LIBERTY-STEIN ROE
INSTITUTIONAL FLOATING RATE INCOME FUND
ANNUAL REPORT
AUGUST 31, 2000
PHOTO OF: BONDS
LOGO: STEIN ROE MUTUAL FUNDS
SENSIBLE RISKS. INTELLIGENT INVESTMENTS.(R)
<PAGE>
Contents
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From the President.................................................... 1
Stephen E. Gibson's thoughts on the market and investing
Questions & Answers................................................... 2
An interview with the Fund's Portfolio Managers - Brian W. Good
and James R. Fellows
Portfolio Highlights.................................................. 4
Portfolio of Investments.............................................. 5
A complete list of investments with market values
Financial Statements................................................... 12
Statements of assets and liabilities, operations, changes in net
assets and cash flows
Notes to Financial Statements.......................................... 19
Financial Highlights................................................... 21
Selected per-share data and ratios to average net assets
Report of Independent Accountants...................................... 22
Must be Preceded or Accompanied by a Prospectus.
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From the President
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TO OUR SHAREHOLDERS:
I am pleased to present the fiscal year 2000 annual report for Liberty-Stein Roe
Institutional Floating Rate Income Fund. The Fund seeks a high level of current
income, consistent with preservation of capital, from investments in
variable-rate senior bank loans.*
A PERIOD DOMINATED BY RISING INTEREST RATES
The United States economy moved at a rapid pace during the fiscal year ended
August 31, 2000. Gross domestic product (GDP) grew at a rate of 8.3% in the
final calendar quarter of 1999, slowed to 4.8% in the first quarter of 2000,
then accelerated again to an estimated 5.3% in the second quarter. 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, for a total of 1.25%, over the course of the fiscal year.
While these increases had a mixed impact on fixed-income investments, they
had a generally positive effect on the floating-rate bank loan market and the
Fund. The reason: the income from floating-rate senior bank loans generally
rises when interest rates escalate, yet the principal value of the loans has
historically remained relatively stable when compared to fixed-rate loans.
A STRONG POSSIBILITY OF STABLE RATES AS 2001 FISCAL YEAR TAKES OFF
Despite the rapid rate of growth in GDP, there is evidence of a slowdown.
Spending by consumers in the second quarter of 2000 declined. After an increase
in July, it fell off again in August. In addition, auto manufacturers are
cutting production. Housing starts in August were at the lowest level in over
two years, while building permits have fallen back to late-1997 levels. In
short, higher interest rates and higher energy costs have begun to rein in the
economic expansion. What's more, if food and energy are excluded, "core"
inflation has remained steady at 0.2% per month for several months now. This mix
of slowing economic activity and manageable rates of inflation suggests that the
Federal Reserve has little reason to boost interest rates anytime soon.
AN EMPHASIS ON QUALITY
In the interview that follows, the Fund's portfolio managers, Brian Good and
James Fellows, discuss their management of the portfolio. As you'll see, their
strategy is a conservative one that stresses high-quality loans and attempts to
avoid problem areas in the bank loan market. They also discuss pricing and how
it has impacted the bank loan market and the Fund's portfolio.
I want to thank you for choosing the Liberty-Stein Roe Institutional
Floating Rate Income Fund, and for your continued confidence.
Sincerely,
/S/ Stephen E. Gibson
Stephen E. Gibson
President
October 25, 2000
* 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.
Because market and economic conditions change, there can be no assurance that
the trends described in this report will continue or come to pass.
1
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Questions & Answers
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Fund Data
INVESTMENT OBJECTIVE:
Liberty-Stein Roe Institutional Floating Rate Income Fund seeks high current
income consistent with preservation of capital by investing primarily in
senior secured floating-rate or variable-rate bank loans made to U.S.
corporations, partnerships and other borrowers.
FUND INCEPTION:
December 17, 1998
NET ASSETS:
$184.7 million
AN INTERVIEW WITH BRIAN W. GOOD AND JAMES R. FELLOWS, PORTFOLIO MANAGERS OF
LIBERTY-STEIN ROE INSTITUTIONAL FLOATING RATE INCOME FUND
Mr. Good and Mr. Fellows, who have worked together since 1989, have more than 20
years of combined experience managing bank loan investments for mutual fund
investors. They joined Stein Roe in April 1998.
