term B 6/30/07 1,338 1,337
Cumulus Media, Inc.,
Term B 9/30/07 1,500 1,500
Term C 2/28/08 1,000 1,000
White Knight Broadcasting,
Term B 6/30/07 1,365 1,364
Young Broadcasting Inc.,
Term B 12/31/06 4,000 4,027
--------
9,228
--------
</TABLE>
<TABLE>
<CAPTION>
PAR VALUE
--------------------------------------------------------
--------------------------------------------------------
<S> <C> <C>
BUILDING & REAL ESTATE - 2.4%
Formica Corp.
Term B 4/30/06 $2,992 $ 3,007
Juno Lighting,
Term B 11/30/06 1,153 1,152
Tapco International Corp.,
Term B 6/23/07 3,094 3,092
Term C 6/23/08 1,856 1,855
Therma-Tru Holdings, Inc.,
Term B 5/9/07 2,985 2,985
--------
12,091
--------
BUSINESS SERVICES - 2.4%
Encompass,
Term C 5/10/07 4,489 4,489
NATG Holdings LLC,
Term B 12/14/06 3,914 3,926
Term C 6/30/07 4,000 4,009
--------
12,424
--------
CABLE/TELEVISION - 3.0%
Century Cable Holdings, LLC.,
Term B 6/30/09 4,500 4,511
Charter Communications Operating, LLC.,
Incremental Term B 12/30/08 4,500 4,483
RCN Corp.,
Term B 6/3/07 6,000 6,068
--------
15,062
--------
CHEMICALS - 3.3%
Huntsman ICI Chemicals, LLC.:
Term B 6/30/07 2,970 2,993
Term C 6/30/08 5,774 5,818
Lyondell Chemical Co.,
Term B 6/30/05 1,490 1,513
Term E 5/17/06 6,449 6,708
--------
17,032
--------
CONSUMER SERVICES - 0.7%
AMF Bowling Worldwide, Inc.,
Axel A 3/31/02 84 76
Axel A-1 3/31/03 2,539 2,240
Axel B 3/31/03 1,330 1,175
--------
3,491
--------
</TABLE>
See notes to investment portfolio.
4
<PAGE> 7
STEIN ROE FLOATING RATE LIMITED LIABILITY COMPANY
INVESTMENT PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
PAR VALUE
--------------------------------------------------------
<S> <C> <C>
CONSUMER SPECIALTIES - 2.1%
American Safety Razor,
Term B 4/30/07 $1,472 $ 1,479
Doane Pet Care Co.,
Term B 12/31/05 1,496 1,501
Jostens, Inc.,
Term B 5/31/08 4,000 4,009
Weight Watchers International,
Term B 9/29/06 461 463
Term B-1 9/29/06 3,519 3,534
--------
10,986
--------
CONTAINER/PACKAGING - 1.4%
Gaylord Container Corp.,
Term 6/19/04 4,795 4,811
Huntsman Packaging Corp.,
Term B 5/31/08 2,500 2,453
--------
7,264
--------
DIVERSIFIED COMMERCIAL SERVICES - 2.1%
Concentra Operating Corp.,
Term B 6/30/06 2,650 2,493
Term C 6/30/07 1,325 1,246
EPS Solutions Corp.,
Term A 6/14/01 716 718
Outsourcing Solutions, Inc.,
Term B 5/31/06 5,972 5,986
--------
10,443
--------
DIVERSIFIED MANUFACTURING - 6.1%
Flowserve Corp.,
Term B 6/30/08 5,500 5,531
Freedom Forge Corp.,
Term 12/17/04 1,087 1,086
General Cable Corp.,
Term B 5/27/07 724 722
Gentek Inc.,
Term C 10/31/07 5,000 5,025
Jason Inc.,
Term B 6/30/07 4,500 4,522
MTD Products Inc.,
Term B 6/20/07 3,500 3,473
Polymer Group, Inc.,
Term C 9/30/08 2,500 2,507
Polypore, Inc.,
Term B 12/31/06 2,000 2,005
SPX Corp.,
Term A 9/30/04 1,830 1,832
</TABLE>
<TABLE>
<CAPTION>
PAR VALUE
--------------------------------------------------------
<S> <C> <C>
Superior Telecom,
Term B 11/27/05 $1,932 $ 1,919
Tekni-Plex Inc.,
Term B 6/23/08 2,500 2,518
--------
31,140
--------
ELECTRIC UTILITIES - 1.2%
AES New York Funding, LLC.,
Term B 5/14/02 4,000 3,995
Western Resources
Term B 3/17/03 2,000 2,007
--------
6,002
--------
ELECTRONIC COMPONENTS - 1.0%
Knowles Electronics, Inc.,
Term B 6/29/07 1,000 925
Viasystems, Inc.,
Term B 3/31/07 4,000 4,003
--------
4,928
--------
ENGINEERING & CONSTRUCTION - 1.5%
Morrison Knudsen Corp.,
Term B 7/7/07 6,000 5,977
URS Corp.,
Term B 6/9/06 743 743
Term C 6/9/07 743 743
--------
7,463
--------
ENVIRONMENTAL SERVICES - 3.2%
Allied Waste North America, Inc.:
Term B 7/23/06 3,182 3,072
Term C 7/23/07 3,818 3,686
Environmental Systems Products Holdings,
Term B 9/30/05 2,268 1,531
Stericycle Inc.,
Term B 11/10/06 3,746 3,778
Synagro Technologies, Inc.,
Term B 7/27/07 4,000 4,005
--------
16,072
--------
FARMING/AGRICULTURE - 1.1%
Hines Nurseries, Inc.,
Term B 2/28/05 2,500 2,508
Quality Stores,
Term B 4/30/06 2,959 2,960
--------
5,468
--------
</TABLE>
See notes to investment portfolio.
