<PAGE>
A logo for the Funds representing a Galaxy appears at the top of the page.
A photo of two men standing near a spiral walkway appears on the cover.
- --------------------------------------------------------------------------------
Taxable Bond Funds Report
- --------------------------------------------------------------------------------
Short-Term Bond Fund . Intermediate Government Income Fund (formerly
Intermediate Bond Fund) . Corporate Bond Fund . High Quality Bond Fund
- ------------------
Annual
Report
For the Year Ended
October 31, 1995
- ------------------
<PAGE>
- --------------------
CHAIRMAN'S
MESSAGE
- --------------------
Dear Shareholder:
What a difference a year makes! In the last 12 months, a dramatic decline in
interest rates produced the third largest total return for bonds in the last 45
years. In addition to strong gains in prices, bonds earned yields that were
quite exceptional given the moderate rates of inflation.
Although these returns were extraordinary by historic standards, and by no
means guarantee future performance, they underscore the importance of a long-
term approach toward bond investing. Shareholders who retained fixed-income
holdings during the temporary market weakness of 1994 were in a position to take
full advantage of the market rally that occurred the following year. Many
investors who sold their holdings may have missed out on these gains and
suffered losses they may not recoup for some time to come.
The ups and down in bond prices are part of normal market cycles that tend
to smooth out over time, although, bond prices have been particularly volatile
during the last two years. While it's unlikely that the superior returns of 1995
will be repeated in the year ahead, there may be additional opportunities for
capital appreciation and income. Such opportunities make bonds an important part
of a well-diversified investment strategy.
The enclosed performance report for the Galaxy Taxable Bond Funds covers
the 12 months ended October 31, 1995. Included is a Market Overview, which
explores the major events that affected bonds during this time. There are also
individual Portfolio Reviews that explain how Fleet Investment Advisors Inc.
managed its bond investments to make the most of these conditions. In addition,
the report provides an outlook for interest rates and bond prices in the months
to come and considers how this might affect future investment strategies.
After reading your report you may have additional questions about the
performance of the Funds' investments. You can discuss such questions with an
Investment Specialist, at any time, by calling 800-628-0414.
Sincerely,
/s/ Dwight E. Vicks, Jr.
Dwight E. Vicks, Jr.
Chairman of the Board of Trustees
- ------------------------------------
Mutual Funds:
. are not bank deposits
. are not FDICinsured
. are not obligations of Fleet Bank
. are not guaranteed by Fleet Bank
. are subject to investment risk
including possible loss of
principal amount invested
- ------------------------------------
<PAGE>
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MARKET OVERVIEW
- --------------------
"Having made significant investments in long-term bonds when their prices were
especially attractive, the Galaxy Taxable Bond Funds made the most of the rally
and delivered strong returns for the 12 months ended October 31, 1995."
BOND MARKET OVERVIEW
By Fleet Investment Advisors Inc.
In the last year, bond prices rebounded strongly from the weak levels of 1994.
Having made significant investments in long-term bonds when their prices were
especially attractive, the Galaxy Taxable Bond Funds made the most of the rally
and delivered strong returns for the 12 months ended October 31, 1995.
The exceptional rally in bonds resulted as expectations for a weaker
economy caused interest rates to fall sharply. During the fourth quarter of
1994, when the period began, the gross domestic product ("GDP"), which measures
goods and services, improved at an annualized rate of 5.1%. Concerned that a
swiftly growing economy would cause higher inflation, the Federal Reserve Board
(the "Fed") raised its short-term Fed Funds rate from 4.75% to 6% between
November of 1994 and February of 1995.
This increased the hope that the Fed would achieve a "soft landing" for the
economy, keeping inflation under control. Soon, long-term bond prices began to
rise and yields on longer-maturity issues began to fall. With news that growth
in the GDP had dropped to 2.7% in 1995's first quarter, investors began to
believe the Fed would soon cut interest rates to prevent a recession.
PERFORMANCE AT-A-GLANCE
Average Annual Returns* as of October 31, 1995
Trust Shares
Bar charts representing the Average Annual Returns for Trust Shares as of
10/31/95 appear on this page
Short-Term Bond Fund
1 year 9.55%
3 years 5.20%
life of fund 5.43%
Intermediate Government Income Fund
1 year 13.18%
3 years 5.01%
5 years 8.19%
life of fund 7.97%
Corporate Bond Fund
life of fund 13.85%
High Quality Bond Fund
1 year 18.66%
3 years 7.92%
life of fund 8.98%
*The Life of Fund return for the Corporate Bond Fund is a total return measured
since the date of inception.
1
<PAGE>
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MARKET OVERVIEW
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MARKET OVERVIEW
"By investing heavily in attractively priced issues with longer maturities,
which tend to outperform shorter-term bonds in a rally, we greatly enhanced
the Funds' potential for capital gains."
By the end of June, rising bond prices had reduced the yields on 30-year
Treasuries to 6.65% from a peak of 8.19% in October 1994. On July 6, the Fed
sliced short-term rates to 5.75%. This cut, the first in three years, pushed
bond prices higher and drove long-term yields to 6.49% in the days that
followed.
Despite rekindled fears of inflation that temporarily weakened bond prices
during the summer, bond prices were higher when the period ended. Investors had
grown increasingly optimistic about legislation that would balance the federal
budget and believed this, combined with moderate inflation, would coax the Fed
to cut interest rates another time. With further gains in bond prices, the
yields on 30-year Treasuries fell as far as 6.3% in October - the lowest they'd
been since February 1994.
INVESTMENT STRATEGIES
Fleet Investment Advisors Inc. had expected a rebound in bonds before the period
started. By investing heavily in attractively priced issues with longer
maturities, which tend to outperform shorter-term bonds in a rally, we greatly
enhanced the Funds' potential for capital gains. The longer maturities also
helped maintain solid yields for the Funds once interest rates began to fall.
Early in the period, about 50% of assets in the longer-term Galaxy Taxable
Bond Funds were invested in securities that matured in 10 years or more. By
summer, when interest rates had stabilized, we reduced the weightings in longer-
maturity issues to 30% so we could insulate the Funds against falling prices.
Once it appeared that interest rates were headed lower, we increased the Funds'
long-term holdings once again. At the end of the period, the weighting in
longer-term issues was about 40%.
For most of the year, we increased weightings in securities issued by the
U.S. government and its agencies. Early on, expectations for stronger corporate
earnings, combined with weak supplies of new issues, caused prices of corporate
bonds to rise faster than prices of government securities. This made corporate
yields less attractive compared to the yields for government bonds. As lower
interest rates encouraged companies to issue new debt, supplies of corporates
improved and corporate yields grew somewhat more attractive. While we made new
investments in selected corporate issues offering good potential, we felt
corporate yields were not yet strong enough generally for significant additions
in that sector.
2
<PAGE>
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MARKET OVERVIEW
- --------------------
"Because the bulk of the rally in bond prices is probably behind us, we now
expect to give greater attention to strategies that can enhance the Funds'
yields."
MARKET OUTLOOK
Although the GDP improved at an annual rate of 4.2% in 1995's third quarter,
Fleet Investment Advisors believes that modest wage gains and consumption should
limit GDP growth to 2.5% in 1996. This, combined with little or no improvement
in commodity prices, should keep inflation near 2.7%.
If this happens, and Congress succeeds in chopping federal deficits, the
Fed could cut interest rates again. In that case, rising bond prices could push
yields on 30-year Treasuries to 6%. Conversely, if the economy improves more
quickly, or hope for budget cuts begins to dim, long-term yields could rise as
high as 6.75%.
As interest rates begin to bottom in the months ahead, we will probably
pare weightings in longer-term bonds. Once interest rates change course, and
bond prices start to weaken, greater weightings in bonds with shorter maturities
should help preserve the value of the Funds' shares. Because the bulk of the
rally in bond prices is probably behind us, we now expect to give greater
attention to strategies that can enhance the Funds' yields and protect share
prices.
PERFORMANCE AT-A-GLANCE
Average Annual Returns as of October 31, 1995
Retail Shares
Bar charts representing the Average Annual Returns for Retail Shares as of
10/31/95 appear on this page
Short-Term Bond Fund
1 year 9.28%
3 years 5.10%
life of fund 5.36%
Intermediate Government Income Fund
1 year 12.85%
3 years 4.91%
5 years 8.13%
life of fund 7.93%
High Quality Bond Fund
1 year 18.46%
3 years 7.85%
life of fund 9.00%
3
<PAGE>
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PORTFOLIO REVIEWS
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GALAXY SHORT-TERM BOND FUND
A photo of Short Term Bond Fund manager Ken Thomae appears here.
By Kenneth W. Thomae
Portfolio Manager
As interest rates fell over the past year, we kept the average maturity of
investments in the Galaxy Short-Term Bond Fund relatively long and also gave
greater emphasis to securities issued by the U.S. government and its agencies.
This helped the Fund deliver strong returns for the 12 months ended October 31,
1995. During that time, the Fund's Retail and Trust Shares had total returns of
9.28% and 9.55%, respectively, versus a return of 8.79% for the average short-
term bond fund tracked by Lipper Analytical Services. This performance put the
Fund in the top third of funds in its class. During the same time, the Lehman
One-to-Three-Year Government Index returned 8.83%.
LEVERAGING THE RALLY
When interest rates fall, raising the prices for fixed-income investments, the
prices of longer-term issues tend to rise more than the prices of shorter-
maturity issues. Therefore, as interest rates began to drop in the fourth
quarter of 1994, we sold some of the Fund's shorter-term holdings and purchased
issues maturing in one to three years. We continued to buy longer-term
investments as interest rates fell further in 1995. By the end of October 1995,
the Fund had an average maturity for its investments of 2.9 years. In addition
to improving the Fund's potential for capital gains, this helped to boost the
Fund's yield.
During the period we also invested more heavily in U.S. government-issued
securities especially those issued by U.S. government agencies. In the past year
the supply of new short-term corporate securities was quite low compared to
demand. This put upward pressure on the prices of these issues, which kept their
yields low relative to those for government securities. The yields for short-
term corporates were further depressed by the improved credit quality of their
issuers. By the end of the period, 84% of the Fund was invested in U.S.
government issues, up from 76% a year earlier, and the Fund's Retail and Trust
shares had 30-day SEC yields of 4.91% and 5.22%, respectively.
Galaxy Short-Term Bond Fund
Distribution of Total Net Assets
as of October 31, 1995
Corporate Bonds & Notes 12%
$10,000
A pie chart listing Short Term Bond Fund investments by type appears here:
Corporate Bonds and Notes 12%
US Government & Agency Obligations 84%
Repurchase Agreements & Other Net Assets
and Liabilities 4%
Other Securities 4%
Galaxy Short-Term Bond Fund
Growth of $10,000 investment*
A mountain chart comparing the growth of $10,000 invested in retail shares and
trust shares of the Short Term Bond Fund and the Lehman Brothers One to Three
Year Government Bond Index appears here:
Start End
Retail Shares $10,000 $12,249
Trust Shares $10,000 $12,216
Index $10,000 $12,276
* Since inception on 12/30/91. The Lehman Brothers One to Three Year Government
Bond Index is an unmanaged index in which investors cannot invest. Results for
the index do not reflect the expenses and investment management fees incurred
by the Fund.
4
<PAGE>
- --------------------
PORTFOLIO REVIEWS
- --------------------
THE MONTHS TO COME
We expect to maintain these strategies in coming months. If inflation remains
moderate, and the economy weakens further, interest rates should continue to
fall. As that happens, the Fund's longer average maturity will help us maximize
its yield and potential for capital gains. Since it's unlikely that the yields
for short-term corporates would become more attractive in this environment, we
will probably stay heavily invested in government issues. We will continue to
emphasize noncallable issues in the government agency sector, which tend to
outperform callable issues when interest rates fall.
Ken Thomae has managed the Galaxy Short-Term Bond Fund since its inception in
December 1991. He has managed fixed-income portfolios for Fleet Investment
Advisors Inc. and its predecessors since 1985.
GALAXY INTERMEDIATE
GOVERNMENT INCOME FUND
By Bruce Barton
Portfolio Manager
The Galaxy Intermediate Bond Fund changed its name to the Galaxy Intermediate
Government Income Fund on September 7, 1995 to better reflect its investment
policy of investing at least 65% of its assets in U.S. Government securities,
under normal market and economic conditions. By increasing investments in issues
with longer maturities, the Galaxy Intermediate Government Income Fund delivered
solid returns for the 12 months ended October 31, 1995. During the period, the
Fund's Retail shares had a total return of 12.85% and Trust shares returned
13.18%. That compares with a return of 13.79% for the average intermediate bond
fund tracked by Lipper Analytical Services, and 12.52% for the Lehman
Intermediate Bond Index.
MAXIMIZING PRICE GAINS AND YIELDS
When the period began, the average maturity of the Fund's investments was eight
years. Among these investments were variable-rate bonds whose prices, like those
of shorter-maturity issues, tend to be less vulnerable to rising interest rates
than the prices of fixed-rate securities.
As interest rates fell, we traded the variable-rate bonds and other
shorter-maturity issues for longer-term securities with fixed rates. Because
prices of longer-term issues typically improve more when rates fall than prices
of shorter-maturity issues, this strategy helped the Fund make the most of the
particularly strong gains enjoyed by intermediate-term issues. It also helped to
maximize the Fund's yield.
Because falling interest rates encourage homeowners to refinance mortgages,
the yields for mortgage-backed securities had a negative impact on the overall
Fund performance, relative to the yields for other corporate and intermediate-
term securities. This caused us to sell many of the Fund's investments in
mortgage-backed securities. For most of the period, the bonds we bought were
issued by the U.S. government and its agencies. This was
A photo of Intermediate Government Income Fund manager Bruce Barton appears
here.
Bruce Barton
Galaxy Intermediate Government
Income Fund
Distribution of Total Net Assets
as of October 31, 1995
A pie chart listing Intermediate Government Income Fund investments by type
appears here:
Corporate Bonds & Notes 25%
U.S. Government & Agency Obligations 69%
Repurchase Agreements & Other Net Assets
and Liabilities 6%
Other Securities 4%
5
<PAGE>
- --------------------
PORTFOLIO REVIEWS
- --------------------
because we felt the yields on corporate bonds were not attractive enough to
offset the additional price volatility these issues tend to incur.
As a result of these strategies, the Fund maintained a solid yield as
interest rates were falling. As of October 31, 1995, the SEC 30-day yields for
the Fund's Retail and Trust shares were 5.84% and 6.15%, respectively. By that
time, about 69% of the Fund was invested in U.S. government securities.
