-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WbnFuOVfisD1wLiNTbFM0kcsvPWZMcrXyLD8E+0vl7EizfXZFsql1hphI3tl9Pqn ell9mhr2m7Z7Bv4uV7qjUg== 0000935069-05-002031.txt : 20050729 0000935069-05-002031.hdr.sgml : 20050729 20050729130654 ACCESSION NUMBER: 0000935069-05-002031 CONFORMED SUBMISSION TYPE: N-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20050531 FILED AS OF DATE: 20050729 DATE AS OF CHANGE: 20050729 EFFECTIVENESS DATE: 20050729 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HIGHLAND FLOATING RATE LTD LIABILITY CO CENTRAL INDEX KEY: 0001068201 IRS NUMBER: 364251184 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: N-Q SEC ACT: 1940 Act SEC FILE NUMBER: 811-08957 FILM NUMBER: 05983809 BUSINESS ADDRESS: STREET 1: TWO GALLERIA TOWER STREET 2: 13455 NOEL ROAD, SUITE 1300 CITY: DALLAS STATE: TX ZIP: 75240 BUSINESS PHONE: 9726284100 MAIL ADDRESS: STREET 1: TWO GALLERIA TOWER STREET 2: 13455 NOEL ROAD, SUITE 1300 CITY: DALLAS STATE: TX ZIP: 75240 FORMER COMPANY: FORMER CONFORMED NAME: COLUMBIA FLOATING RATE LIMITED LIABILITY CO DATE OF NAME CHANGE: 20031107 FORMER COMPANY: FORMER CONFORMED NAME: STEIN ROE FLOATING RATE LIMITED LIABILITY CO DATE OF NAME CHANGE: 19980929 N-Q 1 nq.txt LIMITED LIABILITY NQ 05/31/05 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-Q QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED MANAGEMENT INVESTMENT COMPANY Investment Company Act file number 811-08957 HIGHLAND FLOATING RATE LIMITED LIABILITY COMPANY ------------------------------------------------------- (Exact name of registrant as specified in charter) 13455 Noel Road, Suite 1300 DALLAS, TEXAS 75240 ------------------------------------------------------- (Address of principal executive offices) (Zip code) James D. Dondero Highland Capital Management, L.P. 13455 Noel Road, Suite 1300 DALLAS, TEXAS 75240 ------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: (877) 532-2834 ------------------ Date of fiscal year end: AUGUST 31 ------------------- Date of reporting period: MAY 31, 2005 ------------------- Form N-Q is to be used by management investment companies, other than small business investment companies registered on Form N-5 (ss.ss. 239.24 and 274.5 of this chapter), to file reports with the Commission, not later than 60 days after the close of the first and third fiscal quarters, pursuant to rule 30b1-5 under the Investment Company Act of 1940 (17 CFR 270.30b1-5). The Commission may use the information provided on Form N-Q in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-Q, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-Q unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to the Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. ss. 3507. ITEM 1. SCHEDULE OF INVESTMENTS. The Schedule(s) of Investments is attached herewith. INVESTMENT PORTFOLIO (UNAUDITED) MAY 31, 2005 HIGHLAND FLOATING RATE LIMITED LIABILITY COMPANY PAR/ COMMITMENT ($) VALUE ($) - ------------------ ------------- VARIABLE RATE SENIOR LOAN NOTES (A) - 97.5% AEROSPACE/DEFENSE - 0.3% Vought Aircraft Industries, Inc. 2,992,941 Term Loan, 5.61%, 12/22/11 3,035,980 ------------- AIR TRANSPORT - 0.6% Continental Airlines, Inc. 3,000,000 Term Loan, 05/01/11 (b) (d) 2,985,000 Northwest Airlines, Inc. Tranche C Term Loan, 2,000,000 9.47%, 11/23/10 1,890,000 United Airlines, Inc. 1,980,875 Tranche B, 7.50%, 06/30/05 1,990,779 ------------- 6,865,779 ------------- AUTOMOTIVE - 4.4% CSA Acquisition Corp. Tranche B Term Loan, 1,147,125 5.13%, 12/23/11 1,154,295 Tranche C Term Loan, 615,125 5.13%, 12/23/11 620,507 Federal-Mogul Corp. Supplemental Revolver, 102,746 3.00%, 02/06/06 (c) 100,948 Supplemental Revolver, 1,270,249 6.85%, 12/09/05 1,248,020 Tranche B Term Loan, 5,000,000 5.60%, 06/30/05 4,418,750 Tranche C Term Loan, 1,048,750 6.85%, 12/09/05 1,051,372 Goodyear Tire & Rubber Co. Second Lien Term Loan, 5,500,000 5.89%, 04/30/10 5,482,125 Third Lien Term Loan, 3,500,000 6.64%, 03/01/11 3,403,750 Hayes Lemmerz International, Inc. 3,274,258 Term Loan, 6.49%, 06/03/09 3,278,350 Insurance Auto Auctions, Inc. 1,000,000 Term Loan, 6.19%, 05/19/12 1,005,000 J.L. French Automotive Castings, Inc. First Lien Term Loan, 1,980,000 7.46%, 07/31/11 1,885,950 Key Plastics Holdings, Inc. Junior Secured Subordinated 55,843 Notes, 18.32%, 04/26/07 (d) 45,791 Senior Secured Subordinated 101,433 Notes, 7.00%, 04/26/07 (d) 91,289 5,440,706 Term Loan B, 6.17%, 06/29/10 5,433,905 6,175,000 Term Loan C, 8.91%, 06/25/11 6,043,781 Keystone Automotive Industries, Inc. 830,435 Term Loan, 4.85%, 10/30/09 835,965 Rexnord Corp. 4,000,000 Term Loan B, 12/31/11 (b) 4,020,000 Stanadyne Corp. 3,970,000 Term Loan, 6.76%, 08/02/10 4,009,700 PAR/ COMMITMENT ($) VALUE ($) - ------------------ ------------- AUTOMOTIVE (CONTINUED) Tenneco Automotive, Inc. Tranche B Term Loan, 1,779,338 5.54%, 12/12/10 1,798,252 Tranche B-1 Credit Linked Deposit, 781,632 5.33%, 12/12/10 791,402 ------------- 46,719,152 ------------- BEVERAGE & TOBACCO - 2.4% Caribbean Restaurant LLC 2,800,000 Tranche B, 5.84%, 06/30/09 2,841,132 Commonwealth Brands, Inc. 717,548 Term Loan, 6.44%, 08/28/07 725,621 Constellation Brands, Inc. Tranche B Term Loan, 2,492,500 4.99%, 11/30/11 2,504,389 Dr. Pepper Bottling Company of Texas 5,285,507 Term Loan B, 5.32%, 12/19/10 5,354,852 DS Waters Enterprises LP 2,804,000 Term Loan, 11/07/09 (b) 2,632,844 4,553,125 