[Acorn Graphic]
[Pillar Graphic]
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[Handshake Graphic]
Semi-Annual Report
April 30, 1999
Galaxy Taxable Bond Funds
Galaxy Funds
Galaxy Short-Term Bond Fund
Galaxy Intermediate Government Income Fund
Galaxy High Quality Bond Fund
Galaxy Corporate Bond Fund
[LOGO] Galaxy Funds
<PAGE>
<PAGE>
Chairman's Message
Dear Shareholder:
Enclosed is the Galaxy Taxable Bond Funds' performance report for the six
months ended April 30, 1999. The report includes a Market Overview that
describes the different economic and market factors influencing the taxable bond
market during this time. Following the Market Overview are portfolio reviews for
each of the Galaxy Taxable Bond Funds that describe how Fleet Investment
Advisors Inc. managed the Funds' portfolios in this climate. Financial
statements and a list of portfolio holdings for each of the Funds as of April
30, 1999 appear at the end of the report.
As the economic outlook brightened during the recent six-month period,
bond yields moved higher and their prices fell. With investors abandoning an
earlier flight to quality, many sectors of the bond market outperformed U.S.
Treasury issues. Individual sectors of the stock market also responded to a
changing outlook in different ways. As in previous transitions, experienced
investors held to their long-term strategies and kept their portfolios well
diversified.
During this time, Fleet Investment Advisors Inc. has also worked with us
to expand the information we provide to our shareholders. By giving you more
information that is easier to access, we hope to help you manage current market
conditions more effectively and develop investment plans that bring you closer
to your financial goals.
At the end of 1998, we launched The Galaxy, America's first mutual fund
newspaper. Sent to more than 200,000 retail shareholders of the Galaxy Funds,
this quarterly publication provides in-depth coverage of key market trends,
investment issues, and planning tools. There are also interviews with Galaxy
Fund portfolio managers, as well as announcements of new products and services
for shareholders.
In addition, we are expanding our web site (www.galaxyfunds.com). The
revised site - which should be completed by the end of this summer - will
include more educational articles, interactive services, and market reports.
Shareholders will also be able to access many of the articles from The Galaxy on
the site.
We hope these new shareholder services will help you make the most of your
Galaxy Fund investments. We encourage you to contact us for any additional
information you may need, including questions about the material in this report,
by calling the Galaxy Information Center toll-free at 1-877-BUY-GALAXY
(1-877-289-4252). You can also visit our investment professionals located at
Fleet branches.
Sincerely,
/s/ Dwight E. Vicks, Jr.
---------------------------------
Dwight E. Vicks, Jr.
Chairman of the Board of Trustees
[SIDEBAR]
Mutual Funds:
o are not bank deposits
o are not FDIC insured
o are not obligations of Fleet Bank
o are not guaranteed by Fleet Bank
o are subject to investment risk including possible loss of principal amount
invested
[END SIDEBAR]
<PAGE>
Market Overview
Bond Market Overview
By Fleet Investment Advisors Inc.
Bond yields moved higher in the six months ended April 30, 1999, and their
prices fell. This was due largely to improving economic outlooks at home and
abroad that encouraged investors to move from bonds to stocks. Bonds also
suffered from fears that rising oil prices and robust domestic demand might end
the benign inflation environment of recent years.
During this time, the Galaxy Taxable Bond Funds benefited from increased
investments in corporate bonds, mortgage-backed securities, and issues of U.S.
government agencies -- all of which outperformed U.S. Treasury securities for
the period. Timely adjustment of investment maturities also enhanced returns and
helped the Funds perform well versus their market benchmarks.
Improving Economic Prospects
When the reporting period began, 30-year Treasury bonds were yielding
about 5.2%, and the annual rate of inflation was about 1.6%. After growing at an
annualized rate of 3.7% in the third quarter of 1998, the gross domestic product
("GDP"), which measures the output of U.S. goods and services, grew by 6% in the
fourth quarter of 1998. This gain was due largely to robust spending by
consumers -- which was fueled by record levels of employment, strong stock
market gains, low import prices, and declining interest rates.
For much of 1998, global economic concerns had driven investors at home
and abroad into U.S. Treasury securities for safety. By August, this flight to
quality had created an international liquidity crisis. After cutting short-term
interest rates by 25 basis points (0.25%) in both September and October to stem
the crisis, the Federal Reserve (the "Fed") imposed a third 25-basis point cut
in November.
Besides improving confidence in U.S. growth, the cuts in short-term rates
eased demand for Treasury securities and set the stage for higher bond yields.
While the Fed indicated that it would not cut rates again unless there was
further economic deterioration, some investors felt the third rate cut was
unnecessary and might even jeopardize the low-inflation climate. The risk that
Fed monetary policy might be too loose, combined with economic strength at home
and greater stability overseas, drove bond yields upward in the first months of
1999. Although inflation remained low, investors felt that GDP growth in excess
of 4% would put further pressure on a labor market that was already tight and
eventually cause higher wages and inflation. With investors worried that the Fed
might have to increase short-term rates to preempt future inflation, the yield
for long-term Treasuries rose to about 5.7% by the end of April.
As the economic outlook brightened, many investors moved out of Treasuries
and into mortgage-backed securities and corporate bonds -- attracted by the wide
risk premiums these issues offered after underperforming at the end of 1998.
Performance was particularly strong for corporate bonds issued by firms in
"cyclical" industries that can especially benefit from stronger growth.
Having underperformed as interest rates fell in 1998, due to the risk of
higher home-loan prepayment rates, mortgage-backed securities performed well as
rising interest rates reduced prepayment risk. Issues of U.S. government
agencies also performed strongly, due to decreased demand for Treasury bonds.
Adapting to a Brighter Outlook
With investors concerned about future growth at the start of 1998's fourth
quarter, we had placed extra emphasis on U.S. government securities and
corporate issues with especially strong credit quality. Within the corporate
sector, we focused on debt of companies from economically "defensive" sectors
that would be less sensitive to a slowdown in growth.
As the economic outlook improved, we selectively increased investments in
corporate bonds -- adding debt from industrial and cyclical sectors in some
cases. Given the economic uncertainties that remained, we continued to emphasize
corporates with high credit quality. When prices for mortgage-backed securities
became particularly attractive in the fourth quarter of 1998, we also increased
investments in those issues. The Galaxy Taxable Bond Funds further benefited
from taking advantage of investment opportunities in securities issued by U.S.
government agencies, whose prices had become particularly attractive due to an
increase in supply.
[SIDEBAR]
"After growing at an annualized rate of 3.7% in the third quarter of 1998, the
gross domestic product ("GDP"), which measures the output of U.S. goods and
services, grew by 6% in the fourth quarter of 1998."
[END SIDEBAR]
2
<PAGE>
Expecting a strong economy to put upward pressure on bond yields, we gave
greater attention to investments with shorter maturities in several portfolios
at the end of 1998. Because shorter-term issues lost less in price when bond
yields rose early in 1999 than longer-term issues did, this strategy enhanced
returns for the portfolios where it was used.
Anticipating Slower Growth
Now more than eight years old, the current domestic economic expansion
represents the longest period of domestic growth since 1969. While productivity
trends and moderating wages have helped sustain growth by keeping inflation low,
we believe several factors could slow the rate of GDP growth to less than 3% in
the second half of 1999.
Despite increasing stability, overseas economies still face significant
problems that could remain a drag on U.S. exports. Meanwhile, with consumer
spending outpacing income, it seems likely that consumers will reduce spending
later this year. If growth slows, as we expect, inflation should remain modest,
and the Fed would probably keep interest rates on hold. The U.S. budget surplus
and a related reduction in the supply of Treasuries should provide further
support for bond prices.
Bond yields could edge lower in this environment, and bond prices could
rise, if inflation pressures are confined to higher energy prices and consumer
spending moderates. In the meantime, however, yields could continue to rise --
especially since the Fed has indicated that its next move would likely be to
boost interest rates if inflation appears in other areas. In the months to come,
therefore, we plan to continue to look for attractive opportunities in
high-quality corporate bonds, as well as in selected U.S. government agencies
and mortgage-backed securities that offer good value. If it looks like yields
are peaking, and growth is set to slow, we may add investments in longer-term
debt and give greater weight to Treasury issues.
[SIDEBAR]
"Now more than eight years old, the current domestic expansion represents the
longest period of domestic growth since 1969."
[END SIDEBAR]
PERFORMANCE AT-A-GLANCE
AVERAGE ANNUAL TOTAL RETURNS -- RETAIL A SHARES**
<TABLE>
<CAPTION>
10 Years/
As of April 30, 1999 6 Months 1 Year 3 Years 5 Years Life of Fund
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Short-Term Bond Fund
(Inception date 12/30/91) -2.39%* 1.34% 4.22% 4.76% 4.72%
.................................................................................................
Intermediate Government
Income Fund (Inception date 9/1/88) -4.27* 1.65 5.20 5.63 6.62
.................................................................................................
High Quality Bond Fund
(Inception date 12/14/90) -4.85* 1.75 6.00 6.47 7.42
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS -- A PRIME SHARES**
As of April 30, 1999 6 Months 1 Year 3 Years 5 Years Life of Fund
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
High Quality Bond Fund
(Inception date 11/1/98) -5.85%* N/A N/A N/A -5.85%*
- -------------------------------------------------------------------------------------------------
</TABLE>
* Unannualized total returns.
** Return figures for Retail A Shares have been restated to include the effect
of the maximum 3.75% front-end sales charge which became effective on
December 1, 1995. Return figures for A Prime Shares include the effect of
the maximum 4.75% front-end sales charge.
3
<PAGE>
PERFORMANCE AT-A-GLANCE
AVERAGE ANNUAL TOTAL RETURNS -- TRUST SHARES
<TABLE>
<CAPTION>
10 Years/
As of April 30, 1999 6 Months 1 Year 3 Years 5 Years Life of Fund
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Short-Term Bond Fund
(Inception date 12/30/91) 1.51%* 5.58% 5.79% 5.80% 5.41%
.................................................................................................
Intermediate Government
Income Fund (Inception date 9/1/88) -0.39* 5.95 6.85 6.72 7.13
.................................................................................................
Corporate Bond Fund
(Inception date 12/12/94) -0.24* 5.48 6.93 N/A 7.94
.................................................................................................
High Quality Bond Fund
(Inception date 12/14/90) -1.05* 5.86 7.51 7.43 7.89
- -------------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS -- RETAIL B SHARES***
<TABLE>
<CAPTION>
6 Month 6 Month 1 Year 1 Year Life of Fund Life of Fund
Returns Before Returns After Returns Before Returns After Returns Before Returns After
Contingent Contingent Contingent Contingent Contingent Contingent
As of Deferred Sales Deferred Sales Deferred Sales Deferred Sales Deferred Sales Deferred Sales
April 30, 1999 Charge Deducted Charge Deducted** Charge Deducted Charge Deducted** Charge Deducted Charge Deducted**
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Short-Term Bond Fund
(Inception date 3/4/96) 1.04%* -3.91%* 4.61% -0.39% 4.40% 3.82%
- -----------------------------------------------------------------------------------------------------------------------------------
Intermediate Government
Income Fund
(Inception date 11/1/98) -0.85% -5.70% N/A N/A -0.85% -5.70%
- -----------------------------------------------------------------------------------------------------------------------------------
High Quality Bond Fund
(Inception date 3/4/96) -1.42* -6.20* 5.07 0.09 5.30 4.73
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS -- B PRIME SHARES***
<TABLE>
<CAPTION>
6 Month 6 Month 1 Year 1 Year Life of Fund Life of Fund
Return Before Return After Return Before Return After Return Before Return After
Contingent Contingent Contingent Contingent Contingent Contingent
As of Deferred Sales Deferred Sales Deferred Sales Deferred Sales Deferred Sales Deferred Sales
April 30, 1999 Charge Deducted Charge Deducted** Charge Deducted Charge Deducted** Charge Deducted Charge Deducted**
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
High Quality Bond Fund
(Inception date 11/1/98) -1.57% -6.35% N/A N/A -1.57%* -6.35%*
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Unannualized total returns.
** As if shares were redeemed at end of period.
*** Retail B Shares and B Prime 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 and B Prime Shares
automatically convert to A Prime Shares after eight years.
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 Advisor 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 include the deduction of any sales charges, where applicable,
unless otherwise indicated.
4
<PAGE>
Portfolio Reviews
[PHOTO OF PERRY VIETH]
[CAPTION]
Perry Vieth became manager of the Galaxy Short-Term Bond Fund in March of 1996.
He has managed fixed-income investments since 1986.
[END CAPTION]
GALAXY SHORT-TERM BOND FUND
By Perry Vieth
Portfolio Manager
As an improving economic outlook drove bond yields higher in the six
months ended April 30, 1999, the Galaxy Short-Term Bond Fund benefited from
earlier additions of issues with shorter maturities, whose prices fell less than
the prices for longer maturities. Selective additions of corporate bonds and
mortgage-backed securities, which outperformed during the period, also helped
Fund returns.
For the six months ended April 30, 1999, the Fund's Trust Shares earned a
total return of 1.51%, and its Retail A Shares had a total return of 1.38%
before deducting the 3.75% maximum front-end sales charge. During this time, the
Fund's Retail B Shares had a total return of 1.04% before deducting the maximum
5.00% contingent deferred sales charge. (Please see the chart on page 3 for
total returns after deducting the front-end sales charge and the chart on page 4
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 1.86%, and the
Lehman One-to-Three-Year Government Index had a return of 1.20%.
On April 30, 1999, when the reporting period ended, the portfolio had an
average maturity near that of the Fund's benchmark, and the Fund's Trust Shares
had a 30-day Securities and Exchange Commission ("SEC") annualized yield of
4.93%. On the same date, Retail A Shares had a 30-day SEC annualized yield of
4.72%, and Retail B Shares had a 30-day SEC annualized yield of 4.25%.
Help from Corporates, Mortgages and Short-Term Issues
In the third quarter of 1998, before the period began, we had reduced
investments in longer-term issues. When bond yields rose in the fourth quarter
of 1998 and the first months of 1999, the greater emphasis on shorter maturities
helped to buffer the Fund's portfolio from falling bond prices.
As an improving economic picture helped investors recognize the
significant value available in corporate bonds, the Fund benefited from a
sizable weighting in corporates, as well as opportunistic trades made within the
corporate sector. Given continued uncertainty about where the economy would
head, we remained focused on higher-quality corporate issues.
The addition of mortgage-backed securities also helped Fund returns. We
increased investments in mortgages during the fourth quarter, when low interest
rates made home-loan prepayments more likely and reduced the prices of
mortgage-backed securities. When interest rates rose, and the risk of
prepayments abated, mortgage-backed securities outperformed.
5
<PAGE>
PORTFOLIO REVIEWS
Preparing for a Near-Term Rise in Yields
While we continue to believe that growth could slow later this year, and
inflation will remain under control, the Fed has signaled it may have to raise
short-term interest rates. This could cause bond yields to move higher in coming
months. As a result, we plan to continue our emphasis on shorter-term issues and
give greater attention to investments that tend to outperform treasuries as
yields rise, such as mortgage-backed securities, asset-backed securities and
floating-rate issues.
Galaxy Short-Term Bond Fund
Distribution of Total Net Assets as of April 30, 1999
[PIE CHART]
Commercial Paper 3%
Foreign Bonds and Net Other Assets and Liabilities 4%
Repurchase Agreement 7%
U.S.Government and Agency Obligations 21%
Asset-Backed and Mortgage-Backed Securities 25%
Corporate Notes and Bonds 40%
Galaxy Short-Term Bond Fund
Growth of $10,000 investment*
[MOUNTAIN CHART]
Lehman Brothers One to Three Year Government Bond Index $10,000 - $15,294
Galaxy Short-Term Bond Fund - Retail A Shares $ 9,625 - $14,019
Galaxy Short-Term Bond Fund - Trust Shares $10,000 - $14,719
Galaxy Short-Term Bond Fund - Retail B Shares $10,000 - $11,256
*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, 1999. 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 investment
management fees and other expenses incurred by the Fund.
6
<PAGE>
PORTFOLIO REVIEWS
[PHOTO OF MARIE SCHOFIELD]
[CAPTION]
Marie Schofield became manager of the Galaxy Intermediate Government Income
Fund in December of 1996. She has managed fixed-income investments since 1975.
