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TAXABLE BOND FUNDS REPORT
Short-Term Bond Fund [bullet] Intermediate Government Income Fund [bullet]
Corporate Bond Fund [bullet] High Quality Bond Fund
SEMI-ANNUAL
REPORT
FOR THE SIX MONTHS
ENDED APRIL 30, 1998
<PAGE>
CHAIRMAN'S
MESSAGE
Dear Shareholder:
Enclosed is your performance report for the Galaxy Taxable Bond Funds,
which covers the six months ended April 30, 1998. Inside, you will find a Market
Overview describing the major economic and market trends in place during this
time, as well as Portfolio Reviews explaining how Fleet Investment Advisors Inc.
made the most of these trends. In the back of the report, there are separate
financial statements for each Fund plus a list of Fund investments as of April
30, 1998.
During the reporting period, bond prices fluctuated in a narrow range - as
a tug-of war between stronger growth and lower inflation caused the Federal
Reserve Board to leave interest rates unchanged. In this climate, bond returns
were close to their historical norms. As in previous periods, however, bonds
showed remarkable strength. In January 1998, yields for 30-year U.S. Treasury
bonds hit the lowest level since their introduction in 1977 - the result of hope
for a cut in interest rates, strong demand from foreign investors, and federal
budget surplus promising low interest rates and shrinking Treasury supplies.
Over the last 12 months, bonds returned nearly twice their average annual
return of the past 70 years. During the same time, stocks returned four times
their annual average. In such an unusual environment, the time-tested portfolio
strategies of diversification and rebalancing may help preserve your gains.
When you divide your portfolio among different types of assets, you may
significantly reduce investment risk. With stock valuations still breaking
record highs, many investors are using bonds to cushion their portfolios from a
possible market correction. If you have a long-term diversification strategy,
this may be a good time to see whether recent market changes - especially those
for stocks - have altered your original allocations. Although many investors
rebalance their portfolios once a year, the rapid market changes that have
recently occurred may require that you rebalance more frequently. Your
investment professional can help restore your portfolio to the allocations that
suit your ultimate financial goals.
If you have any questions about this report, or want more information
about any Galaxy Funds or services, 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:
[bullet] are not bank deposits
[bullet] are not FDIC insured
[bullet] are not obligations of Fleet Bank
[bullet] are not guaranteed by Fleet Bank
[bullet] are subject to investment risk including possible loss of principal
amount invested
<PAGE>
MARKET OVERVIEW
BOND MARKET OVERVIEW
By Fleet Investment Advisors Inc.
Changing outlooks on inflation and the economy held interest rates in a
narrow range for the six months ended April 30, 1998.
Although economic growth was stronger than expected, inflation fell to its
lowest level since 1986. With the expectation of slower growth from reduced
trade with Asia, the Federal Reserve ("the Fed") left interest rates unchanged.
At the end of the period, the yield for 30-year U.S. Treasury bonds was 5.95%.
This represented a slight decline from the start of the period and the midpoint
of the overall range.
Good Inflation News
When the reporting period began, 30-year Treasuries were yielding 6.14%,
and the annual rate of inflation was about 2.2%. During the fourth quarter of
1997, the gross domestic product ("GDP"), which measures the production of U.S.
goods and services, increased at an annual rate of 3.7%. This was up from 3.1%
in the third quarter and above the level of growth consistent with a neutral
monetary policy. Although the labor market remained tight, and wage pressures
crept forward, further improvements in productivity and an increasingly
competitive pricing environment helped inflation fall to 1.7% by the end of the
year.
During this time, Asian economic troubles continued to worsen - suggesting
a future slowdown in U.S. exports and growth. This outlook, combined with
declining inflation, encouraged the Fed to shift its monetary policy into
neutral and encouraged some investors to expect a cut in short-term rates.
Meanwhile, the problems in Asia created a flight to quality and increased demand
for dollar-denominated assets - which benefited U.S. securities. By the middle
of January 1998, bond prices had gained enough to give 30-year Treasuries a
yield of 5.69%, which was a 30-year low.
[SIDEBAR]
"Although economic growth was stronger than expected, inflation fell to its
lowest level since 1986. With the expectation of slower growth from reduced
trade with Asia, the Federal Reserve ("the Fed") left interest rates
unchanged."
[END SIDEBAR]
[Bar Charts]
Performance At-A-Glance
Average Annual Returns as of April 30, 1998*
Trust Shares
Short-Term Bond Fund
Inception Date 12/30/91
2.58% Six Months*
6.46% 1 Year
6.26% 3 Years
4.99% 5 Years
5.39% Life of Fund
Intermediate Government Income Fund
Inception Date 9/1/88
2.97% Six Months*
8.69% 1 Year
7.23% 3 Years
4.78% 5 Years
7.41% Life of Fund
Corporate Bond Fund
Inception Date 12/12/94
3.05% Six Months*
9.42% 1 Year
7.70% 3 Years
8.68% 5 Years
High Quality Bond Fund
Inception Date 12/14/90
3.29% Six Months*
10.68% 3 Years
8.79% 1 Year
6.38% 5 Years
8.16% Life of Fund
*Six month returns are unannualized total returns.
1
<PAGE>
MARKET OVERVIEW
Initially, the turmoil in Asia seemed to stimulate U.S. growth through
lower import prices and a flood of liquidity. A strong domestic stock market
seemed to provide additional stimulation by creating wealth that encouraged
stronger consumer spending. As support from the International Monetary Fund
helped to stabilize Asian economies, U.S. growth accelerated to an estimated
rate of 4.8% for the first quarter of 1998. Although declining energy prices
helped inflation fall to a year-over-year rate of 1.4% by March, rising wages
and housing activity made it clear that a rate cut was unlikely, and bond yields
rebounded. In April, the Fed suggested it might have to raise rates to keep
rising stock gains from overstimulating the economy.
Optimizing Market Changes
As the economic problems in Asia worsened and investors became nervous
about corporate earnings, prices for corporate bonds lagged those for Treasury
issues.
Corporates also suffered as low interest rates encouraged corporate
financing, which increased supplies of new issues. Although corporates rebounded
slightly in March and April, spreads between their yields and those for
Treasuries remained wider than before the trouble in Asia started - especially
yield spreads for longer maturities. In this environment we used Treasuries for
most of the longer maturities in the Galaxy Taxable Bond Funds. We believe
Treasuries are particularly attractive given the recent emergence of a federal
budget surplus and upcoming changes in Treasury financing that should reduce
overall supply.
[SIDEBAR]
"As support from the International Monetary Fund helped to stabilize Asian
economies, U.S. growth accelerated to an estimated rate of 4.8% for the first
quarter of 1998."
[END SIDEBAR]
[Bar Charts]
Performance At-A-Glance
Average Annual Returns as of April 30, 1998*
Retail A Shares**
Short-Term Bond Fund
Inception Date 12/30/91
- -1.39% Six Months*
2.25% 1 Year
4.69% 3 Years
4.02% 5 Years
4.62% Life of Fund
Intermediate Government Income Fund
Inception Date 9/1/88
- -1.06% Six Months*
4.30% 1 Year
5.56% 3 Years
3.77% 5 Years
6.87% Life of Fund
High Quality Bond Fund
Inception Date 12/14/90
0.68% Six Months*
6.39% 1 Year
7.23% 3 Years
5.44% 5 Years
7.57% Life of Fund
*Six month returns are unannualized total returns.
**Return figures have been restated to include the effect of the maximum 3.75%
front-end sales charge which became effective on December 1, 1995.
2
<PAGE>
MARKET OVERVIEW
Mortgage-backed securities performed well during the period, as their
higher yields offset marginal price weakness from concerns about home loan
refinancings. To reduce exposure to prepayment risk, we trimmed mortgage-backed
securities from most of the Funds' portfolios over the period - especially
issues with higher coupons.
Slower Growth Still Possible
We believe Asia still has many problems that will take significant time to
resolve and that have yet to fully impact our economy. It remains likely,
therefore, that further deterioration in trade will continue to soften economic
growth in 1998. Although inflationary pressures should moderate in this
environment, we expect the Fed to remain alert to building pressures from wages
and consumer demand. We think it is likely that the fixed-income market will
continue to trade in a narrow range for a time - vacillating between higher
yields when investors focus on domestic strength and lower yields when investors
see disinflationary pressures from economic turmoil abroad. With sustained
evidence of a softer economy we would expect interest rates to hit new lows.
[SIDEBAR]
"We think it is likely that the fixed-income market will continue to trade in a
narrow range for a time - vacillating between higher yields when investors
focus on domestic strength and lower yields when investors see disinflationary
pressures from economic turmoil abroad."
[END SIDEBAR]
Performance At-A-Glance
[Bar Charts]
Average Annual Returns as of April 30, 1998*
Retail B Shares**
Short-Term Bond Fund
Inception Date 3/4/96
- -2.85% o
2.13% oo
5.56% ooo
0.56% oooo
4.30% ooooo
6.54% oooooo
High Quality Bond Fund
Inception Date 3/4/96
- -2.05% o
2.13% oo
9.94% ooo
4.94% oooo
5.41% ooooo
4.09% oooooo
o Six month returns before contingent
deferred sales charge deducted.*
oo Six month returns after contingent deferred
sales charge deducted as if
shares were redeemed at end of period.*
ooo One year returns before contingent
deferred sales charge deducted.
oooo One year returns after contingent deferred
sales charge deducted as if
shares were redeemed at end of period.
ooooo Life of fund returns before contingent
deferred sales charge deducted.
oooooo Life of fund returns after contingent
deferred sales charge deducted as
if shares were redeemed at end of period.
* Six month returns are unannualized total returns.
** 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.
3
<PAGE>
PORTFOLIO REVIEWS
GALAXY SHORT-TERM BOND FUND
By Perry Vieth
Portfolio Manager
[Photo of Perry Vieth]
In the last six months a fluctuating bond market brought many changes in
spreads between yields of different fixed income instruments. By anticipating
these changes, and emphasizing yields that were particularly attractive, we
helped the Galaxy Short-Term Bond Fund take advantage of this climate.
For the six months ended April 30, 1998, the Fund's Trust Shares earned a
total return of 2.58%, and its Retail A Shares had a total return of 2.45%
before deducting the 3.75% maximum front-end sales charge. During this time, the
Fund's Retail B Shares had a total return of 2.13% 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 total returns after deducting the contingent deferred sales charge.)
Over the same six-month period, the average short-term bond fund tracked
by Lipper Analytical Services ("Lipper") earned a total return of 2.66%, and the
Lehman Brothers One-to-Three-Year Government Bond Index had a return of 2.87%.
Adding Yield
In the third quarter of 1997, before the reporting period began, we had
adopted a "barbelled" maturity structure for Fund investments that balanced
issues maturing in two to three years with floating-rate securities whose
coupons reset frequently. This gave the Fund extra income and price appreciation
as interest rates fell in the fourth quarter of 1997. We further enhanced the
Fund's yield at this time by adding investments in high-quality asset-backed and
mortgage-backed securities.
The Fund continued to earn good returns from its asset-backed securities,
as well as from investments in short-term corporate issues. With interest rates
at low levels, the prices for mortgage-backed securities weakened as homeowners
refinanced their loans. Once prices for short-term mortgage-backed securities
became attractive versus the future risk of home-loan prepayments, we made
additional investments in this sector. In addition, we bought some high-quality
corporate issues with longer maturities, which were available at attractive
prices and yields, and traded issues within the asset-backed sector as we found
new yield opportunities.
When short-term instruments rallied at the start of April 1998, we took
profits in some of the Fund's longer-term investments. This turned out to be a
prudent move, as Federal Reserve Board (the "Fed") signals for higher interest
rates caused prices to weaken in the weeks that followed. On April 30, 1998,
when the reporting period ended, the portfolio had an average maturity of 5.5
years, and the Fund's Trust Shares had a 30-day Securities and Exchange
Commission ("SEC") annualized yield of 6.02%. On the same date, Retail A Shares
had a 30-day SEC annualized yield of 5.78%, and Retail B Shares had a 30-day
annualized 30-day SEC yield of 5.80%.
Neutral Maturities
We expect to keep the Fund's average
Galaxy Short-Term
Bond Fund
Distribution of Total Net Assets
as of April 30, 1998
[PIE CHART]
Foreign Bonds, Repurchase Agreements & Net Other Assets & Liabilities 9%
U.S. Government & Agency Obligations 17%
Asset-Backed and Mortgage-Backed Securities 28%
Corporate Notes & Bonds 46%
Galaxy Short-Term Bond Fund
Growth of $10,000 investment*
[START DESCRIPTION OF LINE CHART]
$10,000 - $14,458 12/30/91 - 4/30/98
$ 9,625 - $13,313 12/30/91 - 4/30/98
$10,000 - $13,942 12/30/91 - 4/30/98
$10,000 - $10,654 12/30/91 - 4/30/98
[box] Lehman Brothers One to Three Year Government Bond Index
[box] Galaxy Short-Term Bond Fund-Retail A Shares
[box] Galaxy Short-Term Bond Fund-Trust Shares
[box] Galaxy Short-Term Bond Fund-Retail B Shares
[END DESCRIPTION OF LINE CHART]
*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 April 30, 1998. The Lehman Brothers
One to Three Year Government Bond Index is an unmanaged index in which
investors cannot invest. Results for the index do not reflect the expenses and
investment management fees incurred by the Fund.
4
<PAGE>
PORTFOLIO REVIEWS
maturity near that of its benchmark for now. Although we believe Asia's economic
problems will slow U.S. growth by the end of 1998, keeping inflation and
interest rates low, short-term yields could move higher in the meantime if the
Fed decides to boost rates or investors think this could happen.
We feel the Fund's position in mortgage-backed securities is appropriate
for the current level of interest rates, but may reduce this position if it
looks like rates will fall. In the corporate sector, we plan to stay focused on
high-quality securities, given the earnings uncertainty that slower growth could
bring.
Perry Vieth became manager of the Galaxy Short-Term Bond Fund in March of 1996.
He has managed fixed-income investments since 1986.
GALAXY INTERMEDIATE
GOVERNMENT INCOME FUND
By Marie Schofield
Portfolio Manager
[Photo of Marie Schofield]
In the last six months, as in previous periods, our active duration
discipline helped the Galaxy Intermediate Government Income Fund make the most
of changes in bond yields. Under this strategy, which analyzes "real"
(inflation-adjusted) yields of U.S. Treasury securities, we gave greater
attention to longer-term investments when 30-year Treasury yields moved above
6%. By also increasing investments in Treasury securities during this time, we
helped the Fund earn returns that compared well with other funds having similar
investment objectives.
For the six months ended April 30, 1998, the Fund's Trust Shares had a
total return of 2.97%. Over the same time, the Fund's Retail A Shares had a
total return of 2.83% 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
charge.)