Term Loan, 7.49%, 11/07/09 4,275,202 Intabex Netherlands BV 2,000,000 Term Loan B, 6.73%, 05/13/10 2,027,500 Southern Wine & Spirits of America, Inc. 2,917,662 Term Loan B, 5.35%, 07/02/08 2,935,927 Sunny Delight Beverage Co. First Lien Term Loan, 1,935,294 7.47%, 08/20/10 1,928,037 ------------- 25,225,504 ------------- BROADCAST RADIO & TELEVISION - 1.1% Emmis Operating Co. Tranche B Term Loan, 4.84%, 1,990,000 11/10/11 2,003,452 Spanish Broadcasting Systems, Inc. 4,320,313 Term Loan B, 6.36%, 10/30/09 4,385,117 Warner Music Group 2,961,284 Term Loan B, 5.33%, 02/28/11 2,968,391 Young Broadcasting, Inc. 2,000,000 Term Loan, 5.64%, 11/03/12 2,011,860 ------------- 11,368,820 ------------- BUILDING & DEVELOPMENT PRODUCTS - 3.6% Acoustical Material Services 1,000,000 Term Loan, 5.89%, 04/13/12 1,002,500 Custom Building Products Second Lien Term Loan, 1,000,000 8.19%, 04/20/12 995,620 DESA LLC 1,990,000 Term Loan, 8.18%, 11/26/11 1,900,450 Lake at Las Vegas Joint Venture First Lien Term Loan, 4,329,256 6.07%, 11/01/09 4,349,560 11 INVESTMENT PORTFOLIO (UNAUDITED) (CONTINUED) MAY 31, 2005 HIGHLAND FLOATING RATE LIMITED LIABILITY COMPANY PAR/ COMMITMENT ($) VALUE ($) - ------------------ ------------- VARIABLE RATE SENIOR LOAN NOTES (CONTINUED) BUILDING & DEVELOPMENT PRODUCTS (CONTINUED) LNR Property Corp. 1,000,000 Term Loan, 08/15/05 (b) 1,012,500 Tranche A Term Loan, 1,866,467 6.21%, 02/03/08 1,874,642 Tranche B Term Loan, 12,249,625 6.21%, 02/03/08 12,322,388 NATG Holdings LLC Credit Linked Certificate of Deposit, 1,039,746 3.30%, 01/23/09 904,579 983,991 Term Loan A, 7.85%, 01/23/09 295,197 714,318 Term Loan B1, 8.06%, 01/23/10 210,724 72,363 Term Loan B2, 8.06%, 01/23/10 68,021 Nortek Holdings, Inc. 1,975,025 Term Loan, 5.34%, 08/27/11 1,997,856 Palmdale Hills Property LLC First Lien Term Loan, 3,000,000 6.09%, 05/19/10 3,007,500 Woodlands Commercial Property Co. 4,000,000 Bridge Loan, 5.34%, 08/30/05 4,020,000 Mezzanine Loan, 5,000,000 7.34%, 11/30/07 5,031,250 ------------- 38,992,787 ------------- BUSINESS EQUIPMENT & SERVICES - 4.5% ACI Billing Services, Inc. Second Lien Term Loan, 1,000,000 10.84%, 04/18/11 995,000 Acterna Corp. 974,028 Term Loan, 09/30/07 (b) 980,116 American Reprographics Co. Second Lien Term Loan, 700,000 9.92%, 12/18/09 736,750 Audio Visual Services Corp. 4,000,000 Term Loan, 5.96%, 05/18/11 4,005,000 Brickman Group Holdings, Inc. 4,555,556 Term Loan, 8.73%, 11/15/09 4,544,167 Carey International, Inc. Second Lien Term Loan, 2,500,000 13.50%, 05/10/12 2,503,125 ClientLogic Corp. Second Lien Term Loan, 2,000,000 12.05%, 09/03/12 2,010,000 Data Transmissions Network Corp. Tranche B Term Loan, 1,000,000 6.19%, 03/17/12 1,000,620 Ferrell Cos., Inc. 3,491,250 Term Loan, 6.53%, 12/17/11 3,547,983 Fidelity National Information Services, Inc. 4,625,000 Term Loan B, 4.84%, 03/09/13 4,597,851 Hillman Group, Inc. 1,732,500 Term Loan B, 6.69%, 03/30/11 1,746,568 Knoll, Inc. Initial Term Loan, 3,005,882 6.09%, 09/30/11 3,058,485 PAR/ COMMITMENT ($) VALUE ($) - ------------------ ------------- BUSINESS EQUIPMENT & SERVICES (CONTINUED) OfficeMax, Inc. Tranche D Term Loan, 2,465,753 4.97%, 10/28/11 2,490,411 Survey Sampling International LLC Second Lien Term Loan, 2,000,000 12.25%, 05/06/12 2,025,000 VUTEk, Inc. 1,974,359 Term Loan, 8.50%, 06/25/10 1,979,295 Washington Group International 9,600,000 Term Loan B, 2.96%, 10/03/07 9,648,000 Xerox Corp. New Term Loan, 2,000,000 4.85%, 09/30/08 2,020,000 ------------- 47,888,371 ------------- CABLE & SATELLITE TELEVISION - 10.4% Adelphia Communications Corp. Tranche B DIP Term Loan, 4,991,627 5.38%, 03/31/06 5,016,585 Atlantic Broadband Finance LLC 1,400,000 Term Loan B, 5.70%, 09/01/11 1,415,176 Century Cable Holdings LLC Discretionary Term Loan, 3,500,000 8.00%, 12/31/09 3,460,625 5,000,000 Revolver, 03/31/09 (b) 4,890,600 15,000,000 Term Loan, 8.00%, 06/30/09 14,828,700 Charter Communications Operating LLC Tranche A Term Loan, 2,000,000 6.19%, 04/27/10 1,972,180 Tranche B Term Loan, 13,904,975 6.44%, 04/07/11 13,817,374 DirecTV Holdings LLC Tranche B Term Loan, 5,500,000 4.59%, 04/13/13 5,516,610 Hilton Head Communications LP 14,087,500 Revolver, 6.00%, 09/30/07 13,783,774 Insight Midwest Holdings LLC Additional Term Loan, 5.88%, 1,975,000 12/31/09 1,996,686 2,962,500 Term Loan B, 5.88%, 12/31/09 3,002,138 Mediacom Communications Corp. 3,820,000 Term Loan A, 4.51%, 03/31/10 3,797,691 997,500 Term Loan B, 5.26%, 03/31/13 1,008,203 1,985,000 Term Loan C, 5.09%, 09/30/10 1,994,925 Millennium Digital Media 972,725 Revolver, 8.44%, 10/31/08 980,020 3,087,013 Term Loan B, 8.26%, 10/31/08 3,110,166 3,440,262 Term Loan C, 8.45%, 10/31/08 3,466,064 Olympus Cable Holdings LLC 9,500,000 Term Loan A, 7.25%, 06/30/10 9,333,750 1,000,000 Term Loan B, 8.00%, 09/30/10 983,900 UPC Broadband Holding BV Term Loan F2, 11,442,500 6.60%, 12/31/11 11,541,592 12 INVESTMENT PORTFOLIO (UNAUDITED) (CONTINUED) MAY 31, 2005 HIGHLAND FLOATING RATE LIMITED LIABILITY COMPANY PAR/ COMMITMENT ($) VALUE ($) - ------------------ ------------- VARIABLE RATE SENIOR LOAN NOTES (CONTINUED) CABLE & SATELLITE TELEVISION (CONTINUED) WideOpenWest LLC Incremental Term Loan B, 2,977,500 6.10%, 06/22/11 3,009,121 1,979,950 Term Loan B, 6.09%, 06/22/11 2,000,977 ------------- 110,926,857 ------------- CHEMICALS/PLASTICS - 4.9% Brenntag AG 2,500,000 Term Loan B2, 5.88%, 02/27/12 