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Galaxy
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Funds
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TAX-FREE BOND FUNDS REPORT
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TAX-EXEMPT BOND FUND o NEW YORK MUNICIPAL BOND FUND
CONNECTICUT MUNICIPAL BOND FUND o MASSACHUSETTS MUNICIPAL BOND FUND o
RHODE ISLAND MUNICIPAL BOND FUND
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ANNUAL
REPORT
FOR THE YEAR ENDED
OCTOBER 31 1997
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CHAIRMAN'S
MESSAGE
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Dear Shareholder:
Enclosed is your performance report for the Galaxy tax-free bond funds for
the fiscal year ended October 31, 1997. During this time, moderate growth and
lower inflation pushed bond prices higher, making total returns for municipal
bonds higher than historical averages.
These returns became more attractive with passage of the Taxpayer Relief
Act of 1997 (the "Act"), which reduced tax rates for long-term capital gains.
Under the Act, the top tax rate fell from 28% to 20% for investments sold from
May 7, 1997, through July 28, 1997, that were held longer than 12 months. For
sales after July 28, 1997, the lower capital gains rate applies for investments
held more than 18 months. The rate for investors in the 15% income tax bracket
has fallen from 15% to 10%.
The new law also makes individual retirement accounts more attractive in
some circumstances. Starting in 1998, the law raises the income limits for
deductible contributions when you have a company retirement plan and allows,
when a couple's joint income is less than $150,000, one spouse to make
deductible contributions even if the other spouse has a company plan. If you
want to use money in a deductible IRA to pay college expenses or buy a first
home, you may do so without penalty before age 59 1/2.
Two new IRAs may help you build savings from nondeductible contributions.
The Roth IRA allows up to $2,000 in after-tax contributions each year and
eliminates taxes on all distributions after age 59 1/2. You may remove up to
$10,000 before 59 1/2 to buy a first home. However, no tax-free distributions
may be made until at least five years after you establish a Roth IRA. The
education IRA allows up to $500 in after-tax contributions per year for each
child under age 18. You can remove earnings at any time, without tax or
penalties, to pay the child's college expenses. Both the Roth IRA and the
education IRA are subject to certain income limits.
Fleet Investment Advisors Inc. has prepared a guide to the new tax rules to
help you understand these changes. We have also added a Roth IRA and an
education IRA to our other retirement products. If you would like information on
using IRAs with Fleet Galaxy Funds, or you have questions about this report,
please call the Galaxy Information Center at 1-800-628-0414.
Sincerely,
/s/ Dwight E. Vicks, Jr.
Dwight E. Vicks, Jr.
Chairman of the Board of Trustees
Mutual Funds:
o are not bank deposits
o are not FDIC insured
o are not obligations of Fleet Bank
o are not guaranteed by Fleet Bank
o are subject to investment risk including possible loss of principal amount
invested
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MARKET OVERVIEW
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TAX-FREE BOND MARKET OVERVIEW
By Fleet Investment Advisors Inc.
Bond prices rose substantially in the past year, due largely to lower
inflation. However, the ride was not a smooth one. Although the Federal Reserve
(the "Fed") raised interest rates just once, strong economic growth kept
investors uncertain about the direction of rates for most of the period --
adding volatility to bond prices.
Prices for municipal bonds were generally more stable than prices for
taxable issues. Municipal bond prices often rise less in a rally than the prices
of taxable issues and tend to fall less in a market decline. This is because the
balance of supply and demand for municipal bonds is especially sensitive to
interest rate changes. When rates rise, supplies of municipals tend to shrink
while demand strengthens. The reverse is generally true when rates fall.
Although price gains for municipal bonds were more modest in the last year
than gains for taxable issues, municipals enjoyed total returns that were quite
strong by historical standards.
"Prices for municipal bonds were generally more stable than prices for
taxable issues. Municipal prices often rise less in a rally than the prices of
taxable issues and tend to fall less in a market decline. This is because the
balance of supply and demand for municipal bonds is especially sensitive to
interest rate changes."
Bobbing Interest Rates
When the period began on November 1, 1996, the annual rate of inflation was
3%. The yield for 30-year Treasuries was 6.64%, and the yield for the Bond Buyer
Index -- a benchmark for municipals -- was 5.83%. Signs of slower economic
growth, plus hope for a balanced federal budget, kept interest rates and yields
falling into December.
Evidence of stronger growth drove interest rates and yields higher in
late-1996 and in early-1997. Although inflation fell to 2.5%, the Fed, concerned
about future inflation and an "irrational exuberance" in stock prices, raised
short-term interest rates a modest 25 basis points in March. The expectation of
future rates hikes caused bond prices to fall enough to push long-term Treasury
yields to a nine-month high of 7.17%, and the yield for the Bond Buyer Index to
6.01%.
PERFORMANCE AT-A GLANCE
Average Annual Returns as of October 31, 1997
Trust Shares
TAX-EXEMPT BOND FUND
Inception Date 12/30/91
1yr 7.75%
3 yrs 8.74%
5 yrs 7.21%
Life 6.96%
NEW YORK MUNICIPAL BOND FUND
Inception Date 12/31/91
1 yr 8.17%
3 yrs 8.91%
5 yrs 7.04%
Life 6.69%
CONNECTICUT MUNICIPAL BOND FUND
Inception Date 3/16/93
1 yr 8.06%
3 yrs 9.18%
Life 5.64%
MASSACHUSETTS MUNICIPAL BOND FUND
Inception Date 3/12/93
1 yr 8.06%
3 yrs 8.93%
Life 5.37%
It soon became clear, however, that the economy was not as strong as
investors had thought. After growing at an annualized rate of 4.9% in the first
quarter of 1997, the gross domestic product, which measures U.S. goods and
services, slowed to an annualized rate of 3.6% in the second quarter. This,
combined with further gains in productivity, drove inflation to 2.2% and sent
bond prices higher.
PERFORMANCE AT-A-GLANCE*
Average Annual Returns as of October 31, 1997
Retail A Shares
TAX-EXEMPT BOND FUND
Inception Date 12/30/91
1 yr 3.46%
3 yrs 7.12%
5 yrs 6.25%
Life 6.13%
NEW YORK MUNICIPAL BOND FUND
Inception Date 12/31/91
1 yr 3.87%
3 yrs 7.29%
5 yrs 6.09%
Life 5.88%
CONNECTICUT MUNICPAL BOND FUND
Inception Date 3/16/93
1 yr 3.76%
3 yrs 7.57%
Life 4.63%
MASSACHUSETTS MUNICIPAL BOND FUND
Inception Date 3/12/93
1 yr 3.85%
3 yrs 7.35%
Life 4.39%
RHODE ISLAND MUMICIPAL BOND FUND
Inception Date 12/20/94
1 yr 3.78%
Life 7.02%
[ ] 1 Year [ ] 5 Years
[ ] 3 Years [ ] Life of Fund
* All return figures include the effect of the maximum 3.75%
front-end sales charge.
Investors became worried about future inflation again in the summer when
growth indicators were stronger than they had expected. Concerns about another
hike in interest rates drove bond prices sharply lower in August. When
investors' inflation fears were calmed, bond prices then quickly rebounded.
In October, bonds continued their rally as economic troubles in the Far
East made U.S. income securities more attractive to both domestic and foreign
investors. By October 31, following a 554-point loss in the Dow Jones Industrial
Average, the rally in bond prices had pushed the yield for long-term Treasury
securities to 6.14% and the yield for the Bond Buyer Index to 5.40%.
"Growth continued to slow in the summer, further reducing the rate of
inflation. Investors again became worried about future inflation, however, since
growth remained stronger than they had expected."
Investment Strategy
To make the most of changing yields and prices, we emphasized longer
maturities when we thought prices would rise and shorter maturities when we
thought prices would fall. This helped to maximize price gains, limit price
loss, and improve the Fund's yield. To enhance potential appreciation, we looked
for issues available in strong supply at attractive prices.
Throughout the period we bought high-quality bonds with good credit quality
that have protection against being called in by their issuers. When investors
are uncertain about inflation and interest rates, they tend to favor the lower
price risk of top-quality issues. Investors also favor good call protection in
volatile markets because it means a more reliable income stream.
Slower Growth, Lower Rates
Although economic fundamentals remain solid, we expect growth to slow in
coming months. Productivity gains show signs of peaking, and both consumer
spending and exports are set to ebb. Inflation should remain moderate in this
environment, easing the pressure for further hikes in interest rates.
To make the most of further price gains, we plan to increase investments in
longer maturities and favor positions with the best appreciation potential. As
before, we will look to increase the portion of noncallable securities and
target issues of high quality.
PERFORMANCE AT-A-GLANCE
Average Annual Returns as of October 31, 1997
Retail B Shares *
TAX EXEMPT BOND FUND
Inception Date 3/4/96
1 Yr. Before 6.83%
1 Yr. After 1.83%
Life Before 4.74%
Life After 2.38%
[ ] One year returns before contingent
deferred sales charge deducted.
[ ] One year returns after contingent
deferred sales charge deducted as if
shares were redeemed at end of period.
[ ] Life of fund returns before contingent
deferred sales charge deducted.
[ ] Life of fund returns after contingent
deferred sales charge deducted as if
sales were redeemed at end of period.
*Retail B Shares are subject to a 5.00% contingent
deferred sales charge if shares are redeemed
within the first year. The charge decreases to
4.00%, 3.00%, 3.00%, 2.00% and 1.00% for redemptions
made during the second through sixth years,
respectively. Retail B Shares automatically convert
to Retail A Shares after six years. Total returns
are from the date of inception.
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PORTFOLIO REVIEWS
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GALAXY TAX-EXEMPT BOND FUND
By Daniel Rabasco
Portfolio Manager
[PHOTO OF DANIEL RABASCO]
As interest rates rose and fell in the last year, we tried to optimize
price gains for the Galaxy Tax-Exempt Bond Fund, minimize price losses, and
enhance the Fund's yield. For most of the year, these strategies helped the Fund
earn returns near those for its market benchmark and funds with similar
investment objectives. Because of uncertainty about interest rates, we were
cautious in preparing for lower rates and higher prices. This somewhat dampened
the Fund's relative performance when prices strengthened unexpectedly in October
as a result of economic instability in the Far East and weakness in the equity
markets.
For the 12 months ended October 31, 1997, the Fund's Trust Shares earned a
total return of 7.75%. Over the same time, Retail A Shares had a total return of
7.49% before deducting the maximum 3.75% front-end sales charge, and Retail B
Shares had a total return of 6.83% before deducting the maximum 5.00% contingent
deferred sales charge. (Please see the chart on page 2 for total returns after
deducting the front-end sales charge and the chart on page 3 for returns after
deducting the contingent deferred sales charge.)
During this period, the average general municipal bond fund followed by
Lipper Analytical Services ("Lipper"), a mutual fund performance tracking
service, had a total return of 8.12%. During this time the Lehman Brothers
Municipal Bond Index had a total return of 8.50%.
On October 31, 1997, the Fund's Trust Shares had a 30-day Securities and
Exchange Commission ("SEC") annualized yield of 4.36%. On the same date, Retail
A Shares had a 30-day SEC annualized yield of 3.97%, and Retail B Shares had a
30-day SEC annualized yield of 3.48%. For shareholders in the 36% federal income
tax bracket, these equaled taxable yields of 6.81%, 6.20%, and 5.44%
respectively.
GALAXY TAX-EXEMPT BOND FUND
Distribution of Total Net Assets as of October 31, 1997
East 35%
South 31%
North Central 14%
Mountain 9%
Pacific 8%
Cash Equivalents & Net Other Assets & Liabilities 3%
OPTIMIZING RETURNS
Because higher-coupon issues tend to outperform when interest rates fall,
we traded lower-coupon municipal bonds ("municipals") for higher-coupon
municipals at the end of 1996. With greater optimism about inflation and
interest rates in December, we added 25-year maturities to improve the Fund's
potential appreciation and yield.
As interest rates rose early in 1997, we focused on maturities of 15 to 20
years to defend the Fund from falling bond prices. When rates fell again in
April, we made selective investments in longer term issues. To add appreciation
potential we purchased bonds with better call protection during May through July
and sold bonds with less call protection.
Due to uncertainty regarding the direction of rates and a relatively flat
yield curve, we did not extend the Fund's maturity during August and September.
We concentrated on adding bonds issued for water and education purposes -- which
were available in good supply at attractive prices.
GALAXY TAX EXEMPT BOND FUND
Growth of $10,000 investment*
Lehman Galaxy Galaxy Galaxy
Brothers Tax-Exempt Tax-Exempt Tax-Exempt
Municipal Bond Fund Bond Fund Bond Fund
Bond - Retail A - Trust - Retail B
Index Shares Shares Shares
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12/30/91 $10,000 $ 9,625 $10,000
1992 10,582 10,062 10,455
1993 12,072 11,635 12,089
1994 11,546 11,082 11,515
1995 13,213 12,657 13,084 $10,000
1996 13,967 13,167 13,742 9,615
10/31/97 15,465 14,153 14,807 10,398
* Since inception on 12/30/91 for Trust and Retail A Shares. Since inception
on 3/4/96 for Retail B Shares. Performance figures for Retail A Shares
include the effect of the maximum 3.75% front-end sales charge. Performance
figures for Retail B Shares reflect the deduction of the maximum 5.00%
contingent deferred sales charge as if shares were redeemed on October 31,
1997. The Lehman Brothers Municipal 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.
Even though we had substantially reduced investments that could be called
in by their issuers, many callable holdings still remained. Price gains for the
callable bonds lagged behind those for non-callable issues when rates fell again
in October. These bonds limited the performance of the Fund in October.
GALAXY NEW YORK MUNICIPAL BOND FUND
Distribution of Total Net Assets as of October 31, 1997
New York 94%
Other Territories 2%
Cash Equivalents 2%
Pennsylvania 1%
Net Other Assets & Liabilities 1%
PLANNING FOR FURTHER GAINS
Based on our forecast for stable to lower interest rates, we expect to
lengthen the Fund's maturity further in the months to come and we will attempt
to add more non-callable issues. This should enhance the Fund's appreciation
potential if interest rates continue to fall. Due to their relative
attractiveness, we also plan to add investments from high tax specialty states
such as California, where the potential for price appreciation is especially
strong.
GALAXY NEW YORK MUNICIPAL BOND FUND
By Daniel Rabasco
Portfolio Manager
GALAXY NEW YORK MUNICIPAL BOND FUND
Growth of $10,000 investment*
Lehman Galaxy Galaxy
Brothers New York Municipal New York Municipal
Municipal Bond Fund - Bond Fund -
Bond Index Retail A Shares Trust Shares
- ----------------------------------------------------------------------
12/31/91 $10,000 $ 9,625 $10,000
1992 10,582 9,993 10,383
1993 12,072 11,558 12,009
1994 11,546 10,870 11,294
1995 13,213 12,395 12,901
1996 13,967 12,928 13,488
10/31/97 15,465 13,954 14,590
*Since inception on 12/31/91. Performance figures for Retail A Shares include
the effect of the maximum 3.75% front-end sales charge. The Lehman Brothers
Municipal 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.
When interest rates fluctuate, prices for longer-term bonds tend to change
more than prices for shorter-term bonds. By emphasizing longer maturities when
we expected rising prices, and shorter maturities when we expected falling
prices, we helped the Galaxy New York Municipal Bond Fund make the most of
recent interest rate changes.
For the 12 months ended October 31, 1997, the Fund's Trust Shares earned a
total return of 8.17%. During the same time, Retail A Shares returned 7.93%
before deducting the maximum 3.75% front-end sales charge. (Please see the chart
on page 2 for total returns after deducting the front-end sales charge.)
Over this period the average New York tax-exempt bond fund tracked by
Lipper returned 8.04% and the Lehman Brothers Municipal Bond Index returned
8.50%.
MAKING THE MOST OF FALLING RATES
At the end of 1996, when rates were falling, the yield curve was relatively
flat, and we emphasized maturities of 15 to 20 years. In December, as optimism
about inflation raised hopes for further rate declines, we added 25-year
maturities. These issues produced price gains as rates fell.
As rates rose early in 1997, we returned to maturities of 15 to 20 years.
This, plus a focus on good coupons and strong credit quality, helped protect the
Fund as bond prices fell. When rates peaked in April, we locked in the higher
yields with longer maturities. In May, we traded into municipals that could not
be called in by their issuers to enhance price performance and yield.
During the summer, we improved the Fund's performance with zero-coupon
municipal bonds and issues selling at discounted prices. Because of their
quality and essential service nature, we emphasized investments related to water
and education projects.
On October 31, 1997, the Fund's Trust Shares had a 30-day SEC annualized
yield of 4.59%. On the same date, Retail A Shares had a 30-day SEC annualized
yield of 4.21%. These are the same as taxable yields of 7.17% and 6.58%,
respectively, for shareholders in the 36% federal income tax bracket who live in
the State of New York.
ADDING APPRECIATION POTENTIAL
If interest rates continue to fall, the Fund should benefit further from
its longer maturities. To enhance this benefit, we will probably extend
maturities more in the months to come and reduce positions with less potential
for appreciation. For added liquidity, we plan to eliminate some of the Fund's
smaller positions. As before, we will focus on high-quality issues with good
call protection.
GALAXY CONNECTICUT MUNICIPAL BOND FUND
By Daniel Rabasco
Portfolio Manager
GALAXY CONNECTICUT MUNICIPAL BOND FUND
Distribution of Total Net Assets as of October 31, 1997
Connecticut 90%
Pennsylvania 6%
Michigan 3%
Other Territories 3%
Cash Equivalents 2%
Virginia 1%
Net Other Assets & Liabilities (5)%
With supplies relatively tight, the price gains for municipal bonds in
Connecticut were especially strong in the past year. This, plus an emphasis on
longer maturities when rates were falling, helped the Galaxy Connecticut
Municipal Bond Fund deliver solid returns for the 12 months ended October 31,
1997.
During that time, the Fund's Trust Shares earned a total return of 8.06%.
Before deducting the maximum 3.75% front-end sales charge, Retail A Shares
earned a return of 7.86%. (Please see the chart on page 2 for total returns
after deducting the front-end sales charge.)
For the same period, the average Connecticut municipal bond fund tracked by
Lipper returned 7.77% and the Lehman Brothers Municipal Bond Index returned
8.50%. On October 31, 1997, the Fund's Trust Shares had a 30-day SEC annualized
yield of 4.25%. On the same date, Retail A Shares had a 30-day SEC annualized
yield of 3.89%. These equal taxable yields of 6.64% and 6.08%, respectively, for
shareholders in the 36% federal income tax bracket who live in the State of
Connecticut.
GALAXY CONNECTICUT MUNICIPAL BOND FUND
Growth of $10,000 investment*
Lehman Galaxy Galaxy
Brothers Connecticut Municipal Connecticut Municipal
Municipal Bond Fund - Bond Fund -
Bond Index Retail A Shares Trust Shares
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3/16/93 $10,000 $ 9,625 $10,000
1993 10,697 10,183 10,580
1994 10,231 9,532 9,902
1995 12,594 10,956 11,413
1996 12,952 11,429 11,930
10/31/97 14,776 12,327 12,891
*Since inception on 3/16/93. Performance figures for Retail A Shares include
the effect of the maximum 3.75% front-end sales charge. The Lehman Brothers
Municipal Bond Index is an unmanaged index in which investors cannot invest.
Results for the index are calculated since 3/31/93 because the index returns
are calculated at month-end only. Results for the index do not reflect the
expenses and investment management fees incurred by the Fund.
REALIGNING MATURITIES
In a market where interest rates are falling, prices for longer-term bonds
tend to gain more than prices for shorter-term bonds. While rates were declining
at the end of 1996, we focused on municipals maturing in 15 to 20 years. In
December, with good news on inflation and the prospect of further rate declines,
we added issues that matured in 25 years.
When interest rates reversed course early in 1997, we resumed our focus on
maturities of 15 to 20 years. This, combined with high coupons and strong credit
quality, helped buffer the Fund as prices fell. With the peak in interest rates
during April, we selectively added longer maturities to lock in the higher
yields for more time. In May, to further enhance Fund performance potential, we
traded into municipal bonds that could not be called in by their issuers.