5
<PAGE> 8
STEIN ROE FLOATING RATE LIMITED LIABILITY COMPANY
INVESTMENT PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
PAR VALUE
--------------------------------------------------------
<S> <C> <C>
FOOD CHAINS - 0.5%
Big V Supermarkets, Inc.,
Term B 8/10/03 $2,462 $ 2,452
--------
FOOD MANUFACTURER - 1.6%
American Seafoods Group, LLC.,
Term B 12/31/05 5,000 5,032
Merisant Corp.,
Term B 3/31/07 1,995 2,007
United Signature Foods,
Term C 2/28/05 990 993
--------
8,032
--------
HEALTHCARE SERVICES - 2.1%
Alliance Imaging Inc.,
Term A 10/31/06 5,000 5,101
Quest Diagnostics Inc.,
Term B 8/16/06 517 522
Term C 8/16/07 478 482
Team Health, Inc.,
Term B 1/30/05 4,742 4,708
--------
10,813
--------
HOME FURNISHINGS - 0.1%
Simmons Co.,
Term B 10/29/05 424 424
--------
HOSPITAL MANAGEMENT - 2.3%
Community Health Systems,
Term D 12/31/05 4,974 4,946
HCA-HealthONE, LLC.,
Term B 6/30/05 1,979 1,976
Vanguard Health Systems, Inc.,
Term B 2/1/06 4,975 4,985
--------
11,907
--------
HOTELS/RESORT - 3.0%
Starwood Hotels and Resorts,
Tranche 2-TL2 2/23/03 6,000 6,030
Wyndham International,
IRL 6/30/04 5,500 5,521
Term B 6/30/06 3,500 3,457
--------
15,008
--------
INDUSTRIAL MACHINERY - 1.1%
Terex Corp.,
Term B 3/30/05 4,841 4,860
Term C 3/6/06 986 989
--------
5,849
--------
</TABLE>
<TABLE>
<CAPTION>
PAR VALUE
--------------------------------------------------------
<S> <C> <C>
INSURANCE BROKER/SERVICE - 1.1%
Willis North America, Inc.,
Term C 2/19/08 $2,850 $ 2,864
Term D 8/19/08 2,850 2,864
--------
5,728
--------
MANUFACTURING - 0.7%
Thermadyne Holdings Corp:
Term B 5/22/05 1,896 1,849
Term C 5/22/06 1,896 1,849
--------
3,698
--------
MEDIA CONGLOMERATES - 0.7%
Bridge Information Systems,
Term B 7/7/05 2,478 2,280
Multidraw 7/7/03 1,427 1,313
--------
3,593
--------
MEDICAL SPECIALTIES - 1.3%
Dade Behring:
Term B 6/30/06 2,565 2,582
Term C 6/30/07 2,565 2,582
Stryker Corp.:
Term B 12/4/05 718 722
Term C 12/4/06 921 926
--------
6,812
--------
METAL FABRICATIONS - 2.0%
Mueller Group, Inc.,
Term B 8/16/06 1,511 1,519
Term C 8/16/07 1,511 1,526
Term D 8/16/07 1,746 1,767
OM Group, Inc.,
Term B 3/31/07 5,486 5,496
--------
10,308
--------
MILITARY/GOVERNMENT - 1.0%
Titan Corp.,
Term C 6/1/07 4,858 4,869
--------
MOVIES/ENTERTAINMENT - 1.9%
Metro-Goldwyn-Mayer Studios Inc.,
Term A 3/31/05 5,000 5,011
Six Flags Theme Park
Term B 9/30/05 3,000 3,013
United Artists Theatre Co.,
Term B 4/21/06 821 609
Term C 4/21/07 1,126 836
--------
9,469
--------
</TABLE>
See notes to investment portfolio.