Those returns compare with a return of 2.97% for the average intermediate
bond fund tracked by Lipper, and a return of 3.11% for the Lehman Brothers
Intermediate Government/Corporate Bond Index. As of April 30, 1998, the Fund's
Trust Shares had a 30-day SEC annualized yield of 5.83%, and its Retail A Shares
had a 30-day SEC annualized yield of 5.60%.
Staying Long
Since the spring of 1997, real (inflation-adjusted) yields have ranged
between 4.0% and 4.5% -- a level that is attractive by historical norms. As a
result, we have maintained positions in longer maturities, which gave the Fund
added income and price appreciation when yields fell in the final months of 1997
and the first weeks of 1998. We continued to add longer maturities when 30-year
Treasury yields topped 6% later in the period.
We further improved Fund returns by lightening exposure to corporate
issues, which underperformed as the Asian crisis raised concerns about the
health of the U.S. corporate market. During the period we concentrated on
maturities of less than three years. We felt this would insulate Fund
performance from any further weakening in corporate prices.
Galaxy Intermediate
Government Income Fund
Growth of $10,000 investment*
[START DESCRIPTION OF LINE CHART]
$10,000 - $22,253 9/1/88 - 4/30/98
$ 9,625 - $19,006 9/1/88 - 4/30/98
$10,000 - $19,952 9/1/88 - 4/30/98
[box] Lehman Brothers Intermediate Government/Corporate Bond Index
[box] Galaxy Intermediate Government Income Fund-Retail A Shares
[box] Galaxy Intermediate Government Income Fund-Trust Shares
[END DESCRIPTION OF LINE CHART]
*Since inception on 9/1/88. Performance figures for Retail A Shares include the
effect of the maximum 3.75% front-end sales charge. The Lehman Brothers
Intermediate Government/Corporate Bond Index is an unmanaged index in which
investors cannot invest. Results for the index do not reflect the expenses and
investment management fees incurred by the Fund.
Galaxy Intermediate Government
Income Fund
Distribution of Total Net Assets
as of April 30, 1998
Repurchase Agreements & Net Other Assets & Liabilities 1%
Asset-Backed and Mortgage-Backed Securities 8%
Corporate Notes & Bonds 15%
U.S. Government & Agency Obligations 76%
5
<PAGE>
PORTFOLIO REVIEWS
During the period we also reduced investments in mortgage-backed
securities which fell from about 34% of Fund investments to about 29%, on
continued concerns about the effect of low mortgage rates on home loan
refinancing.
Investing for Low Inflation
As talk of a rate hike by the Fed pushed 30-year Treasury yields above 6%
in April, we again extended maturities. We believe this will serve the Fund well
if growth slows as we expect, and inflation remains low. We expect that any move
by the Fed to raise short-term rates would be moderate and benefit longer
maturities as investors become more convinced that inflation will stay in check.
Until the global economic outlook stabilizes, we plan to maintain a
defensive investment strategy that blends short-maturity corporates and
asset-backed securities with Treasuries and issues of U.S. government agencies
that have intermediate and long maturities. To protect the Fund further against
home-loan prepayments, we are emphasizing lower-coupon mortgage-backed
securities, as well as collateralized mortgage obligations (CMOs) with
prepayment protection and short average lives.
Marie Schofield became manager of the Galaxy Intermediate Government Income Fund
in December of 1996. She has managed fixed-income investments since 1975.
GALAXY CORPORATE BOND FUND
By David Lindsay
Portfolio Manager
[Photo of David Lindsay]
For much of the last six months, the prices of corporate bonds
underperformed - as economic troubles in Asia threatened to curb U.S. exports
and corporate earnings. Corporates also sagged as falling interest rates
increased supplies of new issues. Corporates rebounded strongly between February
and April of 1998, however, as the crisis in Asia stabilized temporarily, and
concerns about earnings eased. While corporate prices underperformed prices for
Treasury bonds slightly over the period, total returns for corporates were about
the same as those for Treasuries - due to the greater yields that corporates
offer.
By stressing high-quality corporates during this time, with reduced
exposure to trade with Asia and the U.S. economic cycle, we helped the Galaxy
Corporate Bond Fund make the most of this environment. For the six months ended
April 30, 1998, the Fund's Trust Shares earned a total return of 3.05%. That
compares to returns of 3.20% for the average intermediate investment grade bond
fund tracked by Lipper and 3.11% for the Lehman Brothers Intermediate
Government/Corporate Bond Index. At the end of the period the Fund's Trust
Shares had a 30-day SEC annualized yield of 6.13%.
Focus on Quality
As concerns about earnings mounted at the end of 1997, we added Treasuries
to the portfolio. To do this, we used the proceeds from maturing mortgage-backed
securities, the sale of a railroad issue, and the sale of Yankee bonds. (Yankee
bonds are dollar-denominated securities issued in the U.S. by foreign companies
and corporations as well as supranational organizations like the World Bank.) We
also bought a few corporate issues when their prices and yields were
particularly attractive. The addition of Treasuries, and
Galaxy Corporate Bond Fund
Distribution of Total Net Assets as of April 30, 1998
Consumer Products 8%
Merchandising & Retail 6%
Industrial 6%
Manufacturing 6%
Finance 16%
U.S. Government & Agency Obligations 11%
Asset-Backed Securities 10%
Automobile Finance 8%
Foreign Bonds, Other Corporate Notes & Bonds &
Net Other Assets & Liabilities 29%
6
<PAGE>
PORTFOLIO REVIEWS
our focus on higher-quality issues, helped the Fund optimize the bond rally that
took place during this time.
We continued to improve the quality of the Fund's investments in the first
months of 1998 by trimming corporate positions in sectors that we thought could
be vulnerable to slower growth-including metal, airline, railroad and paper
firms. At the same time, we added investments in more defensive sectors such as
foods, beverages, drugs and finance.
As part of our movement to higher quality during the period, we increased
positions in mortgage-backed securities. These issues became quite attractive
once investors overreacted to high levels of mortgage prepayments. We also added
high-quality asset-backed securities.
Staying Defensive
We believe the extra emphasis on quality will serve the Fund well in
months to come. If Asia's woes erode U.S. domestic growth and corporate earnings
later this year, corporates may again underperform Treasuries. In this climate,
we would expect corporates with good credit ratings from firms in more defensive
industries to hold up better than lower-quality issues with cyclical exposure.
Corporates could begin outperforming again in 1999, if growth improves at
that time as we currently expect. In the meantime, we plan to maintain extra
investments in mortgage-backed securities - watching for new investment
opportunities in corporates that slower growth and lower interest rates might
bring.
David Lindsay has managed the Galaxy Corporate Bond Fund since its inception in
December of 1994. He has managed other fixed-income portfolios for Fleet
Investment Advisors Inc. since 1986.
Galaxy Corporate
Bond Fund
Growth of $10,000 investment*
[START DESCRIPTION OF LINE CHART]
$10,000 - $13,058 12/12/94 - 4/30/98
$10,000 - $13,251 12/12/94 - 4/30/98
[box] Lehman Brothers Intermediate Government/Corporate Bond Index
[box] Galaxy Corporate Bond Fund-Trust Shares
[END DESCRIPTION OF LINE CHART]
*Since inception on 12/12/94. The Lehman Brothers Intermediate
Government/Corporate Bond Index is an unmanaged index in which investors cannot
invest. Results for the index do not reflect the expenses and investment
management fees incurred by the Fund.
GALAXY HIGH QUALITY BOND FUND
By Marie Schofield
Portfolio Manager
Historically, real (inflation-adjusted) yields of 4% or more for 30-year
Treasury bonds have presented an attractive opportunity to lock in high-quality
returns. With inflation below 2% in the last six months, long-term Treasuries
have been attractive when their yields topped 6%. By purchasing long-term bonds
at these times - and extending portfolio duration - we helped the Galaxy High
Quality Bond perform well against funds with similar investment objectives.
For the six months ended April 30, 1998, the Fund's Trust Shares had a
total return of 3.29%. During the same time, its Retail A Shares had a total
return of 3.22% before deducting the maximum 3.75% front-end sales charge, and
its Retail B Shares had a total return of 2.95% 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 charge and the chart on page 3 for
total returns after deducting the contingent deferred sales charge.)
By comparison, the average A-rated
Galaxy High Quality Bond Fund
Growth of $10,000 investment*
[START DESCRIPTION OF LINE CHART]
$10,000 - $19,671 12/14/90 - 4/30/98
$ 9,625 - $17,067 12/14/90 - 4/30/98
$10,000 - $17,839 12/14/90 - 4/30/98
$10,000 - $10,903 12/14/90 - 4/30/98
[box] Lehman Brothers Long-Term Government/Corporate Bond Index
[box] Galaxy High Quality Bond Fund-Retail A Shares
[box] Galaxy High Quality Bond Fund-Trust Shares
[box] Galaxy High Quality Bond Fund-Retail B Shares
[END DESCRIPTION OF LINE CHART]
*Since inception on 12/14/90 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 April 30, 1998. The Lehman Brothers
Long-Term Government/Corporate Bond Index is an unmanaged index in which
investors cannot invest. Results for the index do not reflect the expenses and
investment management fees incurred by the Fund.
7
<PAGE>
PORTFOLIO REVIEWS
[PHOTO] Marie Schofield
corporate bond fund tracked by Lipper had a total return of 3.29% for the
six-month period, and the Lehman Brothers Long-Term Government/Corporate Bond
Index had a return of 4.91%.
On April 30, 1998, the Fund's Trust Shares had a 30-day SEC annualized
yield of 5.80%, and the Fund's Retail A Shares had a 30-day SEC annualized yield
of 5.57%. On the same date, the Fund's Retail B Shares had a 30-day SEC
annualized yield of 5.59%.
Making the Most of Low Inflation
As in previous periods, we used our "active duration discipline" to choose
investments for the Fund. This strategy uses many measurements, including the
current level of real (inflation-adjusted) yields, to gauge the relative value
of bond investments. When the period began, the average duration of Fund
investments was about one-quarter year longer than the average duration of the
Lehman Brothers Long-Term Government/Corporate Bond Index. This gave the Fund
incremental income and price appreciation when yields fell between November 1997
and January 1998. We extended the Fund's duration later in the period, whenever
30-year Treasury yields topped 6%.
Given the ongoing economic uncertainty that resulted from trouble in Asia,
we trimmed investments in longer-term corporate bonds at the end of 1997 and
focused on positions in short-term issues of high credit quality. At the same
time, we increased our emphasis on longer-term Treasuries - which we thought
would benefit from positive fundamentals that included: 1) an apparent surplus
in the federal budget and 2) reduced supply resulting from Treasury refinancing
initiatives. As corporates underperformed in the fourth quarter of 1997 and the
first two months of 1998, we took advantage of attractive prices in the sector
by using proceeds from sales of financial issues to make modest purchases of
telecommunications, utility and consumer securities. Corporates outperformed
Treasuries slightly in March and April, as the economy became stronger instead
of weaker.
With mortgage interest rates at their lowest levels in years, home-loan
refinancing increased. To reduce the effect of these prepayments on Fund
returns, we trimmed investments in mortgage-backed securities and restructured
that part of the portfolio. While cutting mortgages to less than 20 percent of
Fund assets, we gave greater attention to seasoned issues and securities with
lower coupons.
Future Strategies
We believe the Fund's investment mix will serve it well in the months
ahead. Long-term issues should continue to benefit if inflation and interest
rates remain low, as we expect. Even if further economic strength or wage
pressures require the Fed to raise interest rates, we think such a move would be
modest with minimal impact on longer term maturities. The Fund's focus on
short- and long-term issues, at the expense of intermediate-term issues, should
also prove beneficial if a flattening yield curve prompts slower growth and
lower interest rates.
If interest rates do ease, we may further reduce investments in
mortgage-backed securities. As before, we will look for attractive opportunities
in the corporate sector.
Marie Schofield has managed the Galaxy High Quality Bond Fund since March of
1996. She has managed fixed-income investments since 1975.
- --------------------------------------------------------------------------------
Past performance is no guarantee of future results. Investment returns and
principal values will vary with market conditions so that an investor's shares,
when redeemed, may be worth more or less than their original cost. The
Investment Adviser is presently waiving fees and/or reimbursing expenses and may
revise or discontinue such practice at any time. Without such waivers and/or
reimbursements, performance would be lower. Total return figures in this report
include changes in share price, reinvestment of dividends and capital gains
distributions and exclude the deduction of any contingent deferred sales charge
unless otherwise indicated.
Galaxy High Quality
Bond Fund
Distribution of Total Net Assets
as of April 30, 1998
[Pie Chart]
Asset-Backed and Mortgage-Backed Securities 8%
Foreign Bond 1%
Corporate Notes & Bonds 38%
Repurchase Agreements & Net Other Assets & Liabilities 2%
U.S. Government & Agency Obligations 51%
8
<PAGE>
THE GALAXY FUND
Short-Term Bond Fund
PORTFOLIO OF INVESTMENTS
April 30, 1998 (unaudited)
<TABLE>
<CAPTION>
Value
Par Value (Note 2)
--------- --------
CORPORATE NOTES AND BONDS - 45.91%
Finance - 24.65%
<S> <C> <C> <C>
$ 1,000,000 CIT Group Holdings, Inc.
Senior Notes, MTN
5.88%, 12/09/99 ............................. $ 996,700
2,000,000 Caterpillar Financial Services Corp.
Series F, MTN
6.74%, 04/05/00 ............................. 2,027,500
2,000,000 Caterpillar Financial Services Corp.
Series F, MTN
6.40%, 04/16/01 ............................. 2,022,500
1,000,000 Commercial Credit Co.
6.70%, 08/01/99 ............................. 1,007,280
3,000,000 Deere (John) Capital Corp.
6.30%, 06/01/99 ............................. 3,009,000
2,000,000 General Electric Capital Corp., MTN
5.92%, 04/03/01 ............................. 1,992,500
4,000,000 Keycorp Institutional Capital Corp.
6.63%, 06/15/29, Putable 06/01/99 (B) ....... 4,023,200
2,500,000 Pitney Bowes Credit Corp.
Series C, MTN
6.54%, 07/15/99 ............................. 2,516,475
-----------
17,595,155
-----------
Automobile Finance - 8.81%
2,000,000 Ford Motor Credit Co.
6.38%, 10/06/00 ............................. 2,017,500
1,200,000 Ford Motor Credit Co.
5.75%, 01/25/01 ............................. 1,192,500
3,000,000 General Motors Acceptance Corp.
8.00%, 10/01/99 ............................. 3,082,680
-----------
6,292,680
-----------
Banking - 5.61%
3,000,000 American Express Centurion Bank
5.73%, 07/12/99 (A) ......................... 3,002,370
1,000,000 Chase Manhattan Bank
5.88%, 08/04/99 ............................. 998,750
-----------
4,001,120
-----------
Utilities - 2.84%
2,000,000 Florida Power Corp. , MTN
6.47%, 07/01/01 ............................. 2,025,000
-----------
Transportation - 2.58%
1,820,000 Norfolk Southern Corp.