GOING FORWARD
If the economy grows slowly, and inflation remains moderate, interest rates
could edge lower in the months to come and bond prices could move higher. For
this reason, we expect to keep the Fund focused on issues maturing in 5 to 10
years. Most of the price gains are probably behind us, however, making it more
important to focus on yields. As a result, we've begun buying government agency
issues that can be called in after three to five years. We feel the higher
yields on these issues are attractive enough to outweigh the risk that they will
be called in before interest rates start to rise.
Bruce Barton has managed the Galaxy Intermediate Government Income Fund since
its inception in 1988 as the Intermediate Bond Fund.
GALAXY CORPORATE BOND FUND
By David Lindsay
Portfolio Manager
In building the portfolio of the Galaxy Corporate Bond Fund, we emphasized
issues with attractive yields and strong potential for capital gains. By doing
so, we helped the Fund deliver a strong return that was competitive with other
funds in its class. Between its inception on December 12, 1994, and October 31,
1995, the Fund returned 13.85%. During the period from December 15, 1994 through
October 31, 1995, a period for which Lipper Analytical Services measures other
similar funds' performances, the average return for intermediate term investment
grade bond funds was 13.59% and the Lehman Intermediate Corporate Bond Index
returned 9.67%.
ENHANCING RETURNS
Initially, we used a "barbell" structure for the Fund that balanced issues
matur-
Galaxy Intermediate
Government
Income Fund
Growth of $10,000 investment*
A mountain chart comparing the growth of $10,000 invested in retail shares and
trust shares of the Intermediate Government Income Fund and the Lehman Brothers
Intermediate Government/Corporate Bond Index appears here:
Start End
Retail Shares $10,000 $17,329
Trust Shares $10,000 $17,274
Index $10,000 $18,596
* Since inception on 9/1/88. The Lehman Brothers Intermediate Government/
Corporate Bond Index is an unmanaged index in which investors cannot invest.
Results for the index do not reflect the expenses and investment management
fees incurred by the Fund.
Galaxy Corporate
Bond Fund
Growth of $10,000 investment*
A mountain chart comparing the growth of $10,000 invested in retail shares and
trust shares of the Corporate Bond Fund and the Lehman Brothers Intermediate
Corporate Bond Index appears here:
Start End
Trust Shares $10,000 $11,385
Index $10,000 $10,967
* Since inception on 12/12/94. The Lehman Brothers Intermediate Corporate Bond
Index is an unmanaged index in which investors cannot invest. Results for the
index do not reflect the expenses and investment management fees incurred by
the Fund.
6
<PAGE>
- --------------------
PORTFOLIO REVIEWS
- --------------------
ing in more than 10 years against issues maturing in less than three years. Over
time, such a strategy seeks to maximize the Fund's investment return while
minimizing fluctuations in the value of its investments.
Once interest rates began to fall, we gave greater attention to securities
maturing in three to 10 years. This helped the Fund participate more fully in
the rally in bond prices, while still giving some protection against a short-
term turn around in prices. Although the prices of longer-maturity issues tend
to strengthen more than the prices of shorter-maturity issues when prices rally,
shorter-maturity issues generally outperform issues with longer maturities when
bond prices fall. At the end of the period, the Fund had an average maturity for
its investments of 7.2 years.
Early in the rally, the prices of corporates outperformed those for
Treasuries. By the second quarter of 1995, however, increased supplies of new
issues caused corporate prices to lag. This allowed us to add corporates to the
Fund's portfolio at prices and yields that were particularly attractive. These
additions, plus a focus on higher-coupon securities issued by financial,
industrial and electric utilities firms, enhanced the Fund's yield as interest
rates fell. As of October 31, 1995, the SEC 30-day yield for the Fund's shares
was 5.52%.
FUTURE STRATEGIES
Believing interest rates will stay relatively low in the months ahead, we've
taken several steps that we believe should further strengthen the yield of the
Galaxy Corporate Bond Fund. In addition to emphasizing issues with higher
coupons, we've added investments in mortgage-backed securities, whose prices
have become more attractive due to the heavy refinancing of mortgages that has
occurred in the last year.
Meanwhile, we continue to trade issues with the longest and shortest
maturities for those maturing in five to 10 years. We believe this should boost
the Fund's yield and potential for capital gains, while still leaving
considerable protection against reversals in interest rates and bond prices.
David Lindsay has managed the Galaxy Corporate Bond Fund since its inception in
December of 1994. He has managed the Galaxy Massachusetts Municipal Bond Fund
since 1993 and managed fixed-income portfolios for Fleet Investment Advisors
Inc. since 1986.
GALAXY HIGH QUALITY BOND FUND
By Kenneth W. Thomae
Portfolio Manager
When falling interest rates boost the prices of bonds, prices of issues with
longer maturities generally gain more than prices of bonds with shorter
maturities. By investing in longer-maturity issues early in the recent rally,
the Galaxy High Quality Bond Fund produced outstanding returns for the 12 months
ended October 31, 1995.
During this time, the Fund's Retail and Trust shares produced total returns
of 18.46% and 18.66%, respectively. That compares to returns of 15.80% for the
average A-rated bond fund tracked by Lipper Analytical Services and 16.16%
A photo of Intermediate Government Income Fund manager David Lindsey appears
here.
David Lindsey
Galaxy Corporate
Bond Fund
Distribution of Total Net Assets
as of October 31, 1995
A pie chart listing Corporate Bond Fund investments by type appears here:
US Government & Agency Obligations 21%
Financial 34%
Transportation 6%
Utilities 11%
Other Corporate and Foreign Bonds 24%
Repurchase Agreements & Other Net Assets
and Liabilities 4%
7
<PAGE>
- --------------------
PORTFOLIO REVIEWS
- --------------------
for the Lehman Brothers Long Term Government/Corporate Bond Index.
INVESTING AT ATTRACTIVE PRICES
In the middle of 1994, after rising interest rates had driven bond prices to
historic lows, we increased the average maturity of the Fund's investments from
9.5 years to 11 years. This helped the Fund make the most of the bond rally that
began at the end of 1994 and locked in higher yields as interest rates fell.
We maintained a longer portfolio as prices rallied further in 1995. At mid-
year, when interest rates stabilized, we shortened the average maturity of the
Fund. We felt this would protect the value of the Fund if interest rates
reversed and bond prices fell. By the third quarter of 1995, as a weakening
economy drove interest rates lower, we lengthened the average maturity once
again. When the period ended, the Fund had an average maturity of 8.5 years.
During the period, we continued to invest heavily in securities issued by
the U.S. government and its agencies. As reduced supplies of new issues and
higher credit ratings improved the prices of corporate bonds, their yields
became less attractive relative to those for U.S. government issues. Because the
yields on U.S. government agency securities were particularly attractive, we
added to holdings of agency issues during the period.
Throughout the year, we emphasized bonds that could not be called in by
their issuers. This helped us to further maximize the Fund's yield as interest
rates fell. On October 31, 1995, the Fund's Retail and Trust shares had 30-day
SEC yields of 5.29% and 5.48%, respectively.
LOOKING AHEAD
If the economy grows weaker and interest rates fall further, the Fund's
longer average maturity should provide additional appreciation and solid yields.
Once it looks like the economy is strengthening and interest rates are
bottoming, we'll probably shorten the average maturity of the Fund another time
to preserve the sizable gains that the Fund has earned this year.
Ken Thomae has managed the Galaxy High Quality Bond Fund since its inception in
December 1990. He has managed fixed-income portfolios for Fleet Investment
Advisors Inc. and its predecessors since 1985.
- --------------------------------------------------------------------------------
Investment returns and principal values will vary with market conditions so that
an investor's shares, when redeemed, may be worth more or less than their
original cost. The Investment Adviser is presently waiving fees and/or
reimbursing expenses. Without such waivers and/or reimbursements, performance
would be lower. Past performance is no guarantee of future results. Total return
figures in this report include changes in share price, and reinvestment of
dividends and capital gains distributions, if any.
Galaxy High Quality Bond Fund
Distribution of Total Net Assets
as of October 31, 1995
A pie chart listing High Quality Bond Fund investments by type appears here:
Corporate Bonds & Notes 20%
U.S. Government & Agency Obligations 75%
Cash Equivalents & Net Other Assets
and Liabilities 5%
Galaxy High Quality Bond Fund
Growth of $10,000 investment*
A mountain chart comparing the growth of $10,000 invested in retail shares of
the High Quality Bond Fund and the Lehman Brothers Long Term
Government/Corporate Bond Index appears here:
Start End
Retail Shares $10,000 $15,259
Trust Shares $10,000 $15,230
Index $10,000 $16,856
* Since inception on 12/14/90. The Lehman Brothers Long-Term Government/
Corporate Bond Index is an unmanaged index in which investors cannot invest.
Results for the index do not reflect the expenses and investment management
fees incurred by the Fund.
8
<PAGE>
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SHORT-TERM BOND FUND
PORTFOLIO OF INVESTMENTS
THE GALAXY FUND OCTOBER 31, 1995
- --------------------
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
--------- --------------
<C> <S> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 84.20%
U.S. TREASURY NOTES - 53.19%
$ 2,000,000 7.50%, 01/31/96.......................................................... $ 2,009,798
6,000,000 7.38%, 05/15/96.......................................................... 6,057,120
3,000,000 6.00%, 06/30/96.......................................................... 3,008,400
5,500,000 7.00%, 09/30/96.......................................................... 5,569,735
9,000,000 6.13%, 12/31/96.......................................................... 9,060,829
3,000,000 6.25%, 01/31/97.......................................................... 3,023,970
6,000,000 7.38%, 11/15/97.......................................................... 6,198,774
500,000 6.38%, 07/15/99.......................................................... 510,240
--------------
35,438,866
--------------
U.S. TREASURY STRIPS (A) - 17.07%
3,000,000 4.24%, 11/15/97, Interest (B)............................................ 2,677,827
15,000,000 3.58%, 11/15/04, Interest (B)............................................ 8,698,485
--------------
11,376,312
--------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 7.24%
1,000,000 7.00%, 02/10/96.......................................................... 1,004,319
200,000 6.05%, 01/12/98.......................................................... 201,242
1,000,000 7.30%, 04/17/00, MTN..................................................... 1,027,789
1,000,000 6.40%, 01/13/04.......................................................... 988,599
500,000 7.86%, 05/25/04, MTN..................................................... 521,465
1,000,000 8.63%, 11/10/04.......................................................... 1,079,579
--------------
4,822,993
--------------
FEDERAL HOME LOAN BANK - 3.61%
400,000 6.85%, 02/25/97.......................................................... 406,064
2,000,000 7.10%, 05/22/98.......................................................... 2,000,900
--------------
2,406,964
--------------
STUDENT LOAN MARKETING ASSOCIATION - 3.09%
2,000,000 7.62%, 04/18/00, MTN..................................................... 2,055,198
--------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS............................. 56,100,333
(Cost $55,415,980) --------------
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
- --------------------
SHORT-TERM BOND FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
THE GALAXY FUND OCTOBER 31, 1995
- --------------------
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
--------- --------------
<C> <S> <C>
CORPORATE NOTES AND BONDS - 12.26%
CONSUMER STAPLES - 7.81%
$ 2,000,000 American Home Products Corp.
7.70%, 02/15/00.......................................................... $ 2,107,500
1,000,000 Coca Cola Enterprises, Inc.
7.00%, 11/15/99.......................................................... 1,025,000
1,000,000 Procter & Gamble Co.
6.85%, 06/01/97.......................................................... 1,012,500
1,000,000 Sara Lee Corp., MTN
7.40%, 03/22/02.......................................................... 1,060,000
--------------
5,205,000
--------------
FINANCIAL - 2.87%
500,000 Ford Motor Credit Co.
8.38%, 01/15/00.......................................................... 538,125
250,000 Ford Motor Credit Co.
8.20%, 02/15/02.......................................................... 271,250
1,000,000 General Motors Acceptance Corp.
8.50%, 01/01/03.......................................................... 1,102,500
--------------
1,911,875
--------------
TECHNOLOGY - 1.58%
1,000,000 International Business Machines Corp.
7.25%, 11/01/02.......................................................... 1,051,250
--------------
TOTAL CORPORATE NOTES AND BONDS.......................................... 8,168,125
(Cost $7,777,877) --------------
</TABLE>
See Notes to Financial Statements.
10
<PAGE>
- --------------------
SHORT-TERM BOND FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
THE GALAXY FUND OCTOBER 31, 1995
- --------------------
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
--------- --------------
<C> <S> <C>
REPURCHASE AGREEMENT - 1.68%
$ 1,119,271 Chase Securities, Inc.
5.75%, 11/01/95, Dated 10/31/95,
Repurchase Price $1,119,450
(Collaterized by U.S. Treasury Note
5.88%, Due 1997, Total Par 1,125,000,
Market Value $1,144,688)................................................. $ 1,119,271
--------------
TOTAL REPURCHASE AGREEMENT............................................... 1,119,271
(Cost $1,119,271) --------------
TOTAL INVESTMENTS - 98.14%................................................................ 65,387,729
(Cost $64,313,128) --------------
NET OTHER ASSETS AND LIABILITIES - 1.86%.................................................. 1,242,094
--------------
NET ASSETS - 100.00%...................................................................... $ 66,629,823
==============
</TABLE>
- --------------------------------------------------------------------------------
(A) Annualized yield at time of purchase.
(B) Stripped securities represent the splitting of cash flows into interest and
principal. Holders, as indicated, are entitled to that portion of the
payments representing interest only or principal only.
MTN Medium Term Note
See Notes to Financial Statements.