Q: HOW DID THE LIBERTY-STEIN ROE INSTITUTIONAL FLOATING RATE INCOME FUND PERFORM
DURING THE 12 MONTHS ENDED AUGUST 31, 2000?
We are pleased to report that, relative to both its mutual fund peer group and
the bank loan market, the Fund provided excellent performance. For the one-year
period, the Fund's total return was 8.52%, including reinvested dividends. This
compares to total returns of 5.99% and 4.59%, respectively, for the Lipper Loan
Participation Category1 and the Fund's benchmark, the DLJ Leveraged Loan Index
Plus. Its current SEC yield as of August 31, 2000 was 9.73%.2
Q: WHAT WERE CONDITIONS IN THE MARKETPLACE DURING THE PERIOD?
The market was driven largely by rising interest rates, the robust U.S. economy
and, to some extent, activities in the high-yield bond market.
In response to strong economic activity, the Federal Reserve boosted key
short-term interest rates by a total of 1.25% over the twelve-month period. This
in turn led to increases of 1.36% in the three-month London Interbank Offering
Rate (LIBOR). Since floating-rate bank loans reset their rates periodically to
reflect changes in LIBOR, rising interest rates helped to make them an
attractive complement to other fixed-income investments.
Meanwhile, economic expansion fueled growth in new loan issuance
throughout much of the period, resulting in an extensive supply of loans.
However, in the latter months of the fiscal year, the pace of new issuance
slowed. This was largely due to weakness not in the bank loan arena but in the
high-yield bond market. Companies that might commonly employ a combination of
bank loans, high-yield bonds and equity when raising capital were forced by the
anemic high-yield market to forgo funding or to seek more conservative ways of
achieving their financing needs. Issuers reduced leverage (e.g., bank loans)
and/or turned to other instruments to close the financing gap. Investors
meanwhile grew increasingly focused on credit quality.
Q: HOW DID THESE FACTORS IMPACT YOUR STRATEGY AND THE FUND'S PERFORMANCE?
We believe the Fund's relative outperformance can be attributed to our
conservative investment style, which proved well suited to market conditions.
The ready availability and wide variety of loans allowed us ample
opportunity for diversification and selectivity. As of the fiscal year-end, the
portfolio held loans from 127 issuers in 48 industries, which insulated it to
some degree from individual issue performance and specific industry exposure. By
the period-end, the yield curve had inverted, benefiting our holdings at the
short end of the maturity spectrum.
Additionally, our emphasis on high-quality credits meant higher yields for
the Funds as higher-quality loans increasingly offered better spreads than in
previous years. Also, the portfolio experienced a lower default rate than the
general bank loan market.
Q: WHAT HAPPENED TO DEFAULT RATES IN GENERAL?
During the latter part of 1999, domestic default rates rose approximately 4% in
response to problems among energy companies and providers of long-term care. In
keeping with our conservative approach, we generally avoid commodity-related
investments, and we owned no loans for long-term care facilities, so the
portfolio was not adversely affected.
Later in the period, default rates increased once again as lenders, faced
with the possibility of an economic slowdown, showed less forbearance with
delinquent borrowers. Once again, this uptick had little impact on the
portfolio.
Q: DID ANY OTHER FACTORS PLAY A ROLE IN THE FUND'S PERFORMANCE?
The Fund's net asset value (NAV) fluctuated by approximately 1.0% over the past
year. This was a direct result of greater price transparency and increased
liquidity in the bank loan market. As the market grows in size and efficiency,
it is becoming easier to adjust the price of loans to reflect current market
conditions, and we have done our best
1 Lipper, Inc. is a monitor of mutual fund performance. For the one-year
period ending August 31, 2000, the Fund was ranked in the first quartile of
the Lipper Loan Participation Category (two out of 21 funds). Rankings do
not include sales charges. Past performance cannot predict future results.
2 SEC yields reflect the portfolio's earning power net of expenses, expressed
as an annualized percentage of the public offering price. If the Advisor
had not waived or borne certain expenses, the SEC yield would have been
9.36%.
2
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Questions & Answers Continued
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to value the Fund's holdings accordingly. It is this move to mark-to-market
pricing that accounts for much of the volatility in the Fund's NAV.