As yields continued to fall in July, we added zero-coupon municipals and
issues selling at discounted prices. In making these purchases, we stressed
investments related to water and education services. We focused on bonds with
strong credit quality -- feeling the yields for lesser-quality municipals did
not cover the added risk for those issues.
FUTURE STRATEGIES
In keeping with our outlook for stable to lower interest rates, we expect
to extend maturities further in months to enhance the Fund's appreciation
potential. In addition, we are reducing Fund positions with less appreciation
potential. To improve liquidity, we are eliminating some of the Fund's smaller
positions. Where we can, we will continue to concentrate on issues with strong
credit quality and good call protection.
GALAXY MASSACHUSETTS
MUNICIPAL BOND FUND
By Daniel Rabasco
Portfolio Manager
GALAXY MASSACHUSETTS MUNICIPAL BOND FUND
Distribution of Total Net Assets as of October 31, 1997
Massachusetts 90%
Cash Equivalents & Net Other Assets & Liabilities 4%
Other Territories 4%
Pennsylvania 2%
In the 12 months ended October 31, 1997, we focused on longer maturities
when we expected interest rates would fall and shorter maturities when we
thought rates would rise. Because prices for longer-term issues are more
sensitive to changes in interest rates than prices for shorter-term issues, this
strategy enhanced potential appreciation for the Galaxy Massachusetts Municipal
Bond Fund while limiting the risk of price loss. By locking in higher yields for
more time, the use of longer maturities also improved the Fund's yield.
During the period the Fund's Trust Shares earned a total return of 8.06%.
Over the same time, Retail A Shares earned a return of 7.92% before deducting
the maximum 3.75% front-end sales charge. (Please see the chart on page 2 for
total returns after deducting the front-end sales charge.)
These returns compared to 7.82% for the average Massachusetts municipal
bond fund tracked by Lipper and 8.50% for the benchmark Lehman Brothers
Municipal Bond Index.
GALAXY MASSACHUSETTS MUNICIPAL BOND FUND
Growth of $10,000 investment*
Lehman Galaxy Galaxy
Brothers Massachusetts Massachusetts
Municipal Municipal Bond Fund - Municipal Bond Fund -
Bond Index Retail A Shares Trust Shares
- ---------------------------------------------------------------------------
3/12/93 $10,000 $ 9,625 $10,000
1993 10,584 10,146 10,542
1994 10,231 9,491 9,859
1995 12,594 10,868 11,312
1996 12,952 11,309 11,795
10/31/97 14,776 12,204 12,746
*Since inception on 3/12/93. Performance figures for Retail A Shares include the
effect of the maximum 3.75% front-end sales charge. The Lehman Brothers
Municipal 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. Results for the index are calculated since 3/31/93
because the index returns are calculated at month-end only.
On October 31, 1997, the Fund's Trust Shares had a 30-day SEC annualized
yield of 4.04% and Retail A Shares had a 30-day SEC annualized yield of 4.34%.
These equaled taxable yields of 6.78% and 6.31% for shareholders in the 36%
Federal income tax bracket who live in the Commonwealth of Massachusetts.
MOVING MATURITIES
Although interest rates were falling when the period began, the yield curve
was relatively flat -- giving little incentive for investing in longer
maturities. As a result, we concentrated purchases on maturities of 15 to 20
years. To enhance the Fund's yield, we traded lower-coupon issues for
higher-coupons issues. When good inflation news signaled further rate declines
in December, we bought municipals maturing in 25 years.
At the beginning of 1997, with interest rates headed higher, we turned our
attention again to 15- to 20-year maturities so that we could protect the value
of Fund shares as bond prices fell. Our emphasis on higher-coupon issues of good
credit quality also helped Fund performance. In April, when rates were peaking,
we selectively purchased longer-term municipals with attractive values. In May,
we increased the representation of securities that could not be called by their
issuers, in an effort to improve the Fund's performance.
As rates fell further in July, we added zero-coupon municipals and issues
selling at discounted prices. At the same time we blocked up the size of our
holdings to improve liquidity. With spreads between issues of different credit
quality quite narrow, we remained focused on higher-quality issues. Because
plentiful supplies made their prices more attractive, we targeted municipals
related to essential services.
GOING LONGER
We will probably extend maturities further in coming months based on
expectations that slower growth and lower inflation may help interest rates
decline. To improve liquidity, we are eliminating some of the Fund's smaller
positions. Where we can, we will continue to concentrate on issues with strong
credit quality and good call protection.
GALAXY RHODE ISLAND
MUNICIPAL BOND FUND
By Daniel Rabasco
Portfolio Manager
GALAXY RHODE ISLAND MUNICIPAL BOND FUND
Distribution of Total Net Assets as of October 31, 1997
Rhode Island 87%
Other Territories 7%
Cash Equivalents 4%
Net Other Assets & Liabilities 2%
As interest rates were falling in the 12 months ended October 31, 1997, we
focused on longer-term municipals and securities that could not be called in by
their issuers. This both enhanced the price performance of the Galaxy Rhode
Island Municipal Bond Fund and boosted its yield. We further improved returns by
focusing on issues with higher coupons. The Fund also benefited from ongoing
tightness in Rhode Island's municipal supplies -- which kept upward pressure on
prices.
During the period the Fund's Retail A Shares earned a total return of 7.78%
before deducting the maximum 3.75% front-end sales charge. (Please see chart on
page 2 for total returns after deducting the front-end sales charge.) Over the
same time the Lehman Brothers Municipal Bond Index had a total return of 8.50%.
Lipper does not track Rhode Island municipal bond fund averages.
GALAXY RHODE ISLAND MUNICIPAL BOND FUND
Growth of $10,000 investment*
Lehman Galaxy
Brothers Rhode Island Municipal
Municipal Bond Fund -
Bond Index Retail A Shares
- ----------------------------------------------------
12/20/94 $10,000 $ 9,625
1995 11,445 10,711
1996 12,050 11,270
10/31/97 12,507 12,146
*Since inception on 12/20/94. Performance figures for Retail A Shares include
the effect of the maximum 3.75% front-end sales charge. The Lehman Brothers
Municipal 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. Results for the index are calculated since 12/31/94
because the results are calculated at month-end only.
OPTIMIZING INCOME AND PRICE GAINS
When the period began, interest rates were falling, and investors were
looking for better yield. To optimize income and price appreciation, we traded
lower-coupon municipals for issues with higher coupons. Because the yield curve
was relatively flat, making longer-term issues less attractive, we focused on
maturities of 15 to 20 years.
When rates rose at the start of 1997, the Fund benefited from its emphasis
on higher coupons and municipals with strong credit quality and liquidity. To
improve income and price performance further, we traded into municipals with
better call protection.
In July, we added issues selling at discounted prices. In August, when
prices and yields were especially attractive, we purchased longer-term issues to
enjoy the better yields for more time. With narrow spreads between yields of
issues with different credit risk, we continued to focus on higher-quality
investments. We also targeted municipals representing essential services.
On October 31, 1997, the Fund's Retail A Shares had a 30-day SEC annualized
yield of 4.25%. This equaled a taxable yield of 6.64% for taxpayers in the 36%
federal income tax bracket who live in the State of Rhode Island.
Adding Price Potential and Liquidity
In the months to come, we expect to give added attention to longer
maturities and noncallable issues. This should further improve the Fund's yield
and potential appreciation if rates continue to fall. For additional price
performance, we are reducing positions with less appreciation potential. To
improve liquidity, we are blocking up the size of our holdings.
Daniel Rabasco is a member of the Tax-Exempt Investment Policy Committee of
Fleet Investment Advisors Inc. He became manager of the Galaxy tax-free bond
funds in May of 1997. He has managed fixed income portfolios for Fleet
Investment Advisors Inc. and other investment companies for more than 10 years.
- -------------------------------------------------------------------------------
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 Advisor and Administrator are presently waiving
fees and/or reimbursing expenses and may revise or discontinue such practices at
any time. 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, and the effect of any sales charges, where
applicable..
<PAGE>
---------------
Tax-Exempt Bond Fund
PORTFOLIO OF INVESTMENTS
THE GALAXY FUND October 31, 1997
---------------
VALUE
PAR VALUE (NOTE 2)
--------- --------
MUNICIPAL SECURITIES - 99.97%
ALASKA - 1.16%
$ 375,000 Alaska Municipal Bond Authority
Series B, GO
6.60%, 07/01/99
Insured: MBIA .......................... $ 376,571
1,275,000 Anchorage Hospital Revenue
Sisters of Providence Project
6.75%, 10/01/00 ........................ 1,357,871
-------------
1,734,442
-------------
ARIZONA - 1.00%
1,455,000 Salt River Project Agricultural
Improvement & Power District
Electric System, Series A,
7.10%, 01/01/00
Pre-refunded 01/01/98 .................. 1,491,331
-------------
CALIFORNIA - 1.82%
2,750,000 California Educational Facilities
Authority, Stanford University, Series N
5.20%, 12/01/27 ........................ 2,722,500
-------------
COLORADO - 0.97%
1,450,000 Colorado Water Resource
& Power Development Authority
Drinking Water Revenue, Series A
5.25%, 09/01/15 ........................ 1,446,375
-------------
CONNECTICUT - 2.37%
865,000 Connecticut State Housing Finance
Authority, Housing Mortgage Finance
Program, Series A
6.10%, 05/15/13 ........................ 906,088
1,000,000 Connecticut State Housing Finance
Authority, Housing Mortgage Finance
Program, SubSeries B-1
6.25%, 05/15/11 ........................ 1,062,500
500,000 Connecticut State Special Tax Obligation
Transportation Infrastructure, Series B
6.10%, 09/01/07 ........................ 536,875
1,000,000 Connecticut State Special Tax Obligation
Transportation Infrastructure, Series A
5.40%, 09/01/10 ........................ 1,031,250
-------------
3,536,713
-------------
FLORIDA - 1.40%
1,000,000 Florida State Department
of Transportation, Right of Way
5.40%, 07/01/16 ........................ 1,015,000
1,000,000 Pinellas County Resource Recovery
Revenue, Series A
6.60%, 10/01/00
Insured: MBIA .......................... 1,070,000
-------------
2,085,000
-------------
GEORGIA - 0.70%
1,000,000 Fulton County School District. GO
5.60%, 01/01/11 ........................ 1,040,000
-------------
IDAHO - 1.15%
500,000 Boise-Kuna Irrigation District
Lucky Peak Hydroelectric Project
6.60%, 07/01/05 ........................ 546,875
1,160,000 Idaho Housing & Finance Assistance
Single Family Mortgage, Senior
Series G-2, AMT
5.70%, 07/01/16 ........................ 1,170,150
-------------
1,717,025
-------------
ILLINOIS - 4.96%
1,000,000 Cook County, GO
7.25%, 11/01/07
Insured: MBIA .......................... 1,196,250
3,000,000 Illinois Educational Facilities Authority
Wesleyan University
5.65%, 09/01/26
Insured: MBIA .......................... 3,045,000
1,000,000 Illinois State, GO
5.80%, 09/01/18
Insured: FGIC .......................... 1,045,000
1,000,000 Peoria Public Building Commission
School Building & Facilities
District No. 150 Project
6.50%, 12/01/00
Pre-refunded 12/01/99
Insured: AMBAC ......................... 1,048,750
1,000,000 Regional Transportation Authority
Series A
6.25%, 06/01/15 ........................ 1,080,000
-------------
7,415,000
-------------
INDIANA - 1.39%
2,000,000 Indianapolis Local Public Improvement
Bond Bank, Series A
6.00%, 01/10/18 ........................ 2,075,000
-------------
IOWA - 1.18%
1,745,000 Iowa Finance Authority Single Family
Revenue, Mortgage, Series F
5.55%, 01/01/16 ........................ 1,764,631
-------------
KENTUCKY - 1.42%
1,000,000 Kentucky Housing Corp. Guaranteed
Series C-3
5.70%, 01/01/11 ........................ 1,038,750
1,000,000 Kentucky State Turnpike Authority
Economic Development, Road Revenue
Revitalization Projects
7.13%, 05/15/01
Pre-refunded 05/15/00 .................. 1,085,000
-------------
2,123,750
-------------
MAINE - 1.26%
250,000 Maine Municipal Bond Bank
Series B
6.75%, 11/01/12 ........................ 274,375
500,000 Maine Municipal Bond Bank
Sewer & Water, SRF Program, Series A
6.50%, 11/01/08 ........................ 542,500
1,000,000 Maine State Housing Authority
Mortgage, Series C-1
6.50%, 11/15/11 ........................ 1,072,500
-------------
1,889,375
-------------
MARYLAND - 3.88%
2,875,000 Maryland State Community
Development Administration, Dept.
of Housing & Community Development
Series A , AMT
5.70%, 07/01/17 ........................ 2,910,938
1,500,000 Maryland State Health & Higher
Education, Facilities Authority
Johns Hopkins University
6.00%, 07/01/10 ........................ 1,638,750
1,250,000 Montgomery County Housing
Opportunity, Commission Single
Family Mortgage Revenue
5.75%, 07/01/13 ........................ 1,250,000
-------------
5,799,688
-------------
MASSACHUSETTS - 6.55%
250,000 Massachusetts Bay Transportation
Authority, Series C
6.10%, 03/01/07 ........................ 271,563
1,000,000 Massachusetts Municipal Wholesale
Electric, Copower Supply System
Series D, 6.00%, 07/01/11
Insured: MBIA .......................... 1,071,250
2,000,000 Massachusetts State
Series A , GO
5.50%, 02/01/11 ........................ 2,047,500
1,000,000 Massachusetts State HEFA
Capital Asset Program, Series F
6.70%, 10/01/98
Insured: MBIA .......................... 1,027,150
2,000,000 Massachusetts State HEFA
Partners Healthcare System, Series A
5.38%, 07/01/17
Insured: MBIA .......................... 1,995,000
200,000 Massachusetts State HEFA
South Shore Hospital, Series D
6.50%, 07/01/10
Insured: MBIA .......................... 220,000
50,000 Massachusetts State Housing Finance
Agency, Residential Development
Series C
6.88%, 11/15/11 ........................ 54,375
1,000,000 Massachusetts State Industrial Finance
Electric Utility Revenue
Nantucket Electric, Series A, AMT
5.88%, 07/01/17
Insured: AMBAC ......................... 1,052,500
1,000,000 Massachusetts State
Series A, SP OB,
5.80%, 06/01/14
Pre-refunded 06/01/04 .................. 1,037,500
1,000,000 Massachusetts Water Resource Authority
3.65%, 11/05/97
LOC: Morgan Guaranty Trust ............. 999,972
-------------
9,776,810
-------------
MICHIGAN - 2.09%
1,000,000 Central Michigan University
6.00%, 10/01/13
Insured: MBIA .......................... 1,058,750
2,000,000 Michigan State Building Authority
Facilities Program, Series I
5.30%, 10/01/10
Insured: AMBAC ......................... 2,067,500
-------------
3,126,250
-------------
MINNESOTA - 0.72%
1,000,000 Minnesota Public Facilities Authority Water
PCR, Series A
6.90%, 03/01/03
Pre-refunded 03/01/00 .................. 1,080,000
-------------
MISSOURI - 1.48%
2,000,000 Sikeston Electric Revenue
6.00%, 06/01/14
Insured: MBIA .......................... 2,215,000
-------------
NEVADA - 1.07%
$ 1,000,000 Clark County
Series A, GO & Revenue
6.00%, 06/01/16
Pre-refunded 06/01/02
Insured: AMBAC ......................... $ 1,072,500
500,000 Nevada State
Series B, GO
6.00%, 05/01/10
Pre-refunded 05/01/01 .................. 532,500
-------------
1,605,000
-------------
NEW JERSEY - 1.77%
1,000,000 Mercer County Improvement Authority
Customer Receipts, Justice Complex
6.05%, 01/01/07 ........................ 1,001,850
1,500,000 New Jersey Health Care Facilities
Financing, AHS Hospital Corp., Series A
6.00%, 07/01/12
Insured: AMBAC ......................... 1,648,125
-------------
2,649,975
-------------
NEW YORK - 5.89%
1,000,000 Battery Park City Authority
Senior Lien, Series A
5.50%, 11/01/10 ........................ 1,023,750
1,000,000 New York State, Series I, GO
6.00%, 04/15/09 ........................ 1,066,250
1,000,000 New York Municipal Water Finance
Authority, Water & Sewer System
Series A
5.50%, 06/15/11 ........................ 1,020,000
250,000 New York State, GO
6.10%, 11/15/09 ................. 265,313
1,000,000 New York State, GO
5.50%, 06/15/10 ........................ 1,028,750
1,000,000 New York Sate Dormitory Authority
University of Rochester
6.50%, 07/01/09 ........................ 1,023,660
4,000,000 New York State Dormitory Authority
Capital Appreciation, State University
5.18%, 05/15/10 (A)
Insured: MBIA .......................... 2,125,000
125,000 New York State Local Government
Assistance, Series A
7.00%, 04/01/12 ........................ 140,781
1,000,000 Port Authority of New York &
New Jersey, JFK International Air
Terminal, Series 6, SP OB , AMT
6.00%, 12/01/07
Insured: MBIA .......................... 1,098,750
-------------
8,792,254
-------------
NORTH CAROLINA - 1.73%
$ 1,500,000 Charlotte Certificates of Participation
Convention Facility Project
6.35%, 12/01/00
Insured: AMBAC ......................... $ 1,599,375
925,000 North Carolina Housing Finance Agency
Single Family Revenue, Series Y
6.30%, 09/01/15 ........................ 989,750
-------------
2,589,125
-------------
OHIO - 4.85%
1,000,000 Cleveland Waterworks
First Mortgage, Series F-92 A
6.25%, 01/01/15
Insured: AMBAC ......................... 1,076,250
1,000,000 Cleveland Waterworks
Refunding & Improvement
First Mortgage
5.50%, 01/01/10
Insured: MBIA .......................... 1,050,000
1,500,000 Hamilton County Sewer System
Improvement, Series A
5.00%, 12/01/17
Insured: FGIC .......................... 1,464,375
1,000,000 Ohio State Building Authority
State Facilities, Adult Correctional
Series A
6.00%, 04/01/06
Insured: AMBAC ......................... 1,102,500
750,000 Ohio State Public Facilities Commission
Higher Educational Facilities, Series B
6.50%, 12/01/99
Insured: AMBAC ......................... 786,563
1,785,000 Ohio State Water Development Authority
Pollution Center, Facilities, Water Control
Loan Fund, Water Quality Series
5.00%, 12/01/15
Insured: MBIA .......................... 1,742,606
-------------
7,222,294
-------------
PENNSYLVANIA - 8.01%
2,000,000 Delaware Valley Regional Finance
Authority, Local Government Revenue,
Series B
5.60%, 07/01/17
Insured: AMBAC ......................... 2,105,000
2,210,000 Elizabeth Forward School District
Capital Appreciation, Series B, GO
5.52%, 09/01/21 (A)
Insured: MBIA .......................... 638,138
2,210,000 Elizabeth Forward School District
Capital Appreciation, Series B, GO
5.52%, 09/01/22 (A)
Insured: MBIA .......................... 599,463
1,000,000 Luzerne County, Series B, GO
6.00%, 09/15/11