6.70%, 05/01/00 ............................. 1,842,750
-----------
Consumer Staples - 1.42%
$ 1,000,000 Coca-Cola Enterprises, Inc.
7.00%, 11/15/99 ............................. $ 1,016,250
-----------
Total Corporate Notes and Bonds ............. 32,772,955
(Cost $32,710,420) -----------
ASSET-BACKED AND MORTGAGED-BACKED SECURITIES - 27.70%
1,500,000 California Infrastructure
Southern California Edison
Series 1997-1, Class A-3
6.17%, 03/25/03 ............................. 1,508,438
1,000,000 California Infrastructure
Pacific Gas and Electric
Series 1997-1, Class A3
6.15%, 06/25/02 ............................. 1,003,750
250,000 California Infrastructure
Pacific Gas and Electric
Series 1997-1, Class A4
6.16%, 06/25/03 ............................. 251,328
1,000,000 Chase Manhattan Auto Owner Trust
Series 1998-A, Class A2
5.68%, 05/15/00 ............................. 999,531
4,000,000 Chemical Master Credit Card Trust I
Series 1995-2, Class A
6.23%, 06/15/03 ............................. 4,025,000
184,889 Green Tree Financial Corp.
Series 1996-4, Class A2
6.30%, 06/15/27 ............................. 185,178
2,000,000 Norwest Asset Securities Corp.
Series 1997-17, Class A1, CMO
6.75%, 11/25/27 ............................. 2,003,125
2,618,978 Prudential Home Mortgage Securities
Series 1996-7, Class A-1, CMO
6.75%, 06/25/11 ............................. 2,622,251
1,853,498 Prudential Home Mortgage Securities
Series 1993-38, Class A3, CMO
6.15%, 09/25/23 ............................. 1,828,012
2,323,162 Ryland Mortgage Securities Corp.
Series 1993-3, Class A, CMO
6.71%, 08/25/08 ............................. 2,326,508
3,000,000 Sears Credit Account Master Trust
Series 1996-2, Class A
6.50%, 10/15/03 ............................. 3,020,610
-----------
Total Asset-Backed and
Mortgage-Backed Securities .................. 19,773,731
(Cost $19,691,691) -----------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 16.73%
Federal National
Mortgage Association - 5.83%
1,935,903 7.00%, 07/01/12, Pool #250993 ............... 1,971,581
1,979,869 10.00%, 05/01/22, Pool #313544 .............. 2,192,329
-----------
4,163,910
-----------
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
THE GALAXY FUND
Short-Term Bond Fund
PORTFOLIO OF INVESTMENTS (continued)
April 30, 1998 (unaudited)
<TABLE>
<CAPTION>
Value
Par Value (Note 2)
--------- --------
Federal Home Loan
Mortgage Corporation - 2.99%
<S> <C> <C> <C>
$ 1,950,188 5.50%, 08/01/00, Pool # M80285 .............. $ 1,920,389
212,420 7.00%, 05/01/19, Pool # D29158 .............. 216,785
-----------
2,137,174
-----------
Federal Home Loan Bank - 2.84%
2,000,000 6.23%, 09/19/01 ............................. 2,023,120
-----------
Federal Farm Credit Bank - 2.83%
2,000,000 6.10%, 09/24/01, MTN ........................ 2,015,940
-----------
U.S. Treasury Note - 2.24%
1,500,000 7.88%, 08/15/01 ............................. 1,599,150
-----------
Total U.S. Government
and Agency Obligations ...................... 11,939,294
(Cost $11,937,140) -----------
FOREIGN BONDS - 5.56%
2,000,000 Province of Ontario, Series E, Euro MTN
6.00%, 11/18/99 ............................. 2,005,800
2,000,000 Xerox Credit Corp, Series E, Euro MTN
5.40%, 09/11/00 ............................. 1,963,200
-----------
Total Foreign Bonds ......................... 3,969,000
(Cost $3,949,540) -----------
REPURCHASE AGREEMENT - 3.38%
$ 2,413,027 Chase Manhattan Bank
5.45%, 05/01/98, dated 04/30/98
Repurchase Price $2,413,392
(Collateralized by U.S. Treasury Note
6.38%, due 04/30/98;
Total Par 2,365,000
Market Value $2,468,873) .................... $ 2,413,027
-----------
Total Repurchase Agreement .................. 2,413,027
(Cost $2,413,027) -----------
Total Investments - 99.28% ....................................... 70,868,007
(Cost $70,701,818) -----------
Net Other Assets and Liabilities - 0.72% ......................... 510,990
-----------
Net Assets - 100.00% ............................................. $ 71,378,997
===========
</TABLE>
- ----------------------------------------------
(A) Variable rate demand notes are payable upon not more than one, seven or
thirty business days notice. Put bonds and notes have demand features
which mature within one year.The interest rate shown reflects the rate
in effect at April 30, 1998.
(B) Securities exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold, in transactions exempt
from registration, to qualified institutional buyers. At April 30, 1998,
these securities amounted to $4,023,200 or 5.64% of net assets.
CMO Collateralized Mortgage Obligation
MTN Medium Term Note
See Notes to Financial Statements.
10
<PAGE>
THE GALAXY FUND
Intermediate Government Income Fund
PORTFOLIO OF INVESTMENTS
April 30, 1998 (unaudited)
<TABLE>
<CAPTION>
Value
Par Value (Note 2)
--------- --------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 76.44%
U.S. Treasury Bonds - 22.58%
<S> <C> <C> <C>
$ 2,600,000 6.25%, 08/31/02 ............................. $ 2,656,940
6,000,000 11.13%, 08/15/03 ............................ 7,464,060
3,000,000 11.88%, 11/15/03 ............................ 3,865,860
13,000,000 10.75%, 08/15/05 ............................ 16,814,590
4,350,000 12.00%, 08/15/13 ............................ 6,378,188
8,000,000 7.50%, 11/15/16 ............................. 9,311,360
5,000,000 7.88%, 02/15/21 ............................. 6,119,700
4,000,000 6.88%, 08/15/25 ............................. 4,449,200
6,000,000 6.38%, 08/15/27 ............................. 6,333,600
1,560,000 6.13%, 11/15/27 ............................. 1,597,690
------------
64,991,188
------------
Federal National
Mortgage Association - 17.00%
12,000,000 5.72%, 01/09/01, MTN ........................ 11,975,160
2,635,965 5.00%, 05/01/09, Pool # 326584 .............. 2,524,596
5,810,602 6.00%, 10/01/09, Pool # 303344 .............. 5,758,829
3,539 8.00%, 12/01/09, Pool # 313180 .............. 3,662
153,022 6.00%, 01/01/11, Pool # 303728 .............. 151,228
272,542 6.00%, 04/01/11, Pool # 344764 .............. 268,795
3,945,380 6.00%, 04/01/11, Pool # 398072 .............. 3,891,131
2,261,819 6.00%, 04/01/11, Pool # 338365 .............. 2,235,310
2,289,886 6.00%, 05/01/11, Pool # 348318 .............. 2,258,400
4,920,505 6.50%, 03/01/13, Pool # 251618 .............. 4,937,383
6,250,000 6.00%, 04/01/13, Pool # 424327 .............. 6,158,188
7,919,476 10.00%, 05/01/22, Pool # 313544 ............. 8,769,315
------------
48,931,997
------------
U.S. Treasury Notes - 13.09%
4,000,000 8.88%, 05/15/00 ............................. 4,255,240
3,300,000 6.13%, 09/30/00 ............................. 3,338,379
1,750,000 7.25%, 08/15/04 ............................. 1,890,490
5,000,000 7.50%, 02/15/05 ............................. 5,491,350
13,240,000 7.00%, 07/15/06 ............................. 14,290,859
8,500,000 5.50%, 02/15/08 ............................. 8,391,710
------------
37,658,028
------------
U.S. Government-Backed Bonds - 11.17%
5,000,000 State of Israel
Series 8-B
6.38%, 08/15/01 ............................. 5,100,000
6,450,000 State of Israel
Series 6-A
6.05%, 08/15/00 ............................. 6,498,375
750,000 State of Israel
Series 7-A
5.45%, 02/15/01 ............................. 745,313
4,830,000 State of Israel
Series 2C
5.63%, 09/15/03 ............................. 4,775,663
U.S. Government-Backed Bonds (continued)
$ 6,200,000 Private Export Funding Corp.
Series B
6.49%, 07/15/07 ............................. $ 6,448,000
8,409,244 Small Business Administration
Participation Certificates
Series SBIC-PS 1955-10B
7.25%, 05/10/05 ............................. 8,587,940
------------
32,155,291
------------
Federal Home Loan
Mortgage Corporation - 6.74%
8,429,000 5.38%, 05/01/98 (A) ......................... 8,429,000
5,000,000 6.70%, 07/15/06, CMO ........................ 5,053,100
6,000,000 6.00%, 10/15/08, CMO ........................ 5,923,080
------------
19,405,180
------------
Government National
Mortgage Association - 5.86%
7,580,152 6.50%, 07/15/09, Pool # 780357 .............. 7,663,003
4,696,248 8.00%, 09/15/17, Pool # 780520 .............. 4,942,425
4,159,723 7.38%, 04/20/22, Pool # 8956 ................ 4,267,627
------------
16,873,055
------------
Total U.S. Government
and Agency Obligations ...................... 220,014,739
(Cost $218,615,665) ------------
CORPORATE NOTES AND BONDS - 15.47%
Finance - 5.96%
7,000,000 CIT Group Holdings, Inc., Senior MTN
6.70%, 05/02/00 ............................. 7,087,500
5,000,000 Commercial Credit Co.
5.55%, 02/15/01 ............................. 4,943,750
5,000,000 Pitney Bowes Credit Corp.
Series C, MTN
6.78%, 07/16/01 ............................. 5,112,500
------------
17,143,750
------------
Banking - 4.73%
7,500,000 Bank One Milwaukee
National Association, MTN
6.35%, 03/19/01 ............................. 7,565,624
6,000,000 NationsBank Texas
National Association, Senior Note,
6.35%, 03/15/01 ............................. 6,045,000
------------
13,610,624
------------
Automobile Finance - 3.90%
2,100,000 Ford Motor Credit Co.
6.85%, 08/15/00 ............................. 2,139,374
Automobile Finance (continued)
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
THE GALAXY FUND
Intermediate Government Income Fund
PORTFOLIO OF INVESTMENTS (continued)
April 30, 1998 (unaudited)
<TABLE>
<CAPTION>
Value
Par Value (Note 2)
--------- --------
<S> <C> <C>
$ 3,000,000 Ford Motor Credit Co.
6.38%, 10/06/00 ............................. $ 3,026,250
6,000,000 General Motors Acceptance Corp.
7.13%, 06/01/99 ............................. 6,077,940
------------
11,243,564
------------
Utilities - 0.88%
2,500,000 Potomac Electric Power Co.
First Mortgage
6.25%, 10/15/07 ............................. 2,531,250
------------
Total Corporate Notes and Bonds ............. 44,529,188
------------
ASSET-BACKED AND MORTGAGE-BACKED SECURITIES - 7.70%
2,700,000 California Infrastructure
Southern California Edison
Series 1997-1, Class A-3
6.17%, 03/25/03 ............................ 2,715,187
300,000 California Infrastructure
Pacific Gas and Electric
Series 1997-1, Class A-4
6.16%, 06/25/03 ............................. 301,594
6,000,000 Chemical Master Credit Card Trust I
Series 1996-1, Class A
5.55%, 09/15/03 ............................. 5,930,580
4,364,963 Prudential Home Mortgage Securities
Class 1996-7, Series A-1, CMO
6.75%, 06/25/11 ............................. 4,370,418
3,865,102 Rural Housing Trust
Series 1987-1, Class 1-D, CMO
6.33%, 04/01/26 ............................. 3,857,024
5,000,000 Signet Credit Card Master Trust
Series 1993-1, Class A
5.20%, 02/15/02 ............................. 4,984,350
------------
Total Asset-Backed and
Mortgage-Backed Securities .................. 22,159,153
(Cost 22,060,166) ------------
REPURCHASE AGREEMENT - 2.24%
$ 6,451,422 Chase Manhattan Bank
5.45%, 05/01/98, dated 04/30/98
Repurchase Price $6,452,399
(Collateralized by U.S. Treasury Note
6.75%, due 04/30/98;
Total Par $6,315,000
Market Value $6,592,361) .................... $ 6,451,422
------------
Total Repurchase Agreement .................. 6,451,422
(Cost $6,451,422) ------------
Total Investments - 101.85% ...................................... 293,154,502
(Cost $290,730,362) ------------
Net Other Assets and Liabilities - (1.85)% ....................... (5,335,503)
------------
Net Assets - 100.00% ............................................. $287,818,999
============
</TABLE>
- ---------------------------------------
(A) Discount yield at time of purchase.
CMO Collateralized Mortgage Obligation
MTN Medium Term Note
See Notes to Financial Statements.
12
<PAGE>
THE GALAXY FUND
Corporate Bond Fund
PORTFOLIO OF INVESTMENTS
April 30, 1998 (unaudited)
<TABLE>
<CAPTION>
Value
Par Value (Note 2)
--------- --------
<S> <C> <C>
CORPORATE NOTES AND BONDS - 72.48%
Finance - 15.97%
$ 600,000 Ameritech Capital Funding Corp.
Debenture
7.50%, 04/01/05 ............................. $ 643,500
1,000,000 Caterpillar Financial Services Corp.
Series E, MTN
6.87%, 11/30/99 ............................. 1,011,290
1,000,000 Commercial Credit Co., Debenture
9.60%, 05/15/99 ............................. 1,034,910
750,000 Commercial Credit Co.
6.70%, 08/01/99 ............................. 755,460
500,000 Dean Witter Discover & Co.
6.75%, 08/15/00 ............................. 508,750
600,000 Dow Capital BV
Yankee Debenture
9.00%, 05/15/10 ............................. 724,500
600,000 Fletcher Challenge Financial USA, Inc.
Debenture
9.80%, 06/15/98 ............................. 602,562
350,000 Great Western Financial Corp.
6.13%, 06/15/98 ............................. 350,000
1,000,000 Keycorp Institutional Capital Corp.,
Series A
6.63%, 06/15/29 (B) ......................... 1,005,800
390,000 Norwest Financial Inc., Senior Note
5.13%, 04/15/00 ............................. 384,638
1,000,000 Norwest Financial Inc., Senior Note
6.88%, 06/15/00 ............................. 1,018,750
2,400,000 Paccar Financial Corp., Senior Note
Series H, MTN
5.86%, 03/15/01 ............................. 2,385,000
1,000,000 Pitney Bowes Credit Corp.
Series C, MTN
6.54%, 07/15/99 ............................. 1,006,590
1,000,000 Pitney Bowes Credit Corp.
5.65%, 01/15/03 ............................. 983,750
300,000 Travelers Group, Inc.
6.13%, 06/15/00 ............................. 301,125
250,000 Travelers Group, Inc.