11
<PAGE>
- --------------------
INTERMEDIATE GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS
THE GALAXY FUND OCTOBER 31, 1995
- --------------------
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
--------- --------------
<C> <S> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 69.06%
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 42.52%
$ 1,000,000 9.05%, 04/10/00.......................................................... $ 1,117,319
2,000,000 2.19%, 08/21/01, Principal (A) (B)....................................... 1,907,880
2,000,000 6.93%, 08/23/02, MTN..................................................... 2,001,858
5,000,000 6.80%, 10/23/02, MTN..................................................... 4,999,845
33,500,000 7.65%, 04/29/04.......................................................... 34,154,221
20,000,000 7.70%, 08/10/04.......................................................... 20,810,180
12,000,000 8.42%, 10/20/04, MTN..................................................... 12,441,348
4,000,000 7.50%, 10/25/04.......................................................... 4,087,108
10,000,000 8.00%, 04/13/05.......................................................... 10,402,100
2,000,000 7.00%, 11/25/05.......................................................... 2,005,668
5,150,000 7.00%, 12/25/06.......................................................... 5,107,147
3,350,000 6.80%, 05/25/08.......................................................... 3,339,635
10,400,000 7.00%, 08/25/10.......................................................... 10,565,464
------------
112,939,773
------------
FEDERAL HOME LOAN MORTGAGE CORPORATION - 15.40%
15,000,000 7.49%, 05/25/05.......................................................... 15,244,050
15,093,000 7.95%, 07/15/06.......................................................... 15,464,907
5,000,000 7.50%, 07/23/07.......................................................... 5,088,845
5,000,000 7.55%, 11/27/07.......................................................... 5,110,795
------------
40,908,597
------------
U.S. TREASURY NOTES - 7.28%
13,000,000 5.75%, 08/15/03.......................................................... 12,830,480
6,000,000 7.25%, 08/15/04.......................................................... 6,497,214
------------
19,327,694
------------
U.S. GOVERNMENT BACKED BONDS - 3.86%
10,000,000 Small Business Administration
7.25%, 05/10/05.......................................................... 10,237,500
------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS............................. 183,413,564
(Cost $179,954,430) ------------
</TABLE>
See Notes to Financial Statements.
12
<PAGE>
- --------------------
INTERMEDIATE GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
THE GALAXY FUND OCTOBER 31, 1995
- --------------------
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
--------- --------------
<C> <S> <C>
CORPORATE NOTES AND BONDS - 24.65%
FINANCIAL - 19.44%
$ 5,000,000 American General Corp.
7.75%, 04/01/05.......................................................... $ 5,387,500
5,000,000 Ford Motor Credit Co.
6.38%, 10/06/00.......................................................... 5,018,750
12,000,000 General Motors Acceptance Corp.
7.13%, 06/01/99.......................................................... 12,330,000
5,000,000 General Motors Acceptance Corp.
6.63%, 10/15/05.......................................................... 4,950,000
1,000,000 General Motors Corp.
9.63%, 12/01/00.......................................................... 1,140,000
10,000,000 Norwest Corp., MTN
7.68%, 05/10/02.......................................................... 10,400,000
11,000,000 Wachovia Bank of N.C., NA, MTN
7.75%, 04/15/02.......................................................... 11,632,500
750,000 Sears Roebuck Acceptance Corp., Series V, MTN
8.98%, 07/11/96.......................................................... 765,000
------------
51,623,750
------------
CONSUMER CYCLICALS - 3.39%
8,000,000 Loews Corp.
8.88%, 04/15/11.......................................................... 9,010,000
------------
OIL, GAS, AND PETROLEUM - 1.82%
1,000,000 B.P. America, Inc.
9.38%, 11/01/00.......................................................... 1,135,000
2,600,000 Pennzoil Co., Debenture
10.25%, 11/01/05......................................................... 3,207,750
476,000 Second Atransco Tanker Corp.
8.50%, 06/15/02.......................................................... 490,875
------------
4,833,625
------------
TOTAL CORPORATE NOTES AND BONDS.......................................... 65,467,375
(Cost $63,080,826) ------------
</TABLE>
See Notes to Financial Statements.
13
<PAGE>
- --------------------
INTERMEDIATE GOVERNMENT INCOME FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
THE GALAXY FUND OCTOBER 31, 1995
- --------------------
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
--------- --------------
<C> <S> <C>
REPURCHASE AGREEMENT - 5.55%
$ 14,755,580 Chase Securities, Inc.
5.75%, 11/01/95, Dated 10/31/95
Repurchase Price $14,757,937
(Collaterized by U.S. Treasury Note
5.88%, Due 1997, Total Par 14,795,000,
Market Value $15,053,913)................................................ $ 14,755,581
------------
TOTAL REPURCHASE AGREEMENT............................................... 14,755,581
(Cost $14,755,581) ------------
TOTAL INVESTMENTS - 99.26%................................................................ 263,636,520
(Cost $257,790,837) ------------
NET OTHER ASSETS AND LIABILITIES - 0.74%.................................................. 1,958,692
------------
NET ASSETS - 100.00%...................................................................... $265,595,212
============
</TABLE>
- --------------------------------------------------------------------------------
(A) Annualized yield at time of purchase.
(B) Stripped securities represent the splitting of cash flows into interest
and principal. Holders, as indicated, are entitled to that portion of the
payments representing interest only or principal only.
MTN Medium Term Note
See Notes to Financial Statements.
14
<PAGE>
- --------------------
CORPORATE BOND FUND
PORTFOLIO OF INVESTMENTS
THE GALAXY FUND OCTOBER 31, 1995
- --------------------
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
--------- --------------
<C> <S> <C>
CORPORATE NOTES AND BONDS - 70.67%
FINANCIAL - 33.59%
$ 210,000 American General Corp.
9.63%, 07/15/00.......................................................... $ 238,613
300,000 American General Financial Corp.
5.80%, 04/01/97.......................................................... 299,625
100,000 Aristar, Inc.
6.30%, 07/15/00.......................................................... 100,000
300,000 Associates Corp. of North America
8.38%, 06/01/96.......................................................... 304,473
305,000 Bank of New York, Inc.
7.88%, 11/15/02.......................................................... 330,163
300,000 Chase Manhattan Corp.
7.88%, 01/15/97.......................................................... 306,750
300,000 Chrysler Building N.Y., Inc.
9.13%, 05/01/99.......................................................... 328,125
150,000 Chrysler Financial Corp., MTN
4.99%, 02/03/97.......................................................... 147,938
300,000 Chubb Corp.
8.75%, 11/15/99.......................................................... 319,875
300,000 Cigna Corp.
8.00%, 09/01/96.......................................................... 304,818
300,000 CIT Group Holdings, Inc.
4.75%, 03/15/96.......................................................... 298,719
150,000 Citicorp, MTN
8.70%, 09/24/96.......................................................... 153,750
150,000 CNA Financial Corp.
8.63%, 03/01/96.......................................................... 151,104
300,000 Commercial Credit Group, Inc., Debenture
8.70%, 06/15/09.......................................................... 354,375
500,000 Dean Witter Discover & Co.
6.75%, 08/15/00.......................................................... 510,625
600,000 Dow Capital BV, Debenture
9.00%, 05/15/10.......................................................... 729,000
190,000 First Interstate Bancorp
10.50%, 03/01/96......................................................... 192,850
600,000 Fletcher Challenge Financial USA, Inc.
9.80%, 06/15/98.......................................................... 653,250
500,000 Ford Motor Credit Corp.
6.85%, 08/15/00.......................................................... 511,250
150,000 General Motors Acceptance Corp.
5.63%, 02/01/99.......................................................... 147,188
160,000 General Motors Acceptance Corp.
9.38%, 04/01/00.......................................................... 178,600
200,000 General Motors Acceptance Corp.
9.63%, 05/15/00.......................................................... 225,750
200,000 General Motors Acceptance Corp.
9.63%, 12/15/01.......................................................... 232,250
</TABLE>
See Notes to Financial Statements.
15
<PAGE>
- --------------------
CORPORATE BOND FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
THE GALAXY FUND OCTOBER 31, 1995
- --------------------
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
--------- --------------
<C> <S> <C>
FINANCIAL (CONTINUED)
$ 525,000 Great Western Financial Corp.
6.38%, 07/01/00.......................................................... $ 523,031
300,000 Household Finance Corp.
7.50%, 03/15/97.......................................................... 306,375
500,000 International Lease Finance Corp.
6.13%, 11/01/99.......................................................... 498,750
600,000 NZI Capital Corp.
8.25%, 03/15/97.......................................................... 604,500
300,000 Paccar Financial Corp., MTN
5.12%, 03/10/97.......................................................... 295,875
150,000 Progressive Corp., Ohio
6.60%, 01/15/04.......................................................... 146,625
300,000 Security Pacific Corp.
7.75%, 12/01/96.......................................................... 305,625
600,000 Standard Credit Card Trust, Class A
9.50%, 05/10/97.......................................................... 630,995
250,000 Textron Financial Corp., MTN
9.45%, 04/10/01.......................................................... 283,438
300,000 Torchmark Corp.
9.63%, 05/01/98.......................................................... 321,750
340,000 Transamerica Corp.
9.88%, 01/01/98.......................................................... 365,925
300,000 Travelers Group, Inc.
6.13%, 06/15/00.......................................................... 294,000
180,000 USL Capital Corp.
8.13%, 02/15/00.......................................................... 192,150
120,000 United States Leasing International, Inc.
8.75%, 12/01/01.......................................................... 134,400
600,000 US West Financial Services, Inc., MTN
9.45%, 09/30/97.......................................................... 637,500
-------------
12,560,030
-------------
UTILITIES - 11.00%
250,000 Commonwealth Edison Co.
9.38%, 02/15/00.......................................................... 275,625
300,000 Consumers Power Co.
8.75%, 02/15/98.......................................................... 316,125
250,000 Cox Communications, Inc.
6.38%, 06/15/00.......................................................... 250,000
350,000 GTE Corp.
9.38%, 12/01/00.......................................................... 393,750
300,000 GTE South, Inc., Series B, Debenture
7.25%, 08/01/02.......................................................... 315,375
</TABLE>
See Notes to Financial Statements.
16
<PAGE>
- --------------------
CORPORATE BOND FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
THE GALAXY FUND OCTOBER 31, 1995
- --------------------
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
--------- --------------
<C> <S> <C>
UTILITIES (CONTINUED)
$ 150,000 Kansas Gas & Electric Co.
6.50%, 08/01/05.......................................................... $ 149,063
300,000 Northern Indiana Public Service Co.
7.50%, 04/01/02.......................................................... 306,000
300,000 Orange & Rockland Utilities, Inc., Debenture
6.50%, 10/15/97.......................................................... 302,625
100,000 Orange & Rockland Utilities, Inc.
9.38%, 03/15/00.......................................................... 111,875
180,000 Philadelphia Electric Co.
9.25%, 10/01/99.......................................................... 199,125
250,000 Potomac Electric Power Co., MTN
6.72%, 05/28/97.......................................................... 252,813
365,000 Public Service Electric & Gas Co., Series KK
6.88%, 06/01/97.......................................................... 369,563
200,000 Public Service Electric & Gas Co., Series II
7.63%, 02/01/00.......................................................... 210,000
300,000 United Telecommunications, Inc.
9.75%, 04/01/00.......................................................... 337,500
300,000 Virginia Electric & Power Co., Series 1992 D
7.63%, 07/01/07.......................................................... 325,125
-------------
4,114,564
-------------
TRANSPORTATION - 5.98%
250,000 Atchison, Topeka & Santa Fe Railway Co., Series X
6.00%, 07/01/00.......................................................... 247,813
300,000 CSX Corp.
8.40%, 08/01/96.......................................................... 305,250
300,000 CSX Corp.
9.50%, 08/01/00.......................................................... 340,875
200,000 Federal Express Corp.
10.00%, 04/15/99......................................................... 221,750
150,000 Hertz Corp.
6.00%, 02/01/01.......................................................... 147,563
600,000 Lockheed Corp.
5.88%, 03/15/98.......................................................... 595,500
100,000 Southwest Airlines Co.
8.00%, 03/01/05.......................................................... 107,875
250,000 Union Pacific Corp.
7.60%, 05/01/05.......................................................... 268,438
-------------
2,235,064
-------------
</TABLE>
See Notes to Financial Statements.
17
<PAGE>
- --------------------
CORPORATE BOND FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
THE GALAXY FUND OCTOBER 31, 1995
- --------------------
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
--------- --------------
<C> <S> <C>
OIL, GAS, AND PETROLEUM - 5.64%
$ 300,000 Anadarko Petroleum Corp., Debenture
6.75%, 03/15/03.......................................................... $ 301,875
300,000 Atlantic Richfield Co., Debenture
10.88%, 07/15/05......................................................... 395,250
300,000 Enron Corp.
10.00%, 06/01/98......................................................... 325,875
100,000 Occidental Petroleum Corp.
10.13%, 11/15/01......................................................... 118,125
300,000 Phillips Petroleum Co.
9.00%, 06/01/01.......................................................... 336,375
300,000 Sun Co., Inc.
7.13%, 03/15/04.......................................................... 307,875
150,000 Texaco Capital, Inc.
8.65%, 01/30/98.......................................................... 158,438
150,000 Unocal, Series A, MTN
9.25%, 08/02/99.......................................................... 164,625
-------------
2,108,438
-------------
CONSUMER STAPLES - 5.31%
250,000 American Home Products Corp.
7.90%, 02/15/05.......................................................... 274,375
300,000 Baxter International, Inc.
9.25%, 09/15/96.......................................................... 308,250
150,000 Becton Dickinson & Co.
8.80%, 03/01/01.......................................................... 168,375
300,000 Limited, Inc.
9.13%, 02/01/01.......................................................... 333,750
250,000 Penney (J.C.) & Co., Inc.
9.05%, 03/01/01.......................................................... 280,938
300,000 Seagram Ltd., Debenture
6.50%, 04/01/03.......................................................... 297,000
300,000 Sears Roebuck & Co., Series V, MTN
9.31%, 07/24/98.......................................................... 324,000
-------------
1,986,688
-------------
CONSUMER CYCLICALS - 5.08%
600,000 Armstrong World Industries, Inc.
9.75%, 04/15/08.......................................................... 741,000
100,000 Comdisco, Inc.
9.75%, 01/15/97.......................................................... 104,125
100,000 Comdisco, Inc.
6.50%, 06/15/00.......................................................... 99,875
</TABLE>
See Notes to Financial Statements.
18
<PAGE>
- --------------------
CORPORATE BOND FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
THE GALAXY FUND OCTOBER 31, 1995
- --------------------
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
--------- --------------
<C> <S> <C>
CONSUMER CYCLICALS (CONTINUED)
$ 150,000 Dayton Hudson Corp., MTN
4.83%, 04/01/96.......................................................... $ 149,250
400,000 Eaton Corp., Debenture
7.00%, 04/01/11.......................................................... 395,500
150,000 Times Mirror Co., Debenture
7.50%, 07/01/23.......................................................... 159,375
100,000 Whitman Corp.
7.50%, 08/15/01.......................................................... 104,500
150,000 Whitman Corp.