Insured: FGIC .......................... 1,026,250
2,000,000 Montgomery County Higher Education
& Health Authority, Holy Redeemer
Health, Series A
5.20%, 10/01/12
Insured: AMBAC ......................... 1,992,500
1,500,000 Pennsylvania Housing Finance Agency
Single Family Mortgage, Series 59-A, AMT
5.75%, 10/01/23 ........................ 1,503,750
1,000,000 Pennsylvania State
Second Series A, GO
6.50%, 11/01/04
Pre-refunded 11/01/01
Insured: MBIA .......................... 1,096,250
955,000 Pennsylvania State Higher Education
Assistance, Agency Student Loan
Revenue, Series A
6.80%, 12/01/00
Insured: FGIC .......................... 1,019,463
1,900,000 Pennsylvania Higher Educational
Facilities Authority, Health Services
University of Pennsylvania, Series B
5.88%, 01/01/15 ........................ 1,990,250
-------------
11,971,064
-------------
RHODE ISLAND - 4.62%
135,000 Jamestown, GO
6.75%, 09/01/10 ........................ 146,981
200,000 Rhode Island Clean Water Protection
Finance Agency, Revolving Fund
Pooled Loan Issue, Series A
6.75%, 10/01/13
Insured: MBIA .......................... 220,500
1,000,000 Rhode Island Housing & Mortgage
Finance, Homeownership Opportunity
Series 19-A
5.70%, 04/01/15 ........................ 1,015,000
700,000 Rhode Island Housing & Mortgage
Finance, Homeownership Opportunity
Series 13
6.70%, 10/01/15 ........................ 753,375
1,500,000 Rhode Island State Health & Educational
Building, Corp., Higher Education
Johnson & Wales University
6.38%, 04/01/12
Insured: Connie Lee .................... 1,638,750
500,000 Rhode Island State Health & Educational
Building, Corp., Miriam Hospital, Series B
6.50%, 04/01/13
Pre-refunded 04/01/03 .................. 558,125
1,500,000 Rhode Island State Health & Educational
Corp., Higher Education
Johnson & Wales University , Series A
5.75%, 04/01/12
Insured: Connie Lee .................... 1,550,625
$ 1,000,000 Rhode Island State Health & Educational
Building Corp., Higher Education
Auxiliary, Series A
5.50%, 09/15/13
Insured: MBIA .......................... $ 1,015,000
-------------
6,898,356
-------------
SOUTH CAROLINA - 2.39%
2,100,000 Oconee County PCR
Duke Power Co. Project
5.80%, 04/01/14 ........................ 2,202,375
500,000 Piedmont Municipal
Power Agency Electric
6.10%, 01/01/06
Insured: MBIA .......................... 554,375
750,000 Richland County
Certificates of Participation
6.90%, 02/01/01
Insured: FGIC .......................... 811,875
-------------
3,568,625
-------------
SOUTH DAKOTA - 0.72%
1,000,000 Rapid City Sales Tax
Series B
6.20%, 06/01/12
Insured: FGIC .......................... 1,067,500
-------------
TENNESSEE - 2.47%
500,000 Memphis Water Revenue
Series A
6.00%, 01/01/07 ........................ 532,500
2,000,000 Metropolitan Government Nashville &
Davidson County, GO
5.88%, 05/15/26 ........................ 2,097,500
1,000,000 Metropolitan Government Nashville &
Davidson County Health & Education
Facilities Board, Vanderbilt University
Series B
6.30%, 10/01/14 ........................ 1,057,500
-------------
3,687,500
-------------
TEXAS - 16.27%
2,000,000 Austin Utility System
5.13%, 11/15/15
Insured: FSA ........................... 1,967,500
2,000,000 Brazos County Health Facilities
Development Corp., Franciscan Services
Corp., Obligation Group
5.38%, 01/01/22
Insured: MBIA .......................... 1,985,000
215,000 Harris County
Toll Road, Series A
6.50%, 08/15/17
Pre-refunded 08/15/02
Insured: AMBAC ......................... 238,650
35,000 Harris County Toll Road
Series A, Unrefunded Balance
6.50%, 08/15/17
Insured: AMBAC ......................... 38,063
5,000,000 Harris County Capital Appreciation
Series A, GO & Revenue
5.18%, 08/15/07(A)
Insured: FGIC .......................... 3,156,250
2,000,000 Harris County Health Facilities
Development Corp., Hospital Revenue
Memorial Hospital System, Series A
6.00%, 06/01/12
Insured: MBIA .......................... 2,182,500
2,170,000 Harris County Health Facilities
Development Corp., Memorial Hospital
System Project, Series A
6.00%, 06/01/13
Insured: MBIA .......................... 2,368,013
4,000,000 Houston Water & Sewer System
Junior Lien, Series C
5.35%, 12/01/11(A)
Insured: AMBAC ......................... 1,935,000
1,750,000 Lower Colorado River Authority
Capital Appreciation, Junior Lien
4th Supplement
5.45%, 01/01/13(A)
Insured: FGIC .......................... 783,125
2,000,000 Lower Neches Valley Authority, IDC
Mobil Oil Refining Project
5.80%, 05/01/22 ........................ 2,057,500
2,000,000 New Braunfels Independent School
District, Capital Appreciation, GO
5.23%, 02/01/07(A) ..................... 1,285,000
1,000,000 North Central Health Facilities
Development Corp., Hospital
Presbyterian Healthcare
5.90%, 06/01/21
Pre-refunded 06/01/05 .................. 1,085,000
950,000 North Texas Higher Education Authority
Texas Student Loan Revenue, Series A
6.50%, 04/01/99
Insured: AMBAC ......................... 970,188
2,000,000 San Antonio Airport System
7.13%, 07/01/05
Insured: AMBAC ......................... 2,305,000
2,000,000 Texas Water Development Board State
Revolving Fund, Senior Lien, Series B
5.00%, 07/15/19 ........................ 1,947,500
-------------
24,304,289
-------------
UTAH - 2.73%
1,000,000 Intermountain Power Agency Power
Series F
6.75%, 07/01/98 ........................ 1,012,500
2,000,000 Intermountain Power Agency Power
Series A
5.50%, 07/01/10 ........................ 2,052,500
1,000,000 Utah State Housing Finance Agency
Single Family Mortgage, Series D-1,
Class I
5.65%, 07/01/16 ........................ 1,016,250
-------------
4,081,250
-------------
VIRGINIA - 2.03%
1,000,000 Norfolk Industrial Development
Authority Childrens Hospital,
Kings Group
6.50%, 06/01/21
Insured: AMBAC ......................... 1,072,500
2,000,000 Virginia State Public School Authority
School Financing, Series I, GO
5.13%, 08/01/17 ........................ 1,954,900
-------------
3,027,400
-------------
WASHINGTON - 5.18%
1,000,000 Lewis County Public Utilities District
No. 001, Ref, Cowlitz Falls Hydroelectric
5.50%, 10/01/13 ........................ 1,015,000
1,000,000 Seattle Municipality Metropolitan
Seattle Sewer Revenue, Series S
6.80%, 01/01/02
Pre-refunded 01/01/98 .................. 1,024,380
3,000,000 Washington State, Series C, GO
5.50%, 01/01/17 ........................ 3,045,000
1,500,000 Washington State Public Power Supply
System, Nuclear Project No. 1, Series A
7.25%, 07/01/99 ........................ 1,576,875
1,000,000 Washington State Public Power Supply
System, Nuclear Project No. 2, Series C
7.30%, 07/01/00 ........................ 1,076,250
-------------
7,737,505
-------------
WEST VIRGINIA - 1.39%
2,000,000 West Virginia School Building Authority
Capital Improvement
5.50%, 07/01/11
Insured: AMBAC ......................... 2,077,500
-------------
WISCONSIN - 1.12%
600,000 Milwaukee Metropolitan Sewer District
Series A, GO
6.50%, 10/01/98 ........................ 613,986
1,000,000 Wisconsin State Transportation
Series B
5.75%, 07/01/12
Pre-refunded 07/01/02 .................. 1,060,000
-------------
1,673,986
-------------
OTHER TERRITORIES - 2.23%
3,000,000 Puerto Rico Electric Power Authority
Series BB
6.00%, 07/01/12
Insured: MBIA .......................... 3,326,250
-------------
TOTAL MUNICIPAL SECURITIES ............. 149,318,763
(Cost $143,912,035) -------------
SHARES
------
INVESTMENT COMPANY - 0.44%
662,258 Federated Tax-Free Obligations Fund .... 662,258
-------------
TOTAL INVESTMENT COMPANY ............... 662,258
(Cost $662,258) -------------
TOTAL INVESTMENTS - 100.41% .............................. 149,981,021
(Cost $144,574,293) -------------
NET OTHER ASSETS AND LIABILITIES - (0.41)% ............... (608,150)
-------------
NET ASSETS - 100.00% ..................................... $ 149,372,871
=============
(A) Zero Coupon Bond. Rate shown reflects effective yield to maturity
at the time of purchase.
AMBAC American Municipal Bond Assurance Corp.
AMT Alternate Minimum Tax - Private activity obligations whose
interest is subject to the Federal AMT for individuals.
Connie Lee College Construction Loan Association
FGIC Federal Guaranty Insurance Corp.
FSA Financial Security Assurance Company
GO General Obligation
HEFA Health and Educational Facilities Authority
IDC Industrial Development Corp.
LOC Letter of Credit
MBIA Municipal Bond Insurance Association
PCR Pollution Control Revenue
SP OB Special Obligation
See Notes to Financial Statements.
<PAGE>
---------------
New York Municipal Bond Fund
PORTFOLIO OF INVESTMENTS
THE GALAXY FUND October 31, 1997
---------------
VALUE
PAR VALUE (NOTE 2)
--------- --------
MUNICIPAL SECURITIES - 96.79%
NEW YORK - 94.09%
$ 1,000,000 Albany County, GO
5.50%, 06/01/08
Insured: FGIC .......................... $ 1,050,000
1,000,000 Albany County Airport Authority
5.38%, 12/15/17
Insured: FSA ........................... 996,246
1,500,000 Ballston Spa Central
School District, GO
5.25%, 06/01/15
Insured: FGIC .......................... 1,509,375
100,000 Canandaigua City
School District, GO
6.50%, 06/01/10
Insured: AMBAC ......................... 115,000
150,000 Chenango, GO
6.00%, 07/15/06 ........................ 164,250
100,000 Huntington, GO, Series B
6.25%, 04/15/07
Insured: AMBAC ......................... 108,625
1,000,000 Metropolitan Transportation Authority
Dedicated Tax Fund, Series A
5.50%, 04/01/16
Insured: MBIA .......................... 1,013,750
1,000,000 Metropolitan Transportation Authority
Dedicated Tax Fund, Series A
5.25%, 04/01/21
Insured: MBIA .......................... 986,250
100,000 Monroe County
Public Improvement, GO
6.10%, 06/01/14
Pre-refunded 06/01/04
Insured: AMBAC ......................... 111,250
900,000 Monroe County
Public Improvement, GO
6.10%, 06/01/14
Pre-refunded 06/01/04
Insured: AMBAC ......................... 1,001,250
750,000 Monroe County
Public Improvement, GO
6.10%, 03/01/09
Insured: MBIA .......................... 794,063
100,000 Monroe County
Water Improvement, GO
6.20%, 06/01/05
Pre-refunded 06/01/01
Insured: AMBAC ......................... 108,500
1,000,000 Monroe County Water Authority
Series A
6.25%, 08/01/11 ........................ 1,062,500
1,000,000 Monroe Woodbury
Central School District, GO
5.63%, 05/15/18
Insured: MBIA .......................... 1,026,250
1,500,000 Municipal Assistance Corporation
for New York, New York
Series L
6.00%, 07/01/08 ........................ 1,668,750
$ 2,000,000 Nassau County General Improvement
Series W, GO
5.00%, 09/01/16
Insured: FGIC .......................... $ 1,940,000
225,000 Nassau County, GO
6.10%, 05/15/05
Insured: MBIA .......................... 244,406
500,000 New Castle Public Improvement, GO
5.88%, 09/15/09 ........................ 529,375
1,000,000 New York, GO, Series I
6.00%, 04/15/09 ........................ 1,066,250
750,000 New York City Municipal Water
Finance Authority
Water & Sewer System, Series A
5.90%, 06/15/04 ........................ 809,063
500,000 New York City Municipal Water
Finance Authority
Water & Sewer System, Series A
6.10%, 06/15/06 ........................ 540,625
1,675,000 New York City Municipal Water
Finance Authority
Water & Sewer System, Series A
5.50%, 06/15/11 ........................ 1,708,500
2,000,000 New York City Municipal Water
Finance Authority
Water & Sewer System, Series A
5.13%, 06/15/15 ........................ 1,972,500
1,000,000 New York City Municipal Water
Finance Authority
Water & Sewer System, Series A
6.00%, 06/15/17 ........................ 1,032,500
1,000,000 New York City Municipal Water
Finance Authority
Water & Sewer System, Series A
5.75%, 06/15/18
Insured: AMBAC ......................... 1,026,250
750,000 New York City Municipal Water
Finance Authority
Water & Sewer System, Series B
5.75%, 06/15/13
Insured: MBIA .......................... 809,063
1,000,000 New York City Municipal Water
Finance Authority
Water & Sewer System, Series B
5.75%, 06/15/26
Insured: MBIA .......................... 1,032,500
1,000,000 New York City Industrial
Development Agency Civic Facility
Trinity Episcopal School Corp. Project
5.25%, 06/15/17
Insured: MBIA .......................... 996,250
2,000,000 New York City Trust
Cultural Resources
American Museum
of National History, Series A
5.60%, 04/01/18
Insured: MBIA .......................... 2,055,000
200,000 New York State, GO
6.70%, 03/01/07 ........................ 219,000
1,000,000 New York State, GO
6.25%, 09/15/07 ........................ $ 1,083,750
100,000 New York State, GO
6.90%, 02/01/08 ........................ 109,500
500,000 New York State, GO
6.25%, 06/15/08 ........................ 536,875
1,000,000 New York State, GO
6.13%, 11/15/10 ........................ 1,060,000
500,000 New York State, GO
6.00%, 11/15/11 ........................ 530,000
1,030,000 New York State Dormitory Authority
Cornell University
5.40%, 07/01/12 ........................ 1,041,588
500,000 New York State Dormitory Authority
New York University
6.25%, 07/01/09
Insured: FGIC .......................... 535,625
2,225,000 New York State Dormitory Authority
Rochester Institute of Technology
5.30%, 07/01/17
Insured: MBIA .......................... 2,230,563
2,000,000 New York State Dormitory Authority
St. Johns University
5.70%, 07/01/26
Insured: MBIA .......................... 2,052,500
1,000,000 New York State Dormitory Authority
University of Rochester
Strong Memorial Hospital
5.40%, 07/01/06 ........................ 1,056,250
500,000 New York State Dormitory Authority
University of Rochester
6.50%, 07/01/09 ........................ 511,830
1,000,000 New York State Environmental
Facilities Corp., State Water
Subordinated Revolving Fund, PCR
Series E
5.00%, 06/15/13
Insured: MBIA .......................... 983,750
100,000 New York State Environmental
Facilities Corp., State Water
Revolving Fund, PCR
Pooled Loan, Series A
6.40%, 09/15/06 ........................ 110,375
1,000,000 New York State Environmental
Facilities Corp., State Water
Revolving Fund, PCR
Pooled Loan, Series A
5.40%, 09/15/07 ........................ 1,048,750
500,000 New York State Environmental
Facilities Corp., State Water
Revolving Fund, PCR
Pooled Loan, Series B
6.50%, 09/15/08 ........................ 551,875
100,000 New York State Environmental
Facilities Corp., State Water
Revolving Fund, PCR, Series E
6.88%, 06/15/10
Pre-refunded 06/15/01 .................. 110,625
500,000 New York State Housing
Finance Agency Multifamily Mortgage
Housing, Series A
6.95%, 08/15/12 ........................ 538,750
300,000 New York State Local Government
Assistance Corp., Series A
6.88%, 04/01/06
Pre-refunded 04/01/02 .................. 336,000
250,000 New York State Local Government
Assistance Corp., Series B
6.00%, 04/01/07 ........................ 267,188
1,000,000 New York State Local Government
Assistance Corp., Series B
6.00%, 04/01/18 ........................ 1,033,750
1,250,000 New York State Local Government
Assistance Corp., Series C
6.00%, 04/01/07 ........................ 1,335,938
250,000 New York State Local Government
Assistance Corp., Series C
6.50%, 04/01/15 ........................ 268,125
800,000 New York State Medical Care Facilities
Finance Agency
Second Mortgage Program
Health Care Projects, Series B
6.35%, 11/01/14 ........................ 847,000
500,000 New York State Mortgage Agency
Homeowner Mortgage, Series 27
6.90%, 04/01/15 ........................ 545,625
3,000,000 New York State Mortgage Agency
Homeowner Mortgage, Series 67
5.70%, 10/01/17 ........................ 3,015,000
145,000 New York State Mortgage Agency
Revenue, 8th Series
6.88%, 04/01/17 ........................ 145,758
1,000,000 New York State Power Authority
Revenue, General Purpose, Series AA
6.38%, 01/01/12 ........................ 1,067,500
500,000 New York State Power Authority
Revenue, General Purpose, Series Z
6.63%, 01/01/12 ........................ 546,250
1,250,000 New York State Thruway Authority
Revenue, Series A
5.88%, 01/01/07 ........................ 1,326,563
500,000 Onondaga County, GO
5.88%, 02/15/10 ........................ 550,625
250,000 Orange County, GO
6.20%, 12/01/09
Pre-refunded 12/01/99 .................. 265,313
100,000 Orange County, GO
6.20%, 12/01/10
Pre-refunded 12/01/99 .................. 106,125
100,000 Orleans County, GO
6.50%, 09/15/08 ........................ 115,000
1,000,000 Port Authority of New York
and New Jersey
JFK International Air Terminal
6.00%, 12/01/07
Insured: MBIA .......................... 1,098,750
200,000 Port Authority of New York
and New Jersey
Consolidated Loan, Series 71
6.90%, 07/15/09 ........................ 215,000
500,000 Port Authority of New York
and New Jersey
Consolidated Loan, Series 78
6.50%, 04/15/11 ........................ 541,250
500,000 Triborough Bridge and
Tunnel Authority, Revenue
General Purpose, Series X
6.00%, 01/01/06 ........................ 521,250
500,000 Triborough Bridge and
Tunnel Authority, Revenue
General Purpose, Series X
6.00%, 01/01/07 ........................ 520,625
750,000 Triborough Bridge and
Tunnel Authority, Revenue
General Purpose, Series X
6.00%, 01/01/08 ........................ 778,125
300,000 Triborough Bridge and
Tunnel Authority, Revenue
General Purpose, Series X
6.63%, 01/01/12 ........................ 349,125
750,000 Triborough Bridge and
Tunnel Authority, Revenue
General Purpose, Series Y
6.00%, 01/01/12 ........................ 829,688
100,000 Triborough Bridge and
Tunnel Authority, Revenue, SP OB
6.10%, 01/01/05
Insured: FGIC .......................... 107,750
250,000 Triborough Bridge and
Tunnel Authority, Revenue, SP OB
6.15%, 01/01/06
Insured: FGIC .......................... 269,375
500,000 United Nations Development Corp.
Senior Lien, Series A
6.00%, 07/01/06
Pre-refunded 07/01/03 .................. 549,375
2,000,000 United Nations Development Corp.
Senior Lien, Series A
6.00%, 07/01/12
Pre-refunded 07/01/03 .................. 2,197,500
500,000 United Nations Development Corp.
Subordinated Lien, Series B
6.20%, 07/01/11
Pre-refunded 07/01/03 .................. 554,375
-------------
62,093,895
-------------
PENNSYLVANIA - 1.02%
2,210,000 Elizabeth Forward School District
Capital Appreciation, Series B, GO
5.60%, 09/01/20 (A)
Insured: MBIA .......................... 674,050
-------------
OTHER TERRITORIES - 1.68%
1,000,000 Puerto Rico Electric Power Authority
Series BB
6.00%, 07/01/12
Insured: MBIA .......................... 1,108,750
-------------
TOTAL MUNICPAL SECURITIES .............. 63,876,695
Cost ($60,895,294) -------------
SHARES
------
INVESTMENT COMPANY - 1.82%
1,204,819 New York Federated
Municipal Cash Trust ................... 1,204,819
-------------
TOTAL INVESTMENT COMPANY ............... 1,204,819
Cost ($1,204,819) -------------
TOTAL INVESTMENTS - 98.61% ............................... 65,081,514
Cost ($62,100,113) -------------
NET ASSETS AND OTHER LIABILITIES - 1.39% ................. 914,328
-------------
NET ASSETS -100.00% ...................................... $ 65,995,842
(A) Zero Coupon Bond. Rate shown reflects effective yield to maturity at
time of purchase.