6
<PAGE> 9
STEIN ROE FLOATING RATE LIMITED LIABILITY COMPANY
INVESTMENT PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
PAR VALUE
--------------------------------------------------------
<S> <C> <C>
OFFICE SUPPLIES - 0.8%
Mail-Well I Corp.,
Term B 2/22/07 $3,990 $ 3,993
--------
OIL REFINING/MARKETING - 0.9%
Port Arthur Finance Corp.,
Term B 6/15/07 4,620 4,611
--------
PAPER - 1.4%
Bear Island Paper,
Term 12/31/05 290 291
Stone Container,
Term E 10/1/03 2,725 2,733
Term F 12/31/05 3,283 3,294
Term G 12/31/06 433 430
Term H 12/31/06 462 459
--------
7,207
--------
PHARMACEUTICALS - 0.7%
King Pharmaceutical, Inc.,
Term B 12/18/06 3,566 3,580
--------
PRINTING/PUBLISHING - 2.4%
American Media Operations, Inc.,
Term B 4/1/07 3,000 3,022
DIMAC Corp.,
Term B 6/30/06 571 500
Term C 12/31/06 429 375
Merrill Communications, LLC.,
Term B 11/30/07 2,481 2,495
WRC Media Inc.,
Term B 11/30/06 5,978 6,044
--------
12,436
--------
RAIL/SHIPPING - 0.8%
Kansas City Southern Railway Co.,
Term B 12/31/06 1,000 1,006
RailAmerica Transportation Corp.,
Term B 12/31/06 2,969 2,986
--------
3,992
--------
REAL ESTATE INVESTMENT TRUST - 0.7%
Prison Realty Trust, Inc.,
Term B 12/31/02 2,985 2,537
Term C 12/31/02 990 843
--------
3,380
--------
</TABLE>
<TABLE>
<CAPTION>
PAR VALUE
--------------------------------------------------------
<S> <C> <C>
RENTAL/LEASING COMPANIES - 0.5%
Rent-A-Center Inc.,
Term B 1/31/06 $1,386 $ 1,391
Term C 1/31/07 1,059 1,059
--------
2,450
--------
RETAIL STORES - 2.1%
Duane Reade:
Additional Term C 2/15/06 1,492 1,493
Term C 2/15/06 2,955 2,953
Pantry Inc.,
Term B 1/31/06 1,969 1,977
SDM Corp.,
Term C 2/4/08 2,000 2,009
Term E 2/4/09 2,000 2,009
--------
10,441
--------
SEMICONDUCTORS - 2.9%
Amkor Technology, Inc.,
Term B 9/30/05 8,479 8,591
Semiconductor Components Industries, LLC.,
Term B 8/4/06 481 487
Term C 8/4/07 519 524
Term D 8/4/07 5,300 5,330
--------
14,932
--------
STEEL/IRON ORE - 2.3%
Ispat Inland, LP.,
Term B 7/16/05 2,481 2,475
Term C 7/16/06 2,481 2,475
UCAR Finance Inc.,
Term B 12/31/07 6,478 6,520
--------
11,470
--------
TELECOMMUNICATIONS
INFRASTRUCTURE EQUIPMENT - 2.6%
American Towers Inc.,
Term B 12/31/07 4,000 4,027
Crown Castle Operating Co.,
Term B 2/28/08 4,500 4,512
Global Crossing Holdings, Inc.,
Term B 6/30/06 4,500 4,530
--------
13,069
--------
</TABLE>
See notes to investment portfolio.
7
<PAGE> 10
STEIN ROE FLOATING RATE LIMITED LIABILITY COMPANY
INVESTMENT PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
PAR VALUE
--------------------------------------------------------
<S> <C> <C>
TELECOMMUNICATIONS SERVICES - 2.8%
Alaska Communications Systems Holdings, Inc.,
Term B 11/14/07 $1,579 $ 1,584
Term C 5/14/08 1,421 1,425
ICG Communications, Inc.,
Term B 3/31/06 990 991
KMC Telecom, Inc.,
Term 7/1/07 2,000 1,998
McLeod USA Inc.,
Term B 5/31/08 4,000 4,013
Nextlink Communications Corp.,
Term B 10/31/05 4,000 4,037
--------
14,048
--------
TEXTILES - 1.0%
Synthetic Industries,
Term B 12/14/07 5,000 5,005
--------
TRANSPORTATION - 1.1%
Evergreen International Aviation,
Term B-1 5/7/03 984 970
Term B-2 5/7/04 3,936 3,883
Gemini Air,
Term A 8/12/05 785 784
--------
5,637
--------
TRANSPORTATION MANUFACTURING - 1.5%
Motor Coach Industries,
Term B 6/16/06 1,485 1,486
Transportation Technology,
Term B 3/31/07 5,985 6,008
--------
7,494
--------
WIRELESS COMMUNICATION - 9.4%
American Cellular Corp.,
Term B 3/31/08 2,100 2,102
Term C 3/31/09 2,400 2,402
Centennial Cellular Operating Co.,
LLC.,
Term B 5/31/07 3,470 3,492
Term C 11/30/07 982 989
Cook Inlet/Voicestream Operating Co., LLC.,
Term B 12/31/08 4,000 4,035
Dobson Operating Co.,
Term B 12/31/07 2,114 2,126
Dobson-Sygnet Wireless Inc.,
Term B 3/23/07 899 903
Term C 12/23/07 907 911
</TABLE>
<TABLE>
<CAPTION>
PAR VALUE
--------------------------------------------------------
<S> <C> <C>
Nextel Finance Co., Inc.,
Term B 6/30/08 $2,750 $ 2,769
Term C
12/31/08 2,750 2,769
Term D 3/31/09 2,000 1,997
Alpha-Nextel Partners, Inc.,
Term 1/29/08 6,000 6,042
Rural Cellular Corp.,
Term B 10/3/08 2,250 2,251
Term C 4/3/09 2,250 2,251
Ubiquitel Operating Co.,
Term B 11/17/08 4,500 4,526
Voicestream PCS Holding Corp.,
Vendor A 6/30/09 8,000 8,028
--------
47,593
--------
Total Variable Rate Senior Loan
Interests (cost of $473,887) 472,447
--------
<CAPTION>
SHORT-TERM OBLIGATIONS - 6.1% PAR VALUE
--------------------------------------------------------
<S> <C> <C>
Baxter International Loan,
6.600% 9/1/00 5,000 5,000
Burlington Northern Santa Fe,
6.750% 9/1/00 2,000 2,000
Dow Chemical Corp.,
6.631% 9/1/00 5,000 5,000
Enron Corp.,
6.809% 9/1/00 2,950 2,950
Safeway,
6.750% 9/1/00 3,000 3,000
Target Corp.,
6.631% 9/1/00 5,000 5,000
Texas Utilities,
6.780% 9/1/00 3,000 3,000
Transamerica Financial,
6.650% 9/1/00 5,000 5,000
--------
Total Short-Term Obligations
(cost of $30,950) 30,950
--------
Total Investments -- 99.2%
(cost of $504,837)(c) 503,397
--------
OTHER ASSETS & LIABILITIES, NET - 0.8% 4,268
--------------------------------------------------------
NET ASSETS - 100.0% $507,665
--------
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS:
(a) Senior Loans in the Portfolio generally are subject to mandatory and/or
optional prepayment. Because of these mandatory prepayment conditions and
See notes to financial statements.