[END CAPTION]
GALAXY INTERMEDIATE GOVERNMENT INCOME FUND
By Marie Schofield
Portfolio Manager
During the six months ended April 30, 1999, the Galaxy Intermediate
Government Income Fund increased investments in a range of products including
corporate, asset-backed and mortgage-backed securities and issues of U.S.
government agencies at spread levels deemed to be attractive on a historical
basis. In addition, these securities' higher yields provide some measure of
protection as interest rates increase and prices fall. During the period, the
portfolio's corporate exposure nearly doubled and now stands at 17% of total
assets, of which 5% is in intermediate and long-term industrials and 3.5% is in
intermediate-term utility and phone issues. Asset-backed securities were also
added to the portfolio, primarily high quality credit card issues, and
mortgage-backed exposure was increased to nearly 33% from 18%. Current coupon,
newly-issued mortgages seemed to offer the best value and our purchases were
concentrated there. Additionally, in light of the fragile global environment,
most of the additions were GNMA mortgages which carry the U.S. Government's full
faith and credit obligation. These purchases were funded through a reduction in
the portfolio's allocation to Treasuries, down to 24% from about 44%. Total
allocation to U.S. government issues declined by about 13% to 73%, remaining
well above the 65% threshold. At the beginning and end of the period, the
portfolio's duration exposure remained just over one-quarter year long to the
benchmark. Within the period, we adjusted the portfolio's duration positioning
- -- shortening as long government bond yields fell through 5.0% and lengthening
as those yields rose toward 5.5%. We also maintained a barbell structure
throughout the period which helped performance as rates rose and the yield curve
flattened.
For the six months ended April 30, 1999, the Fund's Trust Shares had a
total return of -0.39%. Over the same time, the Fund's Retail A Shares had a
total return of -0.53% before deducting the maximum 3.75% front-end sales
charge. Retail B Shares had a total return of -0.85% before deducting the
maximum 5.00% contingent deferred sales charge for the period since their
initial public offering on November 1, 1998 through April 30, 1999. (Please see
the chart on page 3 for total returns after deducting the front-end charge and
the chart on page 4 for total returns after deducting the contingent deferred
sales charge.)
Those returns compare with a total return of -0.17% for the average
intermediate government bond fund tracked by Lipper, and a total return of 0.51%
for the Lehman Intermediate Government/Corporate Bond Index. As of April 30,
1999, the Fund's Trust Shares had a 30-day SEC annualized yield of 5.08% and its
Retail A shares had a 30-day SEC annualized yield of 4.87%.
Future Strategies
Inflation concerns continue to dominate market opinion and investor
psychology. We believe fears of substantially higher inflation are misplaced.
Productivity measures remain high, wage costs have fallen, commodity prices on
balance are
7
<PAGE>
PORTFOLIO REVIEWS
steady, corporate pricing power remains subdued, and capacity pressures are
absent. Foremost, the Fed has given notice that a broadening of price pressures
will not be tolerated. As a result of the slight uptick in headline inflation,
we have modified our range for the long bond slightly up to 5% to 6%. We will
continue to monitor inflation closely for any indications of wage pressures or
energy prices feeding through the economy and deteriorating the inflation
outlook. We also feel that the continued reduction in sup ply of Treasuries will
provide support for the bond market. We may extend the portfolio's duration
further should Treasuries breach the 6% yield level and real rates offer above
average value. We are comfortable with the portfolio's current positioning on
sector allocation and may reduce some holdings, especially mortgage-backs,
should the economy begin to slow in response to the higher rate environment.
Galaxy Intermediate Government Income Fund
Distribution of Total Net Assets as of April 30, 1999
[PIE CHART]
Repurchase Agreement 2%
Asset-Backed and Mortgage-Backed Securities 10%
Corporate Notes and Bonds 17%
U.S. Government and Agency Obligations 71%
Galaxy Intermediate Government Income Fund
Growth of $10,000 investment*
[MOUNTAIN CHART]
Lehman Brothers Intermediate Government/Corporate Bond Index $10,000 - $23,668
Galaxy Intermediate Government Income Fund - Retail A Shares $ 9,625 - $20,164
Galaxy Intermediate Government Income Fund - Retail B Shares $10,000 - $ 9,430
Galaxy Intermediate Government Income Fund - Trust Shares $10,000 - $21,138
*Since inception on 9/1/88 for Trust and Retail A Shares . Since inception on
11/1/98 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, 1999. The Lehman Brothers
Intermediate Government/Corporate Bond Index is an unmanaged index in which
investors cannot invest. Results for the index do not reflect investment
management fees and other expenses incurred by the Fund.
8
<PAGE>
PORTFOLIO REVIEWS
[PHOTO OF DAVID LINDSAY]
[CAPTION]
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.
[END CAPTION]
GALAXY CORPORATE BOND FUND
By David Lindsay
Portfolio Manager
Selective additions of corporate bonds, mortgage-backed securities, and
issues of U.S. government agencies enhanced returns for the Galaxy Corporate
Bond Fund over the six months ended April 30, 1999. During this time, the Fund's
Trust Shares earned a total return of -0.24%. That compares to returns of 0.69%
for the average intermediate investment-grade bond fund tracked by Lipper
Analytical Services ("Lipper") and 0.51% for the Lehman Intermediate
Government/Corporate Bond Index. At the end of the period, the Fund's Trust
Shares had a 30-day SEC annualized yield of 4.78%.
Making the Most of Lower Prices
With interest rates still falling when the reporting period began, the
risk of home loan prepayments was relatively high. As a result, we were able to
add mortgage-backed securities at prices that were quite attractive and take
advantage of many trading opportunities within the mortgage sector. We also
found selected opportunities in attractively priced corporate bonds at this
time. Because the economic outlook was still cloudy, we focused on issues from
more defensive sectors, trading bonds of construction equipment and retail firms
for utility debt.
The purchases of corporates and mortgages served the Fund well as an
improving economic picture brightened the outlook for corporate profits, and
rising interest rates reduced the risk of home loan prepayments. With interest
rates on the rise, we reduced issues of financial firms in the first quarter of
1999 and took profits in debt of drug and retail issuers that had performed
well. With the proceeds from these sales, we bought debt of industrial and
telecommunications firms that offered good value.
During this time, we also increased investments in U.S. government agency
securities whose prices had become more attractive due to an increase in
supplies of new issues. This proved a prudent move as prices for agencies
outperformed in the final months of the period. During April, we made additional
investments in agencies and traded bonds of chemical companies for issues of
food and business-machinery firms.
Throughout the period, we continued to emphasize bonds with
intermediate-term maturities. This also benefited Fund returns, as these issues
tend to hold their value better than long-maturity bonds in periods when
interest rates are rising.
Positioned for Slower Growth
Our defensive approach should benefit the Fund in months to come. If
economic growth slows, as we expect, corporate bonds of "cyclical" issuers could
underperform treasuries, as they did during the economic uncertainty of 1998. As
additional opportunities arise, we may make further reductions in holdings from
cyclical sectors and give even greater attention to more economically
"defensive" issues.
Galaxy Corporate Bond Fund
Distribution of Total Net Assets as of April 30, 1999
[PIE CHART]
Foreign Bonds and Net Other Assets & Liabilities 3%
Repurchase Agreement 4%
Asset-Backed and Mortgage-Backed Securities 6%
U.S. Government and Agency Obligations 22%
Corporate Notes and Bonds 65%
Galaxy Corporate Bond Fund
Growth of $10,000 investment*
[MOUNTAIN CHART]
Lehman Brothers Intermediate Government/Corporate Bond Index $10,000 - $15,190
Galaxy Corporate Bond Fund - Trust Shares $10,000 - $13,977
* 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 investment management fees
and other expenses incurred by the Fund.
9
<PAGE>
PORTFOLIO REVIEWS
[PHOTO OF MARIE SCHOFIELD]
[CAPTION]
Marie Schofield has managed the Galaxy High Quality Bond Fund since March of
1996. She has managed fixed-income investments since 1975.
[END CAPTION]
GALAXY HIGH QUALITY BOND FUND
By Marie Schofield
Portfolio Manager
Treasury Bond yields moved higher in the six months ended April 30, 1999,
as the global financial crisis ebbed and the "flight to quality" trading that
dominated 1998 continued to unwind. Robust economic growth at home, and an
improving economic outlook abroad due to a massive reflation effort last fall by
central banks around the world, encouraged investors to move from bonds to
stocks. However, inflationary fears were sparked in the process and intensified
by supply cutbacks from OPEC in an effort to raise oil prices. Corporate,
asset-backed and mortgage-backed securities outperformed Treasuries in this
environment as risk premiums contracted. By the end of the quarter, this reach
for yield extended to riskier sectors such as junk bonds and illiquid emerging
market securities.
During this time, the Galaxy High Quality Bond Fund increased investments
in a range of products including corporate, asset-backed and mortgage-backed
securities and issues of U.S. government agencies. These securities' higher
yields provide some measure of protection as interest rates increase and prices
fall. We added an additional 10% to corporates bringing the allocation to about
37%. Our mortgage-backed purchases totaled another 13% with that sector
accounting for close to 20% of Fund assets, the highest in some time. These
purchases were funded by sales of intermediate Treasuries. We continued to
underweight intermediate maturities relative to holding overweighted positions
in short and long maturities. This combination performed better as the yield
curve flattened, with intermediate rates up nearly 100 basis points and long
rates finishing the period up about 50 basis points. At the end of last year, we
shortened the Fund's duration to inside of one-quarter year long of the
benchmark Lehman Brothers Government/Corporate Bond Index as long Treasury
yields fell below 5%. The Fund's duration was extended in the first quarter to
one-half year long the benchmark as yields rose above 5.25% and real yields
became attractive again. Interest rates continued to trend higher, weighed down
by fears of higher inflation, steamy U.S. economic growth at a time of a
turnaround in global demand, record U.S. trade and current account deficits, and
the impact of higher defense spending on the favorable budget picture.
The Fund's Trust Shares earned a total return of -1.05% for the six months
ended April 30, 1999. Over the same time, its Retail A Shares had a total return
of -1.12% before deducting the maximum 3.75% front-end sales charge, and its
Retail B Shares had a total return of -1.42% before deducting the maximum 5.00%
contingent deferred sales charge. A Prime Shares had a total return of -1.14%
before deducting the maximum 4.75% front-end sales charge for the period since
their initial public offering on November 1, 1998 through April 30, 1999 and B
Prime Shares had a total return of -1.57% before deducting the maximum 5.00%
contingent deferred sales charge for the period since their initial public
offering on November 1, 1998 through April 30, 1999.(Please see the charts on
page 3 for total returns after deducting the applicable front-end sales charge
and the charts on page 4 for total returns after deducting the applicable
contingent deferred sales charge.)
By comparison, the average A-rated corporate bond fund tracked by Lipper
had a total return of 0.38% for the 6-month period, the Lehman Brothers
Government/Corporate Bond Index had a total return of -0.12% and the Lehman
Brothers Long-Term Government/Corporate Bond Index had a total return of -1.51%.
The Fund has changed its benchmark index from the Lehman Brothers Long-Term
Government/Corporate Bond Index to the Lehman Brothers Government/Corporate Bond
Index, which is comprised of securities with remaining maturities that more
closely approximate the remaining maturities of those securities held by the
Fund.
On April 30, 1999, the Fund's Trust Shares had a 30-day SEC annualized
yield of 4.85%, and the Fund's Retail A Shares had a 30-day SEC annualized yield
of 4.52%. On the same date, the Fund's Retail B Shares had a 30-day SEC
annualized yield of 4.01%, the Fund's A Prime Shares had a 30-day SEC annualized
yield of 4.61%, and the Fund's B Prime Shares had a 30-day SEC annualized yield
of 3.74%.
10
<PAGE>
PORTFOLIO REVIEWS
Portfolio Strategy
While most economists predicted a slowdown, the U.S. economy continued its
exceptional performance expanding at a brisk 4% in the first quarter following a
6% growth rate in the final quarter of 1998. Strong consumer demand powered by
stock market gains and low rates of unemployment contributed to the economy's
stellar performance. In addition, manufacturing is now showing a pulse and
beginning a recovery. This strong level of growth should be viewed against a
backdrop of subdued inflation that continues to perplex the Fed. Inflationary
pressures normally exert themselves this late into an expansion, especially in
light of the lowest unemployment rate in a generation. But wage growth is also
slowing, down to 3% from over 4% one year ago. It is thought that
technology-driven productivity enhancements are a factor in holding down costs
and inflation, together with a lack of corporate pricing power, and imported
deflation from abroad.
While supply cutbacks from OPEC have caused oil prices to move up sharply
and clouded the immediate inflation outlook, other commodity prices remain
stable. It is felt that the Fed will focus on core inflation (ex-food and
energy) to gauge any broadening of price increases. Inflation is expected to
average between 2% and 2.5% this year, still moderate by any measure. The Fed
will remain on guard for any change in this outlook. As a result, we have
modified our range for the long bond up slightly to 5% to 6% due to the uptick
in headline inflation and heightened caution by the Fed. We also feel that the
continued reduction in supply of Treasuries will provide support for the bond
market. The Fund's duration remains one-half year long its benchmark and we may
extend duration further should Treasuries breach the 6% yield level and real
rates offer value. We are comfortable with the portfolio's current positioning
on sector allocation and may reduce some holdings should the economy begin to
slow in response to the higher rate environment.
Galaxy High Quality Bond Fund
Distribution of Total Net Assets as of April 30, 1999
[PIE CHART]
Foreign Bond and Net Other Assets and Liabilities 2%
Asset-Backed and Mortgage-Backed Securities 7%
Corporate Notes and Bonds 37%
U.S. Government and Agency Obligations 54%
Galaxy High Quality Bond Fund
Growth of $10,000 investment*
[MOUNTAIN CHART]
Lehman Brothers Long-Term Government/Corporate Bond Index $10,000 - $20,614
Galaxy High Quality Bond Fund - Retail A Shares $ 9,625 - $18,214
Galaxy High Quality Bond Fund - Trust Shares $10,000 - $18,883
Galaxy High Quality Bond Fund - Retail B Shares $10,000 - $11,571
Galaxy High Quality Bond Fund - A Prime Shares $ 9,525 - $ 9,415
Galaxy High Quality Bond Fund - B Prime Shares $10,000 - $ 9,365
Lehman Brothers Government/Corporate Bond Index $10,000 - $ 9,988
*Since inception on 12/14/90 for Trust and Retail A Shares. Since inception on
3/4/96 for Retail B Shares. Since inception on 11/1/98 for A Prime and B Prime
Shares. Performance figures for Retail A Shares include the effect of the
maximum 3.75% front-end sales charge. Performance figures for Prime A Shares
include the effect of the maximum 4.75% front-end sales charge. Performance
figures for Retail B and B Prime Shares reflect the deduction of the maximum
5.00% contingent deferred sales charge as if shares were redeemed on April 30,
1999. The Lehman Brothers Long-Term Government/Corporate Bond Index and the
Lehman Brothers Government/Corporate Bond Index are unmanaged indices in which
investors cannot invest. Results for the indices do not reflect investment
management fees and other expenses incurred by the Fund.
11
<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).
CONSOLIDATED STATEMENTS
Timely, comprehensive mutual fund account statements offer detailed information
on your individual account. If you have a FleetOne 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 toll-free 1-877-BUY-GALAXY (1-877-289-4252) for
information on initial purchases and current performance.
- -------------------------------------------------------------------------------
Certain shareholder services may not be available to Trust, A Prime and B Prime
Share investors. Please consult the 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, Inc., members
NASD and SIPC.
[BEGIN SIDEBAR]
"A well-balanced asset allocation plan may help to control your risk while
pursuing your goals."
[END SIDEBAR]
12
<PAGE>
Short-Term Bond Fund
Portfolio of Investments
April 30, 1999 (unaudited)
<TABLE>
<CAPTION>
Par Value Value
--------- -----------
<S> <C> <C>
CORPORATE NOTES AND BONDS - 39.68%
Finance - 14.79%
$ 2,000,000 Caterpillar Financial Services
Corp., MTN
5.47%, 09/12/01 ................ $ 1,990,000
2,000,000 General Electric Capital Corp.
Series A, MTN
5.92%, 04/03/01 ................ 2,017,500
1,000,000 General Electric Capital Corp., MTN
5.50%, 04/15/02 ................ 996,000
4,000,000 Keycorp Institutional Capital Corp.
Series A
6.63%, 06/15/29
Putable 06/01/99 (A) ........... 4,003,360
-----------
9,006,860
-----------
Automobile Finance - 12.00%
1,000,000 Associates Corp. of North America
Senior Note
5.50%, 02/15/02 ................ 993,750
1,000,000 Associates Corp. of North America
Senior Note
6.50%, 07/15/02 ................ 1,018,750
1,250,000 Ford Motor Credit Co.
6.85%, 08/15/00 ................ 1,270,400
250,000 Ford Motor Credit Co.
6.25%, 11/08/00 ................ 252,460
1,200,000 Ford Motor Credit Co.
5.75%, 01/25/01 ................ 1,203,000
500,000 Ford Motor Credit Co.
7.00%, 09/25/01 ................ 514,375
2,000,000 General Motors Acceptance Corp.
7.13%, 05/01/01 ................ 2,055,000
-----------
7,307,735
-----------
Utilities - 4.97%
2,000,000 Florida Power Corp , MTN
6.47%, 07/01/01 ................ 2,035,000
1,000,000 Sprint Capital Corp.