AMBAC American Municipal Bond Assurance Corp.
FGIC Federal Guaranty Insurance Corp.
FSA Financial Security Assurance Company
GO General Obligation
MBIA Municipal Bond Investors Assurance
PCR Pollution Control Revenue
SP OB Special Obligation
See Notes to Financial Statements.
<PAGE>
---------------
Connecticut Municipal Bond Fund
PORTFOLIO OF INVESTMENTS
THE GALAXY FUND October 31, 1997
---------------
VALUE
PAR VALUE (NOTE 2)
--------- --------
MUNICIPAL SECURITIES - 103.36%
CONNECTICUT - 89.55%
$ 245,000 Bolton, GO
5.10%, 06/01/06 ........................ $ 250,819
355,000 Bristol Water, GO
5.15%, 06/15/07 ........................ 369,639
175,000 Brookfield, GO
5.10%, 07/15/07 ........................ 181,125
250,000 Cheshire, GO
5.10%, 08/15/07 ........................ 257,813
885,000 Colchester, GO, Lot A
5.40%, 08/15/10
Insured: AMBAC ......................... 924,825
400,000 Connecticut State Airport Revenue
Bradley International Airport
7.40%, 10/01/04
Insured: FGIC .......................... 473,000
325,000 Connecticut State Clean Water Fund
5.50%, 10/01/04 ........................ 347,750
200,000 Connecticut State Clean Water Fund
6.00%, 10/01/12 ........................ 222,000
200,000 Connecticut State, GO
6.70%, 12/01/98 ........................ 204,430
250,000 Connecticut State, GO, Series A
5.00%, 11/15/03 ........................ 259,375
250,000 Connecticut State, GO, Series A
5.10%, 11/15/04 ........................ 260,000
1,000,000 Connecticut State, GO, Series A
5.13%, 03/01/10 ........................ 1,016,250
100,000 Connecticut State, GO, Series B
6.50%, 08/01/06 ........................ 105,875
400,000 Connecticut State, GO, Series B
5.40%, 03/15/08 ........................ 423,500
100,000 Connecticut State, GO, Series C
5.00%, 05/01/05 ........................ 103,000
500,000 Connecticut State, GO, Series C
5.50%, 08/15/05 ........................ 531,250
1,000,000 Connecticut State, GO, Series D
4.70%, 08/01/03 ........................ 1,021,250
300,000 Connecticut State, GO, Series D
4.75%, 08/01/04 ........................ 305,625
500,000 Connecticut State, GO, Series E
6.00%, 03/15/12 ........................ 557,500
500,000 Connecticut State HEFA
Backus (William W.) Hospital Issue
Series D
5.63%, 07/01/17
Insured: AMBAC ......................... 516,250
655,000 Connecticut State HEFA
Choate Rosemary Hall Issue, Series B
5.00%, 07/01/17
Insured: MBIA .......................... 636,988
750,000 Connecticut State HEFA
Greenwich Hospital Issue, Series A
5.30%, 07/01/08
Insured: MBIA .......................... 787,500
1,060,000 Connecticut State HEFA
Middlesex Hospital, Series H
5.00%, 07/01/12
Insured: MBIA .......................... 1,045,425
375,000 Connecticut State HEFA
Newington Childrens Hospital
Series A
5.65%, 07/01/05
Insured: MBIA .......................... 402,188
200,000 Connecticut State Housing
Finance Authority
Housing Mortgage Finance Program
Series A
5.40%, 05/15/04 ........................ 210,750
105,000 Connecticut State Housing
Finance Authority
Housing Mortgage Finance Program
Series A
5.60%, 05/15/05 ........................ 111,825
400,000 Connecticut State Housing
Finance Authority
Housing Mortgage Finance Program
Series B
6.25%, 11/15/05 ........................ 430,500
125,000 Connecticut State Housing
Finance Authority
Housing Mortgage Finance Program
Series A-1
5.85%, 11/15/16 ........................ 128,750
100,000 Connecticut State Housing
Finance Authority
Housing Mortgage Finance Program
Series B
6.20%, 05/15/12 ........................ 105,250
415,000 Connecticut State Housing
Finance Authority
Housing Mortgage Finance Program
Series F-1
5.60%, 05/15/14 ........................ 424,856
1,000,000 Connecticut State Resource
Recovery Authority
Series A
5.75%, 11/15/07 ........................ 1,083,750
300,000 Connecticut State Resource
Recovery Authority
Mid-Connecticut System, Series A
5.60%, 11/15/99 ........................ 310,125
1,000,000 Connecticut State
Special Tax Obligation, Series A
5.00%, 11/01/15 ........................ 967,500
400,000 Connecticut State
Special Tax Obligation
Transportation Infrastructure, Series A
6.80%, 06/01/99 ........................ 417,000
100,000 Connecticut State Special
Tax Obligation
Transportation Infrastructure, Series A
5.00%, 09/01/03 ........................ 103,250
150,000 Connecticut State
Special Tax Obligation
Transportation Infrastructure, Series A
5.10%, 09/01/04 ........................ 155,625
950,000 Connecticut State
Special Tax Obligation
Transportation Infrastructure, Series A
5.13%, 09/01/05 ........................ 985,625
500,000 Connecticut State
Special Tax Obligation
Transportation Infrastructure, Series A
5.25%, 09/01/06 ........................ 521,250
700,000 Connecticut State
Special Tax Obligation
Transportation Infrastructure, Series A
5.40%, 04/01/07 ........................ 731,500
1,250,000 Connecticut State
Special Tax Obligation
Transportation Infrastructure, Series A
5.25%, 09/01/07 ........................ 1,314,063
925,000 Connecticut State
Special Tax Obligation
Transportation Infrastructure, Series A
5.38%, 09/01/08 ........................ 982,813
400,000 Connecticut State
Special Tax Obligation
Transportation Infrastructure, Series B
6.13%, 09/01/12 ........................ 449,500
170,000 Connecticut State
Special Tax Obligation
Transportation Infrastructure, Series C
4.50%, 10/01/04 ........................ 170,000
200,000 Danbury, GO
5.63%, 02/01/13 ........................ 213,500
175,000 East Haddam, GO
5.00%, 05/01/06
Insured: MBIA .......................... 179,813
100,000 East Hampton, GO
4.95%, 06/15/04
Insured: MBIA .......................... 104,125
250,000 East Hampton, GO
5.10%, 06/15/05
Insured: MBIA .......................... 260,625
175,000 Groton City, GO
5.30%, 05/15/06 ........................ 182,656
50,000 Groton City, GO
5.40%, 05/15/07 ........................ 52,625
250,000 Groton Town, GO, Lot A
5.00%, 08/15/07 ........................ 254,375
500,000 Hamden, GO
5.50%, 08/15/14
Insured: MBIA .......................... 515,000
250,000 Hartford County
Metropolitan District, GO
6.70%, 10/01/09 ........................ 296,563
200,000 Madison, GO
5.00%, 05/01/06 ........................ 204,250
300,000 Meriden, GO
5.75%, 10/15/04
Insured: AMBAC ......................... 328,125
100,000 Middletown, GO
6.50%, 04/15/98 ........................ 101,258
100,000 Middletown, GO
4.75%, 04/15/01 ........................ 102,500
580,000 Monroe, GO
5.63%, 04/15/14
Insured: FGIC .......................... 601,750
370,000 Montville, GO
5.30%, 12/01/09 ........................ 389,425
1,500,000 New Haven, GO
5.38%, 02/15/11
Insured: FGIC .......................... 1,552,500
100,000 New Milford, GO
5.80%, 10/01/01 ........................ 106,250
250,000 New Milford, GO
5.50%, 08/01/08 ........................ 266,563
350,000 Norwalk, GO
5.00%, 01/15/05 ........................ 361,813
200,000 Norwalk, GO
5.00%, 01/15/06 ........................ 205,000
500,000 Norwich, GO
5.63%, 09/15/07 ........................ 536,875
330,000 Regional School District No. 5, GO
5.05%, 05/15/04 ........................ 334,950
135,000 Regional School District No. 5, GO
5.15%, 05/15/05 ........................ 138,713
225,000 South Central Regional
Water Authority
Water System, Series 11
5.75%, 08/01/12
Insured: FGIC .......................... 237,094
200,000 South Central Regional
Water Authority
Water System, Series 12
4.90%, 08/01/04
Insured: FGIC .......................... 205,000
100,000 South Central Regional
Water Authority
Water System, Series 12
5.00%, 08/01/05
Insured: FGIC .......................... 102,750
175,000 South Central Regional
Water Authority
Water System, Series 12
5.13%, 08/01/07
Insured: FGIC .......................... 180,031
110,000 Stonington, GO
5.00%, 06/15/06 ........................ 113,300
75,000 Torrington, GO
5.20%, 04/15/06
Insured: FGIC .......................... 78,469
100,000 Trumbull, GO
6.00%, 05/15/04 ........................ 109,500
100,000 West Hartford, GO
6.00%, 05/01/07 ........................ 111,500
250,000 West Haven, GO, Series B
5.20%, 06/01/05 ........................ 258,750
250,000 West Haven, GO, Series B
5.40%, 06/01/09 ........................ 256,875
-------------
29,749,832
-------------
MICHIGAN - 3.02%
1,000,000 Grandville Public Schools District, GO
5.20%, 05/01/13 ........................ 1,003,750
-------------
PENNSYLVANIA - 5.75%
1,400,000 Lehigh County General
Purpose Authority
Lehigh Valley Hospital, Series A
4.00%, 07/01/28
Insured: AMBAC ......................... 1,400,000
510,000 Montgomery County
Higher Education Authority
Holy Redeemer Health, Series A
5.20%, 10/01/12
Insured: AMBAC ......................... 508,088
-------------
1,908,088
-------------
VIRGINIA - 1.50%
500,000 Virginia Commonwealth
Transportation Northern Virginia
Transportation District, Series B
5.13%, 05/15/17 ........................ 499,375
-------------
OTHER TERRITORIES - 3.54%
1,000,000 Puerto Rico Municipal
Finance Agency, Series A
5.50%, 07/01/17
Insured: FSA ........................... 1,021,250
150,000 Puerto Rico Telephone Authority
Series M
4.80%, 01/01/01 ........................ 153,000
-------------
1,174,250
-------------
TOTAL MUNICIPAL SECURITIES ............. 34,335,295
(Cost $33,122,501) -------------
INVESTMENT COMPANY - 1.74%
578,719 Connecticut Federated
Municipal Cash Trust ................... 578,719
-------------
TOTAL INVESTMENT COMPANY ............... 578,719
(Cost $578,719) -------------
TOTAL INVESTMENTS - 105.10% .............................. 34,914,014
(Cost $33,701,220) -------------
NET ASSETS AND OTHER LIBILITIES - (5.10)% ................ (1,692,730)
-------------
NET ASSETS - 100.00% ..................................... $ 33,221,284
============
- ---------
AMBAC American Municipal Bond Assurance Corp.
FGIC Federal Guaranty Insurance Corp.
FSA Financial Security Assurance Company
GO General Obligation
HEFA Health and Educational Facilities Authority
MBIA Municipal Bond Investors Assurance
See Notes to Financial Statements.
<PAGE>
---------------
Massachusetts Municipal Bond Fund
PORTFOLIO OF INVESTMENTS
THE GALAXY FUND October 31, 1997
---------------
VALUE
PAR VALUE (NOTE 2)
--------- --------
MUNICIPAL SECURITIES - 96.16%
MASSACHUSETTS - 89.77%
$ 500,000 Andover, GO
4.00%, 12/01/99 ........................ $ 501,875
700,000 Andover, GO
5.00%, 12/01/10 ........................ 713,985
300,000 Attleboro, GO
5.20%, 07/01/02
Insured: AMBAC ......................... 312,375
375,000 Billerica, GO, Lot A
5.40%, 07/15/09
Insured: MBIA .......................... 387,188
250,000 Boston, GO
5.25%, 10/01/05
Insured: MBIA .......................... 261,875
200,000 Boston, GO, Series A
5.00%, 02/01/03
Insured: AMBAC ......................... 206,250
250,000 Boston, GO, Series A
4.70%, 07/01/05
Insured: AMBAC ......................... 252,813
70,000 Boston, GO, Series A
5.35%, 02/01/06
Insured: AMBAC ......................... 73,325
360,000 Boston, GO, Series A
5.45%, 02/01/07
Insured: AMBAC ......................... 377,100
225,000 Boston, GO, Series A
5.55%, 02/01/08
Insured: AMBAC ......................... 235,688
200,000 Boston Metropolitan District, GO
5.35%, 12/01/12 ........................ 203,500
200,000 Boston Water and Sewer Commission
General Purpose, Senior Series A
5.50%, 11/01/01
Insured: FSA ........................... 209,500
230,000 Boston Water and Sewer Commission
General Purpose, Senior Series A
7.00%, 11/01/18
Pre-refunded 11/01/01
Insured: FGIC .......................... 257,888
250,000 Brookline, GO
4.50%, 01/15/06 ........................ 250,625
100,000 Brookline, GO
5.60%, 09/01/10 ........................ 105,375
155,000 Chatham, GO
4.60%, 01/15/05 ........................ 156,550
10,000 Dedham-Westwood
Water District, GO
5.20%, 11/01/05
Insured: MBIA .......................... 10,388
250,000 Deerfield, GO
5.60%, 06/15/02 ........................ 265,000
25,000 Fairhaven, GO
7.10%, 02/01/04 ........................ 26,844
250,000 Franklin, GO
5.50%, 11/15/02
Insured: MBIA .......................... 265,313
250,000 Franklin, GO
5.25%, 11/15/11
Insured: MBIA .......................... 253,438
100,000 Kingston, GO
5.70%, 08/01/07 ........................ 105,750
250,000 Lawrence, GO
5.13%, 09/15/03 ........................ 257,188
250,000 Lowell, GO
6.05%, 04/01/11
Insured: FSA ........................... 271,250
200,000 Lowell, GO, Series A
5.10%, 01/15/04
Insured: FSA ........................... 206,750
265,000 Lowell, GO, Series A
5.20%, 01/15/05
Insured: FSA ........................... 274,606
100,000 Lynn Water & Sewer Commission
5.30%, 12/01/06
Insured: FGIC .......................... 104,375
130,000 Massachusetts Bay Transportation
Authority, Series A
6.00%, 03/01/12 ........................ 140,725
200,000 Massachusetts Bay Transportation
Authority, Series A
5.75%, 03/01/22 ........................ 211,250
200,000 Massachusetts Municipal Wholesale
Electric Copower Supply System
Series A
6.50%, 07/01/02
Insured: AMBAC ......................... 218,750
100,000 Massachusetts Municipal Wholesale
Electric Copower Supply System
Series E
5.75%, 07/01/02
Insured: AMBAC ......................... 106,125
370,000 Massachusetts State, GO
Federal Assisted Housing
6.00%, 02/01/08 ........................ 405,150
750,000 Massachusetts State, GO, Series A
5.25%, 02/01/08 ........................ 769,688
250,000 Massachusetts State, GO, Series A
6.25%, 07/01/02 ........................ 270,625
250,000 Massachusetts State, GO, Series A
6.25%, 07/01/04 ........................ 275,625
100,000 Massachusetts State, GO, Series B
5.10%, 11/01/02 ........................ 103,500
200,000 Massachusetts State, GO, Series B
5.30%, 11/01/05 ........................ 209,750
100,000 Massachusetts State, GO, Series B
5.50%, 11/01/07 ........................ 106,625
250,000 Massachusetts State, GO, Series C
4.80%, 08/01/03
Insured: AMBAC ......................... 256,250
200,000 Massachusetts State Consolidated Loan
GO, Series A
7.00%, 06/01/98 ........................ 203,580
250,000 Massachusetts State Consolidated Loan
GO, Series A
5.75%, 02/01/05
Insured: MBIA .......................... 271,875
250,000 Massachusetts State
Consolidated Loan
GO, Series B
5.10%, 07/01/03 ........................ 259,063
100,000 Massachusetts State Consolidated Loan
GO, Series D
5.75%, 05/01/12 ........................ 107,500
100,000 Massachusetts State Convention
Center Authority
Boston Common Parking Garage
Series A
5.35%, 09/01/06 ........................ 104,750
100,000 Massachusetts State Convention
Center Authority
Boston Common Parking Garage
Series A
5.40%, 09/01/07 ........................ 104,500
200,000 Massachusetts State Convention
Center Authority
Hynes Convention Center, Lot A
6.00%, 09/01/99 ........................ 207,250
200,000 Massachusetts State HEFA
Baystate Medical Center, Series D
4.80%, 07/01/04
Insured: FGIC .......................... 203,750
150,000 Massachusetts State HEFA
Baystate Medical Center, Series D
4.90%, 07/01/05
Insured: FGIC .......................... 152,625
400,000 Massachusetts State HEFA
Beth Israel Hospital, Series G
5.70%, 07/01/05
Insured: AMBAC ......................... 428,000
350,000 Massachusetts State HEFA
Boston College, Series K
4.70%, 06/01/03 ........................ 357,000
300,000 Massachusetts State HEFA
Boston College, Series K
4.90%, 06/01/05 ........................ 307,500
1,000,000 Massachusetts State HEFA
Harvard University, Series P
5.63%, 11/01/26 ........................ 1,030,000
1,000,000 Massachusetts State HEFA
Harvard University, Series P
5.38%, 11/01/32 ........................ 1,008,750
250,000 Massachusetts State HEFA
Massachusetts General Hospital
Series G
4.65%, 07/01/02
Insured: AMBAC ......................... 253,750
550,000 Massachusetts State HEFA
Massachusetts Institute of Technology
Series H
4.70%, 07/01/04 ........................ 563,750
100,000 Massachusetts State HEFA
McLean Hospital Issue, Series C
6.63%, 07/01/15
Insured: FGIC .......................... 109,500
250,000 Massachusetts State HEFA
Medical Center of
Central Massachusetts
Series B
6.00%, 07/01/02
Insured: AMBAC ......................... 268,438
200,000 Massachusetts State HEFA
New England Medical Center Hospital
Series G
4.50%, 07/01/02
Insured: MBIA .......................... 201,500
400,000 Massachusetts State HEFA
New England Medical Center Hospital
Series G
4.60%, 07/01/03
Insured: MBIA .......................... 403,500
250,000 Massachusetts State HEFA
Newton-Wellesley Hospital, Series E
5.00%, 07/01/03
Insured: MBIA .......................... 257,813
1,435,000 Massachusetts State HEFA
Partners Healthcare System, Series A
5.38%, 07/01/17
Insured: MBIA .......................... 1,431,413
100,000 Massachusetts State HEFA
South Shore Hospital, Series E
5.40%, 07/01/07
Insured: MBIA .......................... 104,375
325,000 Massachusetts State HEFA
South Shore Hospital, Series E
5.50%, 07/01/13
Insured: MBIA .......................... 331,094
75,000 Massachusetts State HEFA
University of Massachusetts
Medical School Research, Series A
6.00%, 07/01/12
Insured: Connie Lee .................... 79,125
500,000 Massachusetts State HEFA
Williams College, Series D
5.40%, 07/01/05 ........................ 528,125
1,750,000 Massachusetts State HEFA
Williams College, Series F
5.50%, 07/01/26 ........................ 1,771,875
150,000 Massachusetts State HEFA
Youville Hospital, Series B
5.00%, 02/15/99 ........................ 152,063
150,000 Massachusetts State Housing
Finance Agency
Single Family, Series 41
5.25%, 06/01/01 ........................ 154,500
400,000 Massachusetts State IFA
Brooks School
5.95%, 07/01/23 ........................ 411,500
1,000,000 Massachusetts State IFA
Combined Jewish Philanthropies
Series A
6.38%, 02/01/15
Insured: AMBAC ......................... 1,088,750
50,000 Massachusetts State IFA
Holy Cross College
5.75%, 01/01/02 ........................ 52,875
300,000 Massachusetts State IFA
Holy Cross College, Series II
5.90%, 11/01/01 ........................ 318,000
250,000 Massachusetts State IFA
Lesley College Project, Series A
6.00%, 07/01/10
Insured: Connie Lee .................... 269,063
1,000,000 Massachusetts State IFA
Merrimack College
5.00%, 07/01/27
Insured: MBIA .......................... 955,000
300,000 Massachusetts State IFA
Milton Academy, Series B
5.30%, 09/01/08
Insured: MBIA .......................... 312,375
950,000 Massachusetts State IFA
Nantucket Electric Company, Series A
AMT Bond
5.88%, 07/01/17
Insured: AMBAC ......................... 999,875
2,000,000 Massachusetts State IFA
Phillips Academy Issue
5.38%, 09/01/23 ........................ 2,002,500
1,300,000 Massachusetts State IFA
Worcester Polytechnic Institute
Series 2
5.25%, 09/01/14
Insured: MBIA .......................... 1,309,750
635,000 Massachusetts State Port Authority
5.63%, 07/01/12 ........................ 661,988
250,000 Massachusetts State Port Authority
Series B
5.30%, 07/01/01 ........................ 259,688
1,000,000 Massachusetts State Port Authority
Series C
5.13%, 07/01/16 ........................ 982,500
350,000 Massachusetts State, SP OB
and Revenue, Series A
5.80%, 06/01/00
Insured: AMBAC ......................... 364,438
300,000 Massachusetts State, SP OB
and Revenue, Series A
7.00%, 06/01/02 ........................ 331,875
200,000 Massachusetts State, SP OB
and Revenue, Series A
6.00%, 06/01/13
Insured: AMBAC ......................... 208,750
250,000 Massachusetts State, SP OB
and Revenue, Series A
5.80%, 06/01/14
Pre-refunded 06/01/04 .................. 259,375
300,000 Massachusetts State
Turnpike Authority, Series A
4.63%, 01/01/02 ........................ 303,750
150,000 Massachusetts State
Turnpike Authority, Series A
4.63%, 01/01/02 ........................ 151,875
430,000 Massachusetts State
Turnpike Authority, Series A
5.00%, 01/01/13 ........................ 431,613
50,000 Massachusetts State
Water Pollution Abatement Trust
MWRA Loan Program, Series A
5.20%, 02/01/06 ........................ 51,875
250,000 Massachusetts State
Water Pollution Abatement Trust
MWRA Loan Program, Series A
5.40%, 08/01/11 ........................ 255,938
200,000 Massachusetts State
Water Pollution Abatement Trust
MWRA Loan Program, Series B
4.85%, 08/01/05 ........................ 204,000
250,000 Massachusetts State
Water Pollution Abatement Trust
Pooled Loan Program, Series 1
5.00%, 02/01/02 ........................ 257,188
1,000,000 Massachusetts State
Water Resource Authority
3.65%, 11/05/97
LOC: Morgan Guaranty Trust ............. 999,972
300,000 Massachusetts State
Water Resource Authority, Series A
6.30%, 12/01/01 ........................ 322,125
100,000 Massachusetts State
Water Resource Authority, Series A
6.00%, 04/01/20 ........................ 101,875
190,000 Massachusetts State
Water Resource Authority, Series A
6.50%, 07/15/21
Pre-refunded 07/15/02 .................. 211,138
300,000 Massachusetts State
Water Resource Authority, Series B
5.88%, 11/01/04 ........................ 323,250
50,000 Massachusetts State
Water Resource Authority, Series B
6.00%, 11/01/06 ........................ 53,813
50,000 Massachusetts State
Water Resource Authority, Series B
6.25%, 11/01/10 ........................ 54,000
200,000 Massachusetts State
Water Resource Authority, Series C
5.00%, 12/01/03 ........................ 207,500
1,000,000 Methuen, GO
5.63%, 11/15/14
Insured: FSA ........................... 1,042,500
220,000 Nantucket Island Land Bank
GO and Revenue, Series E
7.25%, 07/01/19 ........................ 241,450
450,000 New England Education
Loan Marketing Corp.