8
<PAGE> 11
STEIN ROE FLOATING RATE LIMITED LIABILITY COMPANY
INVESTMENT PORTFOLIO (CONTINUED)
because there may be significant economic incentives for a Borrower to
prepay, prepayments of Senior Loans in the Portfolio may occur. As a
result, the actual remaining maturity of Senior Loans held in the Portfolio
may be substantially less than the stated maturities shown. Although the
Advisor is unable to accurately estimate the actual remaining maturity of
individual Senior Loans, based on historical experience, the Advisor
believes that the actual economic maturity of the Senior Loans held in its
portfolio will be approximately 18-24 months.
(b) Senior Loans in which the Portfolio 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 Portfolio ordinarily is
contractually obligated to receive approval from the Agent Bank and/or
borrower prior to the disposition of a Senior Loan.
(c) At August 31, 2000, the cost of investments for financial reporting and
federal income tax purposes was identical. Net unrealized depreciation was
$1,440, consisting of gross unrealized appreciation of $2,135 and gross
unrealized depreciation of $3,575.
See notes to financial statements.
9
<PAGE> 12
STEIN ROE FLOATING RATE LIMITED LIABILITY COMPANY
STATEMENT OF ASSETS & LIABILITIES
August 31, 2000
(All amounts in thousands)
<TABLE>
<S> <C> <C>
ASSETS
Investments, at market value
(cost $504,837) $ 503,397
Interest and fees receivable 4,311
Cash 161
Receivable for investments
sold 960
Other 19
----------
Total Assets 508,848
----------
LIABILITIES
Payable to investment advisor 194
Deferred facility fees 963
Other 26
----------
Total Liabilities 1,183
----------
Net assets applicable to
investors' beneficial interest $ 507,665
----------
----------
</TABLE>
STATEMENT OF OPERATIONS
For the Year Ended August 31, 2000
(All amounts in thousands)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest $ 24,468
Fees 317
---------
Total Investment Income 24,785
---------
EXPENSES
Management fees 1,137
Bookkeeping fees 30
Transfer agent fees 6
Audit fees 20
Trustees' fees 11
Custodian fee 14
Legal fees 10
Loan servicing fees 128
Other 36
---------
Total expenses 1,392
---------
Net Investment Income 23,393
---------
REALIZED AND UNREALIZED GAINS (LOSSES) ON
INVESTMENTS
Net Realized Gains on
Investments 243
Net Change in Unrealized
Appreciation/Depreciation on
Investments (1,717)
---------
Net Loss (1,474)
---------
Increase in Net Assets
Resulting from Operations $ 21,919
---------
</TABLE>
See notes to financial statements.
10
<PAGE> 13
STEIN ROE FLOATING RATE LIMITED LIABILITY COMPANY
STATEMENT OF CHANGES IN NET ASSETS
(All amounts in thousands)
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED PERIOD ENDED
AUGUST 31, 2000 AUGUST 31, 1999(A)
---------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net investment income $ 23,393 $ 4,274
Net realized gains on investments 243 38
Net change in unrealized appreciation/depreciation on
investments (1,717) 277
-------- --------
Net increase in net assets resulting from operations 21,919 4,589
-------- --------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST
Contributions 375,731 124,223
Withdrawals (18,278) (519)
-------- --------
Net increase from transactions in investors' beneficial
interest 357,453 123,704
-------- --------
Net increase in net assets 379,372 128,293
TOTAL NET ASSETS
Beginning of period 128,293 --
-------- --------
End of period $507,665 $128,293
======== ========
</TABLE>
(a) From commencement of operations on December 17, 1998.
See notes to financial statements.
11
<PAGE> 14
STEIN ROE FLOATING RATE LIMITED LIABILITY COMPANY
STATEMENT OF CASH FLOWS
For the Year Ended August 31, 2000
(All amounts in thousands)
<TABLE>
<S> <C>
CASH PROVIDED (USED) BY FINANCING
ACTIVITIES
Proceeds from capital contributions $ 375,731
Payments for capital withdrawals (18,278)
----------
357,453
----------
CASH PROVIDED (USED) BY OPERATIONS
Purchases of loan interests (404,693)
Proceeds from sales of loan interests 50,751
Net purchases of short-term portfolio
securities (23,150)
Interest, fees and other income received 24,785
Accretion income (142)
Operating expenses paid (1,392)
Net change in receivables/payables related
to operations (3,462)
----------
(357,303)
----------
Net increase in cash 150
Cash, beginning of year 11
----------
Cash, end of year $ 161
----------
</TABLE>
See notes to financial statements.