6.63%, 09/15/05 ............................. 255,312
1,000,000 Travelers Group, Inc.
6.88%, 06/01/25 ............................. 1,036,250
180,000 USL Capital Corp., Senior Note
8.13%, 02/15/00 ............................. 186,525
-----------
14,194,712
-----------
Consumer Products - 8.15%
1,000,000 Disney (Walt) Co.
6.75%, 03/30/06 ............................. 1,036,250
2,100,000 Hershey Foods Corp., Debenture
7.20%, 08/15/27 ............................. 2,241,750
1,000,000 McDonald's Corp., Senior MTN
5.95%, 01/15/08 ............................. 981,250
Consumer Products (continued)
$ 2,000,000 PepsiCo, Inc., MTN
5.75%, 01/01/03 ............................. $ 1,985,000
1,000,000 Wendy's International, Inc., Debenture
7.00%, 12/15/25 ............................. 998,750
-----------
7,243,000
-----------
Automobile Finance - 7.77%
950,000 Associates Corp. of North America
6.38%, 06/15/00 ............................. 957,125
1,000,000 Associates Corp. of North America
Senior Note
5.25%, 03/30/00 ............................. 987,500
500,000 Ford Motor Credit Co.
6.38%, 04/15/00 ............................. 503,750
500,000 Ford Motor Credit Co.
6.85%, 08/15/00 ............................. 509,375
500,000 Ford Motor Credit Co.
5.75%, 01/25/01 ............................. 496,875
1,000,000 Ford Motor Credit Co.
6.50%, 02/28/02 ............................. 1,012,500
1,800,000 General Motors Acceptance Corp., MTN
7.50%, 06/01/99 ............................. 1,830,294
160,000 General Motors Acceptance Corp.
Debenture
9.38%, 04/01/00 ............................. 169,600
200,000 General Motors Acceptance Corp.
Debenture
9.63%, 05/15/00 ............................. 213,500
200,000 General Motors Acceptance Corp.
9.63%, 12/15/01 ............................. 222,500
-----------
6,903,019
-----------
Industrial - 6.49%
1,000,000 Coca-Cola Enterprises, Inc.
7.13%, 08/01/17 ............................. 1,045,000
650,000 Coca-Cola Enterprises, Inc.
6.70%, 10/15/36 ............................. 674,375
500,000 Crown Cork & Seal Co., Inc.
8.38%, 01/15/05 ............................. 551,875
1,000,000 International Business Machines Corp.
Debenture
6.22%, 08/01/27 ............................. 1,016,250
1,000,000 Mead Corp., Debenture
6.84%, 03/01/37 ............................. 1,043,750
1,000,000 Minnesota Mining & Manufacturing Co.
Debenture
6.38%, 02/15/28 ............................. 982,500
300,000 Seagram Co., Ltd., Yankee Note
6.50%, 04/01/03 ............................. 303,000
150,000 Whitman Corp.
6.50%, 02/01/06 ............................. 149,063
-----------
5,765,813
-----------
</TABLE>
See Notes to Financial Statements.
13
<PAGE>
THE GALAXY FUND
Corporate Bond Fund
PORTFOLIO OF INVESTMENTS (continued)
April 30, 1998 (unaudited)
<TABLE>
<CAPTION>
Value
Par Value (Note 2)
--------- --------
<S> <C> <C>
Manufacturing - 5.95%
$ 1,000,000 International Paper Co.
7.63%, 08/01/04 ............................. $ 1,067,500
500,000 Loral Corp., Senior Note
7.63%, 06/15/04 ............................. 531,875
1,500,000 Raytheon Co.
6.50%, 07/15/05 ............................. 1,516,875
1,000,000 Snap-On, Inc.
6.63%, 10/01/05 ............................. 1,032,500
1,000,000 Weyerhaeuser Co., Debenture
8.38%, 02/15/07 ............................. 1,143,750
-----------
5,292,500
-----------
Merchandising and Retail - 5.62%
1,000,000 Dillard Department Stores Inc.
7.38%, 06/15/99 ............................. 1,015,000
1,000,000 Penney (J.C.) Co., Inc., MTN
6.38%, 09/15/00 ............................. 1,005,000
250,000 Penney (J.C.) Co., Inc., Debenture
9.05%, 03/01/01 ............................. 267,500
300,000 Sears Roebuck & Co., Series V, MTN
9.31%, 07/24/98 ............................. 301,959
2,250,000 Wal-Mart Stores, Inc.
8.63%, 04/01/01 ............................. 2,410,313
-----------
4,999,772
-----------
Utilities - 4.87%
600,000 Alabama Power Co., First Mortgage
6.38%, 08/01/99 ............................. 603,000
300,000 Baltimore Gas & Electric Co.
First Mortgage
8.40%, 10/15/99 ............................. 309,750
1,000,000 Baltimore Gas & Electric Co., Mortgage
8.38%, 08/15/01 ............................. 1,067,500
865,000 Consolidated Natural Gas
6.80%, 12/15/27 ............................. 870,406
1,000,000 Potomac Electric Power Co.
First Mortgage
6.25%, 10/15/07 ............................. 1,012,500
200,000 Public Service Electric & Gas Co.
First Refunding Mortgage
7.63%, 02/01/00 ............................. 205,250
250,000 Virginia Electric & Power Co., MTN
9.40%, 05/27/99 ............................. 257,813
-----------
4,326,219
-----------
Banking - 4.50%
1,000,000 Bank One Milwaukee
National Association, MTN
6.35%, 03/19/01 ............................. 1,008,750
2,000,000 Branch Banking & Trust Co., Senior Note
5.70%, 02/01/01 ............................. 1,980,000
Banking (continued)
$ 500,000 National City Bank of Kentucky
Subordinated Note
6.30%, 02/15/11 ............................. $ 485,625
500,000 SunTrust Bank, Atlanta
Subordinated Note
7.25%, 09/15/06 ............................. 524,375
-----------
3,998,750
-----------
Telephone and Telecommunications - 3.90%
455,000 GTE California, Inc., Debenture
6.75%, 03/15/04 ............................. 466,375
350,000 GTE Corp., Debenture
9.38%, 12/01/00 ............................. 375,813
925,000 GTE Corp., Debenture
6.46%, 04/15/08 ............................. 933,695
200,000 GTE Corp., Debenture
6.84%, 04/15/18 ............................. 199,750
495,000 GTE South, Inc., Debenture
7.25%, 08/01/02 ............................. 511,705
1,000,000 GTE Southwest, Inc., Debenture
6.00%, 01/15/06 ............................. 980,000
-----------
3,467,338
-----------
Transportation - 2.94%
1,000,000 Norfolk Southern Corp.
6.95%, 05/01/02 ............................. 1,028,750
300,000 Southwest Airlines Co.
8.00%, 03/01/05 ............................. 327,750
250,000 Union Pacific Corp.
7.60%, 05/01/05 ............................. 264,375
1,000,000 Union Pacific Corp.
6.40%, 02/01/06 ............................. 991,250
-----------
2,612,125
-----------
Oil, Gas, and Petroleum - 2.34%
500,000 Atlantic Richfield Co., Debenture
10.88%, 07/15/05 ............................ 632,500
1,000,000 Burlington Resources, Inc., Debenture
6.88%, 02/15/26 ............................. 992,500
300,000 Enron Corp., Senior Note
10.00%, 06/01/98 ............................ 300,750
150,000 Unocal Corp., MTN, Debenture
9.25%, 08/02/99 ............................. 155,813
-----------
2,081,563
-----------
Insurance - 1.47%
1,000,000 Hartford Financial Services Group, Inc.
6.38%, 11/01/02 ............................. 1,003,750
300,000 Torchmark Corp., Debenture
9.63%, 05/01/98 ............................. 300,000
-----------
1,303,750
-----------
</TABLE>
See Notes to Financial Statements.
14
<PAGE>
THE GALAXY FUND
Corporate Bond Fund
PORTFOLIO OF INVESTMENTS (continued)
April 30, 1998 (unaudited)
<TABLE>
<CAPTION>
Value
Par Value (Note 2)
--------- --------
<S> <C> <C>
Health Care - 1.30%
$ 150,000 Becton Dickinson & Co., Debenture
8.80%, 03/01/01 ............................. $ 160,500
1,000,000 Merck & Co., Debenture
6.40%, 03/01/28 ............................. 991,900
-----------
1,152,400
-----------
Book Publishing - 1.21%
1,000,000 New York Times Co.
7.63%, 03/15/05 ............................. 1,075,000
-----------
Total Corporate Notes and Bonds ............. 64,415,961
(Cost 64,039,819) -----------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 10.83%
Federal National
Mortgage Association - 5.95%
108,442 7.50%, 11/01/07, Pool # 188629 .............. 111,592
122,836 5.00%, 08/01/10, Pool # 006893 .............. 115,312
Series A-1, CMO
910,359 7.00%, 07/01/12, Pool # 250993 .............. 927,137
3,463,433 6.00%, 11/01/23, Pool # 50940 ............... 3,360,603
789,247 6.50%, 03/01/28, Pool # 412263 .............. 781,102
-----------
5,295,746
-----------
U.S. Treasury Bonds - 2.60%
1,000,000 11.63%, 11/15/02 ............................ 1,236,230
730,000 12.00%, 08/15/13 ............................ 1,070,363
-----------
2,306,593
-----------
Federal Home Loan
Mortgage Corporation - 1.90%
347,000 5.38%, 05/01/98 (A) ......................... 347,000
32,449 8.75%, 08/01/01, Pool # 220011 .............. 33,371
93,261 7.00%, 06/01/04, Pool # 189683 .............. 94,699
76,648 7.50%, 08/01/08, Pool # 181313 .............. 78,033
24,194 7.00%, 05/01/16, Pool # 272046 .............. 24,827
154,890 7.00%, 02/01/17, Pool # 289284 .............. 158,883
121,453 8.00%, 07/01/21, Pool # C00068 .............. 126,386
86,803 8.00%, 10/01/21, Pool # D11045 .............. 90,329
226,558 7.00%, 10/01/22, Pool # C00184 .............. 229,956
228,954 7.00%, 02/01/23, Pool # C00213 .............. 232,388
276,169 6.00%, 09/01/23, Pool # D41208 .............. 268,317
-----------
1,684,189
-----------
Government National
Mortgage Association - 0.38%
$ 93,913 9.00%, 09/15/04, Pool # 003669 .............. $ 99,145
55,866 9.00%, 12/15/08, Pool # 027562 .............. 59,755
168,818 8.00%, 05/15/22, Pool # 319062 .............. 175,993
-----------
334,893
-----------
Total U.S. Government
and Agency Obligations ...................... 9,621,421
(Cost $9,532,770) -----------
ASSET-BACKED AND MORTGAGE-BACKED SECURITIES - 9.73%
1,000,000 Chase Manhattan Auto Owner Trust
Series 1998-B, Class A4
5.80%, 02/17/03 ............................. 995,039
1,000,000 Chemical Master Credit Card Trust I
Series 1996-1, Class A
5.55%, 09/15/03 ............................. 988,430
1,000,000 Ford Credit Auto Loan Master Trust
Series 1995-1, Class A
6.50%, 08/15/02 ............................. 1,009,370
738,901 Ford Credit Auto Owner Trust
Series 1996-A, Class A-3
6.50%, 11/15/99 ............................. 740,749
1,234,043 Guaranteed Export Trust Certificates
Series 1993-D, Class A-3
5.23%, 05/15/05 ............................. 1,204,907
992,854 NationsBank Auto Owner Trust
Series 1996-A, Class A-3
6.38%, 07/15/00 ............................. 995,336
905,167 Premier Auto Trust
Series 1996-3, Class A-3
6.50%, 03/06/00 ............................. 907,711
1,800,000 Standard Credit Card Master Trust I
Series 1995-10, Class A
5.90%, 02/07/01 ............................. 1,802,250
-----------
Total Asset-Backed and
Mortgage-Backed Securities .................. 8,643,792
(Cost $8,593,673) -----------
FOREIGN BONDS - 3.31%
1,000,000 Heinz (H.J.) Co. (C)
5.75%, 02/03/03 ............................. 982,400
2,000,000 Xerox Credit Corp, Series E, Euro MTN
5.40%, 09/11/00 ............................. 1,963,200
-----------
Total Foreign Bonds ......................... 2,945,600
(Cost $2,958,240) -----------
</TABLE>
See Notes to Financial Statements.
15
<PAGE>
THE GALAXY FUND
Corporate Bond Fund
PORTFOLIO OF INVESTMENTS (continued)
April 30, 1998 (unaudited)
<TABLE>
<CAPTION>
Value
Par Value (Note 2)
--------- --------
REPURCHASE AGREEMENT - 1.80%
<S> <C> <C>
$ 1,596,422 Chase Manhattan Bank
5.45%, 05/01/98, dated 04/30/98
Repurchase Price $1,596,663
(Collateralized by U.S. Treasury Note
8.75%, due 08/15/00;
Total Par 1,505,000
Market Value $1,632,096) .................... $ 1,596,422
-----------
Total Repurchase Agreement .................. 1,596,422
(Cost $1,596,422) -----------
Total Investments - 98.15% ....................................... 87,223,196
(Cost $86,720,924) -----------
Other Assets and Liabilities - 1.85% ............................. 1,647,871
-----------
Net Assets - 100.00% ............................................. $88,871,067
===========
- ------------------------------------------
(A) Discount yield at time of purchase.
(B) Security exempt from registration under Rule 144A of the Securities
Act of 1933. This security may be resold, in transactions exempt
from registration, to qualified institutional buyers. At April 30, 1998,
this security amounted to $1,005,800 or 1.13% of net assets.
(C) Euro-Dollar Bond
CMO Collateralized Mortgage Obligation
MTN Medium Term Note
</TABLE>
See Notes to Financial Statements.