6.50%, 02/01/06.......................................................... 145,875
-------------
1,899,500
-------------
BASIC MATERIALS - 2.94%
560,000 Alcan Aluminum, Ltd
5.88%, 04/01/00.......................................................... 550,900
360,000 Reynolds Metals Co., Debenture
9.38%, 06/15/99.......................................................... 395,100
150,000 Weyerhaeuser Co., Debenture
7.13%, 07/15/23.......................................................... 152,250
-------------
1,098,250
-------------
TECHNOLOGY - 0.82%
300,000 Xerox Corp.
8.38%, 09/25/96.......................................................... 306,000
-------------
CAPITAL GOODS - 0.31%
104,000 Alco Standard Corp.
8.88%, 04/15/01.......................................................... 114,530
-------------
TOTAL CORPORATE NOTES AND BONDS.......................................... 26,423,064
(Cost $25,013,556) -------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 20.95%
U.S. TREASURY NOTES - 6.64%
300,000 7.50%, 01/31/96.......................................................... 301,470
300,000 7.63%, 05/31/96.......................................................... 303,417
300,000 7.25%, 08/31/96.......................................................... 303,966
</TABLE>
See Notes to Financial Statements.
19
<PAGE>
- --------------------
CORPORATE BOND FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
THE GALAXY FUND OCTOBER 31, 1995
- --------------------
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
--------- --------------
<C> <S> <C>
U.S. TREASURY NOTES (CONTINUED)
$ 200,000 8.88%, 05/15/00.......................................................... $ 224,650
500,000 6.13%, 07/31/00.......................................................... 506,400
300,000 7.75%, 02/15/01.......................................................... 325,995
500,000 6.50%, 05/15/05.......................................................... 517,575
-------------
2,483,473
-------------
U.S. TREASURY BONDS - 5.90%
700,000 8.88%, 08/15/17.......................................................... 900,003
1,000,000 9.00%, 11/15/18.......................................................... 1,306,622
-------------
2,206,625
-------------
FEDERAL HOME LOAN MORTGAGE CORPORATION - 3.88%
58,228 7.00%, 05/01/16.......................................................... 57,591
245,630 7.00%, 02/01/17.......................................................... 242,943
199,736 8.00%, 07/01/21.......................................................... 204,917
89,767 8.00%, 10/01/21.......................................................... 92,095
288,083 7.00%, 10/01/22.......................................................... 286,192
292,895 7.00%, 02/01/23.......................................................... 290,973
288,129 6.00%, 09/01/23.......................................................... 273,992
-------------
1,448,703
-------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 3.83%
26,045 8.00%, 01/01/99.......................................................... 26,688
251,030 7.50%, 11/07/07.......................................................... 256,208
215,581 5.00%, 08/01/10.......................................................... 199,716
2,367 12.50%, 12/01/13......................................................... 2,682
975,631 6.50%, 12/01/23.......................................................... 948,191
-------------
1,433,485
-------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 0.70%
254,898 8.00%, 05/15/22.......................................................... 262,705
-------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS............................. 7,834,991
(Cost $7,250,090) -------------
</TABLE>
See Notes to Financial Statements.
20
<PAGE>
- --------------------
CORPORATE BOND FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
THE GALAXY FUND OCTOBER 31, 1995
- --------------------
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
--------- --------------
<C> <S> <C>
FOREIGN BONDS - 4.24%
$ 600,000 Hydro-Quebec, Series F, Debenture
11.75%, 02/01/12......................................................... $ 849,750
300,000 Manitoba Province of Canada, Series BM, Debenture
9.13%, 01/15/18.......................................................... 372,375
300,000 Manitoba Province of Canada, Debenture
8.80%, 01/15/20.......................................................... 361,875
-------------
TOTAL FOREIGN BONDS...................................................... 1,584,000
(Cost $1,369,014) -------------
REPURCHASE AGREEMENT - 2.95%
1,104,311 Chase Securities, Inc.
5.75%, 11/01/95, Dated 10/31/95
Repurchase Price $1,104,487
(Collaterized by U.S. Treasury Note
5.88%, Due 1997, Total Par 1,110,000,
Market Value $1,129,425)................................................. 1,104,311
-------------
TOTAL REPURCHASE AGREEMENT............................................... 1,104,311
(Cost $1,104,311) -------------
TOTAL INVESTMENTS - 98.81%................................................................ 36,946,366
(Cost $34,736,971) -------------
NET OTHER ASSETS AND LIABILITIES - 1.19%.................................................. 444,604
-------------
NET ASSETS - 100.00%...................................................................... $ 37,390,970
=============
</TABLE>
- --------------------------------------------------------------------------------
MTN Medium Term Note
See Notes to Financial Statements.
21
<PAGE>
- --------------------
HIGH QUALITY BOND FUND
PORTFOLIO OF INVESTMENTS
THE GALAXY FUND OCTOBER 31, 1995
- --------------------
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
--------- --------------
<C> <S> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 75.35%
U.S. TREASURY BONDS - 23.86%
$ 500,000 10.75%, 02/15/03......................................................... $ 640,520
300,000 11.13%, 08/15/03......................................................... 394,716
500,000 10.75%, 08/15/05......................................................... 670,270
8,000,000 9.38%, 02/15/06.......................................................... 10,014,072
13,000,000 7.88%, 11/15/07.......................................................... 14,358,760
5,000,000 8.38%, 08/15/08.......................................................... 5,716,143
1,000,000 9.25%, 02/15/16.......................................................... 1,321,089
2,000,000 9.00%, 11/15/18.......................................................... 2,613,258
500,000 8.88%, 02/15/19.......................................................... 646,490
3,000,000 6.25%, 08/15/23.......................................................... 2,933,910
------------
39,309,228
------------
U.S. TREASURY NOTES - 20.66%
4,000,000 7.38%, 05/15/96.......................................................... 4,038,080
4,500,000 6.13%, 07/31/96.......................................................... 4,517,591
3,000,000 6.25%, 01/31/97.......................................................... 3,023,970
250,000 8.25%, 07/15/98.......................................................... 265,870
5,500,000 6.38%, 01/15/99.......................................................... 5,606,750
500,000 8.00%, 08/15/99.......................................................... 537,570
5,000,000 6.38%, 01/15/00.......................................................... 5,109,095
250,000 8.75%, 08/15/00.......................................................... 280,305
250,000 8.50%, 11/15/00.......................................................... 279,120
5,550,000 7.75%, 02/15/01.......................................................... 6,030,902
4,000,000 7.50%, 05/15/02.......................................................... 4,347,436
------------
34,036,689
------------
U.S. TREASURY STRIPS (A) - 19.85%
21,000,000 6.32%, 05/15/04, Interest (B)............................................ 12,592,230
14,000,000 6.35%, 11/15/04, Interest (B)............................................ 8,118,586
11,000,000 6.63%, 05/15/12, Interest (B)............................................ 3,812,710
30,000,000 6.70%, 11/15/15, Interest (B)............................................ 8,165,970
------------
32,689,496
------------
</TABLE>
See Notes to Financial Statements.
22
<PAGE>
- --------------------
HIGH QUALITY BOND FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
THE GALAXY FUND OCTOBER 31, 1995
- --------------------
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
--------- --------------
<C> <S> <C>
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 10.65%
$ 2,000,000 7.06%, 04/01/97, MTN..................................................... $ 2,010,618
500,000 8.15%, 05/11/98.......................................................... 527,245
5,500,000 6.40%, 01/13/04.......................................................... 5,437,295
1,000,000 7.86%, 05/25/04, MTN..................................................... 1,042,930
2,000,000 7.85%, 09/10/04.......................................................... 2,101,120
1,000,000 8.18%, 09/22/04, MTN..................................................... 1,027,379
2,000,000 8.63%, 11/10/04.......................................................... 2,159,158
3,000,000 8.50%, 02/01/05.......................................................... 3,234,180
------------
17,539,925
------------
U.S. GOVERNMENT BACKED BONDS - 0.33%
500,000 Farm Credit System Financial Assistance Corp.
9.45%, 11/21/03.......................................................... 542,500
------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS............................. 124,117,838
(Cost $119,795,923) ------------
CORPORATE NOTES AND BONDS - 20.36%
FINANCIAL - 9.76%
2,000,000 Associates Corp. of North America, MTN
7.40%, 05/03/02.......................................................... 2,107,500
3,000,000 Barclays North America Capital Corp.
9.75%, 05/15/21.......................................................... 3,540,000
250,000 Chubb Corp.
8.75%, 11/15/99.......................................................... 266,563
2,500,000 duPont (EI) deNemours & Co.
8.25%, 01/15/22.......................................................... 2,728,125
550,000 Ford Capital BV
9.50%, 06/01/10.......................................................... 671,688
300,000 Ford Motor Credit Co.
8.25%, 05/15/96.......................................................... 303,825
250,000 General Electric Capital Corp.
8.30%, 09/20/09.......................................................... 290,000
2,500,000 National Westminster Bancorp
9.38%, 11/15/03.......................................................... 2,943,750
3,000,000 Norwest Corp., MTN
7.65%, 03/15/05.......................................................... 3,225,000
------------
16,076,451
------------
</TABLE>
See Notes to Financial Statements.
23
<PAGE>
- --------------------
HIGH QUALITY BOND FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
THE GALAXY FUND OCTOBER 31, 1995
- --------------------
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
--------- --------------
<C> <S> <C>
CONSUMER STAPLES - 4.90%
$ 2,500,000 Anheuser- Busch Cos., Inc.
6.90%, 10/01/02.......................................................... $ 2,553,125
2,000,000 Coca Cola Enterprises, Inc.
7.00%, 11/15/99.......................................................... 2,050,000
250,000 Procter & Gamble Co.
8.50%, 08/10/09.......................................................... 295,625
3,000,000 Sara Lee Corp., MTN
7.40%, 03/22/02.......................................................... 3,180,000
------------
8,078,750
------------
TECHNOLOGY - 2.82%
2,500,000 International Business Machines Corp.
7.25%, 11/01/02.......................................................... 2,628,125
1,750,000 International Business Machines Corp., Debenture
8.38%, 11/01/19.......................................................... 2,014,688
------------
4,642,813
------------
CONSUMER CYCLICALS - 2.73%
2,000,000 Toys `R' Us, Inc., Debenture
8.75%, 09/01/21.......................................................... 2,425,000
2,000,000 Wal-Mart Stores, Inc., Debenture
7.25%, 06/01/13.......................................................... 2,067,500
------------
4,492,500
------------
OIL, GAS, AND PETROLEUM - 0.15%
250,000 B.P. America, Inc.
10.15%, 03/15/96......................................................... 253,750
------------
TOTAL CORPORATE NOTES AND BONDS.......................................... 33,544,264
(Cost $30,982,796) ------------
FOREIGN BOND - 1.91%
3,000,000 Province of Ontario
7.38%, 01/27/03.......................................................... 3,146,250
------------
TOTAL FOREIGN BOND....................................................... 3,146,250
(Cost $2,994,750) ------------
</TABLE>
See Notes to Financial Statements.
24
<PAGE>
- --------------------
HIGH QUALITY BOND FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
THE GALAXY FUND OCTOBER 31, 1995
- --------------------
<TABLE>
<CAPTION>
VALUE
PAR VALUE (NOTE 2)
--------- --------------
<C> <S> <C>
REPURCHASE AGREEMENT - 0.84%
$ 1,377,652 Chase Securities, Inc.
5.75%, 11/01/95, Dated 10/31/95
Repurchase Price $1,377,872
(Collaterized by U.S. Treasury Note
5.88%, Due 1997, Total Par 1,385,000,
Market Value $1,409,238)................................................. $ 1,377,652
------------
TOTAL REPURCHASE AGREEMENT............................................... 1,377,652
(Cost $1,377,652) ------------
TOTAL INVESTMENTS - 98.46%................................................................ 162,186,004
(Cost $155,151,121) ------------
NET OTHER ASSETS AND LIABILITIES - 1.54%.................................................. 2,537,301
------------
NET ASSETS - 100.00%...................................................................... $164,723,305
============
</TABLE>
- --------------------------------------------------------------------------------
(A) Annualized yield at time of purchase.
(B) Stripped securities represent the splitting of cash flows into interest
and principal. Holders, as indicated, are entitled to that portion of the
payments representing interest only or principal only.
MTN Medium Term Note
See Notes to Financial Statements.
25
<PAGE>
- --------------------
STATEMENTS OF ASSETS AND LIABILITIES
THE GALAXY FUND OCTOBER 31, 1995
- --------------------
<TABLE>
<CAPTION>
INTERMEDIATE
SHORT-TERM GOVERNMENT CORPORATE HIGH QUALITY
BOND FUND INCOME FUND BOND FUND BOND FUND
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
ASSETS:
Investments (Note 2)
Investments at cost.......................................... $ 63,193,857 $ 243,035,256 $ 33,632,660 $ 153,773,469
Repurchase agreements........................................ 1,119,271 14,755,581 1,104,311 1,377,652
Net unrealized appreciation (depreciation)................... 1,074,601 5,845,683 2,209,395 7,034,883
------------ ------------- ------------ -------------
Total investments at value................................ 65,387,729 263,636,520 36,946,366 162,186,004
Cash............................................................ 183,163 111,478 -- 70,324
Receivable for investments sold................................. -- -- 7,854 --
Receivable for shares sold...................................... 47,859 244,964 -- 264,235
Interest and dividend receivables............................... 1,142,072 3,025,586 682,290 2,864,079
Receivable from Investment Adviser (Note 4)..................... 33,516 1,146 -- --
Deferred organizational expense (Note 2)........................ 4,249 -- 16,212 1,665
------------ ------------- ------------ -------------
Total Assets.............................................. 66,798,588 267,019,694 37,652,722 165,386,307
------------ ------------- ------------ -------------
LIABILITIES:
Dividends payable............................................... 88,317 795,275 -- 258,314
Payable for investments purchased............................... -- -- 124,320 --
Payable for shares redeemed..................................... 6,957 359,848 -- 213,136
Advisory fee payable (Note 3)................................... 30,540 132,512 17,325 75,760
Payable to Fleet and affiliates (Note 3)........................ 9,579 20,897 72,046 36,642
Payable to FDISG (Note 3)....................................... 12,594 55,115 16,292 24,596
Trustees' fees and expenses payable (Note 3).................... 1,986 4,000 9,638 2,408
Accrued expenses and other payables............................. 18,792 56,835 22,131 52,146
------------ ------------- ------------ -------------
Total Liabilities......................................... 168,765 1,424,482 261,752 663,002
------------ ------------- ------------ -------------
NET ASSETS......................................................... $ 66,629,823 $ 265,595,212 $ 37,390,970 $ 164,723,305
============ ============= ============ =============
NET ASSETS CONSIST OF:
Par value (Note 5).............................................. $ 6,625 $ 25,839 $ 3,481 $ 15,494
Paid-in capital in excess of par value.......................... 68,079,347 281,365,265 34,896,336 163,190,812
Undistributed (overdistributed) net investment income........... 19,340 298,687 12,253 73,096
Accumulated net realized gain (loss) on investments sold........ (2,550,090) (21,940,262) 269,505 (5,590,980)
Net unrealized appreciation (depreciation) of investments....... 1,074,601 5,845,683 2,209,395 7,034,883
------------ ------------- ------------ -------------
TOTAL NET ASSETS................................................... $ 66,629,823 $ 265,595,212 $ 37,390,970 $ 164,723,305
============ ============= ============ =============
Retail Shares:
Net Assets...................................................... $ 31,542,310 $ 79,557,772 $ -- $ 30,092,723
Shares of beneficial interest outstanding....................... 3,136,057 7,740,020 -- 2,830,538
NET ASSET VALUE, offering and redemption price per share........ $ 10.06 $ 10.28 $ -- $ 10.63
============ ============= ============ =============
Trust Shares:
Net Assets...................................................... $ 35,087,513 $ 186,037,440 $ 37,390,970 $ 134,630,582
Shares of beneficial interest outstanding....................... 3,488,539 18,099,094 3,480,710 12,662,975
NET ASSET VALUE, offering and redemption price per share........ $ 10.06 $ 10.28 $ 10.74 $ 10.63
============ ============= ============ =============
</TABLE>
See Notes to Financial Statements.