5.88%, 05/01/04 ................ 990,000
-----------
3,025,000
-----------
Technology - 3.30%
2,000,000 International Business
Machines Corp., MTN
5.80%, 05/15/01 ................ 2,008,197
-----------
Transportation - 3.02%
1,820,000 Norfolk Southern Corp.
6.70%, 05/01/00 ................ 1,840,475
-----------
<CAPTION>
Par Value Value
--------- -----------
<S> <C> <C>
Industrial - 1.60%
$ 1,000,000 Pepsi Bottling Holdings, Inc.
5.38%, 02/17/04 (A) ............ $ 977,500
-----------
Total Corporate Notes and Bonds 24,165,767
(Cost $24,145,641) -----------
ASSET-BACKED AND MORTGAGED-BACKED SECURITIES - 24.66%
241,530 Chase Manhattan Auto Owner Trust
Series 1998-A, Class A2
5.68%, 05/15/00 ................ 241,836
4,000,000 Chemical Master Credit Card Trust I
Series 1995-2, Class A
6.23%, 06/15/03 ................ 4,043,720
1,000,000 Citibank Credit Card Master Trust I
Series 1999-1, Class A
5.50%, 02/15/06 ................ 983,120
1,500,000 Discover Card Master Trust I
Series 1999-1, Class A
5.30%, 08/15/04 ................ 1,482,142
1,250,000 Ford Credit Auto Owner Trust
Series 1998-A, Class A3
5.65%, 10/15/01 ................ 1,253,512
1,722,664 Norwest Asset Securities Corp.
Series 1997-17, Class A1, CMO
6.75%, 11/25/27 ................ 1,728,039
1,493,124 Prudential Home Mortgage Securities
Series 1996-7, Class A-1, CMO
6.75%, 06/25/11 ................ 1,497,782
999,602 Prudential Home Mortgage Securities
Series 1993-38, Class A3, CMO
6.15%, 09/25/23 ................ 997,103
1,031,250 Ryland Mortgage Securities Corp.
Series 1993-3, Class A, CMO
6.71%, 08/25/08 ................ 1,039,856
1,750,000 Sears Credit Account Master Trust
Series 1996-2, Class A
6.50%, 10/15/03 ................ 1,755,460
-----------
Total Asset-Backed and
Mortgage-Backed Securities ..... 15,022,570
(Cost $14,930,874) -----------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 21.61%
Government National
Mortgage Association - 6.28%
1,458,851 6.50%, 09/15/13, Pool # 476201.. 1,476,620
954,297 7.00%, 11/15/13, Pool # 780921.. 978,450
1,352,813 7.00%, 01/15/26, Pool # 423465.. 1,373,525
-----------
3,828,595
-----------
Federal Home Loan Bank - 5.00%
1,000,000 5.63%, 03/19/01 ................ 1,005,310
2,000,000 6.23%, 09/19/01 ................ 2,038,120
-----------
3,043,430
-----------
</TABLE>
See Notes to Financial Statements.
13
<PAGE>
Short-Term Bond Fund
Portfolio of Investments (continued)
April 30, 1999 (unaudited)
<TABLE>
<CAPTION>
Par Value Value
--------- -----------
<S> <C> <C>
Federal Home Loan
Mortgage Corporation - 3.81%
$ 1,325,904 5.50%, 08/01/00, Pool # M80285 .. $ 1,323,464
138,807 7.00%, 05/01/19, Pool # D29158 .. 141,171
848,678 6.50%, 11/15/23, Pool # 002008 .. 854,508
-----------
2,319,143
-----------
Federal Farm Credit Bank - 3.34%
2,000,000 6.10%, 09/24/01, MTN ............ 2,032,820
-----------
Federal National
Mortgage Association - 3.06%
892,240 6.50%, 03/01/12, Pool # 313409 .. 899,485
973,407 6.00%, 01/01/14, Pool # 482523 .. 967,236
-----------
1,866,721
-----------
U.S. Treasury Notes - 0.12%
75,000 4.75%, 02/15/04 ................. 73,500
-----------
Total U.S. Government
and Agency Obligations .......... 13,164,209
(Cost $13,164,739) -----------
FOREIGN BOND (C) - 3.27%
2,000,000 Xerox Credit Corp,
Series E, Euro MTN
5.40%, 09/11/00 ................. 1,991,000
-----------
Total Foreign Bond .............. 1,991,000
(Cost $1,973,580) -----------
COMMERCIAL PAPER (B) - 3.28%
2,000,000 John Deere Capital Corp.
4.65%, 05/10/99 ................. 1,997,600
-----------
Total Commercial Paper .......... 1,997,600
(Cost $1,997,600) -----------
<CAPTION>
Par Value Value
--------- -----------
<S> <C> <C>
REPURCHASE AGREEMENT - 6.75%
$ 4,109,000 Repurchase Agreement with:
State Street Bank
4.87%, 04/30/99, dated 05/03/99
Repurchase Price $4,110,668
(Collateralized by U.S. Treasury
Bond 8.50%, Due 2020;
Total Par $3,150,000
Market Value $4,248,171) ........ $ 4,109,000
-----------
Total Repurchase Agreement ...... 4,109,000
(Cost $4,109,000) -----------
Total Investments - 99.25% ........................ 60,450,146
(Cost $60,321,434) -----------
Net Other Assets and Liabilities - 0.75% .......... 457,115
-----------
Net Assets - 100.00% .............................. $60,907,261
===========
</TABLE>
- -----------------------------------
(A) Securities exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may only be resold, in transactions
exempt from registration, to qualified institutional buyers. At April 30,
1999, these securities amounted to $4,980,860 or 8.18% of net assets.
(B) Discount yield at time of purchase
(C) Euro-Dollar Bond
CMO Collateralized Mortgage Obligation
MTN Medium Term Note
See Notes to Financial Statements.
14
<PAGE>
Intermediate Government Income Fund
Portfolio of Investments
April 30, 1999 (unaudited)
<TABLE>
<CAPTION>
Par Value Value
--------- -----------
<S> <C> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 70.65%
U.S. Treasury Bonds - 14.72%
$ 500,000 11.13%, 08/15/03 ................ $ 609,880
1,200,000 11.88%, 11/15/03 ................ 1,511,448
7,000,000 10.75%, 08/15/05 ................ 8,968,680
2,350,000 12.00%, 11/15/13 ................ 3,414,292
3,000,000 7.50%, 11/15/16 ................. 3,516,300
1,250,000 8.50%, 02/15/20 ................. 1,630,763
3,500,000 7.88%, 02/15/21 ................. 4,321,135
6,750,000 8.13%, 08/15/21 ................. 8,558,325
3,000,000 7.25%, 08/15/22 ................. 3,491,940
4,000,000 6.88%, 08/15/25 ................. 4,511,360
1,500,000 6.38%, 08/15/27 ................. 1,601,580
2,000,000 6.13%, 11/15/27 ................. 2,070,140
1,500,000 5.50%, 08/15/28 ................. 1,428,705
-----------
45,634,548
-----------
Government National
Mortgage Association - 14.66%
6,138,309 6.50%, 07/15/09, Pool # 780357 .. 6,213,381
23,542 6.50%, 06/15/13, Pool # 462795 .. 23,828
465,993 6.50%, 07/15/13, Pool # 468077 .. 471,668
980,060 6.50%, 09/15/13, Pool # 464192 .. 991,997
368,326 6.50%, 09/15/13, Pool # 476619 .. 372,813
467,801 6.50%, 09/15/13, Pool # 487907 .. 473,499
544,021 7.00%, 09/15/13, Pool # 484233 .. 557,791
96,470 6.50%, 10/15/13, Pool # 464249 .. 97,645
1,952,189 6.50%, 10/15/13, Pool # 477500 .. 1,975,967
493,838 6.50%, 10/15/13, Pool # 481575 .. 499,852
497,203 6.50%, 11/15/13, Pool # 475712 .. 503,259
485,526 6.50%, 11/15/13, Pool # 492010 .. 491,440
839,683 7.00%, 07/20/21, Pool # 008809 .. 855,165
2,992,749 6.88%, 04/20/22, Pool # 008956 .. 3,030,636
2,594,559 7.50%, 08/15/27, Pool # 448965 .. 2,674,004
1,002,171 7.50%, 10/15/27, Pool # 460697 .. 1,032,857
3,535,000 6.00%, 10/01/28 ................. 3,424,531
1,373,902 7.50%, 11/15/28, Pool # 486708 .. 1,415,971
1,498,333 6.50%, 12/15/28, Pool # 495775 .. 1,488,489
3,996,285 7.00%, 12/15/28, Pool # 483886 .. 4,054,951
339,662 7.00%, 01/15/29, Pool # 499333 .. 344,648
3,437,329 7.00%, 02/15/29, Pool # 486937 .. 3,487,789
1,230,202 6.50%, 03/15/29, Pool # 464613 .. 1,222,119
3,436,350 6.00%, 03/15/29, Pool # 464632 .. 3,327,865
1,836,709 6.50%, 04/15/29, Pool # 474844 .. 1,824,642
3,000,300 6.50%, 04/15/29, Pool # 493855 .. 2,986,948
633,459 6.50%, 04/15/29, Pool # 502170 .. 630,640
1,000,100 6.50%, 04/15/29, Pool # 506494 .. 995,649
-----------
45,470,044
-----------
Federal Home Loan
Mortgage Corporation - 11.32%
5,000,000 6.70%, 07/15/06, CMO, Pool # 1233-G 5,060,900
5,000,000 5.13%, 10/15/08 ................. 4,722,150
6,972,101 5.00%, 12/01/13, Pool # E73815 .. 6,621,265
8,000,836 5.50%, 03/15/14, Pool # 002134 .. 7,593,273
<CAPTION>
Par Value Value
--------- -----------
<S> <C> <C>
Federal Home Loan
Mortgage Corporation (continued)
$ 4,972,717 6.50%, 10/15/23, CMO, Pool
# 001990 ........................ $ 5,010,012
5,936,251 7.50%, 09/01/28, Pool # C00664 .. 6,101,338
-----------
35,108,938
-----------
U.S. Government-Backed Bonds - 11.19%
4,830,000 A.I.D. State of Israel
Series 2-D
5.63%, 09/15/03 ................. 4,815,800
750,000 A.I.D. State of Israel
Series 7-A
5.45%, 02/15/01 ................. 749,175
6,450,000 A.I.D. State of Israel
Series 8-B
6.05%, 08/15/00 ................. 6,493,280
5,000,000 A.I.D. State of Israel
Series 8-B
6.38%, 08/15/01 ................. 5,090,850
5,000,000 A.I.D. State of Israel
Series 8-C
6.63%, 08/15/03 ................. 5,172,800
6,200,000 Private Export Funding Corp.
Series B
6.49%, 07/15/07 ................. 6,494,500
5,882,511 Small Business Administration
Participation Certificates
Series SBIC-PS 1955-10B
7.25%, 05/10/05 ................. 5,897,217
-----------
34,713,622
-----------
Federal National
Mortgage Association - 10.03%
3,000,000 5.10%, 09/25/00, MTN ............ 2,995,830
7,000,000 5.72%, 01/09/01, MTN ............ 7,045,010
2,333,752 5.00%, 05/01/09, Pool # 326584 .. 2,245,560
2,162 8.00%, 12/01/09, Pool # 313180 .. 2,229
1,683,306 6.00%, 04/01/11, Pool # 398072 .. 1,672,786
9,292,957 7.00%, 05/01/12, Pool # 313522 .. 9,493,313
515,140 7.00%, 12/01/12, Pool # 251339 .. 526,246
5,000,000 5.50%, 05/25/14 ................. 4,870,320
2,241,055 6.75%, 04/15/21, CMO, Pool
# 0096-4 ........................ 2,265,550
-----------
31,116,844
-----------
U.S. Treasury Notes - 8.20%
2,000,000 5.00%, 02/28/01 ................. 1,997,440
300,000 6.50%, 05/31/02 ................. 311,493
1,000,000 5.88%, 02/15/04 ................. 1,026,060
3,000,000 7.00%, 07/15/06 ................. 3,279,180
3,000,000 6.50%, 10/15/06 ................. 3,196,320
4,350,000 6.63%, 05/15/07 ................. 4,684,689
7,000,000 5.63%, 05/15/08 ................. 7,101,220
4,000,000 4.75%, 11/15/08 ................. 3,822,480
-----------
25,418,882
-----------
</TABLE>
See Notes to Financial Statements.
15
<PAGE>
Intermediate Government Income Fund
Portfolio of Investments (continued)
April 30, 1999 (unaudited)
<TABLE>
<CAPTION>
Par Value Value
--------- -----------
<S> <C> <C>
U.S. Treasury Strips (A) - 0.53%
$ 5,000,000 3.03%, 11/15/17 Interest only (B) $ 1,632,950
Total U.S. Government -----------
and Agency Obligations .......... 219,095,828
(Cost $220,050,893) -----------
CORPORATE NOTES AND BONDS - 17.34%
Banking - 4.41%
7,500,000 Bank One Milwaukee
National Association, MTN
6.35%, 03/19/01 ................. 7,593,750
6,000,000 NationsBank Texas
National Association, Senior Note,
6.35%, 03/15/01 ................. 6,090,000
-----------
13,683,750
-----------
Utilities - 3.96%
5,125,000 Baltimore Gas & Electric
6.50%, 02/15/03 ................. 5,214,688
1,975,000 Emerson Electric Co.
5.85%, 03/15/09 ................. 1,950,135
1,650,000 National Rural Utilities
5.25%, 01/15/05 ................. 1,614,938
2,500,000 Potomac Electric Power Co.
First Mortgage
6.25%, 10/15/07 ................. 2,521,875
1,000,000 Sprint Capital Corp.
5.88%, 05/01/04 ................. 990,000
-----------
12,291,636
-----------
Finance - 3.42%
4,500,000 Chase Manhattan Corp.
5.75%, 04/15/04 ................. 4,449,375
1,000,000 American Express
6.75%, 06/23/04 ................. 1,030,000
5,000,000 Pitney Bowes Credit Corp.
Series C, MTN
6.78%, 07/16/01 ................. 5,131,250
-----------
10,610,625
-----------
Consumer Staples - 2.77%
1,250,000 Archer-Daniels-Midland
6.63%, 05/01/29 ................. 1,223,438
5,000,000 Pepsi Bottling Holdings, Inc. (C)
Series 144A
5.38%, 02/17/04 ................. 4,887,500
<CAPTION>
Par Value Value
--------- -----------
<S> <C> <C>
Consumer Staples (continued)
$ 2,500,000 Stanford University
5.85%, 03/15/09 ................. $ 2,468,750
-----------
8,579,688
-----------
Capital Goods - 1.68%
5,000,000 Xerox Corp.
7.15%, 08/01/04 ................. 5,206,250
-----------
Automobile Finance - 1.10%
2,100,000 Ford Motor Credit Co.
6.25%, 11/08/00 ................. 2,120,664
1,250,000 Ford Motor Credit Co.
7.00%, 09/25/01 ................. 1,285,938
-----------
3,406,602
-----------
Total Corporate Notes and Bonds . 53,778,551
(Cost $53,520,299) -----------
ASSET-BACKED AND MORTGAGE-BACKED SECURITIES - 10.49%
3,000,000 Chase Manhattan Auto Owner Trust
Series 1998-C, Class A3
5.80%, 01/15/02 ................. 3,013,110
6,000,000 Chemical Master Credit Card Trust I
Series 1996-1, Class A
5.55%, 09/15/03 ................. 6,001,860
4,000,000 Discover Card Master Trust I
Series 1999-2, Class A
5.90%, 10/15/04 ................. 4,032,500
3,240,000 Discover Card Master Trust I
Series 1999-4, Class A
5.65%, 11/16/04 ................. 3,245,063
6,000,000 Ford Credit Auto Owner Trust
Series 1999-A, Class A4
5.31%, 11/15/01 ................. 5,994,510
2,500,000 MBNA Master Credit Card Trust
Series 1998-J, Class A
5.25%, 02/15/06 ................. 2,446,075
1,760,000 Premier Auto Trust
Series 1999-2, Class A4
5.59%, 02/09/04 ................. 1,759,516
2,488,540 Prudential Home Mortgage Securities
Class 1996-7, Series A-1,
CMO 6.75%, 06/25/11 ............. 2,496,304
3,538,269 Rural Housing Trust
Series 1987-1, Class 1-D, CMO
6.33%, 04/01/26 ................. 3,533,846
-----------
Total Asset-Backed and
Mortgage-Backed Securities ...... 32,522,784
(Cost $32,436,290) -----------
</TABLE>
See Notes to Financial Statements.