2,540,625 Celenese Dollar Term Loan B, 7,478,904 5.63%, 04/06/11 7,602,007 Coffeyville, Inc. 7,932,406 Term Loan, 8.11%, 05/10/10 8,051,392 Huntsman Co. LLC 7,000,000 Term Loan B, 6.12%, 03/31/10 7,099,120 Huntsman International LLC Dollar Term B Loan, 3,609,073 5.63%, 12/31/10 3,674,469 Innophos, Inc. Tranche B Term Loan, 1,990,952 5.36%, 08/13/10 1,995,929 INVISTA Canada Co. 1,386,721 Tranche B2, 5.38%, 04/29/11 1,399,728 INVISTA S.A.R.L. 3,196,191 Tranche B1, 5.88%, 04/29/11 3,226,171 Kraton Polymers Group of Cos. 4,043,614 Term Loan, 5.78%, 12/23/10 4,096,707 Nalco Co. 1,963,782 Term Loan A, 5.76%, 11/04/09 1,979,493 1,997,656 Term Loan B, 5.03%, 11/04/10 2,022,307 Polypore, Inc. 1,870,000 Term Loan, 5.35%, 11/12/11 1,891,038 Rockwood Specialties Group, Inc. Tranche B Term Loan, 2,000,000 5.43%, 07/30/12 2,018,960 Supresta U.S. LLC 4,972,475 Term Loan B, 6.10%, 07/20/11 4,984,906 ------------- 52,582,852 ------------- CLOTHING/TEXTILES - 0.8% Levi Strauss & Co. Tranche A Term Loan, 1,912,481 10.10%, 09/29/09 2,006,919 Polymer Group, Inc. First Lien Term Loan, 3,509,375 6.34%, 04/27/10 3,548,891 Second Lien Term Loan, 3,000,000 9.34%, 04/27/11 3,045,000 ------------- 8,600,810 ------------- CONGLOMERATE - 1.3% Appleton Papers, Inc. 3,473,750 Term Loan, 5.73%, 06/11/10 3,504,145 PAR/ COMMITMENT ($) VALUE ($) - ------------------ ------------- CONGLOMERATE (CONTINUED) Jason, Inc. 2,059,979 Term Loan B, 7.57%, 06/30/07 2,029,079 Language Line LCC 2,765,779 Term Loan B, 7.42%, 06/13/11 2,796,894 Mueller Group, Inc. New Term Loan, 2,642,142 5.89%, 04/23/11 2,673,530 Youth & Family Centered Services, Inc. 2,788,620 Term Loan B, 6.80%, 05/28/11 2,781,648 ------------- 13,785,296 ------------- CONTAINER/GLASS PRODUCTS - 3.1% Berry Plastics Corp. 1,805,341 Term Loan, 5.09%, 06/30/10 1,821,137 Consolidated Container Co. LLC 3,473,750 Term Loan, 6.69%, 12/15/08 3,517,172 Graham Packaging International, Inc. 7,481,250 Term Loan B, 5.64%, 10/07/11 7,565,414 Graphic Packaging International, Inc. 2,737,646 Term Loan C, 5.51%, 08/09/10 2,772,359 Kerr Group, Inc. 1,269,103 Term Loan, 6.60%, 08/13/10 1,279,027 Precise Technology, Inc. First Lien Term Loan, 1,806,662 6.13%, 03/31/11 1,818,514 Reddy Ice Group, Inc. 738,750 Term Loan, 5.60%, 08/14/09 744,527 Smurfit-Stone Container Corp. Credit Linked Certificate of Deposit, 654,975 2.77%, 11/01/10 665,618 5,221,345 Tranche B, 4.85%, 11/01/11 5,299,038 1,606,568 Tranche C, 5.00%, 11/01/11 1,630,666 Solo Cup, Inc. 5,925,000 Term Loan, 5.21%, 02/27/11 5,970,089 ------------- 33,083,561 ------------- COSMETICS/TOILETRIES - 0.9% Church & Dwight Co., Inc. 1,469,818 Tranche B, 4.84%, 05/30/11 1,483,297 JohnsonDiversey, Inc. 3,103,199 Term Loan B, 4.51%, 11/03/09 3,155,581 MD Beauty, Inc. Second Lien Term Loan, 1,000,000 9.90%, 02/18/13 1,007,500 Revlon Consumer Products Corp. 3,625,000 Term Loan, 9.20%, 07/09/10 3,743,973 ------------- 9,390,351 ------------- DIVERSIFIED MANUFACTURING - 0.1% GenTek, Inc. Second Lien Term Loan, 1,000,000 8.89%, 02/28/12 913,330 ------------- 13 INVESTMENT PORTFOLIO (UNAUDITED) (CONTINUED) MAY 31, 2005 HIGHLAND FLOATING RATE LIMITED LIABILITY COMPANY PAR/ COMMITMENT ($) VALUE ($) - ------------------ ------------- VARIABLE RATE SENIOR LOAN NOTES (CONTINUED) ECOLOGICAL SERVICE & EQUIPMENT - 1.1% Allied Waste North America, Inc. 3,540,455 Term Loan, 5.23%, 01/15/12 3,541,942 Tranche A Credit Linked Deposit, 1,351,351 2.86%, 01/15/12 1,350,514 Environmental Systems Products Holdings Second Lien, 4,500,000 13.21%, 12/12/10 4,651,875 Safety-Kleen Systems, Inc. LC Term Loan, 800,000 3.09%, 09/15/08 824,000 1,200,000 Term Loan, 10.22%, 09/15/08 1,188,000 Synagro Technologies, Inc. 709,746 Term Loan, 6.28%, 05/07/07 713,295 ------------- 12,269,626 ------------- ELECTRONIC/ELECTRIC - 3.6% AIS Acquisition Corp. / Sensor Systems, Inc. 1,000,000 Term Loan, 5.66%, 04/01/11 (d) 1,005,000 Alliance Laundry Systems LLC 2,475,000 Term Loan, 5.34%, 01/27/12 2,500,790 Amkor Technology, Inc. Second Lien Term Loan, 3,500,000 7.79%, 10/27/10 3,526,250 Bridge Information Systems, Inc. Multidraw Term Loan, 484,353 07/07/13 (e) (f) 14,531 Comsys Information Technology Services, Inc. Second Lien Term Loan, 3,000,000 11.54%, 04/30/10 3,007,500 Corel Corp. First Lien Term Loan, 1,000,000 02/22/10 (b) 1,000,000 Second Lien Term Loan, 2,000,000 11.09%, 08/15/10 2,025,000 DataTel, Inc. Second Lien Term Loan, 1,000,000 10/05/11 (b) 1,010,000 Infor Global Solutions S.A.R.L. Second Lien Term Loan, 1,875,000 12.25%, 04/18/12 1,828,125 Itron, Inc. 251,959 Term Loan B, 5.03%, 06/28/11 253,849 Magellan Holdings, Inc. Second Lien Term Loan, 3,125,000 12.25%, 04/18/12 (d) 3,125,000 Magnequench International, Inc. First Lien Term Loan, 1,236,828 10.59%, 09/30/09 1,244,558 ON Semiconductor Corp. Tranche G Term Loan, 4,987,500 6.13%, 12/15/11 5,024,906 Seagate Technology Holdings, Inc. 3,900,000 Term Loan B, 5.13%, 05/13/07 3,960,918 PAR/ COMMITMENT ($) VALUE ($) - ------------------ ------------- ELECTRONIC/ELECTRIC (CONTINUED) Transfirst Holdings, Inc. Second Lien Term Loan, 2,250,000 10.63%, 03/31/11 2,295,000 UGS Corp. 1,492,500 Term Loan B, 5.10%, 05/27/11 1,524,216 Viasystems, Inc. Tranche B Term Loan, 4,987,500 7.64%, 09/30/09 5,040,467 ------------- 38,386,110 ------------- EQUIPMENT LEASING - 1.3% Neff Rental, Inc. Initial Term Loan, 4,000,000 7.75%, 05/01/08 3,960,000 