12
<PAGE> 15
LIBERTY FLOATING RATE FUND
STATEMENT OF ASSETS & LIABILITIES
August 31, 2000
(All amounts in thousands, except per-share data)
<TABLE>
<S> <C> <C>
ASSETS
Investment in Portfolio, at
value $ 322,505
Receivable for Fund shares sold 7,663
Expense reimbursement due from
Advisor 97
Other 23
----------
Total Assets 330,288
----------
LIABILITIES
Payable for distributions 769
ACCRUED:
Administration fee 50
Transfer agent fee 43
Bookkeeping fee 3
Distribution fee - Class B 4
Distribution fee - Class C 6
----------
Total Liabilities 875
----------
NET ASSETS $ 329,413
----------
----------
Net asset value & redemption
price per share - Class A
($147,209/14,722) $ 10.00(a)
----------
----------
Maximum offering price per
share - Class A ($10.00/0.9650) $ 10.36(b)
----------
----------
Net asset value & offering price
per share - Class B
($83,695/8,369) $ 10.00(a)
----------
----------
Net asset value & offering price
per share - Class C
($91,664/9,167) $ 10.00(a)
----------
----------
Net asset value, redemption &
offering price per share - Class
Z ($6,845/684) $ 10.00
----------
----------
ANALYSIS OF NET ASSETS
Paid-in capital $ 329,805
Overdistributed net investment
income (28)
Net realized gain on
investments 94
Net unrealized depreciation on
investments (458)
----------
$ 329,413
----------
----------
</TABLE>
STATEMENT OF OPERATIONS
For the Year Ended August 31, 2000
(All amounts in thousands)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest and fees allocated from
Portfolio $ 9,634
EXPENSES
Expenses allocated from
Portfolio $ 544
Administrative fees 195
Bookkeeping fees 25
Transfer agent fees 165
Service fees - Class A 119
Service fees - Class B 66
Service fees - Class C 63
Distribution fees - Class A 44
Distribution fees - Class B 114
Distribution fees - Class C 145
Trustees' fees 8
Custodian fees 1
Audit fees 7
Legal fees 57
Registration fees 116
Reports to shareholders 44
Other 10
-------
Total expenses 1,723
Fees and expenses waived or
borne by the Advisor (381)
-------
Net Expenses 1,342
----------
Net Investment Income 8,292
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
ALLOCATED FROM PORTFOLIO
Net Realized Gain 94
Net Change in Unrealized
Appreciation/Depreciation (459)
----------
Net Loss (365)
----------
Increase in Net Assets Resulting
from Operations $ 7,927
----------
</TABLE>
(a) Redemption price per share is equal to net asset value less any applicable
early withdrawal charge.
(b) On sales of $100,000 or more the offering price is reduced.
See notes to financial statements.
13
<PAGE> 16
LIBERTY FLOATING RATE FUND--STATEMENT OF CHANGES IN NET ASSETS
(All amounts in thousands)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
AUGUST 31, AUGUST 31,
2000(A) 1999(B)
-----------------------------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 8,292 $ 30
Net realized gain 94 (c)
Net change in unrealized
appreciation/depreciation (459) 1
-------- ----
Net Increase from
Operations 7,927 31
-------- ----
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net
investment income -
Class A (3,948) --
Distributions from net
realized gains - Class A (c) --
Distributions from net
investment income -
Class B (2,087) --
Distributions from net
realized gains - Class B (c) --
Distributions from net
investment income -
Class C (1,956) --
Distributions from net
realized gains - Class C (c) --
Distributions from net
investment income -
Class Z (329) (30)
Distributions from net
realized gains - Class Z (c) --
In excess of net
investment
income - Class Z -- (c)
-------- ----
(8,320) (30)
-------- ----
SHARE TRANSACTIONS:
Subscriptions to Fund
shares - Class A 145,898 --
Value of distributions
reinvested - Class A 2,733 --
Redemption of Fund
shares - Class A (1,278) --
-------- ----
147,353 --
-------- ----
Subscriptions to Fund
shares - Class B 84,309 --
Value of distributions
reinvested - Class B 1,133 --
Redemption of Fund
shares - Class B (1,639) --
-------- ----
83,803 --
-------- ----
Subscriptions to Fund
shares - Class C 91,170 --
Value of distributions
reinvested - Class C 1,238 --
Redemption of Fund
shares - Class C (621) --
-------- ----
91,787 --
-------- ----
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
AUGUST 31, AUGUST 31,
2000(A) 1999(B)
-----------------------------------------------------
<S> <C> <C>
Subscriptions to Fund
shares - Class Z $ 6,826 $912
Value of distributions
reinvested - Class Z 70 23
Redemption of Fund
shares - Class Z (926) (43)
-------- ----
5,970 892
-------- ----
Net increase from Fund
share transactions 328,913 892
-------- ----
Net increase in net
assets 328,520 893
TOTAL NET ASSETS:
Beginning of period 893 --
-------- ----
End of period $329,413 $893
-------- ----
Undistributed
(Overdistributed) Net
Investment Income at End
of Period $ (28) $ (c)
-------- --------
ANALYSIS OF CHANGES IN SHARES OF BENEFICIAL INTEREST:
Subscriptions to Fund
shares - Class A 14,577 --
Issued in reinvestment of
distributions - Class A 273 --
Redemptions of Fund
shares - Class A (128) --
-------- ----
14,722
-------- ----
Subscriptions to Fund
shares - Class B 8,420 --
Issued in reinvestment of
distributions - Class B 113 --
Redemptions of Fund
shares - Class B (164) --
-------- ----
8,369 --
-------- ----
Subscriptions to Fund
shares - Class C 9,105 --
Issued in reinvestment of
distributions - Class C 124 --
Redemptions of Fund
shares - Class C (62) --
-------- ----
9,167 --
-------- ----
Subscriptions to Fund
shares - Class Z 680 91
Issued in reinvestment of
distributions - Class Z 7 2
Redemptions of Fund
shares - Class Z (92) (4)
-------- ----
595 89
-------- ----
</TABLE>
(a) Class A, Class B and Class C shares were initially offered on November 2,
1999.
(b) From commencement of operations on December 17, 1998.
(c) Rounds to less than one thousand.
See notes to financial statements.