Massachusetts Student
Loan Revenue, Issue A
5.80%, 03/01/02 ........................ 473,063
200,000 Northampton, GO
5.30%, 09/01/10
Insured: AMBAC ......................... 203,250
25,000 Plainville, GO
7.00%, 09/01/03 ........................ 26,594
25,000 Plymouth-Carver
Regional School District, GO
6.15%, 10/01/03
Insured: AMBAC ......................... 27,188
25,000 Quaboag Regional School District, GO
5.10%, 06/15/06
Insured: MBIA .......................... 25,688
250,000 Salem, GO
4.50%, 07/15/03
Insured: MBIA .......................... 251,875
150,000 Salem, GO
5.80%, 07/15/06
Insured: AMBAC ......................... 159,188
100,000 Salem, GO
5.90%, 07/15/07
Insured: AMBAC ......................... 106,375
200,000 Sandwich, GO
5.40%, 11/01/07
Insured: AMBAC ......................... 210,250
125,000 Sandwich Water District, GO
5.60%, 05/15/13 ........................ 127,969
110,000 Southbridge, GO
5.80%, 01/01/03
Insured: AMBAC ......................... 116,463
1,000,000 Southeastern Massachusetts
University Building Authority
Project Revenue, Series A
5.75%, 05/01/16
Insured: AMBAC ......................... 1,046,250
200,000 Southern Berkshire
Regional School District, GO
5.38%, 04/15/10
Insured: MBIA .......................... 204,000
1,500,000 Springfield Municipal Purpose Loan, GO
5.00%, 09/01/15 ........................ 1,462,500
400,000 Taunton, GO
8.00%, 02/01/01 ........................ 442,000
250,000 University of Lowell
Building Authority
Fifth Series A
6.75%, 11/01/03
Insured: AMBAC ......................... 281,875
200,000 University of Massachusetts
Building Authority, Series A
5.50%, 05/01/03
Insured: MBIA .......................... 210,750
100,000 Woods Hole
Martha's Vineyard and Nantucket
Steamship Bonds, Series B
6.00%, 03/01/02 ........................ 107,125
-------------
42,462,408
-------------
PENNSYLVANIA - 1.89%
3,000,000 Berks County
Capital Appreciation, GO
5.47%, 11/15/20 (A)
Insured: FGIC .......................... 896,250
-------------
OTHER TERRITORIES - 4.50%
1,000,000 Puerto Rico Electric Power Authority
Series BB
6.00%, 07/01/12
Insured: MBIA .......................... 1,108,750
1,000,000 Puerto Rico Municipal
Finance Agency, Series A
5.50%, 07/01/17
Insured: FSA ........................... 1,021,250
-------------
2,130,000
-------------
TOTAL MUNICIPAL SECURITIES ............. 45,488,658
(Cost $44,192,693) -------------
SHARES
------
INVESTMENT COMPANY - 0.13%
63,208 Massachusetts Federated
Municipal Cash Trust ................... 63,208
-------------
TOTAL INVESTMENT COMPANY ............... 63,208
(Cost $63,208) -------------
TOTAL INVESTMENTS - 96.29% ............................... 45,551,866
(Cost $44,255,901) -------------
NET ASSETS AND OTHER LIABILITIES - 3.71% ................. 1,752,926
-------------
NET ASSETS - 100.00% ................... $ 47,304,792
=============
- ---------
(A) Zero Coupon Bond. Rate shown reflects effective yield to maturity
at time of purchase.
AMBAC American Municipal Bond Assurance Corp.
AMT Alternative Minimum Tax - Private activity obligations whose
interest is subject to the Federal AMT for individuals.
Connie Lee College Construction Loan Association
FGIC Federal Guaranty Insurance Corp.
FSA Financial Security Assurance Company
GO General Obligation
HEFA Health and Educational Facilities Authority
IFA Industrial Finance Agency
LOC Letter of Credit
MBIA Municipal Bond Investors Assurance
MWRA Massachusetts Water Resource Authority
SP OB Special Obligation
See Notes to Financial Statements.
<PAGE>
---------------
Rhode Island Municipal Bond Fund
PORTFOLIO OF INVESTMENTS
THE GALAXY FUND October 31, 1997
---------------
VALUE
PAR VALUE (NOTE 2)
--------- --------
MUNICIPAL SECURITIES - 94.51%
RHODE ISLAND - 87.19%
$ 500,000 Bristol County Water Authority
General, Series A
5.00%, 07/01/16
Insured: MBIA .......................... $ 483,750
150,000 Burrillville, GO
5.75%, 10/15/17
Insured: MBIA .......................... 154,125
200,000 Burrillville, GO
5.85%, 05/01/14
Insured: FGIC .......................... 210,750
500,000 Convention Center Authority, Series A
6.70%, 05/15/20
Insured: MBIA .......................... 549,375
500,000 Convention Center Authority, Series A
6.38%, 05/15/23
Insured: MBIA .......................... 543,750
700,000 Lincoln, GO
5.50%, 08/15/10
Insured: MBIA .......................... 729,750
400,000 Pawtucket, GO
5.75%, 04/15/11
Insured: FGIC .......................... 418,000
500,000 Providence, GO
5.45%, 01/15/10
Insured: FSA ........................... 520,000
225,000 Providence, GO
6.75%, 01/15/10
Pre-refunded 01/15/00
Insured: MBIA .......................... 241,313
500,000 Providence, GO
5.70%, 01/15/06
Insured: MBIA .......................... 528,125
250,000 Rhode Island
Clean Water Protection
Finance Agency
Wastewater Treatment System
Cranston
5.80%, 09/01/22
Insured: MBIA .......................... 255,000
150,000 Rhode Island
Clean Water Protection
Finance Agency
Revenue, Safe Drinking Water
Providence, Series A
6.20%, 01/01/06
Insured: AMBAC ......................... 165,375
100,000 Rhode Island
Clean Water Protection
Finance Agency
Revenue, Safe Drinking Water
Providence, Series A
6.70%, 01/01/15
Insured: AMBAC ......................... 111,125
500,000 Rhode Island
Depositors Economic Protection Corp.
SP OB, Series A
5.75%, 08/01/21 ........................ 535,000
500,000 Rhode Island
Depositors Economic Protection Corp.
SP OB, Series B
5.25%, 08/01/21
Insured: MBIA .......................... 513,750
300,000 Rhode Island
Housing and Mortgage Finance Corp.
Revenue, Homeownership
Opportunity Series 17-A
6.25%, 04/01/17 ........................ 300,342
500,000 Rhode Island
Housing and Mortgage Finance Corp.
Revenue, Homeownership
Opportunity Series 19-A
5.70%, 04/01/15 ........................ 507,500
500,000 Rhode Island
Housing and Mortgage Finance Corp.
Revenue, Multifamily Housing
Series A
5.60%, 07/01/10
Insured: AMBAC ......................... 522,500
500,000 Rhode Island
Housing and Mortgage Finance Corp.
Multifamily Housing, Series A
6.15%, 07/01/17
Insured: AMBAC ......................... 526,250
250,000 Rhode Island
Housing and Mortgage Finance Corp.
Revenue, Rental Housing Program
Series A
5.65%, 10/01/07 ........................ 258,125
150,000 Rhode Island State, GO, Series A
6.25%, 06/15/07
Pre-refunded 06/15/02
Insured: FGIC .......................... 164,625
200,000 Rhode Island State, GO, Series A
6.10%, 06/15/03
Insured: FGIC .......................... 216,750
150,000 Rhode Island State, GO, Series A
6.25%, 06/15/07
Unrefunded
Insured: FGIC .......................... 163,500
360,000 Rhode Island State
Consolidated Capital Development
Loan GO, Series A
5.50%, 08/01/10 ........................ 371,250
100,000 Rhode Island State
Consolidated Capital Development
Loan GO, Series B
6.00%, 05/15/98 ........................ 101,163
130,000 Rhode Island State
Health and Educational Building Corp.
Revenue, Higher Education Facility
Brown University
6.75%, 09/01/16 ........................ 137,313
500,000 Rhode Island State
Health and Educational Building Corp.
Revenue, Higher Education Facility
Brown University
6.00%, 09/01/20 ........................ 530,625
275,000 Rhode Island State
Health and Educational Building Corp.
Revenue, Higher Education Facility
Bryant College, SP OB
6.50%, 06/01/05
Insured: MBIA .......................... 301,813
475,000 Rhode Island State
Health and Educational Building Corp.
Revenue, Higher Education Facility
New England Institute
6.00%, 03/01/15
Insured: Connie Lee .................... 496,375
300,000 Rhode Island State
Health and Educational Building Corp.
Revenue, Higher Education Facility
Providence College
5.60%, 11/01/09
Insured: MBIA .......................... 313,500
500,000 Rhode Island State
Health and Educational Building Corp.
Revenue, Higher Education Facility
Rhode Island School of Design
5.63%, 06/01/16
Insured: MBIA .......................... 511,875
500,000 Rhode Island State
Health and Educational Building Corp.
Revenue, Higher Education Facility
Roger Williams
6.50%, 11/15/24
Insured: Connie Lee .................... 539,375
260,000 Rhode Island State
Health and Educational Building Corp.
Revenue, Higher Education Facility
Salve Regina
6.25%, 03/15/13
Insured: Connie Lee .................... 276,575
500,000 Rhode Island State
Health and Educational Building Corp.
Revenue, Higher Education Facility
Series B
5.25%, 09/15/23
Insured: MBIA .......................... 485,000
500,000 Rhode Island State
Health and Educational Building Corp.
Revenue, Miriam Hospital Issue
Series B
6.60%, 04/01/19 ........................ 560,000
300,000 Rhode Island State
Health and Educational Building Corp.
Revenue, Saint Antoine
6.75%, 11/15/18
LOC: Allied Irish Banks NY ............. 322,875
500,000 Rhode Island State
Industrial Facilities Corp., Revenue
Marine Terminal, Mobil Oil Refining
6.00%, 11/01/14 ........................ 528,750
500,000 Rhode Island State
Participation Certificate, Series A
5.00%, 06/01/17
Insured: AMBAC ......................... 480,625
100,000 South Kingstown, GO, Series B
5.50%, 06/15/10
Insured: FSA ........................... 104,875
100,000 Warwick, GO
7.00%, 11/15/02
Insured: FGIC .......................... 107,500
140,000 Westerly, GO
6.00%, 09/15/14
Insured: AMBAC ......................... 149,975
-------------
14,938,244
-------------
OTHER TERRITORIES - 7.32%
400,000 Puerto Rico Municipal
Finance Agency, Series A
6.00%, 07/01/14
Insured: FSA ........................... 425,498
315,000 Puerto Rico Municipal
Finance Agency, Series A
5.50%, 07/01/17
Insured: FSA ........................... 321,694
500,000 Puerto Rico Public Buildings Authority
Government Facilities, Series A
5.50%, 07/01/21
Insured: AMBAC ......................... 507,500
-------------
1,254,692
-------------
TOTAL MUNICIPAL SECURITIES ............. 16,192,936
(Cost $15,549,081) -------------
INVESTMENT COMPANY - 3.88%
665,027 Federated Tax-Free Obligations Fund .... 665,027
-------------
TOTAL INVESTMENT COMPANY ............... 665,027
(Cost $665,027) -------------
TOTAL INVESTMENTS - 98.39% ............................... 16,857,963
(Cost $16,214,108) -------------
NET OTHER ASSETS AND LIABILITIES - 1.61% ................. 276,452
-------------
NET ASSETS - 100.00% ..................................... $ 17,134,415
=============
- ---------
AMBAC American Municipal Bond Assurance Corp.
Connie Lee College Construction Loan Association
FGIC Federal Guaranty Insurance Corp.
FSA Financial Security Assurance Company
GO General Obligation
LOC Letter of Credit
MBIA Municipal Bond Investors Assurance
PCR Pollution Control Revenue
SP OB Special Obligation
See Notes to Financial Statements.