26
<PAGE>
- --------------------
STATEMENTS OF OPERATIONS
THE GALAXY FUND FOR THE YEAR ENDED OCTOBER 31, 1995
- --------------------
<TABLE>
<CAPTION>
INTERMEDIATE
SHORT-TERM GOVERNMENT CORPORATE HIGH QUALITY
BOND FUND INCOME FUND BOND FUND(1) BOND FUND
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest (Note 2).............................................. $ 4,243,446 $ 19,755,482 $ 2,390,890 $ 10,654,687
Dividends (Note 2)............................................. 19,952 36,780 9,985 32,936
------------ ------------- ------------ -------------
Total investment income.................................. 4,263,398 19,792,262 2,400,875 10,687,623
------------ ------------- ------------ -------------
EXPENSES:
Investment advisory fee (Note 3)............................... 489,757 2,084,499 234,490 1,116,150
Administration fee (Note 3).................................... 57,153 244,446 27,410 130,250
Custodian fee.................................................. 7,942 11,359 17,461 10,097
Fund accounting fee (Note 3)................................... 42,370 69,170 34,979 48,957
Legal fee (Note 3)............................................. 2,680 26,713 2,916 6,221
Audit fee...................................................... 11,943 12,366 10,944 12,366
Transfer agent fee (Note 3).................................... 54,302 182,726 2,822 209,115
Shareholder servicing fee (Note 3)............................. 45,148 122,743 -- 39,826
Trustees' fees and expenses (Note 3)........................... 4,817 6,831 10,214 5,239
Amortization of organization costs (Note 2).................... 3,639 -- 3,485 6,570
Reports to shareholders........................................ 20,030 77,604 15,616 40,013
Registration fees.............................................. 10,298 23,388 33,505 11,660
Insurance...................................................... 1,401 9,853 534 4,131
Miscellaneous.................................................. 3,755 10,730 1,083 6,877
------------ ------------- ------------ -------------
Total Expenses before reimbursement/waiver............... 755,235 2,882,428 395,459 1,647,472
Less: Reimbursement/Waiver (Note 4)...................... (195,956) (617,414) (62,531) (332,586)
------------ ------------- ------------ -------------
Total Expenses net of reimbursement/waiver............... 559,279 2,265,014 332,928 1,314,886
------------ ------------- ------------ -------------
NET INVESTMENT INCOME............................................. 3,704,119 17,527,248 2,067,947 9,372,737
------------ ------------- ------------ -------------
NET REALIZED AND UNREALIZED
GAIN(LOSS) ON INVESTMENTS (Note 2):
Net realized gain (loss) on investments sold................... (421,060) (2,953,843) 281,758 (2,232,295)
Net change in unrealized appreciation (depreciation)
of investments.............................................. 2,480,497 19,422,871 2,209,395 18,291,500
------------ ------------- ------------ -------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS.......................................... 2,059,437 16,469,028 2,491,153 16,059,205
------------ ------------- ------------ -------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS............................... $ 5,763,556 $ 33,996,276 $ 4,559,100 $ 25,431,942
============ ============= ============ =============
</TABLE>
- --------------------------------------------------------------------------------
/(1)/ The Corporate Bond Fund commenced operations on December 12, 1994.
See Notes to Financial Statements.
27
<PAGE>
- --------------------
THE GALAXY FUND STATEMENTS OF CHANGES IN NET ASSETS
- --------------------
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT
SHORT-TERM BOND FUND INCOME FUND
--------------------------- -----------------------------
YEARS ENDED OCTOBER 31, YEARS ENDED OCTOBER 31,
--------------------------- -----------------------------
1995 1994 1995 1994
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
NET ASSETS AT BEGINNING OF PERIOD................................. $ 73,904,105 $ 85,211,128 $ 306,813,102 $ 447,358,784
------------ ------------ ------------- -------------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS:
Net investment income.......................................... 3,704,119 3,779,478 17,527,248 20,979,424
Net realized gain (loss) on investments sold................... (421,060) (2,093,517) (2,953,843) (18,667,645)
Net change in unrealized appreciation (depreciation)
of investments.............................................. 2,480,497 (2,343,072) 19,422,871 (20,519,611)
------------ ------------ ------------- -------------
Net increase (decrease) in net assets resulting
from operations............................................. 5,763,556 (657,111) 33,996,276 (18,207,832)
------------ ------------ ------------- -------------
DIVIDENDS TO SHAREHOLDERS FROM (NOTE 5):
Net investment income.......................................... (3,704,119) (3,779,478) (17,527,248) (20,531,612)
Dividends in excess of net investment income................... -- (554) -- (467,899)
Net realized gain on investments............................... -- -- -- --
Dividends in excess of net realized gains on investments....... -- (507,910) -- (271,809)
------------ ------------ ------------- -------------
Total Dividends............................................. (3,704,119) (4,287,942) (17,527,248) (21,271,320)
------------ ------------ ------------- -------------
NET INCREASE (DECREASE) FROM SHARE TRANSACTIONS (NOTE 5).......... (9,333,719) (6,361,970) (57,686,918) (101,066,530)
------------ ------------ ------------- -------------
Net increase (decrease) in net assets....................... (7,274,282) (11,307,023) (41,217,890) (140,545,682)
------------ ------------ ------------- -------------
NET ASSETS AT END OF PERIOD (INCLUDING LINE A).................... $ 66,629,823 $ 73,904,105 $ 265,595,212 $ 306,813,102
============ ============ ============= =============
(A) Accumulated undistributed (overdistributed) net
investment income:............................................. $ 19,340 $ 5,011 $ 298,687 $ 36,267
============ ============ ============= =============
</TABLE>
See Notes to Financial Statements.
28
<PAGE>
- --------------------
THE GALAXY FUND STATEMENTS OF CHANGES IN NET ASSETS
- --------------------
<TABLE>
<CAPTION>
CORPORATE HIGH QUALITY BOND FUND
BOND FUND --------------------------------
--------------------- YEARS ENDED OCTOBER 31,
PERIOD ENDED --------------------------------
OCTOBER 31, 1995/(1)/ 1995 1994
--------------------- ------------- -------------
<S> <C> <C> <C>
NET ASSETS AT BEGINNING OF PERIOD............................. $ -- $ 145,429,196 $ 162,594,147
------------ ------------- -------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS:
Net investment income...................................... 2,067,947 9,372,737 9,856,741
Net realized gain (loss) on investments sold............... 281,758 (2,232,295) (3,263,784)
Net change in unrealized appreciation
(depreciation) of investments........................... 2,209,395 18,291,500 (20,583,164)
------------ ------------- -------------
Net increase (decrease) in net assets resulting
from operations......................................... 4,559,100 25,431,942 (13,990,207)
------------ ------------- -------------
DIVIDENDS TO SHAREHOLDERS FROM (NOTE 5):
Net investment income...................................... (2,067,947) (9,354,716) (9,838,837)
Dividends in excess of net investment income............... -- (18,021) (18,362)
Net realized gain on investments........................... -- -- (785,499)
Dividends in excess of
net realized gains on investments....................... -- -- (3,267,227)
------------ ------------- -------------
Total Dividends...................................... (2,067,947) (9,372,737) (13,909,925)
------------ ------------- -------------
NET INCREASE (DECREASE) FROM SHARE TRANSACTIONS (NOTE 5)...... 34,899,817 3,234,904 10,735,181
------------ ------------- -------------
Net increase (decrease) in net assets................... 37,390,970 19,294,109 (17,164,951)
------------ ------------- -------------
NET ASSETS AT END OF PERIOD (INCLUDING LINE A)................ $ 37,390,970 $ 164,723,305 $ 145,429,196
============ ============= =============
(A) Accumulated undistributed (overdistributed)
net investment income:............................... $ 12,253 $ 73,096 $ (18,021)
============ ============= =============
</TABLE>
- --------------------------------------------------------------------------------
/(1)/ The Corporate Bond Fund commenced operations on December 12, 1994.
See Notes to Financial Statements.
29
<PAGE>
- --------------------
SHORT-TERM BOND FUND
FINANCIAL HIGHLIGHTS
THE GALAXY FUND FOR A RETAIL AND TRUST SHARE OUTSTANDING
- -------------------- THROUGHOUT EACH PERIOD.
RETAIL SHARES
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
-----------------------------------------------------------
1995 1994 1993/(2)/ 1992/(1)(2)/
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of period.............................. $ 9.73 $ 10.30 $ 10.09 $ 10.00
-------- -------- -------- --------
Income from Investment Operations:
Net investment income (A)...................................... 0.55 0.44 0.47 0.42
Net realized and unrealized gain (loss)
on investments.............................................. 0.33 (0.51) 0.22 0.09
-------- -------- -------- --------
Total from Investment Operations:........................... 0.88 (0.07) 0.69 0.51
-------- -------- -------- --------
Less Dividends:
Dividends from net investment income........................... (0.55) (0.44) (0.47) (0.42)
Dividends from net realized capital gains...................... -- -- (0.01) --
Dividends in excess of
net realized capital gains.................................. -- (0.06) -- --
-------- -------- -------- --------
Total Dividends:............................................ (0.55) (0.50) (0.48) (0.42)
-------- -------- -------- --------
Net increase (decrease) in net asset value........................ 0.33 (0.57) 0.21 0.09
-------- -------- -------- --------
Net Asset Value, End of period.................................... $ 10.06 $ 9.73 $ 10.30 $ 10.09
======== ======== ======== ========
Total Return...................................................... 9.28% (0.68)% 6.98% 5.21%**
Ratios/Supplemental Data
Net Assets, End of period (000's)................................. $ 31,542 $ 34,061 $ 85,211 $ 57,403
Ratios to average net assets:
Net investment income including reimbursement/waiver........... 5.54% 4.43% 4.51% 5.77%*
Operating expenses including reimbursement/waiver.............. 0.99% 0.93% 0.86% 0.90%*
Operating expenses excluding reimbursement/waiver.............. 1.32% 1.14% 1.06% 1.20%*
Portfolio Turnover Rate........................................... 289% 233% 100% 114%**
</TABLE>
- --------------------------------------------------------------------------------
* Annualized
** Not annualized
/(1)/ The Fund commenced operations on December 30, 1991.
/(2)/ For periods prior to the year ended October 31, 1994, the per share
amounts and selected ratios reflect the financial results of both Retail
and Trust Shares. (See note 5)
/(A)/ Net investment income per share before reimbursement/waiver of fees by
the Investment Adviser and/or Administrator was as follows:
<TABLE>
<CAPTION>
Years ended October 31,
-----------------------------------------------------
1995 1994 1993/(2)/ 1992/(2)/
------- ------- --------- ---------
<S> <C> <C> <C> <C>
Retail Shares.............. $ 0.52 $ 0.42 $ 0.45 $ 0.40
Trust Shares............... 0.54 0.42 0.45 0.40
</TABLE>
See Notes to Financial Statements.
30
<PAGE>
TRUST SHARES
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
-----------------------------------------------------------
1995 1994 1993/(2)/ 1992/(1)(2)/
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of period.............................. $ 9.73 $ 10.30 $ 10.09 $ 10.00
-------- -------- -------- --------
Income from Investment Operations:
Net investment income (A)...................................... 0.57 0.44 0.47 0.42
Net realized and unrealized gain (loss)
on investments.............................................. 0.33 (0.51) 0.22 0.09
-------- -------- -------- --------
Total from Investment Operations:........................... 0.90 (0.07) 0.69 0.51
-------- -------- -------- --------
Less Dividends:
Dividends from net investment income........................... (0.57) (0.44) (0.47) (0.42)
Dividends from net realized capital gains...................... -- -- (0.01) --
Dividends in excess of
net realized capital gains.................................. -- (0.06) -- --
-------- -------- -------- --------
Total Dividends:............................................ (0.57) (0.50) (0.48) (0.42)
-------- -------- -------- --------
Net increase (decrease) in net asset value........................ 0.33 (0.57) 0.21 0.09
-------- -------- -------- --------
Net Asset Value, End of period.................................... $ 10.06 $ 9.73 $ 10.30 $ 10.09
======== ======== ======== ========
Total Return...................................................... 9.55% (0.66)% 6.98% 5.21%**
Ratios/Supplemental Data
Net Assets, End of period (000's)................................. $ 35,088 $ 39,843 $ 85,211 $ 57,403
Ratios to average net assets:
Net investment income including reimbursement/waiver........... 5.79% 4.45% 4.51% 5.77%*
Operating expenses including reimbursement/waiver.............. 0.74% 0.91% 0.86% 0.90%*
Operating expenses excluding reimbursement/waiver.............. 1.02% 1.11% 1.06% 1.20%*
Portfolio Turnover Rate........................................... 289% 233% 100% 114%**
</TABLE>
31
<PAGE>
- --------------------
INTERMEDIATE GOVERNMENT INCOME FUND
FINANCIAL HIGHLIGHTS
FOR A RETAIL AND TRUST SHARE OUTSTANDING
THE GALAXY FUND THROUGHOUT EACH PERIOD.