16
<PAGE>
THE GALAXY FUND
High Quality Bond Fund
PORTFOLIO OF INVESTMENTS
April 30, 1998 (unaudited)
<TABLE>
<CAPTION>
Value
Par Value (Note 2)
--------- --------
<S> <C> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 50.85%
U.S. Treasury Bonds - 23.81%
$ 3,000,000 12.00%, 08/15/13 ............................ $ 4,398,750
5,500,000 13.25%, 05/15/14 ............................ 8,739,170
1,500,000 7.50%, 11/15/16 ............................. 1,745,880
1,000,000 9.00%, 11/15/18 ............................. 1,347,090
5,000,000 7.88%, 02/15/21 ............................. 6,119,700
1,700,000 8.13%, 05/15/21 ............................. 2,135,285
6,800,000 8.13%, 08/15/21 ............................. 8,549,096
3,500,000 8.00%, 11/15/21 ............................. 4,350,535
2,000,000 7.25%, 08/15/22 ............................. 2,303,140
2,000,000 7.13%, 02/15/23 ............................. 2,276,800
10,550,000 6.38%, 08/15/27 ............................. 11,136,580
3,000,000 6.13%, 11/15/27 ............................. 3,072,480
-----------
56,174,506
-----------
Federal National
Mortgage Association - 13.46%
1,933,000 5.38%, 05/01/98 (A) ......................... 1,933,000
2,000,000 7.85%, 09/01/04 ............................. 2,052,320
3,000,000 8.50%, 02/01/05, Debenture .................. 3,130,980
1,427,819 6.50%, 05/01/06, Pool # 348137 .............. 1,433,017
2,000,000 6.64%, 07/02/07, MTN ........................ 2,089,040
4,684,867 6.50%, 03/01/13, Pool # 420018 .............. 4,700,936
5,600,000 7.00%, 03/25/13 ............................. 5,685,747
5,000,000 6.00%, 04/01/13, Pool # 424327 .............. 4,926,550
5,554,153 8.00%, 12/01/17, Pool # 313568 .............. 5,815,365
-----------
31,766,955
-----------
U.S. Treasury Notes - 7.99%
1,000,000 5.88%, 10/31/98 ............................. 1,002,050
5,600,000 5.63%, 10/31/99 ............................. 5,604,312
1,000,000 5.50%, 03/31/00 ............................. 998,680
2,400,000 6.25%, 05/31/00 ............................. 2,431,032
4,000,000 7.25%, 08/15/04 ............................. 4,321,120
1,000,000 7.88%, 11/15/04 ............................. 1,115,560
3,140,000 7.00%, 07/15/06 ............................. 3,389,222
-----------
18,861,976
-----------
Government National
Mortgage Association - 2.85%
6,379,809 8.00%, 09/15/17, Pool # 780520 .............. 6,714,239
-----------
U.S. Government-Backed Bonds - 2.74%
500,000 Farm Credit System
Financial Assistance Corp.
9.45%, 11/21/03 ............................. 509,375
U.S. Government-Backed Bonds (continued)
$ 1,800,000 State of Israel, Series 7-A
5.45%, 02/15/01 ............................. $ 1,788,750
4,000,000 Private Export Funding Corp.
6.49%, 07/15/07 ............................. 4,160,000
-----------
6,458,125
-----------
Total U.S. Government
and Agency Obligations ...................... 119,975,801
(Cost $116,371,227) -----------
CORPORATE NOTES AND BONDS - 37.73%
Finance - 17.25%
1,132,000 Associates Corp. of North America
Senior Note
6.00%, 03/15/00 ............................. 1,132,000
2,000,000 Associates Corp. of North America
6.63%, 05/15/01 ............................. 2,032,500
2,000,000 Associates Corp. of North America
MTN
7.40%, 05/03/02 ............................. 2,080,000
4,000,000 Bank One Milwaukee
National Association, MTN
6.35%, 03/19/01 ............................. 4,035,000
8,300,000 CIT Group Holdings Inc., MTN
6.20%, 06/17/99 ............................. 8,313,363
1,500,000 Caterpillar Financial Services Corp.
Series F, MTN
6.74%, 04/05/00 ............................. 1,520,625
1,500,000 Caterpillar Financial Services Corp.
Series F, MTN
6.40%, 04/16/01 ............................. 1,516,875
7,500,000 Ford Motor Credit Co., Senior Note
6.50%, 02/28/02 ............................. 7,593,750
1,600,000 General Electric Capital Corp.
Series A, MTN
5.92%, 04/03/01 ............................. 1,594,000
250,000 General Electric Capital Corp.
8.30%, 09/20/09 ............................. 289,375
2,000,000 Key Bank of North America
7.13%, 08/15/06 ............................. 2,092,500
3,600,000 Keycorp Institutional Capital Corp.
6.63%, 06/01/99 (B) ......................... 3,620,880
400,000 Pitney Bowes Credit Corp.
5.65%, 01/15/03 ............................. 393,500
1,300,000 Suntrust Bank of Central Florida, MTN
6.90%, 07/01/07 ............................. 1,339,000
3,000,000 Suntrust Bank, Atlanta
Subordinated Note
7.25%, 09/15/06 ............................. 3,146,250
-----------
40,699,618
-----------
</TABLE>
See Notes to Financial Statements.
17
<PAGE>
THE GALAXY FUND
High Quality Bond Fund
PORTFOLIO OF INVESTMENTS (continued)
April 30, 1998 (unaudited)
<TABLE>
<CAPTION>
Value
Par Value (Note 2)
--------- --------
Consumer Staples - 10.63%
<S> <C> <C>
$ 3,600,000 Coca-Cola Enterprises, Inc.
7.00%, 11/15/99 ............................. $ 3,658,500
1,650,000 Coca-Cola Enterprises, Inc.
7.13%, 08/01/17 ............................. 1,724,250
3,500,000 Coca-Cola Enterprises, Inc.
6.70%, 10/15/36 ............................. 3,631,250
5,050,000 Hershey Foods Corp.
7.20%, 08/15/27 ............................. 5,390,875
1,650,000 McDonald's Corp., Senior MTN
5.95%, 01/15/08 ............................. 1,619,063
2,000,000 Minnesota Mining & Manufacturing Co.
Debenture
6.38%, 02/15/28 ............................. 1,965,000
250,000 Procter & Gamble Co.
8.50%, 08/10/09 ............................. 296,250
3,000,000 Sara Lee Corp., MTN
7.40%, 03/22/02 ............................. 3,116,250
3,500,000 Sysco Corp., Senior Note
7.00%, 05/01/06 ............................. 3,675,000
-----------
25,076,438
-----------
Utilities - 6.89%
2,000,000 Consolidated Natural Gas Co.
6.80%, 12/15/27 ............................. 2,012,500
1,950,000 GTE Corp., Debenture
6.46%, 04/15/08 ............................. 1,968,330
2,000,000 GTE Corp., Debenture
6.84%, 04/15/18 ............................. 1,997,500
6,500,000 GTE Florida, Inc., Series A, Debenture
6.31%, 12/15/02 ............................. 6,516,250
1,000,000 National Rural Utilities, Collateral Trust
6.20%, 02/01/08 ............................. 988,750
2,750,000 Potomac Electric Power Co.
First Mortgage
6.25%, 10/15/07 ............................. 2,784,375
-----------
16,267,705
-----------
Health Care - 1.60%
1,800,000 Abbott Laboratories
6.00%, 03/15/08 ............................. 1,789,380
2,000,000 Merck & Co., Inc.
6.40%, 03/01/28 ............................. 1,983,800
-----------
3,773,180
-----------
Technology - 1.36%
$ 2,500,000 International Business Machines Corp.
7.25%, 11/01/02 ............................. $ 2,621,875
600,000 Pitney Bowes, Inc.
5.95%, 02/01/05 ............................. 596,250
-----------
3,218,125
-----------
Total Corporate Notes and Bonds ............. 89,035,066
(Cost $87,298,284) -----------
ASSET-BACKED AND MORTGAGE-BACKED SECURITIES - 8.57%
2,000,000 California Infrastructure
Southern California Edison
Series 1997-1, Class A-3
6.17%, 03/25/03 ............................. 2,011,250
1,600,000 California Infrastructure
Pacific Gas & Electric
Series 1997-1, Class A-4
6.16%, 06/25/03 ............................. 1,608,500
4,000,000 Citibank Credit Card Master Trust I
5.85%, 04/10/03 ............................. 3,987,500
2,978,562 NationsBank Auto Owner Trust
Series 1996-A, Class A-3
6.38%, 07/15/00 ............................. 2,986,009
2,791,849 Prudential Home Mortgage Securities
Series 1993-38, Class A-3, CMO
6.15%, 09/25/23 ............................. 2,753,460
3,865,102 Rural Housing Trust
Series 1987-1, Class 1-D, CMO
6.33%, 04/01/26 ............................. 3,857,023
3,000,000 Sears Credit Account Master Trust II
Series 1996-1, Class A
6.20%, 02/16/06 ............................. 3,010,290
-----------
Total Asset-Backed and
Mortgage-Backed Securities .................. 20,214,032
(Cost $20,080,635) -----------
FOREIGN BOND - 0.62%
1,500,000 Heinz (H.J.) Co. (C)
5.75%, 02/03/03 ............................. 1,473,600
-----------
Total Foreign Bond .......................... 1,473,600
(Cost $1,481,340) -----------
</TABLE>
See Notes to Financial Statements.
18
<PAGE>
THE GALAXY FUND
High Quality Bond Fund
PORTFOLIO OF INVESTMENTS (continued)
April 30, 1998 (unaudited)
<TABLE>
<CAPTION>
Value
Par Value (Note 2)
--------- --------
REPURCHASE AGREEMENT - 1.67%
<S> <C> <C>
$ 3,929,100 Chase Manhattan Bank
5.45%, 05/01/98, dated 04/30/98
Repurchase Price $3,929,695
(Collateralized by U.S. Treasury Note
6.38%, due 05/15/00;
Total Par $3,845,000
Market Value $4,013,876) ................... $ 3,929,100
------------
Total Repurchase Agreement ................. 3,929,100
(Cost $3,929,100) ------------
Total Investments - 99.44% ...................................... 234,627,599
(Cost $229,160,586) ------------
Net Other Assets and Liabilities - 0.56% ........................ 1,322,113
------------
Net Assets - 100.00% ............................................ $235,949,712
============
</TABLE>
- ------------------------------------------
(A) Discount yield at time of purchase.
(B) Security exempt from registration under Rule 144A of the Securities
Act of 1933. This security may be resold, in transactions exempt
from registration, to qualified institutional buyers. At April 30, 1998,
this security amounted to $3,620,880 or 1.53% of net assets.
(C) Euro-Dollar Bond
CMO Collateralized Mortgage Obligation
MTN Medium Term Note
See Notes to Financial Statements.
19
<PAGE>
THE GALAXY FUND
STATEMENTS OF ASSETS AND LIABILITIES
April 30, 1998 (unaudited)
<TABLE>
<CAPTION>
Intermediate
Short-Term Government Corporate High Quality
Bond Fund Income Fund Bond Fund Bond Fund
--------- ----------- --------- ---------
<S> <C> <C> <C> <C>
ASSETS:
Investments (Note 2):
Investments at cost .................... $68,288,791 $284,278,940 $85,124,502 $225,231,486
Repurchase Agreement ................... 2,413,027 6,451,422 1,596,422 3,929,100
Net unrealized appreciation ............ 166,189 2,424,140 502,272 5,467,013
----------- ------------ ----------- ------------
Total investments at value .......... 70,868,007 293,154,502 87,223,196 234,627,599
Cash ................................ 548 -- 995,350 --
Receivable for investments sold ........... -- 17,009,880 2,413,886 7,867,593
Receivable for shares sold ................ 102,071 336,873 94,461 911,296
Interest and dividend receivables ......... 786,848 3,940,115 1,238,291 3,435,850
Deferred organizational expense (Note 2) .. -- -- 6,372 --
----------- ------------ ----------- ------------
Total Assets ........................ 71,757,474 314,441,370 91,971,556 246,842,338
----------- ------------ ----------- ------------
LIABILITIES:
Dividends payable ......................... 122,960 858,759 184,333 309,268
Payable for investments purchased ......... -- 25,351,680 2,763,358 9,592,219
Payable for shares redeemed ............... 177,231 146,785 65,407 802,923
Advisory fee payable (Note 3) ............. 32,592 129,534 40,203 105,733
Payable to Fleet affiliates (Note 3) ...... 4,715 12,245 3,714 31,876
Payable to Administrator (Note 3) ......... 12,112 32,909 11,219 25,986
Trustees' fees and expenses payable (Note 3) 1,715 5,816 1,963 4,135
Payable to Custodian ...................... -- 47,122 -- 5,620
Accrued expenses and other payables ....... 27,152 37,521 30,292 14,866
----------- ------------ ----------- ------------
Total Liabilities ................... 378,477 26,622,371 3,100,489 10,892,626
----------- ------------ ----------- ------------
NET ASSETS ................................... $71,378,997 $287,818,999 $88,871,067 $235,949,712
=========== ============ =========== ============
NET ASSETS consist of:
Par value (Note 5) ........................ $ 7,161 $ 28,356 $ 8,380 $ 21,942
Paid-in capital in excess of par value .... 77,022,263 311,418,598 90,670,098 231,423,848
Undistributed net investment income ....... 190,221 678,088 265,995 202,761
Accumulated net realized (loss) on
investments sold ......................... (6,006,837) (26,730,183) (2,575,678) (1,165,852)
Net unrealized appreciation of investments 166,189 2,424,140 502,272 5,467,013
----------- ------------ ----------- ------------
TOTAL NET ASSETS ............................. $71,378,997 $287,818,999 $88,871,067 $235,949,712
=========== ============ =========== ============
Retail A Shares:
Net Assets ................................ $27,138,852 $ 64,328,378 $ -- $ 35,338,772
Shares of beneficial interest outstanding . 2,722,608 6,337,533 -- 3,286,441
NET ASSET VALUE and redemption price
per share ................................ $ 9.97 $ 10.15 $ -- $ 10.75
Sales charge--3.75% of offering price ..... 0.39 0.40 -- 0.42
----------- ------------ ----------- ------------
Maximum offering price per share .......... $ 10.36 $ 10.55 $ -- $ 11.17
=========== ============ =========== ============
Retail B Shares:
Net Assets ................................ $ 1,013,995 N/A N/A $ 3,384,500
Shares of beneficial interest outstanding . 101,716 N/A N/A 314,750
----------- ------------ ----------- ------------
NET ASSET VALUE and offering price
per share* ............................... $ 9.97 N/A N/A $ 10.75
=========== ============ =========== ============
Trust Shares:
Net Assets ................................ $43,226,150 $223,490,621 $88,871,067 $197,226,440
Shares of beneficial interest outstanding . 4,336,704 22,018,056 8,379,833 18,341,235
----------- ------------ ----------- ------------
NET ASSET VALUE, offering and
redemption price per share ............... $ 9.97 $ 10.15 $ 10.61 $ 10.75
=========== ============ =========== ============
</TABLE>
- -----------------------------------------------
*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.