NES Rentals Holdings, Inc. Second Lien Term Loan, 4,477,500 8.97%, 08/17/10 4,572,647 United Rentals, Inc. Delayed Draw Term Loan B, 5,775,000 5.35%, 02/14/11 5,857,120 ------------- 14,389,767 ------------- FARMING/AGRICULTURE - 0.2% AGCO Corp. 2,583,779 Term Loan, 4.82%, 01/31/06 2,603,157 ------------- FINANCIAL INTERMEDIARIES - 0.2% Stile Acquisition Corp. Canadian Term Loan, 1,000,000 5.21%, 04/06/13 998,040 U S Dollar Term Loan, 1,000,000 5.21%, 04/06/13 998,040 ------------- 1,996,080 ------------- FOOD PRODUCTS - 2.4% American Seafoods Group LLC 2,954,201 Term Loan B, 6.34%, 03/31/09 2,972,664 Doane Pet Care Co. 1,990,000 Term Loan, 7.41%, 11/05/09 2,029,800 Interstate Bakeries Corp. 7,500,000 Revolver, 0.50%, 09/22/06 (c) 7,382,850 Interstate Brands Corp. 1,959,596 Term Loan C, 7.26%, 07/19/07 1,911,821 1,875,000 Tranche A, 7.22%, 07/19/06 1,838,681 Luigino's, Inc. 3,992,143 Term Loan B, 6.00%, 04/02/11 4,017,134 Merisant Co. 907,837 Term Loan B, 6.44%, 01/11/10 905,377 Pierre Foods, Inc. 1,761,667 Term Loan B, 5.69%, 06/30/10 1,778,191 Pinnacle Foods Holding Corp. Delayed Draw Term Loan, 3,138,076 6.35%, 11/25/10 3,165,942 ------------- 26,002,460 ------------- 14 INVESTMENT PORTFOLIO (UNAUDITED) (CONTINUED) MAY 31, 2005 HIGHLAND FLOATING RATE LIMITED LIABILITY COMPANY PAR/ COMMITMENT ($) VALUE ($) - ------------------ ------------- VARIABLE RATE SENIOR LOAN NOTES (CONTINUED) FOOD SERVICES - 0.5% AFC Enterprises, Inc. Tranche B Term Loan, 1,000,000 5.38%, 05/09/11 1,003,750 Buffets, Inc. 2,987,100 Term Loan, 6.27%, 06/28/09 3,009,504 Captain D's Inc., LLC First Lien Term Loan, 982,500 6.86%, 12/27/10 994,781 ------------- 5,008,035 ------------- FOOD/DRUG RETAIL -2.3% Jean Coutu Group, Inc. 7,448,725 Term Loan B, 5.50%, 07/30/11 7,527,830 Michael Foods, Inc. Floater Term Loan, 3,000,000 6.59%, 11/20/11 3,076,860 4,563,758 Term Loan, 5.11%, 11/21/10 4,625,369 Nellson Nutraceutical, Inc. Second Lien Term Loan, 3,000,000 12.50%, 04/02/10 1,710,000 Reliant Pharmaceuticals, Inc. First Lien Term Loan, 2,500,000 12.64%, 06/30/08 (d) 2,500,000 Sturm Foods, Inc. First Lien Term Loan, 1,000,000 7.75%, 05/26/11 1,003,750 Second Lien Term Loan, 2,000,000 12.00%, 05/26/12 2,002,500 Vitaquest International, Inc. First Lien Term Loan, 2,000,000 6.30%, 03/07/11 2,000,000 ------------- 24,446,309 ------------- FOREST PRODUCTS - 0.3% NewPage Corp. 3,000,000 Term Loan, 6.38%, 05/02/11 3,015,000 SP Newsprint Co. Tranche B-1 Credit Linked Deposit, 513,096 3.09%, 01/09/10 517,427 Tranche B-1 Term Loan, 251,904 5.35%, 01/09/10 253,949 ------------- 3,786,376 ------------- HEALTH CARE - 7.5% Alliance Imaging, Inc. Tranche C Term Loan, 1,566,195 5.45%, 12/29/11 1,576,971 Alpharma Operating Corp. 3,947,466 Term Loan B, 6.34%, 10/05/08 3,959,782 American HomePatient, Inc. 1,449,059 Term Loan, 08/01/09 (b) 1,434,568 American Medical Response, Inc. 3,059,000 Term Loan, 5.67%, 02/10/12 3,097,238 PAR/ COMMITMENT ($) VALUE ($) - ------------------ ------------- HEALTH CARE (CONTINUED) Ameripath, Inc. 3,032,358 Term Loan, 6.35%, 03/27/10 3,058,891 Ardent Health Services 2,985,000 Term Loan, 5.35%, 08/12/11 2,988,731 Carl Zeiss Vision 1,000,000 Term Loan B, 05/01/13 (b) 1,011,880 1,000,000 Term Loan C, 05/01/14 (b) 1,007,500 2,500,000 Term Loan D, 11/01/14 (b) 2,534,375 Chemed Corp. 2,000,000 Term Loan, 5.09%, 08/24/10 2,007,500 CRC Health Corp. 2,000,000 Term Loan, 7.75%, 05/11/11 2,007,500 Encore Medical IHC, Inc. 1,246,875 Term Loan, 6.31%, 10/04/10 1,260,117 FHC Health Systems, Inc. Delayed Draw Term Loan, 1,300,000 11.91%, 10/31/06 1,313,000 Initial Term Loan, 1,857,143 8.91%, 10/31/06 1,875,714 Third Lien Term Loan, 6,500,000 12.16%, 02/09/11 6,532,500 Hanger Orthopedic Group, Inc. 2,543,506 Term Loan B, 6.59%, 09/30/09 2,568,941 HealthSouth Corp. 3,937,500 Term Loan, 5.59%, 06/14/07 3,942,422 2,600,000 Term Loan, 10.38%, 01/16/11 2,717,000 Tranche B Term Loan, 1,062,500 2.99%, 03/08/10 1,069,141 Insight Health Services Corp. 7,192,976 Tranche B, 6.84%, 10/17/08 7,201,967 Kinetic Concepts, Inc. 709,896 Term Loan B1, 4.85%, 08/11/10 715,220 Knowledge Learning Corp. 6,677,920 Term Loan, 5.61%, 01/07/12 6,730,142 LifePoint Hospitals, Inc. 2,970,000 Term Loan B, 4.72%, 04/15/12 2,976,029 MedAssets, Inc. 500,000 Second Lien Term Loan, 13.08%, 06/16/08 503,750 Senior Term Loan, 692,254 7.81%, 03/16/09 695,715 MultiPlan, Inc. 3,625,000 Term Loan, 5.85%, 03/04/09 3,653,348 Select Medical Corp. 700,000 Revolver, 0.50%, 02/24/11 (c) 689,500 1,300,000 Revolver, 5.81%, 02/24/11 1,280,500 Tranche B Term Loan, 5,000,000 5.04%, 02/24/12 4,996,900 Skilled Healthcare LLC First Lien Term Loan, 3,211,997 5.91%, 07/31/10 3,232,072 Sunrise Medical Holdings, Inc. Term Loan B-1, 487,538 6.26%, 05/13/10 488,147 VWR International, Inc. 915,333 Term Loan B, 5.65%, 04/07/11 922,766 ------------- 80,049,827 ------------- 15 INVESTMENT PORTFOLIO (UNAUDITED) (CONTINUED) MAY 31, 2005 HIGHLAND FLOATING RATE LIMITED LIABILITY COMPANY PAR/ COMMITMENT ($) VALUE ($) - ------------------ ------------- VARIABLE RATE SENIOR LOAN NOTES (CONTINUED) HOME FURNISHINGS - 0.2% Home Interiors & Gifts, Inc. 2,421,875 Term Loan, 8.38%, 03/31/11 2,283,489 ------------- INDUSTRIAL EQUIPMENT - 1.0% Blount International, Inc. 1,947,505 Term Loan B, 5.64%, 08/09/10 1,967,467 Copperweld Corp. 5,214,061 Term Loan, 7.60%, 12/16/11 5,207,543 Dresser, Inc. 1,098,325 