17
<PAGE>
Intermediate Government Income Fund
Portfolio of Investments (continued)
April 30, 1999 (unaudited)
<TABLE>
<CAPTION>
Par Value Value
--------- -----------
<S> <C> <C>
REPURCHASE AGREEMENT - 1.98%
$ 6,135,000 Repurchase Agreement with:
State Street Bank
4.87%, 05/03/99, dated 4/30/99
Repurchase Price $6,137,490
(Collateralized by U.S. Treasury
Bond 8.50%, Due 12/15/20;
Total Par $4,705,000
Market Value $6,263,531) ........ $ 6,135,000
------------
Total Repurchase Agreement ...... 6,135,000
(Cost $6,135,000) ------------
Total Investments - 100.46% ....................... 311,532,163
(Cost $312,142,482) ------------
Net Other Assets and Liabilities - (0.46)% ........ (1,414,389)
------------
Net Assets - 100.00% .............................. $310,117,774
============
</TABLE>
- -----------------------------------
(A) Discount yield at time of purchase.
(B) Stripped securities represent the splitting of cash flows into interest
and principal. Holders, as indicated, are entitled to that portion of
the payment representing interest only or principal only.
(C) Security exempt from registration under Rule 144A of the Securities Act
of 1933. This security may only be resold, in a transaction exempt from
registration, to qualified institutional buyers. At April 30, 1999,
this security amounted to $4,887,500 or 1.58% of net assets.
CMO Collateralized Mortgage Obligation
MTN Medium Term Note
See Notes to Financial Statements.
17
<PAGE>
Corporate Bond Fund
Portfolio of Investments
April 30, 1999 (unaudited)
<TABLE>
<CAPTION>
Par Value Value
--------- -----------
<S> <C> <C>
CORPORATE NOTES AND BONDS - 65.13%
Finance - 13.64%
$ 1,000,000 Ahold Finance USA, Inc.
6.25%, 05/01/09 ................. $ 983,750
300,000 CitiGroup, Inc.
6.13%, 06/15/00 ................. 300,915
250,000 CitiGroup, Inc.
6.63%, 09/15/05 ................. 252,812
1,000,000 CitiGroup, Inc.
6.88%, 06/01/25 ................. 1,027,500
880,000 Commercial Credit Co.
8.25%, 11/01/01 ................. 930,600
1,000,000 Commercial Credit Co.
6.20%, 11/15/01 ................. 1,011,250
500,000 Dean Witter Discover & Co.
6.75%, 08/15/00 ................. 507,060
1,000,000 Diageo Capital, Plc
6.00%, 03/27/03 ................. 1,001,000
1,000,000 Keycorp Institutional Capital Corp.
Series A
6.63%, 06/15/29
Putable 06/01/99 (A) ............ 1,000,840
1,000,000 Norwest Financial, Inc.,
Senior Note
6.88%, 06/15/00 ................. 1,016,160
2,400,000 Paccar Financial Corp.,
Senior Note
Series H, MTN
5.86%, 03/15/01 ................. 2,406,000
1,020,000 Pitney Bowes Credit Corp.
6.63%, 06/01/02 ................. 1,046,775
180,000 USL Capital Corp., Senior Note
8.13%, 02/15/00 ................. 183,456
------------
11,668,118
------------
Consumer Staples - 9.50%
1,575,000 Archer-Daniels-Midland
6.63%, 05/01/29 ................. 1,541,531
1,000,000 Coca-Cola Enterprises, Inc.
7.88%, 02/01/02 ................. 1,052,500
1,000,000 Coca-Cola Enterprises, Inc.
7.13%, 08/01/17 ................. 1,041,250
500,000 Crown Cork & Seal Co., Inc.
8.38%, 01/15/05 ................. 543,750
1,000,000 Mead Corp., Debenture
6.84%, 03/01/37 ................. 1,048,750
1,000,000 Minnesota Mining & Manufacturing Co.
Debenture
6.38%, 02/15/28 ................. 967,500
1,000,000 Pepsi Bottling Holdings, Inc.
5.38%, 02/17/04 (A) ............. 977,500
300,000 Seagram Co., Ltd., Yankee Note
6.50%, 04/01/03 ................. 299,250
675,000 Sysco Corp., Debenture
6.50%, 08/01/28 ................. 654,750
------------
8,126,781
------------
<CAPTION>
Par Value Value
--------- -----------
<S> <C> <C>
Telephone and Telecommunications - 6.31%
$ 455,000 GTE California, Inc., Debenture
6.75%, 03/15/04 ................. $ 469,788
350,000 GTE Corp., Debenture
9.38%, 12/01/00 ................. 368,375
925,000 GTE Corp., Debenture
6.46%, 04/15/08 ................. 937,302
1,000,000 GTE Southwest, Inc., Debenture
6.00%, 01/15/06 ................. 991,250
2,000,000 MCI WorldCom, Inc.
6.13%, 04/15/02 ................. 2,010,000
625,000 Sprint Capital Corp.
6.90%, 05/01/19 ................. 615,625
------------
5,392,340
------------
Manufacturing - 6.15%
1,000,000 International Paper Co.
7.63%, 08/01/04 ................. 1,047,500
500,000 Loral Corp., Senior Note
7.63%, 06/15/04 ................. 536,250
1,500,000 Raytheon Co.
6.50%, 07/15/05 ................. 1,522,500
1,000,000 Snap-On, Inc.
6.63%, 10/01/05 ................. 1,042,500
1,000,000 Weyerhaeuser Co., Debenture
8.38%, 02/15/07 ................. 1,111,250
------------
5,260,000
------------
Banking - 5.87%
1,000,000 Bank One Milwaukee
National Association, MTN
6.35%, 03/19/01 ................. 1,012,500
2,000,000 Branch Banking & Trust Co.,
Senior Note
5.70%, 02/01/01 ................. 2,000,000
500,000 National City Bank of Kentucky
Subordinated Note
6.30%, 02/15/11 ................. 484,375
1,000,000 NationsBank of North America
5.86%, 05/26/00 ................. 1,003,750
500,000 SunTrust Bank, Atlanta
Subordinated Note
7.25%, 09/15/06 ................. 522,500
------------
5,023,125
------------
Utilities - 5.05%
1,000,000 Baltimore Gas & Electric Co.,
Mortgage
8.38%, 08/15/01 ................. 1,053,750
500,000 Emerson Electric Co.
5.85%, 03/15/09 ................. 493,705
500,000 National Rural Utilities
6.13%, 05/15/05 ................. 503,125
1,000,000 PacifiCorp, MTN
6.38%, 05/15/08 ................. 1,006,250
</TABLE>
See Notes to Financial Statements.
18
<PAGE>
Corporate Bond Fund
Portfolio of Investments (continued)
April 30, 1999 (unaudited)
<TABLE>
<CAPTION>
Par Value Value
--------- -----------
<S> <C> <C>
Utilities (continued)
$ 1,000,000 Potomac Electric Power Co.
First Mortgage
6.25%, 10/15/07 ................. $ 1,008,750
250,000 Virginia Electric & Power Co.,
MTN
9.40%, 05/27/99 ................. 250,625
------------
4,316,205
------------
Automobile Finance - 4.36%
950,000 Associates Corp. of North America
6.38%, 06/15/00 ................. 959,177
250,000 Ford Motor Credit Co.
Debenture
6.25%, 11/08/00 ................. 252,460
250,000 Ford Motor Credit Co.,
7.00%, 09/25/01 ................. 257,188
1,000,000 Ford Motor Credit Co.,
Senior Note
6.50%, 02/28/02 ................. 1,018,750
1,000,000 General Motors Acceptance Corp.
6.88%, 07/15/01 ................. 1,025,000
200,000 General Motors Acceptance Corp.
9.63%, 12/15/01 ................. 218,500
------------
3,731,075
------------
Consumer Products - 3.71%
1,100,000 Hershey Foods Corp., Debenture
7.20%, 08/15/27 ................. 1,179,750
1,000,000 McDonald's Corp., Senior MTN
5.95%, 01/15/08 ................. 995,000
1,000,000 PepsiCo, Inc., MTN
5.75%, 01/01/03 ................. 997,500
------------
3,172,250
------------
Technology - 2.77%
895,000 International Business Machines
Corp.
5.38%, 02/01/09 ................. 849,131
1,000,000 International Business Machines
Corp. Debenture
6.22%, 08/01/27 ................. 1,025,000
500,000 Pitney Bowes, Inc.
5.50%, 04/15/04 ................. 493,750
------------
2,367,881
------------
Health Care - 1.66%
150,000 Becton Dickinson & Co., Debenture
8.80%, 03/01/01 ................. 158,062
1,275,000 Becton Dickinson & Co., Debenture
6.70%, 08/01/28 ................. 1,260,656
------------
1,418,718
------------
<CAPTION>
Par Value Value
--------- -----------
<S> <C> <C>
Transportation - 1.54%
$ 1,000,000 Burlington North Santa Fe
6.13%, 03/15/09 ................. $ 987,500
300,000 Southwest Airlines Co.
8.00%, 03/01/05 ................. 328,125
------------
1,315,625
------------
Book Publishing - 1.26%
1,000,000 New York Times Co., Note
7.63%, 03/15/05 ................. 1,080,000
------------
Merchandising and Retail - 1.23%
1,000,000 Wal-Mart Stores, Inc.
8.63%, 04/01/01 ................. 1,052,500
------------
Insurance - 1.18%
1,000,000 Hartford Financial Services Group
6.38%, 11/01/02 ................. 1,008,750
------------
Oil, Gas and Petroleum - 0.90%
500,000 Atlantic Richfield Co., Debenture
10.88%, 07/15/05 ................ 620,000
150,000 Unocal Corp., MTN, Debenture
9.25%, 08/02/99 ................. 151,312
------------
771,312
------------
Total Corporate Notes and Bonds . 55,704,680
(Cost $55,766,671) ------------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 22.33%
Federal National
Mortgage Association - 7.02%
69,390 7.50%, 11/01/07, Pool # 188629 .. 71,601
750,000 5.25%, 01/15/09 ................. 715,373
93,846 5.00%, 08/01/10, Pool # 006893
Series A-1, CMO ................. 89,652
442,677 7.00%, 09/01/12, Pool # 398610 .. 452,222
406,418 7.00%, 12/01/12, Pool # 251339 .. 415,181
1,124,906 7.50%, 06/01/13, Pool # 457543 .. 1,160,756
1,996,170 6.00%, 11/01/23, Pool # 050940 .. 1,940,038
676,932 6.50%, 03/01/28, Pool # 412263 .. 672,485
503,954 6.00%, 12/01/28, Pool # 450593 .. 488,362
------------
6,005,670
------------
U.S. Treasury Notes - 5.90%
1,000,000 4.50%, 01/31/01 ................. 990,680
250,000 6.38%, 03/31/01 ................. 255,760
1,000,000 5.75%, 08/15/03 ................. 1,018,880
1,250,000 4.75%, 02/15/04 ................. 1,225,000
</TABLE>
See Notes to Financial Statements.
19
<PAGE>
Corporate Bond Fund
Portfolio of Investments (continued)
April 30, 1999 (unaudited)
<TABLE>
<CAPTION>
Par Value Value
--------- -----------
<S> <C> <C>
U.S. Treasury Notes (continued)
$ 1,000,000 7.25%, 08/15/04 ................. $ 1,088,780
250,000 4.75%, 11/15/08 ................. 238,905
250,000 5.25%, 11/15/28 ................. 231,330
-----------
5,049,335
-----------
U.S. Treasury Bonds - 4.85%
1,000,000 11.63%, 11/15/02 ................ 1,201,680
1,350,000 12.00%, 08/15/13 ................ 1,961,402
840,000 7.50%, 11/15/16 ................. 984,564
-----------
4,147,646
-----------
Federal Home Loan
Mortgage Corporation - 2.31%
11,465 8.75%, 08/01/01, Pool # 220011 .. 11,787
1,000,000 5.75%, 07/15/03 ................. 1,005,450
66,391 7.00%, 06/01/04, Pool # 189683 .. 67,415
51,237 7.50%, 08/01/08, Pool # 181313 .. 52,154
23,346 7.00%, 05/01/16, Pool # 272046 .. 23,885
150,789 7.00%, 02/01/17, Pool # 289284 .. 154,574
66,674 8.00%, 07/01/21, Pool # C00068 .. 69,611
44,569 8.00%, 10/01/21, Pool # D11045 .. 46,532
159,548 7.00%, 10/01/22, Pool # C00184 .. 162,091
163,667 7.00%, 02/01/23, Pool # C00213 .. 166,276
220,191 6.00%, 09/01/23, Pool # D41208 .. 214,206
-----------
1,973,981
-----------
Government National
Mortgage Association - 1.66%
68,624 9.00%, 09/15/04, Pool # 003669 .. 71,980
45,049 9.00%, 12/15/08, Pool # 027562 .. 47,944
115,930 8.00%, 05/15/22, Pool # 319062 .. 121,220
499,211 6.00%, 03/15/29, Pool # 487061 .. 483,451
697,069 6.50%, 03/15/29, Pool # 464613 .. 692,489
-----------
1,417,084
-----------
Federal Home Loan Bank - 0.59%
500,000 5.38%, 03/02/01 ................. 500,520
-----------
Total U.S. Government
and Agency Obligations .......... 19,094,236
(Cost $19,338,690) -----------
ASSET-BACKED AND MORTGAGE-BACKED SECURITIES - 5.95%
2,000,000 Chemical Master Credit Card Trust I
Series 1996-1, Class A
5.55%, 09/15/03 ................. 2,000,620
1,000,000 Ford Credit Auto Owner Trust
Series 1999-A, Class A-4
5.31%, 11/15/01 ................. 999,085
<CAPTION>
Par Value Value
--------- -----------
<S> <C> <C>
ASSET-BACKED AND MORTGAGE-BACKED SECURITIES (continued)
$ 1,063,830 Guaranteed Export Trust Certificates
Series 1993-D, Class A-3
5.23%, 05/15/05 ................. $ 1,043,739
26,902 NationsBank Auto Owner Trust
Series 1996-A, Class A-3
6.38%, 07/15/00 ................. 26,911
21,299 Premier Auto Trust
Series 1996-3, Class A-3
6.50%, 03/06/00 ................. 21,299
1,000,000 Premier Auto Trust
Series 1999-2, Class A-4
5.59%, 02/09/04 ................. 999,725
-----------
Total Asset-Backed and
Mortgage-Backed Securities ...... 5,091,379
(Cost $5,067,871) -----------
FOREIGN BONDS (B) - 3.49%
1,000,000 Heinz (H.J.) Co.
5.75%, 02/03/03 ................. 993,200
2,000,000 Xerox Credit Corp., Euro MTN
Series E
5.40%, 09/11/00 ................. 1,991,000
-----------
Total Foreign Bonds ............. 2,984,200
(Cost $2,958,240) -----------
REPURCHASE AGREEMENT - 3.49%
2,986,000 Repurchase Agreement with:
State Street Bank
4.87%, 04/30/99, dated 05/03/99
Repurchase Price $2,986,404
(Collateralized by U.S. Treasury Bond
8.50%, Due 02/15/20;
Total Par $2,290,000
Market Value $3,048,563) ........ 2,986,000
-----------
Total Repurchase Agreement ...... 2,986,000
(Cost $2,986,000) -----------
Total Investments - 100.39% ....................... 85,860,495
(Cost $86,117,472) -----------
Net Assets and Other Liabilities - (0.39)% ........ (333,251)
-----------
Net Assets - 100.00% .............................. $85,527,244
===========
</TABLE>
- -----------------------------------
(A) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may only be resold, in transactions exempt
from registration, to qualified institutional buyers. At April 30,
1999, these securities amounted to $1,978,340 or 2.31% of net assets.
(B) Euro-Dollar Bond
CMO Collateralized Mortgage Obligation
MTN Medium Term Note
See Notes to Financial Statements.