20
<PAGE>
THE GALAXY FUND
STATEMENTS OF OPERATIONS
For the six months ended April 30, 1998 (unaudited)
<TABLE>
<CAPTION>
Intermediate
Short-Term Government Corporate High Quality
Bond Fund Income Fund Bond Fund Bond Fund
--------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest (Note 2) ............................. $ 2,466,515 $ 10,061,185 $ 3,364,213 $ 7,205,700
----------- ------------- ------------ ------------
Total investment income ................. 2,466,515 10,061,185 3,364,213 7,205,700
----------- ------------- ------------ ------------
EXPENSES:
Investment advisory fee (Note 3) .............. 273,051 1,042,106 338,268 836,060
Administration fee (Note 3) ................... 29,412 112,243 36,436 90,045
Custodian fee ................................. 6,756 8,293 9,793 8,991
Fund accounting fee (Note 3) .................. 24,399 32,381 25,838 33,093
Legal fee (Note 3) ............................ 1,732 6,192 2,064 4,797
Audit fee ..................................... 8,353 8,353 7,379 8,874
Transfer agent fee (Note 3) ................... 29,237 89,671 27,985 180,782
12b-1 fee (Note 3) ............................ 3,676 -- -- 10,905
Shareholder services fee (Note 3) ............. 20,449 48,221 -- 23,151
Trustees' fees and expenses (Note 3) .......... 859 3,080 1,026 2,387
Amortization of organization costs (Note 2) ... -- -- 1,953 --
Reports to shareholders ....................... 11,132 29,810 4,701 14,519
Insurance ..................................... 405 1,332 431 985
Miscellaneous ................................. 10,576 12,911 2,372 15,647
----------- ------------- ------------ ------------
Total expenses before reimbursement/waiver . 420,037 1,394,593 458,246 1,230,236
----------- ------------- ------------ ------------
Less: reimbursement/waiver (Note 4) ........ (72,864) (277,895) (90,205) (222,949)
----------- ------------- ------------ ------------
Total expenses net of reimbursement/waiver . 347,173 1,116,698 368,041 1,007,287
----------- ------------- ------------ ------------
NET INVESTMENT INCOME ............................ 2,119,342 8,944,487 2,996,172 6,198,413
----------- ------------- ------------ ------------
NET REALIZED AND UNREALIZED
GAIN(LOSS) ON INVESTMENTS (Note 2):
Net realized gain on investments sold ......... 29,404 535,245 411,274 1,745,822
Net change in unrealized depreciation
of investments ............................. (351,278) (1,525,661) (657,616) (841,700)
----------- ------------- ------------ ------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS ................................ (321,874) (990,416) (246,342) 904,122
----------- ------------- ------------ ------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ..................... $ 1,797,468 $ 7,954,071 $ 2,749,830 $ 7,102,535
=========== ============= ============ ============
</TABLE>
See Notes to Financial Statements.
21
<PAGE>
THE GALAXY FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Intermediate Government
Short-Term Bond Fund Income Fund
-------------------------------- --------------------------------
Six months ended Year ended Six months ended Year ended
April 30, 1998 October 31, April 30, 1998 October 31,
(unaudited) 1997 (unaudited) 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET ASSETS at beginning of period ............................ $78,702,807 $ 91,875,454 $274,840,329 $293,490,809
----------- ------------ ------------ ------------
Increase in Net Assets resulting from operations:
Net investment income ..................................... 2,119,342 4,595,283 8,944,487 17,061,023
Net realized gain on investments sold ..................... 29,404 52,173 535,245 1,223,187
Net change in unrealized appreciation (depreciation)
of investments .......................................... (351,278) 11,015 (1,525,661) 1,852,671
----------- ------------ ------------ ------------
Net increase in net assets resulting from operations ... 1,797,468 4,658,471 7,954,071 20,136,881
----------- ------------ ------------ ------------
Dividends to shareholders from:
Retail A Shares:
Net investment income .................................. (774,148) (1,600,017) (1,998,546) (4,207,799)
----------- ------------ ------------ ------------
Retail B Shares:
Net investment income .................................. (23,048) (24,164) N/A N/A
----------- ------------ ------------ ------------
Trust Shares:
Net investment income .................................. (1,322,054) (2,971,102) (6,945,866) (12,853,224)
----------- ------------ ------------ ------------
Total Dividends to shareholders ........................... (2,119,250) (4,595,283) (8,944,412) (17,061,023)
----------- ------------ ------------ ------------
Net increase (decrease) from share transactions (1) .......... (7,002,028) (13,235,835) 13,969,011 (21,726,338)
----------- ------------ ------------ ------------
Net increase (decrease) in net assets .................. (7,323,810) (13,172,647) 12,978,670 (18,650,480)
----------- ------------ ------------ ------------
NET ASSETS at end of period (including line A) ............... $71,378,997 $ 78,702,807 $287,818,999 $274,840,329
=========== ============ ============ ============
(A) Undistributed net investment income ...................... $ 190,221 $ 190,129 $ 678,088 $ 678,010
=========== ============ ============ ============
</TABLE>
- -----------------------------------------------
(1) For detail on share transactions by series, see Statements of Changes in Net
Assets - Capital Stock Activity on pages 24 and 25.
See Notes to Financial Statements.
22
<PAGE>
THE GALAXY FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Corporate Bond Fund High Quality Bond Fund
-------------------------------- --------------------------------
Six months ended Year ended Six months ended Year ended
April 30, 1998 October 31, April 30, 1998 October 31,
(unaudited) 1997 (unaudited) 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET ASSETS at beginning of period ............................ $ 91,728,383 $107,727,788 $212,346,575 $180,704,892
------------ ------------ ------------ ------------
Increase in Net Assets resulting from operations:
Net investment income ..................................... 2,996,172 5,784,700 6,198,413 11,590,057
Net realized gain (loss) on investments sold .............. 411,274 (409,194) 1,745,822 1,790,921
Net change in unrealized appreciation (depreciation)
of investments ......................................... (657,616) 1,291,642 (841,700) 2,914,586
------------ ------------ ------------ ------------
Net increase in net assets resulting from operations ... 2,749,830 6,667,148 7,102,535 16,295,564
------------ ------------ ------------ ------------
Dividends to shareholders from:
Retail A Shares:
Net investment income .................................. -- -- (837,428) (1,654,569)
------------ ------------ ------------ ------------
Total Dividends ..................................... -- -- (837,428) (1,654,569)
------------ ------------ ------------ ------------
Retail B Shares:
Net investment income .................................. N/A N/A (65,191) (59,668)
------------ ------------ ------------ ------------
Total Dividends ..................................... N/A N/A (65,191) (59,668)
------------ ------------ ------------ ------------
Trust Shares:
Net investment income .................................. (2,996,171) (5,784,700) (5,297,762) (9,875,820)
Net realized gain on investments ....................... -- (94,588) -- --
------------ ------------ ------------ ------------
Total Dividends ..................................... (2,996,171) (5,879,288) (5,297,762) (9,875,820)
------------ ------------ ------------ ------------
Total Dividends to shareholders ........................... (2,996,171) (5,879,288) (6,200,381) (11,590,057)
------------ ------------ ------------ ------------
Net increase (decrease) from share transactions(1) ........... (2,610,975) (16,787,265) 22,700,983 26,936,176
------------ ------------ ------------ ------------
Net increase (decrease) in net assets .................. (2,857,316) (15,999,405) 23,603,137 31,641,683
------------ ------------ ------------ ------------
NET ASSETS at end of period (including line A) ............... $ 88,871,067 $ 91,728,383 $235,949,712 $212,346,575
============ ============ ============ ============
(A) Undistributed net investment income ...................... $ 265,995 $ 265,994 $ 202,761 $ 204,729
============ ============ ============ ============
</TABLE>
- -----------------------------------------------
(1) For detail on share transactions by series, see Statements of Changes in Net
Assets - Capital Stock Activity on pages 24 and 25.
See Notes to Financial Statements.
23
<PAGE>
THE GALAXY FUND
STATEMENTS OF CHANGES IN NET ASSETS -
Capital Stock Activity
<TABLE>
<CAPTION>
Intermediate Government
Short-Term Bond Fund Income Fund
-------------------------------- --------------------------------
Six months ended Year ended Six months ended Year ended
April 30, 1998 October 31, April 30, 1998 October 31,
(unaudited) 1997 (unaudited) 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
DOLLAR AMOUNTS
Retail A Shares:
Sold ...................................................... $ 4,548,773 $ 3,995,870 $ 5,797,964 $ 3,669,282
Issued to shareholders in reinvestment of dividends ....... 646,347 1,346,681 1,473,641 3,067,104
Repurchased ............................................... (5,903,141) (10,793,787) (8,356,510) (21,570,468)
------------ ------------ ------------ ------------
Net (decrease) in shares outstanding ................... $ (708,021) $ (5,451,236) $ (1,084,905) $(14,834,082)
============ ============ ============ ============
Retail B Shares:
Sold ...................................................... $ 570,402 $ 999,153 N/A N/A
Issued to shareholders in reinvestment of dividends ....... 21,544 21,269 N/A N/A
Repurchased ............................................... (479,789) (379,826) N/A N/A
------------ ------------ ------------ ------------
Net increase in shares outstanding ..................... $ 112,157 $ 640,596 N/A N/A
============ ============ ============ ============
Trust Shares:
Sold ...................................................... $ 11,477,774 $ 24,394,847 $ 28,283,336 $36,370,300
Issued to shareholders in reinvestment of dividends ....... 546,094 1,265,211 1,859,031 3,566,591
Repurchased ............................................... (18,430,032) (34,085,253) (15,088,451) (46,829,147)
------------ ------------ ------------ ------------
Net increase (decrease) in shares outstanding .......... $ (6,406,164) $ (8,425,195) $ 15,053,916 $(6,892,256)
============ ============ ============ ============
SHARE ACTIVITY
Retail A Shares:
Sold ...................................................... 455,426 400,607 569,217 365,080
Issued to shareholders in reinvestment of dividends ....... 65,293 135,211 144,789 305,443
Repurchased ............................................... (591,728) (1,083,470) (820,243) (2,150,492)
------------ ------------ ------------ ------------
Net (decrease) in shares outstanding ................... (71,009) (547,652) (106,237) (1,479,969)
============ ============ ============ ============
Retail B Shares:
Sold ...................................................... 57,132 100,387 N/A N/A
Issued to shareholders in reinvestment of dividends ....... 2,159 2,134 N/A N/A
Repurchased ............................................... (47,982) (38,137) N/A N/A
------------ ------------ ------------ ------------
Net increase in shares outstanding ..................... 11,309 64,384 N/A N/A
============ ============ ============ ============
Trust Shares:
Sold ...................................................... 1,148,664 2,446,322 2,773,450 3,618,274
Issued to shareholders in reinvestment of dividends ....... 54,716 127,027 182,662 355,211
Repurchased ............................................... (1,845,761) (3,421,147) (1,480,836) (4,670,476)
------------ ------------ ------------ ------------
Net increase (decrease) in shares outstanding ............. (642,381) (847,798) 1,475,276 (696,991)
============ ============ ============ ============
</TABLE>
See Notes to Financial Statements.
24
<PAGE>
THE GALAXY FUND
STATEMENTS OF CHANGES IN NET ASSETS -
Capital Stock Activity
<TABLE>
<CAPTION>
Corporate Bond Fund High Quality Bond Fund
-------------------------------- --------------------------------
Six months ended Year ended Six months ended Year ended
April 30, 1998 October 31, April 30, 1998 October 31,
(unaudited) 1997 (unaudited) 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
DOLLAR AMOUNTS
Retail A Shares:
Sold ...................................................... $ -- $ -- $ 11,834,560 $ 4,361,984
Issued to shareholders in reinvestment of dividends ....... -- -- 692,741 1,329,363
Repurchased ............................................... -- -- (5,264,933) (9,321,623)
------------ ------------ ------------ ------------
Net increase (decrease) in shares outstanding ............. $ -- $ -- $ 7,262,368 $ (3,630,276)
============ ============ ============ ============
Retail B Shares:
Sold ...................................................... N/A N/A $ 1,484,374 $ 1,462,738
Issued to shareholders in reinvestment of dividends ....... N/A N/A 56,505 51,636
Repurchased ............................................... N/A N/A (163,823) (210,602)
------------ ------------ ------------ ------------
Net increase in shares outstanding ........................ N/A N/A $ 1,377,056 $ 1,303,772
============ ============ ============ ============
Trust Shares:
Sold ...................................................... $ 14,483,906 $ 18,295,070 $ 30,450,948 $ 79,880,780
Issued to shareholders in reinvestment of dividends ....... 1,633,338 3,007,004 2,609,542 6,532,304
Repurchased ............................................... (18,728,219) (38,089,339) (18,998,931) (57,150,404)
------------ ------------ ------------ ------------
Net increase (decrease) in shares outstanding ............. $ (2,610,975) $(16,787,265) $ 14,061,559 $ 29,262,680
============ ============ ============ ============
SHARE ACTIVITY
Retail A Shares:
Sold ...................................................... -- -- 1,099,487 416,980
Issued to shareholders in reinvestment of dividends ....... -- -- 64,328 127,282
Repurchased ............................................... -- -- (488,469) (893,411)
------------ ------------ ------------ ------------
Net increase (decrease) in shares outstanding ............. -- -- 675,346 (349,149)
=========== ============ ============ ============
Retail B Shares:
Sold ...................................................... N/A N/A 137,752 140,116
Issued to shareholders in reinvestment of dividends ....... N/A N/A 5,247 4,930
Repurchased ............................................... N/A N/A (14,921) (20,125)
------------ ------------ ------------ ------------
Net increase in shares outstanding ........................ N/A N/A 128,078 124,921
=========== ============ ============ ============
Trust Shares:
Sold ...................................................... 1,359,843 1,749,086 2,766,756 7,652,225
Issued to shareholders in reinvestment of dividends ....... 153,706 287,115 307,034 624,915
Repurchased ............................................... (1,760,906) (3,637,846) (1,771,360) (5,480,793)
------------ ------------ ------------ ------------
Net increase (decrease) in shares outstanding ............. (247,357) (1,601,645) 1,302,430 2,796,347
=========== ============ ============ ============
</TABLE>
See Notes to Financial Statements.
25
<PAGE>
THE GALAXY FUND
Short-Term Bond Fund
FINANCIAL HIGHLIGHTS
For a Share outstanding throughout each period.