Q: WHAT IS YOUR OUTLOOK FOR THE COMING SIX MONTHS?
We believe the bank loan market will continue to mature, growing more efficient
and more transparent in its pricing. At the same time, we look for the supply of
loans to remain adequate as issuers and investors find alternatives to the
lethargic high-yield bond market. Finally, we think credit spreads will remain
high due to the recent increase in default rates. Therefore, we will continue to
focus on conservatively structured, higher-quality loans.
/S/ BRIAN GOOD /S/ JIM FELLOWS
BRIAN GOOD JIM FELLOWS
Past performance is no guarantee of future results. Share price and investment
return will vary, so you may have gains or losses when you sell shares.
Portfolio holdings are as of August 31, 2000 and are subject to change.
Proceeds of the senior bank loans in which the Fund will acquire interests will
be used primarily to finance leveraged buyouts, recapitalizations, mergers and
acquisitions, among other uses. As a result, many of the borrowers involved in
these activities may be highly leveraged; therefore an increase in interest
rates may impair the ability to meet their obligations under the loan agreement
(or other business obligations). While such loans make up the bulk of the
Portfolio, the managers may invest in other securities (see the prospectus for a
complete description of what the Portfolio may invest in).
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.
Value of a $10,000 Investment
--------------------------------------------------------------------------------
December 17, 1998-- August 31, 2000
Liberty-Stein Roe Institutional Floating Rate Income Fund
Line Chart:
Liberty-Stein Roe Institutional
Floating Rate Income Fund DLJ Leveraged Loan Index Plus*
12/17/99 10000 10000
10011 10000
10078.1 10026
2/28/99 10166.8 9982
10252.2 10043
10329.1 10116
10406.5 10246
10482.5 10339
10553.8 10408
8/31/99 10594.9 10370
10665.9 10346
10720.3 10331
10773.9 10398
10853.6 10469
10936.1 10571
2/29/00 11024.7 10606
11063.3 10522
11133 10560
11229.9 10649
11314.1 10714
11415.9 10790
8/31/00 11497.3 10846
*Index is from 12/31/98.
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.
3
<PAGE>
Portfolio Highlights
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Wireless Communication 9.4%
Diversified Manufacturing 6.1%
Automotive 5.6%
Chemicals 3.3%
Environmental Services 3.2%
Sector breakdowns are calculated as a percentage of total net assets. Because
the Portfolio is actively managed, there can be no guarantee the Portfolio will
maintain this breakdown in the future.
Average Annual Total Returns
As of As of
8/31/00 6/30/00
1 year 8.52% 7.93%
Life 8.55% 8.39%
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. Performance results reflect any voluntary
waivers or reimbursements of Fund expenses by the Advisor or its affiliates.
Absent these waivers and reimbursement arrangements, performance results would
have been lower.
Portfolio Quality Breakdown (Dollar-Weighted)
As of 8/31/00
PIECHART:
B1 35.6%
B2 9.6%
B3 0.7%
Ba1 3.8%
Ba2 10.7%
Ba3 31.4%
Caa1 0.2%
Caa3 0.4%
NR 1.1%
Short-Term 6.5%
Quality breakdowns are calculated as a percentage of total investments. Because
the Portfolio is actively managed, there can be no guarantee the Portfolio will
continue to maintain these quality breakdowns in the future.
4
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<TABLE>
<CAPTION>
Stein Roe Floating Rate Limited Liability Company Investment Portfolio
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August 31, 2000
(in thousands)
Loan Maturity Principal Market
VARIABLE RATE SENIOR LOAN INTERESTS (A)(B) - 93.1% Type Date Amount Value
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AEROSPACE/DEFENSE - 0.9%
DeCrane Aircraft Holdings, Inc.,.................................... Term B 9/30/05 $ 2,958 $ 2,967
DeCrane Aircraft Holdings, Inc.,.................................... Term C 4/30/06 1,496 1,506
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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
Tenneco Automotive Inc., ........................................... 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
Cumulus Media, Inc.,................................................ 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
----------
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
Tapco International Corp.,.......................................... 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
NATG Holdings LLC,.................................................. 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
Huntsman ICI Chemicals, LLC., ...................................... Term C 6/30/08 5,774 5,818
Lyondell Chemical Co., ............................................. Term B 6/30/05 1,490 1,513
Lyondell Chemical Co., ............................................. 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
AMF Bowling Worldwide, Inc., ....................................... Axel A-1 3/31/03 2,539 2,240
AMF Bowling Worldwide, Inc., ....................................... Axel B 3/31/03 1,330 1,175
----------
3,491
----------
See Notes to Investment Portfolio.