Term Loan C, 5.60%, 04/10/09 1,110,220 Penn Engineering & Manufacturing Corp. Second Lien Term Loan, 1,000,000 9.09%, 05/25/12 1,005,000 Terex Corp. 1,276,231 Term Loan, 5.22%, 07/03/09 1,291,112 ------------- 10,581,342 ------------- INSURANCE - 1.8% American Wholesale Insurance Group, Inc. Second Lien Term Loan, 5,000,000 11.86%, 10/13/11 5,000,000 Conseco, Inc. 9,589,006 Term Loan, 6.60%, 06/22/10 9,681,924 Mitchell International, Inc. Second Lien Term Loan, 2,977,500 9.34%, 08/15/12 3,025,884 WellCare Health Plans, Inc. 1,985,000 Term Loan, 7.09%, 05/13/09 1,994,925 ------------- 19,702,733 ------------- LEISURE GOODS/ACTIVITIES/MOVIES - 5.7% AMF Bowling Worldwide, Inc. 3,208,845 Term Loan B, 6.16%, 08/27/09 3,229,895 Amscan Holdings, Inc. 2,977,500 Term Loan B, 5.65%, 04/30/12 2,988,666 Blockbuster Entertainment Corp. Tranche B Term Loan, 1,000,000 08/20/11 (b) 992,610 Tranche B Term Loan, 10,000,000 5.81%, 08/20/11 9,926,100 Camelbak Products, Inc. Second Lien Term Loan, 2,000,000 9.54%, 02/04/12 2,011,260 Cinemark USA, Inc. Tranche C Term Loan, 2,475,000 5.18%, 03/31/11 2,512,125 CNL Hospitality Partners LP Mezzanine A-3 Notes, 5,000,000 5.71%, 09/09/06 5,012,500 2,936,346 Term Loan, 5.59%, 10/13/06 2,943,687 Fender Musical Instruments Corp. Second Lien Term Loan, 2,000,000 09/30/12 (b) 2,000,000 Second Lien Term Loan, 1,000,000 9.50%, 09/30/12 1,000,000 PAR/ COMMITMENT ($) VALUE ($) - ------------------ ------------- LEISURE GOODS/ACTIVITIES/MOVIES (CONTINUED) Metro-Goldwyn-Mayer Holdings, Inc./LOC Acquisition Co. Tranche B Term Loan, 3,505,000 04/08/12 (b) 3,510,117 Tranche B Term Loan, 6,000,000 5.38%, 04/08/12 6,008,760 Movie Gallery, Inc. 3,000,000 Term Loan B, 6.14%, 04/27/11 3,030,000 Oriental Trading Co., Inc. Second Lien Term Loan, 4,500,000 7.88%, 01/08/11 4,533,750 Polaroid Corp. Second Lien Term Loan, 2,000,000 11.75%, 04/27/11 (d) 2,000,000 Regal Cinemas, Inc. 5,759,549 Term Loan, 5.09%, 11/10/10 5,802,746 Six Flags Theme Parks, Inc. 1,572,641 Term Loan B, 5.89%, 06/30/09 1,584,436 Wallace Theaters First Lien Term Loan, 6.35%, 1,985,000 07/31/09 2,004,850 ------------- 61,091,502 ------------- LODGING & CASINOS - 4.1% Ameristar Casinos, Inc. Term Loan B1, 663,580 5.06%, 12/20/06 671,464 CNL Hotel Del Partners LP First Mezzanine Loan, 3,000,000 7.44%, 02/09/07 3,007,500 Green Valley Ranch Gaming LLC 3,960,075 Term Loan B, 5.10%, 12/22/10 3,989,776 OpBiz LLC 1,993,205 Term Loan A, 08/31/10 (b) 1,991,969 11,926,349 Term Loan A, 6.10%, 08/31/10 11,918,955 6,795 Term Loan B, 08/31/10 (b) 6,798 28,511 Term Loan B, 7.10%, 08/31/10 28,523 Penn National Gaming, Inc. Second Lien Term Loan, 1,333,333 05/26/12 (b) 1,345,000 Resorts International Ltd. Second Lien Term Loan, 8,000,000 8.85%, 04/26/13 7,993,280 2,000,000 Term Loan B, 5.61%, 04/26/12 2,013,760 Trump Entertainment Resorts, Inc. Delayed Draw Term Loan B, 750,000 05/01/12 (b) 758,910 750,000 Term Loan B-1, 05/01/12 (b) 758,910 1,000,000 Term Loan B-1, 5.59%, 05/20/12 1,011,880 1,000,000 Term Loan B-2, 1.00%, 05/20/12 (c) 1,011,880 United Auburn Indian Community 2,500,000 Term Loan, 01/22/09 (b) 2,509,375 16 INVESTMENT PORTFOLIO (UNAUDITED) (CONTINUED) MAY 31, 2005 HIGHLAND FLOATING RATE LIMITED LIABILITY COMPANY PAR/ COMMITMENT ($) VALUE ($) - ------------------ ------------- VARIABLE RATE SENIOR LOAN NOTES (CONTINUED) LODGING & CASINOS (CONTINUED) Wyndham International, Inc. Credit Linked Certificate of Deposit, 431,034 5.50%, 05/12/11 432,112 First Lien Term Loan, 4,568,966 6.38%, 05/10/11 4,578,972 ------------- 44,029,064 ------------- NONFERROUS METALS/MINING - 1.1% J W Aluminum Co. First Lien Term Loan, 995,000 6.35%, 10/20/10 1,009,925 Murray Energy Corp. Tranche B Term Loan, 4,738,125 6.10%, 01/28/10 4,749,970 Novelis, Inc. Canadian Term Loan, 976,701 4.96%, 01/07/12 987,386 United States Term Loan, 1,696,373 4.96%, 01/07/12 1,712,743 Trout Coal Holdings LLC First Lien Term Loan, 3,000,000 5.96%, 03/23/11 2,993,760 ------------- 11,453,784 ------------- OIL/GAS - 4.3% ALON USA 5,000,000 Term Loan, 10.00%, 01/15/09 5,150,000 ATP Oil & Gas Corp. 5,000,000 Term Loan, 04/14/10 (b) 5,050,000 Basic Energy Services, Inc. 3,346,803 Term Loan B, 6.06%, 10/03/09 3,363,537 Belden & Blake Corp. 4,016,250 Term Loan, 5.76%, 07/07/11 4,036,331 EL Paso Corp. Deposit Accounts, 2,500,000 2.77%, 11/23/09 2,508,850 4,972,000 Term Loan, 5.88%, 11/23/09 5,002,578 Kerr-McGee Corp. 11,500,000 Term Loan B, 05/15/11 (b) 11,639,610 4,000,000 Term Loan X, 05/03/07 (b) 4,019,360 Trident Exploration Corp. Second Lien Term Loan, 1,000,000 04/26/11 (b) 1,007,500 3,000,000 Second Lien Term Loan, 10.09%, 04/26/11 3,022,500 Western Refining Co. LP 1,260,000 Term Loan, 6.62%, 08/28/08 1,278,900 ------------- 46,079,166 ------------- PUBLISHING - 3.1% Adams Outdoor Advertising LP First Lien Term Loan, 3,090,363 5.15%, 10/15/11 3,128,374 PAR/ COMMITMENT ($) VALUE ($) - ------------------ ------------- PUBLISHING (CONTINUED) American Lawyer Media, Inc. First Lien Term Loan, 5,000,000 5.58%, 03/05/10 4,987,500 Dex Media East LLC 5,589,299 Term Loan A, 4.72%, 11/08/08 5,618,251 1,092,224 Term Loan B, 4.64%, 05/08/09 1,103,954 Dex Media West LLC 2,199,113 Term Loan A, 5.04%, 09/09/09 2,212,528 North American Membership Group, Inc. Second Lien Term Loan, 3,000,000 12.50%, 11/18/11 2,970,000 1,000,000 Term Loan, 11/04/11 (b) 1,000,000 PRIMEDIA, Inc. 