Retail A Shares
<TABLE>
<CAPTION>
Six months ended Years ended October 31,
April 30, 1998 -----------------------------------------------------
(unaudited) 1997 1996 1995 1994 1993(1)
-------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .................... $ 10.01 $ 9.99 $ 10.06 $ 9.73 $ 10.30 $ 10.09
--------- --------- -------- -------- ------- -------
Income from Investment Operations:
Net investment income (A) ............................. 0.24 0.53 0.52 0.55 0.44 0.47
Net realized and unrealized gain (loss) on investments. (0.04) 0.02 (0.07) 0.33 (0.51) 0.22
--------- --------- -------- -------- ------- -------
Total from Investment Operations: .................. 0.20 0.55 0.45 0.88 (0.07) 0.69
--------- --------- -------- -------- ------- -------
Less Dividends:
Dividends from net investment income .................. (0.24) (0.53) (0.52) (0.55) (0.44) (0.47)
Dividends from net realized capital gains ............. -- -- -- -- -- (0.01)
Dividends in excess of net realized capital gains ..... -- -- -- -- (0.06) --
--------- --------- -------- -------- ------- -------
Total Dividends: ................................... (0.24) (0.53) (0.52) (0.55) (0.50) (0.48)
--------- --------- -------- -------- ------- -------
Net increase (decrease) in net asset value .............. (0.04) 0.02 (0.07) 0.33 (0.57) 0.21
--------- --------- -------- -------- ------- -------
Net Asset Value, End of Period .......................... $ 9.97 $ 10.01 $ 9.99 $ 10.06 $ 9.73 $ 10.30
========= ========= ======== ======== ======= =======
Total Return(3) ......................................... 2.45%** 5.64% 4.63% 9.28% (0.68)% 6.98%
Ratios/Supplemental Data:
Net Assets, End of Period (000's) ....................... $ 27,139 $ 27,961 $ 33,388 $ 31,542 $34,061 $85,211
Ratios to average net assets:
Net investment income including
reimbursement/waiver ............................... 5.68%* 5.29% 5.22% 5.54% 4.43% 4.51%
Operating expenses including reimbursement/waiver ..... 1.10%* 1.00% 1.11% 0.99% 0.93% 0.86%
Operating expenses excluding reimbursement/waiver ..... 1.30%* 1.21% 1.35% 1.32% 1.14% 1.06%
Portfolio Turnover Rate ................................. 73%** 173% 214% 289% 233% 100%
</TABLE>
- ----------------------------------------------------------
* 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 six
months ended April 30, 1998 (unaudited) and the years ended October 31,
1997, 1996, 1995, 1994, and 1993 were $0.24, $0.51, $0.50, $0.52, $0.42, and
$0.45, respectively. Net investment income per share before
reimbursement/waiver of fees by the Investment Advisor and/or Administrator
for the Trust Shares for the six months ended April 30, 1998 (unaudited) and
the years ended October 31, 1997, 1996, 1995, 1994 and 1993 were $0.25,
$0.52, $0.53, $0.54, $0.42 and $0.45, respectively. Net investment income
per share before reimbursement/waiver of fees by the Investment Advisor
and/or Administrator for Retail B Shares for the six months ended April 30,
1998 (unaudited) and the years ended October 31, 1997 and 1996, were $0.20,
$0.44 and $0.29, respectively.
See Notes to Financial Statements.
26
<PAGE>
Trust Shares
<TABLE>
<CAPTION>
Retail B Shares
Years ended Years ended
Six months ended October 31, Six months ended October 31,
April 30, 1998 ----------------------------------------------------- April 30, 1998 -------------------
(unaudited) 1997 1996 1995 1994 1993(1) (unaudited) 1997 1996(2)
------------- --------- --------- --------- --------- --------- ------------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 10.01 $ 9.99 $ 10.06 $ 9.73 $ 10.30 $ 10.09 $ 10.01 $ 9.99 $ 10.09
--------- --------- -------- -------- -------- -------- --------- --------- --------
0.25 0.54 0.55 0.57 0.44 0.47 0.21 0.46 0.31
(0.04) 0.02 (0.07) 0.33 (0.51) 0.22 (0.04) 0.03 (0.10)
--------- --------- -------- -------- -------- -------- --------- --------- --------
0.21 0.56 0.48 0.90 (0.07) 0.69 0.17 0.49 0.21
--------- --------- -------- -------- -------- -------- --------- --------- --------
(0.25) (0.54) (0.55) (0.57) (0.44) (0.47) (0.21) (0.47) (0.31)
-- -- -- -- -- (0.01) -- -- --
-- -- -- -- (0.06) -- -- -- --
--------- --------- -------- -------- -------- -------- --------- --------- --------
(0.25) (0.54) (0.55) (0.57) (0.50) (0.48) (0.21) (0.47) (0.31)
--------- --------- -------- -------- -------- -------- --------- --------- --------
(0.04) 0.02 (0.07) 0.33 (0.57) 0.21 (0.04) 0.02 (0.10)
--------- --------- -------- -------- -------- -------- --------- --------- --------
$ 9.97 $ 10.01 $ 9.99 $ 10.06 $ 9.73 $ 10.30 $ 9.97 $ 10.01 $ 9.99
========= ========= ======== ======== ======== ======== ========= ========= ========
2.58%** 5.77% 4.91% 9.55% (0.66)% 6.98% 2.13%** 4.99% 2.12%**
$ 43,226 $ 49,837 $ 58,227 $ 35,088 $ 39,843 $ 85,211 $ 1,014 $ 905 $ 260
5.93%* 5.43% 5.49% 5.79% 4.45% 4.51% 5.01%* 4.56% 4.73%*
0.85%* 0.86% 0.84% 0.74% 0.91% 0.86% 1.78%* 1.75% 1.77%*
1.05%* 1.07% 1.08% 1.02% 1.11% 1.06% 1.99%* 2.01% 1.98%*
73%** 173% 214% 289% 233% 100% 73% 173% 214%
</TABLE>
27
<PAGE>
THE GALAXY FUND
Intermediate Government Income Fund
FINANCIAL HIGHLIGHTS
For a Share outstanding throughout each period.
Retail A Shares
<TABLE>
<CAPTION>
Six months ended Years ended October 31,
April 30, 1998 ----------------------------------------------------
(unaudited) 1997 1996 1995 1994 1993(1)
-------------- --------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ................... $ 10.18 $ 10.06 $ 10.28 $ 9.68 $ 10.72 $ 10.83
--------- --------- --------- --------- ------- --------
Income from Investment Operations:
Net investment income (A) ............................ 0.31 0.59 0.57 0.61 0.57 0.65
Net realized and unrealized gain (loss) on investments (0.03) 0.12 (0.22) 0.60 (1.03) 0.10
--------- --------- --------- --------- ------- --------
Total from Investment Operations: ................. 0.28 0.71 0.35 1.21 (0.46) 0.75
--------- --------- --------- --------- ------- --------
Less Dividends:
Dividends from net investment income ................. (0.31) (0.59) (0.57) (0.61) (0.56) (0.64)
Dividends in excess of net investment income ......... -- -- -- -- (0.01) (0.03)
Dividends from net realized capital gains ............ -- -- -- -- -- (0.19)
Dividends in excess of net realized capital gains .... -- -- -- -- (0.01) --
--------- --------- --------- --------- ------- --------
Total Dividends: .................................. (0.31) (0.59) (0.57) (0.61) (0.58) (0.86)
--------- --------- --------- --------- ------- --------
Net increase (decrease) in net asset value ............. (0.03) 0.12 (0.22) 0.60 (1.04) (0.11)
--------- --------- --------- --------- ------- --------
Net Asset Value, End of Period ......................... $ 10.15 $ 10.18 $ 10.06 $ 10.28 $ 9.68 $ 10.72
========= ========= ========= ========= ======= ========
Total Return(2) ........................................ 2.83%** 7.33% 3.58% 12.85% (4.42)% 7.06%
Ratios/Supplemental Data:
Net Assets, End of Period (000's) ...................... $ 64,328 $ 65,626 $ 79,741 $ 79,558 $94,669 $447,359
Ratios to average net assets:
Net investment income including reimbursement/waiver . 6.22%* 5.90% 5.69% 6.10% 5.58% 6.03%
Operating expenses including reimbursement/waiver .... 1.02%* 1.02% 1.04% 1.02% 0.78% 0.80%
Operating expenses excluding reimbursement/waiver .... 1.22%* 1.22% 1.24% 1.26% 0.99% 1.00%
Portfolio Turnover Rate ................................ 118%** 128% 235% 145% 124% 153%
</TABLE>
- -----------------------------------------------------------
* 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 six
months ended April 30, 1998 (unaudited) and the years ended October 31,
1997, 1996, 1995, 1994 and 1993 were $0.28, $0.57, $0.55, $0.58, $0.54 and
$0.63, respectively. Net investment income per share before
reimbursement/waiver of fees by the Investment Advisor and/or Administrator
for the Trust Shares for the six months ended April 30, 1998 (unaudited) and
the years ended October 31, 1997, 1996, 1995, 1994 and 1993 were $0.29,
$0.60, $0.58, $0.62, $0.54 and $0.63, respectively.
See Notes to Financial Statements.
28
<PAGE>
Trust Shares
<TABLE>
<CAPTION>
Years ended
Six months ended October 31,
April 30, 1998 ---------------------------------------------------------
(unaudited) 1997 1996 1995 1994 1993(1)
------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
$ 10.18 $ 10.06 $ 10.28 $ 9.68 $ 10.72 $ 10.83
---------- --------- -------- --------- ---------- ---------
0.33 0.62 0.60 0.64 0.57 0.65
(0.03) 0.12 (0.22) 0.60 (1.03) 0.10
---------- --------- -------- --------- ---------- ---------
0.30 0.74 0.38 1.24 (0.46) 0.75
---------- --------- -------- --------- ---------- ---------
(0.33) (0.62) (0.60) (0.64) (0.56) (0.64)
-- -- -- -- (0.01) (0.03)
-- -- -- -- -- (0.19)
-- -- -- -- (0.01) --
---------- --------- -------- --------- ---------- ---------
(0.33) (0.62) (0.60) (0.64) (0.58) (0.86)
---------- --------- -------- --------- ---------- ---------
(0.03) 0.12 (0.22) 0.60 (1.04) (0.11)
---------- --------- -------- --------- ---------- ---------
$ 10.15 $ 10.18 $ 10.06 $ 10.28 $ 9.68 $ 10.72
========== ========= ======== ========= ========== =========
2.97%** 7.63% 3.88% 13.18% (4.39)% 7.06%
$ 223,491 $ 209,215 $213,750 $ 186,037 $ 212,144 $ 447,359
6.50%* 6.19% 5.98% 6.39% 5.61% 6.03%
0.74%* 0.74% 0.75% 0.73% 0.75% 0.80%
0.94%* 0.94% 0.95% 0.94% 0.95% 1.00%
118%** 128% 235% 145% 124% 153%
</TABLE>
29
<PAGE>
THE GALAXY FUND
Corporate Bond Fund
FINANCIAL HIGHLIGHTS
For a Share outstanding throughout each period.
Trust Shares
<TABLE>
<CAPTION>
Six months ended Years ended October 31, Period ended
April 30, 1998 ------------------------- October 31,
(unaudited) 1997 1996 1995(1)
------------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ..................... $ 10.63 $ 10.53 $ 10.74 $ 10.00
--------- -------- --------- ---------
Income from Investment Operations:
Net investment income (A) ............................. 0.35 0.66 0.64 0.61
Net realized and unrealized gain (loss) on investments (0.02) 0.11 (0.13) 0.74
--------- -------- --------- ---------
Total from Investment Operations: .................. 0.33 0.77 0.51 1.35
--------- -------- --------- ---------
Less Dividends:
Dividends from net investment income .................. (0.35) (0.66) (0.64) (0.61)
Dividends from net realized capital gains ............. -- (0.01) (0.08) --
--------- -------- --------- ---------
Total Dividends: ................................... (0.35) (0.67) (0.72) (0.61)
--------- -------- --------- ---------
Net increase (decrease) in net asset value ............... (0.02) 0.10 (0.21) 0.74
--------- -------- --------- ---------
Net Asset Value, End of Period ........................... $ 10.61 $ 10.63 $ 10.53 $ 10.74
========= ======== ========= =========
Total Return ............................................. 3.05%** 7.56% 5.00% 13.85%**
Ratios/Supplemental Data:
Net Assets, End of Period (000's) ........................ $ 88,871 $ 91,728 $ 107,728 $ 37,391
Ratios to average net assets:
Net investment income including
reimbursement/waiver ............................... 6.64%* 6.27% 6.13% 6.61%*
Operating expenses including
reimbursement/waiver ............................... 0.82%* 0.80% 0.85% 1.06%*
Operating expenses excluding
reimbursement/waiver ............................... 1.02%* 1.00% 1.05% 1.26%*
Portfolio Turnover Rate .................................. 91%** 37% 84% 41%**
</TABLE>
- ---------------------------------------------------------------
* Annualized
** Not Annualized
(1) The Fund commenced operations on December 12, 1994.
(A) Net investment income per share before reimbursement/waiver of fees by the
Investment Advisor and/or Administrator for the six months ended April 30,
1998 (unaudited) and the years ended October 31, 1997 and 1996 and the
period ended October 31, 1995 were $0.34, $0.64, $0.62 and $0.57,
respectively.
See Notes to Financial Statements.
30
<PAGE>
THE GALAXY FUND
High Quality Bond Fund
FINANCIAL HIGHLIGHTS
For a Share outstanding throughout each period.
Retail A Shares
<TABLE>
<CAPTION>
Six months ended Years ended October 31,
April 30, 1998 --------------------------------------------------------
(unaudited) 1997 1996 1995 1994 1993(1)
------------- --------- --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ................... $ 10.70 $ 10.47 $ 10.63 $ 9.54 $ 11.37 $ 10.60
--------- --------- -------- --------- -------- --------
Income from Investment Operations:
Net investment income (A) ............................ 0.29 0.60 0.59 0.62 0.64 0.66
Net realized and unrealized gain (loss) on investments 0.05 0.23 (0.16) 1.09 (1.56) 0.93
--------- --------- -------- --------- -------- --------
Total from Investment Operations: .............. 0.34 0.83 0.43 1.71 (0.92) 1.59
--------- --------- -------- --------- -------- --------
Less Dividends:
Dividends from net investment income ................. (0.29) (0.60) (0.59) (0.62) (0.64) (0.66)
Dividends from net realized capital gains ............ -- -- -- -- -- (0.16)
Dividends in excess of net realized capital gains .... -- -- -- -- (0.27) --
--------- --------- -------- --------- -------- --------
Total Dividends: ............................... (0.29) (0.60) (0.59) (0.62) (0.91) (0.82)
--------- --------- -------- --------- -------- --------
Net increase (decrease) in net asset value ............. 0.05 0.23 (0.16) 1.09 (1.83) 0.77
--------- --------- -------- --------- -------- --------
Net Asset Value, End of Period ......................... $ 10.75 $ 10.70 $ 10.47 $ 10.63 $ 9.54 $ 11.37
========= ========= ======== ========= ======== ========
Total Return(2) ........................................ 3.22%** 8.22% 4.24% 18.46% (8.41)% 15.63%
Ratios/Supplemental Data:
Net Assets, End of Period (000's) ...................... $ 35,339 $ 27,950 $ 30,984 $ 30,093 $ 26,654 $162,594
Ratios to average net assets:
Net investment income including
reimbursement/waiver .............................. 5.42%* 5.73% 5.66% 6.16% 6.25% 5.98%
Operating expenses including
reimbursement/waiver .............................. 1.02%* 1.01% 1.07% 1.02% 0.81% 0.76%
Operating expenses excluding
reimbursement/waiver .............................. 1.22%* 1.21% 1.28% 1.26% 1.02% 0.96%
Portfolio Turnover Rate ................................ 149%** 182% 163% 110% 108% 128%
</TABLE>
* 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 for Retail A Shares before
reimbursement/waiver of fees by the Investment Advisor and/or Administrator
for the six months ended April 30, 1998 (unaudited) and for the years ended
October 31, 1997, 1996, 1995, 1994 and 1993 were $0.28, $0.58, $0.57, $0.59,
$0.62 and $0.63, respectively.
See Notes to Financial Statements.
31
<PAGE>
THE GALAXY FUND
High Quality Bond Fund
FINANCIAL HIGHLIGHTS
For a Share outstanding throughout each period.