20
<PAGE>
High Quality Bond Fund
Portfolio of Investments
April 30, 1999 (unaudited)
<TABLE>
<CAPTION>
Par Value Value
--------- -----------
<S> <C> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 54.23%
U.S. Treasury Bonds - 19.08%
$ 4,450,000 12.00%, 08/15/13 ................ $ 6,465,361
4,000,000 13.25%, 05/15/14 ................ 6,291,520
950,000 7.50%, 11/15/16 ................. 1,113,495
6,000,000 7.88%, 02/15/21 ................. 7,407,660
200,000 8.13%, 05/15/21 ................. 253,304
9,500,000 8.13%, 08/15/21 ................. 12,045,050
3,500,000 8.00%, 11/15/21 ................. 4,394,180
5,500,000 7.25%, 08/15/22 ................. 6,401,890
1,475,000 6.38%, 08/15/27 ................. 1,574,887
6,090,000 6.13%, 11/15/27 ................. 6,303,576
2,500,000 5.50%, 08/15/28 ................. 2,381,175
-----------
54,632,098
-----------
Government National
Mortgage Association - 10.94%
260,204 6.50%, 03/15/13, Pool # 458165 .. 263,456
82,210 6.50%, 03/15/13, Pool # 463723 .. 83,237
278,117 6.50%, 04/15/13, Pool # 466013 .. 281,594
304,377 6.50%, 04/15/13, Pool # 473476 .. 308,182
307,412 6.50%, 05/15/13, Pool # 433742 .. 311,254
145,524 6.50%, 05/15/13, Pool # 476292 .. 147,343
50,704 6.50%, 10/15/13, Pool # 434026 .. 51,322
369,117 6.50%, 10/15/13, Pool # 434017 .. 373,613
2,015,998 6.50%, 10/15/13, Pool # 471586 .. 2,040,553
390,844 6.50%, 10/15/13, Pool # 464249 .. 395,605
129,691 6.50%, 10/15/13, Pool # 484576 .. 131,271
1,144,596 6.50%, 11/15/13, Pool # 454228 .. 1,158,538
788,013 6.50%, 11/15/13, Pool # 477529 .. 797,611
925,441 6.50%, 11/15/13, Pool # 490795 .. 936,713
1,038,534 7.00%, 07/20/22, Pool # 008022 (C) 1,056,386
1,479,780 7.00%, 11/15/22, Pool # 330551 .. 1,505,218
1,000,100 6.50%, 01/15/29, Pool # 482909 .. 993,529
3,516,776 7.00%, 01/15/29, Pool # 499333 .. 3,568,402
778,963 7.00%, 02/15/29, Pool # 470018 .. 790,399
3,598,203 7.00%, 02/15/29, Pool # 486937 .. 3,651,024
4,940,847 7.00%, 02/15/29, Pool # 492173 .. 5,013,378
25,002 6.50%, 03/15/29, Pool # 464613 .. 24,838
3,597,181 6.00%, 03/15/29, Pool # 464632 .. 3,483,618
2,061,367 6.50%, 03/15/29, Pool # 503051 .. 2,047,823
1,939,032 6.50%, 04/15/29, Pool # 483349 .. 1,926,293
-----------
31,341,200
-----------
Federal National
Mortgage Association - 7.99%
6,000,000 5.10%, 09/25/00, MTN ............ 5,991,660
2,000,000 7.85%, 09/10/04 ................. 2,017,300
3,000,000 8.50%, 02/01/05 ................. 3,050,040
989,677 6.50%, 05/01/06, Pool # 348137 .. 994,151
2,000,000 6.64%, 07/02/07, MTN ............ 2,084,700
1,615,000 5.25%, 01/15/09 ................. 1,540,435
1,394,429 7.00%, 12/01/12, Pool # 251339 .. 1,424,493
2,241,055 6.75%, 04/25/21, CMO ............ 2,265,550
3,335,956 8.50%, 12/01/25, Pool # 313420 .. 3,504,823
-----------
22,873,152
-----------
<CAPTION>
Par Value Value
--------- -----------
<S> <C> <C>
U.S. Treasury Notes - 6.20%
$ 2,500,000 5.00%, 02/28/01 ................. $ 2,496,800
200,000 5.88%, 11/30/01 ................. 203,544
1,000,000 5.88%, 09/30/02 ................. 1,019,530
500,000 5.75%, 08/15/03 ................. 509,440
2,000,000 4.75%, 02/15/04 ................. 1,960,000
2,000,000 5.88%, 02/15/04 ................. 2,052,120
1,000,000 7.25%, 08/15/04 ................. 1,088,780
1,000,000 7.88%, 11/15/04 ................. 1,121,050
2,500,000 5.63%, 05/15/08 ................. 2,536,150
2,000,000 4.75%, 11/15/08 ................. 4,778,100
-----------
17,765,514
-----------
Federal Home Loan
Mortgage Corporation - 4.22%
7,000,000 5.50%, 03/15/14, Series 2134,
Class PM ........................ 6,643,420
5,479,528 6.50%, 01/01/29, Pool # C21178 .. 5,448,679
-----------
12,092,099
-----------
U.S. Government-Backed Bonds - 3.90%
4,000,000 Private Export Funding Corp.
6.49%, 07/15/07 ................. 4,190,000
1,800,000 A.I.D. State of Israel
Series 7-A
5.45%, 02/15/01 ................. 1,798,020
5,000,000 A.I.D. Israel
Series 8-C
6.63%, 08/15/03 ................. 5,172,800
-----------
11,160,820
-----------
U.S. Treasury Strip (A) - 1.90%
9,000,000 4.86%, 05/15/08 Interest only (B) 5,455,080
-----------
Total U.S. Government
and Agency Obligations .......... 155,319,963
(Cost $155,159,229) -----------
CORPORATE NOTES AND BONDS - 36.68%
Finance - 11.44%
1,000,000 American Expresss
6.75%, 06/23/04 ................. 1,030,000
2,000,000 Associates Corp. of North America
6.63%, 05/15/01 ................. 2,037,500
2,000,000 Associates Corp. of North America,
MTN
7.40%, 05/03/02 ................. 2,085,000
4,000,000 Bank One Milwaukee
National Association, MTN
6.35%, 03/19/01 ................. 4,050,000
1,500,000 Caterpillar Financial Services Corp.
Series F, MTN
5.47%, 09/12/01 ................. 1,492,500
7,500,000 Ford Motor Credit Co., Senior Note
6.50%, 02/28/02 ................. 7,640,625
</TABLE>
See Notes to Financial Statements.
21
<PAGE>
High Quality Bond Fund
Portfolio of Investments (continued)
April 30, 1999 (unaudited)
<TABLE>
<CAPTION>
Par Value Value
--------- -----------
<S> <C> <C>
Finance (continued)
$ 1,600,000 General Electric Capital Corp.
Series A, MTN
5.92%, 04/03/01 ................. $ 1,614,000
250,000 General Electric Capital Corp.
8.30%, 09/20/09 ................. 286,562
2,000,000 Key Bank of North America
7.13%, 08/15/06 ................. 2,082,500
3,600,000 Keycorp Institutional Capital Corp.
Series A
6.63%, 06/15/29
Putable 06/01/99 (D) ............ 3,603,024
1,300,000 Suntrust Bank of Central Florida,
MTN
6.90%, 07/01/07 ................. 1,361,750
3,000,000 Suntrust Bank, Atlanta
Subordinated Note
7.25%, 09/15/06 ................. 3,135,000
2,350,000 Xerox Credit Corp., Euro MTN
5.40%, 09/11/00 ................. 2,339,425
-----------
32,757,886
-----------
Utilities - 10.25%
500,000 Emerson Electric Co.
5.85%, 03/15/09 ................. 493,705
1,950,000 GTE Corp., Debenture
6.46%, 04/15/08 ................. 1,975,935
6,500,000 GTE Florida, Inc., Series A,
Debenture
6.31%, 12/15/02 ................. 6,597,500
3,000,000 MCI WorldCom, Inc.
6.13%, 04/15/02 ................. 3,015,000
3,500,000 National Rural Utilities
5.50%, 01/15/05 ................. 3,425,625
1,025,000 National Rural Utilities
6.20%, 02/01/08 ................. 1,026,281
5,000,000 PacifiCorp, MTN
6.38%, 05/15/08 ................. 5,031,250
2,750,000 Potomac Electric Power Co.
First Mortgage
6.25%, 10/15/07 ................. 2,774,062
3,500,000 Sprint Capital Corp.
6.90%, 05/01/19 ................. 3,447,500
1,500,000 Tele-Commun, Inc.
7.25%, 08/01/05 ................. 1,588,125
-----------
29,374,983
-----------
Consumer Staples - 9.10%
1,650,000 Archer-Daniels-Midland, Debenture
6.63%, 05/01/29 ................. 1,614,937
1,650,000 Coca-Cola Enterprises, Inc.
7.13%, 08/01/17 ................. 1,718,062
1,900,000 Colgate-Palmolive Co., Series C,
MTN
5.27%, 12/01/03 ................. 1,854,875
5,050,000 Hershey Foods Corp.
7.20%, 08/15/27 ................. 5,416,125
1,650,000 McDonald's Corp., Senior MTN
5.95%, 01/15/08 ................. 1,641,750
<CAPTION>
Par Value Value
--------- -----------
<S> <C> <C>
Consumer Staples (continued)
$ 2,000,000 Minnesota Mining & Manufacturing Co.
Debenture
6.38%, 02/15/28 ................. $ 1,935,000
1,800,000 Pepsi Bottling Holdings, Inc.
5.38%, 02/17/04 (D) ............. 1,759,500
250,000 Procter & Gamble Co.
8.50%, 08/10/09 ................. 295,312
3,000,000 Sara Lee Corp., MTN
7.40%, 03/22/02 ................. 3,112,500
3,000,000 Sysco Corp.
7.00%, 05/01/06 ................. 3,146,250
3,675,000 Sysco Corp., Debenture
6.50%, 08/01/28 ................. 3,564,750
-----------
26,059,061
-----------
Industrial - 2.35%
2,000,000 Illinois Tool Works
5.75%, 03/01/09 ................. 1,957,432
3,800,000 United Technologies Corp.
6.70%, 08/01/28 ................. 3,785,750
1,000,000 Xerox Corp.
5.50%, 11/15/03 ................. 985,000
-----------
6,728,182
-----------
Technology - 2.22%
2,500,000 International Business Machines Corp.
7.25%, 11/01/02 ................. 2,612,500
2,900,000 International Business Machines Corp.
5.38%, 02/01/09 ................. 2,751,375
1,000,000 Pitney Bowes, Inc.
5.50%, 04/15/04 ................. 987,500
-----------
6,351,375
-----------
Health Care - 1.32%
800,000 Abbott Laboratories
6.40%, 12/01/06 ................. 820,000
3,000,000 Becton Dickinson, Debenture
6.70%, 08/01/28 ................. 2,966,250
-----------
3,786,250
-----------
Total Corporate Notes and Bonds 105,057,737
(Cost $104,466,574) -----------
ASSET-BACKED AND MORTGAGE-BACKED SECURITIES - 6.50%
2,300,000 Chase Manhattan Auto Owner Trust
Series 1998-C, Class A3
5.80%, 01/15/02 ................. 2,310,051
6,000,000 Citibank Credit Card Master Trust I
Series 1998-6
5.85%, 04/10/03 ................. 6,028,080
1,000,000 Citibank Credit Card Master Trust I
Series 1999-1, Class A
5.50%, 02/15/06 ................. 983,120
</TABLE>
See Notes to Financial Statements.
22
<PAGE>
High Quality Bond Fund
Portfolio of Investments (continued)
April 30, 1999 (unaudited)
<TABLE>
<CAPTION>
Par Value Value
--------- -----------
<S> <C> <C>
ASSET-BACKED AND MORTGAGE-BACKED SECURITIES (continued)
$ 700,000 MBNA Master Credit Card Trust
Series 1998-D, Class A
5.80%, 12/15/05 ................. $ 702,761
4,000,000 MBNA Master Credit Card Trust
Series 1998-J, Class A
5.25%, 02/15/06 ................. 3,913,720
1,505,660 Prudential Home Mortgage Securities
Series 1993-38, Class A-3, CMO
6.15%, 09/25/23 ................. 1,501,896
3,184,102 Rural Housing Trust
Series 1987-1, Class 1-D, CMO
6.33%, 04/01/26 ................. 3,180,121
------------
Total Asset-Backed and
Mortgage-Backed Securities ...... 18,619,749
(Cost $18,537,538) ------------
FOREIGN BOND (E)- 0.52%
1,500,000 Heinz (H.J.) Co.
5.75%, 02/03/03 ................. 1,489,800
------------
Total Foreign Bond .............. 1,489,800
(Cost $1,481,340) ------------
REPURCHASE AGREEMENT - 2.91%
8,320,000 Repurchase Agreement with:
State Street Bank
4.87%, 04/30/99, dated 05/03/99
Repurchase Price $8,321,126
(Collateralized by U.S. Treasury
Bond 7.25%, Due 05/15/16,
Total Par $7,155,000
Market Value $8,487,619) ........ 8,320,000
------------
Total Repurchase Agreement ...... 8,320,000
(Cost $8,320,000) ------------
Total Investments - 100.84% ....................... 288,807,249
(Cost $287,964,681) ------------
Net Other Assets and Liabilities - (0.84)% ........ (2,406,878)
------------
Net Assets - 100.00% .............................. $286,400,371
============
</TABLE>
- -----------------------------------
(A) Discount yield at time of purchase.
(B) Stripped securities represent the splitting of cash flows into interest
and principal. Holders, as indicated, are entitled to that portion of
the payment representing interest only or principal only.
(C) 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, 1999.
(D) Security exempt from registration under Rule 144A of the Securities Act
of 1933, as amended. These securities may only be resold, in
transactions exempt from registration, to qualified institutional
buyers. At April 30, 1999, these securities amounted to $5,362,524 or
1.87% of net assets.
(E) Euro-Dollar Bond
CMO Collateralized Mortgage Obligation
MTN Medium Term Note
See Notes to Financial Statements.
23
<PAGE>
Galaxy Taxable Bond Funds
Statements of Assets and Liabilities
April 30, 1999 (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 .................................... $ 56,212,434 $ 306,007,482 $ 83,131,472 $ 279,644,681
Repurchase Agreements .................................. 4,109,000 6,135,000 2,986,000 8,320,000
Net unrealized appreciation (depreciation) on investments 128,712 (610,319) (256,977) 842,568
------------- ------------- ------------- -------------
Total investments at value ........................... 60,450,146 311,532,163 85,860,495 288,807,249
Cash ..................................................... 4,827 124,385 -- 14,849
Receivable for investments sold .......................... 1,196,879 17,769,035 2,490,443 8,432,558
Receivable for shares sold ............................... 59,148 250,528 867,722 1,806,767
Interest receivable ...................................... 626,151 3,123,266 1,139,442 3,798,506
Deferred organizational expense (Note 2) ................. -- -- 2,433 --
------------- ------------- ------------- -------------
Total Assets 62,337,151 332,799,377 90,360,535 302,859,929
------------- ------------- ------------- -------------
LIABILITIES:
Dividends payable ........................................ 90,457 886,769 387,555 1,216,743
Payable for investments purchased ........................ 1,218,875 21,469,902 4,350,463 14,523,266
Payable for shares redeemed .............................. 38,420 76,516 26,633 533,802
Advisory fee payable (Note 3) ............................ 27,497 139,810 38,497 128,651
Payable to Fleet affiliates (Note 3) ..................... 11,897 15,479 3,609 27,836
Payable to Administrator (Note 3) ........................ 24,883 56,340 13,974 10,686
Trustees' fees and expenses payable (Note 3) ............. 2,824 8,778 10,200 6,289
Payable to Custodian ..................................... -- -- 1,112 --
Accrued expenses and other payables ...................... 15,037 28,009 1,248 12,285
------------- ------------- ------------- -------------
Total Liabilities .................................... 1,429,890 22,681,603 4,833,291 16,459,558
------------- ------------- ------------- -------------
NET ASSETS $ 60,907,261 $ 310,117,774 $ 85,527,244 $ 286,400,371
============= ============= ============= =============
NET ASSETS consist of:
Par value (Note 5) ....................................... $ 6,088 $ 30,459 $ 8,084 $ 26,750
Paid-in capital in excess of par value ................... 66,306,718 333,248,120 87,416,770 284,599,777
Undistributed net investment income ...................... 121,169 169,845 131,198 203,133
Accumulated net realized gain (loss) on investments sold . (5,655,426) (22,720,331) (1,771,831) 728,143
Net unrealized appreciation (depreciation) of investments 128,712 (610,319) (256,977) 842,568
------------- ------------- ------------- -------------
TOTAL NET ASSETS ............................................ $ 60,907,261 $ 310,117,774 $ 85,527,244 $ 286,400,371
============= ============= ============= =============
Retail A Shares:
Net Assets ............................................... $ 26,286,353 $ 63,438,363 $ -- $ 51,130,995
Shares of beneficial interest outstanding ................ 2,627,580 6,230,776 -- 4,775,872
NET ASSET VALUE and redemption price per share ........... $ 10.00 $ 10.18 $ -- $ 10.71
Sales charge - 3.75% of offering price ................... 0.39 0.40 -- 0.42
------------- ------------- ------------- -------------
Maximum offering price per share ......................... $ 10.39 $ 10.58 $ -- $ 11.13
============= ============= ============= =============
Retail B Shares:
Net Assets ............................................... $ 840,619 $ 520,668 N/A $ 7,617,231
Shares of beneficial interest outstanding ................ 84,028 51,169 N/A 711,449
------------- ------------- ------------- -------------
NET ASSET VALUE and offering price per share* ............ $ 10.00 $ 10.18 N/A $ 10.71
============= ============= ============= =============
Trust Shares:
Net Assets ............................................... $ 33,780,289 $ 246,158,743 $ 85,527,244 $ 227,352,681
Shares of beneficial interest outstanding ................ 3,376,743 24,177,195 8,083,563 21,235,110
------------- ------------- ------------- -------------
NET ASSET VALUE, offering and redemption price per share . $ 10.00 $ 10.18 $ 10.58 $ 10.71
============= ============= ============= =============
A Prime Shares:
Net Assets ............................................... $ -- $ -- N/A $ 13,849
Shares of beneficial interest outstanding ................ -- -- N/A 1,293
NET ASSET VALUE and redemption price per share ........... $ -- $ -- N/A $ 10.71
Sales charge - 4.75% of offering price ................... -- -- N/A 0.53
------------- ------------- ------------- -------------
Maximum offering price per share ......................... $ -- $ -- N/A $ 11.24
============= ============= ============= =============
B Prime Shares:
Net Assets ............................................... $ -- $ -- N/A $ 285,615
Shares of beneficial interest outstanding ................ -- -- N/A 26,699
------------- ------------- ------------- -------------
NET ASSET VALUE and offering price per share* ............ $ -- $ -- N/A $ 10.70
============= ============= ============= =============
</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.