14
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION
Liberty Floating Rate Fund (formerly Stein Roe Floating Rate Income Fund) (the
"Fund") is a non-diversified, closed-end management investment company organized
as a Massachusetts business trust. The Fund invests all of its investable assets
in Stein Roe Floating Rate Limited Liability Company (the "Portfolio"), which
seeks to provide a high-level of current income, consistent with preservation of
capital. The Fund may issue an unlimited number of shares. Effective November 2,
1999, the Fund began offering Class A, Class B and Class C shares. The Fund
offers four classes of shares: Class A, Class B, Class C and Class Z shares.
Class A shares are sold with a front end sales charge and an annual distribution
fee. A 1.00% early withdrawal charge is assessed to Class A shares purchased
without an initial sales charge on redemptions made within eighteen months on an
original purchase of $1 million to $25 million. Class B shares are subject to an
annual distribution fee and an early withdrawal charge. Class B shares will
convert to Class A shares in three, four or eight years after purchase depending
on the program under which shares were purchased. Class C shares are subject to
an early withdrawal charge on redemptions made within one year after purchase
and an annual distribution fee. Class Z shares are offered continuously at net
asset value. There are certain restrictions on the purchase of Class Z shares,
as described in the Fund's prospectus.
The Portfolio is a non-diversified, closed-end management investment company
organized as a Delaware limited liability company. The Portfolio commenced
operations December 17, 1998. At commencement, the Fund contributed $100,000 in
cash in exchange for beneficial ownership of the Portfolio. At December 17,
1998, Liberty-Stein Roe Institutional Floating Rate Income Fund also contributed
cash of $100,000. The Portfolio allocates income, expenses, realized and
unrealized gains and losses to each investor on a daily basis, based on methods
approved by the Internal Revenue Service. At August 31, 2000, Liberty Floating
Rate Fund and Liberty-Stein Roe Institutional Floating Rate Income Fund owned
63.5% and 36.5%, respectively, of the Portfolio.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the period. Actual results
could differ from those estimates. The following is a summary of significant
accounting policies that are consistently followed by the Fund in the
preparation of its financial statements.
NOTE 2. SECURITY VALUATION AND TRANSACTIONS:
Senior loans are generally valued using market prices or quotations provided by
banks, dealers or pricing services with respect to secondary market
transactions. In the absence of actual market values, Senior Loans will be
valued by Stein Roe & Farnham Inc. (the Advisor), an indirect, wholly-owned
subsidiary of Liberty Financial Companies, Inc. ("Liberty"), at fair value,
which is intended to approximate market value. In determining fair value, the
Advisor will consider on an ongoing basis, among other factors, (i) the
creditworthiness of the Borrower; (ii) the current interest rate, the interest
rate redetermination period and maturity of such Senior Loan interests; and
(iii) recent prices in the market for instruments of similar quality, rate and
interest rate redetermination period and maturity. Because of uncertainty
inherent in the valuation process, the estimated value of a Senior Loan interest
may differ significantly from the value that would have been used had there been
market activity for that Senior Loan interest.
Short-term 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 and losses are based upon the specific
identification method for both financial statement and federal income tax
purposes.
DETERMINATION OF CLASS NET ASSET VALUES AND FINANCIAL HIGHLIGHTS:
All income, expenses (other than the Class A, Class B and Class C service and
distribution fees), and realized and unrealized gains (losses) are allocated to
each class proportionately on a daily basis for purposes of determining the net
asset value of each class.
Class A, Class B and Class C per share data and ratios are calculated by
adjusting the expense and net investment income per share data and ratios for
the Fund for the entire period by the service and distribution fees per share
applicable to Class A, Class B and Class C shares.
FEDERAL INCOME TAXES:
No provision is made for federal income taxes since (a) the Fund elects to be
taxed as a "regulated investment company" and make distributions to its
shareholders to be relieved of all federal income taxes
15
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
under provisions of current federal tax law; and (b) the Portfolio is treated as
a partnership for federal income tax purposes and all of its income is allocated
to its owners based on methods approved by the Internal Revenue Service.
INTEREST INCOME, DEBT DISCOUNT AND PREMIUM:
Interest income is recorded on the accrual basis. Facility fees received are
treated as market discounts. Market premiums and discounts are amortized over
the estimated life of each applicable security.
DISTRIBUTIONS TO SHAREHOLDERS:
The Fund declares and records distributions daily and pays monthly.
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. Reclassifications are made to the Fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryforwards) under income tax regulations.
STATEMENT OF CASH FLOWS:
Information on financial transactions which have been settled through the
receipt or disbursement of cash is presented in the Statement of Cash Flows. The
cash amount shown in the Statement of Cash Flows is the amount included in the
Portfolio's Statement of Assets and Liabilities and represents cash on hand at
its custodian bank account and does not include any short-term investments at
August 31, 2000.
NOTE 2. FEES AND COMPENSATION PAID TO AFFILIATES
MANAGEMENT FEE:
Stein Roe & Farnham, Inc. (the Advisor), is the investment Advisor of the
Portfolio and receives a monthly fee equal to 0.45% annually of the Portfolio's
average net assets.
ADMINISTRATION FEE:
Colonial Management Associates, Inc. (the Administrator), an affiliate of the
Advisor, provides accounting and other services for a monthly fee equal to 0.20%
annually of the Fund's average net assets.
BOOKKEEPING FEE:
The Administrator provides bookkeeping and pricing services for a monthly fee
equal to $25,000 annually plus 0.0025% annually of the Portfolio's and Fund's
average net assets over $50 million.