5
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<CAPTION>
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Continued
Loan Maturity Principal Market
Type Date Amount Value
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <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
Weight Watchers International 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
Concentra Operating Corp., ......................................... 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
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
URS Corp., ......................................................... 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
Allied Waste North America, Inc., .................................. 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
----------
See Notes to Investment Portfolio.
6
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Stein Roe Floating Rate Limited Liability Company Investment Portfolio
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Continued
Loan Maturity Principal Market
Type Date Amount Value
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<S> <C> <C> <C> <C>
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
----------
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
Quest Diagnostics Inc., ............................................ 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
Wyndham International,.............................................. 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
Terex Corp., ....................................................... Term C 3/6/06 986 989
----------
5,849
----------
INSURANCE BROKER/SERVICE - 1.1%
Willis North America, Inc., ........................................ Term C 2/19/08 2,850 2,864
Willis North America, Inc., ........................................ 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
Thermadyne Holdings Corp., ......................................... 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
Bridge Information Systems, ........................................ Multidraw 7/7/03 1,427 1,313
----------
3,593
----------
See Notes to Investment Portfolio.
7
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Stein Roe Floating Rate Limited Liability Company Investment Portfolio
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Continued
Loan Maturity Principal Market
Type Date Amount Value
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<S> <C> <C> <C> <C>
MEDICAL SPECIALTIES - 1.3%
Dade Behring: ...................................................... Term B 6/30/06 $ 2,565 $ 2,582
Dade Behring: ...................................................... Term C 6/30/07 2,565 2,582
Stryker Corp.: ..................................................... Term B 12/4/05 718 722
Stryker Corp.:...................................................... 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
Mueller Group, Inc., ............................................... Term C 8/16/07 1,511 1,526
Mueller Group, Inc., ............................................... 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
United Artists Theatre Co., ........................................ Term C 4/21/07 1,126 836
----------
9,469
----------
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
Stone Container, ................................................... Term F 12/31/05 3,283 3,294
Stone Container, ................................................... Term G 12/31/06 433 430
Stone Container, ................................................... 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
DIMAC Corp., ....................................................... 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
----------
See Notes to Investment Portfolio.
8
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<CAPTION>
Stein Roe Floating Rate Limited Liability Company Investment Portfolio
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Continued
Loan Maturity Principal Market
Type Date Amount Value
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<S> <C> <C> <C> <C>
REAL ESTATE INVESTMENT TRUST - 0.7%
Prison Realty Trust, Inc., ......................................... Term B 12/31/02 $ 2,985 $ 2,537
Prison Realty Trust, Inc., ......................................... Term C 12/31/02 990 843
----------
3,380
----------
RENTAL/LEASING COMPANIES - 0.5%
Rent-A-Center Inc., ................................................ Term B 1/31/06 1,386 1,391
Rent-A-Center Inc., ................................................ 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
Duane Reade: ....................................................... 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
SDM Corp., ......................................................... 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
Semiconductor Components Industries, LLC., ......................... Term C 8/4/07 519 524
Semiconductor Components Industries, LLC., ......................... 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
Ispat Inland, LP., ................................................. 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
----------
TELECOMMUNICATIONS SERVICES - 2.8%
Alaska Communications Systems Holdings, Inc., ...................... Term B 11/14/07 1,579 1,584
Alaska Communications Systems Holdings, Inc., ...................... 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
Evergreen International Aviation, .................................. Term B-2 5/7/04 3,936 3,883
Gemini Air, ........................................................ Term A 8/12/05 785 784
----------
5,637
----------
See Notes to Investment Portfolio.