1,765,856 Term Loan B, 5.88%, 06/30/09 1,769,175 R.H. Donnelley Corp. 1,743,624 Term Loan D, 4.63%, 06/30/11 1,759,874 Relizon Co. 1,300,533 Term Loan, 6.28%, 02/20/11 1,307,035 Sun Media Corp. 1,303,206 Term Loan B, 5.19%, 02/07/09 1,315,626 Transwestern Publishing Co. First Lien Term Loan, 3,016,125 5.46%, 02/25/11 3,026,983 VISANT Corp. 2,910,000 Tranche B, 5.19%, 10/04/11 2,944,047 ------------- 33,143,347 ------------- REAL ESTATE INVESTMENT TRUST - 2.1% AIMCO Properties, LP 2,000,000 Term Loan, 5.21%, 11/02/09 2,016,240 General Growth Properties, Inc. Tranche B Term Loan, 14,955,152 5.34%, 11/12/08 15,074,196 Strategic Hotel Capital, Inc. 5,000,000 Term Loan B2, 5.76%, 07/09/06 5,078,500 ------------- 22,168,936 ------------- RETAILERS - 0.9% Dollarama 2,992,500 Term Loan B, 5.44%, 11/18/11 3,017,757 Harbor Freight Tools USA 4,032,319 Term Loan, 5.76%, 07/15/10 4,047,441 Prestige Brands Holdings, Inc. Term Loan B Add-on, 107,892 5.19%, 04/06/11 108,970 1,980,000 Term Loan B, 5.38%, 04/06/11 1,999,800 ------------- 9,173,968 ------------- STEEL - 0.3% The Techs Industries, Inc. 2,850,000 Term Loan, 5.35%, 01/14/10 2,857,125 ------------- 17 INVESTMENT PORTFOLIO (UNAUDITED) (CONTINUED) MAY 31, 2005 HIGHLAND FLOATING RATE LIMITED LIABILITY COMPANY PAR/ COMMITMENT ($) VALUE ($) - ------------------ ------------- VARIABLE RATE SENIOR LOAN NOTES (CONTINUED) SURFACE TRANSPORT - 1.3% Helm Holding Corp. 6,967,494 Term Loan B, 5.85%, 07/02/10 7,040,095 Quality Distribution, Inc. 2,165,340 Term Loan, 6.09%, 11/13/09 (f) 2,176,167 2,738,600 Term Loan, 6.09%, 11/13/09 2,752,293 Transport Industries LP 2,525,886 Term Loan B, 7.13%, 06/13/10 2,538,516 ------------- 14,507,071 ------------- TELECOMMUNICATIONS/CELLULAR - 2.2% Cellular South, Inc. 2,977,500 Term Loan, 5.34%, 05/04/11 3,017,518 Dobson Cellular Systems, Inc. 625,000 Revolver, 0.63%, 10/23/08 (c) 602,600 MetroPCS, Inc. First Lien Term Loan, 4,000,000 05/27/11 (b) 4,030,000 Second Lien Term Loan, 6,000,000 05/27/12 (b) 6,075,000 Qwest Corp. 10,000,000 Term Loan B, 6.95%, 06/30/10 9,815,600 ------------- 23,540,718 ------------- TELECOMMUNICATIONS/COMBINATION - 2.4% Alaska Communications Systems Holdings, Inc. 2,000,000 Term Loan, 5.09%, 02/01/12 2,009,380 Centennial Cellular Operating Co. 2,250,000 Revolver, 0.50%, 02/09/11 (c) 2,248,605 4,117,875 Term Loan, 5.51%, 02/09/11 4,165,478 NTELOS, Inc. First Lien Term Loan B, 1,251,875 5.61%, 08/24/05 1,250,310 Second Lien Term Loan, 1,500,000 8.07%, 02/24/12 1,479,375 NTL, Inc. Tranche B Term Loan, 5,000,000 6.41%, 04/14/12 5,039,100 PanAmSat Corp. 4,962,349 Term Loan B, 5.31%, 08/20/11 5,021,153 RCN Corp. 3,990,000 Term Loan, 7.56%, 12/21/11 4,006,199 ------------- 25,219,600 ------------- TELECOMMUNICATIONS/WIRELESS - 4.5% Bresnan Communications LLC 2,150,000 Term Loan B, 6.56%, 09/30/10 2,174,725 Consolidated Communications, Inc. 4,950,000 Term Loan C, 5.68%, 10/14/11 5,011,875 Cricket Communications, Inc. 5,000,000 Revolver, 0.75%, 01/10/10 (c) 4,818,750 14,962,500 Term Loan B, 5.59%, 01/10/11 14,911,029 FairPoint Communications, Inc. Initial B Term Loan, 5,000,000 5.17%, 02/08/12 5,035,600 PAR/ COMMITMENT ($) VALUE ($) - ------------------ ------------- TELECOMMUNICATIONS/WIRELESS (CONTINUED) Nextel Partners Operating Corp. Tranche D Term Loan, 4,000,000 4.44%, 05/31/12 4,012,480 SBA Senior Finance, Inc. 4,466,250 Term Loan, 6.02%, 10/31/08 4,546,285 Telcordia Technologies, Inc. 3,000,000 Term Loan, 6.07%, 09/15/12 2,945,010 WilTel Communications Group, Inc. 5,976,212 Term Loan, 7.00%, 04/01/10 5,139,542 ------------- 48,595,296 ------------- TELECOMMUNICATIONS/WIRELINE - 0.2% Valor Telecommunications Enterprises LLC Tranche B Term Loan, 1,960,000 5.10%, 02/14/12 1,977,758 ------------- UTILITIES - 4.5% Allegheny Energy, Inc. 1,000,000 Term Advances, 03/08/11 (b) 1,011,040 2,496,053 Term Advances, 5.69%, 03/08/11 2,523,609 Calpine Construction Finance Co. LP First Lien Term Loan, 1,970,000 9.08%, 08/26/09 2,036,980 Calpine Corp. Second Lien Term Loan B, 234,945 8.89%, 07/16/07 172,489 CenterPoint Energy, Inc. 2,250,000 Term Loan, 04/30/10 (b) 2,258,190 4,987,500 Term Loan, 6.04%, 04/30/10 5,005,655 Infrasource, Inc. 1,949,011 Term Loan, 5.85%, 09/30/10 1,973,374 KGen, LLC Tranche A Term Loan, 2,000,000 5.64%, 08/05/11 1,960,000 Tranche B Term Loan, 1,000,000 12.01%, 08/05/11 955,000 Midwest Generations LLC 1,397,163 Term Loan, 5.29%, 04/27/11 1,408,732 Mirant Corp. 2,000,000 Revolver, 07/17/05 (e) 1,437,500 2,000,000 Revolver, 07/17/05 (b) (e) 1,437,500 4,000,000 Revolver, 07/15/08 (b) (e) 2,916,640 Riverside Energy Center LLC 4,626,288 Term Loan, 7.44%, 06/24/11 4,741,945 Rocky Mountain Energy Center LLC Credit Linked Certificate of Deposit, 361,073 4.35%, 06/24/11 368,295 3,286,536 Term Loan, 7.44%, 06/24/11 3,368,699 Texas Genco LLC Delayed Draw Term Loan, 1,461,538 5.06%, 12/14/11 1,473,114 Initial Term Loan, 9,847,115 5.01%, 12/14/11 9,939,481 18 INVESTMENT PORTFOLIO (UNAUDITED) (CONTINUED) MAY 31, 2005 HIGHLAND FLOATING RATE LIMITED LIABILITY COMPANY PAR/ COMMITMENT ($) VALUE ($) - ------------------ ------------- VARIABLE RATE SENIOR LOAN NOTES (CONTINUED) UTILITIES (CONTINUED) TNP Enterprises, Inc. 2,947,500 Term Loan, 8.22%, 12/31/06 2,951,182 ------------- 47,939,425 ------------- TOTAL VARIABLE RATE SENIOR LOAN NOTES (COST $1,026,032,593) 1,042,661,521 ------------- CORPORATE NOTES