24
<PAGE>
Galaxy Taxable Bond Funds
Statements of Operations
For the six months ended April 30, 1999 (unaudited)
<TABLE>
<CAPTION>
Intermediate
Short-Term Government Corporate High Quality
Bond Fund Income Fund Bond Fund Bond Fund
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest (Note 2) .................................. $ 1,867,878 $ 9,443,074 $ 2,653,495 $ 8,339,000
------------- ------------- ------------- -------------
Total investment income .......................... 1,867,878 9,443,074 2,653,495 8,339,000
------------- ------------- ------------- -------------
EXPENSES:
Investment advisory fee (Note 3) ................... 237,682 1,146,848 313,091 1,035,557
Administration fee (Note 3) ........................ 24,232 116,353 31,768 105,056
Custodian fee ...................................... 7,452 9,305 10,733 10,645
Fund accounting fee (Note 3) ....................... 24,502 33,315 24,042 34,439
Legal fee (Note 3) ................................. 1,466 6,713 1,964 5,645
Audit fee .......................................... 8,688 8,688 7,674 9,229
Transfer agent fee (Note 3) ........................ 23,862 78,281 30,035 174,778
Shareholder services and 12b-1 fees (Note 3) ....... 23,779 47,111 -- 59,573
Trustees' fees and expenses (Note 3) ............... 1,205 4,087 1,196 3,437
Amortization of organization costs (Note 2) ........ -- -- 1,953 --
Reports to shareholders ............................ 10,201 13,850 4,579 17,644
Miscellaneous ...................................... 11,757 17,518 4,596 21,868
------------- ------------- ------------- -------------
Total expenses before reimbursement/waiver ....... 374,826 1,482,069 431,631 1,477,871
------------- ------------- ------------- -------------
Less: reimbursement/waiver (Note 4) .............. (62,822) (305,986) (83,491) (276,419)
------------- ------------- ------------- -------------
Total expenses net of reimbursement/waiver ....... 312,004 1,176,083 348,140 1,201,452
------------- ------------- ------------- -------------
NET INVESTMENT INCOME ................................. 1,555,874 8,266,991 2,305,355 7,137,548
------------- ------------- ------------- -------------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS (Note 2):
Net realized gain on investments sold .............. 220,321 733,029 277,714 753,799
Net change in unrealized (depreciation)
of investments ................................... (861,826) (10,292,569) (2,791,277) (11,110,880)
------------- ------------- ------------- -------------
NET REALIZED AND UNREALIZED (LOSS)
ON INVESTMENTS ..................................... (641,505) (9,559,540) (2,513,563) (10,357,081)
------------- ------------- ------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS .......................... $ 914,369 $ (1,292,549) $ (208,208) $ (3,219,533)
============= ============= ============= =============
</TABLE>
See Notes to Financial Statements.
25
<PAGE>
Galaxy Taxable Bond Funds
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Intermediate Government
Short-Term Bond Fund Income Fund
--------------------------- ----------------------------
Six months Six months
ended Year ended ended Year ended
April 30, 1999 October 31, April 30, 1999 October 31,
(unaudited) 1998 (unaudited) 1998
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
NET ASSETS at beginning of period ............................ $68,224,850 $78,702,807 $306,627,909 $274,840,329
----------- ----------- ------------ ------------
Increase in Net Assets resulting from operations:
Net investment income ..................................... 1,555,874 3,710,475 8,266,991 16,426,815
Net realized gain on investments sold ..................... 220,321 276,632 733,029 3,980,175
Net change in unrealized appreciation
(depreciation) of investments ............................ (861,826) 473,071 (10,292,569) 5,732,449
----------- ----------- ------------ ------------
Net increase (decrease) in net assets resulting
from operations ........................................ 914,369 4,460,178 (1,292,549) 26,139,439
----------- ----------- ------------ ------------
Dividends to shareholders from:
Retail A Shares:
Net investment income ................................... (661,569) (1,464,083) (1,689,336) (3,735,466)
----------- ----------- ------------ ------------
Retail B Shares:
Net investment income ................................... (19,743) (44,206) (6,206) --
----------- ----------- ------------ ------------
Trust Shares:
Net investment income ................................... (877,055) (2,384,791) (6,571,449) (13,367,624)
----------- ----------- ------------ ------------
Total Dividends to shareholders ........................... (1,558,367) (3,893,080) (8,266,991) (17,103,090)
----------- ----------- ------------ ------------
Net increase (decrease) from share transactions (1) .......... (6,673,591) (11,045,055) 13,049,405 22,751,231
----------- ----------- ------------ ------------
Net increase (decrease) in net assets ..................... (7,317,589) (10,477,957) 3,489,865 31,787,580
----------- ----------- ------------ ------------
NET ASSETS at end of period (including line A) ............... $60,907,261 $68,224,850 $310,117,774 $306,627,909
=========== =========== ============ ============
(A) Undistributed net investment income ...................... $ 121,169 $ 123,662 $ 169,845 $ 169,845
=========== =========== ============ ============
</TABLE>
- ------------------------------------
(1) For detail on share transactions by series, see Statements of Changes
in Net Assets - Capital Stock Activity on pages 28 and 29.
See Notes to Financial Statements.
26
<PAGE>
Galaxy Taxable Bond Funds
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Corporate Bond Fund High Quality Bond Fund
--------------------------- ----------------------------
Six months Six months
ended Year ended ended Year ended
April 30, 1999 October 31, April 30, 1999 October 31,
(unaudited) 1998 (unaudited) 1998
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
NET ASSETS at beginning of period ........................... $83,564,654 $91,728,383 $268,441,362 $212,346,575
----------- ----------- ------------ ------------
Increase in Net Assets resulting from operations:
Net investment income .................................... 2,305,355 5,160,979 7,137,548 12,717,417
Net realized gain on investments sold .................... 277,714 1,076,268 753,799 5,166,591
Net change in unrealized appreciation (depreciation)
of investments ......................................... (2,791,277) 1,374,412 (11,110,880) 5,644,735
----------- ----------- ------------ ------------
Net increase (decrease) in net assets resulting
from operations ...................................... (208,208) 7,611,659 (3,219,533) 23,528,743
----------- ----------- ------------ ------------
Dividends to shareholders from:
Retail A Shares:
Net investment income .................................. -- -- (1,258,237) (1,841,859)
Net realized gain on investments ....................... -- -- (407,808) --
----------- ----------- ------------ ------------
Total Dividends ...................................... -- -- (1,666,045) (1,841,859)
----------- ----------- ------------ ------------
Retail B Shares:
Net investment income .................................. N/A N/A (139,897) (157,568)
Net realized gain on investments ....................... N/A N/A (48,335) --
----------- ----------- ------------ ------------
Total Dividends ...................................... N/A N/A (188,232) (157,568)
----------- ----------- ------------ ------------
Trust Shares:
Net investment income .................................. (2,305,825) (5,434,239) (5,735,657) (10,708,262)
Net realized gain on investments -- -- (1,834,817) --
----------- ----------- ------------ ------------
Total Dividends ...................................... (2,305,825) (5,434,239) (7,570,474) (10,708,262)
----------- ----------- ------------ ------------
A Prime Shares:
Net investment income .................................. N/A N/A (861) N/A
Net realized gain on investments ....................... N/A N/A (412) N/A
----------- ----------- ------------ ------------
Total Dividends ...................................... N/A N/A (1,273) N/A
----------- ----------- ------------ ------------
B Prime Shares:
Net investment income .................................. N/A N/A (2,917) N/A
Net realized gain on investments ....................... N/A N/A (504) N/A
----------- ----------- ------------ ------------
Total Dividends ...................................... N/A N/A (3,421) N/A
----------- ----------- ------------ ------------
Total Dividends to shareholders .......................... (2,305,825) (5,434,239) (9,429,445) (12,707,689)
----------- ----------- ------------ ------------
Net increase (decrease) from share transactions (1) ......... 4,476,623 (10,341,149) 30,607,987 45,273,733
----------- ----------- ------------ ------------
Net increase (decrease) in net assets .................... 1,962,590 (8,163,729) 17,959,009 56,094,787
----------- ----------- ------------ ------------
NET ASSETS at end of period (including line A) .............. $85,527,244 $83,564,654 $286,400,371 $268,441,362
=========== =========== ============ ============
(A) Undistributed net investment income ..................... $ 131,198 $ 131,668 $ 203,133 $ 203,154
=========== ========== ============ ============
</TABLE>
- ---------------------------------
(1) For detail on share transactions by series, see Statements of Changes in
Net Assets -- Capital Stock Activity on pages 28 and 29.
See Notes to Financial Statements.
27
<PAGE>
Galaxy Taxable Bond Funds
Statements of Changes in Net Assets --
Capital Stock Activity
<TABLE>
<CAPTION>
Intermediate Government
Short-Term Bond Fund Income Fund
--------------------------- ----------------------------
Six months Six months
ended Year ended ended Year ended
April 30, 1999 October 31, April 30, 1999 October 31,
(unaudited) 1998 (unaudited) 1998
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
DOLLAR AMOUNTS
Retail A Shares:
Sold ......................................................... $11,130,271 $ 15,574,273 $ 7,574,440 $ 14,217,594
Issued to shareholders in reinvestment of dividends .......... 563,320 1,235,792 1,304,437 2,790,118
Repurchased .................................................. (14,190,028) (15,956,842) (10,273,485) (17,809,958)
----------- ------------ ------------- -------------
Net increase (decrease) in shares outstanding ............. $(2,496,437) $ 853,223 $ (1,394,608) $ (802,246)
=========== ============ ============= =============
Retail B Shares:
Sold ......................................................... $ 172,666 $ 1,004,036 $ 665,864 $ --
Issued to shareholders in reinvestment of dividends .......... 16,805 41,720 4,315 --
Repurchased .................................................. (425,690) (873,621) (141,238) --
----------- ------------ ------------- -------------
Net increase (decrease) in shares outstanding ............. $ (236,219) $ 172,135 $ 528,941 $ --
=========== ============ ============= =============
Trust Shares:
Sold ......................................................... $ 2,983,367 $ 19,853,367 $ 25,582,208 $ 56,054,947
Issued to shareholders in reinvestment of dividends .......... 400,801 1,021,177 1,727,667 3,567,705
Repurchased .................................................. (7,325,103) (32,944,957) (13,394,803) (36,069,175)
----------- ------------ ------------- -------------
Net increase (decrease) in shares outstanding ............. $(3,940,935) $(12,070,413) $ 13,915,072 $ 23,553,477
=========== ============ ============= =============
SHARE ACTIVITY
Retail A Shares:
Sold ......................................................... 1,106,901 1,555,052 730,485 1,383,512
Issued to shareholders in reinvestment of dividends .......... 56,157 124,057 123,564 272,011
Repurchased .................................................. (1,412,710) (1,595,494) (990,633) (1,731,933)
----------- ------------ ------------- -------------
Net increase (decrease) in shares outstanding ............. (249,652) 83,615 (136,584) (76,410)
=========== ============ ============= =============
Retail B Shares:
Sold ......................................................... 17,170 101,000 64,378 --
Issued to shareholders in reinvestment of dividends .......... 1,674 4,171 422 --
Repurchased .................................................. (42,383) (88,011) (13,631) --
----------- ------------ ------------- -------------
Net increase (decrease) in shares outstanding ............. (23,539) 17,160 51,169 --
=========== ============ ============= =============
Trust Shares:
Sold ......................................................... 296,054 1,986,106 2,475,295 5,459,216
Issued to shareholders in reinvestment of dividends .......... 39,952 102,083 167,492 347,783
Repurchased .................................................. (727,840) (3,298,697) (1,297,727) (3,517,644)
----------- ------------ ------------- -------------
Net increase (decrease) in shares outstanding ............. (391,834) (1,210,508) 1,345,060 2,289,355
=========== ============ ============= =============
</TABLE>
See Notes to Financial Statements.
28
<PAGE>
Galaxy Taxable Bond Funds
Statements of Changes in Net Assets --
Capital Stock Activity
<TABLE>
<CAPTION>
Corporate Bond Fund High Quality Bond Fund
--------------------------- ----------------------------
Six months Six months
ended Year ended ended Year ended
April 30, 1999 October 31, April 30, 1999 October 31,
(unaudited) 1998 (unaudited) 1998
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
DOLLAR AMOUNTS
Retail A Shares:
Sold ......................................................... $ -- $ -- $ 15,732,543 $ 26,890,214
Issued to shareholders in reinvestment of dividends .......... -- -- 1,500,423 1,560,277
Repurchased .................................................. -- -- (9,698,073) (12,206,245)
----------- ----------- ------------ ------------
Net increase in shares outstanding ........................ $ -- $ -- $ 7,534,893 $ 16,244,246
=========== =========== ============ ============
Retail B Shares:
Sold ......................................................... N/A N/A $ 3,210,380 $ 3,721,786
Issued to shareholders in reinvestment of dividends .......... N/A N/A 153,164 133,597
Repurchased .................................................. N/A N/A (876,079) (596,983)
----------- ----------- ------------ ------------
Net increase in shares outstanding ........................ N/A N/A $ 2,487,465 $ 3,258,400
=========== =========== ============ ============
Trust Shares:
Sold ......................................................... $ 9,530,227 23,376,133 $ 41,633,445 $ 63,505,520
Issued to shareholders in reinvestment of dividends .......... 1,237,691 2,954,566 5,113,919 6,911,279
Repurchased .................................................. (6,291,295) (36,671,848) (26,468,040) (44,645,712)
----------- ----------- ------------ ------------
Net increase (decrease) in shares outstanding ............. $ 4,476,623 (10,341,149) $ 20,279,324 $ 25,771,087
=========== =========== ============ ============
A Prime Shares:
Sold ......................................................... N/A N/A $ 49,260 N/A
Issued to shareholders in reinvestment of dividends .......... N/A N/A -- N/A
Repurchased .................................................. N/A N/A (33,508) N/A
----------- ----------- ------------ ------------
Net increase in shares outstanding ........................ N/A N/A $ 15,752 N/A
=========== =========== ============ ============
B Prime Shares:
Sold ......................................................... N/A N/A $ 287,738 N/A
Issued to shareholders in reinvestment of dividends .......... N/A N/A 2,815 N/A
Repurchased .................................................. N/A N/A -- N/A
----------- ----------- ------------ ------------
Net increase in shares outstanding ........................ N/A N/A $ 290,553 N/A
=========== =========== ============ ============
SHARE ACTIVITY
Retail A Shares:
Sold ......................................................... -- -- 1,430,090 2,460,852
Issued to shareholders in reinvestment of dividends .......... -- -- 137,466 142,902
Repurchased .................................................. -- -- (887,640) (1,118,893)
----------- ----------- ------------ ------------
Net increase in shares outstanding ........................ -- -- 679,916 1,484,861
=========== =========== ============ ============
Retail B Shares:
Sold ......................................................... N/A N/A 294,021 339,876
Issued to shareholders in reinvestment of dividends .......... N/A N/A 13,977 12,227
Repurchased .................................................. N/A N/A (80,415) (54,909)
----------- ----------- ------------ ------------
Net increase in shares outstanding ........................ N/A N/A 227,583 297,194
=========== =========== ============ ============
Trust Shares:
Sold ......................................................... 887,748 2,187,748 3,804,571 5,817,335
Issued to shareholders in reinvestment of dividends .......... 111,123 276,364 474,444 633,673
Repurchased .................................................. (581,993) (3,424,617) (2,429,030) (4,104,688)
----------- ----------- ------------ ------------
Net increase (decrease) in shares outstanding ............. 416,878 (960,505) 1,849,985 2,346,320
=========== =========== ============ ============
A Prime Shares:
Sold ......................................................... N/A N/A 4,430 N/A
Issued to shareholders in reinvestment of dividends .......... N/A N/A -- N/A
Repurchased .................................................. N/A N/A (3,137) N/A
----------- ----------- ------------ ------------
Net increase in shares outstanding ........................ N/A N/A 1,293 N/A
=========== =========== ============ ============
B Prime Shares:
Sold ......................................................... N/A N/A 26,440 N/A
Issued to shareholders in reinvestment of dividends .......... N/A N/A 259 N/A
Repurchased .................................................. N/A N/A -- N/A
----------- ----------- ------------ ------------
Net increase in shares outstanding ........................ N/A N/A 26,699 N/A
=========== =========== ============ ============
</TABLE>
See Notes to Financial Statements.