9
<PAGE>
<CAPTION>
Stein Roe Floating Rate Limited Liability Company Investment Portfolio
---------------------------------------------------------------------------------------------------------------------------------
Continued
Loan Maturity Principal Market
Type Date Amount Value
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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
American Cellular Corp., ........................................... Term C 3/31/09 2,400 2,402
Centennial Cellular Operating Co., LLC., ........................... Term B 5/31/07 3,470 3,492
Centennial Cellular Operating Co., LLC., ........................... 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
Dobson-Sygnet Wireless Inc., ....................................... Term C 12/23/07 907 911
Nextel Finance Co., Inc., .......................................... Term B 6/30/08 2,750 2,769
Nextel Finance Co., Inc., .......................................... Term C 12/31/08 2,750 2,769
Nextel Finance Co., Inc., .......................................... Term D 3/31/09 2,000 1,997
Nextel Partners, Inc., ............................................. Term 1/29/08 6,000 6,042
Rural Cellular Corp., .............................................. Term B 10/3/08 2,250 2,251
Rural Cellular Corp., .............................................. 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
----------
---------------------------------------------------------------------------------------------------------------------------------
See Notes to Investment Portfolio.
10
<PAGE>
<CAPTION>
Stein Roe Floating Rate Limited Liability Company Investment Portfolio
---------------------------------------------------------------------------------------------------------------------------------
Continued
Maturity Principal Market
Rates Date Amount Value
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHORT-TERM OBLIGATIONS - 6.1%
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
==========
---------------------------------------------------------------------------------------------------------------------------------
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
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.
11
</TABLE>
<PAGE>
<TABLE>
Stein Roe Floating Rate Limited Liability Company
---------------------------------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities
August 31, 2000
(All amounts in thousands)
<CAPTION>
<S> <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
===========
See Notes to Financial Statements.
</TABLE>
12
<PAGE>
<TABLE>
Stein Roe Floating Rate Limited Liability Company
---------------------------------------------------------------------------------------------------------------------------------
Statement of Operations
For the Year Ended August 31, 2000
(All amounts in thousands)
<S> <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
=========
See Notes to Financial Statements.
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Stein Roe Floating Rate Limited Liability Company
---------------------------------------------------------------------------------------------------------------------------------
Statement of Changes in Net Assets
(All amounts in thousands)
FOR THE FOR THE
YEAR ENDED PERIOD ENDED
AUGUST 31, AUGUST 31,
2000 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
=========== ===========
(a) From commencement of operations on December 17, 1998.
See Notes to Financial Statements.
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Stein Roe Floating Rate Limited Liability Company
-------------------------------------------------------------------------------------------------------------------------------
Statement of Cash Flows
For the Year Ended August 31, 2000
(All amounts in thousands)
<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
=========
See Notes to Financial Statements.
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Liberty-Stein Roe Institutional Floating Rate Income Fund
---------------------------------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities
August 31, 2000
(All amounts in thousands, except per-share data)
<S> <C>
ASSETS
Investment in Portfolio, at value ........................................................................ $ 185,160
Expense reinbursement due from Advisor ................................................................... 57
---------
Total Assets .......................................................................................... 185,217
---------
LIABILITIES
Distributions payable to shareholders .................................................................... 484
Accrued:
Administrative fees ................................................................................... 30
Bookkeeping fees ...................................................................................... 3
Transfer agent fees ................................................................................... 8
Other .................................................................................................... 31
---------
Total Liabilities ..................................................................................... 556
---------
Net Assets ............................................................................................ $ 184,661
=========
ANALYSIS OF NET ASSETS
Paid-in capital .......................................................................................... $ 185,460
Overdistributed net investment income .................................................................... 26
Net realized gains on investments allocated from Portfolio ............................................... 149
Net unrealized depreciation on investments allocated from Portfolio ...................................... (974)
---------
Net Assets ............................................................................................ $ 184,661
=========
Shares outstanding (unlimited number authorized) ......................................................... 18,473
=========
Net asset value per share ................................................................................ $ 10.00
=========
See Notes to Financial Statements.