AND BONDS - 1.8% BEVERAGE & TOBACCO- 0.2% Commonwealth Brands, Inc Floating Rate Note, 2,000,000 10.91%, 04/15/08 (g) 2,090,000 ------------- CONTAINER/GLASS PRODUCTS - 0.2% Constar International, Inc. Floating Rate Note, 2,500,000 6.64%, 02/15/12 (g) 2,375,000 ------------- FOREST PRODUCTS - 0.1% NewPage Corp. Floating Rate Note, 1,000,000 9.46%, 05/01/12 (g) 985,000 ------------- HEALTH CARE - 0.2% Elan Finance Floating Rate Note, 2,000,000 7.27%, 11/15/11 (g) 1,740,000 ------------- OIL & GAS - 0.3% Secunda International Ltd. Floating Rate Note, 4,000,000 11.14%, 09/01/12 3,800,000 ------------- TELECOMMUNICATIONS/CELLULAR - 0.2% Dobson Cellular Systems, Inc. Floating Rate Note, 2,000,000 7.96%, 11/01/11 (g) 2,055,000 ------------- TELECOMMUNICATIONS/COMBINATION - 0.4% US Unwired, Inc. Floating Rate Note, Series B, 4,000,000 7.26%, 06/15/10 4,120,000 ------------- UTILITIES - 0.2% Calpine Construction Finance Co. LP Floating Rate Note, 2,000,000 11.63%, 08/26/11 (g) 2,110,000 ------------- TOTAL CORPORATE NOTES AND BONDS (COST $19,682,757) 19,275,000 ------------- PAR/ COMMITMENT ($) VALUE ($) - ------------------ ------------- COMMERCIAL MORTGAGE-BACKED SECURITY - 0.5% Bear Stearns Series 2004-ESA, Class K, 5,000,000 5.59%, 05/14/16 5,007,693 ------------- TOTAL COMMERCIAL MORTGAGE- BACKED SECURITY (COST $5,000,000) 5,007,693 ------------- SHARES ------ COMMON STOCKS (h) - 0.3% BUSINESS SERVICES - 0.0% 322,876 NATG Holdings LLC (d) 0 ------------- DIVERSIFIED MANUFACTURING - 0.0% 4,021 GenTek, Inc., B Shares 43,869 ------------- ECOLOGICAL SERVICE& EQUIPMENT - 0.0% Environmental Systems Products 3,445 Holdings (d) 0 ------------- HEALTH CARE - 0.0% 22,500 Sun Healthcare Group, Inc. 157,500 ------------- INDUSTRIAL EQUIPMENT - 0.1% 400 Copperweld Corp., Class A (d) 380,000 56 Copperweld Corp., Class B (d) 939,400 ------------- 1,319,400 ------------- TELECOMMUNICATIONS/COMBINATION - 0.0% 87,288 SAVVIS Communications Corp. 59,356 ------------- TELECOMMUNICATIONS/WIRELESS - 0.2% 76,137 Leap Wireless International, Inc. 2,048,085 ------------- TOTAL COMMON STOCKS (COST $3,079,031) 3,628,210 ------------- PREFERRED STOCKS -0.0% AUTOMOTIVE -0.0% 13 Key Plastics Holdings, Inc. (d) (h) 0 ------------- DIVERSIFIED MANUFACTURING - 0.0% 14,382 Superior Essex, Inc., Series A (d) 14,382 ------------- TOTAL PREFERRED STOCKS (COST $14,382) 14,382 ------------- 19 INVESTMENT PORTFOLIO (UNAUDITED) (CONTINUED) MAY 31, 2005 HIGHLAND FLOATING RATE LIMITED LIABILITY COMPANY UNITS VALUE ($) ----- ------------- WARRANTS - 0.0% DIVERSIFIED MANUFACTURING - 0.0% GenTek, Inc., Class A expires 4 10/31/06 12 GenTek, Inc., Class B expires 2 10/31/08 6 ------------- 18 ------------- UTILITIES - 0.0% CenterPoint Energy, Inc., expires 8,508 08/01/08 (d) 0 ------------- TOTAL WARRANTS (COST $34) 18 ------------- UNFUNDED LOAN COMMITMENTS - (1.6)% (17,177,746) ------------- TOTAL INVESTMENTS - 98.5% 1,053,409,078 ------------- (cost of $1,053,808,797) (i) OTHER ASSETS & LIABILITIES, NET - 1.5% 15,736,613 ------------- NET ASSETS - 100.0% 1,069,145,691 ============= _______________________ Notes to Investment Portfolio: Highland Floating Rate Fund (formerly Columbia Floating Rate Fund) and Highland Institutional Floating Rate Fund (formerly Columbia Institutional Floating Rate Fund) (the "Funds") invest all of their investable assets in Highland Floating Rate Limited Liability Company (formerly Columbia Floating Rate Limited Liability Company) (the "Portfolio"). (a) Senior loans in which the Portfolio invests generally pay interest at rates which are periodically predetermined by reference to a base lending rate plus a premium. These base lending rates are generally (i) the prime rate offered by one or more major United States banks, (ii) the lending rate offered by one or more European banks such as the London Inter-Bank Offered Rate ("LIBOR") and (iii) the certificate of deposit rate. Rate shown represents the weighted average rate at May 31, 2005. Senior loans are generally considered to be restricted in that the Portfolio ordinarily is contractually obligated to receive approval from the agent bank and/or borrower prior to the disposition of a senior loan. (b) Unsettled loan. Interest rate cannot be determined at this time. (c) Unfunded commitment. As of May 31, 2005, the Portfolio had unfunded loan commitments of $17,177,746, which could be extended at the option of the Borrower, pursuant to the following loan agreements: UNFUNDED LOAN BORROWER COMMITMENT -------- -------------- Centennial Cellular Operating Co. $ 2,250,000 Cricket Communications, Inc. 5,000,000 Dobson Cellular Systems, Inc. 625,000 Federal-Mogul Corp. 102,746 Interstate Bakeries Corp. 7,500,000 Select Medical Corp. 700,000 Trump Entertainment Resorts, Inc. 1,000,000 -------------- $ 17,177,746 ============== (d) Represents fair value as determined in good faith under the direction of the Board of Trustees. (e) The issuer is in default of certain debt covenants. Income is not being accrued. As of May 31, 2005, the value of these securities amounted to $5,806,171, which represents 0.5% of net assets. (f) Loans held on participation. (g) Securities exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may only be resold, in transactions exempt from registration, to qualified institutional buyers. At May 31, 2005, these securities amounted to $11,355,000 