29
<PAGE>
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, 1999 --------------------------------------------------------
(unaudited) 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .................. $ 10.10 $ 10.01 $ 9.99 $ 10.06 $ 9.73 $ 10.30
-------- -------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income (A) ............................ 0.24 0.51 0.53 0.52 0.55 0.44
Net realized and unrealized gain (loss) on investments (0.10) 0.11 0.02 (0.07) 0.33 (0.51)
-------- -------- -------- -------- -------- --------
Total from Investment Operations .................. 0.14 0.62 0.55 0.45 0.88 (0.07)
-------- -------- -------- -------- -------- --------
Less Dividends:
Dividends from net investment income ................. (0.24) (0.53) (0.53) (0.52) (0.55) (0.44)
Dividends in excess of net realized capital gains .... -- -- -- -- -- (0.06)
-------- -------- -------- -------- -------- --------
Total Dividends ................................... (0.24) (0.53) (0.53) (0.52) (0.55) (0.50)
-------- -------- -------- -------- -------- --------
Net increase (decrease) in net asset value ............ (0.10) 0.09 0.02 (0.07) 0.33 (0.57)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period ........................ $ 10.00 $ 10.10 $ 10.01 $ 9.99 $ 10.06 $ 9.73
======== ======== ======== ======== ======== ========
Total Return(2) ....................................... 1.38%** 6.42% 5.64% 4.63% 9.28% (0.68)%
Ratios/Supplemental Data:
Net Assets, End of Period (000's) ..................... $ 26,286 $ 29,067 $ 27,961 $ 33,388 $ 31,542 $ 34,061
Ratios to average net assets:
Net investment income including
reimbursement/waiver ............................ 4.76%* 5.07% 5.29% 5.22% 5.54% 4.43%
Operating expenses including reimbursement/waiver . 1.11%* 1.11% 1.00% 1.11% 0.99% 0.93%
Operating expenses excluding reimbursement/waiver . 1.31%* 1.31% 1.21% 1.35% 1.32% 1.14%
Portfolio Turnover Rate ............................... 77%** 133% 173% 214% 289% 233%
</TABLE>
- --------------------------------------
* Annualized
** Not Annualized
(1) The Fund began offering Retail B Shares on March 4, 1996.
(2) 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, 1999 (unaudited) and the years ended October 31,
1998, 1997, 1996, 1995 and 1994 were $0.23, $0.49, $0.51, $0.50, $0.52 and
$0.42, 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, 1999 (unaudited)
and the years ended October 31, 1998, 1997, 1996, 1995, and 1994 were $0.24
$0.52, $0.52, $0.53, $0.54, and $0.42, 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,
1999 (unaudited) and the years ended October 31, 1998, 1997 and 1996 were
$0.19, $0.42, $0.44 and $0.29, respectively.
See Notes to Financial Statements.
30
<PAGE>
Trust Shares
<TABLE>
<CAPTION>
Six months ended Years ended October 31,
April 30, 1999 --------------------------------------------------------
(unaudited) 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 10.10 $ 10.01 $ 9.99 $ 10.06 $ 9.73 $ 10.30
-------- -------- -------- -------- -------- --------
0.25 0.54 0.54 0.55 0.57 0.44
(0.10) 0.11 0.02 (0.07) 0.33 (0.51)
-------- -------- -------- -------- -------- --------
0.15 0.65 0.56 0.48 0.90 (0.07)
-------- -------- -------- -------- -------- --------
(0.25) (0.56) (0.54) (0.55) (0.57) (0.44)
-- -- -- -- -- (0.06)
-------- -------- -------- -------- -------- --------
(0.25) (0.56) (0.54) (0.55) (0.57) (0.50)
-------- -------- -------- -------- -------- --------
(0.10) 0.09 0.02 (0.07) 0.33 (0.57)
-------- -------- -------- -------- -------- --------
$ 10.00 $ 10.10 $ 10.01 $ 9.99 $ 10.06 $ 9.73
======== ======== ======== ======== ======== ========
1.51%** 6.68% 5.77% 4.91% 9.55% (0.66)%
$ 33,780 $ 38,071 $ 49,837 $ 58,227 $ 35,088 $ 39,843
5.02%* 5.33% 5.43% 5.49% 5.79% 4.45%
0.85%* 0.85% 0.86% 0.84% 0.74% 0.91%
1.05%* 1.05% 1.07% 1.08% 1.02% 1.11%
77%** 133% 173% 214% 289% 233%
</TABLE>
Retail B Shares
<TABLE>
<CAPTION>
Six months ended Years ended October 31,
April 30, 1999 --------------------------------
(unaudited) 1998 1997 1996(1)
------------ -------- -------- --------
<S> <C> <C> <C>
$ 10.10 $ 10.01 $ 9.99 $ 10.09
-------- -------- -------- --------
0.20 0.45 0.46 0.31
(0.10) 0.11 0.03 (0.10)
-------- -------- -------- --------
0.10 0.56 0.49 0.21
-------- -------- -------- --------
(0.20) (0.47) (0.47) (0.31)
-- -- -- --
-------- -------- -------- --------
(0.20) (0.47) (0.47) (0.31)
-------- -------- -------- --------
(0.10) 0.09 0.02 (0.10)
-------- -------- -------- --------
$ 10.00 $ 10.10 $ 10.01 $ 9.99
======== ======== ======== ========
1.04%** 5.73% 4.99% 2.12%
$ 841 $ 1,087 $ 905 $ 260
4.09%* 4.40% 4.56% 4.73%*
1.78%* 1.78% 1.75% 1.77%*
2.02%* 1.99% 2.01% 1.98%*
77%** 133% 173% 214%**
</TABLE>
31
<PAGE>
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, 1999 --------------------------------------------------------
(unaudited) 1998 1997 1996 1995 1994
---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ................... $ 10.50 10.18 $ 10.06 $ 10.28 $ 9.68 $ 10.72
-------- ----- -------- -------- -------- --------
Income from Investment Operations:
Net investment income (A) ............................ 0.27 0.57 0.59 0.57 0.61 0.57
Net realized and unrealized gain (loss) on investments (0.32) 0.34 0.12 (0.22) 0.60 (1.03)
----- ---- ---- ----- ---- -----
Total from Investment Operations .................. (0.05) 0.91 0.71 0.35 1.21 (0.46)
-------- ----- -------- -------- -------- --------
Less Dividends:
Dividends from net investment income ................. (0.27) (0.59) (0.59) (0.57) (0.61) (0.56)
Dividends in excess of net investment income ......... -- -- -- -- -- (0.01)
Dividends in excess of net realized capital gains .... -- -- -- -- -- (0.01)
-------- ----- -------- -------- -------- --------
Total Dividends ................................... (0.27) (0.59) (0.59) (0.57) (0.61) (0.58)
-------- ----- -------- -------- -------- --------
Net increase (decrease) in net asset value ............. (0.32) 0.32 0.12 (0.22) 0.60 (1.04)
-------- ----- -------- -------- -------- --------
Net Asset Value, End of Period ......................... $ 10.18 10.50 $ 10.18 $ 10.06 $ 10.28 $ 9.68
======== ===== ======== ======== ======== ========
Total Return(2) ........................................ (0.53)%** 9.22% 7.33% 3.58% 12.85% (4.42)%
Ratios/Supplemental Data:
Net Assets, End of Period (000's) ...................... $ 63,438 $ 66,865 $ 65,626 $ 79,741 $ 79,558 $ 94,669
Ratios to average net assets:
Net investment income including reimbursement/waiver . 5.19%* 5.49% 5.90% 5.69% 6.10% 5.58%
Operating expenses including reimbursement/waiver .... 0.99%* 1.01% 1.02% 1.04% 1.02% 0.78%
Operating expenses excluding reimbursement/waiver .... 1.19%* 1.21% 1.22% 1.24% 1.26% 0.99%
Portfolio Turnover Rate ................................ 86%** 205% 128% 235% 145% 124%
</TABLE>
- -------------------------------------
* Annualized
** Not Annualized
(1) The Fund began offering Retail B Shares on November 1, 1998.
(2) 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, 1999 (unaudited) and the years ended October 31,
1998, 1997, 1996, 1995 and 1994 were $0.26, $0.55, $0.57, $0.55, $0.58 and
$0.54, 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, 1999 (unaudited)
and the years ended October 31, 1998, 1997, 1996, 1995 and 1994 were $0.27,
$0.57, $0.60, $0.58, $0.62 and $0.54, respectively. Net investment income
per share before reimbursement/waiver of fees by the Investment Advisor
and/or Administrator for Retail B Shares for the period ended April 30,
1999 (unaudited) was $0.21.
See Notes to Financial Statements.
32
<PAGE>
<TABLE>
<CAPTION>
Trust Shares Retail B Shares
Six months ended Years ended October 31, Period ended
April 30, 1999 -------------------------------------------------------- April 30, 1999(1)
(unaudited) 1998 1997 1996 1995 1994 (unaudited)
---------- -------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
$ 10.50 $ 10.18 $ 10.06 $ 10.28 $ 9.68 $ 10.72 $ 10.50
-------- -------- -------- -------- -------- -------- ---------
0.28 0.59 0.62 0.60 0.64 0.57 0.24
(0.32) 0.35 0.12 (0.22) 0.60 (1.03) (0.33)
-------- -------- -------- -------- -------- -------- ---------
(0.04) 0.94 0.74 0.38 1.24 (0.46) (0.09)
-------- -------- -------- -------- -------- -------- ---------
(0.28) (0.62) (0.62) (0.60) (0.64) (0.56) (0.23)
-- -- -- -- -- (0.01) --
-- -- -- -- -- (0.01) --
-------- -------- -------- -------- -------- -------- ---------
(0.28) (0.62) (0.62) (0.60) (0.64) (0.58) (0.23)
-------- -------- -------- -------- -------- -------- ---------
(0.32) 0.32 0.12 (0.22) 0.60 (1.04) (0.32)
-------- -------- -------- -------- -------- -------- ---------
$ 10.18 10.50 $ 10.18 $ 10.06 $ 10.28 $ 9.68 $ 10.18
======== ======== ======== ======== ======== ======== =========
(0.39)%** 9.52% 7.63% 3.88% 13.18% (4.39)% (0.85)%**
$246,159 $239,763 $209,215 $213,750 $186,037 $212,144 $ 521
5.47%* 5.77% 6.19% 5.98% 6.39% 5.61% 4.54%*
0.71%* 0.73% 0.74% 0.75% 0.73% 0.75% 1.64%*
0.91%* 0.93% 0.94% 0.95% 0.94% 0.95% 1.95%*
86%** 205% 128% 235% 145% 124% 86%**
</TABLE>
33
<PAGE>
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, 1999 --------------------------------- October 31,
(unaudited) 1998 1997 1996 1995(1)
---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ................... $ 10.90 $ 10.63 $ 10.53 $ 10.74 $ 10.00
-------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income (A) ............................ 0.29 0.62 0.66 0.64 0.61
Net realized and unrealized gain (loss) on investments (0.32) 0.30 0.11 (0.13) 0.74
-------- -------- -------- -------- --------
Total from Investment Operations ................... (0.03) 0.92 0.77 0.51 1.35
-------- -------- -------- -------- --------
Less Dividends:
Dividends from net investment income ................. (0.29) (0.65) (0.66) (0.64) (0.61)
Dividends from net realized capital gains ............ 0.00 -- (0.01) (0.08) --
-------- -------- -------- -------- --------
Total Dividends .................................... (0.29) (0.65) (0.67) (0.72) (0.61)
-------- -------- -------- -------- --------
Net increase (decrease) in net asset value ............. (0.32) 0.27 0.10 (0.21) 0.74
-------- -------- -------- -------- --------
Net Asset Value, End of Period ......................... $ 10.58 $ 10.90 $ 10.63 $ 10.53 $ 10.74
======== ======== ======== ======== ========
Total Return ........................................... (0.24)%** 8.96% 7.56% 5.00% 13.85%**
Ratios/Supplemental Data:
Net Assets, End of Period (000's) ...................... $ 85,527 $ 83,565 $ 91,728 $107,728 $ 37,391
Ratios to average net assets:
Net investment income including reimbursement/waiver 5.52%* 5.80% 6.27% 6.13% 6.61%*
Operating expenses including reimbursement/waiver ... 0.83%* 0.82% 0.80% 0.85% 1.06%*
Operating expenses excluding reimbursement/waiver ... 1.03%* 1.02% 1.00% 1.05% 1.26%*
Portfolio Turnover Rate ................................ 111%** 155% 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,
1999 (unaudited), the years ended October 31, 1998, 1997 and 1996 and the
period ended October 31, 1995 were $0.28, $0.60, $0.64, $0.62 and $0.57,
respectively.
See Notes to Financial Statements.
34
<PAGE>
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, 1999 --------------------------------------------------------
(unaudited) 1998 1997 1996 1995 1994
---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ................... $ 11.20 $ 10.70 $ 10.47 $ 10.63 $ 9.54 $ 11.37
-------- -------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income (A) ............................ 0.28 0.58 0.60 0.59 0.62 0.64
Net realized and unrealized gain (loss) on investments (0.40) 0.50 0.23 (0.16) 1.09 (1.56)
-------- -------- -------- -------- -------- --------
Total from Investment Operations ................ (0.12) 1.08 0.83 0.43 1.71 (0.92)
-------- -------- -------- -------- -------- --------
Less Dividends:
Dividends from net investment income ................. (0.28) (0.58) (0.60) (0.59) (0.62) (0.64)
Dividends from net realized capital gains ............ (0.09) -- -- -- -- --
Dividends in excess of net realized capital gains .... -- -- -- -- -- (0.27)
-------- -------- -------- -------- -------- --------
Total Dividends ................................. (0.37) (0.58) (0.60) (0.59) (0.62) (0.91)
-------- -------- -------- -------- -------- --------
Net increase (decrease) in net asset value ............. (0.49) 0.50 0.23 (0.16) 1.09 (1.83)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period ......................... $ 10.71 $ 11.20 $ 10.70 $ 10.47 $ 10.63 $ 9.54
======== ======== ======== ======== ======== ========
Total Return(1) ........................................ (1.12)%** 10.35% 8.22% 4.24% 18.46% (8.41)%
Ratios/Supplemental Data:
Net Assets, End of Period (000's) ...................... $ 51,131 $ 45,879 $ 27,950 $ 30,984 $ 30,093 $ 26,654
Ratios to average net assets:
Net investment income including reimbursement/waiver . 5.08%* 5.30% 5.73% 5.66% 6.16% 6.25%
Operating expenses including reimbursement/waiver .... 0.96%* 1.00% 1.01% 1.07% 1.02% 0.81%
Operating expenses excluding reimbursement/waiver .... 1.16%* 1.20% 1.21% 1.28% 1.26% 1.02%
Portfolio Turnover Rate ................................ 128%** 253% 182% 163% 110% 108%
</TABLE>
- -------------------------------------------------
* Annualized
** Not Annualized
(1) 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, 1999 (unaudited) and the years ended October 31,
1998, 1997, 1996, 1995 and 1994 were $0.27, $0.56, $0.58, $0.57, $0.59 and
$0.62, respectively.
See Notes to Financial Statements.
35
<PAGE>
High Quality Bond Fund
Financial Highlights (continued)
For a Share outstanding throughout each period.
Trust Shares
<TABLE>
<CAPTION>
Six months ended Years ended October 31,
April 30, 1999 --------------------------------------------------------
(unaudited) 1998 1997 1996 1995 1994
---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ................... $ 11.20 $ 10.70 $ 10.47 $ 10.63 $ 9.54 $ 11.37
-------- -------- -------- -------- -------- --------
Income from Investment Operations:
Net investment income (A) ............................ 0.28 0.59 0.61 0.62 0.64 0.65
Net realized and unrealized gain (loss) on investments (0.40) 0.50 0.23 (0.16) 1.09 (1.56)
-------- -------- -------- -------- -------- --------
Total from Investment Operations ................ (0.12) 1.09 0.84 0.46 1.73 (0.91)
-------- -------- -------- -------- -------- --------
Less Dividends:
Dividends from net investment income ................. (0.28) (0.59) (0.61) (0.62) (0.64) (0.65)
Dividends from net realized capital gains ............ (0.09) -- -- -- -- --
Dividends in excess of net realized capital gains .... -- -- -- -- -- (0.27)
-------- -------- -------- -------- -------- --------
Total Dividends ................................. (0.37) (0.59) (0.61) (0.62) (0.64) (0.92)
-------- -------- -------- -------- -------- --------
Net increase (decrease) in net asset value ............. (0.49) 0.50 0.23 (0.16) 1.09 (1.83)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of Period ......................... $ 10.71 $ 11.20 $ 10.70 $ 10.47 $ 10.63 $ 9.54
======== ======== ======== ======== ======== ========
Total Return(2) ........................................ (1.05)%** 10.50% 8.36% 4.46% 18.66% (8.39)%
Ratios/Supplemental Data:
Net Assets, End of Period (000's) ...................... $227,353 $217,143 $182,398 $149,075 $134,631 $118,776
Ratios to average net assets:
Net investment income including reimbursement/waiver . 5.21%* 5.43% 5.88% 5.88% 6.33% 6.28%
Operating expenses including reimbursement/waiver .... 0.83%* 0.87% 0.87% 0.85% 0.85% 0.78%
Operating expenses excluding reimbursement/waiver .... 1.03%* 1.07% 1.09% 1.06% 1.07% 0.98%
Portfolio Turnover Rate ................................ 128%** 253% 182% 163% 110% 108%
</TABLE>
- ------------------------------------------------
* Annualized
** Not Annualized
(1) The Fund began offering Retail B Shares on March 4, 1996 and A Prime Shares
and B Prime Shares, on November 1, 1998.