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Liberty-Stein Roe Institutional Floating Rate Income Fund
---------------------------------------------------------------------------------------------------------------------------------
Statement of Operations
For the Year Ended August 31, 2000
(All amounts in thousands)
INVESTMENT INCOME
<S> <C> <C>
Interest and fees allocated from Portfolio ................................................. $ 15,151
--------
EXPENSES
Expenses allocated from Portfolio ............................................................ $ 848
Administrative fees .......................................................................... 312
Bookkeeping fees ............................................................................. 28
Transfer agent fees .......................................................................... 78
Trustees' fees ............................................................................... 8
Custodian fees ............................................................................... 1
Audit fees ................................................................................... 8
Legal fees ................................................................................... 2
Report to shareholders ....................................................................... 29
Registration fees ............................................................................ 29
Other ........................................................................................ 41
--------
Total Expenses ............................................................................ 1,384
Expense reimbursement from Advisor ........................................................... (215)
--------
Net Expenses ........................................................................... 1,169
--------
Net Investment Income ..................................................................... 13,982
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS ALLOCATED FROM PORTFOLIO:
Net realized gains on investments ............................................................ 149
Net change in unrealized appreciation/depreciation ........................................... (1,250)
--------
Net loss .................................................................................. (1,101)
--------
Increase in net assets resulting from operations ............................................. $ 12,881
========
See Notes to Financial Statements.
17
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Liberty-Stein Roe Institutional Floating Rate Income Fund
---------------------------------------------------------------------------------------------------------------------------------
Statement of Changes in Net Assets
(All amounts in thousands)
YEAR ENDED PERIOD ENDED
AUGUST 31, AUGUST 31,
2000 1999(A)
---------- ------------
<S> <C> <C>
OPERATIONS
Net investment income .................................................................... $ 13,982 $ 4,291
Net realized gain ........................................................................ 149 38
Net change in unrealized appreciation/depreciation ....................................... (1,250) 276
--------- ---------
Net increase in net assets resulting from operations .................................. 12,881 4,605
--------- ---------
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income ................................................. (13,950) (4,291)
In excess of net investment income ....................................................... -- (6)
Distributions from net realized gains .................................................... (38) --
--------- ---------
(13,988) (4,297)
--------- ---------
SHARE TRANSACTIONS
Subscriptions to Fund shares ............................................................. 62,901 123,262
Value of distributions reinvested ........................................................ 13,015 3,825
Redemptions of Fund shares ............................................................... (17,343) (200)
--------- ---------
Net increase from Fund share transactions ............................................. 58,573 126,887
--------- ---------
Net increase in net assets ............................................................ 57,466 127,195
TOTAL NET ASSETS
Beginning of period ...................................................................... 127,195 --
--------- ---------
End of period ............................................................................ $ 184,661 $ 127,195
========= =========
Undistributed (Overdistributed) Net Investment Income at End of Period ................... $ 26 $ (6)
========= =========
ANALYSIS OF CHANGES IN SHARES OF BENEFICIAL INTEREST
Subscriptions to Fund shares ............................................................. 6,277 12,267
Issued in reinvestment of distributions .................................................. 1,299 379
Redemptions of Fund shares ............................................................... (1,729) (20)
--------- ---------
Net increase in Fund shares ........................................................... 5,847 12,626
Shares outstanding at beginning of period ................................................ 12,626 --
--------- ---------
Shares outstanding at end of period ...................................................... 18,473 12,626
========= =========
(a) From commencement of operations on December 17, 1998.
See Notes to Financial Statements.
</TABLE>
18
<PAGE>
Notes to Financial Statements
--------------------------------------------------------------------------------
(All amounts in thousands)
NOTE 1. ORGANIZATION
Liberty-Stein Roe Institutional 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 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 in cash
in exchange for beneficial ownership of the Portfolio. At December 17, 1998,
Liberty Floating Rate Fund (formerly Stein Roe Floating Rate Income Fund)
contributed cash of $100. 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-Stein Roe
Institutional Floating Rate Income Fund and Liberty Floating Rate Fund owned
36.5% and 63.5%, respectively, of the Portfolio.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
The following summarizes the significant accounting policies of the Fund and
Portfolio. These policies are in conformity with generally accepted accounting
principles, which require management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
SECURITY VALUATIONS
All securities are valued as of August 31, 2000. The value of the Portfolio is
determined in accordance with guidelines established, and periodically reviewed,
by the Board of Trustees. Senior Loans are generally valued using market prices
or quotations provided by banks, dealers or pricing services with respect to
secondary market transactions. In the absence of actual market values, Senior
Loans will be valued by Stein Roe and Farnham Incorporated (the "Advisor"), an
indirect, wholly-owned subsidiary of Liberty Financial Companies, Inc.