or 1.1% of net assets. These securities have been determined by the Portfolio's investment adviser to be liquid securities. (h) Non-income producing security. (i) Cost for Federal income tax purposes is $1,054,143,492. Gross unrealized appreciation $ 9,126,027 Gross unrealized depreciation (9,860,441) ----------- Net unrealized depreciation $ (734,414) =========== DIP Debtor in Possession S.A.R.L. Software Architectural Representation Language SECURITY VALUATION: The value of the Funds' assets is based on its proportionate shares of the current market value of the Portfolio's investments. For securities with readily available market quotations, the Portfolio uses those quotations for pricing. When portfolio securities are traded on the relevant day of valuation, the valuation will be the last reported sale price on that day. If there are no such sales on that day, the security will be valued at the mean between the most recently quoted bid and asked prices from principal market makers. Securities without a sale price or bid and ask quotations on the valuation day will be priced by an independent pricing service. If securities do not have readily available market quotations or pricing service prices, including circumstances under which such are determined not to be accurate or current (including when events materially affect the value of securities occurring between the time when market price is determined and calculation of the Portfolio's net asset value), such securities are valued at their fair value, as determined in good faith in accordance with procedures established by the Portfolio's Board of Trustees. In these cases, the Portfolio's net asset value will reflect the affected portfolio securities' value as determined in the judgment of the Board of Trustees or its designee instead of being determined by the market. Using a fair value pricing methodology to price securities may result in a value that is different from a security's most recent sale price and from the prices used by other investment companies to calculate their net asset values. There can be no assurance that the Portfolio's valuation of a security will not differ from the amount that it realizes upon the sale of such security. For more information, see the most recent semi annual report filed with the Securities and Exchange Commission. 20 ITEM 2. CONTROLS AND PROCEDURES. (a) The registrant's principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)). (b) There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the registrant's last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 3. EXHIBITS. Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) HIGHLAND FLOATING RATE LIMITED LIABILITY COMPANY By (Signature and Title)* /S/ JAMES D. DONDERO ------------------------------------------------------- James D. Dondero, Chief Executive Officer (principal executive officer) Date JULY 27, 2005 ---------------------------------------------------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title)* /S/ JAMES D. DONDERO ------------------------------------------------------- James D. Dondero, Chief Executive Officer (principal executive officer) Date JULY 27, 2005 ---------------------------------------------------------------------------- By (Signature and Title)* /S/ M. JASON BLACKBURN ------------------------------------------------------- M. Jason Blackburn, Chief Financial Officer (principal financial officer) Date JULY 27, 2005 ---------------------------------------------------------------------------- * Print the name and title of each signing officer under his or her signature. EX-99.CERT 2 cert302.txt 302 CERTIFICATION CERTIFICATION PURSUANT TO RULE 30A-2(A) UNDER THE 1940 ACT AND SECTION 302 OF THE SARBANES-OXLEY ACT I, James D. Dondero, certify that: 1. I have reviewed this report on Form N-Q of Highland Floating Rate Limited Liability Company; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the schedules of investments included in this report fairly present in all material respects the investments of the registrant as of the end of the fiscal quarter for which the report is filed; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) [Omitted] (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report, based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: JULY 27, 2005 /S/ JAMES D. DONDERO -------------- ----------------------------------------------------- James D. Dondero, Chief Executive Officer (principal executive officer) CERTIFICATION PURSUANT TO RULE 30A-2(A) UNDER THE 1940 ACT AND SECTION 302 OF THE SARBANES-OXLEY ACT I, M. Jason Blackburn, certify that: 1. I have reviewed this report on Form N-Q of Highland Floating Rate Limited Liability Company; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the schedules of investments included in this report fairly present in all material respects the investments of the registrant as of the end of the fiscal quarter for which the report is filed; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) [Omitted] (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report, based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: JULY 27, 2005 /S/ M. JASON BLACKBURN -------------- -------------------------------------------- M. Jason Blackburn, Chief Financial Officer (principal financial officer) -----END PRIVACY-ENHANCED MESSAGE-----