- --------------------
RETAIL SHARES
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
--------------------------------------------------------------------
1995 1994 1993/(1)/ 1992/(1)/ 1991/(1)/
-------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of period................. $ 9.68 $ 10.72 $ 10.83 $ 10.46 $ 9.73
-------- -------- --------- --------- --------
Income from Investment Operations:
Net investment income (A)......................... 0.61 0.57 0.65 0.71 0.73
Net realized and unrealized gain (loss)
on investments................................. 0.60 (1.03) 0.10 0.40 0.71
-------- -------- --------- --------- --------
Total from Investment Operations:........... 1.21 (0.46) 0.75 1.11 1.44
-------- -------- --------- --------- --------
Less Dividends:
Dividends from net investment income.............. (0.61) (0.56) (0.64) (0.74) (0.71)
Dividends in excess of net
investment income.............................. -- (0.01) (0.03) -- --
Dividends from net realized capital gains......... -- -- (0.19) -- --
Dividends in excess of
net realized capital gains..................... -- (0.01) -- -- --
-------- -------- --------- --------- --------
Total Dividends:............................ (0.61) (0.58) (0.86) (0.74) (0.71)
-------- -------- --------- --------- --------
Net increase (decrease) in net asset value........... 0.60 (1.04) (0.11) 0.37 0.73
-------- -------- --------- --------- --------
Net Asset Value, End of period....................... $ 10.28 $ 9.68 $ 10.72 $ 10.83 $ 10.46
======== ======== ========= ========= ========
Total Return......................................... 12.85% (4.42)% 7.06% 10.95% 15.35%
Ratios/Supplemental Data:
Net Assets, End of period (000's).................... $ 79,558 $ 94,669 $ 447,359 $ 199,135 $ 99,942
Ratios to average net assets:
Net investment income including
reimbursement/waiver........................... 6.10% 5.58% 6.03% 6.52% 7.25%
Operating expenses including
reimbursement/waiver........................... 1.02% 0.78% 0.80% 0.80% 0.96%
Operating expenses excluding
reimbursement/waiver........................... 1.26% 0.99% 1.00% 0.94% 0.96%
Portfolio Turnover................................... 145% 124% 153% 103% 150%
</TABLE>
- --------------------------------------------------------------------------------
/(1)/ For periods prior to the year ended October 31, 1994, the per share
amounts and selected ratios reflect the financial results of both Retail
and Trust Shares. (See note 5)
/(A)/ Net investment income per share before reimbursement/waiver of fees by
the Investment Adviser and/or Administrator was as follows:
<TABLE>
<CAPTION>
Years ended October 31,
---------------------------------------------------------------------
1995 1994/(1)/ 1993/(1)/ 1992/(1)/ 1991/(1)/
------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Retail Shares.............. $ 0.58 $ 0.54 $ 0.63 $ 0.70 $ 0.73
Trust Shares............... 0.62 0.54 0.63 0.70 0.73
</TABLE>
See Notes to Financial Statements.
32
<PAGE>
TRUST SHARES
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
---------------------------------------------------------------------
1995 1994 1993/(1)/ 1992/(1)/ 1991/(1)/
-------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of period................. $ 9.68 $ 10.72 $ 10.83 $ 10.46 $ 9.73
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income (A)......................... 0.64 0.57 0.65 0.71 0.73
Net realized and unrealized gain (loss)
on investments................................. 0.60 (1.03) 0.10 0.40 0.71
-------- -------- -------- -------- --------
Total from Investment Operations:........... 1.24 (0.46) 0.75 1.11 1.44
-------- -------- -------- -------- --------
Less Dividends:
Dividends from net investment income.............. (0.64) (0.56) (0.64) (0.74) (0.71)
Dividends in excess of net
investment income.............................. -- (0.01) (0.03) -- --
Dividends from net realized capital gains......... -- -- (0.19) -- --
Dividends in excess of
net realized capital gains..................... -- (0.01) -- -- --
-------- -------- -------- -------- --------
Total Dividends:............................ (0.64) (0.58) (0.86) (0.74) (0.71)
-------- -------- -------- -------- --------
Net increase (decrease) in net asset value........... 0.60 (1.04) (0.11) 0.37 0.73
-------- -------- -------- -------- --------
Net Asset Value, End of period....................... $ 10.28 $ 9.68 $ 10.72 $ 10.83 $ 10.46
======== ======== ======== ======== ========
Total Return......................................... 13.18% (4.39)% 7.06% 10.95% 15.35%
Ratios/Supplemental Data:
Net Assets, End of period (000's).................... $186,037 $212,144 $447,359 $199,135 $ 99,942
Ratios to average net assets:
Net investment income including
reimbursement/waiver........................... 6.39% 5.61% 6.03% 6.52% 7.25%
Operating expenses including
reimbursement/waiver........................... 0.73% 0.75% 0.80% 0.80% 0.96%
Operating expenses excluding
reimbursement/waiver........................... 0.94% 0.95% 1.00% 0.94% 0.96%
Portfolio Turnover................................... 145% 124% 153% 103% 150%
</TABLE>
33
<PAGE>
- --------------------
CORPORATE BOND FUND
FINANCIAL HIGHLIGHTS
FOR A TRUST SHARE OUTSTANDING THROUGHOUT
THE GALAXY FUND THE PERIOD.
- --------------------
TRUST SHARES
<TABLE>
<CAPTION>
PERIOD ENDED
OCTOBER 31, 1995/(1)/
---------------------
<S> <C>
Net Asset Value, Beginning of period........................................ $ 10.00
--------
Income from Investment Operations:
Net investment income (A)................................................ 0.61
Net realized and unrealized gain (loss) on investments................... 0.74
--------
Total from Investment Operations:..................................... 1.35
--------
Less Dividends:
Dividends from net investment income..................................... (0.61)
Dividends from net realized capital gains................................ --
--------
Total Dividends:...................................................... (0.61)
--------
Net increase (decrease) in net asset value.................................. 0.74
--------
Net Asset Value, End of period.............................................. $ 10.74
========
Total Return................................................................ 13.85%**
Ratios/Supplemental Data:
Net Assets, End of period (000's)........................................... $ 37,391
Ratios to average net assets:
Net investment income including
reimbursement/waiver.................................................. 6.61%*
Operating expenses including
reimbursement/waiver.................................................. 1.06%*
Operating expenses excluding
reimbursement/waiver.................................................. 1.26%*
Portfolio Turnover Rate..................................................... 41%**
</TABLE>
- --------------------------------------------------------------------------------
* Annualized
** Not Annualized
/(1)/ The Fund commenced operations on December 12, 1994.
/(A)/ Net investment income per share before reimbursement/waiver of fees by
the Investment Adviser and/or Administrator for the period ended
October 31, 1995 was $0.57.
See Notes to Financial Statements.
34
<PAGE>
- --------------------
HIGH QUALITY BOND FUND
FINANCIAL HIGHLIGHTS
FOR A RETAIL SHARE OUTSTANDING
THE GALAXY FUND THROUGHOUT EACH PERIOD.
- --------------------
RETAIL SHARES
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
------------------------------------------------------------------------
1995 1994 1993/(2)/ 1992/(2)/ 1991/(1)(2)/
-------- -------- --------- --------- ------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of period................ $ 9.54 $ 11.37 $ 10.60 $ 10.35 $ 10.00
-------- -------- --------- --------- --------
Income from Investment Operations:
Net investment income (A)........................ 0.62 0.64 0.66 0.68 0.64
Net realized and unrealized gain (loss)
on investments................................ 1.09 (1.56) 0.93 0.36 0.33
-------- -------- --------- --------- --------
Total from Investment Operations:.......... 1.71 (0.92) 1.59 1.04 0.97
-------- -------- --------- --------- --------
Less Dividends:
Dividends from net investment income............. (0.62) (0.64) (0.66) (0.71) (0.62)
Dividends from net realized capital gains........ -- -- (0.16) (0.08) --
Dividends in excess of
net realized capital gains.................... -- (0.27) -- -- --
-------- -------- --------- --------- --------
Total Dividends:........................... (0.62) (0.91) (0.82) (0.79) (0.62)
-------- -------- --------- --------- --------
Net increase (decrease) in net asset value.......... 1.09 (1.83) 0.77 0.25 0.35
-------- -------- --------- --------- --------
Net Asset Value, End of period...................... $ 10.63 $ 9.54 $ 11.37 $ 10.60 $ 10.35
======== ======== ========= ========= ========
Total Return........................................ 18.46% (8.41)% 15.63% 10.32% 10.04%**
Ratios/Supplemental Data:
Net Assets, End of period (000's)................... $ 30,093 $ 26,654 $ 162,594 $ 108,774 $ 57,580
Ratios to average net assets:
Net investment income including
reimbursement/waiver.......................... 6.16% 6.25% 5.98% 6.55% 7.25%*
Operating expenses including
reimbursement/waiver.......................... 1.02% 0.81% 0.76% 0.87% 0.95%*
Operating expenses excluding
reimbursement/waiver.......................... 1.26% 1.02% 0.96% 0.94% 0.95%*
Portfolio Turnover Rate............................. 110% 108% 128% 121% 145%**
</TABLE>
- --------------------------------------------------------------------------------
* Annualized
** Not Annualized
/(1)/ The Fund commenced operations on December 14, 1990.
/(2)/ For periods prior to the year ended October 31, 1994, the per share
amounts and selected ratios reflect the financial results of both Retail
and Trust Shares. (See note 5)
/(A)/ Net investment income per share for Retail Shares before
reimbursement/waiver of fees by the Investment Adviser and/or
Administrator for the years ended October 31, 1995, 1994, 1993 , 1992 and
1991 were $0.59, $0.62, $0.63, $0.67and $0.64, respectively.
See Notes to Financial Statements.
35
<PAGE>
- --------------------
HIGH QUALITY BOND FUND
FINANCIAL HIGHLIGHTS
FOR A TRUST SHARE OUTSTANDING
THE GALAXY FUND THROUGHOUT EACH PERIOD.
- --------------------
TRUST SHARES
<TABLE>
<CAPTION>
YEARS ENDED OCTOBER 31,
------------------------------------------------------------------------
1995 1994 1993/(2)/ 1992/(2)/ 1991/(1)(2)/
-------- -------- --------- --------- ------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of period................. $ 9.54 $ 11.37 $ 10.60 $ 10.35 $ 10.00
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income (A)......................... 0.64 0.65 0.66 0.68 0.64
Net realized and unrealized gain (loss)
on investments................................. 1.09 (1.56) 0.93 0.36 0.33
-------- -------- -------- -------- --------
Total from Investment Operations:........... 1.73 (0.91) 1.59 1.04 0.97
-------- -------- -------- -------- --------
Less Dividends:
Dividends from net investment income.............. (0.64) (0.65) (0.66) (0.71) (0.62)
Dividends from net realized capital gains......... -- -- (0.16) (0.08) --
Dividends in excess of
net realized capital gains..................... -- (0.27) -- -- --
-------- -------- -------- -------- --------
Total Dividends:............................ (0.64) (0.92) (0.82) (0.79) (0.62)
-------- -------- -------- -------- --------
Net increase (decrease) in net asset value........... 1.09 (1.83) 0.77 0.25 0.35
-------- -------- -------- -------- --------
Net Asset Value, End of period....................... $ 10.63 $ 9.54 $ 11.37 $ 10.60 $ 10.35
======== ======== ======== ======== ========
Total Return......................................... 18.66% (8.39)% 15.63% 10.32% 10.04%**
Ratios/Supplemental Data:
Net Assets, End of Period (000's).................... $134,631 $118,776 $162,594 $108,774 $ 57,580
Ratios to average net assets:
Net investment income including
reimbursement/waiver........................... 6.33% 6.28% 5.98% 6.55% 7.25%*
Operating expenses including
reimbursement/waiver........................... 0.85% 0.78% 0.76% 0.87% 0.95%*
Operating expenses excluding
reimbursement/waiver........................... 1.07% 0.98% 0.96% 0.94% 0.95%*
Portfolio Turnover Rate.............................. 110% 108% 128% 121% 145%**
</TABLE>
- --------------------------------------------------------------------------------
* Annualized
** Not Annualized
/(1)/ The Fund commenced operations on December 14, 1990.
/(2)/ For periods prior to the year ended October 31, 1994, the per share
amounts and selected ratios reflect the financial results of both Retail
and Trust Shares. (See note 5)
/(A)/ Net investment income per share for Trust Shares before
reimbursement/waiver of fees by the Investment Adviser and/or
Administrator for the years ended October 31, 1995 , 1994 , 1993 , 1992
and 1991 were $0.62, $0.63, $0.63, $0.67and $0.64, respectively.
See Notes to Financial Statements.
36
<PAGE>
- --------------------
THE GALAXY FUND NOTES TO FINANCIAL STATEMENTS
- --------------------
1. ORGANIZATION
The Galaxy Fund, a Massachusetts business trust (the "Trust"), is registered
under the Investment Company Act of 1940, as amended, as an open-end management
investment company. As of the date of this report, the Trust offered twenty
managed investment portfolios. The accompanying financial statements and
financial highlights are those of the Short-Term Bond, Intermediate Government
Income (formerly Intermediate Bond), Corporate Bond and High Quality Bond Funds
(individually, a "Fund", collectively, the "Funds") only.
Each Fund is authorized to issue two series of shares (Trust Shares and
Retail Shares). Trust Shares and Retail Shares are substantially the same,
except that, effective as of October 1, 1994, each series bears the following
series specific expenses: shareholder servicing fees and transfer agent charges.
As of October 31, 1995, the Corporate Bond Fund had issued only Trust Shares.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies in conformity
with generally accepted accounting principles consistently followed by the Funds
in the preparation of their financial statements.
PORTFOLIO VALUATION: Investment securities are valued by an independent
pricing service approved by the Trust's Board of Trustees. When, in the judgment
of the service, quoted bid prices are readily available and are representative
of the bid side of the market, investments are valued at the mean between quoted
bid prices and asked prices. Other investments are carried at fair value as
determined by the service based on methods which include consideration of yields
or prices of bonds of comparable quality, coupon maturity and type; indications
as to values from dealers; and general market conditions. Short-term obligations
that mature in 60 days or less are valued at amortized cost, which constitutes
fair value as determined by the Board of Trustees of the Trust. All other
securities and other assets are appraised at their fair value as determined in
good faith under consistently applied procedures established by and under the
general supervision of the Board of Trustees.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
accounted for on a trade date basis. Net realized gains or losses on sales of
securities sold are determined by the identified cost method. Interest income is
recorded on the accrual basis. Investment income and realized and unrealized
gains and losses are allocated to the separate series based upon the relative
net assets of each series.