("Liberty"), on behalf of the Portfolio 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 securities with remaining
maturities of 60 days or less are valued at amortized cost.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME
Investment transactions are accounted for on trade date. 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. Realized gains and losses from investment
transactions are reported on an identified cost basis.
FEDERAL INCOME TAXES
No provision is made for federal income taxes since (a) the Fund elects to be
taxed as a "regulated investment company" and make distributions to its
shareholders to be relieved of all federal income taxes under provisions of
current federal tax law; and (b) the Portfolio is treated as a partnership for
federal income tax purposes and all of its income is allocated to its owners
based on methods approved by the Internal Revenue Service.
DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income are declared by the Fund and recorded each
business day and are paid monthly. Capital gains distributions, if any, are
declared and paid annually. Dividends and distributions are recorded on the
ex-dividend date. Dividends are determined in accordance with income tax
principles, which may treat certain transactions differently than generally
accepted accounting principles. Distributions in excess of tax basis earnings
are reported in the financial statements as a return of capital. Permanent
differences in the recognition or classification of income between the financial
statements and tax earnings are reclassified to paid-in capital.
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.
19
<PAGE>
Notes to Financial Statements Continued
--------------------------------------------------------------------------------
NOTE 3. TRUSTEES' FEES AND TRANSACTIONS WITH AFFILIATES
MANAGEMENT & ADMINISTRATIVE FEES
The Portfolio pays a monthly management fee and the Fund pays a monthly
administrative fee to the Advisor for its services as investment advisor and
manager.
The management fee for the Portfolio is computed at an annual rate of 0.45%
of average daily net assets. The administrative fee for the Fund is computed at
an annual rate of 0.20% of average daily net assets.
BOOKKEEPING FEE
The Advisor provides bookkeeping and pricing services for a monthly fee equal to
$25 annually plus 0.0025% annually of the Portfolio's and Fund's average daily
net assets over $50 million.
TRANSFER AGENT FEE
Liberty Funds Services, Inc. (the Transfer Agent), an affiliate of Liberty,
provides shareholder services for a monthly fee equal to 0.05% annually of the
Fund's average daily net assets and receives reimbursement for certain out of
pocket expenses. The Portfolio pays the Transfer Agent a monthly fee equal to $6
annually.
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 brokerage commissions, interest, taxes and
extraordinary expenses, if any) exceed 0.75% of average daily net assets. Other
Certain officers and trustees of the Trust are also officers of the Advisor.
Compensation is paid to trustees not affiliated with the Advisor. No
remuneration was paid to any other trustee or officer of the Trust, who is
affiliated with the Advisor.
NOTE 4. INVESTMENT TRANSACTIONS
The Portfolio's aggregate cost of purchases and proceeds from sales other than
short-term obligations for the year ended August 31, 2000 were $404,693 and
$50,751, respectively.
NOTE 5. TENDER OF SHARES
The Board of Trustees has adopted a policy of making tender offers on a
quarterly basis. The Board has designated the 15th day of March, June, September
and December, each year, or the next business day if the 15th is not a business
day as the Repurchase Request Deadline. Tender offers are made for a portion of
the Fund's then outstanding shares at the net asset value of the shares as of
the Repurchase Pricing Date. The tender offer amount, which is determined by the
Board of Trustees, will be at least 5% and no more than 25% of the total number
of shares outstanding on the Repurchase Request Deadline. 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 0.44%, 5.73%, 2.10%
and 0.05%, respectively, of shares outstanding were tendered.
NOTE 6. SENIOR LOAN PARTICIPATION COMMITMENTS
The Portfolio invests primarily in participations and assignments, or acts as a
party to the primary lending syndicate of a Variable Rate Senior Loan interest
to United States corporations, partnerships, and other entities. If the lead
lender in a typical lending syndicate becomes insolvent, enters FDIC
receivership or, if not FDIC insured, enters into bankruptcy, the Portfolio may
incur certain costs and delays in receiving payment or may suffer a loss of
principal and/or interest. When the Portfolio purchases a participation of a
Senior Loan interest, the Portfolio typically enters into a contractual
agreement with the lender or other third party selling the participation, but
not with the borrower directly. As such, the Portfolio assumes the credit risk
of the Borrower, Selling Participant or other persons interpositioned between
the Portfolio and the Borrower.