TRANSFER AGENT FEE:
Liberty Funds Services, Inc. (the Transfer Agent), an affiliate of the
Administrator, provides shareholder services for a monthly fee comprised of
0.17% annually of the Fund's average net assets plus charges based on the number
of shareholder accounts and transactions and receives reimbursement for certain
out of pocket expenses. The Portfolio pays the Transfer Agent a monthly fee
equal to $6,000 annually.
UNDERWRITING DISCOUNTS, SERVICE AND DISTRIBUTION FEES:
Liberty Funds Distributor, Inc. (the Distributor), a subsidiary of the
Administrator is the Fund's principal underwriter. For the year ended August 31,
2000, the Fund has been advised that the Distributor retained no net
underwriting discounts on sales of the Fund's Class A shares and received no
early withdrawal charges (EWC) on Class A, Class B and Class C share
redemptions, respectively.
The Fund has adopted a 12b-1 plan which requires it to pay the Distributor a
service fee equal to 0.25% annually on Class A, Class B and Class C net assets
as of the 20th of each month. The plan also requires the payment of a monthly
distribution fee to the Distributor equal to 0.10%, 0.45% and 0.60% annually of
the average net assets attributable to Class A, Class B and Class C shares,
respectively.
The EWC and the fees received from the 12b-1 plan are used principally as
repayment to the Distributor for amounts paid by the Distributor to dealers who
sold such shares.
EXPENSE LIMITS:
The Advisor has agreed, until further notice, to waive fees and bear certain
Fund expenses to the extent that total expenses (inclusive of allocated
Portfolio expenses but exclusive of service fees, distribution fees, brokerage
commissions, interest, commitment fees, taxes and extraordinary expenses, if
any) exceed 0.80% of average net assets.
OTHER:
The Portfolio and Fund pays no compensation to their officers, all of whom are
employees of the Advisor or Administrator.
INVESTMENT ACTIVITY:
During the year ended August 31, 2000, purchases and sales of investments, other
than short-term obligations, were $404,693,379 and $50,750,597, respectively.
16
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OTHER:
The Portfolio may focus its investments in certain industries, subjecting it to
greater risk than a fund that is more diversified.
NOTE 3. 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 March, June,
September and December, 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.
During the year ended August 31, 2000, there were four tender offers in
November, February, May and August. The Fund offered to repurchase 10% of its
shares and 0.01%, 1.55%, 1.71% and 3.36%, respectively, of shares outstanding
were tendered.
NOTE 4. SENIOR LOAN PARTICIPATION COMMITMENTS
The Portfolio invests primarily in participations and assignments, or acts as a
party to the primary lending syndicate of a Variable Rate Senior Loan interest
to United States corporations, partnerships, and other entities. If the lead
lender in a typical lending syndicate becomes insolvent, enters FDIC
receivership or, if not FDIC insured, enters into bankruptcy, the Portfolio may
incur certain costs and delays in receiving payment or may suffer a loss of
principal and/or interest. When the Portfolio purchases a participation of a
Senior Loan interest, the Portfolio typically enters into a contractual
agreement with the lender or other third party selling the participation, but
not with the borrower directly. As such, the Portfolio assumes the credit risk
of the Borrower, Selling Participant or other persons interpositioned between
the Portfolio and the Borrower.
At August 31, 2000, the following sets forth the selling participants with
respect to interests in Senior Loans purchased by the Portfolio on a
participation basis.
<TABLE>
<CAPTION>
SELLING PRINCIPAL
PARTICIPANT AMOUNT VALUE
----------- --------- -----
<S> <C> <C>
Goldman Sachs Credit
Partners LP $3,986,031 $3,821,000
</TABLE>
The ability of borrowers to meet their obligations may be affected by economic
developments in a specific industry.
17
<PAGE> 20
STEIN ROE FLOATING RATE LIMITED LIABILITY COMPANY
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
AUGUST 31, 2000 AUGUST 31, 1999(A)
---------------------------------------------------------------------------------------------------
<S> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 0.55% 0.96%(b)
Net investment income 9.26% 7.59%(b)
Portfolio turnover 21% 17%
</TABLE>
(a) From commencement of operations on December 17, 1998.
(b) Annualized.
18
<PAGE> 21
LIBERTY FLOATING RATE FUND -- FINANCIAL HIGHLIGHTS (CONTINUED)
Selected per-share data (for a share outstanding
throughout the period), ratios and supplemental data:
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31, 2000
CLASS A(A) CLASS B(A) CLASS C(A) CLASS Z
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE -- BEGINNING OF PERIOD $ 10.05 $ 10.05 $ 10.05 $ 10.07
-------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.71 0.67 0.66 0.87
Net realized and unrealized losses allocated from (0.07)
Portfolio (0.05) (0.05) (0.05)
-------- -------- -------- --------
Total from Investment Operations 0.66 0.62 0.61 0.80
-------- -------- -------- --------
DISTRIBUTIONS:
Net investment income (0.71) (0.67) (0.66) (0.87)
From net realized gains (g) (g) (g) (g)
-------- -------- -------- --------
Total Distributions (0.71) (0.67) (0.66) (0.87)
-------- -------- -------- --------
NET ASSET VALUE -- END OF PERIOD $ 10.00 $ 10.00 $ 10.00 $ 10.00
======== ======== ======== ========
Ratio of net expenses to average net assets(b) 1.15%(f) 1.50%(f) 1.65%(f) 0.80%
Ratio of net investment income to average net assets(c) 8.53%(f) 8.18%(f) 8.03%(f) 8.94%
Total return(d)(e) 6.79%(h) 6.35%(h) 6.20%(h) 8.23%
Net assets, end of period (000's) $147,209 $ 83,695 $ 91,664 $ 6,845
</TABLE>
(a) Class A, Class B, and Class C shares were initially offered on November 2,
1999. Per share data reflects activity from that date.
(b) If the Fund had paid all of its expenses and there had been no reimbursement
of expenses by the Advisor, these ratios would have been 1.28%, 1.63%, 1.78%
and 1.19%, respectively.