<PAGE>
<TABLE>
---------------
STATEMENTS OF ASSETS AND LIABILITIES
THE GALAXY FUND October 31, 1997
---------------
<CAPTION>
NEW YORK CONNECTICUT MASSACHUSETTS RHODE ISLAND
TAX-EXEMPT MUNICIPAL MUNICIPAL MUNICIPAL MUNICIPAL
BOND FUND BOND FUND BOND FUND BOND FUND BOND FUND
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments (Note 2):
Investments at cost ............................ $144,574,293 $ 62,100,113 $ 33,701,220 $ 44,255,901 $ 16,214,108
Net unrealized appreciation .................... 5,406,728 2,981,401 1,212,794 1,295,965 643,855
------------ ------------ ------------ ------------ ------------
Total investments at value ..................... 149,981,021 65,081,514 34,914,014 45,551,866 16,857,963
Receivable for investments sold ................... 2,897,460 -- -- -- --
Receivable for shares sold ........................ 80,904 112,625 51,502 1,733,759 57,990
Interest and dividend receivables ................. 2,202,144 1,018,447 402,083 739,525 270,361
Receivable from Investment Advisor (Note 4 ........ 10,335 1,665 -- -- 113
Deferred organizational expense (Note 2) .......... -- -- 926 882 6,859
------------ ------------ ------------ ------------ ------------
Total Assets ................................... 155,171,864 66,214,251 35,368,525 48,026,032 17,193,286
------------ ------------ ------------ ------------ ------------
LIABILITIES:
Dividends payable ................................ 330,766 134,924 56,327 80,011 35,771
Payable for investments purchased ................ 5,303,440 -- 2,046,780 -- --
Payable to Custodian ............................. -- -- 2,281 -- --
Payable for shares repurchased ................... 18,408 10,835 932 598,653 --
Advisory fee payable (Note 3) .................... 69,350 30,692 6,751 9,387 4,068
Payable to Fleet affiliates (Note 3) ............. 4,815 5,940 2,965 4,509 --
Payable to Administrator (Note 3) ................ 19,258 7,265 9,985 22,337 4,174
Trustees' fees and expenses payable (Note 3) ..... 2,075 954 1,257 2,039 2,737
Accrued expenses and other payables .............. 50,881 27,799 19,963 4,304 12,121
------------ ------------ ------------ ------------ ------------
Total Liabilities .............................. 5,798,993 218,409 2,147,241 721,240 58,871
------------ ------------ ------------ ------------ ------------
NET ASSETS .......................................... $149,372,871 $ 65,995,842 $ 33,221,284 $ 47,304,792 $ 17,134,415
============ ============ ============ ============ ============
NET ASSETS CONSIST OF:
Par value (Note 5) ............................... $ 13,505 $ 5,949 $ 3,173 $ 4,614 $ 1,571
Paid-in capital in excess of par value ........... 142,672,591 64,345,922 33,048,440 46,759,001 16,477,155
Undistributed net investment income (loss) ....... 40,027 (4,150) (14,293) (45,590) (25,307)
Accumulated net realized gain (loss) on
investments sold ............................... 1,240,020 (1,333,280) (1,028,830) (709,198) 37,141
Net unrealized appreciation
of investments ................................. 5,406,728 2,981,401 1,212,794 1,295,965 643,855
------------ ------------ ------------ ------------ ------------
TOTAL NET ASSETS .................................... $149,372,871 $ 65,995,842 $ 33,221,284 $ 47,304,792 $ 17,134,415
============ ============ ============ ============ ============
Retail A Shares:
Net Assets ....................................... $ 25,465,173 $ 38,434,009 $ 23,354,832 $ 33,318,466 $ 17,134,415
Shares of beneficial interest outstanding ........ 2,302,321 3,464,721 2,230,405 3,250,152 1,571,137
NET ASSET VALUE and redemption price per share ... $ 11.06 $ 11.09 $ 10.47 $ 10.25 $ 10.91
Sales charge - 3.75% of offering price ........... 0.43 0.43 0.41 0.40 0.43
------------ ------------ ------------ ------------ ------------
Maximum offering price per share ................. $ 11.49 $ 11.52 $ 10.88 $ 10.65 $ 11.34
============ ============ ============ ============ ============
Retail B Shares:
Net Assets ....................................... $ 1,689,979 N/A N/A N/A N/A
Shares of beneficial interest outstanding ........ 152,789 N/A N/A N/A N/A
NET ASSET VALUE, offering and redemption
price per share* ............................... $ 11.06 N/A N/A N/A N/A
============ ============ ============ ============ ============
Trust Shares:
Net Assets ....................................... $122,217,719 $ 27,561,833 $ 9,866,452 $ 13,986,326 $ --
Shares of beneficial interest outstanding ........ 11,050,094 2,484,601 942,246 1,364,310 --
NET ASSET VALUE and offering price per share ..... $ 11.06 $ 11.09 $ 10.47 $ 10.25 $ --
============ ============ ============ ============ ============
*Redemption price per share is equal to the Net Asset Value per share less any
applicable contingent deferred sales charge.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
---------------
STATEMENTS OF OPERATIONS
THE GALAXY FUND For the year ended October 31, 1997
---------------
<CAPTION>
NEW YORK CONNECTICUT MASSACHUSETTS RHODE ISLAND
TAX-EXEMPT MUNICIPAL MUNICIPAL MUNICIPAL MUNICIPAL
BOND FUND BOND FUND BOND FUND BOND FUND BOND FUND
--------- --------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest (Note 2) .................................. $ 7,907,164 $3,461,882 $1,482,393 $2,032,422 $ 793,954
Dividends (Note 2) ................................. 63,689 25,218 14,314 13,863 8,432
----------- ---------- ---------- ---------- ----------
Total investment income .......................... 7,970,853 3,487,100 1,496,707 2,046,285 802,386
----------- ---------- ---------- ---------- ----------
EXPENSES:
Investment advisory fee (Note 3) ................... 1,076,725 478,692 224,398 306,120 112,925
Administration fee (Note 3) ........................ 117,223 52,119 24,431 33,325 12,293
Custodian fee ...................................... 12,739 8,384 8,172 9,109 6,798
Fund accounting fee (Note 3) ....................... 62,317 49,280 38,815 46,105 29,882
Legal fee (Note 3) ................................. 5,982 2,669 1,248 1,762 672
Audit fee .......................................... 19,674 17,834 17,158 10,219 18,090
Transfer agent fee (Note 3) ........................ 22,965 36,275 14,495 12,425 8,932
12b-1 fee (Note 3) ................................. 9,572 -- -- -- --
Shareholder servicing fee (Note 3) ................. 37,652 56,596 32,160 40,842 --
Trustees' fees and expenses (Note 3) ............... 1,347 1,149 122 170 65
Amortization of organization costs (Note 2) ........ -- -- 2,000 2,000 3,420
Reports to shareholders ............................ 23,434 23,436 11,212 100 2,726
Registration fees .................................. 30,012 -- 7,915 191 85
Insurance .......................................... 1,596 133 491 353 148
Miscellaneous ...................................... 20,872 19,226 177 4,855 5,067
----------- ---------- ---------- ---------- ----------
Total expenses before reimbursement/waiver ....... 1,442,110 745,793 382,794 467,576 201,103
Less: reimbursement/waiver (Note 4) .............. (360,461) (202,320) (189,354) (234,999) (75,822)
----------- ---------- ---------- ---------- ----------
Total expenses net of reimbursement/waiver ....... 1,081,649 543,473 193,440 232,577 125,281
----------- ---------- ---------- ---------- ----------
NET INVESTMENT INCOME ................................. 6,889,204 2,943,627 1,303,267 1,813,708 677,105
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (NOTE 2):
Net realized gain (loss) on investments sold ....... 1,296,888 564,735 (82,263) 66,828 37,141
Net change in unrealized appreciation of investments 2,503,907 1,436,259 1,036,480 1,298,792 416,740
----------- ---------- ---------- ---------- ----------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS ................................ 3,800,795 2,000,994 954,217 1,365,620 453,881
----------- ---------- ---------- ---------- ----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS .......................... $10,689,999 $4,944,621 $2,257,484 $3,179,328 $1,130,986
=========== ========== ========== ========== ==========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
---------------
THE GALAXY FUND STATEMENTS OF CHANGES IN NET ASSETS
---------------
<CAPTION>
TAX-EXEMPT BOND FUND NEW YORK MUNICIPAL BOND FUND
------------------------------ ------------------------------
YEARS ENDED OCTOBER 31, YEARS ENDED OCTOBER 31,
------------------------------ ------------------------------
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
NET ASSETS AT BEGINNING OF PERIOD .............................. $ 132,288,859 $ 123,348,800 $ 63,915,925 $ 65,946,713
------------- ------------- ------------- -------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS:
Net investment income ....................................... 6,889,204 6,159,385 2,943,627 3,005,920
Net realized gain (loss) on investments sold ................ 1,296,888 184,040 564,735 (16,589)
Net change in unrealized appreciation
(depreciation) of investments ............................. 2,503,907 (121,103) 1,436,259 (200,532)
------------- ------------- ------------- -------------
Net increase in net assets resulting from operations ........ 10,689,999 6,222,322 4,944,621 2,788,799
------------- ------------- ------------- -------------
DIVIDENDS TO SHAREHOLDERS FROM:
RETAIL A SHARES:
Net investment income ..................................... (1,214,501) (1,393,399) (1,750,144) (1,896,290)
Dividends in excess of net investment income .............. -- (19) -- --
Net realized gain on investments .......................... (16,116) -- -- --
------------- ------------- ------------- -------------
Total Dividends ......................................... (1,230,617) (1,393,418) (1,750,144) (1,896,290)
------------- ------------- ------------- -------------
RETAIL B SHARES:
Net investment income ..................................... (47,668) (8,291) N/A N/A
Net realized gain on investments .......................... (462) -- N/A N/A
------------- ------------- ------------- -------------
Total Dividends ......................................... (48,130) (8,291) N/A N/A
------------- ------------- ------------- -------------
TRUST SHARES:
Net investment income ..................................... (5,646,255) (4,757,676) (1,197,633) (1,109,630)
Net realized gain on investments .......................... (63,205) -- -- --
------------- ------------- ------------- -------------
Total Dividends ......................................... (5,709,460) (4,757,676) (1,197,633) (1,109,630)
------------- ------------- ------------- -------------
Total Dividends to shareholders ......................... (6,988,207) (6,159,385) (2,947,777) (3,005,920)
------------- ------------- ------------- -------------
NET INCREASE (DECREASE) FROM SHARE TRANSACTIONS(1) ............. 13,382,220 8,877,122 83,073 (1,813,667)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets ....................... 17,084,012 8,940,059 2,079,917 (2,030,788)
------------- ------------- ------------- -------------
NET ASSETS AT END OF PERIOD (INCLUDING LINE A) ................. $ 149,372,871 $ 132,288,859 $ 65,995,842 $ 63,915,925
============= ============= ============= =============
(A) Undistributed (overdistributed) net investment income ...... $ 40,027 $ 2,378 $ (4,150) $ --
============= ============= ============= =============
- ---------
(1) For detail on share transactions by series, see Statements of Changes in Net
Assets - Capital Stock Activity on pages 32 and 33.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONNECTICUT MUNICIPAL MASSACHUSETTS MUNICIPAL RHODE ISLAND MUNICIPAL
BOND FUND BOND FUND BOND FUND
------------------------- ------------------------- -------------------------
YEARS ENDED OCTOBER 31, YEARS ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
------------------------- ------------------------- -------------------------
1997 1996 1997 1996 1997 1996
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSETS AT BEGINNING OF PERIOD ............... $29,592,030 $22,148,469 $37,321,817 $23,720,447 $14,899,739 $10,849,844
----------- ----------- ----------- ----------- ----------- -----------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS:
Net investment income ........................ 1,303,267 1,286,706 1,813,708 1,613,223 677,105 630,785
Net realized gain (loss) on investments sold . (82,263) 6,306 66,828 13,421 37,141 60,733
Net change in unrealized appreciation
(depreciation) of investments .............. 1,036,480 52,961 1,298,792 (183,226) 416,740 (40,492)
----------- ----------- ----------- ----------- ----------- -----------
Net increase in net assets resulting
from operations ............................ 2,257,484 1,345,973 3,179,328 1,443,418 1,130,986 651,026
----------- ----------- ----------- ----------- ----------- -----------
DIVIDENDS TO SHAREHOLDERS FROM:
RETAIL A SHARES:
Net investment income ...................... (984,379) (1,015,743) (1,277,846) (1,133,798) (704,462) (630,785)
Dividends in excess of net investment income -- -- -- -- -- --
Net realized gain on investments ........... -- -- -- -- (58,722) (59,217)
----------- ----------- ----------- ----------- ----------- -----------
Total Dividends .......................... (984,379) (1,015,743) (1,277,846) (1,133,798) (763,184) (690,002)
----------- ----------- ----------- ----------- ----------- -----------
RETAIL B SHARES:
Net investment income ...................... N/A N/A N/A N/A N/A N/A
Net realized gain on investments ........... N/A N/A N/A N/A N/A N/A
----------- ----------- ----------- ----------- ----------- -----------
Total Dividends .......................... N/A N/A N/A N/A N/A N/A
----------- ----------- ----------- ----------- ----------- -----------
TRUST SHARES:
Net investment income ...................... (337,583) (267,813) (600,444) (468,311) -- --
Net realized gain on investments ........... -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Total Dividends .......................... (337,583) (267,813) (600,444) (468,311) -- --
----------- ----------- ----------- ----------- ----------- -----------
Total Dividends to shareholders .......... (1,321,962) (1,283,556) (1,878,290) (1,602,109) (763,184) (690,002)
----------- ----------- ----------- ----------- ----------- -----------
NET INCREASE (DECREASE) FROM SHARE
TRANSACTIONS(1) ............................... 2,693,732 7,381,144 8,681,937 13,760,061 1,866,874 4,088,871
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets ........ 3,629,254 7,443,561 9,982,975 13,601,370 2,234,676 4,049,895
----------- ----------- ----------- ----------- ----------- -----------
NET ASSETS AT END OF PERIOD
(INCLUDING LINE A) ............................. $33,221,284 $29,592,030 $47,304,792 $37,321,817 $17,134,415 $14,899,739
=========== =========== =========== =========== =========== ===========
(A) Undistributed (overdistributed) net
investment income ............................. $ (14,293) $ 4,402 $ (45,590) $ 12,622 $ (25,307) $ 2,050
=========== =========== =========== =========== =========== ===========
</TABLE>
<PAGE>
<TABLE>
---------------
STATEMENTS OF CHANGES IN NET ASSETS -
THE GALAXY FUND Capital Stock Activity
---------------
<CAPTION>
NEW YORK MUNICIPAL CONNECTICUT MUNICIPAL
TAX-EXEMPT BOND FUND BOND FUND BOND FUND
---------------------------- ---------------------------- ----------------------------
YEARS ENDED OCTOBER 31, YEARS ENDED OCTOBER 31, YEARS ENDED OCTOBER 31,
---------------------------- ---------------------------- ----------------------------
1997 1996 1997 1996 1997 1996
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
DOLLAR AMOUNTS
RETAIL A SHARES:
Sold ............................. $ 2,646,111 $ 3,667,225 $ 4,874,717 $ 7,610,907 $ 3,252,075 $ 2,793,266
Issued in connection with
acquisition (Note 8) ........... -- -- -- -- -- 7,856,253
Issued to shareholders in
reinvestment of dividends ...... 885,221 989,521 1,251,447 1,393,109 702,784 720,485
Repurchased ...................... (7,050,231) (7,906,263) (9,033,566) (11,561,982) (4,550,082) (6,235,644)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease)
in shares outstanding .......... $ (3,518,899) $ (3,249,517) $ (2,907,402) $ (2,557,966) $ (595,223) $ 5,134,360
============ ============ ============ ============ ============ ============
RETAIL B SHARES:
Sold ............................. $ 970,301 $ 775,566 N/A N/A N/A N/A
Issued to shareholders
in reinvestment of dividends ... 17,346 3,525 N/A N/A N/A N/A
Repurchased ...................... (123,614) -- N/A N/A N/A N/A
------------ ------------ ------------ ------------ ------------ ------------
Net increase in shares
outstanding .................... $ 864,033 $ 779,091 N/A N/A N/A N/A
============ ============ ============ ============ ============ ============
TRUST SHARES:
Sold ............................. $ 27,034,670 $ 17,408,564 $ 6,640,097 $ 4,313,377 $ 5,259,690 $ 1,367,373
Issued in connection with
acquisition (Note 8) ........... -- -- -- -- -- 1,902,226
Issued to shareholders in
reinvestment of dividends ...... 1,908,816 58,201 158,550 144,855 17,100 16,017
Repurchased ...................... (12,906,400) (6,119,217) (3,808,172) (3,713,933) (1,987,835) (1,038,832)
------------ ------------ ------------ ------------ ------------ ------------
Net increase in shares
outstanding .................... $ 16,037,086 $ 11,347,548 $ 2,990,475 $ 744,299 $ 3,288,955 $ 2,246,784
============ ============ ============ ============ ============ ============
SHARE ACTIVITY
RETAIL A SHARES:
Sold ............................. 241,746 341,647 448,266 707,832 315,384 290,186
Issued in connection with
acquisition (Note 8) ........... -- -- -- -- -- 765,050
Issued to shareholders in
reinvestment of dividends ...... 81,401 92,052 114,934 129,708 68,408 71,265
Repurchased ...................... (649,802) (737,059) (833,825) (1,079,631) (444,610) (619,017)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in
shares outstanding ............. (326,655) (303,360) (270,625) (242,091) (60,818) 507,484
============ ============ ============ ============ ============ ============
RETAIL B SHARES:
Sold ............................. 89,576 72,647 N/A N/A N/A N/A
Issued to shareholders in
reinvestment of dividends ...... 1,593 331 N/A N/A N/A N/A
Repurchased ...................... (11,358) -- N/A N/A N/A N/A
------------ ------------ ------------ ------------ ------------ ------------
Net increase in shares
outstanding .................... 79,811 72,978 N/A N/A N/A N/A
============ ============ ============ ============ ============ ============
TRUST SHARES:
Sold ............................. 2,493,761 1,625,350 610,447 402,557 507,333 138,864
Issued in connection with
acquisition (Note 8) ........... -- -- -- -- -- 185,222
Issued to shareholders in
reinvestment of dividends ...... 175,380 5,421 14,549 13,488 1,664 1,582
Repurchased ...................... (1,189,272) (571,530) (350,861) (346,485) (192,523) (103,022)
------------ ------------ ------------ ------------ ------------ ------------
Net increase in shares outstanding 1,479,869 1,059,241 274,135 69,560 316,474 222,646
============ ============ ============ ============ ============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
---------------
STATEMENTS OF CHANGES IN NET ASSETS -
THE GALAXY FUND CAPITAL STOCK ACTIVITY (CONTINUED)
---------------
MASSACHUSETTS MUNICIPAL RHODE ISLAND MUNICIPAL
BOND FUND BOND FUND (1)
---------------------------- ----------------------------
YEARS ENDED OCTOBER 31, YEARS ENDED OCTOBER 31,
---------------------------- ----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
DOLLAR AMOUNTS
RETAIL A SHARES:
<S> <C> <C> <C> <C>
Sold .......................................................... $ 11,981,846 $ 7,299,767 $ 5,083,499 $ 7,329,224
Issued in connection with acquisition (Note 8) ................ -- 11,025,564 -- --
Issued to shareholders in reinvestment of dividends ........... 957,093 838,981 311,919 299,394
Repurchased ................................................... (6,781,712) (8,871,687) (3,528,544) (3,539,747)
------------ ------------ ------------ ------------
Net increase (decrease)in shares outstanding .................. $ 6,157,227 $ 10,292,625 $ 1,866,874 $ 4,088,871
============ ============ ============ ============
RETAIL B SHARES:
Sold .......................................................... N/A N/A N/A N/A
Issued to shareholders in reinvestment of dividends ........... N/A N/A N/A N/A
Repurchased ................................................... N/A N/A N/A N/A
------------ ------------ ------------ ------------
Net increase in shares outstanding ............................ N/A N/A N/A N/A
============ ============ ============ ============
TRUST SHARES:
Sold .......................................................... $ 4,805,492 $ 3,035,952 -- --
Issued in connection with acquisition (Note 8) ................ -- 1,814,561 -- --
Issued to shareholders in reinvestment of dividends ........... 451 121 -- --
Repurchased ................................................... (2,281,233) (1,383,198) -- --
------------ ------------ ------------ ------------
Net increase in shares outstanding ............................ $ 2,524,710 $ 3,467,436 -- --
============ ============ ============ ============
SHARE ACTIVITY
RETAIL A SHARES:
Sold .......................................................... 1,185,033 749,419 472,719 688,695
Issued in connection with acquisition (Note 8) ................ -- 1,090,523 -- --
Issued to shareholders in reinvestment of dividends ........... 95,167 84,645 29,036 28,196
Repurchased ................................................... (672,810) (896,522) (329,120) (335,169)
------------ ------------ ------------ ------------
Net increase (decrease) in shares outstanding ................. 607,390 1,028,065 172,635 381,722
============ ============ ============ ============
RETAIL B SHARES:
Sold
Issued to shareholders in reinvestment of dividends ........... N/A N/A N/A N/A
Repurchased ................................................... N/A N/A N/A N/A
------------ ------------ ------------ ------------
Net increase in shares outstanding ............................ N/A N/A N/A N/A
============ ============ ============ ============
TRUST SHARES:
Sold .......................................................... 478,517 309,904 -- --
Issued in connection with acquisition (Note 8) ................ -- 179,482 -- --
Issued to shareholders in reinvestment of dividends ........... 44 12 -- --
Repurchased ................................................... (225,905) (140,144) -- --
------------ ------------ ------------ ------------
Net increase in shares outstanding ............................ 252,656 349,254 -- --
============ ============ ============ ============
- -----------------------
(1) As of October 31, 1997, the Rhode Island Municipal Bond Fund had not issued Trust Shares.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
---------------
TAX-EXEMPT BOND FUND
FINANCIAL HIGHLIGHTS
THE GALAXY FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
---------------
RETAIL A SHARES
YEARS ENDED OCTOBER 31,
----------------------------------------------------------------
1997 1996 1995 1994 1993(1)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ........................ $ 10.78 $ 10.78 $ 9.99 $ 11.12 $ 10.11
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income (A) ................................ 0.50 0.50 0.52 0.53 0.54
Net realized and unrealized gain (loss) on investments ... 0.29 -- 0.79 (1.04) 1.01
-------- -------- -------- -------- --------
Total from Investment Operations: .................... 0.79 0.50 1.31 (0.51) 1.55
-------- -------- -------- -------- --------
Less Dividends:
Dividends from net investment income ..................... (0.50) (0.50) (0.52) (0.53) (0.54)
Dividends from net realized capital gains ................ (0.01) -- -- -- --
Dividends in excess of net realized capital gains ........ -- -- -- (0.09) --
-------- -------- -------- -------- --------
Total Dividends: ....................................... (0.51) (0.50) (0.52) (0.62) (0.54)
-------- -------- -------- -------- --------
Net increase (decrease) in net asset value .................. 0.28 -- 0.79 (1.13) 1.01
Net Asset Value, End of Period .............................. $ 11.06 $ 10.78 $ 10.78 $ 9.99 $ 11.12
======== ======== ======== ======== ========
Total Return(3) ............................................. 7.49% 4.77% 13.40% (4.75)% 15.63%
Ratios/Supplemental Data:
Net Assets, End of Period (000's) ........................... $ 25,465 $ 28,339 $ 31,609 $ 35,911 $144,048
Ratios to average net assets:
Net investment income including reimbursement/waiver ..... 4.60% 4.68% 4.99% 5.01% 5.00%
Operating expenses including reimbursement/waiver ........ 0.95% 0.93% 0.91% 0.80% 0.64%
Operating expenses excluding reimbursement/waiver ........ 1.18% 1.18% 1.24% 1.03% 1.08%
Portfolio Turnover Rate ..................................... 78% 15% 11% 17% 38%
- ----------------
* Annualized
** Not Annualized
(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 A Shares and Trust Shares.
(2) The Fund began offering Retail B shares on March 4, 1996.
(3) Calculation does not include the effect of any sales charge for Retail A Shares and Retail B Shares.