Trust Shares
<TABLE>
<CAPTION>
Six months ended Years ended October 31,
April 30, 1998 --------------------------------------------------------
(unaudited) 1997 1996 1995 1994 1993(1)
------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .................. $ 10.70 $ 10.47 $ 10.63 $ 9.54 $ 11.37 $ 10.60
--------- --------- --------- --------- --------- --------
Income from Investment Operations:
Net investment income (A) ............................ 0.30 0.61 0.62 0.64 0.65 0.66
Net realized and unrealized gain (loss) on investments 0.05 0.23 (0.16) 1.09 (1.56) 0.93
--------- --------- --------- --------- --------- --------
Total from Investment Operations: .............. 0.35 0.84 0.46 1.73 (0.91) 1.59
--------- --------- --------- --------- --------- --------
Less Dividends:
Dividends from net investment income ................. (0.30) (0.61) (0.62) (0.64) (0.65) (0.66)
Dividends from net realized capital gains ............ -- -- -- -- -- (0.16)
Dividends in excess of net realized capital gains .... -- -- -- -- (0.27) --
--------- --------- --------- --------- --------- --------
Total Dividends: ............................... (0.30) (0.61) (0.62) (0.64) (0.92) (0.82)
--------- --------- --------- --------- --------- --------
Net increase (decrease) in net asset value ............. 0.05 0.23 (0.16) 1.09 (1.83) 0.77
--------- --------- --------- --------- --------- --------
Net Asset Value, End of Period ......................... $ 10.75 $ 10.70 $ 10.47 $ 10.63 $ 9.54 $ 11.37
========= ========= ========= ========= ========= ========
Total Return(3) 3.29%** 8.36% 4.46% 18.66% (8.39)% 15.63%
Ratios/Supplemental Data:
Net Assets, End of Period (000's) $ 197,226 $ 182,398 $ 149,075 $ 134,631 $ 118,776 $162,594
Ratios to average net assets:
Net investment income including reimbursement/waiver . 5.59%* 5.88% 5.88% 6.33% 6.28% 5.98%
Operating expenses including reimbursement/waiver .... 0.87%* 0.87% 0.85% 0.85% 0.78% 0.76%
Operating expenses excluding reimbursement/waiver .... 1.07%* 1.09% 1.06% 1.07% 0.98% 0.96%
Portfolio Turnover Rate ................................ 149%** 182% 163% 110% 108% 128%
</TABLE>
- ----------------------------------------------------------
* 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 sales charge for Retail B Shares.
(A) Net investment income per share for Trust Shares before reimbursement/waiver
of fees by the Investment Advisor and/or Administrator for the six months
ended April 30, 1998 (unaudited) and the years ended October 31, 1997, 1996,
1995, 1994 and 1993 were $0.29, $0.59, $0.60, $0.62, $0.63 and $0.63,
respectively. Net investment income per share for Retail B Shares before
reimbursement/waiver of fees by the Investment Advisor and/or Administrator
for the six months ended April 30, 1998 (unaudited) and the years ended
October 31, 1997 and 1996 were $0.25, $0.51 and $0.34, respectively.
See Notes to Financial Statements.
32
<PAGE>
Retail B Shares
<TABLE>
<CAPTION>
Six months ended Year ended Period ended
April 30, 1998 October 31, October 31,
(unaudited) 1997 1996(2)
------------- ------------ ------------
<S> <C> <C>
$ 10.70 $ 10.47 $ 10.72
-------- --------- --------
0.26 0.53 0.36
0.05 0.24 (0.25)
-------- --------- --------
0.31 0.77 0.11
-------- --------- --------
(0.26) (0.54) (0.36)
-- -- --
-- -- --
-------- --------- --------
(0.26) (0.54) (0.36)
-------- --------- --------
0.05 0.23 (0.25)
-------- --------- --------
$ 10.75 $ 10.70 $ 10.47
======== ========= ========
2.95%** 7.59% 1.14%**
$ 3,385 $ 1,998 $ 646
4.78%* 5.07% 5.34%*
1.63%* 1.69% 1.60%*
1.83%* 1.95% 1.81%*
149%** 182% 163%
</TABLE>
33
<PAGE>
THE GALAXY FUND
NOTES TO FINANCIAL STATEMENTS (unaudited)
1. Organization
The Galaxy Fund, a Massachusetts business trust (the "Trust"), is registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end management investment company. As of the date of this report, the Trust
offered twenty-six managed investment portfolios. The accompanying financial
statements and financial highlights are those of the Short-Term Bond,
Intermediate Government Income, Corporate Bond and High Quality Bond Funds
(individually, a "Fund", collectively, the "Funds") only.
The Short-Term Bond and High Quality Bond Funds are authorized to issue three
series of shares (Trust Shares, Retail A Shares and Retail B Shares). The
Intermediate Government Income and Corporate Bond Funds are authorized to issue
two series of shares (Trust Shares and Retail A Shares). Currently, the
Short-Term Bond and High Quality Bond Funds offer all three series of shares,
the Intermediate Government Income Fund offers Trust Shares and Retail A Shares
and the Corporate Bond Fund offers Trust Shares only. 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 constitutes
fair value as determined by the Board of Trustees of the Trust. All other
securities and other assets are appraised at their fair value as determined in
good faith under consistently applied procedures established by and under the
general supervision of the Board of Trustees.
Securities Transactions and Investment Income: Securities transactions are
accounted for on a trade date basis. Net realized gains or losses on sales of
securities are determined by the identified cost method. Interest income is
recorded on the accrual basis. Investment income and realized and unrealized
gains and losses are allocated to the separate series 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.
Repurchase Agreements: Each Fund may engage in repurchase agreement
transactions with institutions that the Trust's investment advisor has
determined are creditworthy pursuant to guidelines established by the Trust's
Board of Trustees. Each repurchase agreement transaction is recorded at cost
plus accrued interest. Each Fund requires that the securities collateralizing a
repurchase agreement transaction be transferred to the Trust's custodian in a
manner that is intended to enable the Fund to
34
<PAGE>
THE GALAXY FUND
NOTES TO FINANCIAL STATEMENTS (continued) (unaudited)
obtain those securities in the event of a counterparty default. The value of
the collateral securities is monitored daily to ensure that the value of the
collateral, including accrued interest, equals or exceeds the repurchase price.
Repurchase agreement transactions involve certain risks in the event of default
or insolvency of the counterparty, including possible delays or restrictions
upon a Fund's ability to dispose of the underlying securities, and a possible
decline in the value of the underlying securities during the period while the
Fund seeks to assert its rights.
Expenses: The Trust accounts separately for the assets, liabilities and
operations of each Fund. Expenses directly 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 deferred and amortized using the straight-line method over a
period of five years beginning with the commencement of each Fund's operations.
In the event that any of the initial shares purchased by a Fund's sponsor are
redeemed during such period by any holder thereof, the Fund involved will be
reimbursed by such holder for any unamortized organization costs in the same
proportion as the number of initial shares being redeemed bears to the number of
initial shares outstanding at the time of redemption.
3. Investment Advisory, Administration, Distribution, Shareholder Services and
Other Fees
The Trust and Fleet Investment Advisors Inc. (the "Investment Advisor"), 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.
In addition, Investor Services Group also provides certain fund accounting,
custody administration and transfer agency services pursuant to certain fee
arrangements. Pursuant to these fee arrangements, Investor Services Group
compensates the Trust's custodian bank, The Chase Manhattan 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 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.
The Trust has adopted a distribution and services plan (the "12b-1 Plan") with
respect to Retail B Shares of the Short-Term Bond and High Quality Bond Funds.
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 administrative support services are being made solely to Fleet Bank
and its affiliates. Payments for distribution expenses may not exceed an annual
rate of 0.65% of the average daily net assets attributable to each of the Funds'
outstanding Retail B Shares. The fees paid
35
<PAGE>
THE GALAXY FUND
NOTES TO FINANCIAL STATEMENTS (continued) (unaudited)
for shareholder liaison services and administrative support services may not
exceed the annual rates of 0.15% and 0.15%, respectively, of the average daily
net assets attributable to each of the Funds' outstanding Retail B Shares owned
of record or beneficially by the customers of institutions. 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 customers of
institutions. For the six months ended April 30, 1998, the Funds paid fees under
the Services Plan and 12b-1 Plan as follows:
<TABLE>
<CAPTION>
12b-1 Plan
Services -------------
Fund Plan Services Distribution
---- ---- -------- ------------
<S> <C> <C> <C>
Short-Term Bond ........... $ 20,449 $ 689 $ 2,987
Intermediate
Government Income ....... 48,221 N/A N/A
High Quality Bond ......... 23,151 2,045 8,860
</TABLE>
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 six months ended
April 30, 1998, transfer agent charges for each series were as follows:
<TABLE>
<CAPTION>
Fund Retail A Retail B Trust
---- -------- -------- -----
<S> <C> <C> <C>
Short-Term Bond ........ $20,355 $ 804 $ 8,078
Intermediate
Government Income ... 54,401 N/A 35,270
Corporate Bond ......... -- N/A 27,985
High Quality Bond ...... 24,137 1,675 154,970
</TABLE>
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 March 5, 1998, 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 $40,000 per
annum plus certain other fees for attending or participating in meetings as well
as reimbursement for expenses incurred in attending meetings. Prior to March 5,
1998, each Trustee was entitled to receive for services as a trustee of the
Trust, VIP and 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.
Each Trustee is eligible to participate in The Galaxy Fund/The Galaxy VIP
Fund/Galaxy Fund II 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.
Expenses for the six months ended April 30, 1998 include legal fees paid to
Drinker Biddle & Reath LLP. A partner of that firm is Secretary to the Trust.
4. Waiver of Fees
Fleet and/or its affiliates and/or Investor Services Group voluntarily agreed
to waive a portion of their fees and/or reimburse the Funds for certain expenses
so that total expenses would not exceed certain expense limitations established
for each Fund. The respective parties, at their discretion, may revise or
discontinue the voluntary fee waivers and expense reimbursements at any time.
For the six months ended April 30, 1998, the waived fees and/or reimbursed
expenses with respect to the Funds are as follows:
<TABLE>
<CAPTION>
Fund Fees Waived
- ---- -----------
<S> <C>
Short-Term Bond ............ $ 72,864
Intermediate
Government Income ........ 277,895
Corporate Bond ............. 90,205
High Quality Bond .......... 222,949
</TABLE>
5. Shares of Beneficial Interest
The Trust's Declaration of Trust authorizes the Trustees to issue an unlimited
number of shares of beneficial interest, each with a par value of $0.001. Shares
of the Trust are currently classified into twenty-seven classes of shares each
consisting of one or more series including: Class L - Series 1 Shares (Trust
Shares), Class L - Series 2 Shares (Retail A Shares) and Class L - Series 3
Shares (Retail B Shares) - Short-Term Bond Fund; Class D Shares (Trust Shares)
and Class D - Special Series 1 Shares (Retail A Shares) - Intermediate
Government Income Fund; Class T - Series 1 Shares (Trust Shares)
36
<PAGE>
THE GALAXY FUND
NOTES TO FINANCIAL STATEMENTS (continued) (unaudited)
and Class T - Series 2 Shares (Retail A Shares) - Corporate Bond Fund; and
Class J - Series 1 Shares (Trust Shares), Class J - Series 2 Shares (Retail A
Shares) and Class J - Series 3 Shares (Retail B Shares) - High Quality 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 Retail A Shares, Retail B Shares and Trust
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, excluding
short-term investments, for the six months ended April 30, 1998 were as
follows:
<TABLE>
<CAPTION>
Fund
Purchases Government Other
- --------- ---------- -----
<S> <C> <C>
Short-Term Bond........... $ 28,549,362 $ 23,891,569
Intermediate
Government Income....... 280,990,666 49,756,027
Corporate Bond............ 40,447,948 38,863,142
High Quality Bond......... 283,135,155 62,700,432
Fund
Sales
- -----
Short-Term Bond........... 34,467,322 26,291,605
Intermediate
Government Income....... 270,926,877 52,363,471
Corporate Bond............ 42,076,323 39,611,882
High Quality Bond......... 266,492,103 59,723,962
</TABLE>
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 April 30, 1998 for each Fund is as follows:
<TABLE>
<CAPTION>
Fund Appreciation (Depreciation)
- ---- ------------ --------------
<S> <C> <C>
Short-Term Bond.......... $ 339,147 $ (172,958)
Intermediate Government
Income................. 3,401,053 (976,913)
Corporate Bond........... 1,236,825 (734,553)
High Quality Bond........ 5,827,431 (360,418)
</TABLE>
<TABLE>
<CAPTION>
Fund Net Cost
- ---- --- ----
<S> <C> <C>
Short-Term Bond.......... $ 166,189 $ 70,701,818
Intermediate Government
Income................. 2,424,140 290,730,362
Corporate Bond........... 502,272 86,720,924
High Quality Bond........ 5,467,013 229,160,586
</TABLE>
At October 31, 1997 the following Funds had capital loss carryforwards:
<TABLE>
<CAPTION>
Fund Amount Expiration
---- ------ ----------
<S> <C> <C>
Short-Term Bond.......... $ 166,802 2000
1,797,977 2001
2,843,359 2002
1,206,932 2003
10,917 2004
9,409 2005
Intermediate
Government Income...... 480,329 2001
20,986,933 2002
3,291,626 2003
2,479,060 2004
Corporate Bond........... 73,972 2001
1,153,008 2002
1,309,536 2003
450,363 2005
High Quality Bond........ 2,899,174 2003
</TABLE>
37
<PAGE>
SHAREHOLDER
SERVICES
AUTOMATIC INVESTMENT PROGRAM
The Golden Rule of investing is "pay yourself first." That is easy to do with
Galaxy's Automatic Investment Program. For as little as $50 per month deducted
directly from your checking 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.
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 at no cost (as long as you exchange within
the same share class).
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, Fleet Gold or a Fleet
Private Banking Account, your Galaxy Fund information can be added to these
statements.
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
1-800-628-0414 Option 1.
- ------------------------------------------------------------------------------
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., Fleet Enterprises, Inc., or Quick & Reilly, members NASD
and SIPC.
[SIDEBAR]
"A well-balanced asset allocation plan may help to control your risk while
pursuing your goals."
[END SIDEBAR]
38
<PAGE>
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<PAGE>
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<PAGE>
[INSIDE BACK COVER]
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 bank 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, guaranteed by, obligations of or otherwise supported by
the U.S. Government, the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other governmental 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 amount invested.
[RECYCLE LOGO]
This report was printed on recycled paper.
<PAGE>
[BACK COVER]
[LOGO GALAXY FUNDS]
4400 Computer Drive
Box 5108
Westborough, MA 01581-5108
[INDICIA]
BULK RATE
U.S. POSTAGE
PAID
PERMIT NO. 54201
BOSTON, MA
FN-080 (4/98) Date of first use 7/1/98