(c) Computed giving effect to the Advisor's expense limitation undertaking.
(d) Had the Advisor not waived or reimbursed a portion of expenses, total return
would have been reduced.
(e) Total return at net asset value assuming all distributions reinvested and
no initial sales charge or early withdrawal charge.
(f) Annualized.
(g) Rounds to less than $0.01.
(h) Not annualized.
Federal Income Tax information (unaudited)
The Fund designates $2,522 of long term capital gains earned during fiscal year
ended August 31, 2000.
<TABLE>
<CAPTION>
PERIOD ENDED
AUGUST 31,
1999(A)
--------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE -- BEGINNING OF PERIOD $ 10.00
--------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.47
Net realized and unrealized gains allocated from Portfolio 0.07
--------
Total from Investment Operations 0.54
--------
DISTRIBUTIONS:
Net investment income (0.47)
In excess of net investment income (b)
--------
Total Distributions (0.47)
--------
NET ASSET VALUE -- END OF PERIOD $ 10.07
========
Ratio of net expenses to average net assets(c) 1.30%
Ratio of net investment income to average net assets(d)(e) 7.10%
Total return(f)(g) 5.43%
Net assets, end of period (000's) $ 893
</TABLE>
(a) From commencement of operations on December 17, 1998.
(b) Rounds to less than $0.01.
(c) If the Fund had paid all of its expenses and there had been no
reimbursement of expenses by the Advisor, this ratio would have been
56.79%.
(d) Computed giving effect to the Advisor's expense limitation undertaking.
(e) Annualized.
(f) Not annualized.
(g) Had the Advisor not waived or reimbursed a portion of expenses, total
return would have been reduced.
19
<PAGE> 22
REPORT OF PRICEWATERHOUSECOOPERS LLP, INDEPENDENT ACCOUNTANTS
TO THE TRUSTEES AND THE SHAREHOLDERS OF
LIBERTY FLOATING RATE FUND
STEIN ROE FLOATING RATE LIMITED LIABILITY COMPANY
In our opinion, the accompanying statements of assets and liabilities, including
the investment portfolio, and the related statements of operations, changes in
net assets, cash flows and the financial highlights present fairly, in all
material respects, the financial position of Liberty Floating Rate Fund (the
"Fund") and Stein Roe Floating Rate Limited Liability Company (the "Portfolio")
at August 31, 2000, the results of each of their operations, the changes in each
of their net assets and the Portfolio's cash flows and each of their financial
highlights for the periods indicated, in conformity with accounting principles
generally accepted in the United States of America. These financial statements
and the financial highlights (hereafter referred to as "financial statements")
are the responsibility of the Portfolio's and Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States of America,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of portfolio positions at August 31, 2000 by correspondence with
the custodian and lending or agent banks provide a reasonable basis for our
opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
October 25, 2000
20
<PAGE> 23
TRUSTEES & TRANSFER AGENT
JOHN A. BACON, JR.
Private Investor
WILLIAM W. BOYD
Chairman and Director, Sterling Plumbing Group Inc.
LINDSAY COOK
Executive Vice President, Liberty Financial Companies, Inc.
DOUGLAS A. HACKER
Executive Vice President and Chief Financial Officer, United Airlines
JANET LANGFORD KELLY
Executive Vice President, Secretary and General Counsel, Kellogg Company
CHARLES R. NELSON
Van Voorhis Professor of Political Economy, University of Washington
JOSEPH R. PALOMBO
Executive Vice President and Director, Colonial Management Associates
THOMAS C. THEOBALD
Managing Director, William Blair Capital Partners
IMPORTANT INFORMATION ABOUT THIS REPORT
The Transfer Agent for Liberty Floating Rate Fund is:
Liberty Funds Services, Inc.
P.O. Box 1722
Boston, MA 02105-1722
1-800-345-6611
The Fund mails one shareholder report to each shareholder address. If you would
like more than one report, please call 1-800-426-3750 and additional reports
will be sent to you.
This report has been prepared for shareholders of Liberty Floating Rate Fund.
This report may also be used as sales literature when preceded or accompanied by
the current prospectus which provides details of sales charges, investment
objectives and operating policies of the Funds and with the most recent copy of
the Liberty Funds Distributor, Inc. Performance Update.
Annual Report:
Liberty Floating Rate Fund
<PAGE> 24
(Back Cover)
Give me Liberty.(R)
Liberty Funds believes in financial choice
At Liberty, it's our job to help you achieve your financial goals. So whether
it's saving for your kids' education, building your retirement nest egg, or
managing your income... we can help. Liberty offers a diverse family of mutual
funds representing a wide selection of investment styles and specialized money
management. It's all designed to help you reach for financial freedom - however
you define it.
Liberty believes in professional advice
Today's ever-changing financial markets can challenge even the most seasoned
investors. That's why we recommend working with a financial advisor. With an
advisor you have an experienced, knowledgeable professional looking out for your
best interests. Your advisor can help you establish a plan for reaching your
personal financial goals and help you stay on track over the long-term. It's a
relationship that's focused on you and your needs.
Liberty Floating Rate Fund Annual Report, August 31, 2000
Liberty Funds
Liberty Funds Distributor, Inc.(C)2000
One Financial Center, Boston, MA 02111-2621, 800-426-3750
www.libertyfunds.com
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