DIVIDENDS TO SHAREHOLDERS: Dividends from net investment income are
determined separately for each series and are declared daily and paid monthly.
Net realized capital gains, if any, are distributed at least annually.
Income dividends and capital gain dividends are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles.
FEDERAL INCOME TAXES: The Trust treats each Fund as a separate entity for
Federal income tax purposes. Each Fund intends to qualify each year as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended. By so qualifying, each Fund will not be subject to Federal
income taxes to the extent that it distributes substantially all of its taxable
or tax-exempt income, if any, for its tax year ending October 31. In addition,
by distributing in each calendar year substantially all of its net investment
income, capital gains and certain other amounts, if any, each Fund will not be
subject to a Federal excise tax. Therefore, no Federal income tax provision is
required.
37
<PAGE>
- --------------------
THE GALAXY FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------
REPURCHASE AGREEMENTS: Each Fund may engage in repurchase agreement
transactions with institutions that the Trust's investment adviser has
determined are creditworthy pursuant to guidelines established by the Trust's
Board of Trustees. Each repurchase agreement transaction is recorded at cost.
Each Fund requires that the securities purchased in a repurchase agreement
transaction be transferred to the Trust's Custodian (or sub-custodian) in a
manner that is intended to enable the Fund to obtain those securities in the
event of a counterparty default. The investment adviser monitors the value of
the securities, including accrued interest, daily to ensure that the value of
the collateral equals or exceeds amounts due under the repurchase agreement.
Repurchase agreement transactions involve certain risks in the event of default
or insolvency of the counterparty, including possible delays or restrictions
upon a Fund's ability to dispose of the underlying securities and a possible
decline in the value of the underlying securities during the period while the
Fund seeks to assert its rights.
EXPENSES: The Trust accounts separately for the assets, liabilities and
operations of each Fund. Expenses directly attributed to a Fund are charged to
the Fund, while expenses which are attributable to more than one fund of the
Trust are allocated among the respective funds.
In addition, expenses of a Fund not directly attributable to the operations
of a particular series of shares of the Fund are allocated to the separate
series based upon the relative net assets of each series. Operating expenses
directly attributable to a series of shares of a Fund are charged to the
operations of that series.
ORGANIZATION COSTS: Each Fund bears all costs in connection with its
organization, including the fees and expenses of registering and qualifying its
initial shares for distribution under Federal and state securities laws. All
such costs are amortized using the straight-line method over a period of five
years beginning with the commencement of each Fund's operations. In the event
that any of the initial shares purchased by a Fund's sponsor are redeemed during
such period by any holder thereof, the Fund involved will be reimbursed by such
holder for any unamortized organization costs in the same proportion as the
number of initial shares being redeemed bears to the number of initial shares
outstanding at the time of redemption.
3. INVESTMENT ADVISORY, ADMINISTRATION, SHAREHOLDER SERVICES AND OTHER FEES
The Trust and Fleet Investment Advisors Inc. (the "Investment Adviser"), an
indirect wholly-owned subsidiary of Fleet Financial Group, Inc., are parties to
an investment advisory agreement under which the Investment Adviser provides
services for a fee, computed daily and paid monthly, at the annual rate of 0.75%
of the average daily net assets of the Funds.
The Trust and First Data Investor Sevices Group Inc., ("FDISG"), (formerly
known as The Shareholder Services Group, Inc. doing business as 440 Financial) a
wholly-owned subsidiary of First Data Corporation, are parties to an
administration agreement under which FDISG (the "Administrator") provides
services for a fee that is computed daily and paid monthly, at the annual rate
of 0.09% of the first $2.5 billion of the combined average daily net assets of
the Funds and the other funds offered by the Trust, 0.085% of the next $2.5
billion of combined average daily net assets and 0.08% of combined average daily
net assets over $5 billion. In addition, FDISG also provides a certain fund
accounting, custody administration and transfer agency services pursuant to
certain fee arrangements. Pursuant to these fee arrangements, FDISG compensates
the Trust's custodian bank for its
38
<PAGE>
- --------------------
THE GALAXY FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------
sevices. Prior to March 31, 1995, the administration, fund accounting, custody
administration and transfer agency services described above were provided by 440
Financial Group of Worcester, Inc., a wholly-owned subsidiary of State Mutual
Life Assurance Company of America ("State Mutual"), for the same annual fees. On
that date, FDISG acquired substantially all of the assets of 440 Financial Group
of Worcester, Inc.
Prior to March 1, 1994, 440 Financial Group of Worcester, Inc. was entitled
to receive administration fees, computed daily and paid monthly, at an annual
rate of 0.078% of the first $2.5 billion of the combined average daily net
assets of the Funds and the other funds offered by the Trust plus 0.073% of
combined average daily net assets in excess of $2.5 billion.
Effective October 1, 1994, the Trust implemented a shareholder services plan
("Services Plan") with respect to Retail Shares of the Funds. Currently, the
Services Plan has not been implemented with respect to the Funds' Trust Shares.
The Services Plan provides compensation to institutions (currently limited to
Fleet Bank and its affiliates) which provide administrative and support services
to their customers who beneficially own Retail Shares at an annual rate not to
exceed 0.30% of the average daily net asset value of the outstanding Retail
Shares of each Fund beneficially owned by such customers. The Trust, under the
direction of the Board of Trustees, is currently limiting fees payable under the
Services Plan with respect to each Fund to an annual rate not to exceed 0.15% of
the average daily net asset value of the outstanding Retail Shares beneficially
owned by such customers.
Effective October 1, 1994, the Retail Shares and Trust Shares of the Funds
bear series specific transfer agent charges based upon the number of shareholder
accounts for each series. In addition, effective November 1, 1994, Trust Shares
also bear additional transfer agency fees in order to compensate FDISG for
payments made to Fleet Trust Company, an affiliate of the Investment Adviser,
for performing certain sub-account and administrative functions on a per account
basis with respect to Trust Shares held by defined contribution plans. For the
year ended October 31, 1995, transfer agent charges for each series were as
follows:
<TABLE>
<CAPTION>
FUND RETAIL TRUST
- ---- ------ -----
<S> <C> <C>
Short-Term Bond................................... $ 48,421 $ 5,881
Intermediate Government Income.................... 148,331 34,395
Corporate Bond.................................... -- 2,822
High Quality Bond................................. 46,182 162,933
</TABLE>
440 Financial Distributors, Inc. (the "Distributor"), a wholly-owned
subsidiary of FDISG and an indirect wholly-owned subsidiary of First Data
Corporation, acts as the exclusive distributor of the Trust's shares. Prior to
March 31, 1995, the Distributor was a wholly-owned subsidiary of 440 Financial
Group of Worcester, Inc., and an indirect wholly-owned subsidiary of State
Mutual. Prior to March 1, 1994, Allmerica Investments, Inc., a wholly-owned
subsidiary of State Mutual, served as the Trust's distributor.
Certain officers of the Trust may be officers of the Administrator and/or
the Distributor. Such officers receive no compensation from the Trust for
serving in their respective roles. No officer, director or employee of the
Investment Adviser serves as an officer, Trustee, or employee of the Trust.
Effective May 26, 1995, each Trustee is entitled to receive for services as a
trustee of the Trust and The Galaxy VIP Fund ("VIP") an aggregate fee of $18,000
per annum plus certain other fees for attending or participating in meetings as
well as reimbursement for expenses incurred in attending meetings. The Chairman
of the Boards of Trustees of the Trust and VIP is entitled to an additional
annual fee of $4,000 and the President and Treasurer of the Trust and VIP is
entitled to an additional annual fee of $2,500 for their services in these
capacities. These fees are allocated among the Funds of the Trust and VIP based
on their relative net assets.
39
<PAGE>
- --------------------
THE GALAXY FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------
Expenses for the year ended October 31, 1995 include legal fees paid to
Drinker Biddle & Reath. A partner of that firm is Secretary to the Trust.
4. WAIVER OF FEES AND REIMBURSEMENT OF EXPENSES
The Investment Adviser voluntarily agreed to waive a portion of its fees and
to reimburse the Funds for certain expenses so that total expenses would not
exceed certain expense limitations established for each series. The Investment
Adviser, at its discretion, may revise or discontinue the voluntary fee waivers
and expense reimbursements. For the year ended October 31, 1995, the Investment
Adviser waived fees and/or reimbursed expenses with respect to the Funds in the
following amounts:
<TABLE>
<CAPTION>
FEES WAIVED BY REIMBURSEMENT BY
FUND INVESTMENT ADVISER INVESTMENT ADVISER
- ---- ------------------ ------------------
<S> <C> <C>
Short-Term Bond.................... $ 130,602 $ 65,354
Intermediate
Government Income............... 557,058 60,356
Corporate Bond..................... 62,531 --
High Quality Bond.................. 297,640 34,946
</TABLE>
5. SHARES OF BENEFICIAL INTEREST
The Trust's Declaration of Trust authorizes the Trustees to issue an
unlimited number of shares of beneficial interest, each with a par value of
$0.001. Shares of the Trust are currently classified into twenty classes of
shares generally consisting of two series including: Class L - Series 1 and
Class L - Series 2 - Short-Term Bond Fund; Class D and Class D - Special Series
1 - Intermediate Government Income Fund; Class T - Series 1 and Class T - Series
2 - Corporate Bond Fund; and Class J - Series 1 and Class J -Series 2 - High
Quality Bond Fund. Each share represents an equal proportionate interest in the
respective Fund, bears the same fees and expenses (except that effective October
1, 1994, Retail Shares bear the expense of payments under the Services Plan and
Trust Shares and Retail Shares bear series specific transfer agent charges), and
are entitled to such dividends and distributions of income earned as are
declared at the discretion of the Trust's Board of Trustees.
Shareholders are entitled to one vote for each full share held and will vote in
the aggregate and not by class or series, except as otherwise expressly required
by law or when the Board of Trustees determines that the matter to be voted on
affects only the interests of shareholders of a particular class or series.
The following is a summary of transactions in portfolio shares and dividends to
shareholders for the year ended October 31, 1995 (by series for each Fund) and
for the year ended October 31, 1994 (in the aggregate):
<TABLE>
<CAPTION>
TRANSACTIONS IN PORTFOLIO SHARES:
SHORT-TERM BOND: SHARE ACTIVITY DOLLAR AMOUNTS
----------------------------------------- ---------------------------------------------
YEAR ENDED YEAR ENDED
OCTOBER 31, 1995 YEAR ENDED OCTOBER 31, 1995 YEAR ENDED
-------------------------- OCTOBER 31, ------------------------------ OCTOBER 31,
RETAIL TRUST 1994 RETAIL TRUST 1994
----------- ----------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Sold............................... 809,377 1,020,628 4,039,061 $ 8,050,740 $ 10,145,423 $ 40,766,159
Issued to shareholders in
reinvestment of dividends........ 132,385 137,810 320,334 1,308,564 1,360,406 3,199,455
Repurchased........................ (1,305,939) (1,764,334) (5,037,575) (12,823,541) (17,375,311) (50,327,584)
----------- ----------- ----------- ------------- ------------- -------------
Net increase (decrease) in
shares outstanding............... (364,177) (605,896) (678,180) $ (3,464,237) $ (5,869,482) $ (6,361,970)
=========== =========== =========== ============= ============= =============
</TABLE>
40
<PAGE>
- --------------------
THE GALAXY FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT INCOME: SHARE ACTIVITY DOLLAR AMOUNTS
----------------------------------------- ---------------------------------------------
YEAR ENDED YEAR ENDED
OCTOBER 31, 1995 YEAR ENDED OCTOBER 31, 1995 YEAR ENDED
-------------------------- OCTOBER 31, ------------------------------ OCTOBER 31,
RETAIL TRUST 1994 RETAIL TRUST 1994
----------- ----------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Sold............................... 804,775 2,266,661 5,498,756 $ 8,076,188 $ 22,701,923 $ 56,371,490
Issued to shareholders in
reinvestment of dividends........ 346,569 401,560 981,890 3,456,642 4,002,421 9,932,422
Repurchased........................ (3,194,928) (6,493,207) (16,521,419) (31,399,298) (64,524,794) (167,370,442)
----------- ----------- ----------- ------------- ------------- -------------
Net increase (decrease) in
shares outstanding............... (2,043,584) (3,824,986) (10,040,773) $(19,866,468) $(37,820,450) $(101,066,530)
=========== =========== =========== ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
CORPORATE BOND: SHARE ACTIVITY DOLLAR AMOUNTS
----------------- -----------------
PERIOD ENDED PERIOD ENDED
OCTOBER 31, 1995* OCTOBER 31, 1995*
----------------- -----------------
TRUST TRUST
----------------- -----------------
<S> <C> <C>
Sold............................... 3,956,883 $ 39,666,165
Issued to shareholders in
reinvestment of dividends........ 195,224 2,040,905
Repurchased........................ (671,397) (6,807,253)
----------------- -----------------
Net increase (decrease) in
shares outstanding............... 3,480,710 $ 34,899,817
================= =================
</TABLE>
<TABLE>
<CAPTION>
HIGH QUALITY BOND: SHARE ACTIVITY DOLLAR AMOUNTS
----------------------------------------- ---------------------------------------------
YEAR ENDED YEAR ENDED
OCTOBER 31, 1995 YEAR ENDED OCTOBER 31, 1995 YEAR ENDED
-------------------------- OCTOBER 31, ------------------------------ OCTOBER 31,
RETAIL TRUST 1994 RETAIL TRUST 1994
----------- ----------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Sold............................... 788,979 3,623,670 6,146,181 $ 8,003,866 $ 36,501,865 $ 64,197,582
Issued to shareholders in
reinvestment of dividends........ 112,202 534,027 1,031,305 1,132,273 5,380,120 10,780,225
Repurchased........................ (864,201) (3,943,913) (6,230,003) (8,535,985) (39,247,235) (64,242,626)
----------- ----------- ----------- ------------- ------------- -------------
Net increase (decrease) in
shares outstanding............... 36,980 213,784 947,483 $ 600,154 $ 2,634,750 $ 10,735,181
=========== =========== =========== ============= ============= =============
</TABLE>
* The Corporate Bond Fund commenced operations on December 12, 1994.