(A) Net investment income per share before reimbursement/waiver of fees by the Investment Advisor and/or Administrator for Retail
A Shares for the years ended October 31, 1997, 1996, 1995, 1994 and 1993 were $0.47, $0.48, $0.48, $0.50 and $0.49,
respectively. Net investment income per share before reimbursement/waiver of fees by the Investment Advisor and/or
Administrator for Trust Shares for the years ended October 31, 1997, 1996, 1995, 1994 and 1993 were $0.51, $0.51, $0.51,
$0.50 and $0.49, respectively. Net investment income per share before reimbursement/waiver of fees by the Investment Advisor
and/or Administrator for Retail B Shares for the year ended October 31, 1997 and the period ended October 31, 1996 were $0.40
and $0.25, respectively.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TRUST SHARES RETAIL B SHARES
YEARS ENDED OCTOBER 31, YEARS ENDED OCTOBER 31,
------------------------------------------------------- ---------------------
1997 1996 1995 1994 1993(1) 1997 1996(2)
------- ------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ......... $ 10.78 $ 10.78 $ 9.99 $ 11.12 $ 10.11 $ 10.78 $ 10.94
------- ------- -------- -------- -------- ------- -------
Income from Investment Operations:
Net investment income (A) ................. 0.53 0.53 0.54 0.53 0.54 0.43 0.27
Net realized and unrealized gain (loss) on
investments ............................. 0.29 -- 0.79 (1.04) 1.01 0.29 (0.16)
------- ------- -------- -------- -------- ------- -------
Total from Investment Operations: ..... 0.82 0.53 1.33 (0.51) 1.55 0.72 0.11
------- ------- -------- -------- -------- ------- -------
Less Dividends:
Dividends from net investment income ...... (0.53) (0.53) (0.54) (0.53) (0.54) (0.43) (0.27)
Dividends from net realized capital gains . (0.01) -- -- -- -- (0.01) --
Dividends in excess of net realized capital
gains ................................... -- -- -- (0.09) -- -- --
------- ------- -------- -------- -------- ------- -------
Total Dividends: ........................ (0.54) (0.53) (0.54) (0.62) (0.54) (0.44) (0.27)
------- ------- -------- -------- -------- ------- -------
Net increase (decrease) in net asset value ... 0.28 -- 0.79 (1.13) 1.01 0.28 (0.16)
------- ------- -------- -------- -------- ------- -------
Net Asset Value, End of Period ............... $ 11.06 $ 10.78 $ 10.78 $ 9.99 $ 11.12 $ 11.06 $ 10.78
======= ======= ======== ======== ======== ======= =======
Total Return(3) .............................. 7.75% 5.03% 13.62% (4.75)% 15.63% 6.83% 1.08%**
Ratios/Supplemental Data:
Net Assets, End of Period (000's) ............ $122,218 $103,163 $ 91,740 $ 91,647 $144,048 $ 1,690 $ 787
Ratios to average net assets:
Net investment income including
reimbursement/waiver .................... 4.85% 4.91% 5.18% 5.01% 5.00% 3.95% 4.08%*
Operating expenses including
reimbursement/waiver .................... 0.70% 0.70% 0.72% 0.78% 0.64% 1.60% 1.57%*
Operating expenses excluding
reimbursement/waiver .................... 0.96% 0.95% 0.97% 1.00% 1.08% 1.83% 1.77%*
Portfolio Turnover Rate ...................... 78% 15% 11% 17% 38% 78% 15%
- ----------------
* Annualized
** Not Annualized
(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 A Shares and Trust Shares.
(2) The Fund began offering Retail B shares on March 4, 1996.
(3) Calculation does not include the effect of any sales charge for Retail A Shares and Retail B Shares.
(A) Net investment income per share before reimbursement/waiver of fees by the Investment Advisor and/or Administrator for Retail
A Shares for the years ended October 31, 1997, 1996, 1995, 1994 and 1993 were $0.47, $0.48, $0.48, $0.50 and $0.49,
respectively. Net investment income per share before reimbursement/waiver of fees by the Investment Advisor and/or
Administrator for Trust Shares for the years ended October 31, 1997, 1996, 1995, 1994 and 1993 were $0.51, $0.51, $0.51,
$0.50 and $0.49, respectively. Net investment income per share before reimbursement/waiver of fees by the Investment Advisor
and/or Administrator for Retail B Shares for the year ended October 31, 1997 and the period ended October 31, 1996 were $0.40
and $0.25, respectively.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
---------------
New York Municipal Bond Fund
FINANCIAL HIGHLIGHTS
THE GALAXY FUND For a Share outstanding throughout each period.
---------------
RETAIL A SHARES
YEARS ENDED OCTOBER 31,
------------------------------------------------------------
1997 1996 1995 1994 1993(1)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ......................... $ 10.75 $ 10.78 $ 9.89 $ 11.04 $ 10.00
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income (A) ................................. 0.49 0.48 0.49 0.49 0.50
Net realized and unrealized gain (loss) on investments .... 0.34 (0.03) 0.89 (1.15) 1.04
-------- -------- -------- -------- --------
Total from Investment Operations: ..................... 0.83 0.45 1.38 (0.66) 1.54
-------- -------- -------- -------- --------
Less Dividends:
Dividends from net investment income ...................... (0.49) (0.48) (0.49) (0.49) (0.50)
Dividends from net realized capital gains ................. -- -- -- -- --
-------- -------- -------- -------- --------
Total Dividends: ........................................ (0.49) (0.48) (0.49) (0.49) (0.50)
-------- -------- -------- -------- --------
Net increase (decrease) in net asset value ................... 0.34 (0.03) 0.89 (1.15) 1.04
-------- -------- -------- -------- --------
Net Asset Value, End of Period ............................... $ 11.09 $ 10.75 $ 10.78 $ 9.89 $ 11.04
======== ======== ======== ======== ========
Total Return(2) .............................................. 7.93% 4.31% 14.03% (6.14)% 15.66%
Ratios/Supplemental Data:
Net Assets, End of Period (000's) ............................ $ 38,434 $ 40,154 $ 42,870 $ 42,451 $ 70,242
Ratios to average net assets:
Net investment income including reimbursement/waiver ...... 4.52% 4.50% 4.73% 4.64% 4.54%
Operating expenses including reimbursement/waiver ......... 0.94% 0.95% 0.92% 0.87% 0.87%
Operating expenses excluding reimbursement/waiver ......... 1.26% 1.35% 1.31% 1.10% 1.19%
Portfolio Turnover Rate ...................................... 61% 12% 5% 18% 3%
- -----------------
* Annualized
** Not Annualized
(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 A Shares and Trust Shares.
(2) Calculation does not include the effect of any sales charge for Retail A Shares.
(A) Net investment income per share before reimbursement/waiver of fees by the Investment Advisor and/or Administrator for Retail
A Shares for the years ended October 31, 1997, 1996, 1995, 1994 and 1993 were $0.45, $0.44, $0.44, $0.46 and $0.47,
respectively. Net investment income per share before reimbursement/waiver of fees by the Investment Advisor and/or
Administrator for Trust Shares for the years ended October 31, 1997, 1996, 1995, 1994 and 1993 were $0.49, $0.47, $0.48,
$0.47 and $0.47, respectively.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TRUST SHARES
YEARS ENDED OCTOBER 31,
-----------------------------------------------------------
1997 1996 1995 1994 1993(1)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ......................... $ 10.75 $ 10.78 $ 9.89 $ 11.04 $ 10.00
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income (A) ................................. 0.52 0.51 0.51 0.49 0.50
Net realized and unrealized gain (loss) on investments .... 0.34 (0.03) 0.89 (1.15) 1.04
-------- -------- -------- -------- --------
Total from Investment Operations: ..................... 0.86 0.48 1.40 (0.66) 1.54
-------- -------- -------- -------- --------
Less Dividends:
Dividends from net investment income ...................... (0.52) (0.51) (0.51) (0.49) (0.50)
Dividends from net realized capital gains ................. -- -- -- -- --
-------- -------- -------- -------- --------
Total Dividends: ........................................ (0.52) (0.51) (0.51) (0.49) (0.50)
-------- -------- -------- -------- --------
Net increase (decrease) in net asset value ................... 0.34 (0.03) 0.89 (1.15) 1.04
-------- -------- -------- -------- --------
Net Asset Value, End of Period ............................... $ 11.09 $ 10.75 $ 10.78 $ 9.89 $ 11.04
======== ======== ======== ======== ========
Total Return(2) .............................................. 8.17% 4.55% 14.23% (6.14)% 15.66%
Ratios/Supplemental Data:
Net Assets, End of Period (000's) ............................ $ 27,562 $ 23,762 $ 23,077 $ 24,209 $ 70,242
Ratios to average net assets:
Net investment income including reimbursement/waiver ...... 4.75% 4.75% 4.91% 4.64% 4.54%
Operating expenses including reimbursement/waiver ......... 0.71% 0.70% 0.74% 0.87% 0.87%
Operating expenses excluding reimbursement/waiver ......... 1.02% 1.10% 1.07% 1.08% 1.19%
Portfolio Turnover Rate ...................................... 61% 12% 5% 18% 3%
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
---------------
CONNECTICUT MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS
THE GALAXY FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
---------------
RETAIL A SHARES
YEARS ENDED OCTOBER 31,
------------------------------------------------------------
1997 1996 1995 1994 1993(1)(2)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .................... $ 10.14 $ 10.13 $ 9.22 $ 10.32 $ 10.00
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income (A) ............................ 0.45 0.42 0.44 0.46 0.25
Net realized and unrealized gain (loss) on investments 0.33 0.01 0.91 (1.10) 0.32
-------- -------- -------- -------- --------
Total from Investment Operations: ................ 0.78 0.43 1.35 (0.64) 0.57
-------- -------- -------- -------- --------
Less Dividends:
Dividends from net investment income ................. (0.45) (0.42) (0.44) (0.46) (0.25)
Dividends from net realized capital gains ............ -- -- -- -- --
-------- -------- -------- -------- --------
Total Dividends: ................................... (0.45) (0.42) (0.44) (0.46) (0.25)
-------- -------- -------- -------- --------
Net increase (decrease) in net asset value .............. 0.33 0.01 0.91 (1.10) 0.32
-------- -------- -------- -------- --------
Net Asset Value, End of Period .......................... $ 10.47 $ 10.14 $ 10.13 $ 9.22 $ 10.32
======== ======== ======== ======== ========
Total Return (3) ........................................ 7.86% 4.32% 14.94% (6.39)% 5.80%**
Ratios/Supplemental Data:
Net Assets, End of Period (000's) ....................... $ 23,355 $ 23,244 $ 18,066 $ 18,229 $ 18,771
Ratios to average net assets:
Net investment income including reimbursement/waiver . 4.30% 4.13% 4.53% 4.66% 4.30%*
Operating expenses including reimbursement/waiver .... 0.70% 0.70% 0.68% 0.25% 0.00%*
Operating expenses excluding reimbursement/waiver .... 1.31% 1.38% 1.48% 1.42% 1.73%*
Portfolio Turnover Rate ................................. 42% 3% 7% 4% 7%**
- --------------
* Annualized
** Not Annualized
(1) The Fund commenced operations on March 16, 1993.
(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 A Shares and Trust Shares.
(3) Calculation does not include the effect of any sales charge for Retail A Shares.
(A) Net investment income per share before reimbursement/waiver of fees by the Investment Advisor and/or Administrator for Retail
A Shares for the years ended October 31, 1997, 1996, 1995 and 1994 and for the period ended October 31, 1993 were $0.38,
$0.35, $0.37, $0.34 and $0.15, respectively. Net investment income per share before reimbursement/waiver of fees by the
Investment Advisor and/or Administrator for Trust Shares for the years ended October 31, 1997, 1996, 1995 and 1994 and for
the period ended October 31, 1993 were $0.41, $0.37, $0.38, $0.35 and $0.15, respectively.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TRUST SHARES
YEARS ENDED OCTOBER 31,
------------------------------------------------------------
1997 1996 1995 1994 1993(1)(2)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .................... $ 10.14 $ 10.13 $ 9.22 $ 10.32 $ 10.00
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income (A) ............................ 0.47 0.44 0.46 0.46 0.25
Net realized and unrealized gain (loss) on investments 0.33 0.01 0.91 (1.10) 0.32
-------- -------- -------- -------- --------
Total from Investment Operations: ................ 0.80 0.45 1.37 (0.64) 0.57
-------- -------- -------- -------- --------
Less Dividends:
Dividends from net investment income ................. (0.47) (0.44) (0.46) (0.46) (0.25)
Dividends from net realized capital gains ............ -- -- -- -- --
-------- -------- -------- -------- --------
Total Dividends: ................................... (0.47) (0.44) (0.46) (0.46) (0.25)
-------- -------- -------- -------- --------
Net increase (decrease) in net asset value .............. 0.33 0.01 0.91 (1.10) 0.32
-------- -------- -------- -------- --------
Net Asset Value, End of Period .......................... $ 10.47 $ 10.14 $ 10.13 $ 9.22 $ 10.32
======== ======== ======== ======== ========
Total Return (3) ........................................ 8.06% 4.54% 15.21% (6.37)% 5.80%**
Ratios/Supplemental Data:
Net Assets, End of Period (000's) ....................... $ 9,866 $ 6,348 $ 4,083 $ 4,419 $ 18,771
Ratios to average net assets:
Net investment income including reimbursement/waiver . 4.51% 4.34% 4.76% 4.66% 4.30%*
Operating expenses including reimbursement/waiver .... 0.49% 0.49% 0.45% 0.23% 0.00%*
Operating expenses excluding reimbursement/waiver .... 1.10% 1.17% 1.24% 1.41% 1.73%*
Portfolio Turnover Rate ................................. 42% 3% 7% 4% 7%**
- ---------------
* Annualized
** Not Annualized
(1) The Fund commenced operations on March 16, 1993.
(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 A Shares and Trust Shares.
(3) Calculation does not include the effect of any sales charge for Retail A Shares.
(A) Net investment income per share before reimbursement/waiver of fees by the Investment Advisor and/or Administrator for Retail
A Shares for the years ended October 31, 1997, 1996, 1995 and 1994 and for the period ended October 31, 1993 were $0.38,
$0.35, $0.37, $0.34 and $0.15, respectively. Net investment income per share before reimbursement/waiver of fees by the
Investment Advisor and/or Administrator for Trust Shares for the years ended October 31, 1997, 1996, 1995 and 1994 and for
the period ended October 31, 1993 were $0.41, $0.37, $0.38, $0.35 and $0.15, respectively.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
---------------
MASSACHUSETTS MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS
THE GALAXY FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
---------------
RETAIL A SHARES
YEARS ENDED OCTOBER 31,
-------------------------------------------------------------
1997 1996 1995 1994 1993(1)(2)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .................... $ 9.94 $ 9.98 $ 9.12 $ 10.24 $ 10.00
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income (A) ............................ 0.45 0.43 0.44 0.47 0.29
Net realized and unrealized gain (loss) on investments 0.32 (0.04) 0.86 (1.12) 0.24
-------- -------- -------- -------- --------
Total from Investment Operations: ................ 0.77 0.39 1.30 (0.65) 0.53
-------- -------- -------- -------- --------
Less Dividends:
Dividends from net investment income ................. (0.46) (0.43) (0.44) (0.47) (0.29)
Dividends from net realized capital gains ............ -- -- -- -- --
-------- -------- -------- -------- --------
Total Dividends: ................................... (0.46) (0.43) (0.44) (0.47) (0.29)
-------- -------- -------- -------- --------
Net increase (decrease) in net asset value .............. 0.31 (0.04) 0.86 (1.12) 0.24
-------- -------- -------- -------- --------
Net Asset Value, End of Period .......................... $ 10.25 $ 9.94 $ 9.98 $ 9.12 $ 10.24
======== ======== ======== ======== ========
Total Return (3) ........................................ 7.92% 4.05% 14.52% (6.46)% 5.42%**
Ratios/Supplemental Data:
Net Assets, End of Period (000's) ....................... $ 33,318 $ 26,275 $ 16,113 $ 15,966 $ 20,121
Ratios to average net assets:
Net investment income including reimbursement/waiver . 4.38% 4.42% 4.56% 4.89% 4.87%*
Operating expenses including reimbursement/waiver .... 0.63% 0.66% 0.70% 0.33% 0.05%*
Operating expenses excluding reimbursement/waiver .... 1.20% 1.32% 1.58% 1.43% 1.82%*
Portfolio Turnover Rate ................................. 48% 16% 19% 11% 0%**
- ---------------
* Annualized
** Not Annualized
(1) The Fund commenced operations on March 12, 1993.
(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 A Shares and Trust Shares.
(3) Calculation does not include the effect of any sales charge for Retail A Shares.
(A) Net investment income per share before reimbursement/waiver of fees by the Investment Advisor and/or Administrator for Retail
A Shares for the years ended October 31, 1997, 1996, 1995 and 1994 and for the period ended October 31, 1993 were $0.39,
$0.37, $0.36, $0.37 and $0.18, respectively. Net investment income per share before reimbursement/waiver of fees by the
Investment Advisor and/or Administrator for Trust Shares for the years ended October 31, 1997, 1996, 1995 and 1994 and for
the period ended October 31, 1993 were $0.40, $0.40, $0.38, $0.38 and $0.18, respectively.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TRUST SHARES
YEARS ENDED OCTOBER 31,
-------------------------------------------------------------
1997 1996 1995 1994 1993(1)(2)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .................... $ 9.94 $ 9.98 $ 9.12 $ 10.24 $ 10.00
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income (A) ............................ 0.46 0.46 0.45 0.48 0.29
Net realized and unrealized gain (loss) on investments 0.32 (0.04) 0.86 (1.12) 0.24
-------- -------- -------- -------- --------
Total from Investment Operations: ................ 0.78 0.42 1.31 (0.64) 0.53
-------- -------- -------- -------- --------
Less Dividends:
Dividends from net investment income ................. (0.47) (0.46) (0.45) (0.48) (0.29)
Dividends from net realized capital gains ............ -- -- -- -- --
-------- -------- -------- -------- --------
Total Dividends: ................................... (0.47) (0.46) (0.45) (0.48) (0.29)
-------- -------- -------- -------- --------
Net increase (decrease) in net asset value .............. 0.31 (0.04) 0.86 (1.12) 0.24
-------- -------- -------- -------- --------
Net Asset Value, End of Period .......................... $ 10.25 $ 9.94 $ 9.98 $ 9.12 $ 10.24
======== ======== ======== ======== ========
Total Return (3) ........................................ 8.06% 4.27% 14.72% (6.46)% 5.42%**
Ratios/Supplemental Data:
Net Assets, End of Period (000's) ....................... $ 13,986 $ 11,047 $ 7,607 $ 5,617 $ 20,121
Ratios to average net assets:
Net investment income including reimbursement/waiver . 4.57% 4.60% 4.73% 4.89% 4.87%*
Operating expenses including reimbursement/waiver .... 0.44% 0.48% 0.52% 0.33% 0.05%*
Operating expenses excluding reimbursement/waiver .... 1.01% 1.14% 1.31% 1.41% 1.82%*
Portfolio Turnover Rate ................................. 48% 16% 19% 11% 0%**
- ---------------
* Annualized
** Not Annualized
(1) The Fund commenced operations on March 12, 1993.
(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 A Shares and Trust Shares.
(3) Calculation does not include the effect of any sales charge for Retail A Shares.
(A) Net investment income per share before reimbursement/waiver of fees by the Investment Advisor and/or Administrator for Retail
A Shares for the years ended October 31, 1997, 1996, 1995 and 1994 and for the period ended October 31, 1993 were $0.39,
$0.37, $0.36, $0.37 and $0.18, respectively. Net investment income per share before reimbursement/waiver of fees by the
Investment Advisor and/or Administrator for Trust Shares for the years ended October 31, 1997, 1996, 1995 and 1994 and for
the period ended October 31, 1993 were $0.40, $0.40, $0.38, $0.38 and $0.18, respectively.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
---------------
RHODE ISLAND MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS
THE GALAXY FUND FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD.