(2) Calculation does not include the effect of any sales charge for Retail B
Shares, A Prime Shares and B Prime Shares.
(A) Net investment income per share before reimbursement/waiver of fees by the
Investment Advisor and/or Administrator for Trust Shares for the six months
ended April 30, 1999 (unaudited) and the years ended October 31, 1998,
1997, 1996, 1995 and 1994 were $0.26, $0.56, $0.59, $0.60, $0.62 and $0.63,
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, 1999 (unaudited) and the years ended
October 31, 1998, 1997 and 1996 were $0.22, $0.49, $0.51 and $0.34,
respectively. Net investment income per share before reimbursement/waiver
of fees by the Investment Advisor and/or Administrator for A Prime Shares
for the period ended April 30, 1999 (unaudited) was $0.25. Net investment
income per share before reimbursement/waiver of fees by the Investment
Advisor and/or Administrator for B Prime Shares for the period ended April
30, 1999 (unaudited) was $0.21.
See Notes to Financial Statements.
36
<PAGE>
<TABLE>
<CAPTION>
Retail B Shares A Prime Shares B Prime Shares
Six months ended Years ended October 31, Period ended Period ended
April 30, 1999 ------------------------------------ April 30, 1999(1) April 30, 1999(1)
(unaudited) 1998 1997 1996(1) (unaudited) (unaudited)
---------- --------- --------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
$ 11.20 $ 10.70 $ 10.47 $ 10.72 $ 11.20 $ 11.20
--------- --------- --------- --------- --------- ----------
0.24 0.51 0.53 0.36 0.29 0.24
(0.40) 0.51 0.24 (0.25) (0.42) (0.42)
--------- --------- --------- --------- --------- ----------
(0.16) 1.02 0.77 0.11 (0.13) (0.18)
--------- --------- --------- --------- --------- ----------
(0.24) (0.52) (0.54) (0.36) (0.27) (0.23)
(0.09) -- -- -- (0.09) (0.09)
-- -- -- -- -- --
--------- --------- --------- --------- --------- ----------
(0.33) (0.52) (0.54) (0.36) (0.36) (0.32)
--------- --------- --------- --------- --------- ----------
(0.49) 0.50 0.23 (0.25) (0.49) (0.50)
--------- --------- --------- --------- --------- ----------
$ 10.71 $ 11.20 $ 10.70 $ 10.47 $ 10.71 $ 10.70
========= ========= ========= ========== ========= =========
(1.42)%** 9.73% 7.59% 1.14%** (1.14)%** (1.57)%**
$ 7,617 $ 5,420 $ 1,998 $ 646 $ 14 $ 286
4.47%* 4.69% 5.07% 5.34%* 5.09%* 4.35%*
1.57%* 1.61% 1.69% 1.60%* 0.95%* 1.69%*
1.77%* 1.81% 1.95% 1.81%* 1.68%* 2.14%*
128%** 253% 182% 163% 128%** 128%**
</TABLE>
37
<PAGE>
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, as an open-end management
investment company. As of the date of this report, the Trust offered twenty-nine
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, Intermediate Government Income and High Quality Bond
Funds are authorized to issue five series of shares (Trust Shares, Retail A
Shares, Retail B Shares, A Prime Shares and B Prime Shares). The Corporate Bond
Fund is authorized to issue two series of shares (Trust Shares and Retail A
Shares). Currently, the High Quality Bond Fund offers all five series of shares,
the Short-Term Bond and Intermediate Government Income Funds offer Trust Shares,
Retail A Shares and Retail B Shares and the Corporate Bond Fund offers Trust
Shares only. Trust Shares, Retail A Shares, Retail B Shares, A Prime Shares and
B Prime Shares are substantially the same except that (i) Retail A Shares are
subject to a maximum 3.75% front-end sales charge, (ii) A Prime Shares are
subject to a maximum 4.75% front-end sales charge, (iii) Retail B Shares and B
Prime Shares are subject to a maximum 5.00% contingent deferred sales charge,
and (iv) 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 and eight years after purchase, B Prime Shares will automatically convert
to A Prime Shares.
2. Significant Accounting Policies
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies in conformity with generally accepted accounting
principles consistently followed by the Funds in the preparation of their
financial statements.
Portfolio Valuation: Investment securities are valued by an independent
pricing service approved by the Trust's Board of Trustees. When, in the judgment
of the service, quoted bid prices are readily available and are representative
of the bid side of the market, investments are valued at the mean between quoted
bid prices and asked prices. Other investments are carried at fair value as
determined by the service based on methods which include consideration of yields
or prices of bonds of comparable quality, coupon maturity and type; indications
as to values from dealers; and general market conditions. Short-term obligations
that mature in 60 days or less are valued at amortized cost, which approximates
fair value. All other securities and other assets are appraised at their fair
value as determined in good faith under consistently applied procedures
established by and under the general supervision of the Board of Trustees.
Securities Transactions and Investment Income: Securities transactions are
accounted for on a trade date basis. Net realized gains or losses on sales of
securities are determined by the identified cost method. Interest 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. 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
38
<PAGE>
Notes to Financial Statements
Fund to 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, effective September 10, 1998, 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,
0.075% of the next $7 billion of combined average daily net assets, 0.065% of
the next $3 billion of combined average daily net assets, 0.06% of the next $3
billion of combined average daily net assets and 0.0575% of combined average
daily net assets in excess of $18 billion. Prior to September 10, 1998, Investor
Services Group received administration fees at the annual rate of 0.09% of the
first $2.5 billion of combined average daily net assets of the Funds and the
other funds offered by the Trust, 0.085% of the next $2.5 billion of combined
average daily net assets and 0.075% 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 in accordance with 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, Intermediate Government
Income 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
39
<PAGE>
Notes to Financial Statements
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 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, 1999, 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 ............... $ 19,949 $ 682 $ 3,148
Intermediate Government Income 46,001 208 902
Corporate Bond ................ -- N/A N/A
High Quality Bond ............. 33,837 4,431 20,568
</TABLE>
The Trust has adopted a Distribution Plan (the "A Prime Shares Plan") with
respect to A Prime Shares of the Short-Term Bond, Intermediate Government Income
and High Quality Bond Funds. Under the A Prime Shares Plan, the Trust may pay
the Distributor or another person for expenses and activities primarily intended
to result in the sale of A Prime Shares. Payments by the Trust under the A Prime
Shares Plan may not exceed the annual rate of 0.30% of the average daily net
assets attributable to each Fund's outstanding A Prime Shares. The Trust, under
the direction of the Board of Trustees, is currently limiting the Funds'
payments under the A Prime Shares Plan to an annual rate of not more than 0.25%
of the average daily net asset value of each Fund's outstanding A Prime Shares.
The Trust has adopted a Distribution and Services Plan (the "B Prime Shares
Plan") with respect to B Prime Shares of the Short-Term Bond, Intermediate
Government Income and High Quality Bond Funds. Under the B Prime Shares Plan,
the Trust may pay (i) the Distributor or another person for expenses and
activities primarily intended to result in the sale of B Prime Shares, (ii)
institutions for shareholder liaison services, and (iii) institutions for
administrative support services. Payments for distribution expenses may not
exceed an annual rate of 0.75% of the average daily net assets attributable to
each Fund's outstanding B Prime Shares. The fees paid to institutions for
shareholder liaison services and/or administrative support services may not
exceed the annual rates of 0.25% and 0.25%, respectively, of the average daily
net assets attributable to each Fund's outstanding B Prime Shares owned of
record or beneficially by 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 B Prime
Shares Plan to an aggregate fee of not more than 0.25% of the average daily net
asset value of B Prime Shares owned of record or beneficially by customers of
institutions. For the period ended April 30, 1999, the Funds paid fees under the
A Prime Shares Plan and B Prime Shares Plan as follows:
<TABLE>
<CAPTION>
A Prime B Prime Shares Plan
-------------------
Fund Shares Plan Services Distribution
- ---- ----------- -------- ------------
<S> <C> <C> <C>
Short-Term Bond .............. $ -- $ -- $ --
Intermediate Government Income -- -- --
Corporate Bond ............... N/A N/A N/A
High Quality Bond ............ 43 174 520
</TABLE>
Retail A Shares, Retail B Shares, Trust Shares, A Prime Shares and B Prime
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 underlying participant
accounts. For the period ended April 30, 1999, transfer agent charges for each
series were as follows:
<TABLE>
<CAPTION>
Fund Retail A Retail B Trust
- ---- -------- -------- -----
<S> <C> <C> <C>
Short-Term Bond .............. $ 19,212 $ 938 $ 3,712
Intermediate Government
Income ................... 51,211 421 26,649
Corporate Bond ............... N/A N/A 30,035
High Quality Bond ............ 31,168 2,612 140,728
Fund A Prime B Prime
- ---- ------- -------
Short-Term Bond .............. $ -- $ --
Intermediate Government Income -- --
Corporate Bond ............... N/A N/A
High Quality Bond ............ 93 177
</TABLE>
40
<PAGE>
Notes to Financial Statements
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, 1999 include legal fees paid to
Drinker Biddle & Reath LLP. A partner of that firm is Secretary to the Trust.
4. Waiver of Fees and Reimbursement of Expenses
The Advisor and/or its affiliates and/or the Administrator 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, 1999, the fees waived and/or expenses
reimbursed with respect to the Funds were as follows:
<TABLE>
<CAPTION>
Expenses
Fund Fees Waived Reimbursed
- ---- ----------- ----------
<S> <C> <C>
Short-Term Bond ........... $ 62,585 $ 237
Intermediate Government
Income ................ 305,826 160
Corporate Bond ............ 83,491 --
High Quality Bond ......... 276,419 --
</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 thirty 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), Class L - Series 3 Shares
(Retail B Shares), Class L - Series 4 Shares (A Prime Shares) and Class L Series
5 Shares (B Prime Shares)- Short-Term Bond Fund; Class D Shares (Trust Shares),
Class D - Special Series 1 Shares (Retail A Shares), Class D - Special Series 2
Shares (Retail B Shares), Class D - Special Series 3 Shares (A Prime Shares) and
Class D - Special Series 4 Shares (B Prime Shares) - Intermediate Government
Income Fund; Class T - Series 1 Shares (Trust Shares) 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), Class J - Series 3
Shares (Retail B Shares), Class J - Series 4 Shares (A Prime Shares) and Class J
- - Series 5 Shares (B prime 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, A Prime Shares bear the expense of payments under
the A Prime Shares Plan, B Prime Shares bear the expense of payments under the B
Prime Shares Plan and Trust Shares, Retail A Shares, Retail B Shares, A Prime
Shares and B Prime 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 a
proportionate fractional vote for each fractional 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.
41
<PAGE>
Notes to Financial Statements
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, 1999 were as follows:
<TABLE>
<CAPTION>
Fund
Purchases Government Other
- --------- ---------- -----
<S> <C> <C>
Short-Term Bond ........... $ 21,463,344 $ 25,389,627
Intermediate Government
Income ................. 198,415,240 86,496,235
Corporate Bond ............ 53,727,662 39,759,693
High Quality Bond ......... 240,196,630 135,674,977
Fund
Sales
- -----
Short-Term Bond ........... $ 31,844,085 $ 25,131,529
Intermediate Government
Income ................. 214,553,967 47,162,686
Corporate Bond ............ 53,937,007 36,184,222
High Quality Bond ......... 251,381,318 95,990,896
</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, 1999 for each Fund is as follows:
<TABLE>
<CAPTION>
Fund Appreciation (Depreciation)
- ---- ------------ --------------
<S> <C> <C>
Short-Term Bond ........... $ 237,510 $ (108,798)
Intermediate Government
Income ................. 1,873,448 (2,483,767)
Corporate Bond ............ 722,491 (979,468)
High Quality Bond ......... 4,420,568 (3,578,000)
Fund Net Cost
- ---- --- ----
Short-Term Bond ........... $ 128,712 $ 60,321,434
Intermediate Government
Income ................. 610,319 312,142,482
Corporate Bond ............ (256,977) 86,117,472
High Quality Bond ......... 842,568 287,964,681
</TABLE>
At October 31, 1998, the following Funds had capital loss carryforwards:
<TABLE>
<CAPTION>
Fund Amount Expiration
- ---- ------ ----------
<S> <C> <C>
Short-Term Bond ........... $ 7,153 2000
1,797,977 2001
2,843,359 2002
1,206,932 2003
10,917 2004
9,409 2005
Intermediate Government
Income ................. 17,636,357 2002
3,291,626 2003
2,479,060 2004
Corporate Bond ............ 288,371 2002
1,309,536 2003
450,363 2005
</TABLE>
7. Change of Accountants
On January 13, 1999, the Trust dismissed PricewaterhouseCoopers LLP ("PwC") as
the Funds' independent auditors by action of the Trust's Board of Trustees upon
the recommendation of a Special Committee of the Board. PwC's reports on the
Funds' financial statements for the fiscal years ended October 31, 1998 and
October 31, 1997 contained no adverse opinion or disclaimer of opinion nor were
they qualified or modified as to uncertainty, audit scope or accounting
principles. During the Funds' fiscal years ended October 31, 1998 and October
31, 1997 and the interim period commencing November 1, 1998 and ending January
13, 1999, (i) there were no disagreements with PwC on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure, which disagreements, if not resolved to the satisfaction of PwC,
would have caused it to make reference to the subject matter of the
disagreements in connection with its reports on the Funds' financial statements
for such years, and (ii) there were no "reportable events" of the kind described
in Item 304(a)(1)(v) of Regulation S-K under the Securities Exchange Act of
1934, as amended.
42
<PAGE>
Notes to Financial Statements
On January 13, 1999, the Trust by action of its Board of Trustees upon the
recommendation of a Special Committee of the Board engaged Ernst & Young LLP
("E&Y") as the independent auditors to audit the Funds' financial statements for
the fiscal year ending October 31, 1999. During the Funds' fiscal years ended
October 31, 1998 and October 31, 1997 and the interim period commencing November
1, 1998 and ending January 13, 1999, neither the Trust, the Funds nor anyone on
their behalf has consulted E&Y on items which (i) concerned the application of
accounting principles to a specified transaction, either completed or proposed,
or the type of audit opinion that might be rendered on the Funds' financial
statements or (ii) concerned the subject of a disagreement (as defined in
paragraph (a)(1)(iv) of Item 304 of Regulation S-K) or reportable events (as
described in paragraph (a)(1)(v) of said Item 304).
43
<PAGE>
Shareholder Information
[Begin Sidebar]
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 and
Assistant Treasurer
William Greilich
Vice President
INVESTMENT ADVISOR
Fleet Investment
Advisors Inc.
75 State Street
Boston, MA
02109
DISTRIBUTOR
First Data
Distributors, Inc.
4400 Computer Drive
Westborough,
Massachusetts 01581-5108
ADMINISTRATOR
First Data Investor
Services Group, Inc.
4400 Computer Drive
Westborough,
Massachusetts 01581-5108
[End Sidebar]
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 each Fund of The
Galaxy Fund, which contains more information concerning the investment policies
and expenses of the Funds as well as other pertinent information. For complete
information, and before making an investment decision on any of the Funds of The
Galaxy Fund, you should request a prospectus from First Data Distributors, Inc.
by calling toll-free 1-877-BUY-GALAXY (1-877-289-4252). 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.
[Recycled Paper Logo]
This report was printed on recycled paper.
44
<PAGE>
<PAGE>
[BACKPAGE]
[LOGO] Galaxy Funds
4400 Computer Drive
P.O. Box 5108
Westborough, MA 01581-5108
- --------------------------
BULK RATE
U. S. POSTAGE PAID
PERMIT NO. 105
NORTH READING, MA
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SEMIABND (7/1/99)