41
<PAGE>
- --------------------
THE GALAXY FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------
<TABLE>
<CAPTION>
DIVIDENDS TO SHAREHOLDERS: SHORT-TERM BOND INTERMEDIATE GOVERNMENT INCOME
----------------------------------------- ---------------------------------------------
YEAR ENDED YEAR ENDED
OCTOBER 31, 1995 YEAR ENDED OCTOBER 31, 1995 YEAR ENDED
-------------------------- OCTOBER 31, ------------------------------ OCTOBER 31,
RETAIL TRUST 1994 RETAIL TRUST 1994
----------- ----------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net investment income.............. $(1,667,283) $(2,036,836) $(3,779,478) $ (4,989,851) $ (12,537,397) $ (20,531,612)
Dividends in excess of
net investment income............ -- -- (554) -- -- (467,899)
Dividends in excess of net
realized gain on investments..... -- -- (507,910) -- -- (271,809)
----------- ----------- ----------- ------------- ------------- -------------
Total Dividends.................. $(1,667,283) $(2,036,836) $(4,287,942) $ (4,989,851) $ (12,537,397) $ (21,271,320)
=========== =========== =========== ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
CORPORATE BOND HIGH QUALITY BOND
----------------- ----------------------------------------------
PERIOD ENDED YEAR ENDED
OCTOBER 31, 1995* OCTOBER 31, 1995 YEAR ENDED
----------------- ----------------------------- OCTOBER 31,
TRUST RETAIL TRUST 1994
----------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Net investment income.............. $ (2,067,947) $ (1,631,664) $ (7,723,052) $ (9,838,837)
Dividends in excess of
net investment income............ -- (3,143) (14,878) (18,362)
Net realized gain on investments... -- -- -- (785,499)
Dividends in excess of net
realized gain on investments..... -- -- -- (3,267,227)
----------------- ------------- ------------- --------------
Total Dividends.................. $ (2,067,947) $ (1,634,807) $ (7,737,930) $ (13,909,925)
================= ============= ============= ==============
</TABLE>
* The Corporate Bond Fund commenced operations on December 12, 1994.
6. PURCHASES AND SALES OF SECURITIES
The cost of purchases and proceeds from sales of securities, excluding
short-term investments, for the year ended October 31, 1995 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------------------------ ------------------------------
FUND GOVERNMENT OTHER GOVERNMENT OTHER
- ------------------------------------------------ ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Short-Term Bond................................. $ 127,539,195 $ 3,746,438 $ 122,607,689 $ 10,463,700
Intermediate Government Income.................. 273,022,689 115,134,578 304,346,406 143,848,600
Corporate Bond.................................. 13,601,290 32,619,640 6,504,602 6,380,222
High Quality Bond............................... 150,298,578 9,960,970 145,696,793 7,751,536
</TABLE>
42
<PAGE>
- --------------------
THE GALAXY FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------
The aggregate gross unrealized appreciation and depreciation, net unrealized
appreciation (depreciation),and cost for all securities as computed on a Federal
income tax basis, at October 31, 1995 for each Fund is as follows:
<TABLE>
<CAPTION>
FUND APPRECIATION (DEPRECIATION)
- ---- ------------ --------------
<S> <C> <C>
Short-Term Bond.......................... $ 1,106,312 $ (46,320)
Intermediate Government
Income.................................. 6,530,489 (684,806)
Corporate Bond........................... 2,213,511 (4,116)
High Quality Bond........................ 7,829,328 (796,789)
<CAPTION>
FUND NET COST
- ---- --- ----
<S> <C> <C>
Short-Term Bond.......................... $ 1,059,992 $ 64,327,737
Intermediate Government
Income.................................. 5,845,683 257,790,837
Corporate Bond........................... 2,209,395 34,736,971
High Quality Bond........................ 7,032,539 155,153,465
</TABLE>
At October 31, 1995 the following Funds had capital loss carryforwards:
<TABLE>
<CAPTION>
FUND AMOUNT EXPIRATION
- ---- ------ ----------
<S> <C> <C>
Short-Term Bond.......................... $ 2,061,577 2002
473,903 2003
Intermediate Government
Income................................... 18,723,999 2002
3,216,263 2003
High Quality Bond........................ 2,590,214 2002
2,998,422 2003
</TABLE>
7. ACQUISITION OF THE SHAWMUT FUNDS
At a meeting held on June 12, 1995, the Board of Trustees of the Trust
approved an Agreement and Plan of Reorganization (the "Agreement") for the
acquisition of The Shawmut Funds ("Shawmut") by the Trust. Under the Agreement,
all of the assets and liabilities of the Shawmut Limited Term Income Fund, the
Shawmut Intermediate Government Income Fund and the Shawmut Fixed Income Fund
were transferred to the Galaxy Short-Term Bond Fund, the Galaxy Intermediate
Government Income Fund and the Galaxy Corporate Bond Fund, respectively, in
exchange for shares of the Galaxy Short-Term Bond Fund, the Galaxy Intermediate
Government Income Fund and Trust Shares of the Galaxy Corporate Bond Fund,
respectively. Accordingly, the net assets of the Shawmut Short-Term Bond Fund,
the Shawmut Intermediate Government Income Fund and the Shawmut Fixed Income
Fund, respectively were exchanged for 769,927 Retail Shares and 3,042,900 Trust
Shares of the Galaxy Short-Term Bond Fund, 1,010,018 Retail Shares and 4,449,125
Trust Shares of Galaxy Intermediate Income Fund and 8,188,057 Trust Shares of
the Galaxy Corporate Bond Fund, respectively. The reorganization, which
qualified as a tax-free reorganization for Federal income tax purposes, was
completed on December 4, 1995 following approval of the reorganization by The
Shawmut Fund Shareholders. Certain share registration fees incurred in
connection with the reorganization were borne by the Trust. The following is a
summary of the Net Assets, Shares Outstanding, Net Asset Value per share and
Unrealized Appreciation associated with the transaction:
43
<PAGE>
- --------------------
THE GALAXY FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------
<TABLE>
<CAPTION>
Before Acquisition After Acquisition
-------------------------------- -----------------
Galaxy Shawmut Galaxy
Short Term Limited Term Short Term
Bond Income Bond
---------- ------------ ----------
<S> <C> <C> <C>
Net Assets............................................... $ 67,193,642 $ 38,592,419 $ 105,786,061
Shares outstanding....................................... 6,639,613 4,010,158 10,452,440
Retail Net Asset Value, per share........................ $ 10.12 $ 9.63 $ 10.12
Trust Net Asset Value, per share......................... $ 10.12 $ 9.62 $ 10.12
Unrealized Appreciation.................................. $ 1,401,348 $ 520,971
</TABLE>
<TABLE>
<CAPTION>
Before Acquisition After Acquisition
--------------------------------- -----------------
Galaxy Shawmut Galaxy
Intermediate Intermediate Intermediate
Government Government Government
Income Income Income
------------ ------------ ------------
<S> <C> <C> <C>
Net Assets............................................... $ 268,704,491 $ 56,676,793 $ 325,381,284
Shares outstanding....................................... 25,878,466 5,718,050 31,337,609
Retail and Trust Net Asset Value, per share.............. $ 10.38 $ 9.91 $ 10.38
Unrealized Appreciation.................................. $ 8,182,521 $ 1,253,530
</TABLE>
<TABLE>
<CAPTION>
Before Acquisition After Acquisition
-------------------------------- -----------------
Galaxy Shawmut Galaxy
Corporate Fixed Corporate
Bond Income Bond
--------- ------- ---------
<S> <C> <C> <C>
Net Assets............................................... $ 37,891,079 $ 88,144,360 $ 126,035,439
Shares outstanding....................................... 3,518,577 8,818,538 11,706,634
Retail and Trust Net Asset Value, per share.............. $ 10.77 $ 10.00 $ 10.77
Unrealized Appreciation.................................. $ 2,501,831 $ 1,370,661
</TABLE>
8. IMPOSITION OF FRONT-END SALES LOAD
Effective December 1, 1995, the public offering price for Retail Shares of the
Funds will be the sum of the Net Asset Value of the Retail Shares purchased
plus, if applicable, a maximum 3.75% front-end sales charge. Reduced sales
charges are available. No sales charge will be assessed on certain transactions
and/or investors, including purchases by persons who were beneficial owners of
shares of Galaxy or any other funds advised by Fleet Investment Advisors Inc. or
its affiliates before December 1, 1995.
44
<PAGE>
- --------------------
THE GALAXY FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------
TAX INFORMATION (UNAUDITED):
During the fiscal year ended October 31, 1995, the following Funds earned
income from direct obligations of the U.S. Government:
<TABLE>
<CAPTION>
U.S. GOVERNMENT
FUND INCOME
- ---- ---------------
<S> <C>
Short Term Bond......................................... 65.31%
Intermediate Government Income.......................... 9.70%
Corporate Bond.......................................... 12.88%
High Quality Bond....................................... 61.19%
</TABLE>
Appropriate tax information detailing the government income percentages on a
calendar year basis will accompany your year end statement. As each state's
rules on the exemption of this income differs, please consult your tax advisor
regarding specific tax treatment.
45
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
The Galaxy Fund:
We have audited the accompanying statements of assets and liabilities of the
Short-Term Bond Fund, Corporate Bond Fund, Intermediate Government Income Fund
(formerly Intermediate Bond Fund) and High Quality Bond Fund (four series of The
Galaxy Fund), including the portfolios of investments, as of October 31, 1995,
and the related statements of operations, the statements of changes in net
assets, and financial highlights for each of the periods indicated therein.
These financial statements and financial highlights are the responsibility of
The Galaxy Fund's management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
aforementioned series of The Galaxy Fund as of October 31, 1995, the results of
their operations, the changes in their net assets, and their financial
highlights for each of the periods indicated therein, in conformity with
generally accepted accounting principles.
Boston, Massachusetts Coopers & Lybrand L.L.P.
December 8, 1995
<PAGE>
- --------------------
SHAREHOLDER
SERVICES
- --------------------
AUTOMATIC INVESTMENT PROGRAM
The Golden Rule of investing is "pay yourself first." That is easy to do with
Galaxy's Automatic Investment Program. For as little as $50 per month deducted
directly from your checking, statement savings, NOW or bank money market
account, you can consistently and conveniently add to your Galaxy investment.
When you establish an Automatic Investment Program, the $2,500 initial
investment requirement for Galaxy is waived. Of course, such a program does not
assume a profit and does not protect against loss in declining markets.
DIVERSIFICATION
A fundamental investment practice is "diversification." A well-balanced asset
allocation plan may help to control your risk while pursuing your goals. Many
mutual funds offer a low-cost way to diversify your investments while you
benefit from professional management. Galaxy's comprehensive array of investment
choices can be used in combination to match the needs of nearly everyone.
EXCHANGE PRIVILEGES
As your investment needs change, you can conveniently exchange your shares in
one fund for shares in another fund.
INFORMATION
Service also means giving you the practical information you need, in language
you can understand, to make smart investment decisions. The quarterly magazine,
Galaxy Observer, brings news, strategies and simple, straight-forward
explanations of investment basics and terminology. Timely, comprehensive mutual
fund account statements offer status reports on your individual account. If you
have a Fleet One or a Fleet Private Banking Account, your Galaxy Fund
information can appear on your regular bank account statement.
INVESTMENT SPECIALISTS
In many Fleet branch offices you can visit one-on-one with an Investment
Specialist* whose main concern is that you select the investments that match
your individual needs. This service is at no cost to you.
24-HOUR ACCESS TO REGISTERED REPRESENTATIVES
24 hours a day, seven days a week, 365 days a year, we are ready and available
to help. Our toll-free telephone lines offer round-the-clock access to Fund
information and service. Call 1-800-628-0414 for information on initial
purchases and current performance.
CUSTOMER SERVICE
Quality customer service is only a phone call away. Call 1-800-628-0413 between
9 a.m. and 5 p.m. to arrange bank wires, or to make telephone exchanges and
redemptions.
- --------------------------------------------------------------------------------
Certain shareholder services may not be available for Trust Share investors.
Please consult your Fund Prospectus.
* Investment Specialists are registered representatives of FIS Securities, Inc.,
member NASD, or 440 Financial Distributors, Inc., member NASD and SIPC.
"A well-balanced asset allocation plan may help to control your risk while
pursuing your goals."
<PAGE>
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<PAGE>
This report is submitted for the general information of shareholders of The
Galaxy Fund. It is not authorized for distribution to prospective investors
unless accompanied or preceded by an effective prospectus for the Fund, which
contains more information concerning the Fund's investment policies, as well as
fees and expenses and other pertinent information. Read the prospectus carefully
before you invest.
Shares of the Funds are not deposits or obligations of, or guaranteed or
endorsed by Fleet Financial Group, Inc. or any of its affiliates, Fleet
Investment Advisors Inc. or any Fleet bank. Shares of the Funds are not
federally insured by the U.S. Government, the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other agency. Investment return
and principal value will vary as a result of market conditions or other factors
so that shares of the Funds, when redeemed, may be worth more or less than their
original cost. An investment in the Funds involves investment risks, including
the possible loss of principal.
[RECYCLED PAPER LOGO APPEARS HERE]
This report was printed on recycled paper.
TRUSTEES
AND OFFICERS
Dwight E. Vicks, Jr.
Chairman and Trustee
John T. O'Neill
President, Treasurer
and Trustee
Louis DeThomasis,
F.S.C., Ph.D.
Trustee
Donald B. Miller
Trustee
James M. Seed
Trustee
Bradford S. Wellman
Trustee
W. Bruce McConnel, III, Esq.
Secretary
Louis J. Russo
Assistant Treasurer
Neil Forrest
Vice President &
Assistant Treasurer
INVESTMENT ADVISER
Fleet Investment
Advisors Inc.
50 Kennedy Plaza
Providence, Rhode Island
02903
DISTRIBUTOR
440 Financial
Distributors, Inc.
290 Donald Lynch
Boulevard
Marlboro,
Massachusetts 01752
ADMINISTRATOR
First Data Investor
Services Group, Inc.
(formerly The Shareholder
Services Group, Inc.
d/b/a 440 Financial)
4400 Computer Drive
Westboro,
Massachusetts 01581-5108
<PAGE>
- -------------------- -----------------
BULK RATE
U. S. POSTAGE
4400 Computer Drive PAID
GALAXY Box 5108 PERMIT NO. 54201
FUNDS Westboro, MA 01581-5108 BOSTON, MA
- -------------------- -----------------
FN-080 (12/95)