At August 31, 2000, the following sets forth the selling participants with
respect to interests in Senior Loans purchased by the Portfolio on a
participation basis.
PRINCIPAL
AMOUNT VALUE
SELLING PARTICIPANT (000) (000)
------------------- ------- ------
Goldman Sachs Credit Partners LP.... $3,986 $3,821
The ability of borrowers to meet their obligations may be affected by
economic developments in a specific industry.
20
<PAGE>
Financial Highlights
--------------------------------------------------------------------------------
Stein Roe Floating Rate Limited Liability Company
PERIOD
YEAR ENDED ENDED
AUGUST 31, AUGUST 31,
RATIOS TO AVERAGE NET ASSETS 2000 1999(A)
------------- -------------
Expenses...................................... 0.55% 0.96%(b)
Net investment income......................... 9.26% 7.59%(b)
Portfolio turnover............................ 21% 17%
(a) From commencement of operations on December 17, 1998.
(b) Annualized.
<TABLE>
--------------------------------------------------------------------------------
Liberty-Stein Roe Institutional Floating Rate Income Fund
<CAPTION>
YEAR PERIOD
ENDED ENDED
AUGUST 31, AUGUST 31,
2000 1999(a)
----------- -----------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ........................ $ 10.07 $ 10.00
----------- -----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income .................................... 0.88 0.51
Net realized and unrealized gain (loss) on investments ... (0.07) 0.07
----------- -----------
Total from investment operations ...................... 0.81 0.58
----------- -----------
DISTRIBUTIONS
Net investment income .................................... (0.88) (0.51)
In excess of net investment income ....................... -- (b)
From net realized gains .................................. (b) --
----------- -----------
Total distributions ................................... (0.88) (0.51)
----------- -----------
NET ASSET VALUE, END OF PERIOD .............................. $ 10.00 $ 10.07
=========== ===========
Ratio of net expenses to average net assets (c) ............. 0.75% 0.87%(e)
Ratio of net investment income to average net assets (d) .... 8.97% 7.68%(e)
Total Return (d) ............................................ 8.52% 5.94%(f)
Net assets, end of period (000's) ........................... $ 184,661 $ 127,195
(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 Investment Advisor, this ratio would have
been 0.89% and 1.72% (annualized), respectively.
(d) Computed giving effect to the Advisor's expense limitation undertaking.
(e) Annualized.
(f) Not annualized.
</TABLE>
21
<PAGE>
Report of PricewaterhouseCoopers LLP, Independent Accountants
--------------------------------------------------------------------------------
To the Trustees and the Shareholders of
Liberty-Stein Roe Institutional Floating Rate Income 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-Stein Roe Institutional
Floating Rate Income 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
22
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Stein Roe Institutional Floating Rate Income Fund
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TRUSTEES
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
Senior Vice President and Chief Financial Officer,
United Airlines
Janet Langford Kelly
Executive Vice President-Corporate Development, General
Counsel and Secretary, Kellogg Co.
Charles R. Nelson
Van Voorhis Professor of Political Economy,
University of Washington
Thomas C. Theobald
Managing Director, William Blair Capital Partners
OFFICERS
Stephen E. Gibson, President
William D. Andrews, Executive Vice President
Kevin M. Carome, Executive Vice President
Loren A. Hansen, Executive Vice President
Joseph Palombo, Executive Vice President
Pamela McGrath,Senior Vice President, Treasurer
AGENTS AND ADVISORS
Stein Roe & Farnham Incorporated
Investment Advisor
State Street Bank and Trust Company
Custodian
Liberty Funds Services Inc.
Transfer Agent
Bell, Boyd & Lloyd
Legal Counsel to the Fund
PricewaterhouseCoopers LLP
Independent Accountants
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Stein Roe Mutual Funds
P.O. Box 8900
Boston, MA
02205-8900
Shareholders call: 800-338-2550
www.steinroe.com
Liberty Funds Distributor, Inc. (10/00)
S87-02/819C-0900 (10/00) 00/1742