---------------
RETAIL A SHARES
YEARS ENDED OCTOBER 31, PERIOD ENDED
1997 1996 OCTOBER 31, 1995(1)
-------- -------- ------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period ..................... $ 10.65 $ 10.67 $ 10.00
-------- -------- --------
Income from Investment Operations:
Net investment income (A) ............................. 0.48 0.51 0.44
Net realized and unrealized gain on investments ....... 0.32 0.03 0.67
-------- -------- --------
Total from Investment Operations: ................... 0.80 0.54 1.11
-------- -------- --------
Less Dividends:
Dividends from net investment income .................. (0.50) (0.51) (0.44)
Dividends from net realized capital gains ............. (0.04) (0.05) --
-------- -------- --------
Total Dividends: .................................... (0.54) (0.56) (0.44)
-------- -------- --------
Net increase (decrease) in net asset value ............... 0.26 (0.02) 0.67
-------- -------- --------
Net Asset Value, End of Period ........................... $ 10.91 $ 10.65 $ 10.67
======== ======== ========
Total Return (2) ......................................... 7.78% 5.22% 11.29%**
Ratios/Supplemental Data:
Net Assets, End of Period (000's) ........................ $ 17,134 $ 14,900 $ 10,850
Ratios to average net assets:
Net investment income including reimbursement/waiver .. 4.50% 4.78% 5.13%*
Operating expenses including reimbursement/waiver ..... 0.83% 0.77% 0.40%*
Operating expenses excluding reimbursement/waiver ..... 1.34% 1.34% 2.25%*
Portfolio Turnover Rate ............................ ..... 19% 13% 34%**
- ------------------
* Annualized
** Not Annualized
(1) The Fund commenced operations on December 20, 1994.
(2) Calculation does not include the effect of any sales charge for Retail A Shares.
(A) Net investment income per share before reimbursement/waiver of fees by the Investment Advisor
and/or Administrator for the years ended October 31, 1997 and 1996 and for the period ended
October 31, 1995 were $0.43, $0.45 and $0.28, respectively.
See Notes to Financial Statements.
</TABLE>
<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-four
managed investment portfolios. The accompanying financial statements and
financial highlights are those of the Tax-Exempt Bond, New York Municipal Bond,
Connecticut Municipal Bond, Massachusetts Municipal Bond and Rhode Island
Municipal Bond Funds (individually, a "Fund", collectively, the "Funds") only.
Each Fund is authorized to issue two series of shares (Trust Shares and Retail
A Shares), except for the Tax-Exempt Bond Fund, which is authorized to issue
three series of shares (Trust Shares, Retail A Shares and Retail B Shares). As
of October 31, 1997, the Rhode Island Municipal Bond Fund has offered only
Retail A Shares. Trust Shares, Retail A Shares and Retail B Shares are
substantially the same except that (i) Retail A Shares are subject to a maximum
3.75% front-end sales charge, (ii) Retail B Shares are subject to a maximum
5.00% contingent deferred sales charge, and (iii) each series of shares bears
the following series specific expenses: distribution fees and/or shareholder
servicing fees and transfer agency charges. Six years after purchase, Retail B
Shares will convert automatically to Retail A Shares.
2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. 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 approximates
fair value. 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 are determined by the identified cost method. Interest and dividend
income is recorded on the accrual basis. Investment income and realized and
unrealized gains and losses are allocated to the separate series of a Fund 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 continue 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 or excise tax provision is recorded.
EXPENSES: The Trust accounts separately for the assets, liabilities and
operations of each Fund. Expenses directly attributable 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.
WHEN-ISSUED SECURITIES: Each Fund may purchase and sell securities, such as
municipal obligations, on a "when-issued" basis. Delivery of the security and
payment take place after the date of the commitment to purchase and such
securities are subject to market fluctuations during this period. The fair value
of these securities is determined in the same manner as other municipal
obligations. The Trust's custodian will set aside cash or liquid portfolio
securities equal to the amount of the when-issued commitment in a separate
account.
3. INVESTMENT ADVISORY, ADMINISTRATION, SHAREHOLDER SERVICES AND OTHER FEES
The Trust and Fleet Investment Advisors Inc. (the "Investment Advisor" or
"Fleet"), an indirect wholly-owned subsidiary of Fleet Financial Group, Inc.,
are parties to an investment advisory agreement under which the Investment
Advisor provides services for a fee, computed daily and paid monthly, at the
annual rate of 0.75% of the average daily net assets of each Fund (See Note 4).
The Trust and First Data Investor Services Group, Inc. ("Investor Services
Group"), a wholly-owned subsidiary of First Data Corporation, are parties to an
administration agreement under which Investor Services Group (the
"Administrator") provides services for a fee, 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 (whose
financial statements are provided in separate reports), 0.085% of the next $2.5
billion of combined average daily net assets and 0.075% of combined average
daily net assets over $5 billion. Prior to September 5, 1996, Investor Services
Group was entitled to receive administration fees, 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, Investor Services Group also provides certain fund accounting,
custody administration and transfer agency services pursuant to certain fee
arrangements. Pursuant to such fee arrangements, Investor Services Group
compensates Chase Manhattan Bank, N.A. the Trust's custodian bank, for its
services.
First Data Distributors, Inc. (the "Distributor"), a wholly-owned subsidiary
of Investor Services Group and an indirect wholly-owned subsidiary of First Data
Corporation, serves as the exclusive distributor of the Trust's shares.
The Trust has adopted a shareholder services plan ("Services Plan") with
respect to Retail A Shares and Trust 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 (including and currently
limited to Fleet Bank and its affiliates) which provide administrative and
support services to their customers who beneficially own Retail A Shares at an
aggregate annual rate not to exceed 0.30% of the average daily net asset value
of the outstanding Retail A 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
aggregate annual rate not to exceed 0.15% of the average daily net asset value
of the outstanding Retail A Shares beneficially owned by such customers. No fees
were charged under the Services Plan with respect to the Rhode Island Municipal
Bond Fund for the period ended October 31, 1997.
The Trust has adopted a distribution and shareholder services plan (the
"12b-1 Plan") with respect to Retail B Shares of the Tax-Exempt Bond Fund. Under
the 12b-1 Plan, the Trust may pay (i) the Distributor or another person for
expenses and activities primarily intended to result in the sale of Retail B
Shares, (ii) institutions for shareholder liaison services and (iii)
institutions for administrative support services. Currently, payments under the
12b-1 Plan for distribution services are being made solely to broker-dealer
affiliates of Fleet Bank and payments under the 12b-1 Plan for shareholder
liaison and shareholder administrative support services are being made solely to
Fleet Bank and its affilitates. Payments for distribution expenses may not
exceed an annual rate of 0.65% of the average daily net assets attributable to
the Fund's outstanding Retail B Shares. The fees for shareholder liaison
services and/or administrative support services may not exceed the annual rates
of 0.15% and 0.15%, respectively, of the average daily net assets attributable
to the Fund's outstanding Retail B Shares owned of record or beneficially by the
Institution's Customers. The Trust, under the direction of the Board of
Trustees, is currently limiting each Fund's payments for shareholder liaison and
administrative support services under the 12b-1 Plan to an aggregate fee of not
more than 0.15% of the average daily net asset value of Retail B Shares owned of
record or beneficially by the Institution's Customers. For the year ended
October 31, 1997, the Funds paid fees under the Services Plan and 12b-1 Plan as
follows:
12B-1 PLAN
SERVICES ----------------------
FUND PLAN SERVICES DISTRIBUTION
---- -------- -------- ------------
Tax-Exempt Bond ............................. $ 37,652 $ 1,784 $ 7,788
New York Municipal Bond ..................... 56,596 N/A N/A
Connecticut Municipal Bond .................. 32,160 N/A N/A
Massachusetts Municipal Bond ................ 40,842 N/A N/A
Rhode Island Municipal Bond ................. -- N/A N/A
Retail A Shares, Retail B Shares and Trust Shares of the Funds each bear series
specific transfer agent charges based upon the number of shareholder accounts
for each series. In addition, Trust Shares also bear additional transfer agency
fees in order to compensate Investor Services Group for payments made to Fleet
Bank, an affiliate of the Investment Advisor, for performing certain
sub-accounting and administrative functions on a per account basis with respect
to Trust Shares held by defined contribution plans. These additional fees are
based on the number of shareholder accounts. For the year ended October 31,
1997, transfer agent charges for each series were as follows:
FUND RETAIL A RETAIL B TRUST
- ---- -------- -------- -----
Tax-Exempt Bond .............................. $22,037 $854 $74
New York Municipal Bond ...................... 36,212 N/A 63
Connecticut Municipal Bond ................... 14,432 N/A 63
Massachusetts Municipal Bond ................. 12,356 N/A 69
Rhode Island Municipal Bond .................. 8,932 N/A --
Certain officers of the Trust may be officers of the Administrator. Such
officers receive no compensation from the Trust for serving in their respective
roles. No officer, director or employee of the Investment Advisor serves as an
officer, Trustee or employee of the Trust. Effective November 1, 1996, each
Trustee is entitled to receive for services as a trustee of the Trust, The
Galaxy VIP Fund ("VIP") and Galaxy Fund II ("Galaxy II") an aggregate fee of
$29,000 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 and the President and Treasurer of the
Trust, VIP and Galaxy II are also entitled to additional fees for their services
in these capacities. These fees are allocated among the funds of the Trust, VIP
and Galaxy II, based on their relative net assets. Prior to November 1, 1996,
each Trustee was entitled to receive for services as a trustee of the Trust and
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
and the President and Treasurer of the Trust and VIP were entitled to additional
annual fees for their services in these capacities.
Each Trustee is eligible to participate in the Trust's Deferred Compensation
Plan (the "Plan"), an unfunded, non-qualified deferred compensation plan. The
Plan allows each Trustee to defer receipt of all or a percentage of fees which
otherwise would be payable for services performed. On January 1, 1997, the Plan
was merged into a combined Deferred Compensation Plan for the Trust, VIP and
Galaxy II.
Expenses for the year ended October 31, 1997 include legal fees paid to
Drinker Biddle & Reath LLP. A partner of that firm is Secretary to the Trust.
4. WAIVER OF FEES AND REIMBURSEMENT OF EXPENSES
The Investment Advisor and Administrator voluntarily agreed to waive a
portion of their fees and/or to reimburse the Funds for certain expenses so that
total expenses would not exceed certain expense limitations established for each
series. The Investment Advisor and Administrator may revise or discontinue the
voluntary fee waivers and expense reimbursements at any time. For the year ended
October 31, 1997, the Investment Advisor and Administrator waived fees and/or
reimbursed expenses with respect to the Funds in the following amounts:
FEES WAIVED BY
------------------------------
INVESTMENT
FUND ADVISOR ADMINISTRATOR
- ----- ------------- -------------
Tax-Exempt Bond ............................ $287,127 $ --
New York Municipal Bond .................... 127,651 25,827
Connecticut Municipal Bond ................. 149,599 39,755
Massachusetts Municipal Bond ............... 204,080 30,919
Rhode Island Municipal Bond ................ 75,284 --
REIMBURSEMENT BY
FUND INVESTMENT ADVISOR
- ----- ------------------
Tax-Exempt Bond .............................. $ 73,334
New York Municipal Bond ...................... 48,842
Connecticut Municipal Bond ................... --
Massachusetts Municipal Bond ................. --
Rhode Island Municipal Bond .................. 538
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-four classes of
shares each consisting of one or more series including: Class M - Series 1
Shares (Trust Shares), Class M - Series 2 Shares (Retail A Shares) and Class M -
Series 3 Shares (Retail B Shares) - Tax-Exempt Bond Fund; Class O - Series 1
Shares (Trust Shares) and Class O - Series 2 Shares (Retail A Shares) - New York
Municipal Bond Fund; Class P - Series 1 Shares (Trust Shares) and Class P -
Series 2 Shares (Retail A Shares) - Connecticut Municipal Bond Fund; Class Q -
Series 1 Shares (Trust Shares) and Class Q - Series 2 Shares (Retail A Shares) -
Massachusetts Municipal Bond Fund; and Class R - Series 1 Shares (Trust Shares)
and Class R - Series 2 Shares (Retail A Shares) - Rhode Island Municipal Bond
Fund.
Each share represents an equal proportionate interest in the respective Fund,
bears the same fees and expenses (except that Retail A Shares bear the expense
of payments under the Services Plan, Retail B Shares bear the expense of
payments under the 12b-1 Plan and Trust Shares, Retail A Shares and Retail B
Shares each 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.
6. PURCHASES AND SALES OF SECURITIES
The cost of purchases and proceeds from sales of securities, other than
short-term investments, for the year ended October 31, 1997 were as follows:
FUND PURCHASES SALES
- ---- ------------- -------------
Tax-Exempt Bond .............. $ 127,636,627 $ 109,985,061
New York Municipal Bond ...... 38,542,577 40,335,118
Connecticut Municipal Bond ... 16,333,420 12,431,078
Massachusetts Municipal Bond . 26,874,877 19,127,419
Rhode Island Municipal Bond .. 3,949,147 2,765,899
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, 1997 for each Fund is as follows:
FUND APPRECIATION (DEPRECIATION)
- ---- ------------- -------------
Tax-Exempt Bond .............. $ 5,453,808 $ (47,080)
New York Municipal Bond ...... 2,981,937 (536)
Connecticut Municipal Bond ... 1,214,595 (1,801)
Massachusetts Municipal Bond . 1,321,758 (25,793)
Rhode Island Municipal Bond .. 650,555 (6,700)
FUND NET COST
- ---- ------------- -------------
Tax-Exempt Bond .............. $ 5,406,728 $ 144,574,293
New York Municipal Bond ...... 2,981,401 62,100,113
Connecticut Municipal Bond ... 1,212,794 33,701,220
Massachusetts Municipal Bond . 1,295,965 44,255,901
Rhode Island Municipal Bond .. 643,855 16,214,108
At October 31, 1997, the following Funds had capital loss carryforwards:
FUND AMOUNT EXPIRATION
- ---- ------------- -------------
New York Municipal Bond ...... $ 640,235 2002
676,456 2003
16,589 2004
Connecticut Municipal Bond ... 178,995 2001
82,181 2002
685,391 2003
90,957 2005
Massachusetts Municipal Bond . 221,579 2002
487,619 2003
7. CONCENTRATION OF CREDIT
The New York Municipal Bond, Connecticut Municipal Bond, Massachusetts
Municipal Bond and Rhode Island Municipal Bond Funds invest primarily in debt
obligations issued by the State of New York, the State of Connecticut, the
Commonwealth of Massachusetts and the State of Rhode Island, respectively, and
their respective political subdivisions, agencies and public authorities to
obtain funds for various public purposes. The Funds, as non-diversified
investment portfolios, are more susceptible to economic and political factors
adversely affecting issuers of each respective state's specific municipal
securities than are municipal bond funds that are not concentrated in these
issuers to the same extent.
8. 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. Pursuant to the
Agreement, all of the assets and liabilities of the Shawmut Connecticut
Intermediate Municipal Income Fund and the Shawmut Massachusetts Intermediate
Municipal Income Fund were transferred to the Galaxy Connecticut Municipal Bond
Fund and the Galaxy Massachusetts Municipal Bond Fund, respectively, in exchange
for Retail A Shares and Trust Shares of the Galaxy Connecticut Municipal Bond
Fund and the Galaxy Massachusetts Municipal Bond Fund, respectively.
Accordingly, the net assets of the Shawmut Connecticut Intermediate Municipal
Income Fund were exchanged for 765,050 Retail A Shares and 185,222 Trust Shares
of the Galaxy Connecticut Municipal Bond Fund and the net assets of the Shawmut
Massachusetts Intermediate Municipal Income Fund were exchanged for 1,090,523
Retail A Shares and 179,482 Trust Shares of the Galaxy Massachusetts Municipal
Bond Fund, respectively. In related transactions, the assets and liabilities of
the other Shawmut portfolios were transferred to corresponding Galaxy portfolios
in exchange for shares in such Galaxy portfolios. 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
Shawmut 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 Values per share and Unrealized
Appreciation associated with the transaction:
Before Acquisition After Acquisition
------------------------------- -----------------
Galaxy Shawmut Galaxy
Connecticut Connecticut Connecticut
Municipal Intermediate Municipal
Bond Municipal Bond Bond
----------- -------------- ------------
Net Assets .............. $22,703,295 $ 9,758,479 $ 32,461,774
Shares outstanding ...... 2,210,642 963,404 3,160,914
Retail A and Trust Net
Asset Value, per share . $ 10.27 $ 10.13 $ 10.27
Unrealized Appreciation . $ 435,707 $ 182,610
Before Acquisition After Acquisition
------------------------------- -----------------
Galaxy Shawmut Galaxy
Massachusetts Massachusetts Massachusetts
Municipal Intermediate Municipal
Bond Municipal Bond Bond
----------- -------------- ------------
Net Assets .............. $24,534,165 $ 12,840,125 $ 37,374,290
Shares outstanding ...... 2,426,213 1,270,005 3,696,218
Retail A and Trust Net
Asset Value, per share . $ 10.11 $ 10.11 $ 10.11
Unrealized Appreciation . $ 501,126 $ 199,433
TAX INFORMATION (UNAUDITED)
During the fiscal year ended October 31, 1997, the Funds earned the following
percent of their income from municipal obligations which generally qualify as
exempt from federal and state taxation.
FUND INCOME
- ----- --------
Tax-Exempt Bond ............... 99.09%
New York Municipal Bond ....... 100.00%
Connecticut Municipal Bond .... 100.00%
Massachusetts Municipal Bond .. 99.70%
Rhode Island Municipal Bond ... 100.00%
During the fiscal year ended October 31, 1997, the following funds made
distributions from long-term capital gains:
LONG-TERM-GAINS
FUND PAID
- ----- ----------------
Tax-Exempt Bond ............... $ 79,784
Rhode Island Municipal Bond ... 6,897
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To Shareholders and the Board of Trustees of
The Galaxy Fund:
We have audited the accompanying statements of assets and liabilities of
the Tax-Exempt Bond Fund, New York Municipal Bond Fund, Connecticut Municipal
Bond Fund, Massachusetts Municipal Bond Fund and Rhode Island Municipal Bond
Fund (five series of The Galaxy Fund), including the portfolios of investments,
as of October 31, 1997, 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, 1997, 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
each of the aforementioned series of The Galaxy Fund as of October 31, 1997, 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 19, 1997
<PAGE>
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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, savings 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 assure a profit and does
not protect against loss in a declining market.
"A well-balanced asset allocation plan may help to control your risk while
pursuing your goals."
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.
QUARTERLY MAGAZINE
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.
CONSOLIDATED STATEMENTS
Timely, comprehensive mutual fund account statements offer detailed information
on your individual account. If you have a Fleet One or a Fleet Private Banking
Account, your Galaxy Fund information can be added to these statements.
INVESTMENT SPECIALISTS
In many Fleet branch offices or in the convenience of your home or office, you
can visit one-on-one with an Investment Specialist* who can help 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 1-800-628-0414 between
9 a.m. and 5 p.m. to arrange bank wires, or to make telephone exchanges and
redemptions.
In addition, Galaxy's state-of-the-art InvestConnect automated voice response
system is available to serve you 24-hours a day, seven days a week by calling
1-800-FOR-GLXY (367-4599).
- --------------------------------------------------------------------------------
Certain shareholder services may not be available for Trust Share investors.
Please consult your Fund Prospectus.
* Shares of the Funds are distributed through First Data Distributors, Inc.
member NASD and SIPC. Investment Specialists are registered representatives of
FIS Securities, Inc., member NASD, Fleet Enterprises, Inc., member NASD and
SIPC.
<PAGE>
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
Jylanne Dunne
Vice President &
Assistant Treasurer
INVESTMENT ADVISOR
Fleet Investment
Advisors Inc.
75 State Street
Boston, MA
02109
DISTRIBUTOR
First Data
Distributors, Inc.
4400 Computer Drive
Westborough,
Massachusetts 01581
ADMINISTRATOR
First Data Investor
Services Group, Inc.
4400 Computer Drive
Westborough,
Massachusetts 01581-5108
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.
[RECYCLE SYMBOL]
This report was printed on recycled paper.
<PAGE>
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4400 Computer Drive
GALAXY Box 5108
FUNDS Westborough, MA 01581-5108
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FN-243 (12/97) Date of first use 1/1/98
